Jim: > There isn't really a debate that I know, except about semantics. Banks > can't create commodity money (a province of nature, as it were) or > fiat money (a province of the state). They create bookkeeping money, > i.e., liquid assets that are entries in a bank's books, that > corresponds to debt.
We are in a minor disagreement, Jim. Fiat money is debt also, the debt of the central bank to itself. Further, fiat money is credit also, the credit of the central bank to itself. Hence, in your terminology, fiat money is bookkeeping money also, which means that debt (liabilities) = money = credit (assets) to the central bank at the moment the central bank creates it. Things get different when central bank lends that money to the rest of the world. Prior to that, both the assets and the liabilities are equally liquid since they are the same thing, but after the money is lent to the rest of the world, the central bank assets, that is, the central bank credit may get illiquid. But, this is not a problem to the central bank, because if the central bank assets/credit disappear altogether, the central bank liabilities/debt and hence money disappear also. Then the central bank can create new money if the money is fiat money. This is what the other banks cannot do in the presence of a central bank. However, if there is no central bank, and the US did not have one until 1913, then who creates the fiat money? Best, Sabri _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
