Japanese Banking Minister found hanged

84 Comments / latest / By

From Reuters this evening –

Japanese Banking Minister Tadahiro Matsushita was found hanged at his home on Monday in what police suspect was a suicide, Kyodo news agency said.

Obvioulsy very sad for him and his family. That aside I cannot help but wonder – why?

 

84 thoughts on “Japanese Banking Minister found hanged”

  3. Ken Lorp

    I can’t help but remember when God’s banker was found hanged under Blackfriars bridge – apparently also a suicide. With time, murky waters become somewhat less so.

    Reply
  4. Comminus

    I’m not convinced that allegations of an affair alone would be enough to drive him to suicide. my understanding of Japanese culture is that marital infidelity isn’t viewed the same way as in the UK or US. not quite taken to the lengths of France (where it is apparently compulsory) but not usually a resigning issue.

    Reply
  6. Mike Hall

    Newsflash!

    On BBC Newsnight tonight, an incredible story of City of London based banks scamming Italian municipal/regional authorities with derivative (CDS) linked loans. Up to 100B Euro of loans involved. Derivative losses could be higher – some linked to Greek debt which have already been triggered. This lending, in similar fashion to Greece, effectively disguised the true state of Itlay’s public sector borrowing. Talk of a ‘facilitation fees’ trail paid offshore by London based banks to officials in Sicily & possibly in other regions too.

    Starts approx 25 mins into the program – well worth catching on the iPlayer if you can get it.

    Needless to say this was extraordinarily profitable for the London banks but massively risky for the borrowers. Such deals involving public authorities in UK were banned, but not in Italy & possibly elsewhere.

    Reply
    2. Ken Lorp

      Mike,

      This is more widespread than you think. In the US, there are a lot of municipal governments that availed of this type of funding. While I agree with David on the suspension of a moral code, there are 2 sides to this issue; the fact that public authorities can hide transactions and not be transparent in their financial reporting is the other side of the banks pushing these deals – remember you can’t cheat an honest man.

      Frankly, all public authorities that spend taxpayer money should be subject to full, clear and transparent accounting so we can really see what liabilities are being run up in our name.

      Reply
        1. Ken Lorp

          John,

          A very good link and well worth reading.

          I often think that a fundamental problem that pushes us into these situations is the constant desire of politicians to spend money (primarily to secure re-election). In many cases, they want to spend more than is earned and that’s what creates the opportunities for the Wall Street sharks to feed.

          Have we paid too little attention to the politicians’ deeds and not exercised proper democratic control at the ballot box? Or, is democracy fundamentally flawed?

          Ken.

          Reply
      2. john newman

        And for what its worth, in the US you cant elect an honest man either: to qualify as a “serious” candidate one must excel at the solicitation of bribes.

        Reply
  7. Patrick Donnelly

    Blackfriars was a warning.

    This, if murder, is disguised, so no blatant lesson!

    Nip in the air! Lovely! …… Terrible taste. Why racist though? Nippon is their mother land? Are peeps confusing this with another N word? Paddy, Tommy etc are all in same vein. PC idiocy disguises theft by TPTB.

    Reply
  8. Patrick Donnelly

    Having read the Mordechai piece oops, PC Police!, I now know he was 73! With a woman? He should be beating his chest, assuming he did not kill and eat her.

    Clearly, the real cause is bad news, that will become evident in due course. Anything to do with Bonds denominated in billions of US $$?

    Reply
    1. Ken Lorp

      Patrick,

      Economically, Japan is a bug in search of a windshield! I would expect that the gentleman had access to data that is not yet public, but will show a material deterioration in the economy. It is truely depressing to see that the country has wasted 22 years and dug itself into an even deeper hole!

      Reply
  9. Pat Flannery

    For those of you like me who cannot get BBC iPlayer here is a link to a text version of the story http://www.bbc.co.uk/news/business-19545849

    I believe the banks perfected this kind of financing scam with American local authorities before trying it out on the Europeans. I tried my best to bring attention to what was happening in San Diego when I was living there.

    The BBC story does not explain exactly what kind of phony repayment plans were used in Italy but it is clear that there was some sort of derivatives involved. That sounds familiar. In San Diego they used among others what we used to call “zero coupon bonds” to repay city and school district bonds. The banks got huge up-front fees. It was massive fraud on the San Diego taxpayer but nobody wanted to know because it avoided increasing taxes. They just “ballooned” it. That was the real role of banks for the last decade or so – “balooning”. It was profitable business.

    I believe that the next balloon to bust will be phony municipal financing. But there is so much phony money out there that more balloons will be busting than the finale of a big party convention. What fun times we live in.

    Reply
  10. James

    Very odd, wonder what else will emerge. On a separate note David , I just saw your documentary “of hearts and minds” as it should hve been called. Very sorry to hear you have been through such a personal ordeal and I hope your wife is fully recovered. Courageous and thought provoking. Best wishes James

    Reply
  12. Dave (aka Frog2)

    In France very many municipalities, hospitals, etc, were conned into toxic structured loans by the usual suspects. Barclays, Deutsche, JPMC, the Squid, all the French banks, et al.

    A typical loan for 25 years would start off looking lovely.

    After say three years the interest rate would be revised according to an abstruse formula involving other currencies such as the Swissy, Sterling, USD,or Yen, and it could shoot up to 20%+. Some have been re-negotiated by now, but most have not.

    A few years ago now, Gillian Tett did a piece in the Ft on similar toxics to the Italian Munis.

    Crazy stuff, sometimes involving corruption, but I suspect mostly plain stupidity of the ‘innnocent’ falling for the sales Spiel.

    I’m now off to find again the Vimeo version of Hearts and Minds ( old computer died).

    Very best wishes to you David and your family.

    EDIT, I forgot the link !

    http://www.liberation.fr/societe/01012360988-votre-commune-est-elle-infectee-par-un-emprunt-toxique

    Reply
    1. Phil

      Yes, it goes back to the banks’ ‘it’s the fault of people borrowing too much’ argument.

      Or as I prefer to call it, the ‘you were stupid enough to believe us’ argument.

      I’ve heard commentators elsewhere say, ‘the more i look into this, the more i subscribe to the ‘cock up’ theory rather than ‘conspiracy’. Yes, that’s all well and good but I don’t see any desire by our financial friends to make amends for the disaster they have caused and indeed, we know that they are profiting from the situation and furthering political agendas which had little previous support at the ballot box.

      Reply
      1. Dave (aka Frog2)

        Phil, good morning !

        No confusion on my side . This was very much a Conspiracy by the wide boys to exploit the weakness, gullibility, plain stupidity, of the Muni councillors and employees.

        Reply
        1. steviefinn

          Phil

          The elites are only united because they all lust for the same thing, wealth & power. It’s only an alliance or a movement in a certain direction out of individual self interest, I think when factions find that they are under threat from bigger players or each other, they will tear each other part,. I also think they will eventually, as historically they always have, push it too far, because they just can’t help themselves.

          It’s like cancer, it will never be possible to destroy all the disease. After drastic treatment we will, ( if we manage to save the patient that is), only be in remission, the corruption will always be there & seek to multiply. The patient will forever need careful monitoring to prevent future metastasis.

          Even dead dogs still bite :

          http://dealbook.nytimes.com/2010/05/26/lehman-suit-seeks-5-billion-from-jpmorgan/

          Reply
  13. Mike Hall

    Steve Keen has just posted up two videos of a recent presentation in New Zealand which explain the financial crisis & it’s macro economic effects, integrating a correct understanding of the monetary & banking system into his accounting methodology dynamic models.

    If you want to understand what Keen’s work is about – and you should, because as these videos show, he has by far the best methodology, putting mainstream thinking, rightly, to shame – then these videos are the most complete, comprehensive & current presentations.

    In two parts, 1hr 40mins, & 63mins, they are long but absolutely a must watch. At the end of the second part Keen’s most developed solutions are offered to the ongoing crisis in Europe & stagnations elsewhere.

    Really stunning stuff.

    Keen on Schumpeter, Minsky & Aggregate Demand 2012 New Zealand parts 1 & 2

    http://www.youtube.com/watch?feature=endscreen&NR=1&v=3g_eFf-n04o

    http://www.youtube.com/watch?NR=1&feature=endscreen&v=KQ9aNMMNTP8

    Reply
  16. nathan

    RE – roberto calvi (gods banker)
    In robert aldrich’s book about the history of GCHQ he says Calvi was kiled as part of a joint US/UK operation to stop the argentines getting hold of Exocet missiles in the falklands conflict. He says Calvi was killed by a mafia hit man/CIA asset .
    The french also ‘liquidated’ a number of exocet dealers to help the uk , and the spanish foiled a plot to attack UK ships in gibraltar.

    Reply
  18. steviefinn

    The bankers theoretical watchdog, or should that be toothless lapdog ? the FSA & the treasury both support the City in it’s efforts to retain high frequency trading. What could possibly go wrong ? Obviously nothing for those mentioned above.

    “The UK’s official response, made jointly through the Treasury and the City watchdog, the Financial Services Authority, supports HFT, arguing it increases liquidity and cuts trading costs. While supporting ‘steps to enhance stability and protect against market abuse’, the Treasury does not support European moves requiring HFT firms to hold equities for a minimum period.”

    http://www.thebureauinvestigates.com/2012/09/16/britain-opposes-meps-seeking-ban-on-high-frequency-trading/

    http://www.thebureauinvestigates.com/2012/09/16/robot-wars-how-high-frequency-trading-changed-global-markets/

    http://www.thebureauinvestigates.com/2012/09/16/the-a-z-of-high-frequency-trading/

    http://www.thebureauinvestigates.com/2012/09/16/opinion-wtf-is-hft/

    http://www.thebureauinvestigates.com/2012/09/16/infographic-trading-at-the-speed-of-light/

    Reply
    1. Golem XIV

      Yes, all is well.

      The FSA finds High Frequency trading is good for …well everything. And OFCOM has found that Sky is a ‘fit and proper’ broadcaster.

      My question is can OFCOM let us know what a broadcaster or media company would have to do for it not to be fit and proper? Aparently they don’t have to report accurately. They can print outright falsehoods. They can steal private messages from people’s phones. They can bribe. They can pay people do break the laws of this country. They can be involved with the corruption of police-officers. Have I forgotten anyhting that a ‘fit and proper’ broadcaster can do?

      Reply
      1. orville

        They would argue that BSkyB and the Sun are different entities. Let’s face it though, Newscorp have a controlling stake and James Murdoch himself was the Chairman up until he resigned this year. Given the demented drivel that comes out of Adam Boulton on Sky News and them ‘accidentally’ leaving on Gordon Brown’s mic in an election campaign and then broadcasting the results (not to mention the working atmosphere at Sky Sports), it’s pretty obvious what sort of culture exists there as well. Still, fit and proper enough for OFCOM.

        Reply
      2. John Souter

        HFT – is wonderful – anything that goes wrong can be blamed on the computer.

        But, what will the effect be on the legions of manic high flying bonus guzzling dealers. Could they not be the next to involuntarily join the dependency culture?

        24 x 7 x 365 and minimal wage bill for the Top Dog’s -scrumptious.

        Reply
  19. Pat Flannery

    Golem: do you still believe that debtor nations should make common cause against creditor nations who are failing to force bondholders to mark debtor nations’ bonds to market? If the market is god why not let god rule?

    The answer of course is that governments in both debtor and creditor nations are political captives of the bondholders and the constituent members of the ECB consist of banking interests only. How then can the people make common cause against the bondholders?

    As it is now clear to everybody that it was the massive build-up of bondholder debt that caused the present difficulties, what has happened to Steve Keen’s suggestion of a (bond) debt jubilee?

    We cannot tell our descendants that we didn’t know. We will all be guilty of economic suicide if we continue in the fantasy that asset-purchase bonds are real money in their own right They carry the value of their secured assets and no more. That is why under American law real estate mortgages remain real estate, whether they are securitized or not. Securitizing them does not make them money. Why do we not hear more about that?

    Reply
  20. Phil

    Two articles on our finance friends which reach very different conclusions

    http://www.telegraph.co.uk/finance/comment/kamal-ahmed/9560249/Bank-bashers-its-time-to-put-away-those-mallets.html

    http://www.guardian.co.uk/commentisfree/2012/sep/23/will-hutton-rebuilding-britain-financial-system?fb=native&CMP=FBCNETTXT9038

    There appears to be some good ideas in the Will Hutton piece, I particularly liked the concept of different public banks for different sectors rather than one monolithic state bank. I did wonder however what David might make of the ‘bad bank’ idea.

    Reply
  24. Nell

    Interesting peice by Bill Mitchell (MMT) on the deterioration of macroeconomic indicators in Ireland.
    The Celtic poster child demonstrates the failure of austerity
    http://bilbo.economicoutlook.net/blog/?p=21073

    Also on the topic of Keen, he’s announced a major theoretical breakthrough. His monetary circuit model can now account for horizontal and vertical money. That is Keen has been able to integrate his model on endogenous money (ie debt generated in the private sector) with MMT’s arguments about sectoral balances.

    This is pretty amazing stuff and in my mind is the economic model of the future (until we paradigm shift out of capitalism).
    http://www.debtdeflation.com/blogs/2012/09/22/american-monetary-institute-conference-2012/

    Reply
    1. steviefinn

      The Philadelphia federal reserve president seems to provide backup to the economicollapse article although he doesn’t mention Weimar, just the 30’s. His projection of the possible sudden onset of high inflation is a close match to a diagram within the above article that illustrates how long it took for the emergence of hyperinflation, after the application of QE – about 4 years :

      http://www.economicpolicyjournal.com/2012/09/hot-fed-prez-spills-beans-on-excess.html

      Reply
    2. Mike Hall

      stevie

      Weimar wasn’t QE – putting money into private banks’ reserves. And in god knows how many ways, Weimar isn’t remotely comparable to today’s macro economics or monetary situation in US or Europe. Honestly, if you read anyone trying to make such comparisons, just walk away.

      Also, Philadelphia fed president Plosser is a Chicago school ideologue. His prescription is precisely what made the 30s depression far worse than it need have been until the the US dropped the Gold standard & FDR came in. ie what the EZ is doing now to wreck Greece, Spain, Italy, Portugal & Ireland which will ultimately kill the the returns to labour in the core & vastly increase inequality. Plosser worked on the utter bullsh1t that is ‘Real Business Cycle’ ‘modelling’ which like DSGE models, besides being built on rediculous assumptions of what is included completely ignores the elements that are the biggest factors in macro – debt, money & banking, as pointed out by Steve Keen, MMT & other Post Keynesians. (Incidentally, recent papers from the BIS, the ECB itself & numerous central bankers concur exactly with latters’ descriptions of how money & banking actually works.)

      As Michael Hudson & others have pointed out, QE is a gift to the big banks – more $$ to play commodity/currency speculation (etc) with whilst falsely dressed up as something to aid the real economy. As these commentators have also said, following QE1 & QE2, there is no doubt Bernanke knows exactly what the the effects are – more profits for the financial sector & moderate inflation (external, ‘cost-push’) from specualtion derived rises in commodity prices (incl oil) – nothing more than that.

      Reply
      2. Mike Hall

        The key aspect of Weimar was the fact that the capacity to produce goods & services was seriously depleted following the war. They had already pushed the limits of this during the war causing significant inflation in order to supply war materials. Upon defeat this production had to stop. Further, Germany had to pay crippling reparations to France & also ceded territory with industrial capacity. (German workers were not wanted there – some stayed, but many didn’t.) With Gold reserves depleted by the war, Germany had little choice but to print & hope.

        Note that in contrast to today, most money was in notes (& coins, tho’ these were melted down for higher value), so ‘extinguishing’ money was very difficult when things got out of hand, even had they tried. Only 3% of money today is notes & coins – it’s important to realise that it isn’t a ‘commodity’ in the sense most people (including economists who should know better) think.

        Thus, with modern computing etc. money as a ‘scorecard’ can be controlled very quickly & effectively if the need arises. The inflation hyperventilators never mention the modern examples of ‘flash’ hyperinflation that have been effectively dealt with in a matter of weeks & the economy returned to stability. But +all+ instances of hyperinflation have followed periods of massive social upheavel, such as defeat in debillitating wars, that wreck productive capacity.

        Outside of ignorant politicians, captured and/or stupid media commentators & economics ideologues, the fact that QE produces little or no effect in the real economy, never mind inflation, is not really contraversial. QE1 & QE2 in the US did nothing, nor has the ECB ‘LTRO’ or UK’s QE.

        Banks do not even need extra reserves prior to lending in substantial amounts into an economy – this fact is in both BIS & ECB documents & has been publicly stated by Greenspan & other central bankers.

        Money needs to get into the real economy to have an effect & in the short to medium term it makes little difference if such money is lent or issued debt free – providing the pace of introduction is shorter than repayment (extinguishing) would occur. Not hard to see how obvious this is, I think. We have more than adequate ability to steadliy, carefully, increase money by spending & cutting back (or taxing it back) to nip even modest inflation in the bud in a timely fashion as the future requires.

        We +know+ we have at least 10% of GDP in unused capacity in labour & facilities in Europe because we were at that level of activity 5/6 years ago. And this 10% (+) is a massive unrecoverable loss in goods & services – real living standards forgone by society.

        Why is this criminal stupidity happening?

        Simple. The top few percent elites who run the show can do just as well – even gain – from suppressing wages & importantly the price of (usually existing) assets which they buy up cheap in order to extract even greater economic ‘rent’, going forward, from the rest of us. (including further ‘knock down’ natural monopoly privatisations – financed by bank debt of course.)

        Finally, besides the kind of fiscal stimulus advocated by MMTers (& others), we do need to revert the financial sector back to the level of service industry or more debt bubbles, boom & busts, will happen again.

        Maybe a little more there than you were looking for 🙂

        Yes, Ireland dumped again – even more galling given the ECb’s recent proposals to buy gov debt (in certain circumstances), meaning no ‘taxpayers’ anywhere need be on the hook.

        Meanwhile Spain follows Greece into social destruction, Portugal, Itlay & Ireland to follow….none of which needs to happen.

        These ‘authorities’ are pure @ssholes, makes me very angry.

        Reply
    1. Mike Hall

      Sure, the financial coup is ongoing & getting worse (except for the top few percent).

      The losses are to be dumped on citizens whilst at the same time destroying their ability to pay (their jobs).

      On the (probably optimistic) upside, Warren Mosler (MMT co-founder) has been invited to make a presentation at a conference in Italy on 25th Oct. & will be sitting on a panel alongside Mario Draghi (ECB head). His draft presentation is here:

      (Very short & to the point.)

      National Government Debt Dynamics- Causes and Policy Options

      http://www.moslereconomics.com/wp-content/pdf/rome-draft.pdf

      Reply
      1. Jim M.

        I am sure Messrs Wray, Mosler and Black are already aware of the thoughts (wrongly) attributed to Gandhi:

        First they ignore you, then they laugh at you, then they fight you, then you win.

        I’ve seen ’em being ignored, seen ’em laughed at and been laughed at myself. I hope to be around long enough to see the rest come to fruition. I only hope it comes soon enough to avoid too much more of this kinda thing!

        http://www.guardian.co.uk/world/2012/sep/28/greek-police-victims-neo-nazi

        Reply
        1. Mike Hall

          Yeah, let’s hope so Jim 🙂

          I think they’re doing pretty well considering we’ve had near 4 decades of neoliberal bullsh1t taught in economics.

          I think Keen is doing great work too. To control anything – & banks & debt sorely need it – first it’s effects have to be measured. Keen’s modelling now derived from uncontestable double entry bookeeping is serious progress 🙂

          Reply
          1. Jim M.

            I agree with you about Steve Keen, Mike. I leave the theory to others, but am happy to see the heterodoxical views given serious consideration and not being simply scoffed at as unacademic. As little as ten years ago that was absolutely not the case.
            It takes time to turn around a supertanker, and the neoliberal economic view is just such a behemoth. Too many vested interests and careers on the line to expect them to just roll over, I suppose.
            The good news, from my point of view, is that the Overton Window* of what is and is not considered to be “on the table” seems to be headed inexorably in the direction of meaningful reform. Even Ed Milliband is talking of a return to the ways of Glass-Steagal, but I guess that even in a world of rising commodity values, talk is still cheap.

            *The concept of the Overton Window always puts me in mind of a cursor on a slide-rule, but that’s just me showing my age!

    1. penny bloater

      Phil.

      Surely, bailing out the banks is the essence of neoliberalism as advocated by Friedman for the Japanese banking system at the beginning of it’s slump in the early 1990s.

      People make the mistake of assuming neoliberalism is about effficent market theory and allowing creative destruction to destroy inflated asset prices Austrian style – it’s not, on the contrary, it’s about maintaining their ‘ficticious value’.

      Neoliberalism doesn’t work according to the ‘free market’ – it’s nothing like neo-classical economic models – it works through building a parasitic corporatist relationship to local and central governence where huge multi-nationals and financial corporations come to rely upon the state, which merely becomes a commisioning agent and a financial back-stop against their potential failure.It also bypasses democratic accountability too.

      http://www.open.ac.uk/socialsciences/emergentpublics/publications/barnett_publicsandmarkets.pdf

      Thus, it’s nothing to do with the ideas of the free market or neo-classicism or the Austrian School – neoliberalism is closer to the model which initiated the idea of the modern corporatist state in facist Chile and Argentina in the 1970s – only modified to take account of democratic structures (until these can themselves be enfeebled).

      There are dozens of previous examples within this type of neoliberalism with a passive corporate state subsidising parasitic private corporations and the idea is probably reached it’s limits over the past 30 years – LTCM, the Savings and Loans crisis, the Lloyds names ‘bail-out’, the bail-out of the US and UK banking systems, car industries, failure of G4S, train operating companies, PFI hospitals etc.

      In this sense the distinction made by politicians between public and private services – and that ‘the market knows best’ – is a false dichotomy used to obscure the argument and advance the sell off of vital assets and the dismantlement of municipal and welfare services.

      I would completely agree however that it is also a (reconfigured) form of class power that is grabbing these publically owned assets while it can.

      Reply
      1. Hawkeye

        Penny

        Thanks for the article. It might take me a while to digest, though!

        This seems very similar to arguments also made by James Galbraith in Predator State:

        http://forensicstatistician.wordpress.com/2011/05/23/a-predator-state-the-worst-bits-of-capitalism-communism-and-feudalism/

        The state as monopoly collector of taxes and corrupt distributor of the spoils to the private sector. Therefore:

        “Capitalism will never fail as long as there is socialism there to pay for its failures.”

        Reply
  30. penny bloater

    Here are some links from Nakedcapitalism that pursue this Neoliberal/Friedmanite argument further:

    http://www.nakedcapitalism.com/2012/07/philip-pilkington-the-new-monetarism-part-i-the-british-experience.html

    http://www.nakedcapitalism.com/2012/07/philip-pilkington-the-new-monetarism-part-ii-holes-in-the-theory.html

    http://www.nakedcapitalism.com/2012/07/philip-pilkington-the-new-monetarism-part-iii-critique-of-economic-reason.html

    I’d like to know what posters think of this argument – after all it is important to ascertain why we are in the present situation.

    Reply
    1. Phil

      Many thanks for this Penny. I will read them with interest. It would appear I was indeed confusing it with neoclassical / Austrian economics.

      Reply
  31. Pat Flannery

    Penny & Phil:

    The current failure of QE seems to be because in putting extra money into circulation by routing it through the banking system it is being used for speculation not being lent out for productive purposes. The failure of Monetarism was that in reducing the money supply to curb inflation it choked off money for productive purposes.

    Therefore should the lesson not be that money must ALWAYS be linked to productive activity? Money on its own is not the answer. It is the PURPOSE to which it is put that matters. That may be what all the economic theorists are missing. They are getting in their own way with their endless arguments about supply/velocity/endogenous theories.

    Could it be that QE would work fine if the money created was directed to productive purposes? Its inflationary effects would be offset by increased productivity? I think so. All we may need to do is find ways of controlling the USES of money, not how much we create.

    If the true objective of our governments is to increase our national income it seems to me that our present difficulties are political not economic. If increasing our national income is not their true objective then our difficulties are most certainly political not economic.

    Reply
    1. Mike Hall

      Pat

      I think what needs to be understood first is that there are two distinct issues which are somewhat overlapping & cause confusion a great deal here as to which, or in what aspects of them comments & discussion are being addressed.

      One issues is the behaviour of banks & the financial sector, in particular what they have done – & continue to do. And of course preventing them from making a similar mess in future.

      The second is how the monetary system integrates with the radical macro policy reforms we need to cure the depression & mass unemployment & prevent them recurring in future.

      Understanding the endogenous nature of money & how banking works is hugely important for both issues. IMO, how this informs appropriate policy in the second issue is clearcut, but rather less so for the first.

      So for yourself….

      …& penny bloater

      (Thanks for linking those Philip Pilkington pieces – his writing is always excellent.)

      Here’s a couple of recent pieces, one from Neil referencing (with link) another Pilikington post & one from Jan Kregel of the Levy Institute (broadly post Keynesian oriented).

      Together, I think they offer a very short & succinct summary of endogenous money & also arguments around banking & full reserve banking (intended or de facto).

      For info, commentor Ralph Musgrave on Neil’s piece is an advocate of Positivemoney’s proposals (full reserve with Lerner/MMT/P-K functional finance).

      http://www.3spoken.co.uk/2012/10/endogenous-money-matters-summary.html

      http://pke-forum.com/2012/09/27/submissions/

      Reply
  32. Pat Flannery

    Mike:

    You seem to be redirecting me back to banks and money supply theories when I am trying to deemphasise them and look elsewhere for solutions. I think economists need to look at their failing theories about crowding out and the centrality of banks.

    The endogenous school, including Keen, seem to believe that crowding out the entrepreneurial sector of the economy is not a problem. That does not stand up empirically. The facts right now indicate that bank “recapitalization” is a bottomless pit and is sucking up all the money, endogenous or otherwise, being created.

    The empirical facts are that the bondholders are successfully using scare tactics about bank failures to justify collecting worthless bonds at par and the economists are struggling to justify it – because banks and the bond markets is their biggest employer.

    Reply
    1. Mike Hall

      Pat

      I think you are looking at this thru’ the lens of the very extreme current circumstances & seeing the wrong cause & effect.

      The private sector & households have a massive debt overhang – a great deal of it relating to an asset bubble, not investment in the real economy – & deliberate contractionary public policy. In these circumstances there is great risk and/or little appetite for banks’ lending. The fundamental issue is lack of aggregate demand and every likelyhood it will stagnate or fall further.

      The nature of the monetary system is there in ECB, BIS, Fed & others’ papers – the Post Keynesians are correct in their understanding of it.

      Reply
  33. Pat Flannery

    Mike:

    Most of that private debt overhang you mention is held by the bondholders who funded the mortgages originated by the banks at retail level. These bonds are called mortgage-backed securities. They are now only worth what their secured properties are worth.

    Thus the overhang is not private debt it is the false valuation of mortgage-backed bonds.

    If the holders of these bonds were forced by our governments to accept what their bonds are really worth, the crippling overhang would be cleared very rapidly through sale and refinancing of the affected properties. In other words our governments and economists are distorting the facts with made-up theories to explain away the above reality.

    One of the main reasons our governments, particularly the American Government, are reluctant to admit the truth is that the financial services sector sold these now worthless bonds to our pension fund managers, both public and private, both DB and DC. This truth will inevitably bring down the whole pension system as we now know it because the private debt overhang is unsustainable and no economic theory can fix it.

    How about them for apples?

    Reply
    1. Phil

      I’m sorry I haven’t had the time to read both Pat and Mike’s thoughts, but the bit I read briefly in Pat’s first comment about productive USE chimes with what Prof Michael Hudson says on today’s Keiser Report:

      http://rt.com/programs/keiser-report/episode-349-keiser-max/

      I forwarded Penny’s comments to a very astute friend of mine. He responded:

      “I agree. The neoliberal line always seems to be the pragmatic thing to do – whether it means privatising (profits) or socialising (losses). The hold of this thinking over public and private power allows it to be Hayekian or Keynesian as and when necessary, as long as it is in the interest of the rich. Pointing out the obvious hypocrisy of this doesn’t seem to land for some reason. My only conclusion is that their ideological dominance allows them one final monopoly that is more important than all the others: a monopoly on common sense.”

      Reply
    2. Mike Hall

      Pat

      “…Thus the overhang is not private debt…”

      Chart from Steve Keen: (US, UK, AUS household debt)

      http://cdn.debtdeflation.com/blogs/wp-content/uploads/2011/12/123111_0028_DebtBritann5.png

      See also charts in BIS paper (ignore all the Reinhardt & Rogoff cr@p – just look at the debt charts)

      http://www.bis.org/publ/othp16.pdf

      Sure, there’s lots of unrealised (except in a minority of countries, like Ireland) losses from the (high level) property casino 9& derivatives) on banks’ books, but what’s playing out in the real economy is citizens struggling to service & pay down accumulated debt (incrementally increased in lieu of wage growth, per Hudson & others) in contracting or stagnating high unemployment economies.

      I’m not sure why you say “no economic theory can fix it” ? Keen, MMT & other Post Keynesians, as a result of their correct understanding of money, banking & macro, have perfectly viable solutions. (The financialised economy also needs to be stopped from creating more bubble casinos, but they are all clear on that too.)

      As regards pensions, MMT have plenty to say about that too. The issue is production of real goods & services & the agreed distribution of them by democratic process. A sovereign fiat currency issuer can always ensure there is sufficient money in circulation to maximise use of resources, up to the point of maximum productive capacity. For most people, such policy will always produce a higher standard of living (including for pensioners) than having 10 to 20% of able workers producing nothing & languishing in dole queues (or worse).

      Reply
    1. Mike Hall

      Tnx for posting stevie, I’ve only been dimly aware of this. Since I’ve donated to Manning’s legal defence, best not travel to the new fascist US.

      Beeb4 have a new 6 part series that started tonight on Hitler’s rise to power. Interesting stuff, lot’s of 1st hand interviews.

      So many parts of the world moving in an awful direction just now…

      Reply
      1. steviefinn

        The Beeb are brilliant at producing documentaries, David of course being responsible for some of them, but it’s a pity that they don’t look at comparisons from the post WW1 period & where we are now. I wonder if the programme will focus at all on the role played by corporations in aiding & abetting the 3rd reich, particularly IBM.

        The seeds of fascism are growing everywhere especially in the US where they once were seen as a bulwark against it. If the quote below is valid, we are close to it’s fruition & wasn’t Hitler keen on a European superstate with inferior races ( Celts included ) used as slave labour, a kind of extreme version of outsourcing ?

        “Fascism should rightly be called Corporatism, as it is the merger of corporate and government power”.
        Benito Mussolini

        Reply
        1. Mike Hall

          “….I wonder if the programme will focus at all on the role played by corporations in aiding & abetting the 3rd reich…”

          They already have – shown that it was special pleading by business leaders to Hindenburg (President) that installed Hitler as Chancellor, late 32, Jan 33. Even tho’ the Nazis had the highest vote (37%) of any party, Hindenburg considered him dangerous. (He had already stated in a public speech how they would get rid of the ‘other 30 Parties’.)

          Apparently, the business leaders were afraid of the communists who had polled nearly as much as Hitler.

          Funny thing is, it was Hitler who had actually used the phrase ‘German soviet union’ as a goal of Nazism.

          Reply
          1. penny bloater

            “….I wonder if the programme will focus at all on the role played by corporations in aiding & abetting the 3rd reich…”

            …or the the economic reprecussions of the Versailles Treaty, which are currently being re-played throughout Europe.

            The only complaint I really have about history documentaries (this includes BBC4 as well which really is a very good channel) is that they rarely provide enough of an in-depth economic context through which to investigate events. Sounds a great documentary though.

            I wonder where the current trend of neoliberal corporatism is taking us….

Leave a Comment

Your email address will not be published.