Economics Dictionary of ArgumentsHome
| |||
|
| |||
| Monetization of debt: Monetization of debt occurs when a central bank purchases government debt, such as bonds, to finance public spending. This increases the money supply, enabling the government to fund deficits without raising taxes or borrowing from private markets. While it can support economic growth, excessive monetization risks inflation or loss of monetary policy credibility. See also Credit, Money supply, Central Banks, Governmental debt._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
| Author | Concept | Summary/Quotes | Sources |
|---|---|---|---|
|
Murray N. Rothbard on Monetization of Debt - Dictionary of Arguments
Rothbard III 807 Monetization of debt/Rothbard: [Scenario A] The „warehouse receipts“ ((s) quotation marks added) function and exchange as money-substitutes, replacing, not adding to, the gold stored in the bank. All the warehouse receipts are money certificates, 100-percent reserve has been maintained, and no invasion of the free market has occurred. The warehouse receipts may take the form of printed tickets (notes) or book credit (demand deposits) transferable by written order or "check." The two are economically identical. >Money-substitutes/Rothbard, >Banks/Rothbard. [Scenario B] (…) suppose that law enforcement is lax and the bank sees that it can make money easily by engaging in fraud, i.e., by lending some of the depositors' gold (or, rather, issuing pseudo warehouse receipts for nonexistent gold and lending them) to people who wish to borrow it.(1) Rothbard III 808 The warehouse receipts still function as money-substitutes on the market. And we see that new money has been created by the bank out of thin air, as if by magic. This process ofmoney creation has also been called the "monetization of debt," an apt term since it describes the only instance where a liability can be transformed into money - the supreme asset. It is obvious that the more money the bank creates, the more profits it will earn, for any income earned on newly created money is a pure unalloyed gain. The bank has been able to alter the conditions of the free market system, in which money can be obtained only by purchase, mining, or gift. In each of these routes, productive service (…) was necessary in order to obtain money. The bank's inflationary intervention has created another route to money: the creation of new money out of thin air, by issuing receipts for nonexistent gold.(2),(3). >Bank Reserve/Rothbard, >Money market/Rothbard. 1. We might ask why the owners of the bank do not really reap the spoils and lend the money to themselves. The answer is that they once did so profusely, as the history of early American banking shows. Legal regulations forced the banks to abandon this practice. 2. This discussion is not meant to imply that bankers, particularly at the prsent time, are always knowingly engaged in fraudulent practices. So embedded, indeed, have these practices become, and always with the sanction of law as well as of sophisticated but fallacious economic doctrines, that it is undoubtedly a rare banker who regards his standard occupational procedure as fraudulent. 3. For a brilliant discussion of fractional-reserve banking, see Amasa Walker, The Science of Wealth (3rd ed.; Boston: Little, Brown & Co., 1867), pp. 138-68, 184-232._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
||
Authors A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Concepts A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
