Congratulations, you have independently rediscovered Knut Wicksell's pure credit economy, which he expounded in his 1906 Lectures on Political Economy, volume 2. Probably they didn't teach it or even talk about it when you attended MIT because it was "too old."
Until the 19th century, in sparsely settled areas, the account books of a general store functioned as a kind of central ledger, with cash, such as silver coins, rarely used. Credit rather than cash predominated in agricultural regions; payments were settled quarterly, semiannually, or annually at market days.
There's no rule in Monopoly that limits players to only using mortgages to obtain cash. Dealing between players is allowed so the only thing stopping Monopoly repos is player creativity.
Shining your light of expertise on my ignorance using Monopoly™️ was brilliant. Thank you. (Now let’s hope Parker Bros. doesn’t rip you off with a rules change)
This is a wonderful, practical description of the Fiscal Theory of the Price Level. All the sentences correlate with the equations in John H Cochrane's latest book. One concept, though, needs to be added. It's not only the total net private financial wealth (which arises from the total federal debt) that predicts inflation, but more importantly, the extent to which we expect the federal government to tax vs inflate to honor that debt.
A rose by any other name is still....... In Arnold's previous post on this topic he questioned whether we would have such a thing as Monetary Theory if we had a cashless society. I think we would have something like "Monetary Theory" except it would have a different name. When looing at access to the payment system we usually examine only the asset side of the balance sheet. The assets in the balance sheet have various characteristics. Some of those assets consist of things wanted by everyone. Assets Wanted by Everyone (AWE) means one can exchange an AWE for anything else which would include AWE as well as non-AWE. I'm sure one can see pretty quickly that the amount of AWE in existence will influence people's behavior and economists would develop theories about the impact of changing the level of AWE. Probably we would begin to describe what would amount to Monetary Policy as Shock and AWE.
I am trying to understand your conception of a cashless society in which there is no money (no deposits or currency) and in which the central bank has no influence on the economy.
If you add up everyone's balance of dollars at a point in time, what would it sum to? A positive number? I think your answer is zero. If so, I don't see how this system gets started in the first place.
At the dawn of time in a cashless society, someone wants to buy something and they must pay by telling the computer to deduct a dollar from their balance and ading it to someone else's balance. But this person has a zero balance. So they borrow dollars using a real asset as collateral. Who lends? How did they get dollars to lend? How is the dollar value of their collateral determined?
While it might not be directly relevant, it seems worth noting that total wealth tends to increase as the game of monopoly progresses. That certainly seems real world. What isn't real world is that in monopoly, most players wealth does not increase. Unless the players collude, it won't. In monopoly there can only be one winner but in real world free market capitalism that's not what happens.
Yes, the haircut in Monopoly is larger. My memory is the "interest charge" to unmortgage is also rather large, though it doesn't increase each turn so there's no time factor.
Beyond that monopoly seems nothing like finance. When a bank loans out money, most of it eventually comes back to that bank or another bank as a new deposit and they lend most of it out again, unless they deposit it with the Fed instead. (Increased deposits with Fed is one reason the Fed's new money and quantitative easing did not create inflation after the great recession). They create more money. Cash or cashless system does nothing to change this. I'm not sure if it is the same issue as I just described or another but I'm baffled why you think a CD would exist in a cashless system but not a checking account. Other than the length of the deposit (checking is a series of one day deposits) they seem the same to me.
That all said, I remain clueless why you think a cashless system is different in the ways you suggest.
The Fed might have to develop new instruments to deal with a cashless society, but a policy trying to keep inflation at a rate that facilitates relative price changes, would not need to change at all.
Congratulations, you have independently rediscovered Knut Wicksell's pure credit economy, which he expounded in his 1906 Lectures on Political Economy, volume 2. Probably they didn't teach it or even talk about it when you attended MIT because it was "too old."
Until the 19th century, in sparsely settled areas, the account books of a general store functioned as a kind of central ledger, with cash, such as silver coins, rarely used. Credit rather than cash predominated in agricultural regions; payments were settled quarterly, semiannually, or annually at market days.
There's no rule in Monopoly that limits players to only using mortgages to obtain cash. Dealing between players is allowed so the only thing stopping Monopoly repos is player creativity.
Shining your light of expertise on my ignorance using Monopoly™️ was brilliant. Thank you. (Now let’s hope Parker Bros. doesn’t rip you off with a rules change)
This is a wonderful, practical description of the Fiscal Theory of the Price Level. All the sentences correlate with the equations in John H Cochrane's latest book. One concept, though, needs to be added. It's not only the total net private financial wealth (which arises from the total federal debt) that predicts inflation, but more importantly, the extent to which we expect the federal government to tax vs inflate to honor that debt.
A rose by any other name is still....... In Arnold's previous post on this topic he questioned whether we would have such a thing as Monetary Theory if we had a cashless society. I think we would have something like "Monetary Theory" except it would have a different name. When looing at access to the payment system we usually examine only the asset side of the balance sheet. The assets in the balance sheet have various characteristics. Some of those assets consist of things wanted by everyone. Assets Wanted by Everyone (AWE) means one can exchange an AWE for anything else which would include AWE as well as non-AWE. I'm sure one can see pretty quickly that the amount of AWE in existence will influence people's behavior and economists would develop theories about the impact of changing the level of AWE. Probably we would begin to describe what would amount to Monetary Policy as Shock and AWE.
I am trying to understand your conception of a cashless society in which there is no money (no deposits or currency) and in which the central bank has no influence on the economy.
If you add up everyone's balance of dollars at a point in time, what would it sum to? A positive number? I think your answer is zero. If so, I don't see how this system gets started in the first place.
At the dawn of time in a cashless society, someone wants to buy something and they must pay by telling the computer to deduct a dollar from their balance and ading it to someone else's balance. But this person has a zero balance. So they borrow dollars using a real asset as collateral. Who lends? How did they get dollars to lend? How is the dollar value of their collateral determined?
While it might not be directly relevant, it seems worth noting that total wealth tends to increase as the game of monopoly progresses. That certainly seems real world. What isn't real world is that in monopoly, most players wealth does not increase. Unless the players collude, it won't. In monopoly there can only be one winner but in real world free market capitalism that's not what happens.
Yes, the haircut in Monopoly is larger. My memory is the "interest charge" to unmortgage is also rather large, though it doesn't increase each turn so there's no time factor.
Beyond that monopoly seems nothing like finance. When a bank loans out money, most of it eventually comes back to that bank or another bank as a new deposit and they lend most of it out again, unless they deposit it with the Fed instead. (Increased deposits with Fed is one reason the Fed's new money and quantitative easing did not create inflation after the great recession). They create more money. Cash or cashless system does nothing to change this. I'm not sure if it is the same issue as I just described or another but I'm baffled why you think a CD would exist in a cashless system but not a checking account. Other than the length of the deposit (checking is a series of one day deposits) they seem the same to me.
That all said, I remain clueless why you think a cashless system is different in the ways you suggest.
The Fed might have to develop new instruments to deal with a cashless society, but a policy trying to keep inflation at a rate that facilitates relative price changes, would not need to change at all.