45 巻 (2008) 2 号 p. 15-25
I have advocated the endogeneity of money supply following the views of M. Nishikawa and J. Itakura as well as those of N. Kalldor and B. J. Moor. As Moor appropriately wrote, "Currently the standard paradigm, especially in the United States, treats the central bank as determining the money base and thence the money stock. / Modern monetary theory has inherited an approach to money that was more appropriate in a world where money was a commodity, usually gold or silver, without fully recognizing the fundamental differences between commodity and credit money." These views, however, have not been widely accepted, especially among Japanese Marxian economists. Some of them have criticized the endogenous money supply theory. This article is a counter-criticism of some most criticizing arguments, mainly those of professor H. Noda and professor T. Itoh Marxian economists quite often express their views based on what Marx said, especially in "The Capital". Marx introduced capitalistic money through the logical developments of the value form, and said that gold would become the main material of money due to its physical characteristics. Then, it is not strange that their views on credit money are based on gold. They have regarded that the gold convertibility is the essence of credit money. They do not attach greater importance to the causes of issuance or withdrawal of credit money, that is, the connection between the supply of credit and the supply of money. In the modern world gold as money does not exist. But they tacitly regard fiat money as a replacement of gold, in other word, exogenous money. Another point I stressed in this article is that those who are severely critical to the endogenous money supply theory misunderstand Marx's logical way of writing. In "The Capital" vol. 1 and 2, there are no credit systems, no credit money. There is only commodity money (gold) introduced at the money theory (vol. 1). At the reproduction charts (vol. 2), his premise is each capitalist has a certain amount of money which is needed for the purchase of materials and the payment of wages etc. Credit system and credit money are the problems of vol. 3, and unfortunately Marx could not complete the credit theory. But some of those who criticize the endogenous money supply theory quote from vol. 1 or 2 where, actually, only commodity money (gold) exists. I also stressed that Phillips-type credit creation theory (multiplier theory)is not valid, especially in the world of credit money. Revival of Macleod or Hahn=Schumpeter type theory is very important. Today's monetary policies of major central banks are not money supply control, but money market interest rates control that affects the public demand of funds. The starting points of the credit creation are loans of banks to firms and household by crediting to their deposit accounts. At this point banks do not need surplus money. Monies are created by the action of banks, that is Macleod-type credit creation. When the cash demand increases, central banks should accommodate. If a central bank worries about the level of the economic expansion and the increase of prices, it can affect demand of funds and then affect prices by interest rates control policy. Today's monetary policies of major central banks are money market interest rates control. Lastly, I stressed the importance of the independence of central banks. Some people might question that the central bank independence is against the democratic procedures of policy determination. But, in my opinion, there is a big difference between the monetary policy and other policies of the governments. While monetary policies are executed through financial transactions in the market, other governmental policies are executed as an exercise of administrative powers.