Money and Economic Reforms
This article is a continuation of the article published on December 11, 2015 on the same resource of my article.
“Money in the economy is not enough? Why?"
A direct impetus to its writing was the reading of the article of the current First Deputy Chairman of the Bank of Russia Dmitry Tulin “ In Search of Seignorage, or Easy Ways to Prosperity” , devoted to criticism of the well-known proposals of Sergei Glazyev.
This article was published in November 2014, but I read it only recently.
Now you can more accurately answer the following questions raised in the discussion of my December article:
1. Is money and their quantity the direct driving force of the economy?
')
2. Who exactly and where exactly is not enough money?
3. Is it possible to cause economic growth only by concessional loans?
4. Do we need to focus on the development of the existing monetary system based on the ruble as the only legal means of payment, or is it better (and quite enough) to allow the use in settlements within the Russian Federation without any restrictions of any foreign currency?
The answer to the first question is simple - no, money itself is not the driving force of the economy.
I already wrote that money is a lubricant for the economy. And on one grease you will not get far.
And if you pour in more oil, you will not go faster either.
Now I saw with great interest that in almost exactly the same way D. Tulin speaks in one of his interviews (I will refer to him several times more). Here is a quote from his interview (“Interfax” March 5, 2015):
“ To understand, economics can be compared to a complex machine that is run by several brigades of people. The Central Bank has a brigade, there is a brigade in the Ministry of Finance, there is a brigade from industry ministries, the government, the presidential administration. And everyone is trying to make our economy viable and surviving, and people live well. The Central Bank has a team of people responsible for the supply of oil. If it is too much to fill in - it is bad, a little to fill in is even worse. But unlike the car, there are no strict technical instructions . ”
Probably you can not tell more clearly. Is it possible to add that in the modern economy there are not enough methods of purposeful (and not using the “hand of the market”) redistribution of lubricant (money) from those places where there is now some excess to those places where there is a shortage.
Consider question number 2: Who exactly and where exactly is not enough money?
If you take specific people or individual organizations - of course, specific people and organizations do not have enough money by definition. This is a common place and you can not talk about it.
Let us now look at this issue from the point of view of the country's banking system. The lack of money, if any, is here called the lack of liquidity. Is there a lack of liquidity in the banking system?
I am inclined to agree with D. Tulin here that now (as of March 2015) there is apparently no shortage of liquidity in the Russian banking system. He justifies this by:
“ We believe that liquidity is still enough. Why do we think so? Well, firstly, when we conducted the last auctions, our offer exceeded demand, and liquidity was not fully chosen. This is the first sign that there is no rush at the current level of interest rates.
The second sign that liquidity is enough is that the rate of the interbank market falls within the corridor around the key rate. In December, when we had a super-tight policy, the rate of the interbank market was almost a week above the upper limit, but then we were not up to the purity of the theory of inflation targeting. And now all this has returned to normal, our policy has become moderately tight, and the stakes have entered the corridor.
And the third indicator is the utilization of collateral. According to our estimates, the disposal of market assets at the end of 2014 reached its peak - 80%, that is, only 20% was not yet used. Now a survey of banks shows that this figure has dropped to 50%. Our units that are engaged in lending on the security of non-marketable assets are more conservative. They do not interrogate anyone, but trust only what they themselves have “felt.” They have different numbers, but the trend is the same. According to them, the utilization rate of non-market collateral as of January 1, 2015 was 86%, and as of February 25, it was 69.5%. These signs suggest that there is still enough liquidity collateral, but the problem is that the economy’s lending is not very well at these rates . ”
So what's all good with the amount of money?
No, banks are not final consumers of money.
That is enough for them, but not for the economy. And it is necessary to speak about the economy as a whole.
The following signs speak of a deficit (shortage) of money in the economy as a whole (note that I’m talking about signs, not about evidence, because if it were possible to bring evidence so easily, it would mean that the task of determining the required amount of money got his solution. And alas, this is not so. This task has no simple solution):
1. A low coefficient of monetization in our country (the coefficient of monetization is the ratio of the money supply in the country to GDP). It is now less than 50% in Russia, while not only in developed countries, but even in all other BRICS countries, it is much larger and closer to 100% and even more.
2. Small and medium businesses have now become virtually inaccessible bank project financing (I am writing this from my own experience of the last year and, if necessary, I can explain this conclusion separately).
We confine ourselves for the time being with these signs.
Of particular interest is the monetization coefficient also because if you look at exactly how prosperous countries in the world are grouped together in an economic sense (where, in particular, low inflation, sustainable economic growth) and disadvantaged (high inflation, unstable growth or lack thereof), then so it turns out that in the first group of countries the monetization is always high, and in the second it is always low.
So what kind of beast is this - monetization? Is it not necessary to increase it urgently, quickly and immediately (as many suggest)?
I think we should treat it (monetization) as an integral characteristic of the type of body temperature in humans. And low monetization is a sign of some trouble. It is like an increased or excessively low temperature in a patient — symptoms of some kind of illness. And of course, it is necessary to treat not the symptom, but the disease itself. Only now, continuing the analogy, if the disease is neglected, then at the same time as treating the causes of the disease, it is necessary that the temperature be brought down or the person is warmed up, otherwise the patient will not live to recover.
It should also be said here that simple linear dependencies practically do not work in the economy. For example, the well-known Fisher equation ( MV = PQ ), which relates the amount of money in circulation to the speed of their circulation, the price of goods and their quantity, is in fact suitable only for elementary education in the basics of economics, but completely unsuitable for practice.
And the existing dependencies are all multiparametric and always non-linear.
So for example, if we analyze economic statistics for many countries and try to build one-dimensional graphs of the inflation rate as a function of the following values: monetization coefficient, refinancing rate, government spending share in GDP and wage share to GDP, all these dependencies look like a V-shaped curve with distinct inflation minima with the following values of the studied parameters:
- in terms of monetization - minimum inflation at 100-150%
- at the refinancing rate - at least at 2-6%
- by the share of government spending in GDP - at least at about 80%
- by the share of wages in GDP - at least at about 70%
(source: S.Sulakshin's speech at the scientific conference “Demonetization as a factor of stagnation”).
Thus, it can be assumed that the well-being of the economy can be achieved only with approximately the above parameters of the economy.
Now suppose that we decided to raise the monetization coefficient and stimulate economic growth, not inflation, but not due to direct issue of rubles by the Central Bank, but by a sharp decrease in the refinancing rate and an increase in the bank multiplier (which is about 3 in the Russian Federation).
Those. We will stimulate the growth of the amount, conditionally speaking, of “credit money” (although I will immediately make a reservation that this “credit money” in circulation does not in any way differ from all other money, including directly issued by the Central Bank).
At the same time, however, it will be necessary for the Central Bank to significantly soften its standards, in particular, the N1 ratio (simplified, this is the ratio of bank capital to the amount of loans issued). Now the standard H1 in each bank must be at least 10%.
And with a total amount of loans issued about 55 trillion. rubles and the capital of the entire banking system of 8 trillion rubles the average value of the standard H1 is already close to the limit value.
Well, or it is necessary to greatly increase the capitalization of the banking system (again, to give money from the budget to state banks.)
And of course, it will be necessary for banks and the Central Bank to reduce the requirements for the quality of loans.
All this, of course, in the future will reduce as the overall stability of the banking system to the next crisis and reduce competition in it. This is at least.
However, if the volume of cheap loans can be raised (and the economy needs only cheap loans), then only crumbs will reach the real sector.
First, as Tulin rightly writes, at the expense of interest-based arbitrage, there will be a redistribution of credit money into deposits, of which, as a result, only money for the former or slightly lower interest will reach the real sector.
Secondly, no one has canceled such a phenomenon as capital flight and a substantial part of cheap money will simply increase the export of capital abroad.
Thirdly, it is necessary to take into account that it is now more profitable for banks to lend to individuals, and not enterprises. And such lending will stimulate the growth of imports and, therefore, first, an increase in inflation, and only then, perhaps, there will be an increase in production.
So by themselves, low-interest, cheap loans (if you make the main rate only for them), alas, not a panacea either.
Let us now take a closer look at what D.Tulin writes in his article published in November 2014 (it’s better, of course, that you read this article completely):
1. The current monetary policy of the Bank of Russia is basically correct, although there were mistakes in it, and the change in the “ financial paradigm, financial and economic model ” as a whole, which actually makes sense to say, “ goes beyond the scope of authority and responsibility Central Bank .
2. D.Tulin agrees with S.Glaziev that “the relationship between the dynamics of the growth of the money supply and inflation rates is not strict - the quantitative parameters of this relationship are not the same in different periods of time and in different national economies ”. Those. in other words, the growth of the money supply does not cause a purely automatic, obligatory growth of inflation (although it can sometimes cause it).
3. He criticizes, in my opinion, reasonably and convincingly, the idea of a "seignorage" arising from the process of any issue of money.
4. Writes that there is no evidence-based causal link between the methods of issuing money by the Central Bank (by purchasing foreign currency or through refinancing operations in the domestic market) and the growth rate of the economy.
5. Shows how and why preferential (at a low rate) loans of the Central Bank without a radical change in many of the existing financial and economic schemes - will not give the real sector cheap money.
Here at the last, what can be understood by truly radical reforms in money circulation and the economy as a whole , and we must dwell in more detail.
My fourth question (should I focus on the development of the existing monetary system based on the ruble as the sole legal means of payment, or is it better (and quite enough) to allow the use in settlements within the Russian Federation without restrictions of any foreign currency?) Was deliberately a little provocative. Because the correct answer, in my opinion, is neither.
Let's start from the end - why not allow the circulation of dollars without restrictions. As one of the commentators wrote to me earlier, because a dollar in my pocket is already my dollar - where is the loss of sovereignty?
A lot can be said about criticism of the free circulation of the dollar. But I will confine myself to only one: everyone who has a little idea of the specifics of cash payments through banks understand that all payments go through correspondent accounts.
In the end, correspondent accounts for dollars are always in US banks. And the USA at ANY MOMENT can, with a “flick of the wrist,” stop all non-cash transfers of dollars. Well, the value of cash dollars then it will become generally unclear what. Yes, of course they are unlikely to do this in practice. But they can!
What, then, can be done enough radical, remaining within the framework of only the ruble as the only legal means of payment.
1. It is possible and even to a certain extent, it is necessary to introduce direct state management (not control as it is now, namely, management) in terms of managing the credit policy of banks. The measure is not very market. Although, allegedly, it is actively used in some countries (China, Italy).
2. It is possible (as suggested by, in particular, Mikhail Yuriev) to introduce a total ban on the ownership and any use of foreign currency within the country. It is also not a market measure.
3. You can try to cancel the partial bank reservation system itself. Introduce the rule of mandatory 100% reservation of term deposits with the Central Bank. In this case, the only issuer of money will be only the state. Banks will not produce credit money. And by the way a lot of reasons for banking crises will disappear. However, there will be no need for the Central Bank either. Such proposals are promoted by the Austrian School of Economics. True growth of monetization, these proposals do not provide at all.
In this regard, I want to return again to the proposal, which was described earlier in my article “ What kind of money the economy needs (new money for settlements )”, published on this resource on November 30, 2015
Its use will make it possible to use non-market measures of direct state administration to a lesser extent (although we cannot do without them, either).
The basis of this proposal is, first of all, the rejection of the assumption (well, or statements, someone like) that the parallel circulation of several domestic currencies (but not foreign ones of course!) Is bad and inconvenient.
In this regard, I propose to recall that even in the history of our country there were at least three periods when several currencies existed in parallel.
The first period - the middle of the 19th century - the simultaneous and prolonged circulation of a silver coin and paper banknotes.
The second period - the twenties of the 20th century - NEP - the parallel circulation of the “golden chervonets” and “ordinary rubles”.
The third period - from about the end of the thirties to the beginning of the sixties of the last century. In the USSR, then there were two different rubles with different areas of circulation: the ruble was cash and the cash was non-cash, and sometimes the number of such different currencies reached 4, so in the settlements between the CMEA countries another ruble was used, and foreign workers could receive part of their salaries in Vneshtorgbank’s checks (which could then be spent in the special chain of shops Berezka on return to the USSR).
In all these cases, the state has solved, and quite successfully, including with the help of several currencies, various socio-economic tasks.
Further, let us recall once again about local additional currencies, which during periods of crisis and economic recession in many countries very successfully helped to solve local economic problems. They first of all eliminated local failures in the distribution of the money supply, and also allowed to solve local problems on their own, without waiting for help from the central organs of the state.
And so it is quite logical to add a list of measures for radical economic reform (and there should of course be a few measures, now I consciously speak only about one of the measures) with the condition for allowing the circulation of local local currencies.
And we will further increase the monetization of the economy not by issuing ordinary rubles (followed by a bunch of problems of how to deliver them to the real sector of the economy), but by issuing new types of currency into circulation. All the same, we really are in the process of increasing monetization - so it is better to do this through multi-currency systems.
The new currency (I conditionally called it - Special Means of Settlement - abbreviated - SSR ) should be intended only for calculations, without the accumulation function.
It should be with a demurrage and there should be a ban on its use in foreign exchange and stock markets. In all other calculations, it probably needs to be allowed to apply.
The state (Government) should use this currency to finance public investment.
I think the introduction of another currency into circulation - only for settlements - will also allow a new approach (which also needs to be done) and, in general, the question of the role, place and significance of the currency and stock market in the economy.
The presence of two different currencies (for calculations - the currency with demurrage and ordinary currencies with low lending rate for savings and savings, and a number of other purposes) will reflect and support the simultaneous existence of two equally necessary but seemingly opposing social objectives:
- to promote competition (ordinary money with a lending rate) and
- encouraging cooperation (how and why money with a demerit encourages cooperation is well written by Bernard Liethar (the book "The Soul of Money" and "The Future of Money").
In conclusion, in one essential point, I would like to add D. Tulin's theses. Namely: money (and their amount in the economy) cannot be considered only as a derivative of the existing economic ties and the degree of complexity of the economy. They themselves (or rather, certainly not they, but the existing monetary system itself) are the most serious factor that changes even the consciousness of people, and not only the economy. Wait when the economy evolves and then the question of increasing the money supply and other issues of the monetary system will be solved as if by themselves, alas, there is no possibility. I'm afraid just will not wait.
“Money in the economy is not enough? Why?"
A direct impetus to its writing was the reading of the article of the current First Deputy Chairman of the Bank of Russia Dmitry Tulin “ In Search of Seignorage, or Easy Ways to Prosperity” , devoted to criticism of the well-known proposals of Sergei Glazyev.
This article was published in November 2014, but I read it only recently.
Now you can more accurately answer the following questions raised in the discussion of my December article:
1. Is money and their quantity the direct driving force of the economy?
')
2. Who exactly and where exactly is not enough money?
3. Is it possible to cause economic growth only by concessional loans?
4. Do we need to focus on the development of the existing monetary system based on the ruble as the only legal means of payment, or is it better (and quite enough) to allow the use in settlements within the Russian Federation without any restrictions of any foreign currency?
The answer to the first question is simple - no, money itself is not the driving force of the economy.
I already wrote that money is a lubricant for the economy. And on one grease you will not get far.
And if you pour in more oil, you will not go faster either.
Now I saw with great interest that in almost exactly the same way D. Tulin speaks in one of his interviews (I will refer to him several times more). Here is a quote from his interview (“Interfax” March 5, 2015):
“ To understand, economics can be compared to a complex machine that is run by several brigades of people. The Central Bank has a brigade, there is a brigade in the Ministry of Finance, there is a brigade from industry ministries, the government, the presidential administration. And everyone is trying to make our economy viable and surviving, and people live well. The Central Bank has a team of people responsible for the supply of oil. If it is too much to fill in - it is bad, a little to fill in is even worse. But unlike the car, there are no strict technical instructions . ”
Probably you can not tell more clearly. Is it possible to add that in the modern economy there are not enough methods of purposeful (and not using the “hand of the market”) redistribution of lubricant (money) from those places where there is now some excess to those places where there is a shortage.
Consider question number 2: Who exactly and where exactly is not enough money?
If you take specific people or individual organizations - of course, specific people and organizations do not have enough money by definition. This is a common place and you can not talk about it.
Let us now look at this issue from the point of view of the country's banking system. The lack of money, if any, is here called the lack of liquidity. Is there a lack of liquidity in the banking system?
I am inclined to agree with D. Tulin here that now (as of March 2015) there is apparently no shortage of liquidity in the Russian banking system. He justifies this by:
“ We believe that liquidity is still enough. Why do we think so? Well, firstly, when we conducted the last auctions, our offer exceeded demand, and liquidity was not fully chosen. This is the first sign that there is no rush at the current level of interest rates.
The second sign that liquidity is enough is that the rate of the interbank market falls within the corridor around the key rate. In December, when we had a super-tight policy, the rate of the interbank market was almost a week above the upper limit, but then we were not up to the purity of the theory of inflation targeting. And now all this has returned to normal, our policy has become moderately tight, and the stakes have entered the corridor.
And the third indicator is the utilization of collateral. According to our estimates, the disposal of market assets at the end of 2014 reached its peak - 80%, that is, only 20% was not yet used. Now a survey of banks shows that this figure has dropped to 50%. Our units that are engaged in lending on the security of non-marketable assets are more conservative. They do not interrogate anyone, but trust only what they themselves have “felt.” They have different numbers, but the trend is the same. According to them, the utilization rate of non-market collateral as of January 1, 2015 was 86%, and as of February 25, it was 69.5%. These signs suggest that there is still enough liquidity collateral, but the problem is that the economy’s lending is not very well at these rates . ”
So what's all good with the amount of money?
No, banks are not final consumers of money.
That is enough for them, but not for the economy. And it is necessary to speak about the economy as a whole.
The following signs speak of a deficit (shortage) of money in the economy as a whole (note that I’m talking about signs, not about evidence, because if it were possible to bring evidence so easily, it would mean that the task of determining the required amount of money got his solution. And alas, this is not so. This task has no simple solution):
1. A low coefficient of monetization in our country (the coefficient of monetization is the ratio of the money supply in the country to GDP). It is now less than 50% in Russia, while not only in developed countries, but even in all other BRICS countries, it is much larger and closer to 100% and even more.
2. Small and medium businesses have now become virtually inaccessible bank project financing (I am writing this from my own experience of the last year and, if necessary, I can explain this conclusion separately).
We confine ourselves for the time being with these signs.
Of particular interest is the monetization coefficient also because if you look at exactly how prosperous countries in the world are grouped together in an economic sense (where, in particular, low inflation, sustainable economic growth) and disadvantaged (high inflation, unstable growth or lack thereof), then so it turns out that in the first group of countries the monetization is always high, and in the second it is always low.
So what kind of beast is this - monetization? Is it not necessary to increase it urgently, quickly and immediately (as many suggest)?
I think we should treat it (monetization) as an integral characteristic of the type of body temperature in humans. And low monetization is a sign of some trouble. It is like an increased or excessively low temperature in a patient — symptoms of some kind of illness. And of course, it is necessary to treat not the symptom, but the disease itself. Only now, continuing the analogy, if the disease is neglected, then at the same time as treating the causes of the disease, it is necessary that the temperature be brought down or the person is warmed up, otherwise the patient will not live to recover.
It should also be said here that simple linear dependencies practically do not work in the economy. For example, the well-known Fisher equation ( MV = PQ ), which relates the amount of money in circulation to the speed of their circulation, the price of goods and their quantity, is in fact suitable only for elementary education in the basics of economics, but completely unsuitable for practice.
And the existing dependencies are all multiparametric and always non-linear.
So for example, if we analyze economic statistics for many countries and try to build one-dimensional graphs of the inflation rate as a function of the following values: monetization coefficient, refinancing rate, government spending share in GDP and wage share to GDP, all these dependencies look like a V-shaped curve with distinct inflation minima with the following values of the studied parameters:
- in terms of monetization - minimum inflation at 100-150%
- at the refinancing rate - at least at 2-6%
- by the share of government spending in GDP - at least at about 80%
- by the share of wages in GDP - at least at about 70%
(source: S.Sulakshin's speech at the scientific conference “Demonetization as a factor of stagnation”).
Thus, it can be assumed that the well-being of the economy can be achieved only with approximately the above parameters of the economy.
Now suppose that we decided to raise the monetization coefficient and stimulate economic growth, not inflation, but not due to direct issue of rubles by the Central Bank, but by a sharp decrease in the refinancing rate and an increase in the bank multiplier (which is about 3 in the Russian Federation).
Those. We will stimulate the growth of the amount, conditionally speaking, of “credit money” (although I will immediately make a reservation that this “credit money” in circulation does not in any way differ from all other money, including directly issued by the Central Bank).
At the same time, however, it will be necessary for the Central Bank to significantly soften its standards, in particular, the N1 ratio (simplified, this is the ratio of bank capital to the amount of loans issued). Now the standard H1 in each bank must be at least 10%.
And with a total amount of loans issued about 55 trillion. rubles and the capital of the entire banking system of 8 trillion rubles the average value of the standard H1 is already close to the limit value.
Well, or it is necessary to greatly increase the capitalization of the banking system (again, to give money from the budget to state banks.)
And of course, it will be necessary for banks and the Central Bank to reduce the requirements for the quality of loans.
All this, of course, in the future will reduce as the overall stability of the banking system to the next crisis and reduce competition in it. This is at least.
However, if the volume of cheap loans can be raised (and the economy needs only cheap loans), then only crumbs will reach the real sector.
First, as Tulin rightly writes, at the expense of interest-based arbitrage, there will be a redistribution of credit money into deposits, of which, as a result, only money for the former or slightly lower interest will reach the real sector.
Secondly, no one has canceled such a phenomenon as capital flight and a substantial part of cheap money will simply increase the export of capital abroad.
Thirdly, it is necessary to take into account that it is now more profitable for banks to lend to individuals, and not enterprises. And such lending will stimulate the growth of imports and, therefore, first, an increase in inflation, and only then, perhaps, there will be an increase in production.
So by themselves, low-interest, cheap loans (if you make the main rate only for them), alas, not a panacea either.
Let us now take a closer look at what D.Tulin writes in his article published in November 2014 (it’s better, of course, that you read this article completely):
1. The current monetary policy of the Bank of Russia is basically correct, although there were mistakes in it, and the change in the “ financial paradigm, financial and economic model ” as a whole, which actually makes sense to say, “ goes beyond the scope of authority and responsibility Central Bank .
2. D.Tulin agrees with S.Glaziev that “the relationship between the dynamics of the growth of the money supply and inflation rates is not strict - the quantitative parameters of this relationship are not the same in different periods of time and in different national economies ”. Those. in other words, the growth of the money supply does not cause a purely automatic, obligatory growth of inflation (although it can sometimes cause it).
3. He criticizes, in my opinion, reasonably and convincingly, the idea of a "seignorage" arising from the process of any issue of money.
4. Writes that there is no evidence-based causal link between the methods of issuing money by the Central Bank (by purchasing foreign currency or through refinancing operations in the domestic market) and the growth rate of the economy.
5. Shows how and why preferential (at a low rate) loans of the Central Bank without a radical change in many of the existing financial and economic schemes - will not give the real sector cheap money.
Here at the last, what can be understood by truly radical reforms in money circulation and the economy as a whole , and we must dwell in more detail.
My fourth question (should I focus on the development of the existing monetary system based on the ruble as the sole legal means of payment, or is it better (and quite enough) to allow the use in settlements within the Russian Federation without restrictions of any foreign currency?) Was deliberately a little provocative. Because the correct answer, in my opinion, is neither.
Let's start from the end - why not allow the circulation of dollars without restrictions. As one of the commentators wrote to me earlier, because a dollar in my pocket is already my dollar - where is the loss of sovereignty?
A lot can be said about criticism of the free circulation of the dollar. But I will confine myself to only one: everyone who has a little idea of the specifics of cash payments through banks understand that all payments go through correspondent accounts.
In the end, correspondent accounts for dollars are always in US banks. And the USA at ANY MOMENT can, with a “flick of the wrist,” stop all non-cash transfers of dollars. Well, the value of cash dollars then it will become generally unclear what. Yes, of course they are unlikely to do this in practice. But they can!
What, then, can be done enough radical, remaining within the framework of only the ruble as the only legal means of payment.
1. It is possible and even to a certain extent, it is necessary to introduce direct state management (not control as it is now, namely, management) in terms of managing the credit policy of banks. The measure is not very market. Although, allegedly, it is actively used in some countries (China, Italy).
2. It is possible (as suggested by, in particular, Mikhail Yuriev) to introduce a total ban on the ownership and any use of foreign currency within the country. It is also not a market measure.
3. You can try to cancel the partial bank reservation system itself. Introduce the rule of mandatory 100% reservation of term deposits with the Central Bank. In this case, the only issuer of money will be only the state. Banks will not produce credit money. And by the way a lot of reasons for banking crises will disappear. However, there will be no need for the Central Bank either. Such proposals are promoted by the Austrian School of Economics. True growth of monetization, these proposals do not provide at all.
In this regard, I want to return again to the proposal, which was described earlier in my article “ What kind of money the economy needs (new money for settlements )”, published on this resource on November 30, 2015
Its use will make it possible to use non-market measures of direct state administration to a lesser extent (although we cannot do without them, either).
The basis of this proposal is, first of all, the rejection of the assumption (well, or statements, someone like) that the parallel circulation of several domestic currencies (but not foreign ones of course!) Is bad and inconvenient.
In this regard, I propose to recall that even in the history of our country there were at least three periods when several currencies existed in parallel.
The first period - the middle of the 19th century - the simultaneous and prolonged circulation of a silver coin and paper banknotes.
The second period - the twenties of the 20th century - NEP - the parallel circulation of the “golden chervonets” and “ordinary rubles”.
The third period - from about the end of the thirties to the beginning of the sixties of the last century. In the USSR, then there were two different rubles with different areas of circulation: the ruble was cash and the cash was non-cash, and sometimes the number of such different currencies reached 4, so in the settlements between the CMEA countries another ruble was used, and foreign workers could receive part of their salaries in Vneshtorgbank’s checks (which could then be spent in the special chain of shops Berezka on return to the USSR).
In all these cases, the state has solved, and quite successfully, including with the help of several currencies, various socio-economic tasks.
Further, let us recall once again about local additional currencies, which during periods of crisis and economic recession in many countries very successfully helped to solve local economic problems. They first of all eliminated local failures in the distribution of the money supply, and also allowed to solve local problems on their own, without waiting for help from the central organs of the state.
And so it is quite logical to add a list of measures for radical economic reform (and there should of course be a few measures, now I consciously speak only about one of the measures) with the condition for allowing the circulation of local local currencies.
And we will further increase the monetization of the economy not by issuing ordinary rubles (followed by a bunch of problems of how to deliver them to the real sector of the economy), but by issuing new types of currency into circulation. All the same, we really are in the process of increasing monetization - so it is better to do this through multi-currency systems.
The new currency (I conditionally called it - Special Means of Settlement - abbreviated - SSR ) should be intended only for calculations, without the accumulation function.
It should be with a demurrage and there should be a ban on its use in foreign exchange and stock markets. In all other calculations, it probably needs to be allowed to apply.
The state (Government) should use this currency to finance public investment.
I think the introduction of another currency into circulation - only for settlements - will also allow a new approach (which also needs to be done) and, in general, the question of the role, place and significance of the currency and stock market in the economy.
The presence of two different currencies (for calculations - the currency with demurrage and ordinary currencies with low lending rate for savings and savings, and a number of other purposes) will reflect and support the simultaneous existence of two equally necessary but seemingly opposing social objectives:
- to promote competition (ordinary money with a lending rate) and
- encouraging cooperation (how and why money with a demerit encourages cooperation is well written by Bernard Liethar (the book "The Soul of Money" and "The Future of Money").
In conclusion, in one essential point, I would like to add D. Tulin's theses. Namely: money (and their amount in the economy) cannot be considered only as a derivative of the existing economic ties and the degree of complexity of the economy. They themselves (or rather, certainly not they, but the existing monetary system itself) are the most serious factor that changes even the consciousness of people, and not only the economy. Wait when the economy evolves and then the question of increasing the money supply and other issues of the monetary system will be solved as if by themselves, alas, there is no possibility. I'm afraid just will not wait.
Source: https://habr.com/ru/post/297900/
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