On the Liquidation of Government Debt under A Debt-Free Money System

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28 Οκτ 2013 (πριν από 3 χρόνια και 7 μήνες)

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On the Liquidation of Government Debt

under A Debt
-
Free Money System

-

Modeling the American Monetary Act
-

Prof. Kaoru Yamaguchi, Ph.D.

Doshisha Business School

Doshisha University, Kyoto, Japan

E
-
mail: kaoyamag@mail.doshisha.ac.jp

The 6th Annual AMI

Monetary Reform Conference


At University Center


in Downtown Chicago


Sept. 30


Oct. 3, 2010

Background:


SD Macroeconomic

Modeling Series

2003
-

2008


SD Macroeconomic Modeling Series


Principle of Accounting System Dynamics


-

Modeling Corporate Financial Statements
-


New York City, July 20
-
24, 2003


Money Supply and Creation of Deposits (SD modeling 1)

University of Oxford, England, July 25
-

29, 2004


Aggregate Demand Equilibria and Price Flexibility (SD modeling 2)


Boston, USA, July 17
-
21, 2005
-
> Visit Prof. Jay Forrester (Sept. 14)


Integration of Real and

Monetary Sector with Labor Market


(SD modeling 3)

Nijmegen, The Netherlands, July 23
-

27, 2006


Balance of Payments and Foreign Exchange Dynamics (SD modeling 4)


Boston, USA, July 29


August 2, 2007



Open Macroeconomies as a Closed Economic System (SD modeling 5)


Athens, Greece, July 20


July 24, 2008






National Model


A creation of a system dynamics
model of the United States economy
-

a project as leading to a new
approach to economic science and a
fundamental understanding of the
way macroeconomic systems work.


Although his national economic
model remains unfinished, the most
noteworthy intermediate result is
that the model generates a 40
-

to 60
year economic cycle or “long wave
(or Kondratiev cycle)” that not only
explains the Grerat Depression of
the 1930s, but also shows that deep
economic slumps are a repetitive
feature of capitalist economies.

Sept. 14, 2005, MIT

Macroeconomic System Overview

Engines of Dynamics

A Relation between Stock and Flow

わかる!図解キャッシュフロー


久保豊子著、ダイアモンド社


2000年、
p. 111

Business Dynamics by John D. Sterman,


McGraw
-
Hill Companies, 2000, p.194

Cash through

Operation

Cash through

Investment

Cash through

Finance

Principle of Accounting System Dynamics

-

Modeling Corporate Financial Statements
-

Presented at the 21st International Conference of the
System Dynamics Society , New York, 2003

Balance Sheet as a System of Stocks

Double Entry Rule of Bookkeeping

as Debit and Credit

Analytical

Methods

Creation of Money: Gold Standard

Creation of Money: Gold Standard

Required Reserve Ratio

10%
-
>

4% at t=8



Money Multiplier: 4
-
> 5

Money Supply: 800
-
> 1,000

Monetary Base of Gold = 200

Creation of Money: Gold Standard

Required Reserve Ratio

10%
-
>

100% at t=8



Money Multiplier: 4
-
> 1

Money Supply: 800
-
> 200

Monetary Base of Gold = 200

Macroeconomic


System Design


-

American Monetary Act
-

1.
Privately
-
Owned

Central Bank

issues Money (Notes)

2.
Credit Creation by
Commercial Banks


(A Fractional


Reserve System)




Monetary Control


by (and for)


the Elite Bankers


Macroeconomic System of
Money as Debt

-

Money out of Nothing (Thin Air)
-


What is Money ?

Money Supply

=

Currency Outstanding

(Cash: Bank Notes and Coins)

+

Bank Deposits (Credits)

Who can create Money?


Money as Debt System

-

Transactions of the Central Bank
-


Expert Ideas for

Macroeconomic System Design

608 pages, 4
th

ed. 2002

724 pages, 2002

A New Macroeconomic System Design


A Debt
-
Free Money System

-

the American Monetary Act
-

1.
Government Issues Money

(Nationalization of


the Central Bank)


2.
100% Fractional Reserve

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-

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-


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-
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Macroeconomic System of Debt
-
Free Money

-

Transactions of Government
-


Seigniorage

Leverage

Point


Macroeconomic System of Debt
-
Free Money

-

Transactions of
the Public Money Administration

-


The Issue We are Facing



Repeated Financial Crises


(in September 2008)



Government has no money!


Why can’t they borrow or tax?



Run
-
away Debt Crises


(in Japan, USA, Greece, etc.)

Debt Crisis in Japan


About $56,000.00

per


each Japanese


Nixon Shock 1971

No Convertibility

between US dollar

and Gold

2009

of annual
gross domestic product
.
























of annual
gross domestic product
.
























Debt Crisis in OECD


Japan

Italy

USA

France

Germany

Canada

U.K.

110 %

190 %

File:Public debt percent GDP world map.PNG

From Wikipedia, the free encyclopedia


Japan

189 %

Belgium

98 %

Austria

69 %

Spain

53 %

Italy

115 %

France

78 %

U.K.

68 %

USA

53 %

Greece

113 %

Portugal

77 %

Norway

61 %

Poland

47 %

Singapore

113 %

Canada

75 %

Brazil

60 %

Finland

44 %

Iceland

108 %

Germany

72 %

India

58 %

Denmark

42 %

In 2009

Solutions under

the current Macroeconomic
System

of Money as Debt



Mostly Equilibria in the Real Sector



Government Debt is
Build


in

the System of Money as Debt


Built
-
in Debt

For Growing Economy


Liquidation of Government Debt

under the System of Money as Debt


Liquidation of Government Debt

By

Primary Balance Ratio of 91%

(9% Spending Cut) at t=6

Built
-
in Debt

For Growing Economy


Liquidation of Debt is Costly !


Recession

Current Macroeconomic System is Dead
-
End !

Solutions under

the Macroeconomic System

of Debt
-
free Money



Liquidation of Government Debt and Debt
-
GDP Ratios


Liquidation of Government Debt

Under

A Debt
-
Free Money System


Higher Economic Growth by Debt Liquidation


Higher Economic Growth


Comparison of Prices and Inflation Rates


No Inflation is triggered


by the Liquidation of Debt

Criticism of Debt
-
Free Money System:



Inflation !!!

Can we trust the Government ?



No: Political business cycle proves it.

Then

Can we trust privately
-
owned Central Bank ?

No: History of economic crises proves it.

So, what can be trusted?

Gov’t Policies based on SD models



No Inflation under GDP Gap


GDP gap by changing

the Exponent of Capital

0.4
-
> 0.43

New Issues of of money

by the amount of 23

for 10 years

from t=6



Inflation by
Mis
managing Money Supply

In Equilibrium

increase spending

by 10 for 3 years

starting at t=10

Political Business Cycle



Business Cycles by Mismanaging Money Supply

Increase in


spending

by 10 for

3 years

starting at
t=10

Political Business Cycle



Build
-
in Feedback Mechanism

for Preventing Inflation (Deflation)

Independence of Political Power Abuse

Conclusion

From a viewpoint of
system design,

macroeonomic system of
debt
-
free money

is worth being
implemented

to avoid government debt,
financial crisis

and environmental
destruction


Thank you for your attention !


Macroeconomic Dynamics

-

Accounting System Dynamics Approach
-


On
-
going Draft (v.2, 350 pages)


and SD Simulation Models


are available



at Session A, 5PM, Oct. 2.