Additional Comment

This is an additional comment on "Logic of New Monetary and Tax Policy" published on Tuesday, August 14, 2007 on this blog.

1. To the extreme, the Central Bank are obliged to pay for the bubble, because the bankrupted economic units are unable to return write-offs as tax. In that case debts might exceed assets on the substantial B/S of the Central Bank. But it might be permitted to put the presuppossion that the Central Bank never bankrupt, by nature, even in this situiation, in order to overcome the burst of bubble.
And, in case the economy in deflationary spiral, with expectation for inflation entirely disappeared, the Central Bank is given a great chance to put new system in operation.
Or, even if inflationary expectation exists, the system enables the Central Bank to on one hand raise benchmark rate to cope with inflationary expectation, on the other hand restructuring the inflicted balance sheet of economic units.
The system is more realistic than helicopter-money under liquidity-trap.

2. Every write-off must be traced, by centralaized function. So every write-off must be executed through this function, which might exist on the internet.

3. The traced write-offs must be distinguished from high-powered money.

4. For cross-border
(1)AB1 is calculated for each non-residential economic unit, with the only cause from specific asset depreciation(nowadays it is real estate situated in the residential country).
(2)But the economic unit that will be written-off should next write-off in the same booked currency.
(3)In case surplusses of the written-off exists on the economic uint, it's taxed and absorbed by the foreign government and handed over to the soverign government of the currency, based on treaty.

Illustration on Multiplier Effect of Original Fund of The Central Bank and it's Absorption by The Government

Here, let me illustrate the pragmatic picture of Logic of New Monetary and Tax Policy published on Tuesday, August 14, 2007 on this blog.
As you can see, the Government is substituting the loans for tax claims, the contents of which composed bubble. In other words, the Central Bank and the government succeeded in extracting the cause of bubble form the economy.
When the Government assign the tax claims to the Central bank, the Central Bank hold the claims toward the economic unit.
It's up to the Government or the Central Bank, how they dispose of the claims, considering the situation of economy and of the economic unit.
Talking about the latter, the government should examine the possibility of the economic unit's turnaround, together with the other creditors, remaining desirable debt to the economic unit(empirically it's ten to fifteen times annual earnings before interest, taxes, depreciation and amortization, known as EBITDA, of the economic unit), writing off the rest debt, taking into account the value of disposable collateral(that do not accrue earning) and of guarantor.

(Please note that
･amount is book value
･amount in parentheses is on current value accounting of above book value)



(And please neglect the odd two lines at the most right side and on the bottom, in the illustration.)