http://www.newyorker.com/magazine/2015/11/23/printing-money-books-john-cassidy
Edit: I cede to Krinkle's original correction. If nothing else.
Edited by RedMaistre ()
HenryKrinkle posted:the proposal is just printing money and handing it out without any debt obligations attached to it. not that radical but kind of a misleading thread title.
he meant figurative debt, as in social guilt
HenryKrinkle posted:the proposal is just printing money and handing it out without any debt obligations attached to it. not that radical but kind of a misleading thread title.
As was indicated in the passage I quoted by "money" he means bank credit. He is proposong having certain kinds of debt ( above all that issued for household/consumer spending ) being dealt with directly by the central banks instead of by commercial banks (like the one he worked with prior to 2008 crash) thus minimizing the latter's risks from "debt pollution" (I.e. That arising from consumption by the poors and the middling sort) while they continue to privately profit from the "good" kinds of financial obligations (that accured "productively" by capitalists).
Edited by RedMaistre ()
So, in response to this financial crisis, we have now introduced some, as it were, “sand in the wheels” of global financial integration, such as by requiring the subsidiarization within each country of significant bank operations, rather than operations through branches."
http://www.moneyandbanking.com/commentary/2015/4/16/interview-with-adair-turner
The delegation of "short term debt flow" (the one that is must used by proles and plebs) to the various central banks fullfills the role of the" subsidiarization" he speaks of here.
Two things: First. note that both example are war-time governments, one of which was bent on genocidal colonial aggression abroad...
Second, the examples are deceitful, since in neither case were independent central banks the ones in charge. In the Civil War case, the so called "greenbacks" were issued directly by the state. The Lincoln administration was not interested in taking out loans from private banks at high interest rates to pay for the war effort. So instead it directed Congress to issue currency in its own name that was "unbacked" , whose value was dependent upon popular trust in the Federal government's ability to win the war. In the Japanese example, the policies of the Japanese finance ministry were subordinate to the far right nationalists in the army, who assassinated both orthodox gold bug Junnosuke Inoue and, later, the "Keynesian" Keynsian Takahashi for opposing military build up.
But Turner lists “three reasons for caution” about the idea of stopping banks creating money:
The first is banks can play a useful role in maturity transformation – turning short-term savings into long-term loans, and that it would be a shame to lose that maturity transformation function. This objection makes little sense to us, as the banks advocated in Positive Money’s proposals would still be able to ‘transform’ short-term savings into longer-term loans (in fact, that would be one of the main reasons for using a bank rather than going through, say, a peer to peer lender). It is possible to have maturity transformation without money creation, and so we’d dismiss this reason for concern outright (more here).
Secondly, Turner argues that without banks creating money, we would be reliant entirely on states to create money. The danger here is that they may create too much or use the money for the wrong or inefficient uses....
Thirdly, Turner highlights the risk that stopping banks creating money will alone be insufficient to constrain credit booms. Other parts of the financial sector may find ways to create equivalent substitutes for state-issued money, or so-called ‘near monies’, that can function as money in the economy."
http://positivemoney.org/2015/10/adair-turners-new-book-between-debt-and-the-devil/
TL;DR : Keep the commanding heights of economic power out of the hands of politicians and government officials potentially answerable to the public, and in the hand of plutocrats masquerading as technocrats.
the problem is that you can lower the nominal rate to near zero (the zero lower rate bound) and new investment still might not be enough. so you get creative and get the central bank to buy assets that don't have much risk, such as US government debt, in such a way that it pushes down the real interest rate, which has a similar effect.
when the central bank "loans" to banks overnight the sums are very large but the actual cost is very low. like they expect to get all of it back almost certainly. that loan is not an approximation of how much money the banks can lend. it just affects their ability to lend. this guy knows this so i guess his point is that instead of buying large amounts of riskless assets and then trying to generate activity through flow through, they should simply pay consumers a much smaller amount in hopes of generating that activity.
the reason they do it through interbank loans and government debt is because this is supposed to be somewhat neutral. like theoretically everyone has to bid on the same types of debt, and there is a hierarchy of riskiness. obviously you can manipulate this and make money (like they did around LIBOR) but it does seem less fraught than like deciding exact amounts to deposit in accounts.
anyway i probably getting things wrong but whatever!
HenryKrinkle posted:the proposal is just printing money and handing it out without any debt obligations attached to it. not that radical but kind of a misleading thread title.
this is correct, the thread title is misleading.
what they are talking about is the equivalent of the federal reserve physically printing $1000 bills and mailing one to every person who makes less than $30,000. the idea is that poorer people have a higher marginal propensity to consume any increased income, so that is the best way to stimulate demand, rather than trying to push new money out as cheap loans through the banking system.
it's an old keynesian idea that's been around for a long time. as the article mentions, it's recently spawned an internet based school called MMT. in canada we have a monetary policy crank group that has been advocating this for a long time:
http://www.comer.org/
we also had a somewhat successful populist party that advocated similar monetary reform, amongst other things:
https://en.m.wikipedia.org/wiki/Social_Credit_Party_of_Canada
tpaine posted:methlabretriever posted:i'm in so much debt
me too. dave grabber has me entranced
can't get enough of david grabber
HenryKrinkle posted:so he isn't calling for a kind of UBI funded by newly printed money, he just wants central banks to lend directly to consumers? that may (or may not) be better than the status quo of payday loans places and other usurious middlemen. but not radical and, as you said, could be considered a kind of deflection from just abolishing private banks altogether.
1. Its a UBI proposal of a sort, but its one that is premised on the (further) cannibalization of the state by private interests. What it actually entail he leaves ambiguous in the mainstream "popularizations" of his proposal, but he says in more technical presentations can take three forms, which he says are more or less interchangeable.
https://www.youtube.com/watch?v=7pZzrdpHMZs
http://www.imf.org/external/np/res/seminars/2015/arc/pdf/adair.pdf
The end result. as he says identical: "The consolidated balance sheet of the government and central bank together is the same."
Taxes takes the place of interest, in other words. because:
"NPV of current and future taxes = NPV of current and future expenditures"
With the bank credit used to effect monetary financing underwritten by future tax returns. Which in turn are still used to compensate the central bank, as Turner explain in a footnote:
:
"The fact that remuneration of reserves creates a variant of a debt servicing burden on the consolidated public sector, is also independent of whether the asset claim which the central bank has on the government is in itself interest-bearing (e.g. the central bank owns interest-bearing bonds) or a non-interest-bearing and irredeemable asset. In the former case, government will make debt servicing payments to the central bank, which in turn makes them to private banks which hold monetary reserves: in the latter, the central bank will face a loss, for which the government will need to compensate it (via subsidy or repeated capital injections."
2. Its certainly not the worst plan for the future on offer at the moment, though i suspect, as with Takahashi's monetary policies, they could be easily synthesized with fascist solutions to the current crisis by the metropolitan elites. But at the very least people should be aware what pov its coming from.
Edited by methlabretriever ()
solzhesnitchin posted:HenryKrinkle posted:the proposal is just printing money and handing it out without any debt obligations attached to it. not that radical but kind of a misleading thread title.
this is correct, the thread title is misleading.
what they are talking about is the equivalent of the federal reserve physically printing $1000 bills and mailing one to every person who makes less than $30,000. the idea is that poorer people have a higher marginal propensity to consume any increased income, so that is the best way to stimulate demand, rather than trying to push new money out as cheap loans through the banking system.
it's an old keynesian idea that's been around for a long time. as the article mentions, it's recently spawned an internet based school called MMT. in canada we have a monetary policy crank group that has been advocating this for a long time:
http://www.comer.org/
we also had a somewhat successful populist party that advocated similar monetary reform, amongst other things:
https://en.m.wikipedia.org/wiki/Social_Credit_Party_of_Canada
Except the Social Credit movement has historically been highly critical of the power of independent central bank, while,as I have already noted,Turner explicitly rejects the idea of replacing bank created money with state created money.
"Such losses could happen again, and neither bankers threatened by prison nor a no-bailout regime will guarantee a more stable financial system. A fixation on these issues threatens to divert us from the underlying causes of financial instability.
The fundamental problem is that modern financial systems inevitably create debt in excessive quantities. The debt they create doesn't finance new capital investment but the purchase of existing assets, and above all real estate. Debt drives booms and financial busts. And it is a debt overhang from the last boom that explains why recovery from the 2007–2008 crisis has been so anemic.
Debt creation is a form of economic pollution. Heating a house or fueling a car is necessary, yet the carbon emissions are harmful to the climate. Lending a family money to buy a house is socially useful, but too much mortgage debt can make the economy unstable."
http://www.bloombergview.com/articles/2015-11-06/inequality-and-excessive-debt-cause-financial-crisis
Families who want homes, not bankers, are thus pointed to as the real source of financial instability. And the solution to the latter menace, despite vaguely populist sounding rhetoric, is the suppression of the latter's consumption:
"To manage this, the available tools include significantly higher capital requirements for real-estate lending. They also include borrower constraints, such as maximum loan-to-value and loan-to-income ratios. Policies to address the underlying drivers of real-estate supply and demand are also crucial. I recommend tight mortgage underwriting standards and limits on the advertising of very high-interest credit...
Tax policy also must be changed. Capital-gains tax regimes that exempt family homes make housing a capital asset that delivers a tax-free return."
http://www.bloombergview.com/articles/2015-11-09/blame-real-estate-lending-then-rein-it-in
(again, he makes many fair points, but from the perspective that can't allow for any democratic and socialist solutions to the problems it raises)
getfiscal posted:the NDP, green party and almost all minor parties have had social credit style policies as part of their platforms one time or another over the past decade or so because those people are really persistent organizers.
they are... i share an interest in certain economists with the MMT people, so i saw their group coalesce a few years ago. for a scattered bunch of profs at 3rd tier universities and a bunch of online commenters, they've been really successful in getting their ideas out into the mainstream policy discussion.
it helps that the general concept of using seigniorage to promote the public good is a very good idea. it's just never gonna happen, and the economic concepts are too arcane to imagine it really being taken up as a popular transitional demand