Tomorrow expect further massive drops in European bank shares because of this just in from Reuters :
(Reuters) – Austria, the Netherlands and Slovakia said on Thursday they want collateral on loans to Greece after Finland secured a commitment, raising question marks over a second bailout agreed for Athens last month.
It does a little more than raise a question mark. Athens doesn’t have the collateral to meet all those demands. And those making the demands know it. If Athens had that much collateral it wouldn’t need the bail out.
We are back to asking Greece to pledge islands and pieces of Greece as collateral for loans. And apart form the small fact that I don’t think the Greeks will accept such dismemberment, I’m not even sure if Austria and Slovakia want islands and airports. I think they. just like the Finns already insisted upon, want cash or gold because they are both in trouble themselves.
Of course they could settle this with mutual debt cancellation but their respective banking aristocracies wouldn’t accept that at all.
This development puts any bail out of Greece almost beyond any reach except a massive German or covert Fed led direct bail out.
At the very least this will add to US fears and even more US money will be pulled and even fewer European banks will be able to borrow from the US markets. I expect more European banks to be turning to the ECB for overnight cash just to stay within the law.
How much more of their share price the Big European banks can stand to lose before they have to be strapped to a table and have 250 volts jolted into them to keep them going I don’t know. But Soc Gen has lost about 48% of the share price it had only 4 weeks ago. The it was at 38 euro. Today it is at 21.75. While UniCredit is less than a Euro a share. That doesn’t give them a lot to play with does it and both are badly exposed to Greece.
SocGen has €2.9 billion of Greek sovereign debt. But is also has about €3.6 billion in mortgage, corporate and retail loans. The total exposure is therefore about €6.59 billion. This means Soc Gen;s exposure to Greece’;s sovereign debt is 10% of its Tier one capital and its total exposure comes to 23.6% of Tier one capital. Thus Soc Gen could be wiped out by Greece alone before we even talk about Spain.
careful what you say about SOCGEN, they French secret service are on the case.
Sean,
thanks for the warning. Those chaps don't kid around.
Things may get nasty.
The opinions I read have been anticipating a US recession since April – whether we're already there depends on revisions later in the year.
So I thought it would be a question of riding it out and waiting for more stimulus. But … the CBs are boxed in by their QE induced price inflation, which still has a way to run.
As with all investments, it's mostly about timing. Recessionary conditions have returned too early.
Some news from across the pond:
Is the SEC Covering Up Wall Street Crimes? – Rolling Stone magazine
"A whistle-blower claims that over the past two decades, the agency has destroyed records of thousands of investigations, whitewashing the files of some of the nation's worst financial criminals."
I suppose there is some hope in the fact that US authorities have the stamina and courage to investigate such allegations against the august Secuirites & Exchange Commission. The article sates that "As a federally protected whistle-blower, Flynn is not permitted to speak to the press." This is quite different to my own situation where I am threatened by the Central Bank of Ireland with criminal proceedings if I proceed to inform them of what they allegedly do not know.
WhistleblowerIRL
UniCredit Bank Ireland's EX Risk Manager
Hello all
David were your ears burning tonight? : )
We were talking about you at the Equality Trust. I hope you can come to see us next month.
Here is some more on the Amnesty Campaign against RBS funding cluster bombs.
'In just two days, over 7,700 of you have emailed RBS asking them to stop funding these companies. We know RBS are worried because they sent some of you emails denying our claims and trying to discredit our campaign.
Royal Bank of Scotland ad creativeBut we‘re not backing down – they’re in the wrong and we’re right to take them to task. We’ve asked RBS in private meetings and by email to change their ways. They haven’t. Now is the time to shame RBS publicly through a high profile advertising campaign.
We’ll confront them, their customers and the taxpayers who bailed them out with the ugly truth about what they’re funding. However, we only have a few days to raise the funds we need to do it. See the full-size ad and donate now
We know from our campaign against Shell last year that big corporations hate nothing more than having their dirty practices exposed in public. So we believe that with your help we can shame RBS into withdrawing their deadly investments.'
http://pthblog.amnesty.org.uk/stop-rbs-investing-in-slaughter/?utm_source=email&utm_medium=mass_email&utm_campaign=arms&utm_content=cluster1_link1
All as England get to the top in cricket! The criminality involved in all this seems far from clear in terms of how long people needed to take the money and run. I can't remember ever being offered any financial services much use to me or that needed any selling. It's obvious nearly everything from loans to insurance could be sold by auction at minimal fee rates. The very idea of a personal pension plan as sold in the UK should be theft.
I know when investigating fraud that the key was usually about 'network discovery' – finding the people who could push claims through the system and who they met at weekends. Nicked a few on that basis – but nearly all banking-financial services looks crooked to me at the outset – you hardly get a service worthy of any fee and it's hard to find competitive offers or differences between products you can check out reliably.
My guess is some very nasty people have got involved in squeezing required margins for bent money. It's otherwise difficult to see why none of the risk managers find the black holes and 888 accounts. My old department once had some clue on who was doing bent banking and the kind of dirty money likely to bring undesirable types. I'm told this is no longer true. Yet practices similar to the Scottish Enclosures are known at the end of investment networks. I don't believe any of the maths being used is applicable – rather like witch trials the standards of proof have to be dropped to reach conviction.
allcoppedout,
I'd love to hear more about your old department.
eric,
Yes I can. I'm looking forward to it.
I'm sorry I have been tardy getting back to you, it was rude of me. I apologize.
No apologies necessary! We are very much looking forward to seeing you!
"Are We Approaching Endgame Fro The Euro?"
Marshall Auerback
http://neweconomicperspectives.blogspot.com/2011/08/are-we-approaching-endgame-for-euro.html#more
Following on from the comments on the previous blog piece, did anyone watch Newsnight tonight (Thursday)?
Sachs was on with an American woman from Reuters and an English fella whose providence i can't remember but who I do recall saying, 'the problem is the banks have been too tightly regulated these last few years, they haven't been able to grow'…
When Sach's talked about income inequality (a subject close to my heart) our man replied that there had been a lot of 'envy' of the bankers…
He then said that millions had been lifted out of poverty in China and India – thanks to globalisation – without mentioning the millions more whose poverty has been made worse in those countries (the removal of the Chinese Iron Rice Bowl for example) and further afield.
And they always manage to sound so reasonable when they say it…
@ shtove
re "…QE induced price inflation…"
don't think so:
http://pragcap.com/inflation-update-4
http://pragcap.com/do-gold-prices-correlate-with-u-s-inflation
@mikehall
I agree with PC that there is no way hyperinflation will occur in the west. Too much bad debt.
But I'm convinced QE has allowed the banks to push up commodity prices well above the demand level. That feeds into production costs, and I guess leads to demand destruction. That should impact China internally as well.
I expect commodity prices to fall, but in the long term they will probably rise with Asian demand.
For now, the CBs have to hold back until prices rises go into a downtrend.
@Eric
I think you might be referring to this prick. Andrew Haldane BoE.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8709616/Banks-should-take-more-risk-argues-BoE-executive-director.html
@eric
He said banks need to grow! Talk about a market bubble… Its amazing how few people at the top are willing to admit that banking is completely unneccessary on the scale we see it at. It does all seem like a giant fraud as allcoppedout said. I just don't see what is going to happen though.
@steviefinn
Haldane is back in the news recommending fiddling the banks books so they start to lend again. He said the same in 2009.
Not sure what to make of it.
Priority #1 is jobs. Welfare, subsidies and individual debt (residential and consumer) are just sucking us into a blackhole. But how do you get the growth to provide jobs without more debt?
@ shtove
Yes, I'd agree that it's commodity prices that are responsible for the inflation & mostly speculation. (Although I think actual, of proximal, supply constraints play into that too, esp energy & food.)
It must affect aggregate demand, but I think it's important to distinguish between cost push & demand pull inflation. By cost push, I mean prices of externally sourced specific items, particularly energy for western economies & often food as well. We can't do much about these, but they will tend to have a far less 'spiralling' effect than demand pull inflation which is driven by internal demand rising over near all internal supply resources, particularly labour, which has a far greater & more rapid effect on all prices. It's the latter we really need to focus on in monetary & fiscal policy. The key point is that job creation and growth to facillitate recovery must come from investment. The private sector are not obliging (typical in a recession). Therefore the public sector must. Which is what Krugman & other progressives advocate. However, the MMT position is that this can be done without (sovereign currency issuing) governments incurring debt which must be both serviced & then repaid later. Provided the public spending is reduced (or taxes increased) before demand pull inflation can occur there is no concern. (Our modern ability to gather key metrics in very timely fashion is vital to note here.) This does differ from the kinds of QE so far in that it is much better targeted directly at employing people without jobs.
Prof Yamaguchi did some modelling on this for Japan:
http://www.monetary.org/yamaguchipaper.pdf
This can be done, but don't forget 'debt' IS the banksters' business. They don't want the cat out of the bag.
As Roubini recently pointed out we're heading rapidly toward the problem Marx identified for unfettered capitalism. When all the money ends up in the hording vaults of the elite few, the real economy has no income & the system crashes. There needs to be a limit on this & much fairer (even) distribution to those who spend the bulk of their income. Governments must do the balancing. When they become near entirely 'captured' by the capital owners, as now, & fail to do this, the system falls. There is a limit to what proportion of wealth can be transferred into unproductive ownership. We've exceeded that. The massive rise of the FIRE sector in the last decade or so, & current events are absolute proof of that. Economists like Steve Keen & others are highly critical of mainstream economics that completely fails to monitor the size of this parallel (M-C-M) money-commodity-money cycle (as opposed to C-M-C that more characterises the 'productive' economy cycle). His 'accounting' methodolgy showed clearly what was happening & why, years in advance of the crisis. Again, tho' that's another 'cat' the greedy few would prefer to keep in the bag.
@ shtove (again!)
Spooky…Bill Mitchell has just blogged about inflation risk here:
"Painstaking, dot-point summary – bond issuance doesn't lower inflation risk."
http://bilbo.economicoutlook.net/blog/?p=15753#more-15753
This is a DEPRESSION!!!!!!!
The sort that often means Revolution is feasible. This is predictable and will have been planned for by some governments. Now we see another reason apart from pillage, for the war on terror. Citizens will become terrorists if they step too far.
Glad to see Golem taking the self cancellation on board. But only after the Euro collapses! Then the plans call for rationalization under one financial central power.
Just come across details of a private members' bill introduced by Conservative MP Steve Baker, a former Lehman Bros. executive (!).
Baker said the bill was designed “to expose banks’ false profits, overstated capital and hidden losses”.
See http://www.ianfraser.org/steve-bakers-bill-would-expose-banks%E2%80%99-false-profits-overstated-capital-and-hidden-losses/ and the bill itself at http://services.parliament.uk/bills/2010-11/financialservicesregulationofderivatives.html .
However – quote: "This bill was not moved for its second reading debate on 10 June 2011. There is no indication as to when the bill will progress further.
For further information please contact the bill’s sponsor, Steve Baker."
Worth following up, perhaps – and Ian Fraser certainly seems to be one of us, so to speak, judging from his blog (http://www.ianfraser.org ).
Hi Stevefinn, it was actually another prick called Tim Congdon from International Monetary Research.
http://www.bbc.co.uk/iplayer/episode/b013n4h8/Newsnight_18_08_2011/
In eulogising about the benefits of globalisation for China and India Mr Congdon neglected to mention the riots and strikes which are happening in China every week and the various Maoist insurgencies / social movements in India.
The 38 degree dinner was great.
The food was nice and the people were all lovely. Nobody can remember how they found the website which is a bit weird. If you get an email invite to an event of theirs mail back straight away as it's done on a first come basis.
Becky and Danielle the hostesses were great company, young and good looking, very much like myself. I'm so glad I went as it was great to meet other people who are fed up with all this cr@p.
Becky loved the RBS audit G, I've mailed them about it. I parrot repeated you like there was no tomorrow.
"Take this jumper, mark to market accounting…"
hehe, nobody knows about this stuff though, even the ones that don't like the banks. But unless you watch Max Keiser (nobody had heard of him) or similar why would you?
I'm gonna mail them all a link to your blog so I better not slag off Chris too much 😛
Only messing, Chris was a top dude, infact everybody was top. I'm so much the weird guy though, I wanna bump into somebody I can call the freak.
Still feel everybody needs to get behind one campaign, the audit seems like the 2nd best. ZBDS being No 1 obviously. I mentioned that we all have a step infront of us as a society and we all need to take a deep breath and step up.
That's when I was asked to get off the table 😀
All joking aside though they have a good thing going and there has got to be a way of connecting all these things. They mentioned another site Avaz, Azzaz, something like that, red wine has erased the word from my mind.
If all these things can come together like a jigsaw we might get to see a beautiful picture.
Thanks G 😉
#24k
Avaaz
Hey thanks dude!
@eric
Getting my pricks mixed up, there's so many to choose from, I get confused.
@mikehall
Thanks for the responses.
One thing I can't nail is the mechanism of QE feeding in to commodity price rises. I'm sure it is the case, but haven't seen a clear description.
The ridiculous price rises aren't the end of the world because they're bubbly and will not last. Buuut … they will keep repeating even as the bankers give us Brownian assurances of no more boom and bust. And I suspect they have caused critical problems in, say, north Africa and perhaps even in the Somalia famine.
My temperament is to say No to big government, especially the mad monetary experiments we've been seeing. But I do see the need for fiscal stimulus in a downturn, and it is an interesting debate on whether that can be achieved sustainably and justly ie. without picking winners and losers.
Very good 18 page paper that covers most of these points, probably largely in agreement with MMT:
http://www.levyinstitute.org/pubs/ppb_117.pdf
shtove and mikehall
i don't know if this contributes anything to your discussion but i found it via Nick Shaxon's Treasure Islands website. Essentially the QE2 money ended up in the tax havens.
http://www.globalresearch.ca/index.php?context=va&aid=25566
Yes, I watched that Newsnight piece, Congdon was a total prick. Jeff Sachs was talking some sense for a change – stimulus required to raise aggregate demand etc – a change from his 'globalisation is good' mantra. (If only he'd cop on to MMT..) Woman from Reuters was a clueless muppet.
@ 24k
Re. 'one campaign' – get behind MMT & bust the myth that UK is NOT financially constrained in government spending to provide jobs. (MMT advocate a Job Guarantee Scheme.) Move to 'functional finance' & give government the role it should have in both providing employment and making appropriate investment for the public good in ecological sustainability.
@ shtove
I've not seen a definitive analysis as to the effect of the (US) QE either. It certainly wasn't a good method of providing stimulus – that should have been done via fiscal policy, but congress wasn't having any of it, so the Fed acted instead. I think the Fed realised where in the system (financial sector) it was feeding the money in, with a combination of motives. The Fed is clearly favourable to the financial sector & probably still had concerns (reasonable I think) of some weakness there. As regards 'main street' I think they knew full well it would not cause demand pull inflation with so much unemployment & might do a little good. Perhaps also responding to the Administration's preference for some kind of stimulus that they knew couldn't be done fiscally for political not economics reasons. So, from that point of view, a little 'mad'. I don't think it's done any harm. Wasn't properly Keynesian at all, let alone 'post-Keynesian & hence didn't do much good.
Much of the 'financial' economy, drawing the distinction with the 'real' or 'productive' economy is & was already awash with cash. And commodities have been a target for that cash as well as other, essentially asset based, speculative areas. So how much QE contributed itself is uncertain.
Real news have recently had an excellent interview series with CFTC chief Bart Chilton which sheds some light on commodities speculation (& actual & potential market manipulation). Well worth viewing:
http://therealnews.com/t2/index.php?option=com_content&task=view&id=33&Itemid=74&jumival=762
I can fully understand where revulsion to 'big government' comes from. It can hardly have been more disfunctional lately. However, I do see this fundamentally as an extraordinary level of 'capture' by lobby interests – most especially financial sector – together with a monetary & fiscal system that simply doesn't work in the way mainstream economists, media, politicians etc. think it does. Incredible, but sadly true.
But, we've seen the utter failure of letting the financial sector do whatever it wants. Even Greenspan, its primary architect, now admits this. So we +do+ need a government role. Preferably one that also relies more on a clear framework of rules than regulator 'judgement'.
This is where I see other advantages for MMT. Their (correct) approach to the monetary system automatically enables a much more clearly defined fiscal role for government – 'functional finance'. The current economic parameters, unemployment, inflation etc., can be used to determine with some accuracy which way the government net spending (or contraction) needs to go in the next budget period to maintain balance. This 'calculation' aspect would be done by a body independent of gov or other vested interests. The elected members would then need to use that to determine their distributional preferences. I would see this going round a couple times between the two bodies, requiring sign off of both before the final budget is settled. All done in a transparent way with a clear framework that the public would be able to follow. Goals to policy instruments (spending, taxation) in clear statements with robust mathematics. Unreasonable peddling of vested interests, pork narrelling etc. would be far more easily exposed.
Thanks for the Levy Institute link. They are linked with Prof Randall Wray, with Bill Mitchell one of MMT's leading academic advocates, so I would anticipate some MMT flavour there as you say.
Thanks for engaging, I hope I've been able to offer some food for thought!
Excellent piece by Faisal Islam of Channel 4 News on the role of hedge funds and credit default swaps in the current sovereign debt crisis. This puts recent events in this area in a whole new perspective, for me at least:
http://blogs.channel4.com/faisal-islam-on-economics/the-new-big-short-against-the-euro-that-suggests-france-is-riskier-than-panama/14630 .
He also did an interesting piece picking up on Osborne's recent use of the term "balance-sheet recession": http://blogs.channel4.com/faisal-islam-on-economics/balance-sheet-recession-is-this-the-japanese-lost-decade-malaise/14654 .
PS If anyone were looking for an alternative investment to gold, look at how this ETF shorting European banks has fared recently in comparison to one in physical gold: http://online.hl.co.uk/content/chart-graphic/store/9CD65565.png
For all who are investing in paper: counter party risk!
A lot of people know it is a depression and they also know of countries where extradition does not apply!
The American 'Dream' Down Payment Fund.
"One of the barriers is paying the down payment".
"How can you promote homeownership if people can't afford the homes?" W. Bush.
Yes George, how can you?
Great Documentary. Overdose: The Next Financial Crisis
Off topic, but China has been mentioned here before.
Very interesting piece on the Chinese financial system & economy here:
http://www.nakedcapitalism.com/2011/08/chinese-banks-these-things-arent-banks.html
Incredibly, the JP Morgan guy & Shih both have the Chutzpa to grin at the 'fragility' of their banking system – actually in feckall danger of any 'implosion' because it's effectively a 'public' system controlled & backed to the last cent by their Gov.
Note the lack of significant (real, 'demand pull') inflation following Chinese 'printing' of new money at '15 to 20%' of GDP for the last 3 years.
Just shows that 'inevitable hyperinflation' from 'printing' money into an economy with high underemployment/under utilisation of resources is complete bollocks.
Refusing to 'stimulus' spend to provide jobs on the spurious grounds of 'unaffordability' is pure economic warfare on labour – nothing else, & certainly NOT economics.
@24k
Sorry, that 'documentary' – which I have to say reminded me of a 'Durkin' style 'polemic' – is really just propaganda.
There are so many distortions, misrepresentations & flat out lies, very cleverly interspersed with a few, actually trivial, 'truths'.
For example, former US Comptroller General Walker, says that '…US is dependent on FOREIGN lenders…'
What? Complete rubbish! The US produces its own soverign currency – it doesn't need to borrow from any foreign source to create those $$.
The implication is that the US is like Greece or Italy, who are currency USERS not ISSUERS, and can go 'bankrupt'. Crap.
The whole thing is a PR piece for a lobby that wants to promote austerity and run down public services in the US, continuing the bullshit that this will reduce the Gov deficit. It won't – but it will drive labour income into the ground, & offer the public & other assets in the distressed sale buying opportunity of a lifetime for the wealthy elites. ie privatise everything.
Another section that was unbelievably stupid…
In its various spurious claims about the stimulus – which it claims had no effect – it shows a street, "admittedly potholed", in a well heeled area that was repaired & implies those wealthy inhabitants got the benefit. Laughable, how many millionaires do you know that apply for jobs fixing roads? The benefit went where it was intended – continuing (or creating) employment at the bottom, keeping them off welfare & spending their income onward to keep others working.
If you want to read what's really driving things, Matt Taibi in Rolling Stone is on the money:
http://www.rollingstone.com/politics/blogs/taibblog
(No flashy 'polemic' BS, just lots of facts.)
Well, well, surprise, surprise (not). Co-producer of 'Overdose: The Next Financial Crisis' was non other than Johan Norberg, senior fellow of Koch brothers Washington DC propaganda organ, the Cato Institute.
ie
'…globalisation is good, financial crisis not a problem with capitalism, it's those pesky governments, see?…yadda, yadda…'
Damn well crafted stuff tho', Edward Bernays would be proud.
http://blogs.mediapart.fr/en/blog/les-invites-de-mediapart/200811/european-appeal-resist-financial-dictatorship
A petition from the march to Brussels Indignados people. Seems they are making some headway with gathering support from Greeks, Italians & the French. If you want to show a bit of solidarity from us Northeners, add your name.
Was it?
I quite liked it.
I liked the start with Bush and the down payment fund to get the ball rolling, I thought that was good.
I liked the bit about poshville getting cash and the airport getting a facelift when hardly anybody uses it. I never saw the propaganda bit. I thought he just meant it could've deen used in Mowtown instead rather than Rodeo Drive.
Maybe the fact it was well crafted fooled me, that's not hard mind. A 5D mkII's dynamic range will get me every time.
That got you going then 🙂 I'm gonna see if I can find some more whitewash documentaries. Was it really that bad? Loads of it seemed to make sense, my mate Gerald was in it, I like that dude dude. The best lies are saddle between truths I suppose.
Matt T is the best. That's who inspired me to write The Game
I wonder if you can guess the article the lyrics are from?
Man, I'm not watching it again to see if I can see what you saw. Talking about privatisation though, 38 degrees mention the NHS thing is gonna kick off soon as everybody is up in arms over it.
I voted for the campaign today aswell about auditing but the name of it is a bit long.
So I made another today Audit RBS
I'm gonna write a song for it as Audit zombie banker man is easier to rhyme than blah blah blah blah and see if I can get people to vote it u via audio propaganda (good propaganda though mike).
Oh yeah some how I managed to write similar words to what you wrote G. That's a mad coincidence innit? I thought it didn't seem like my usual dry style.
Vote it up, Make artwork, tell your neighbours, tell your friends, tell your haters.
AUDIT RBS and put THEM to the test. Go on it's not hard, there's a hyperlink and everything. open a new tab and send it to all your contacts.
'Like' it on facebook.
Twitter it.
Get stickers printed and stick them to stuff. Could overtake Banksy as outsider art.
Stevie, you said you were good at pixel art. How about some Warhol style AUDIT RBS logos? High contrast easy to read logos that we can fill the world with, plus it says what it wants and so much more in two words. That two less than ZBDS, bonus.
Bring The Beat Back
24K
RoBS (put logo after R makes the o)
hehe
Like This?
Re the Stevie Finn post above,
Spain currently has 45% youth unemployment, while here in the UK around half of black youth are unemployed.
The petition calls on European citizens to occupy large town centres massively and peacefully every Sunday until their will has been heard and respected:
http://blogs.mediapart.fr/en/blog/les-invites-de-mediapart/200811/european-appeal-resist-financial-dictatorship
To fill in the country box, click on "Royaume Uni" (French for UK).
This is something 38 Degrees and Avaaz should be involved in.
Sorry, wrong Rolling Stone link in my last post, try this:
http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405?print=true
There's no 'next financial crises' until you have solved the one your in.
That's the problem with these financial shamans they've got to keep the conveyors of merde moving fast, otherwise the bewildered herd will not only be able to smell and get a taste of taint from it, they'll be able to really study it and understand how truly merde it really is.
Once that's understood the merde conveyor has its power switched off and its product ignored.
Thought for the day – say No to shit; either as being regarded, treated, concerned by, or exploited by it.
David: Very interesting post over on Zero Hedge – Bloomberg investigation into the Fed's secret $1.2 trillion bailout! Have a look at some of the names of the companies that have had to borrow emergency funds.
http://www.zerohedge.com/news/visualizing-what-12-trillion-secret-fed-bailouts-banking-kleptocracy-looks
Deutsche Bank charged in South Korea over stock rout
Deutsche Bank's South Korean brokerage is facing charges over improper trading
Deutsche Bank's South Korean brokerage and four of its employees have been charged with illegally manipulating Seoul's stock market last year.
More here: http://www.bbc.co.uk/news/business-14611852
mikehall,
I am finally reading Bil Mitchell on MMT at the moment. I know you have recommended pieces before but I can't find where you did so. Would you mind recommending a couple of pieces you think I really ought to have read to have a firm grasp of the basic argument?
What I have read so far I fgind I agree with. It seems I have come to many similar conclusions about the nature of money and debt. They have, of course, worked out a comprehensive system far beyond anything I have done.
All that said, a couple of the things you have written on this thread strike me as perhaps not quite right. Forgive me if I have either misunderstood you or have not quite understood the theory – but for the moment I want to question a couple of things.
You say that there is no chance of the Chinese banks imploding simply because they are a social system backed by the government. And so they are. But I don't think being backed by the government means they cannot implode.
It was less than twenty years ago that all four of the majors did implode. The Chinese government did then step in and bail them out. So would could say this means they didn't implode, though I start to feel it becomes a matter of semantics at that point.
The situation in the 90's was that thet big four Chinese banks had made a lot of loans that had very little chance of being repaid. The fact that thet government was there to bail them out does not seem to me to be grounds for saying they didn't implode.
WHat happened was the government chose to divert money it could have spent on other things buying up private loans from private banks and putting them on the public tab.
The same banks are heading right back to the same situation now. Bad loans which teh banks themselves will not be getting income from which will mean they suffer large losses and most likely will mean they can't cover other liabilities.
So we have a massive misallocation of capital by the private banks (building tower blocks in cities which no one lives in for example) for which the 'remedy' has been to compound teh error by misallocating (divert away from something truely beneficial) public capital as well.
Now I think I understand that you could counter by saying, the government can simply print up this money it is using (being a sovereign nation with a sovereign currency) and so it can 'create' the money without having to borrow it. So China and in your later post the US, can print up more money without having to go in to debt by borrowing it on the bond market.
That they chose to borrow it is another part of the whole clash of paradigms.
Continued below
Continuation
But the idea of printing is the other thing I wanted to question. You have said a couple of times, naitons can print and there is no problem. Hence your assertion that there is a) no need to borrow, and b) no need to worry about deficit spending.
Which I agree with but only up to a point (so far – maybe I the penny will drop for me). You seem – and I may have misunderstood you – but you seem to have said or at least implied a couple of times that there is virtually no limit on the amount a nation can print. I wonder if you really meant that?
Surely a naiton can print so long as those to whom it would like to tender the paper money (the promise to pay the bearer) think it is likely the nations will make good on that promise.
To give you a simple example – Let's imagine that Andorra was still a naiton with its own currency (Let's ca;ll them Andorros) . I do not think Andorra could print up 13 trillion of its 'Andorros' and expect the world to treat it as being worth what it was before they started to print.
So if Andorra housed vast banks which then went bust (Iceland) it would simply not work for them to say, we are a sovereign nation with our own currency, thus we will print all the money required.
Why not? Because money has to be backed by something. Otherwise the Andorrans could all print their way to being billionaires. What backs a currency is the untapped resources and untapped labour of a nation.
So China has lots of both as yet untapped. America has somewhat less of both. The UK has a lot less of both. So I would argue that even a nation with its own currency cannot print any amount it likes. It can print only as much as its future labour and wealth production seem likely to be able to carry.
Which raises a further point. What the money is beiong printed for. And here you and I are in complete agreement. Printing money is a promise to divert future wealth (labour and production) to pay for what the money has 'bought'. So printing a trillion to buy up rotten debts seems spectaculalry unwise and unproductive, whereas, printing a trillion to develope two or three indsutries (wave power, Stem Cell therapies for example) seems for more likely to bring in the wealth to underpin all those new promises to pay the bearer.
What all this boils down to is that I don't buy that simply being a sovereign with you r own currency means you can never go bankrupt (in teh semse of getting to a point where you cannot pay off debts on time) simply by printing an endless supply of paper promises.
That said I agree that the current 'austerity' is politically motivated and monumentally stupid. A vast mis-allocation of our future taxes.
This has already gone on longer than I had hoped. Sorry. Perhaps I should write a couple of posts?
The MAGIC CARPET
and the
WHITE HORSE of RACIAL JUSTICE
Trojan Horse replica in Turkey.
Why does the British Government classify Turkish people as White and Kurdish people as Arab (Other)?
Have you overstood the Magic Carpet of Racial Justice?
". . . where ignorance is bliss,
'Tis folly to be wise. . ."
http://en.wikisource.org/wiki/Ode_on_a_Distant_Prospect_of_Eton_College
Humble yourselves you White Supremacist Racists and acknowledge this manifestation of the POWER of The Almighty before you get a "Bloody Good Hiding"!
http://united-races.blogspot.com/2011/08/magic-carpet-and-white-horse-of-racial.html
Hope the above makes some kind of sense. I have come down with a dose of summer flu and am feeling somewhat less than sparkling.
United,
I always find rants work better if they are coherent. If you would care to explain a little we might even have a conversation.
Chris,
Thanks, yes I saw that one. Morgan Stanley! Yikes.
I have been trying to write something about what is going on in bank land but I feel so awful I haven't made much progress.
@ 24k
Yes, it was really that bad! But….it was made very much for a US (TV) audience I think where the Big Government=Bad message would resonate much more strongly. It's the 'Tea Party' line basically, which is also a creation of the Koch brothers – the Banks f&*kd up, but 'big government' is the 'problem'.
Projects like that small airport that got a new runway (not facelift) was made to look like the 'gubmint' just wasted a pile of cash. Well, yes, imo too, not a great 'end product'. From my perspective not a great choice on environmental grounds to sudsidise more air travel. But from the economic 'stimulus' point of view, not so much. The point there was to give people, at the lower wage scale, work, & income badly needed for them that would also benefit others in their locality when they spent it. State income tax would also go back into their locality – all good. There was undoubtedly some 'pork barreling' going on. A local politician getting federal cash spent into his/her constituency. Maybe a local contractor getting a nice earner. But a far better use of Fed cash than giving tax cuts to billionaires so they can gamble on a commodities market. This was what the Fed's 'QE' did when congress refused to sanction any other stimulus spending into the real economy.
In any case, cherry picking & sound biting a couple of tiny projects told us nothing 'factual' about the $700B stimulus package overall. Of course, that wasn't the point. The point was to tap into our 'emotional' brain centre, preclude any 'thinking' & get us to 'conclude' 'gubmint is wasting our money!'.
Gerald Celente seems to take the view that it's all going to fall apart anyway, but he's offering no solutions at all. Well, you don't need to be a genius to see it's not going too well, but he certainly seems to enjoy self publicising himself. He seems to rail against Obama being 'a servant of big corporations' (true, but hardly a revelation) & then appears in a propaganda film effectively sponsored by the Koch brothers – some of the nastiest, most 'fascist' corporates out there. Is he a f*&ing idiot, misguided fool or perhaps a shrewd 'business consultant' as he often styles himself? Who knows?
Peter Schiff is just another self publicising opportunist slime ball imo (ex Republican presidential nominee & former economic 'adviser' to Ron Paul). Apparently for all his claimed 'predictions' about 2008, many of his investment clients did badly with his incorrect view on which way the dollar would go. David McWilliams went down massively imo when he invited Schiff to an economics gig in Ireland.
Is Germany's Commerzbank in Need of Another Bailout?
Yahoo!Finance now cites CBK.DE market cap as 9.75 Billion. But that is as of June 30, when share prices were 3.18 EU. Now share prices are 1.91 EU so you can lop off about 40% of that market cap, which means after an injection of 10 billion EU, the bank is now worth approximately 5.85 billion EU.
@24K
I'v stuck a pic on your facebook page, let me know what you think, it's kind of Warholish.
Obama Administration Takes Tough Stance on Banks – Glenn Greewald
"It is worth keeping a watchful eye on Schneiderman's investigative efforts and doing everything possible to provide what will undoubtedly be much-needed support if, as appears to be the case, he is serious about taking on these pernicious factions and impeding the conspiring by the political class to protect their benefactors/owners."
"When I wrote that, I assumed the pressure would come from the banks themselves, not from top Executive Branch officials. At this point, though, the mistake is to consider those entities as separate and distinct at all. As Democratic Sen. Dick Durbin said of the branch of government in which he serves: banks "frankly own the place." Capitol Hill is obviously not the only property they own on Pennsylvania Avenue."
I'm following the MMT discussion with much interest – haven't been able to get to grips with it myself yet. Can you recommend any good books that outline the fundamentals, Mike?
It is high time to describe the Obama Administration by its proper name: corrupt.
Admittedly, corruption among our elites generally and in Washington in particular has become so widespread and blatant as to fall into the “dog bites man” category. But the nauseating gap between the Administration’s propaganda and the many and varied ways it sells out average Americans on behalf of its favored backers, in this case the too big to fail banks, has become so noisome that it has become impossible to ignore the fetid smell.
http://www.nakedcapitalism.com/2011/08/corrupt-obama-administration-pressuring-new-york-attorney-general-to-support-mortgage-whitewash.html
@ Golem
Ok. Lets's see if I can help 🙂
1st point, and I must apologise if I've not been clear on this. MMT does +not+ say there are +no+ constraints on money creation. What they say is that there are no +financial+ constraints. ie, no borrowing & the actual size of the notional book keeping 'deficit' in the government accounts is irelevant. The money wasn't borrowed from anywhere, thus needs no repayment or interest service.
I hope I've expressed this before by saying 'not credit constrained' or some such, but all our lives we've programmed ourselves to react very strongly against what seems a 'something for nothing' idea. Even now, I find myself baulking a little at the idea that money can just be created on a computer keyboard. Seeing that piece on China – a real world example – was very exciting even tho', intellectually, I thought I had dispelled any fears I had. (More on China in a minute.)
So, in a nutshell, a sovereign government, provided it issues a fiat currency with flexible foreign exchange, can print (keyboard) all the money it wants debt free. BUT, there ARE CONSTRAINTS.
There must be enough idle capacity in resources, principally labour, to be bought with that money otherwise all that happens is that the price of goods/resources already being bought will be bid up in price – inflation. This is the key. MMT does recognise also that some 'sectoral' inflation can occur. In the purchase of some good or service, there may be a part of that supply which is (sub contracted if you will) from a source that is already at or near full resource capacity. Supposing, just now, we wanted to construct 100 new wind farms within, say, 2 years. Planning issues aside, we probably have plenty of civil works construction workers available given the housing construction downturn. But do we have enough, or can we train quickly enough from the unemployed, the electrical technicians needed to make the grid connections etc? Probably not, & that +could+ bid up the price of those services, but note, for many projects it may only be a short term & somewhat isolated effect. 'Bottlenecks' & other effects such as the 'crowding out' of existing provision of goods/services needs to be considered in how spending is applied.
Care is needed in how government spends into the economy. It's possible, perhaps likely, that price inflation, & perhaps with greater sector variation, might well range up to 2% or so higher than presently typical. But what must be realised – & this is also central to MMT – is that by achieving far greater use of labour resources, & far less economic'drag' from unemployment, we will all be better off anyway (assuming appropriate 'distributional' tax arrangements) .
The effect of the spending must be monitored & adjustments made to either spending or taxation, as required, to balance resource use (mainly labour, taking a socially desireable view) vs inflation. We have the ability to collect data & analyse it as never before. Most of this is already done.
cont…
Coming back to China, it seems to me that the essence of what the government has been doing, especially over the last 3 years, is creating money, debt free & spending it directly into their economy. I say debt free, because the 'banks' are effectively government controlled and financed. Central planners told these banks exactly which projects could/should be financed. With the absolutely implicit backing for banks of making good any shortfall if the loans don't perform. A loan where the lender ultimately doesn't care if it's repaid is a 'grant' by any other name. I think the Chinese politburo understand exactly what's going on. These regional banks, among other functions, are effectively an arm of central government grant spending.
Why loans, not grants then?
I suspect it's part of their central control way of doing things.
The individuals & companies benefitting (& possibly some local authorities?) from any returns on these projects still have the 'threat' that any non performing loans +could+ be foreclosed if they incur the wrath of Beijing. Good way of keeping all your corrupt officials in the provinces getting too uppity.
In any case, from an MMT point of view, the economics is clear. Central government have been 'printing' very large sums of money, maintaining & growing employment & their economy at break neck speed (+ 9 or 10% pa) whilst their export business fell off a cliff following the crisis in USA & Europe. It's a pretty extreme case of shovelling 'debt free' money into their economy by any stretch. But they clearly have a vast pool of under utilised labour & plenty of other resources, so inflation (at 6%, but less the 'cost push' element) has hardly ticked up at all. Certainly no 'excessive' or 'hyperinflation'.
It's not ideal that they've pumped so much into property, much of which isn't immediately needed, but the wages provided to workers in building it has kept their aggregate demand going nicely.
To bone up on Modern Monetary Theory (MMT), you could try this: http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf . It's written for a lay audience and comes recommended and with a foreword by James K Galbraith (JK Galbraith's son).
See also: http://www.3spoken.co.uk/2010/04/primer-on-modern-monetary-theory-mmt.html .
more…
Golem
"WHat happened was the government chose to divert money it could have spent on other things buying up private loans from private banks and putting them on the public tab."
I'll use this, if I may, to illustrate a key concept not just of MMT, but actually how the monetary system works.
Golem's statement implies that government (sovereign etc etc conditions) must raise taxes or find funds from somewhere (borrow etc) before it spends. In practice, the government (or its agents eg banks) must create the money +first+ into existence so that people have it to pay taxes (or lend to the gov in bonds). But note since the government is essentially the creator of money, what it takes in taxes or chooses to borrow is entirely a voluntary, non-obligatory excercise for the system. (It can still 'print' & spend!) However taxpayers have no such freedom to meet their obligations.
So, in essence, so long as there are 'things' to be bought, the government is not constrained in buying them, no 'diversion' of funds is needed.
A funny story illustrates this point (how it actually works now).
A man goes to the inland revenue office to pay his gov taxes with a bag full of $100 bills. The clerk notes the payment of his obligation (in full), collects the bank notes from him, empties them into a bin & sets fire to them, burning every last note. Anything 'wrong'? Nope, the taxpayer met his obligation & the government duly noted that, but did not need the 'money' handed over to be able to spend or put in some 'account'. End of transaction.
Another related concept is that (bank) loans must be created first (out of thin air!) to create spendable funds (bank deposits). And banks are +not+ constrained by reserves, only capital.
Reading back, I don't know if I'm explaining this too well! It took me a while to get my head around & accept these concepts.
I watched a video'd lecture by Bill Mitchell & Randall Wray early on which illustrated wonderfully the concept of money creation. The sound quality was appalling, but I'll see if I can find the link again & also post some other resources. This link has a good brief outline:
http://pragcap.com/resources/understanding-modern-monetary-system
..but I've had to hunt around to find more in depth explanations.
More to come…
I like Gerald, he does good one liners.
I don't get American politics. The only real news I watch these days is The Onion. Is there a difference between The Onion and MSM? Other than The Onion is funnier? Makes me smile just thinking about it.
Thanks mike for the insight.
Stevie I love the picture but I can't see the word Audit. Sorta like Coca without the Cola. I forget about the facebook. Cheers dude 😀
I also liked the idea of using the word audit numerous times to make up the O and RBS of the RBS logo but do ya think I can figure out how to do it. Changing the letter round was easy but making a mask to fill with the words, made my head hurt in the end.
Thanks Neil, those are good sources.
Probably the most extensive resource in one place is Bill Mitchell's blog:
http://bilbo.economicoutlook.net/blog/
Whatever you choose to read, he references & inserts links to further explanation of key concepts.
Other MMT blogs I visit regularly are:
http://neweconomicperspectives.blogspot.com/
http://moslereconomics.com/
http://www.nakedcapitalism.com/
http://pragcap.com/
The link to the video I mentioned is broken. I'm downloading from another to see if it's the same one….
Ok, found the video link:
http://e1.newcastle.edu.au/coffee/multimedia/video/2009/Macro_Lecture_2_May_20_2009.mp4
It's about a 210mB download. Any trouble with a program to view it – use 'Gom' player (free download). Some players may not have codecs for all mp4 variations.
Sound is still poor, but for grasping the basic concepts of a currency system, the lecture is stunning, do watch it!
In particular, Randall Wray uses a 'currency' – 'buckaroos' – that they created at his University of Missouri Kansas City, to illustrate how a floating fiat currency works. The notes were printed in his basement 'Fed'! Watch this section most carefully.
Stellar work, Mikehall.
And thanks for the links guys – I'll start boning up…
On a day the FTSE went up 1%, RBS shares went down another 5.3%, taking them below 20p. Lloyds shares fell 2.89% to 27.56p. How long before both are taken into full state ownership?
From the Guardian:
"A former credit-ratings agency executive has launched a stinging attack on the powerful organisations that can damage countries' economies and wreak havoc in the markets with the stroke of a pen.
William Harrington, a former senior president at Moody's, claims the organisation's senior management interfere with analysts' independent assessments.[…]
Harrington, who worked at Moody's for 11 years until he resigned last year, said ratings agencies suffer from a conflict of interest because they are paid by the banks and companies they are supposed to rate objectively.
"This salient conflict of interest permeates all levels of employment, from entry-level analyst to the chairman and chief executive officer of Moody's corporation," Harrington said in a filing to the US financial regulator the securities and exchange commission (SEC), which is considering new rules to reform the agencies.
Harrington claims that Moody's uses a long-standing culture of "intimidation and harassment" to persuade its analysts to ensure ratings match those wanted by the company's clients. He says Moody's compliance department "actively harasses analysts viewed as 'troublesome' " and said management "rewarded lenient voting".
"The goal of management is to mould analysts into pliable corporate citizens who cast their committee votes in line with the unchanging corporate credo of maximising earnings of the largely captive franchise," he said in the 78-page filing submitted earlier this month.
More at: http://www.guardian.co.uk/business/2011/aug/22/ratings-agencies-conflict-of-interest
Germany Reveals The European Annexation Blueprints
Unless and until a fundamental change of regime occurs involving an extensive surrender of national fiscal sovereignty, it is imperative that the no bail-out rule that is still enshrined in the treaties and the associated disciplining function of the capital markets be strengthened, and not fatally weakened.
Post by Bruce Krasting at Zerohedge:
"Two important articles today on the gnarly topic of liquidity in Europe.
The first from Zero Hedge. This looks at a report out from Morgan Stanley on the status of Euro banks and the issuance of LONG-TERM debt. The bottom line is that as of August there is no long-term debt market for the EU financials.
[…]
Next from FTAlphaville who comments on a Fitch report Re: US money market funds draining cash from European banks. This was a July data report. Things have gotten much worse since then. The July data scared the crap out of (even) me.
It has been well know that the MMFs [money market funds] were leaving the weaker countries in the EU. What is scary to note however is that the money funds are leaving Germany too. The largest month over month decline came from German banks. Shocking!; is my reaction. Essentially the MMFs are saying, “NO EUROPE”."
Links and more at:
http://www.zerohedge.com/contributed/europe-%E2%80%93-%E2%80%9Csorry-bad-address%E2%80%9D
Meanwhile an Exchange Traded Fund (ETF) shorting European banks continues to outperform an ETF in physical gold…
Yes, I saw the ZH posts. A few more clicks on the ratchet.
From another blog I've been frequenting, looks like UK banks are dumping toxic assets in their employees' pension funds by way of meeting funding obligations. Other interesting commentary as well.
http://theautomaticearth.blogspot.com/2011/08/august-22-2011-reality-we-wouldnt-want.html
For MMT, this is probably the best synopsis:
http://pragcap.com/resources/understanding-modern-monetary-system
@mikehall
MMT is not just risky – it's a delusion, a further can-kicking from the failure of Keynesian and other socialist theories.
My objection is that it doesn't appeal to common sense – people only hope that debt is wealth when they've been forced to abandon what they believe in. That raises lots of issues about family and morals, but people need to know their own worth. Having the central authority conjure up wealth by "sending men into the computer room" is just bad soap opera, and people do get tired of that.
In MMT our feelings and beliefs don't matter squat, and I suggest that the theory is simply an obsession of number crunchers and analysts.
The nakedcapitalism link to the discussion on China was excellent.
For anyone who didn't see it, here's the link again:
http://www.nakedcapitalism.com/2011/08/chinese-banks-these-things-arent-banks.html
Your faith in the Chinese banking system made me laugh. I hope your communist masters recognise you as a fellow traveller and let you live in peace and prosperity!
Tiocfaidh ar la, comrade!
@ shtove
My interest in the Chinese 'system' was purely the operation of their monetary system. How their 'politics' arrived at their decisions wasn't the point, of little interest to me & irrelevant.
I think you're running away with your own ideological biases there?
My approach is entirely pragmatic, as is that of MMT. Really only three principles – what's best for the vast majority of people who by definition rely on their labour (not unearned income) to live; what can maintain the blight of unemployment at a minimum; what can best address our serious ecological challenges. (Well, a 4th, rather obvious, all within a one (non 'corporate' entity) person one vote democratic system – which admittedly barely exists just now.)
Unfortunately 'common sense' isn't too 'common' in macro economics. MMT is entirely based on what banks & central banks +actually+ do – it isn't 'theoretical'. No smoke & mirrors required.
Yes, I have noticed the beginnings now of a massive effort to claim that the US stimulus didn't work. But the reality is, it was no where near large enough or continued long enough (or optimally designed) to fully counter the massive fall off a cliff of economic activity. The facts speak for themselves. Following the stimulus, US began recovering. Once the money ran out it wasn't enough to power thru' the massive consumer deleveraging (still happening). So down you go again. Not helped of course by UK & Europe ramping up austerity measures too.
A major effort is also under way to misrepresent what Keynes actually said & not even try to understand what modern developers of that say either. The people pushing this are very much the same people who created the financial crisis in the first place & have pushed very hard against sane solutions. Do you really think Charles Forbes & co are interested in the wellbeing of ordinary citizens? Their wealth almost entirely occupies the mainstream narrative (& government). If that's where you align yourself, I do wonder what you are doing here, 'off-piste'?
(I noticed an absolutely shockingly bad piece on ZH yesterday by someone called 'Jim Quinn' who is otherwise completely anonymous. Dreadful junk economics – another 'polemic' really of disjointed pseudo 'science' ranting.)
If you can get past your ideological baggage, here are some good links where serious economists are making their arguments.
http://bilbo.economicoutlook.net/blog/?p=15774
http://www.social-europe.eu/2011/08/the-size-of-the-us-public-debt-are-the-rating-agencies-fools-or-knaves/
http://bilbo.economicoutlook.net/blog/?p=15765#more-15765
@ Sthtove
'Having the central authority conjure up wealth by "sending men into the computer room" is just bad soap opera'.
Isn't one of the main causes of this crisis precisely the gross abuse by "too-big-to-fail" banks of their ability to conjure up credit on computer screens?
Tax deal with Swiss banks agreed by UK authorities
UK describes the tax deal as "historic"
The Swiss government has agreed to tax money held by UK citizens in Swiss bank accounts for the first time, while still hiding their identity.
http://www.bbc.co.uk/news/business-14649194
This puts a positive gloss on the deal, but an earlier blog post on a similar proposed German deal was highly suspicious: http://taxjustice.blogspot.com/2011/08/swiss-german-tax-deal-more-dominoes-to.html
PS Christian Aid criticized the deal before it was made: http://www.christianaid.org.uk/pressoffice/pressreleases/august-2011/morality-demands-rethink-uk-swiss-deal-christian-aid-1808.aspx .
Meanwhile France is still holding out against a similar deal: see "France stands up to Swiss dodging", Thursday 18 August post at http://taxjustice.blogspot.com/ :
"So what's going on? The Swiss have offered to impose a withholding tax on the interest earnings of British and German residents and to pay the revenues direct to London and Berlin respectively. In return, Swiss bank's clients will retain their anonymity (and continue to dodge inheritance and similar taxes), and Swiss bankers will be allowed immunity from investigation and prosecution for assisting with tax evasion. No matter which way you look at this arrangement, it stinks".
Just finished watching "Inside Job", brilliant. Naive I know, but I can't get used to the fact that the long list of turds featured, are not all in prison, instead of all doing very nicely, thank you.
Glenn Hubbard is fortunate it wasn't me he was asking to " Give me your best shot " but then, they would soon pack me off to prison.
I liked how it ended, & they are right, it will be hard, but it is worth fighting for.
@Mikehall – Am really enjoying reading the discussion about MMT etc. Re your last post. Would you say that you believe the stimulus in the US worked? I don't think it did. But that's because I believe QE is a mad way of 'stimulating' the economy when taken alone. I'd also argue it isn't really Keynsian as such, it falls well short of real Keynsian stimulus as I understand it? I would have said that the way QE has been pumped into the banking system is a very monetarist policy. And that QE in combo with austerity is quite toxic.
The QE helps hold up certain asset values (Bernanke openly admitted that QE was partly there to help Wall St stay afloat) but because the banks are not lending into the wider economy (in essence the financial system is still not working properly) then QE has little effect on the wider economy? I mean I get the whole 'lets put it through the banks due to the lending multiplier' thinking but if the banks aren't lending and are using that QE for other purposese then it won't work.
Does anybody have an up to date figure for the RBS bailout ? 53.5 billion is the amount I have found on the web, any advance on that ?
It's for the petition.
@ princesschipchops
Yes, the MMT economists (& others) believe the data shows some effect from the stimulus, but given the massive scale of the burst debt bubble, it was no where near big enough. Note that QE was very different, was as you say more a gift to the banks & had little or no effect on the US domestic economy. In terms of the US administration tho', QE is monetary (Fed) policy & 'stimulus' is fiscal (Congress). Bernanke knows full well that money introduced at the lowest wage levl, as directly as possible was the correct policy. He went for QE because Congress refused any more stimulus. (It doubtless played to his own 'constituency' too.)
MMT proponents favour spending at the lowest wage level too (the most effective) when required & advocate a Job guarantee scheme. Generally at the minimum wage level & with some flexibility to allow expansion & contraction according to economic conditions.
One of the fundamental problems identified by Michael Hudson & others, is the massive oversize of the 'FIRE' sector, much of it in essence a casino. As you imply, QE tends to bypass the 'real' economy where it's needed & just give the gamblers more free money to bet with.
BTW, MMT entirely disputes the 'money multiplier' effect in banks' propensity to lend. Bill Mitchell has a lot on this on his blog. I think they are right. Mainstream economics seems very poor – utterly bogged down in false 'micro' thinking & non too clever on actual real world bank operations.
I'm glad you find MMT interesting. I cannot understate how transformative it could be if adopted imo. I've seen no flaws, their basis is solid & thoroughly argued, & reflects 'reality' of macro behaviour better than anything else by some margin.
I think history will look back at this period with incredulity, considering the economics we could be using, but aren't.
@MikeHall – Thanks very much for the reply. I'd always thought that QE was monetary policy, not any real sort of Keynsian fiscal stimulus – but am just so used to people referring to QE as part of the 'stimulus package' so thought that was what you were referring to but I've re read your posts and seen I was wrong.
I agree that the ''real'' stimulus package put forward by Obama was far too small – watered down anyway I think in the Senate? from an already small package.
I tend to think of QE – alongside austerity – as a pretty dangerous policy and one that will cause a tiny elite to keep on gambling and making money while the real problems in the finance sector are glossed over – whilst the rest of us suffer depression like conditions made worse and worse by austerity measures. The fact that the US is now too talking about austerity and yet signalling that there may be(probably will be, once Wall st crash themselves enough to scare Bernanke to death) more QE frightens me.
I might be totally wrong here but instinctively it seems to me that QE alongside austerity is socialism for the very, very few and a very long depression (or ''jobless recovery'') for the rest of us.
Do you have a link to Bill Mitchells blog? I'm trying to read up on MMT at the moment -it's certainly very interesting and I want to know more about it.
@ princesschipchops
Yes, I agree. I don't think it's an overstatement to call it economic warfare. A really callous attitude among most of the wealthy that was always there.
Bill Mitchell's blog is here:
http://bilbo.economicoutlook.net/blog/
It's well worth going back thru' his posts of the last several weeks as he's been giving an excellent commentary on recent events from an MMT perspective. It's the best source for background explanations too for learners in economics (which includes me too aside from very basic studying previously).
@ Golem
David, perhaps if you were to include one link to an MMT blog? I would strongly reccomend Bill Mitchell's above as being the most in depth & accessible on the subject & in particular for commentary on current events. (I know Hudson is a supporter but his topic is more political economy than macro nuts & bolts.)
ps
The video lecture from Mitchell & Wray I linked earlier:
http://e1.newcastle.edu.au/coffee/multimedia/video/2009/Macro_Lecture_2_May_20_2009.mp4
is an absolute must watch to grasp just how important the difference is between 'micro' economics (of households & firms) & 'macro' (of currency sovereign nations). In fact, this issue is at the heart of the shocking state of mainstream economics' intellectual dishonesty. Before 1930 'macro' did not really exist. Economists just scaled up 'micro' assumptions which people like Keynes knew didn't hold, are indeed flat wrong in real economies. It's fairly obvious that the bankers have made huge efforts & spent billions over the years to keep people away from the truth of this. We are now paying the price again. Sadly, the public remain largely in ignorance.
Thanks for the links. Will be reading and watching these tonight (don't have tv at the moment so it's great to have something interesting to read/watch).