{"id":44604,"date":"2019-03-20T06:44:33","date_gmt":"2019-03-20T11:44:33","guid":{"rendered":"https:\/\/olduvai.ca\/?p=44604"},"modified":"2019-03-20T06:44:40","modified_gmt":"2019-03-20T11:44:40","slug":"changes-in-government-deposits-and-money-supply","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=44604","title":{"rendered":"Changes in Government Deposits and Money Supply"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/www.cobdencentre.org\/2019\/03\/changes-in-government-deposits-and-money-supply\/\">CHANGES IN GOVERNMENT DEPOSITS AND MONEY SUPPLY<\/a><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The US debt ceiling suspension, signed in February 2018, expires at the beginning of March this year. Some commentators are of the view that the US Treasury must carry out special measures if it expects a delay in raising the debt ceiling in March.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Treasury would have to draw down its deposits at the Fed and deposit the cash in various government department accounts at commercial banks, for future use to pay government salaries and contractors\u2019 fees.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These commentators are of the view that the Treasury deposit withdrawals act like QE (quantitative easing) and the Treasury deposit build-ups like QT (quantitative tightening). However, is it the case?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If in an economy people hold $<strong>10,000<\/strong>&nbsp;in cash, we would say that the money supply in this economy is $<strong>10,000<\/strong>. If some individuals then decided to place $<strong>2,000<\/strong>&nbsp;of their money in demand deposits, the total money supply will still remain $<strong>10,000<\/strong>, comprising of $<strong>8,000<\/strong>&nbsp;cash and $<strong>2,000<\/strong>&nbsp;in demand deposits.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Now, if government taxes people by $<strong>1,000<\/strong>, this amount of money is then transferred from individual\u2019s demand deposits to the government\u2019s deposits. Conventional thinking would view this as if the money supply fell by $<strong>1,000<\/strong>. In reality, however, the $<strong>1,000<\/strong>&nbsp;is now available for government expenditure meaning that money supply is still $<strong>10,000<\/strong>, comprising of $<strong>8,000&nbsp;<\/strong>in cash, $<strong>1000<\/strong>&nbsp;in individuals demand deposits and $<strong>1,000<\/strong>&nbsp;in government deposits.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If the government were to withdraw $<strong>1000<\/strong>&nbsp;from its deposit with the Fed and buy goods from individuals then the amount of money will be still $<strong>10,000<\/strong>&nbsp;comprising of $<strong>8,000<\/strong>&nbsp;in cash and $<strong>2,000<\/strong>&nbsp;in individuals demand deposits.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">From this we can conclude that a large withdrawal of money from the government deposit account with the Fed is not going to strengthen the money supply as suggested by popular thinking.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">What are the sources for money expansion?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>CHANGES IN GOVERNMENT DEPOSITS AND MONEY SUPPLY The US debt ceiling suspension, signed in February 2018, expires at the beginning of March this year. Some commentators are of the view that the US Treasury must carry out special measures if it expects a delay in raising the debt ceiling in March. The Treasury would have [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[7380,17390,379,24720,954,662,8625,783,1576,2202],"class_list":["post-44604","post","type-post","status-publish","format-standard","hentry","category-economics","tag-cobden-centre","tag-dr-frank-shostak","tag-government","tag-government-deposits","tag-money-supply","tag-quantitative-easing","tag-quantitative-tightening","tag-taxes","tag-us-debt","tag-us-treasury"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/44604","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=44604"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/44604\/revisions"}],"predecessor-version":[{"id":44605,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/44604\/revisions\/44605"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=44604"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=44604"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=44604"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}