Friday, April 29, 2011

Austrians and MMTers should be on the same side

Austrians and MMTers should be on the same side. After all, both camps understand the relationship between money and credit, and both understand the full ramifications of having fiat money. They should be on the same side arguing against economists who argue that demand can be created by flooding the banking system with reserves, and both should be on the same side arguing against those who think that increasing inflation expectations is an effective way to get an already over-indebted economy to take on more debt.

As it turns out, these two groups are the most ardent critics of each other, thereby giving the mainstream enough bullets to shoot both of them both down with each other's bullets. MMTers are shot down with the branding that they don't care about inflation, while Austrians are shot down with being crazy gold bugs.

As I see it, both have a good understanding of monetary transmission, except each follows this understanding to two of its logical outcomes. Austrians believe that having fiat money in the economy will lead to continuous malinvestments, endless bubbles, and will eventually destroy the credibility of the currency. MMTers embrace fiat, and believe that it is precisely the government's ability to spend fiat that enables it to offset the private sector's need to save, to take over when the private sector is deleveraging, restructuring, or just plain fearful of investment, so that the economy does not spiral into cascading deflation.

MMTers are different from the mainstream because they distiniguish between fiat being used to fuel government spending, which translates into actual income for the economy, and fiat being issued just to encourage people to spend today what they would otherwise spend at some future date. MMTers recognize that when a person is devoid of income, no amount of inflationary push will nudge him to spend money he does not have, or borrow money that no lender will ever prudently provide him.

But MMTers, just like Austrians, recognize that having fiat money could lead the private sector to extend more credit than is prudent during a boom, and this excess lending eventually leads to a ponzi scheme where the last person holding the now bust asset is unable to pay his debt, and the last person holding the bad debt loses his ability and compunction to lend some more.

Austrians, however, prescribe that the best way to handle a bust is to let it take its natural course, so that people who made bad investments lose, and those who plan to invest do so when the economy settles at a stable floor. MMTers, on the other hand, do not believe it logical for government to leave a private sector bust to itself, precisely because people who have just lost income will not be the right ones to start spending again, and investors who just lost equity are not the best ones to start investing again.

But regardless, both can look at the economy granurally, and see debtors and creditors, investors and investees. Mainstreamers only see buyers and sellers, and believe that just dropping money will solve the problem of non-existent buyers. Mainstream do not see how this money will be transmitted from fiat issuer to end consumer without agravating consumer's already heavy debt load. There is no such thing as balance sheet recession to the mainstream, no such thing as leveraging and deleveraging.

Austrians and MMters see this dynamic, and so should take a common stand against the mainstream who can easily shoot them both down like fleeing rabbits. For my part, though, while I see how Austrians see the dangers of fiat, and therefore want to take it away from those who can issue it - from the government, by going back to the gold standard, and from the banks, by advocating a 100% reserve lending, I don't share the same prescription.

As I've mentioned it previous posts, I don't believe the gold standard is apt to our current level of economic development and population. I don't believe 100% reserve lending addresses the needs of today's economic reality, or ever did the reality of a growing economy at any time in the past. And I also believe that recessions cannot be left alone, particularly when private businesses are no longer willing or able to do their regular job of investing, producing, hiring, and selling. I do believe though that government should support a more organic revival of the private sector by supporting the local businesses who hire the most people in aggregate. It should also respect that a recession is the best way also to reverse and break the previous boom's tendencies towards monopoly and concentrated market power. Government should not use fiat spending to perpetuate that status quo.

Fiat is now the reality. The best way to control politicians and bankers from abusing it is to strictly enforce macroprudential monitors and controls.


Mario said...

this is really interesting and I appreciate the post...especially since I fall on the MMT side and vehemently oppose the gold standard...though I like to remind people that you can still buy PM's within a fiat currency but the reverse is not true under a gold standard.

Funnily enough I was considering these same concepts the other day and was planning on getting even more educated about Austrian econ. I like how they are into productive employment and true wealth creation. Like many MMT-ers who don't like the over-inflated financial markets and just how much they contribute to our GDP...way too much of our GDP is based on the financial speculation industry rather than on real wealth activity.

These are serious issues b/c I really can't see how wealth creative we can be based upon variable and fixed cost comparisons between the USA and 3rd world nations.

I tend to believe that a substantial aspect to the solution lies in regulation and transparency at the governing level...including the Fed.

I also think we need to improve our standard of living in the USA through government support. MMT's understanding of the monetary system allows for this to actually take place without worry of "government insolvency and debt crisis." It seems to me that corporations would actually support government funded health care b/c it means less variable cost for the corps. I don't get it.

I agree with you and think that the combo of wealth creative and de-monopolizing (pro-competition) Austrians alongside MMTer's that understand our monetary system and how to balance the economy and achieve full employment could combine to create both solid regulation reform (new government order and stability and base-line support) to create a more fertile and sustainable economic environment to thrive.

we should have an Austrian/MMT Unite Conference or something?!!?! :D

Anonymous said...

"I do believe though that government should support a more organic revival of the private sector by supporting the local businesses who hire the most people in aggregate."

Can you expand on what you mean by that? Govt bailed out GM (supported local business) but certainly Austrians despised that....

Anonymous said...

The ability to create money is far too much concentrated power to be in the hands of the government or the elite that control the government. Implementing MMT would very likely break down the remaining walls and create a horrible hyperinflation. I'd like to hear from MMT theorists how to control the genie once it's out of the bottle rather than how to get the genie out.

-- Jim.

Mario said...

Jim what exactly are you referring to as the concern?

That the people will start to demand less taxes and more government spending? Or that people will not pay their taxes at all b/c they now know that they don't fund revenues only deflate nfa? Remember if you don't pay your taxes you will get burned with serious fines and possibly jail time...that doesn't (and won't) go away.

I think it is a perfectly safe and healthy debate for the people to have over how they wish to use their "genie" in the best ways for all involved. Isn't that the purpose of a democracy to begin with right? Remember that this ENTIRE DEBATE over the debt crisis would all but vanish under the MMT system...b/c in truth it doesn't exist. If the government spending halts as many wish and UE stays where it's at (it will likely get worse) and the money supply stays so contracted, eventually it will become so depressed that people will likely have to sell whatever hard assets they own (land, real estate, etc.) just get cash to pay bills. This is just one more step in the rich/powerful accumulation of USA wealth...we don't really want to see that do we? All under the lie of protecting our grandkids from Chinese treasury holdings?!?! Seriously...we need this information out there asap!

Funnily enough, if we can get the Fed tansparent and more aacountable and drop it's power-ties with the Wall St. fraternity it is possible that we could have the Fed actually take greater strides in fulfilling it's mandate for full employment. The Fed can stay independent but it must become fully accountable to the people not to Wall St. and it must become transparent as the public has every right to know/see their operations. The Fed can also get more involved in targeting credit/lending programs (rather than reserve balances), possibly even some type of fiscal policy system (in conjunction with the Treasury, etc.), labor reps on the board (for employment representation), real consumer advocacy, and live FOMC meetings along with full disclosure of Fed monetary ops. The list can go on but this would be a big help. Here are some vids for you in this regard:

Mario said...

Asset-Based Reserve Requirements (ABRR) would also be highly valuable to help stabilize the various types of risks associated with so many complex securities that exist today and force banks and lenders and under-writers to more adequately and substantially buffer and protect themselves against deals gone bad.

ABRR is a brilliant idea imho.

ellen1910 said...

Question for MMTers --

Without government debt out there to give the Fed's trading desk something to buy and sell (that is, OMOs), how would the Fed conduct monetary policy?

Mario said...

Hi Ellen,

Basically OMO exists b/c the Fed and Tsy have separate balance sheets. If the Fed allowed the Tsy to run a deficit on the Fed's books the Tsy wouldn't need to issue debt to the Fed to sell at auction. Note that those auction sales to Primary Dealers quite literally constitute as a government subsidy to those institutions since they are getting "free" interest on that debt in exchange for cash, which then balances the Tsy's account at the Fed.

Many MMT'ers support a "no-bonds" system where these auctions are no longer necessary. That can be accomplished by the Fed allowing the Tsy to run a deficit on their books and therefore no need to issue debt for the Fed to turn around at auction. Many MMT'ers also feel that these bond subsidies are a major contribution to a disproportionate distribution of wealth and power (aka rent seeking activities) to the wealthy few and therefore create significant "gaps" in the actual economy.

In this way the Tsy can still spend as it pleases just like it does now. The only thing different is the accounting procedures with the Fed.

This wouldn't have to effect the Fed Funds Rate (FFR) as that is different than accounting for Tsy spending and balancing accounts between the Fed and Tsy.

In terms of handling reserve balances and FFR, it is also important to note that MMT'ers recognize that Tsy securities are no different than cash except in their term structure. That is a 5 year bond is as good as cash + 5 years of interest. They are essentially one and the same outside of the differing term structures.

There are even some MMT'ers like Warren Mosler and others who propose in keeping interest rates at zero or something like that (I'm still looking into that idea myself). See his piece "The Natural Rate of Interest is Zero" for more on that.

I'll see if I can grab some other MMT'ers to come over here and answer your question in their own words as well in case I misspoke anywhere in my post here and/or they have more to add.

Matt Franko said...


The Fed would pay interest on reserve balances directly to the member banks. It would appropriately be a low interest rate. This rate would be the policy rate. (btw they are already doing this)

Here's a paper by Prof Fullwiler:


Tom Hickey said...

ellen: "Without government debt out there to give the Fed's trading desk something to buy and sell (that is, OMOs), how would the Fed conduct monetary policy?"

MMT recommends replacing monetary policy with fiscal policy, using stock-flow consistent macro modeling, the sectoral balance approach, and functional finance instead of NAIRU and a Taylor rule.

Tsy issuance is operationally unnecessary under the current monetary regime. It is required in the US due to political restraints that MMT recommends be removed. Some MMT'ers prefer going to no-bonds and setting the overnight rate to zero. Others observe that the Fed can set any overnight rate it chooses without tsy issuance by paying a support rate on reserves equal to or greater than its target rate (which the Fed does now).

There is no reason for the Treasury not to directly issue notes under this monetary regime, and only a modest modification of the political restraints presently in place would be required. In that case the central bank function would be for settlement only. Many MMT'ers recommend formally consolidating the Treasury and Fed since they are informally consolidated anyway, both functionally being government agencies.

Rogue Economist said...

Mario, welcome to the site, and thanks for having already addressed some of the questions asked.

From what I've read of some written posts and comments of some Austrian-leaning people, they already possess the concepts to come to a common understanding of the economy with MMTers. It all boils down to whether they acknowledge that we are already on a fiat world, and whether they find it acceptable or not. If they abhor it, no amount of discussion will convince them of the viability of the world as described by MMT. I think the discussion needs to be on the basis of whether we should have a fiat currency, or one based on a gold standard. All ideas and beliefs of Austrians seem consistent, but in a world where currency cannot be issued at will. This was true sometime ago, but not anymore. Do we go back to it or not, that should be the discussion.

Jim, the genie is already out, and it was let out by the Western powers during the 1930's depression. For a complete story, see Liaquat's Lords of Finance. Once countries decided to let go of the gold standard, they already had the capability to fund government spending at will by issuing currency. No more need to ensure an adequate gold reserve to back it up, or to pay those who demand gold for their currency.

I agree we should start focusing more on what macroprudential controls should be in place once it is common knowledge among politicians that they can fund any pet projects by demanding Treasury or the Fed to issue currency. Nations could also enforce this discipline on one another via having international trade payment agremeements, like this IMF Articles of Agreement Article VIII, Section 4 as pointed out by Ramanan.

Anonymous. "I do believe though that government should support a more organic revival of the private sector by supporting the local businesses who hire the most people in aggregate." By this I mean government should focus on helping out small businesses to thrive in a more perfectly competitive economy, rather than bailing out large monopolistic firms that got there by killing off competitors via various anticompetitive tactics, such as slashing their workforce and and sending production off to cheaper slave wage locations. This is cannibalistic to the economy in the long-term, because once companies have in aggregate destroyed enough local jobs, they in aggregate have killed the market where they in turn sell their wares.

I posted this idea in more detail here

Ellen, Mario and Tom have answered your question in detail. I would only add that if the government no longer determines a risk free rate via issuing government bonds, then private sector market rates would likely be determined purely by the market-assessed risk of a particular business or investment, not by how much premium investors want over a riskless government option.

Tom, welcome back!

Calgacus said...

Ellen: In addition to the above answers, the Fed, or whatever replaces it inside the Treasury, would go back to its original mission, “to furnish an elastic currency, to afford the means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States” see US Monetary Policy and Financial Markets E.g. it has a function in buying (good) private debt to stabilize the economy, particularly during a panic or natural disaster.

Jim: "MMT" has already been implemented, for thousands of years. Governments have always had the power to create money at will. Even if they artificially constrained themselves, they would abandon the constraints in crises or wars.

In addition, one thing that MMT theorists sometimes exaggerate is the novelty of the theory. Parts of it, including "the genie" were the mainstream back in the 60s say. (Warren Mosler just criticized congressman he knows who just signed a "deficit terrorist" letter. The congressman understood Mosler's explanations of the monetary/fiscal system, and said "that was how I learnt it back in college in the 60s".)

Historically, it is clear that there has been too little, not too much usage of "the genie" of money creation for public purposes other than war in the past few centuries. During times when "monetary analysis" ruled the roost, like the 30s-70s in the USA and elsewhere, when it was generally understood that governments had the power to use "the genie" to create full employment, or face the wrath of the electorate, we had full employment and the greatest prosperity the world has ever seen.

Since then, with the rise of nonsensical "economic" theories, the genie has been used by elites to enrich themselves at the expense of the lesser people and general prosperity.

Knowledge is power. Spread the knowledge of what money is, how it works, and how the government owes everyone a job, and people will responsibly use this power to create prosperity. Keep it restricted, and the elite will enslave the rest.

Tom Hickey said...

Jim, the genie is already out of the bottle. The world has been on a nonconvertible floating rate regime since Nixon shut the gold window on August 15, 1971 and this was officially ratified internationally two years later — even though a lot of people either don't seem to realize this, or don't like it.

MMT simply describes the present monetary regime operationally. It also examines the special case of different countries based on restraints that have been imposed politically.

MMT does prefer a nonconvertible floating rate regime over a convertible fixed rate regime since it preserves monetary sovereignty and gives the nation greater control over its economy. Austrians should like that since many are Libertarians that value freedom.

Why ceded monetary sovereignty to a fixed rate that artificially limits political choices? Right, politicians may abuse their power. Well, that's just saying that you don't trust democracy to work and that markets work better than democracy.

But just as government can be hijacked, so too can markets and if you read people like Bill Black, Yves Smith, Janet Tavakoli, Karl Denninger, Elliot Spitzer, Frank Partnoy and other, it is obvious that markets have been hijacked by cheaters whose size and influence is so vast they cannot now be controlled. The present economy is dominated by the military-industrial complex, which requires unending war, and economic rent — land rent, monopoly rent, and financial rent. Even the financial market, or especially the financial markets, are also rigged. This is not a level playing field.

Tom Hickey said...

On the subject of which monetary system is superior, a convertible fixed rate one or a nonconvertible floating rate one, each has advantages and disadvantages. Those who fear that governments will not able to discipline themselves argue for the former, while those who believe that democratic governance is the optimal form of government and that a democratic government should be provided with the tools the enable maximum freedom prefer the latter.

Convertible fixed rates systems restrict monetary sovereignty operationally. Nonconvertible floating rate systems maximize monetary sovereignty operationally. Political restrictions can be imposed on nonconvertible systems that reduce the degree of freedom that the monetarily sovereign nation has to excise its sovereignty. This usually done in the name of "fiscal discipline." For example, the debt ceiling is supposedly such a restraint, but it has shown itself to be ineffective.

MMT argues for empowering a democratically elected government with full monetary sovereignty and holding it accountable at the ballot box. MMT objects to the dominance of monetary policy over fiscal policy in that it delivers control of the economy to a small group of unelected and unaccountable technocrats.

This is not only a national issue, but also an international one. The IMF article cited above states that nations relinquish a degree of monetary sovereignty by joining in the IMF Agreement. Probably most Americans are unaware of this, but the US has ceded some of its sovereignty to an unelected and unaccountable international body (although the US has veto power over it). Dani Rodrik broaches this as the trilemma among democracy, national sovereignty and international institutions in The inescapable trilemma of the world economy . It is possible to have two of them simultaneously, but not all three.

ellen1910 said...

Thanks all.

Tom Hickey: "MMT recommends replacing monetary policy with fiscal policy. . . . Tsy issuance is operationally unnecessary under the current monetary regime."

So the Fed would be "buying" (or "selling") reserves rather than buying/selling treasuries?

But I thought MMTers didn't consider changes in total reserves -- irrespective of whether the interest rate the Fed pays on them causes that change -- to affect the real economy. That the extension or contraction of bank credit and its effect on the money supply is unrelated to the level of reserves.

Aren't MMTers forced by their own logic to toss Krugman, Summers, DeLong and the rest of those that think the Fed and monetary policy is so important on the scrap heap of history?

Mario said...

Well when I was looking into the gold standard, the issue for me was a basic tri-factor:

#1. Assuming 100% backed dollars I frankly don't think there would be enough dollars (gold) to go around based upon population alone. If you just do the math and scale it out over the years, I think mathematically it would be impossible not to have people completely destitute (aka no money/gold) simply due to supply/demand levels of gold. That makes 100% backed dollars obviously unacceptable and out of the question. So scratch that option immediately.

#2. Assuming any level of fractional reserve banking, you immediately create a quasi-fiat currency. All of the currency that is not covered by the "fractional reserves" is by definition fiat dollars. Therefore, logically speaking, I don't see how an Austrian can legitimately support fractional reserve banking while at the same time refuse to support even the possibility of a fiat currency. They contradict themselves in their very premise b/c they actually accept a partial fiat currency already. And if Austrians agree that fractional reserve banking can operate legitimately then by logic it is hardly a step to admit that fiat currency can also operate legitimately. The question becomes what value does fractional reserve banking provide? The argument I usually here is that gold "has store value" or something to that effect. However when I press them on this point, it becomes quite clear and obvious that this "inherent value" of gold is quite frankly no more arbitrary than the value of a fiat dollar/paper. What makes gold more valuable than paper? Absolutely nothing...except our minds. We create the "meaning" that exists in gold as much as we create the value that exists in fiat dollars. Both are arbitrary. Therefore since they are both arbitrary and therefore equal in actual inherent value, and fractional reserve banking is already quasi-fiat currency...then there really becomes no reason to not shed the self-imposed constraint of fractional reserve banking and just accept the fiat currency. We then become insolvent by definition, flexible and able to expand and contract to whatever level is necessary to maintain economic stability, and with other factors in place (like proper regulation, maintenance, monetary operations, fiscal policy, etc.) we can truly meet whatever challenges our economy is faced with and achieve full employment and price stability, etc., etc.

#3. A fiat currency regime (whether that be the government, a business, or a household) can still purchase and own gold as an asset class/investment/hedge/etc. Fiat currency is not threatened by gold's existence, however the gold standard is threatened by fiat dollars. Therefore it is to our advantage to choose the fiat b/c we (government, business, household, etc.) can still own and purchase/invest in gold. We are more free under fiat and we still have full and complete access to the "store value" of gold anyway.

It is for these reasons, mainly, that I support a fiat currency over a self-imposed currency backed by anything (gold, silver, dirt, etc.). I'd appreciate hearing an Austrians review of these points and how they perceive these issues presented. Thank you and Most kindly, Mario.

Mario said...

holy crap!! I state in the post above under my #2 explanation that "we become INSOLVENT by definition"!!?!?!

Of course I meant to say other words we can never default on our obligations under a fiat currency...insolvency, unlike what so many politicians want us to believe otherwise, is a factual impossibility under our fiat currency that floats. That is what I meant to say!!! LOL

I'd also like to add a #4 point that is that under a gold standard there is a tendency to see major swings in the value of gold over time and therefore major swings (volatility) in inflation/deflation in the economy. Gold is a commodity and therefore does change in value over time based upon cyclical and natural laws of supply and demand. This is a reality and does create a rather unappetizing scenario in terms of one's currency valuations yoy...US history alone appears to reflect this as far as I can see in the data. It would make for a very anxious and untenable economic environment in my view.

Mario said...

point #4 also reveals a major vulnerability our economy would possess that could VERY EASILY lead to serious manipulation of our currency and therefore our entire economy and nation. A situation not too dissimilar to OPEC for example. This would be beyond a problem and probably can stand alone as a reason good enough not to have any standard be it gold, silver, trees, gems, dirt, etc.

Mario said...

Hey Ellen,

from what I understand of MMT you are talking about two different things.

#1. yes MMT recognizes the fact that there does not exist any channels connecting reserve levels with the actual economy. Loans create reserves not vice-versa. This is why it doesn't matter if there's zero dollars or ten trillion dollars in reserves in our fiat currency that floats...if no one is borrowing then it makes no difference. Loans creates reserves not vice-versa. This also explains why QE2 essentially amounts to nothing for the economy. In fact it does amount to less interest income for the non-government and is therefore actually deflationary rather than inflationary in terms of operating procedures. Where that cash goes is another story...clearly it went to stocks and comms creating another bubble more than likely. But that's another issue. ;)

#2. The interest on reserves payments, as far as I understand it, is simply another means to perform Fed Funds in the overnight market to balance accounts. I believe that is correct, though Tom would know best on that one.

Personally I agree that monetary policy is a blunt and possibly even ineffective instrument, however for the sake of gradual change, there is really no reason why we can't implement certain MMT principles today in our economy and gradually work on essentially eradicating the primary function of the Fed...namely interest rates through bond issuance. ;)

I also forgot to mention that many MMT'ers believe that monetary policy actually does the opposite of what we think it does. In other words, raising rates actually FEEDS inflation rather than suppresses it. This is b/c as rates rise, businesses then need to pass through higher costs to customers which were assumed due to higher capital expenses, hence causing higher prices, etc. What businessman says, "Well we're not going to do that venture this year b/c rates are just too high." They don't think like that...they go for whatever opportunity presents itself regardless of inflation...they just look for a spread to capitalize on and more than likely if the environment is inflationary, people will spend since monetary policy is a blunt and "lagging" policy. Also higher rates reward savers which increases nfa and a wealth effect. Likewise lowering rates hurts savers lowering nfa and causes even more de-leveraging and also creates the opportunity for a bubble to be created again. There may be more to this argument but it is another MMT du jour. Cheers!

Mario said...


just fyi I posted your question over at Warren's blog and he responded saying this:

"just offer fed funds at 0 to any bank in any quantity and wake up to the fact that the liability side of banking is not the place for market discipline.

see my proposals on this website"

here's the link:

Tom Hickey said...

Ellen: "So the Fed would be "buying" (or "selling") reserves rather than buying/selling treasuries?"

Reserves are irrelevant other than for settlement. Since government is generally in deficit under functional finance since the private sector usually net saves and the US net imports, there will be excess reserves. The Fed just leaves them there at zero % overnight or pays a support rate to hit the target. The only thing that the Fed actually does is to set the overnight rate and act as lender of last resort in order to ensure that all accounts settle. This involves also setting the discount rate for borrowing on collateral from the Fed. In this set up the Fed does not use OMO, and the quantity of reserves is based on reserves created by fiscal deficits and Fed lending to cover as needed.

Under Moslers's plan the Fed would set the overnight rate to zero and make reserves available for settlement as needed. Very simple. It essentially reduces the role of the Fed to settlement.

"But I thought MMTers didn't consider changes in total reserves -- irrespective of whether the interest rate the Fed pays on them causes that change -- to affect the real economy. That the extension or contraction of bank credit and its effect on the money supply is unrelated to the level of reserves."

Right. Reserves are for settlement. They are also used for monetary policy since the Fed sets the overnight rate, even if this is set to zero.

"But I thought MMTers didn't consider changes in total reserves -- irrespective of whether the interest rate the Fed pays on them causes that change -- to affect the real economy. That the extension or contraction of bank credit and its effect on the money supply is unrelated to the level of reserves."

Yes. A major point of MMT is to focus on fiscal policy instead of monetary policy. It is both more effective, more efficient, and more democratic. Neoliberals and New Keynesians are monetarists rather than fiscalists. MMT rejects this emphasis as misplaced. MMT also criticizes their understanding of monetary/creditary economics and operations. They don't do the accounting, so their models are not stock-flow consistent.

Anonymous said...

" It is both more effective, more efficient, and more democratic. "

Exactly right. Monetary policy works in a roundabout way and is controlled by an unelected cabal.

STF said...

It's also worth mentioning that many central banks have achieved interest rate targets without purchasing Tsy's. They use repos, purchase pvt sector debt (outright or via repos), or just lend at their announced rate. Marc Lavoie has written on this for many years and labeled it the "overdraft approach" to central bank operations, as opposed to the "asset-based approach" of Anglo-Saxon central banks. I have argued that the overdraft approach is the general approach central banks take, whereas the asset-based approach is just a special case (see principle 9, I think, or 8, here