Cross stimulus - a whole-economic monetary policy tool

Cross stimulus

Cross stimulus is suggested as a whole-economic (as opposed to macro-economic) moneteray policy tool.  It crosses the boundaries of nation state that are typically associated with macro-economic tools to allow confidence in one nation state to stimulate economic growth and infrastructure spending in a second nation state at little or no cost to the first nation state.

Monetary policy line items

  • Cash - a numeric value that is a legacy of the requirement to deliver physical tokens such as gold, coin or paper in order to facilitate transactions.
  • Liabilities as gilts - contractual government debt that promises to repay coupons and principal at some fixed rate, time and end date (where perpetuals are not considered.)
  • Sovereign self-issued debt contracts as assets - previously created debt contracts that contain within them a promised receipt of future coupon and principal payments. Created by the central bank itself.
  • Other entity (e.g. corporate) debt contracts as assets - previously created debt contracts that contain within them a promised receipt of future coupon and principal payments.  Created by third party entities.

Additional monetary line items

  • Outbound cash - a collection of numeric values that represent committed outbound cash to other nation states, or to infrastructure projects within other nation states.  This could also include line items for global infrastructure projects such as universal basic income.

Example


The UK 'prints' GBP as an outbound line item commitment for a housing infrastructure project in Russia.

The money is then made available to fund local non-financial purchases in on the targeted project. The strength of the UK economy can then hold the perceived risk that such a line item creates, freeing the Russian economy to spend the cash on the project without having to worry local people financial or otherwise.  Thus Russia should see no 'debt' pressure on itself.

As the money is spent locally in Russia, the line item as little or no impact on inflation or growth with the UK economy.  Effectively a risk neutral debt obligation without an associated tradable asset.

Economic impacts might include inflationary pressure within Russia, and a stimulus to the value of the Rouble associated with increased economic activity.


Comments welcome in the comments section of via email.

SJH / 2018-09-24 (initial version)
sjh.android.2@gmail.com
twitter: @stephenjhunt

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