bain_y_howells__monetary_economics__policy_and_its_theoretical_basis

464 MONETARY ECONOMICS
Endnotes
Chapter 1
1. This includes the idea that, in past societies, money has taken the form of
colourful objects such as ‘cattle, tobacco, leather and hides, furs, olive oil, beer
or spirits, slaves or wives, copper, iron, gold, silver, rings, diamonds, wampum
beads or shells, huge rocks and landmarks, and cigarette butts’. This list is
taken from Samuelson (9e, 1973).
2. It is possible for a firm to be bankrupted because their resources are insufficiently
liquid but this implies an inability to borrow and, thus, a judgement by
financial intermediaries about the true value of the firm’s illiquid resources.
3. Essentially notes and coins (see Chapter 1).
4. In making this argument, Wray quotes extensively from Polanyi (1971).
5. In modern economies, seigniorage takes many forms. For example, in international
economics, the willingness of countries and central banks to hold and
use US dollars after World War II converted US dollars into a world currency
and the US government obtained benefits (or seigniorage) as the issuer of the
currency. It gave the USA the ability to run Balance of Payments deficits and
thus to expand the economy to a greater extent than would otherwise have
been possible and to spend freely abroad.
6. This led to Gresham’s Law stated by Sir Thomas Gresham in 1558 as ‘bad
money always drives out good’.
Chapter 3
1. In many systems the expression ‘non-bank private sector’ is used to denote the
general (non-government) public whose holdings of deposits are part of the
money stock. In the UK, M4 includes building society as well as bank
deposits and so the relevant deposit holders have to be identified as the ‘nonbank,
non-building society, private sector’. Fortunately, this is usually shortened
to ‘M4 private sector’ or simply ‘M4PS’.
2. The suggestion that deposits and loans (and changes in them) must match may
seem strange. It does involve a small simplification in that it abstracts from
shareholders’ funds on the liabilities side. But this apart, the statement is correct
since all bank assets are loans in some shape or form. Securities/investments
are loans (mainly to government) backed by securities. Since notes and
coin are issued by government, holdings of these are also in effect loans to the