In the process of development and evolution, monetary theory has not yet formed a unified and systematic framework. The modern economic system is highly dependent on the monetary and financial system, and it is necessary to continue to systematically explore the theory of monetary base.
1. Credit system model.
Credit is manifested in the belief of a social subject that another subject will be able to perform an agreed matter after a period of time. Credit exchange refers to the exchange of material or information between social entities and external objects. The system of interactive exchange of information and matter is called the credit system. If this trust is based on a physical object or a third party, it is called a guarantee or deed. Symbolized, standardized, and widely used collateral is called currency, which arises in the context of the accumulation of interactive links of social subjects to a large scale and the need for frequent credit swaps. In other words, credit is a mechanism for the operation of society, and traditional money is the internal product of the credit system.
As a carrier of credit, currency itself needs to have utility value in order to have a broad social trust base and circulation, which is the result of the natural choice of money. Difficult access means credible, and high production costs mean that the substance has value. With the systematic development of society, the ** department is involved in the issuance and management of currency. In particular, after the currency was separated from the gold standard system, the currency became the expression of the right to tax, and had the attribute of debt and a new way of operation. Paper money is the result of the deep systematization of society and the high development of society.
2. The system model of modern money.
The modern circulation of banknotes is formed by each country according to its own needs to form a corresponding organizational system, in order to cope with the currency issuance, circulation, trading and supervision, as well as supporting the corresponding currency management, payment system, foreign exchange system, monetary policy and other aspects of the design and arrangement. Currency first enters the internal departments of the system for circulation, including households, enterprises, banks, and the four major departments.
1) Balance of sectoral credit needs in the monetary system.
According to the balance sheets of the four departments, the corresponding credit demand formulas of the four departments are obtained.
1 Household sector.
Credit Requirement Formula: CD U (Assets, Labor Surplus, Equity, Taxes, Loans).
The rate of return on consumer goods can be positive or negative.
Among them, the consumption items with a large and more common rate of return are labor surplus, labor surplus labor income. The household sector can create a large amount of credit value in the long run, and the consumption item that increases the accumulation of wealth for society is employment. Therefore, full employment is the basis for the stable operation of the social credit system.
2 Corporate sector.
Credit Requirement Formula: CD U (Assets, Patents, Products, Taxes, Loans, Equity, Labor).
The credit income of the corporate sector mainly comes from the income from assets and the surplus value of products, and the rest of the consumer items such as equity and labor are characterized as liabilities. Because the value contribution of enterprises to the credit system is hidden in the operating energy efficiency and cost, there is a large information asymmetry to the outside. At the macro level, monetary policies such as creating markets, expanding demand, and reducing social costs can enable the corporate sector to improve its wealth creation capacity; At the micro level, more complex theories and methods are needed to support the external exertion of monetary and financial policy influence.
3 Banking sector.
Credit Requirement Formula: CD U (Assets, Cash, Taxes).
In a bank, assets are liabilities of other departments, and deposits are one's own liabilities. Banks can reap the benefits by expanding the amount of endogenous money** or raising lending rates, at which point the gains become a cost to other sectors. If banks tend to maintain their sector net worth at 0, then the bank is neutral, at which point the cross-sector impact of endogenous money is neutral. However, due to the existence of taxes, endogenous money must maintain net income, so it cannot be fully neutral.
4 ** Departments.
Credit Requirement Formula: CD U (Debt, Public Expenditure, Taxes, Income Assets, Assets).
* In the sector, debt and public expenditure are the assets of society, income is the liabilities of other sectors, and taxes are the guarantee of social credit. When bonds are issued and expenditures are formed, the monetary system injects additional credit into other sectors, expanding the amount of money. At this time, money is exogenous, forming the creation of net credit. ** Sectors generally have difficulty producing credit value, i.e. income asset consumption is generally difficult to generate or very weak. If there is a large amount of assets or capital that can create endogenous credit, then the sector CD will have a great utility and have a positive impact on the entire monetary system. From the perspective of the department as a whole, the key to the solvency of the department is the interest rate and tax of the currency, and it is the special income assets that can create additional credit value.
2) Analysis of the quantitative needs of the monetary system.
When the four sectors are combined into a monetary system, the total amount of the monetary system is calculated as m v p t. Wherein: M represents the average amount of money in circulation, V represents the velocity of money, P represents the average ** level, and T represents the total volume of goods and services.
It can be found that the representation term of the effect of inflation is **level p, which is affected by the increase of exogenous money m and shows a long-term trend, which can be adjusted by reducing the amount of money ** and controlling the velocity of money circulation. Deflation will affect the total amount of money m in the society, and after the disappearance of social confidence, the level of p** will decline, and the total amount of t transactions will decline, which can only affect v.
The multiplier effect of deflation on money can be observed, and the total demand for money in society can also be expressed by the general formula of money demand as: MD pf ( assets, cash, labor, bonds, *taxes, loans). where p is the absolute ** level constant.
In times of deflation, the return on a large number of assets in many sectors** can only passively reduce the amount of liabilities. It is known that the liabilities of one sector within the monetary system are the assets of another, and the assets of all sectors are forced to shrink in size, resulting in a rapid contraction of MD.
3) Analysis of cross-regional credit needs of the monetary system.
Different systems have different ways of generating credit demand, which determines the difference in their consumption items. When two monetary systems are exchanged, the currency is reflected in the other party's credit system as a general commodity equivalent, which needs to be measured and compared by the other's credit consumption bundle. The external credit value of a currency is determined by the external evaluation of its credit system, the production competitiveness and cost relative to other systems, and is not directly related to the amount of money in its internal system.
The monetary system is observed from the regional dimension and is divided into three categories: cross-regional currencies, anchor currencies, and regional currencies. The modern monetary system is different from the traditional monetary system, and its core is that paper money is no longer the value equivalent of general commodities, but the embodiment of tax rights, and money is endowed with more debt attributes. Paper money has transformed the traditional social credit system and promoted the formation of a more systematic and theoretical credit mechanism. It can be considered that the emergence of the modern monetary system has brought human society into an economic and social era, and the society has operated on the basis of a modern economic theory system.
3. Speculation on the model of the modern credit money system.
1 The global** sector has become the focus of economic contradictions.
After entering the economic society, the state, as the formulator and maintainer of the order of economic activities, regulates the microeconomy, and regulates and manages the operation of the market as an arbiter. ** The financial sector and the banking sector are the main balancers and counterparties of the money market, and naturally gather the main economic contradictions. Since the debt of the ** sector is the common interest and demand of all sectors, the trend of increasing the debt of the ** sector will not disappear. Liabilities are the responsibility of the owner, the "problem" of the owner, and the interests belong to all departments but the debts need to be repaid alone.
2 The U.S. currency is an asset of the U.S. and is a global issue.
The U.S. dollar is widely accepted by the world and circulates freely in many regions, at which point the debt of the United States automatically becomes an asset of the world and enters the credit system for circulation. U.S. domestic sector policies on inflation and employment become liabilities to the rest of the world. The world will become an additional monetary system - a fifth sector that will absorb the credit costs of the dollar, and the stability of the dollar will be further strengthened. The interest cost of the dollar is a common cost to the global credit system. The U.S. dollar is an asset of the United States**, but the world has to pay the cost of credit for it.
3 China's land rent assets are unique credit assets.
Rent assets generally refer to various types of assets that can be obtained from investment income, interest or operating profits from land. In China, land rent assets are held by various sectors of society, accounting for more than half of the asset value of various social sectors, and are widely present in the balance sheets of all walks of life, becoming an important part of the debt of various sectors. It has brought unprecedented growth to China, created huge amounts of credit, and created huge debts.
For the modern credit money system, the land rent assets that have formed debt or capital are endogenous variables, which can be placed within the system for digestion and circulation. Therefore, the current policy needs of land rental assets are: to avoid debt traps, form asset credit, create credit demand internally, and create monetary liquidity. The main reason for the occurrence of debt trap is that the cost of debt is higher than the return on assets. Drawing on the theories, experiences and cases of negative interest rates in Europe over the past decade, we can quickly restore the vitality of China's credit system by innovating methods and tools to make the interest rate of the monetary system lower than the average level of income on land rent assets.
Land assets and monetary capital are both factors of social production, so that the income of land rent assets can be positiveized and can be freely exchanged or converted into monetary value and create liquidity, which can inject credit into the society and provide China's credit and monetary system with unique world competitiveness.
4 The specific objective of monetary management is employment.
From the perspective of the credit system, innovative development represents the creation of new credit assets. Due to information asymmetry, macro monetary policy is difficult to guide and it is easy to introduce hidden costs or unfair competition for the enterprise sector. Therefore, corporate value creation should not be the focus of monetary policy.
The most widespread credit demand within the monetary system is full employment, which means that the private sector credit system, at the lowest level within the monetary system, is functioning well and is a sign of the stability of the social system. A focus on employment is the most appropriate micro target for monetary policy. The large number of enterprises and the large number of jobs can become the evaluation index of monetary policy.
5 Interest rates are an important cost management tool owned by the credit system.
At the micro level, interest rates are understood as a premium to risk, and at the macro level, interest rates are the cost of the credit system. The value of the banking sector comes from interest rate differentials rather than interest rate levels. If interest rates can be lowered while maintaining exchange rate stability through a series of monetary credit management strategies and tools, an effective global value exchange can be formed. Resolve debts internally and reduce the cost pressure on the credit system. Europe's negative interest rate policy over the past decade proves that interest rate instrumentalization is viable.
Pei Palmwei, Dongbei University of Finance and Economics; Bai Yantao, Institute of Quantitative and Technical Economics, Chinese Academy of Social Sciences).