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Is the PMC Transition Plan Inflationary?
1. Recap: the players and their interactions in monetary creation.
The players:
TAXPAYERS/CONSUMERS
FED GOV
BANK OF CANADA (central bank, a crown corp.)
COMMERCIAL BANKS (private shareholders)
Interactions:
PRIMARY MARKET
Fed Gov issues securities (bonds, treasury bills) in order to get cash to pay for govt programs.
Securities pay to the holder both interest and eventual principal repayment.
They are acquired by the BoC, using MCAAKE (trademark!) = money created as a keyboard entry.
Interest earned on securities held by the BoC (making up usually 13% of total issue) is returned to the Fed Gov.
SECONDARY MARKET
The Bank of Canada first absorbs all marketable securities.
The BoC then auctions off to institutions incl. commercial banks the securities not held by itself (i.e., about 87% of issue).
The commercial banks are allowed to use MCAAKE to complete these purchases.
The BoC holds the money it receives from commercial banks in accounts called “settlement balances”.
The BoC pays interest on the settlement balances, using its own MCAAKE.
Quantitative Easing (QE): significantly increased bank liquidity facilitated by the BoC.
LOANS MARKET
Commercial banks lend to creditworthy consumers and businesses at interest, using MCAAKE.
Problem: taxpayer/consumer is on the hook to pay interest using real money earned over time.
In the aggregate, the amount of money in circulation is insufficient to allow debtors to pay the interest.
2. Is the PMC proposal inflationary?
Reflexive talking point: “government spending causes inflation.”
3. Major causes of inflation in recent times.
Energy prices; downstream effects and artificial rises; QE and stock market speculation; real estate institutional purchases. Govt relief money: minimal effect on inflation. “Corporate greed” is really a result of the institutional set-up.
4. Hyperinflation: essential causes.
5. Straw men and the real problem.
We point to the structural setup that channels wealth from the general populace into private hands.
6. PMC - a (truly!) modest proposal:
a. already exisiting practice;
b. gradual in implementation;
c. requires only a mandate from parliament;
d. the Bank of Canada Act in its preamble has not changed.
7. COMER inititative.
8. Jeff says: please see website resources, where you can see plain language explanations.
RESOURCES
BoC pdf: Settlement Balances Deconstructed June 2022
Progressive Money Canada:
money creation page
hyperinlfation page
View all episodes
By Ed Robertson1. Recap: the players and their interactions in monetary creation.
The players:
TAXPAYERS/CONSUMERS
FED GOV
BANK OF CANADA (central bank, a crown corp.)
COMMERCIAL BANKS (private shareholders)
Interactions:
PRIMARY MARKET
Fed Gov issues securities (bonds, treasury bills) in order to get cash to pay for govt programs.
Securities pay to the holder both interest and eventual principal repayment.
They are acquired by the BoC, using MCAAKE (trademark!) = money created as a keyboard entry.
Interest earned on securities held by the BoC (making up usually 13% of total issue) is returned to the Fed Gov.
SECONDARY MARKET
The Bank of Canada first absorbs all marketable securities.
The BoC then auctions off to institutions incl. commercial banks the securities not held by itself (i.e., about 87% of issue).
The commercial banks are allowed to use MCAAKE to complete these purchases.
The BoC holds the money it receives from commercial banks in accounts called “settlement balances”.
The BoC pays interest on the settlement balances, using its own MCAAKE.
Quantitative Easing (QE): significantly increased bank liquidity facilitated by the BoC.
LOANS MARKET
Commercial banks lend to creditworthy consumers and businesses at interest, using MCAAKE.
Problem: taxpayer/consumer is on the hook to pay interest using real money earned over time.
In the aggregate, the amount of money in circulation is insufficient to allow debtors to pay the interest.
2. Is the PMC proposal inflationary?
Reflexive talking point: “government spending causes inflation.”
3. Major causes of inflation in recent times.
Energy prices; downstream effects and artificial rises; QE and stock market speculation; real estate institutional purchases. Govt relief money: minimal effect on inflation. “Corporate greed” is really a result of the institutional set-up.
4. Hyperinflation: essential causes.
5. Straw men and the real problem.
We point to the structural setup that channels wealth from the general populace into private hands.
6. PMC - a (truly!) modest proposal:
a. already exisiting practice;
b. gradual in implementation;
c. requires only a mandate from parliament;
d. the Bank of Canada Act in its preamble has not changed.
7. COMER inititative.
8. Jeff says: please see website resources, where you can see plain language explanations.
RESOURCES
BoC pdf: Settlement Balances Deconstructed June 2022
Progressive Money Canada:
money creation page
hyperinlfation page