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#14420 From: Dirk Bezemer <d.j.bezemer@...>
Date: Mon Nov 16, 2009 9:01 am
Subject: Re: the 1931 Lautenbach Plan in Germany
p233369
Offline Offline
Send Email Send Email
 
Hi Arno,

Thanks for the link. I also found the transcripts of that 'secret'
conference of the Friedrich List Society of Sept. 16-17, 1931. They are
referenced in "Freedom with responsibility: the social market economy in
Germany, 1918-1963" By Anthony James Nicholls, p 45, note 49.
Lautenbach's plan (to spend 1.6 billion Mark in productive credit) was
rejected by those present, just as Reichsbank president Luther had hoped
when he called the meeting to have the plan discussed. He and Chancellor
Bruening were then still wedded to deflationary policies.

In the LaRouche pubs there is also an interesting note on Tokyo being
rebuilt aided by a gvt credit creation scheme after the 1923 earthquake
("They just issued unlimited credit, reconstructed Tokyo...") but other
sources write that "A massive reconstruction plan was drawn up, but was
too expensive to complete..."

Dirk

Mong Daastoel wrote:
>
>
> Dirk,
> This snippet by the signature klaatu in 2004 may be of some interest.
> Arno
>
> http://wc0.worldcrossing.com/WebX?14@@.1ddfd222/29
> <http://wc0.worldcrossing.com/WebX?14@@.1ddfd222/29>
>
>
--------------------------------------------------------------------------------
>
> *klaatu* <http://wc0.worldcrossing.com/WebX?224@@11f1df73@.1ddfd222/30> - Sep
2,
> 2004 5:47 pm (#31 <http://wc0.worldcrossing.com/WebX?14@@.1ddfd222/30> of 162)
> http://wc0.worldcrossing.com/Images/space.gifReply
> <http://wc0.worldcrossing.com/WebX?229@@.1ddfd222>
>
> I have been reading about *the 1931 Lautenbach Plan in Germany*. The situation
> then is very much like the situation now, the German economy was in shambles
and
> was being pressured to undertake an austerity program. Hyperinflation had
taken
> place after the printing of more than enough money to nominally pay off the
> reparations debt.
>
> Various plans were offered, the most documented one being the Lautenbach Plan,
> which proposed that steps similar to what FDR.
>
> ·  issue national credit for infrastructure projects
>
> ·  this would not be inflationary, because it would generate real wealth for
the
> country
>
> ·  this would slow and stop the economic decline
>
> ·  credit used for speculation is inflationary
>
> ·  the reparation agreement did not permit this creation of credit
>
> ·  The Bank Of England (Norman Montagu) and BIS (Hjalmar Schact) did not want
> Germany free of their financial system
>
> In response Montagu and Schacht provided the financing to install Hitler. It
is
> argued that had these plans been put into place, there would have been no
WWII.
>
> Each article covers the same ground, but I found very little overlap between
them.
>
> http://www.larouchepub.com/hzl/2003/3001berlin_eir_laut.html
> <http://www.larouchepub.com/hzl/2003/3001berlin_eir_laut.html>
>
> http://www.schillerinstitut.dk/hzlspeech.html
> <http://www.schillerinstitut.dk/hzlspeech.html>
>
> /Excerpts:/
>
> On November 24, 2003 of this year, Professor Herbert Giersch , formerly one of
> the "Five Wise Men," headed up the World Economic Institute in Kiel, wrote in
> /Welt am Sonntag./ on the current deteriorating economic situation:
>
> "Seventy years ago, when the worldwide economic crisis erupted, a group of
noted
> economists of various persuasions, including Wagemann, Woytinsky, Baade,
> Lautenbach, Lombard, Loewe, and Lederer, sought to build enthusiasm among the
> political class and in public opinion, for its policy of active government
> expenditures. Quite probably it could have cost the National Socialists their
> victory in the Summer of 1932."
>
> ... The economic debate, which raged from 1930 to 1932, is almost completely
> swept under the rug in Germany today. Instead we get the widespread myth that
it
> was the Nazis, and Hjalmar Schacht and Hitler, whose job-creation programs
> succeeded in eliminating unemployment. Nothing can be further from the truth.
>
> "The natural course for overcoming economic and financial emergency," is "not
to
> limit economic activity, but to increase it, because the market, in the
current
> conditions of simultaneous depression and world monetary crisis, no longer
> intervenes." -- Dr. Wilhelm Lautenbach, /Possibilities for Reviving Economic
> Activity, by Means of Investment and Expansion of Credit,/ at September 16-17,
> 1932 conference at the Friedrich List Society
>
> He was saying that we have two possibilities: Either we create credit right
now
> for investment, or else, in very short order we will have to do it anyway, but
> merely in order to finance unemployment—exactly the situation we have today.
>
> ... Many historians today have surmised that with his deflation policy,
Brüning
> wanted to intentionally ruin the economy in order to make the point that
Germany
> could not pay the reparations. At the time, there were indeed negotiations for
> debt relief, the so-called Hoover Moratorium. But that came too late for
> Brüning, and this terrified him; he had an image of himself as a marathon
> runner, who was only 100 meters away from the finish-line, but who couldn't
run
> the final stretch.
>
> ... If Woytinsky's proposals, and those of Lautenbach, had been implemented in
> 1931, the conditions would not have existed for two years as they did, making
it
> possible for the Nazis to seize power. And if von Schleicher had had even a
mere
> six months' time to implement his program, the same would have been true.
Which
> is to say that if, in Germany, people had been able to follow the same policy
as
> Franklin Delano Roosevelt in America, in all probability, World War II would
> never have happened.
>
>
>

#14419 From: Arno Mong Daastoel <amd@...>
Date: Sun Nov 15, 2009 4:46 pm
Subject: [Fwd: the 1931 Lautenbach Plan in Germany]
arnomd
Offline Offline
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Comment on the last sentence:

"Which is to say that if, in Germany, people had been able to follow the same policy as Franklin Delano Roosevelt in America, in all probability, World War II would never have happened."

The author does not realise that FDR's policy failed (employment rising, late 30s, 18 % in 1938) and that FDR also was a (perhaps the greatest) war monger, both against Japan and Germany.

Arno


-------- Original Message --------
Subject: [gang8] the 1931 Lautenbach Plan in Germany
Date: Sun, 15 Nov 2009 12:03:29 +0100
From: Arno Mong Daastoel <amd@...>
Reply-To: gang8@yahoogroups.com
To: Gang8 <gang8@yahooGroups.com>


Dirk,
This snippet by the signature klaatu in 2004 may be of some interest.
Arno

http://wc0.worldcrossing.com/WebX?14@@.1ddfd222/29


klaatu - Sep 2, 2004 5:47 pm (#31 of 162) http://wc0.worldcrossing.com/Images/space.gifReply

I have been reading about the 1931 Lautenbach Plan in Germany. The situation then is very much like the situation now, the German economy was in shambles and was being pressured to undertake an austerity program. Hyperinflation had taken place after the printing of more than enough money to nominally pay off the reparations debt.

Various plans were offered, the most documented one being the Lautenbach Plan, which proposed that steps similar to what FDR.

·  issue national credit for infrastructure projects

·  this would not be inflationary, because it would generate real wealth for the country

·  this would slow and stop the economic decline

·  credit used for speculation is inflationary

·  the reparation agreement did not permit this creation of credit

·  The Bank Of England (Norman Montagu) and BIS (Hjalmar Schact) did not want Germany free of their financial system

In response Montagu and Schacht provided the financing to install Hitler. It is argued that had these plans been put into place, there would have been no WWII.

Each article covers the same ground, but I found very little overlap between them.

http://www.larouchepub.com/hzl/2003/3001berlin_eir_laut.html

http://www.schillerinstitut.dk/hzlspeech.html

Excerpts:

On November 24, 2003 of this year, Professor Herbert Giersch , formerly one of the "Five Wise Men," headed up the World Economic Institute in Kiel, wrote in Welt am Sonntag. on the current deteriorating economic situation:

"Seventy years ago, when the worldwide economic crisis erupted, a group of noted economists of various persuasions, including Wagemann, Woytinsky, Baade, Lautenbach, Lombard, Loewe, and Lederer, sought to build enthusiasm among the political class and in public opinion, for its policy of active government expenditures. Quite probably it could have cost the National Socialists their victory in the Summer of 1932."

... The economic debate, which raged from 1930 to 1932, is almost completely swept under the rug in Germany today. Instead we get the widespread myth that it was the Nazis, and Hjalmar Schacht and Hitler, whose job-creation programs succeeded in eliminating unemployment. Nothing can be further from the truth.

"The natural course for overcoming economic and financial emergency," is "not to limit economic activity, but to increase it, because the market, in the current conditions of simultaneous depression and world monetary crisis, no longer intervenes." -- Dr. Wilhelm Lautenbach, Possibilities for Reviving Economic Activity, by Means of Investment and Expansion of Credit, at September 16-17, 1932 conference at the Friedrich List Society

He was saying that we have two possibilities: Either we create credit right now for investment, or else, in very short order we will have to do it anyway, but merely in order to finance unemployment—exactly the situation we have today.

... Many historians today have surmised that with his deflation policy, Brüning wanted to intentionally ruin the economy in order to make the point that Germany could not pay the reparations. At the time, there were indeed negotiations for debt relief, the so-called Hoover Moratorium. But that came too late for Brüning, and this terrified him; he had an image of himself as a marathon runner, who was only 100 meters away from the finish-line, but who couldn't run the final stretch.

... If Woytinsky's proposals, and those of Lautenbach, had been implemented in 1931, the conditions would not have existed for two years as they did, making it possible for the Nazis to seize power. And if von Schleicher had had even a mere six months' time to implement his program, the same would have been true. Which is to say that if, in Germany, people had been able to follow the same policy as Franklin Delano Roosevelt in America, in all probability, World War II would never have happened.




#14418 From: Arno Mong Daastoel <amd@...>
Date: Sun Nov 15, 2009 11:03 am
Subject: the 1931 Lautenbach Plan in Germany
arnomd
Offline Offline
Send Email Send Email
 
Dirk,
This snippet by the signature klaatu in 2004 may be of some interest.
Arno

http://wc0.worldcrossing.com/WebX?14@@.1ddfd222/29


klaatu - Sep 2, 2004 5:47 pm (#31 of 162) http://wc0.worldcrossing.com/Images/space.gifReply

I have been reading about the 1931 Lautenbach Plan in Germany. The situation then is very much like the situation now, the German economy was in shambles and was being pressured to undertake an austerity program. Hyperinflation had taken place after the printing of more than enough money to nominally pay off the reparations debt.

Various plans were offered, the most documented one being the Lautenbach Plan, which proposed that steps similar to what FDR.

·  issue national credit for infrastructure projects

·  this would not be inflationary, because it would generate real wealth for the country

·  this would slow and stop the economic decline

·  credit used for speculation is inflationary

·  the reparation agreement did not permit this creation of credit

·  The Bank Of England (Norman Montagu) and BIS (Hjalmar Schact) did not want Germany free of their financial system

In response Montagu and Schacht provided the financing to install Hitler. It is argued that had these plans been put into place, there would have been no WWII.

Each article covers the same ground, but I found very little overlap between them.

http://www.larouchepub.com/hzl/2003/3001berlin_eir_laut.html

http://www.schillerinstitut.dk/hzlspeech.html

Excerpts:

On November 24, 2003 of this year, Professor Herbert Giersch , formerly one of the "Five Wise Men," headed up the World Economic Institute in Kiel, wrote in Welt am Sonntag. on the current deteriorating economic situation:

"Seventy years ago, when the worldwide economic crisis erupted, a group of noted economists of various persuasions, including Wagemann, Woytinsky, Baade, Lautenbach, Lombard, Loewe, and Lederer, sought to build enthusiasm among the political class and in public opinion, for its policy of active government expenditures. Quite probably it could have cost the National Socialists their victory in the Summer of 1932."

... The economic debate, which raged from 1930 to 1932, is almost completely swept under the rug in Germany today. Instead we get the widespread myth that it was the Nazis, and Hjalmar Schacht and Hitler, whose job-creation programs succeeded in eliminating unemployment. Nothing can be further from the truth.

"The natural course for overcoming economic and financial emergency," is "not to limit economic activity, but to increase it, because the market, in the current conditions of simultaneous depression and world monetary crisis, no longer intervenes." -- Dr. Wilhelm Lautenbach, Possibilities for Reviving Economic Activity, by Means of Investment and Expansion of Credit, at September 16-17, 1932 conference at the Friedrich List Society

He was saying that we have two possibilities: Either we create credit right now for investment, or else, in very short order we will have to do it anyway, but merely in order to finance unemployment—exactly the situation we have today.

... Many historians today have surmised that with his deflation policy, Brüning wanted to intentionally ruin the economy in order to make the point that Germany could not pay the reparations. At the time, there were indeed negotiations for debt relief, the so-called Hoover Moratorium. But that came too late for Brüning, and this terrified him; he had an image of himself as a marathon runner, who was only 100 meters away from the finish-line, but who couldn't run the final stretch.

... If Woytinsky's proposals, and those of Lautenbach, had been implemented in 1931, the conditions would not have existed for two years as they did, making it possible for the Nazis to seize power. And if von Schleicher had had even a mere six months' time to implement his program, the same would have been true. Which is to say that if, in Germany, people had been able to follow the same policy as Franklin Delano Roosevelt in America, in all probability, World War II would never have happened.


#14417 From: Arno Mong Daastoel <amd@...>
Date: Sun Nov 15, 2009 7:45 am
Subject: Hudson multimedia goodies - Tour de Australia
arnomd
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From Michael's Tour de Australia :


Hudson multimedia goodies

Hudson multimedia goodies

Thanks to all those who attended Professor Hudson's talks - welcome to our new friends.

"Classical economists fought a 500 year battle to overcome the hangover of feudal influence over a genuine democracy. With the devolution of Neo-Classical and now Neo-Liberal economics, this period will be known as the Counter-Enlightenment" stated Hudson with prominence.

Enjoy these links (many are from our sister org Prosper's site):

Melbourne Town Hall - Lifting the Lid on the GFC presentation

Lifting the Lid on the GFC slideshow

Hudson on ABC International TV (broadcast to 41 countries and millions of people)

Press Release: Rising Interest Rates in Whose Interest?

Hudson on Sky New's Switzer TV

Federal Parliament's Vital Issues speech - Global Policy Trends in a Financialised Economy

Video of Sydney's "Forever Blowing Bubbles" speech (thanks to Sean Reynolds from Global House Price Crash for filming/ editing)

Other Hudson highlights including the Phillip Adams interview, the Renegade Economists interviews and his op-ed can be found by clicking on the Michael Hudson tag on any of his posts on our earthsharing or prosper websites. Don't forget to subscribe to the Renegade Economists to hear more from Hudson.

More video and audio to come soon.

 

Progress Progress

Progress Progress

Get the most out of Professor Hudson's discussions by signing up as a Trial Subscriber to our flagship Progress magazine. You will receive 4 free copies of the 24 page magazine to trial before you hopefully become a member ($30).

For over 100 years we have been maintaining the knowledge-base that the earth will always get more valuable and that this increase can and should fund government.

Read the latest articles and reports from around the world on cane-based paper - the best way for this paradigm shift to sink in.



#14416 From: Michael Hudson <michael.hudson@...>
Date: Sat Nov 14, 2009 10:24 pm
Subject: FW: Customs House talk
peshinesmith
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Dear Arno,
    A new link for my website. Here’s my Sydney Australia speech from last month. The fidelity on me is OK, but the intro by the lady is bad sound.
    Michael

Hi guys,

I've just posted the video of your talk at Customs House to my blog Michael--the link is:

http://www.debtdeflation.com/blogs/2009/11/14/michael-hudson-talk-green-new-deal-discussion/

I found it actually quite easy to listen to using headphones--useless on my PC's speakers though. So have a listen when you have a chance.


Cheers, Steve


#14415 From: Michael Hudson <michael.hudson@...>
Date: Sat Nov 14, 2009 4:38 pm
Subject: Re: Wikipedia: Michael Hudson (economist)
peshinesmith
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March 14 is my birthday. 71 is next, so 72 is the round number after that (9 x 8, or 3 squared times 2 to the third power). In China we talked about my perhaps conducting a concert there for a conference on music as an analogy for law (harmony, equality of tuning, etc.). I just returned.
    Michael


On 11/14/09 6:38 AM, "Arno Mong Daastoel" <amd@...> wrote:


 
 
   

Pretty good description Michael!
;-)
No mention of your movie and musical carereer though.
Can you fill me in?
Arno

PS
When is your big birthday?
Am I too late to congratulate?



http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29
Michael Hudson (economist)
From Wikipedia, the free encyclopedia
Jump to: navigation <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#column-one> , search <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#searchInput>
Michael Hudson (born in 1939 <http://en.wikipedia.org/wiki/1939> , Chicago, Illinois, USA) is Distinguished Research Professor of Economics <http://en.wikipedia.org/wiki/Economics> at University of Missouri, Kansas City <http://en.wikipedia.org/wiki/University_of_Missouri,_Kansas_City> (UMKC). He is also a Wall Street <http://en.wikipedia.org/wiki/Wall_Street>  analyst <http://en.wikipedia.org/wiki/Financial_analyst> and consultant as well as president of The Institute for the Study of Long-term Economic Trends <http://en.wikipedia.org/w/index.php?title=Institute_for_the_Study_of_Long-term_Economic_Trends&amp;action=edit&amp;redlink=1>  (ISLET) and a founding member of International Scholars Conference on Ancient Near Eastern Economies <http://en.wikipedia.org/w/index.php?title=International_Scholars_Conference_on_Ancient_Near_Eastern_Economies&amp;action=edit&amp;redlink=1>  (ISCANEE).
 
  
Contents [hide]
  
[edit <http://en.wikipedia.org/w/index.php?title=Michael_Hudson_%28economist%29&amp;action=edit&amp;section=1> ] Highlights
The New School <http://en.wikipedia.org/wiki/New_School>  in New York City, where he taught previously, and UMKC, where he is currently a Distinguished Research Professor, are the main U.S. alternatives to Chicago School <http://en.wikipedia.org/wiki/Chicago_School_of_economics>  anti-government economics. He also lectures and publishes in association with UMKC at The Berlin School of Economics <http://en.wikipedia.org/wiki/Berlin_School_of_Economics> ,
Hudson served as Chief Economic Advisor for Dennis Kucinich <http://en.wikipedia.org/wiki/Dennis_Kucinich> ’s 2008 presidential campaign and holds the same position in Kucinich’s Congressional campaign. He has been economic advisor to the U.S., Canadian, Mexican and Latvian governments, to the United Nations Institute for Training and Research <http://en.wikipedia.org/wiki/United_Nations_Institute_for_Training_and_Research>  (UNITAR), and he is president of the Institute for the Study of Long-term Economic Trends <http://en.wikipedia.org/w/index.php?title=Institute_for_the_Study_of_Long-term_Economic_Trends&amp;action=edit&amp;redlink=1>  (ISLET).
Hudson is a former balance-of-payments economist for Chase Manhattan Bank <http://en.wikipedia.org/wiki/Chase_Manhattan_Bank>  and Arthur Andersen <http://en.wikipedia.org/wiki/Arthur_Andersen> , and economic futurist for the Hudson Institute <http://en.wikipedia.org/wiki/Hudson_Institute>  (no relation). For Scudder, Stevens & Clark <http://en.wikipedia.org/w/index.php?title=Scudder,_Stevens_%26_Clark&amp;action=edit&amp;redlink=1>  in 1990, he established the world’s first Third World sovereign debt <http://en.wikipedia.org/wiki/Developing_countries%27_debt> fund, which became the second best performing international fund in 1991[citation needed <http://en.wikipedia.org/wiki/Wikipedia:Citation_needed> ] (an Australian <http://en.wikipedia.org/wiki/Australian> real estate fund was number one[citation needed <http://en.wikipedia.org/wiki/Wikipedia:Citation_needed> ]).
[edit <http://en.wikipedia.org/w/index.php?title=Michael_Hudson_%28economist%29&amp;action=edit&amp;section=2> ] Influential writings
Hudson has written cover stories for Harper's Magazine <http://en.wikipedia.org/wiki/Harper%27s_Magazine> and is on the editorial board of Lapham's Quarterly <http://en.wikipedia.org/wiki/Lapham%27s_Quarterly> . He is a regular on American Public Media <http://en.wikipedia.org/wiki/American_Public_Media> 's Marketplace <http://en.wikipedia.org/wiki/Marketplace_%28radio_program%29> , Bloomberg Radio <http://en.wikipedia.org/wiki/Bloomberg_Radio> , has been on numerous Pacifica Radio <http://en.wikipedia.org/wiki/Pacifica_Radio>  interview programs, and is a regular contributor to CounterPunch <http://en.wikipedia.org/wiki/CounterPunch> (http://counterpunch.com/). He has written for the Journal of International Affairs <http://en.wikipedia.org/wiki/Journal_of_International_Affairs> , Commonweal <http://en.wikipedia.org/wiki/Commonweal> , Bible Review <http://en.wikipedia.org/wiki/Bible_Review> , International Economy <http://en.wikipedia.org/w/index.php?title=International_Economy&amp;action=edit&amp;redlink=1> , New York Times <http://en.wikipedia.org/wiki/New_York_Times> op-eds, and has often contributed editorials in leading Latvian, Polish and Arabic business papers. His trade books are translated into Japanese, Chinese, Spanish and Russian.
Hudson's April 2006 Harper's cover story, “The $4.7 Trillion Pyramid: Why Social Security Won’t Be Enough to Save Wall Street,” helped defeat the Bush administration’s attempt to privatize Social Security <http://en.wikipedia.org/wiki/Social_Security_debate_%28United_States%29>  by showing its aim of steering wage withholding into the stock market <http://en.wikipedia.org/wiki/Stock_market>  to reflate stock market prices for the benefit of insiders <http://en.wikipedia.org/wiki/Insider> and speculators <http://en.wikipedia.org/wiki/Speculator> – and to sell to the pension funds <http://en.wikipedia.org/wiki/Pension_funds> . His May 2006 Harper's cover story, “The New Road to Serfdom: An illustrated guide to the coming real estate collapse,” was the first major national article forecasting - in precise chart form - the bursting of the real estate bubble <http://en.wikipedia.org/wiki/Real_estate_bubble>  and its consequences for homeowners and state and local government solvency <http://en.wikipedia.org/wiki/Solvency> .[1] <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_note-0> The November 2008 “How to Save Capitalism” issue of Harper's includes an article by Hudson on the inevitability of a large write-off <http://en.wikipedia.org/wiki/Write-off> of debts and the savings they back.
[edit <http://en.wikipedia.org/w/index.php?title=Michael_Hudson_%28economist%29&amp;action=edit&amp;section=3> ] Books
Professor Hudson is the author of several books.
Super Imperialism: The Economic Strategy of American Empire,[2] <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_note-1> was the first book to describe the global free ride for America after it went off the gold standard in 1971, putting the world onto a paper U.S. Treasury-bill standard. Obliging foreign central banks to keep their monetary reserves in Treasury bonds forced them to finance U.S. military spending abroad, which was responsible for the U.S. balance-of-payments deficit at that time.
Global Fracture: The New International Economic order[3] <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_note-2> , a sequel to Super Imperialism, forecast the division of the world into regional trade and currency blocs.
Super Imperialism - New Edition: The Origin and Fundamentals of U.S. World Dominance[4] <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_note-3> , a new and completely revised edition of "Super Imperialism", describes the genesis of America's political and financial domination.
Global Fracture: The New International Economic order, Second Edition[5] <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_note-4> , a new and updated edition that explores how and why the US came to achieve world economic hegemony.
His forthcoming book, The Fictitious Economy, is among the first to explain to general readers how a corrosive bubble economy <http://en.wikipedia.org/wiki/Bubble_economy>  is replacing industrial capitalism <http://en.wikipedia.org/wiki/Industrial_capitalism>  via debt-financed <http://en.wikipedia.org/wiki/Debt_finance> , asset price inflation <http://en.wikipedia.org/wiki/Asset_price_inflation>  with the main purpose of increasing balance-sheet <http://en.wikipedia.org/wiki/Balance_sheet>  net worth <http://en.wikipedia.org/wiki/Net_worth> , benefiting a select few[6] <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_note-5> while spreading risk <http://en.wikipedia.org/wiki/Risk> among the general population.
[edit <http://en.wikipedia.org/w/index.php?title=Michael_Hudson_%28economist%29&amp;action=edit&amp;section=4> ] ISCANEE
In 1984, Hudson joined Harvard’s archaeology <http://en.wikipedia.org/wiki/Archaeology> faculty at the Peabody Museum <http://en.wikipedia.org/wiki/Peabody_Museum>  as a research fellow in Babylonian <http://en.wikipedia.org/wiki/Babylon> economics. A decade later, he was a founding member of ISCANEE (International Scholars Conference on Ancient Near Eastern Economies), an international group of Assyriologists and archaeologists that has published a series of colloquia analyzing the economic origins of civilization. This group has become the successor to Karl Polanyi <http://en.wikipedia.org/wiki/Karl_Polanyi> ’s anthropological and historical group of a half-century ago. Four volumes co-edited by Hudson have appeared so far, dealing with privatization, urbanization and land use, the origins of money, accounting, debt, and clean slates in the Ancient Near East (a fifth volume, on the evolution of free labor, is in progress). This new direction in research is now known as the New Economic Archaeology.
[edit <http://en.wikipedia.org/w/index.php?title=Michael_Hudson_%28economist%29&amp;action=edit&amp;section=5> ] Education
Prof. Hudson received his Ph.D. <http://en.wikipedia.org/wiki/Ph.D.>  from New York University <http://en.wikipedia.org/wiki/New_York_University>  in 1968 (economics <http://en.wikipedia.org/wiki/Economics> ). His dissertation was on American economic and technological thought in the nineteenth century. He received his M.A. <http://en.wikipedia.org/wiki/Master_of_Arts_%28postgraduate%29>  also from New York University in 1963 in economics, with a thesis on the World Bank <http://en.wikipedia.org/wiki/World_Bank> 's philosophy of development, with special reference to lending policies in the agricultural sector. He was a philology <http://en.wikipedia.org/wiki/Philology> major with a minor in history at the University of Chicago <http://en.wikipedia.org/wiki/University_of_Chicago> , where he received his B.A. <http://en.wikipedia.org/wiki/Bachelor_of_Arts> in 1959. He attended the University of Chicago's Laboratory School <http://en.wikipedia.org/wiki/University_of_Chicago_Laboratory_Schools>  for high school and grade school.
[edit <http://en.wikipedia.org/w/index.php?title=Michael_Hudson_%28economist%29&amp;action=edit&amp;section=6> ] External links
 
  
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[edit <http://en.wikipedia.org/w/index.php?title=Michael_Hudson_%28economist%29&amp;action=edit&amp;section=7> ] References
  1. ^ <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_ref-0> Michael Hudson. Harper's. May 2006. Available at: http://www.michael-hudson.com/articles/debt/Hudson,RoadToSerfdom.pdf
  2. ^ <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_ref-1> Hudson, Michael (1972). Super Imperialism: The Economic Strategy of American Empire. Holt, Rinehart and Winston <http://en.wikipedia.org/wiki/Holt,_Rinehart_and_Winston> . ISBN <http://en.wikipedia.org/wiki/International_Standard_Book_Number>  978-0030859960 <http://en.wikipedia.org/wiki/Special:BookSources/978-0030859960> .
  3. ^ <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_ref-2> Hudson, Michael (March 1979). Global Fracture: The New International Economic order. Harper & Row <http://en.wikipedia.org/wiki/Harper_%26_Row> . ISBN <http://en.wikipedia.org/wiki/International_Standard_Book_Number>  978-0745323954 <http://en.wikipedia.org/wiki/Special:BookSources/978-0745323954> .
  4. ^ <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_ref-3> Hudson, Michael (March 2003). Super Imperialism - New Edition: The Origin and Fundamentals of U.S. World Dominance. Pluto Press <http://en.wikipedia.org/wiki/Pluto_Press> . ISBN <http://en.wikipedia.org/wiki/International_Standard_Book_Number>  978-0745319896 <http://en.wikipedia.org/wiki/Special:BookSources/978-0745319896> .
  5. ^ <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_ref-4> Hudson, Michael (April 2005). Global Fracture: The New International Economic order, Second Edition. Pluto Press <http://en.wikipedia.org/wiki/Pluto_Press> . ISBN <http://en.wikipedia.org/wiki/International_Standard_Book_Number>  978-0745323947 <http://en.wikipedia.org/wiki/Special:BookSources/978-0745323947> .
  6. ^ <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#cite_ref-5> See also FIRE economy <http://en.wikipedia.org/wiki/FIRE_economy> .
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Michael Hudson (economist)
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Michael Hudson <http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29> (born in 1939 <http://en.wikiquote.org/wiki/1939> ) is Distinguished Research Professor of Economics at University of Missouri, Kansas City (UMKC). He is also a Wall Street analyst and consultant as well as president of The Institute for the Study of Long-term Economic Trends (ISLET) and a founding member of International Scholars Conference on Ancient Near Eastern Economies (ISCANEE).
 
 
   
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#14414 From: Arno Mong Daastoel <amd@...>
Date: Sat Nov 14, 2009 2:19 pm
Subject: [RE: On the intellectual history of the quality theory of credit ...]
arnomd
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Thanks Chris,
;-)

I owe my info on the List conference in 1931 to Peter Spengler.
He refered me to several German economists who worked intensely with
productive credit creation in the 1930s
("produktive Kredit-schöpfung") They wrote several books on this.

It is not so easy to find material on this on the web.
Google give only 6 links:
http://www.google.no/search?hl=en-GB&q=%28%22produktive+Kredit-sch%C3%B6pfung%22\
&sourceid=navclient-ff&rlz=1B3GGGL_en-GBNO328NO328&ie=UTF-8

Prof. Jurgen Backhaus has alos worked on this, see e.g. his article on
the social-democratic Lautenbach.

The LaRouche people likewise.
See e.g. http://www.larouchepub.com/hzl/2003/3001berlin_eir_laut.html
And in the US, let us not forget their work on the Abe Lincoln experience.
http://american_almanac.tripod.com/ascher1.htm

It is also of interest to include the Japanse MITI eperience, and
similar stories in (pre-revolution) Russia, Taiwan, Korea and ... China.

The same goes for the French tradition that is older than perhaps any,
and stretches from before Colbert (Charlemagne & Louis XI) to after de
Gaulle.

Arno

#14413 From: "Geoffrey Gardiner" <geoffrey.gardiner@...>
Date: Sat Nov 14, 2009 1:03 pm
Subject: IS/LM
geoffrey276927
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Charles Goodhart's paper in Economica was circulated. His criticisms of IS/LM are vallid but I have supplemented them in the attached pdf  which I have sent to Charles.
 
Geoffrey

1 of 1 File(s)


#14412 From: "Geoffrey Gardiner" <geoffrey.gardiner@...>
Date: Sat Nov 14, 2009 12:49 pm
Subject: Re: I=S: 'pushing on a string'
geoffrey276927
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Dirk,

The best figure I have been able to find as yet is the Gross Margin of Marks
and Spencer. It hovers around 38 per cent. In calculating the margin they
are probably valuing purchases 'c.i.f', that is including carriage,
insurance and freight. Imports are valued the same way, but exports are
valued 'f.o.b', which does not include carriage, insurance and freight. Any
of the diference which accrues to Britain will show up in 'invisibles'.

The margin will include profit, but profit is a ytue cost, the cost of
capital.

The margin on locally produced goods would not need to be so high as on on
imported goods, so 38 is an average, the margin on imports being slightly
higher. My estimate of a 100 per cent mark-up is on these figures a trifle
high, but not much. Perhaps we could safely say 80 per cent.

Geoff



----- Original Message -----
From: "D.J.Bezemer" <d.j.bezemer@...>
To: <gang8@yahoogroups.com>
Sent: Monday, October 26, 2009 9:55 PM
Subject: [gang8] I=S: 'pushing on a string'


> Geoffrey, this is very clear. As I wrote in connection to developing
> countries, the attempt to fill their 'savings gap' by aid so that they
> can reach the required investment levels is like 'pushing on a
> string'.
>
> The one thing I was wondering about is how we could substantiate the
> figure of import goods needing about as many people to distribute them
> as to produce them?
>
> I believe this because of circumstantial evidence - how else would the
> US run such low unemployment figures while neglecting its real
> investment (if indeed it did that - the investment figures are
> problematic)? How can financilazed economies living off capital ains,
> lending and imports have decent employment levels? This is the only
> answer I can think of. Also others - e.g. the Daily Reckoning people -
> make this argument. But I have never seen a solid study on it.
>
> If true, the implication is that the depression will truly change the
> economy fundamentally from what is was before, and there is no back to
> businessas as usual without the deficit.
>
> Dirk
>
> On Mon, 26 Oct 2009 18:43:32 -0000
>  "Geoffrey Gardiner" <geoffrey.gardiner@...> wrote:
>> Dirk,
>>
>> I have been in touch with Charles. I attach my addition to his
>>arguments
>> which I sent him today.
>>
>> Credit, as we all know, needs to be got into the IS/LM model.
>>
>> Geoff
>>
>> ----- Original Message -----
>>From: "Dirk Bezemer" <d.j.bezemer@...>
>> To: <gang8@yahoogroups.com>
>> Sent: Wednesday, October 07, 2009 9:05 AM
>> Subject: Re: [gang8] The Continuing Muddles of Monetary Theory
>>
>>
>>> dear Geoffrey,
>>>
>>> Is not ALL 'money' derivative of credit?
>>>
>>> I was thinking of the creditary dictum "All money is credit, but
>>>credit
>>> is not all money". Are there exceptions to this ?
>>>
>>> Dirk
>>>
>>> Gardiner wrote:
>>>> I have had a brief glance at the paper.
>>>>
>>>> My first impression is that all that Charles was taught in 1957, and
>>>>I
>>>> was
>>>> taught a little earlier, is based on the assumption that 'money' is
>>>>a
>>>> 'thing', whereas it is a relationship of debtor and creditor. Once
>>>>this
>>>> point is grasped one sees that the theory has to be changed
>>>>drastically.
>>>> We
>>>> study the quantity of credit, not the quantity of 'money', which is
>>>> derivative of some, but not all, of the former.
>>>>
>>>> We are concerned not with a commodity but the level of debt, and
>>>>that
>>>> means
>>>> the quantity of goods and services which are supplied but not paid
>>>>for.
>>>> The
>>>> old theory assumes that the commodity, called money, has an absolute
>>>> level,
>>>> set by the central bank. But credit can be increased in ways which
>>>>are
>>>> outside central bank control, even if central banks knew how to
>>>>control
>>>> it,
>>>> which they don't.
>>>>
>>>> The ultimate in the follies resulting from seeing 'money' as a
>>>>thing, not
>>>> a
>>>> debtor/creditor reationship, is the daft ideas of the American
>>>>Monetary
>>>> Institute.
>>>>
>>>> As money is not a 'thing', the increase in the supply of money does
>>>>not
>>>> necessarily lower its value. What can lower the value of money is a
>>>> shortage
>>>> of the goods and services which credit is used to buy. If there is
>>>>no
>>>> such
>>>> constraint an increase in credit need not cause inflation.
>>>>
>>>> I am finding that I can get the idea that money is not a thing
>>>>across to
>>>> intelligent people. On Friday night the candidate for Swindon South
>>>> Parliamentary Constituency, with whom I had some weeks earlier
>>>>talked at
>>>> length about it, explained my point very well to the future Justice
>>>> Minister, forestallin my intent to do so. It probably helps that the
>>>> candidate is a lawyer (and trainee judge), not an economist, and is
>>>> therefore used to using words carefully and accurately.
>>>>
>>>> Charles wants to talk again so we meet on 10th November. We have a
>>>>more
>>>> practical matter to discuss.
>>>>
>>>> Geoffrey
>>>>
>>>>
>>>> ----- Original Message -----
>>>> From: "Dirk Bezemer" <d.j.bezemer@...>
>>>> To: <gang8@yahoogroups.com>
>>>> Sent: Thursday, October 01, 2009 9:11 AM
>>>> Subject: [gang8] The Continuing Muddles of Monetary Theory [1
>>>>Attachment]
>>>>
>>>>
>>>>
>>>>> Dear All,
>>>>>
>>>>> Attached a paper by Goodhart wit an excellent title (still need to
>>>>>read
>>>>> it), which as been circulating for a while and is now published in
>>>>> Economica.
>>>>>
>>>>> It is based on a lecture on the occasion of the 2007 75th
>>>>>Anniversary
>>>>> Lionel Robbins Conference in Londo. In ' The Continuing Muddles of
>>>>> Monetary Theory: A Steadfast Refusal to Face Facts', Goodhart sets
>>>>>out
>>>>> why he believes monetary economics has "a long way yet to go", and
>>>>>few
>>>>> economists "have bothered much to relate theory to reality." Here's
>>>>>the
>>>>> abstract to his short paper:
>>>>>
>>>>> Lionel Robbins was much concerned about the methodology of economic
>>>>> science.
>>>>> When he discussed the desirable relationship between theory and
>>>>> ‘reality’, two of the
>>>>> three examples that he presented where the theoretical analysis was
>>>>>not
>>>>> sufficiently
>>>>> based on a knowledge of historical fact were taken from monetary
>>>>> economics.
>>>>> Indeed, monetary theory has remained prone to such shortcomings ever
>>>>> since.
>>>>>
>>>>> Amongst the worst are:-
>>>>> (1) IS/LM: the monetary authorities set the monetary base, and the
>>>>> interest rate is
>>>>> determined in the market;
>>>>> (2) The monetary base multiplier of bank deposits, and the role of
>>>>> reserve ratios;
>>>>> (3) The current three equation neo-classical consensus, which not
>>>>>only
>>>>> assumes
>>>>> perfect creditworthiness for all agents, but also an essentially
>>>>> non-monetary
>>>>> system, e.g. no need for banks;
>>>>> (4) The standard theory of the evolution of money.
>>>>>
>>>>> Monetary economics can only get better, but it has a long way yet to
>>>>>go.
>>>>>
>>>>>
>>>>> best,
>>>>>
>>>>> Dirk
>>>>>
>>>>>
>>>>>
>>>>>
>>>>> ------------------------------------
>>>>>
>>>>> The gang8 list is devoted to Creditary Economics.
>>>>> To unsubscribe, email: gang8-unsubscribe@yahoogroups.com
>>>>>
>>>>> Yahoo! Groups Links
>>>>>
>>>>>
>>>>>
>>>>>
>>>>
>>>>
>>>>
>>>> ------------------------------------
>>>>
>>>> The gang8 list is devoted to Creditary Economics.
>>>> To unsubscribe, email: gang8-unsubscribe@yahoogroups.com
>>>>
>>>> Yahoo! Groups Links
>>>>
>>>>
>>>>
>>>>
>>>
>>>
>>>
>>> ------------------------------------
>>>
>>> The gang8 list is devoted to Creditary Economics.
>>> To unsubscribe, email: gang8-unsubscribe@yahoogroups.com
>>>
>>> Yahoo! Groups Links
>>>
>>>
>>>
>>
>>
>>
>>
>> ------------------------------------
>>
>> The gang8 list is devoted to Creditary Economics.
>> To unsubscribe, email: gang8-unsubscribe@yahoogroups.com
>>
>> Yahoo! Groups Links
>>
>>
>>
>
>
>
> ------------------------------------
>
> The gang8 list is devoted to Creditary Economics.
> To unsubscribe, email: gang8-unsubscribe@yahoogroups.com
>
> Yahoo! Groups Links
>
>
>

#14411 From: Arno Mong Daastoel <amd@...>
Date: Sat Nov 14, 2009 11:38 am
Subject: Wikipedia: Michael Hudson (economist)
arnomd
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Pretty good description Michael!
;-)
No mention of your movie and musical carereer though.
Can you fill me in?
Arno

PS
When is your big birthday?
Am I too late to congratulate?


http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29

Michael Hudson (economist)

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Michael Hudson (born in 1939, Chicago, Illinois, USA) is Distinguished Research Professor of Economics at University of Missouri, Kansas City (UMKC). He is also a Wall Street analyst and consultant as well as president of The Institute for the Study of Long-term Economic Trends (ISLET) and a founding member of International Scholars Conference on Ancient Near Eastern Economies (ISCANEE).

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[edit] Highlights

The New School in New York City, where he taught previously, and UMKC, where he is currently a Distinguished Research Professor, are the main U.S. alternatives to Chicago School anti-government economics. He also lectures and publishes in association with UMKC at The Berlin School of Economics,

Hudson served as Chief Economic Advisor for Dennis Kucinich’s 2008 presidential campaign and holds the same position in Kucinich’s Congressional campaign. He has been economic advisor to the U.S., Canadian, Mexican and Latvian governments, to the United Nations Institute for Training and Research (UNITAR), and he is president of the Institute for the Study of Long-term Economic Trends (ISLET).

Hudson is a former balance-of-payments economist for Chase Manhattan Bank and Arthur Andersen, and economic futurist for the Hudson Institute (no relation). For Scudder, Stevens & Clark in 1990, he established the world’s first Third World sovereign debt fund, which became the second best performing international fund in 1991[citation needed] (an Australian real estate fund was number one[citation needed]).

[edit] Influential writings

Hudson has written cover stories for Harper's Magazine and is on the editorial board of Lapham's Quarterly. He is a regular on American Public Media's Marketplace, Bloomberg Radio, has been on numerous Pacifica Radio interview programs, and is a regular contributor to CounterPunch (http://counterpunch.com/). He has written for the Journal of International Affairs, Commonweal, Bible Review, International Economy, New York Times op-eds, and has often contributed editorials in leading Latvian, Polish and Arabic business papers. His trade books are translated into Japanese, Chinese, Spanish and Russian.

Hudson's April 2006 Harper's cover story, “The $4.7 Trillion Pyramid: Why Social Security Won’t Be Enough to Save Wall Street,” helped defeat the Bush administration’s attempt to privatize Social Security by showing its aim of steering wage withholding into the stock market to reflate stock market prices for the benefit of insiders and speculators – and to sell to the pension funds. His May 2006 Harper's cover story, “The New Road to Serfdom: An illustrated guide to the coming real estate collapse,” was the first major national article forecasting - in precise chart form - the bursting of the real estate bubble and its consequences for homeowners and state and local government solvency.[1] The November 2008 “How to Save Capitalism” issue of Harper's includes an article by Hudson on the inevitability of a large write-off of debts and the savings they back.

[edit] Books

Professor Hudson is the author of several books.

Super Imperialism: The Economic Strategy of American Empire,[2] was the first book to describe the global free ride for America after it went off the gold standard in 1971, putting the world onto a paper U.S. Treasury-bill standard. Obliging foreign central banks to keep their monetary reserves in Treasury bonds forced them to finance U.S. military spending abroad, which was responsible for the U.S. balance-of-payments deficit at that time.

Global Fracture: The New International Economic order[3], a sequel to Super Imperialism, forecast the division of the world into regional trade and currency blocs.

Super Imperialism - New Edition: The Origin and Fundamentals of U.S. World Dominance[4], a new and completely revised edition of "Super Imperialism", describes the genesis of America's political and financial domination.

Global Fracture: The New International Economic order, Second Edition[5], a new and updated edition that explores how and why the US came to achieve world economic hegemony.

His forthcoming book, The Fictitious Economy, is among the first to explain to general readers how a corrosive bubble economy is replacing industrial capitalism via debt-financed, asset price inflation with the main purpose of increasing balance-sheet net worth, benefiting a select few[6] while spreading risk among the general population.

[edit] ISCANEE

In 1984, Hudson joined Harvard’s archaeology faculty at the Peabody Museum as a research fellow in Babylonian economics. A decade later, he was a founding member of ISCANEE (International Scholars Conference on Ancient Near Eastern Economies), an international group of Assyriologists and archaeologists that has published a series of colloquia analyzing the economic origins of civilization. This group has become the successor to Karl Polanyi’s anthropological and historical group of a half-century ago. Four volumes co-edited by Hudson have appeared so far, dealing with privatization, urbanization and land use, the origins of money, accounting, debt, and clean slates in the Ancient Near East (a fifth volume, on the evolution of free labor, is in progress). This new direction in research is now known as the New Economic Archaeology.

[edit] Education

Prof. Hudson received his Ph.D. from New York University in 1968 (economics). His dissertation was on American economic and technological thought in the nineteenth century. He received his M.A. also from New York University in 1963 in economics, with a thesis on the World Bank's philosophy of development, with special reference to lending policies in the agricultural sector. He was a philology major with a minor in history at the University of Chicago, where he received his B.A. in 1959. He attended the University of Chicago's Laboratory School for high school and grade school.

[edit] External links

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[edit] References

  1. ^ Michael Hudson. Harper's. May 2006. Available at: http://www.michael-hudson.com/articles/debt/Hudson,RoadToSerfdom.pdf
  2. ^ Hudson, Michael (1972). Super Imperialism: The Economic Strategy of American Empire. Holt, Rinehart and Winston. ISBN 978-0030859960. 
  3. ^ Hudson, Michael (March 1979). Global Fracture: The New International Economic order. Harper & Row. ISBN 978-0745323954. 
  4. ^ Hudson, Michael (March 2003). Super Imperialism - New Edition: The Origin and Fundamentals of U.S. World Dominance. Pluto Press. ISBN 978-0745319896. 
  5. ^ Hudson, Michael (April 2005). Global Fracture: The New International Economic order, Second Edition. Pluto Press. ISBN 978-0745323947. 
  6. ^ See also FIRE economy.

Retrieved from "http://en.wikipedia.org/wiki/Michael_Hudson_(economist)"

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Michael Hudson (economist)

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Michael Hudson (born in 1939) is Distinguished Research Professor of Economics at University of Missouri, Kansas City (UMKC). He is also a Wall Street analyst and consultant as well as president of The Institute for the Study of Long-term Economic Trends (ISLET) and a founding member of International Scholars Conference on Ancient Near Eastern Economies (ISCANEE).


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  • If you look at the speeches he gave just before he left the Fed, it's pretty much “After me - the Deluge. I'm getting out while my reputation's intact”.

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#14410 From: Ercouncil@...
Date: Thu Nov 12, 2009 7:21 am
Subject: Re: [RE: On the intellectual history of the quality theory of credit ...
econrescouncil
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Absolutely, Michael.  But when as you say money barely obeys the sophomoronic laws of supply and demand, and the worldwide oil imbroglio just hasn't the time to obey those laws either, while the property/real estate market usually inverts them completely, what the hell are the Samuelsons of this world left with ? Widgets, for God's sake. I take a real bash at all that absurd stuff about widgets in my book :
 
"This last is an idiosyncratic approach peculiar to third-rate economists. They usually talk about ‘widgets’. Respectable historians would scarce waste their time wondering how some notional King Widget might sign notional treaties or pass notional laws using notional constitutional structures. Acknowledged geographers would have better things to do than analyse how some notional range of mountains, the Widget Alps perhaps, in some notional continent might influence its notional climate, or a notional River Widget might foster notional cities or irrigate notional crops."
 
Onward upward
Chris

#14409 From: Michael Hudson <michael.hudson@...>
Date: Thu Nov 12, 2009 1:08 am
Subject: Re: [RE: On the intellectual history of the quality theory of credit ...
peshinesmith
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Dear Chris,
    I was just reading Steve Keen’s book, Debunking Economics, where he makes the same point that you made a few years ago so clearly: the smoothly rising supply and demand curves taught in the first class of economics students is absolutely ridiculous. You used the example of commodities, but the same certainly is true of credit. All attempts to explain the interest rate “rationally” pale, as the gov’t sets it — the price needed to increase asset prices at a rate enabling debtors to borrow the interest by refinancing their mortgages or other debt.
    Michael


On 11/11/09 10:50 AM, "Ercouncil@..." <Ercouncil@...> wrote:


 
 
   

.
 
Good stuff Arno. The more of these historic references are assembled here on Gang 8, the more ridiculous it becomes that the concept we are all talking about - I call it the Quality Theory of Credit but there's no special magic in the name - has stayed outside the mainstream of economic wisdom.
 
A man from Mars might even think it was some kind of conspiracy!
 
Chris

   




#14408 From: Ercouncil@...
Date: Wed Nov 11, 2009 10:50 am
Subject: Re: [RE: On the intellectual history of the quality theory of credit ...
econrescouncil
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.
 
Good stuff Arno. The more of these historic references are assembled here on Gang 8, the more ridiculous it becomes that the concept we are all talking about - I call it the Quality Theory of Credit but there's no special magic in the name - has stayed outside the mainstream of economic wisdom.
 
A man from Mars might even think it was some kind of conspiracy!
 
Chris

#14407 From: "Geoffrey Gardiner" <geoffrey.gardiner@...>
Date: Wed Nov 11, 2009 3:42 pm
Subject: Re: The ins and outs of Quantitative Easing
geoffrey276927
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Richard,
 
The legislation may have been brief but it had profound effects. Remember this is an enabling Act and it was the Statutory Instruments, so-called secondary legislation, which filled in the detail. The postwar Labour Government was criticised often for putting the controversial parts of legislation in Statutory Instruments as it knew the Instruments got only cursory attention from Members of Parliament. Many of the Labour members were very poorly educated and would have found the SIs incomprehensible.
 
A very powerful committee was already existed to vet all borrowing covered by the Act, and it was not only borrowing but equity capital as well. It was called the Capital Issues Committee and the chairman. Lord Tennet, I think it was, became a very influential figure indeed. Naturally its actions came in for heavy criticism, especially from the finanical journalist, Harold Wincott (see http://www.wincott.co.uk/main.htm). See also http://www.buckingham.ac.uk/international/academic/wincott/wincottbio.html for an appreciation of Wincott by the first director of the IEA. Wincott is seen by many as the inspirer of Thatcherism so naturally he opposed state intervention and ruthlessly exposed every action of the CIC he disagreed with. He named it the 'Curious Issues Committee.' Nevertheless mature judgement might well be that the CIC prevented some of the follies we have seen since Nigel Lawson abolished it. One of our distinguished lurkers, Michael Moore, an expert on Keynes, has studied the work of the committee.
 
When I was in the heart of the City in the early 1970s we had to bear in mind that every capital issue we made had to pass the test of the Committee. Often I had to go along the HMSO to get hold of the relevant Statutory Instruments issued under primary legislation which affected my work. See http://www.jstor.org/pss/2976732 for an academic paper. Unfortunately I cannot access the full paper.
 
What one heard less of was the 'Guarantees' part. This was intended to make it easier for small companies to raise capital and it is that part which we think may have been inspred by Keynes.
 
http://hansard.millbanksystems.com/written_answers/1951/apr/17/capital-issues-committee-instructions will give you a taste of the comprehensive nature of the Act. It was of course a continuation of wartime legislation but its purpose was probably less oriented to defence, and more towards promoting exports. http://hansard.millbanksystems.com/written_answers/1919/apr/09/capital-issues-committee shows the committee at work in the 1914-18 war.
 
I also found this http://hansard.millbanksystems.com/written_answers/1919/apr/09/enemy-debtors-and-creditors which is interesting as it shows the consequences of the crisis which Mervyn King referred to when he said that the current crisis was the worst since August 1914. The outbreak of war bankrupted many if not all British banks as the bills of excahnge drawn of enemy aliens were worthless. The Bank of England bought them up and this item shows, I think, that the liabilities were included in the postwar settlement, as I had suspected.
 
Geoff
 
 
----- Original Message ----- 
Sent: Wednesday, November 11, 2009 12:23 PM
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

Dear Chris,

Did you mean this bill, referring to Keynes’ 1946 bill on borrowing control?

http://www.statutelaw.gov.uk/content.aspx?LegType=All+Legislation&searchEnacted=0&extentMatchOnly=0&confersPower=0&blanketAmendment=0&sortAlpha=0&PageNumber=0&NavFrom=0&parentActiveTextDocId=1089924&ActiveTextDocId=1089927&filesize=5486

I must say, I don’t think this can be interpreted as fitting into the genealogy of credit creation based economics.

In fact, I think it bears repeating that for this exploration to be useful we have to distinguish between the broader ideas and a credit-based approach in general, and the specific disaggregated re-formulation of the quantity equation, which gives the precise relationships. I have not yet seen any antecedents to the latter.

Regards,

Richard


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Ercouncil@aol.com
Sent: Monday, November 09, 2009 5:51 AM
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

Richard Werner writes:
"This sounds like my Quantity Theory of Disaggregated Credit. When did you formulate yours? Have you taken a look at my formulations and empirical support?"

Hi Richard:
I think it's safe to say it the Quality Theory of Credit mentioned by me yet again in Friday's post was originally labelled as such many years ago. It has been explained numerous times here on Gang 8, more or less since the Gang was originally founded in September 1998. 

Gunnar's very meticulous analysis of early economic theory would I am sure trace the basic concept back much earlier than that; what I call the Quality Theory of Credit (QTC) as a replacement for the standard Quantity Theory of Money (QTM) also goes back much earlier than the founding of Gang 8 by a number of years. It almost certainly dates back originally, even if not yet labelled QTC, to when I was working in banking, 1979 to 1986.

And I'm sure the basic concept goes back far earlier than that anyway. As I did mention in the posting on Friday, Geoffrey and I both reckon there are very clear hints of it in Keynes's "Control of Borrowing Act" which he arranged to put through Parliament way back in 1946. About ten years ago I went right through Keynes's private papers at the Public Records Office in Kew here in London - or such of them as have survived  - to try and find any further clues on his formulation of the original parliamentary bill. 

Either Keynes's private papers have been filleted or, as I suspect, Keynes was deliberately keeping quiet about his true intent until the legislation was safely on the Statute Book. Sadly he did not live to see that day. Had he done so I'm quite sure he would have wanted to indicate to the banks, and as much more recently I would wish to indicate to the banks, that the aim of his crafty legislation was to monitor how much of their credit goes into genuine expansion of the economy, how much of it goes into consumer spending, and how much of it goes into Asset Price Inflation. The 1946 Control of Borrowing Act makes very little sense otherwise.

Unlike the more dirigiste Keynes, my preference would be to go down the Accountancy Rules route, and simply require banks to publish that vital information as part of the public reporting of their results. As head of PR at two major banks I've done enough of the publishing of bank results myself in my time, before I spent the next five years (1986-1990) as the group's spokesman on all financial matters, inter alia writing the results at BAT Industries - then Britain's third largest industrial company. I always did the words while a young finance director, Martin Broughton, did the numbers. (Martin is nowadays Chairman of British Airways.)  That five years of quarterly reporting was a masterclass in the byzantine financial and corporate politics which lie behind seemingly innocent Quarterly Results.

Thus I am convinced much could be deduced from such declaration by the banks.  In a very similar vein, Geoffrey Gardiner would dearly like to see British banks publish retrospectively their true results during the critical years between the wars, by revealing all the internal transfers to and from inner reserves, which for many years Britain permitted them to do to mask their true activities.

When I arrived in Hong Kong  as (among other things)  HSBC's top spokesman in early 1984, I was intrigued to see just how much its undeclared transfers between undeclared gross profits and undeclared internal reserves, then still permissible under Hong Kong banking law if no longer under British banking law, enabled the bank to build a worldwide reputation of rock solid stability.

The existence of such transfers, if not their amount, was just quietly mentioned in HSBC's published accounts. In fact the bank was doing pretty well, not least because it had failed to move quickly enough to join in the frenzy for "sovereign lending" pursued among US money centre, and UK high street and commercial banks, a frenzy which landed them in it up to their necks in the early-mid 1980s.

Anyone who believes for one moment that excessive banking greed before tragic banking setback is an invention of just the past ten years is sadly mistaken.  There had been another such frenzy in the mid 1970s which practically brought down National Westminster Bank here in the UK, and certainly caused the demise of assorted secondary banks.

I'm rather inclined to the Tomassonian view in economics that there is very little which is truly new under the sun. Go digging hard enough and you can probably find layer upon layer of quasi-antecedents, with varying names, for just about anything.

Chris Meakin

London


#14406 From: "Dr. Richard Werner" <werner@...>
Date: Wed Nov 11, 2009 12:23 pm
Subject: RE: The ins and outs of Quantitative Easing
rawjapan2005
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Dear Chris,

 

Did you mean this bill, referring to Keynes’ 1946 bill on borrowing control?

 

http://www.statutelaw.gov.uk/content.aspx?LegType=All+Legislation&searchEnacted=0&extentMatchOnly=0&confersPower=0&blanketAmendment=0&sortAlpha=0&PageNumber=0&NavFrom=0&parentActiveTextDocId=1089924&ActiveTextDocId=1089927&filesize=5486

 

I must say, I don’t think this can be interpreted as fitting into the genealogy of credit creation based economics.

 

In fact, I think it bears repeating that for this exploration to be useful we have to distinguish between the broader ideas and a credit-based approach in general, and the specific disaggregated re-formulation of the quantity equation, which gives the precise relationships. I have not yet seen any antecedents to the latter.

 

Regards,

Richard

 

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Ercouncil@...
Sent: Monday, November 09, 2009 5:51 AM
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Richard Werner writes:
"This sounds like my Quantity Theory of Disaggregated Credit. When did you formulate yours? Have you taken a look at my formulations and empirical support?"

Hi Richard:
I think it's safe to say it the Quality Theory of Credit mentioned by me yet again in Friday's post was originally labelled as such many years ago. It has been explained numerous times here on Gang 8, more or less since the Gang was originally founded in September 1998. 

 

Gunnar's very meticulous analysis of early economic theory would I am sure trace the basic concept back much earlier than that; what I call the Quality Theory of Credit (QTC) as a replacement for the standard Quantity Theory of Money (QTM) also goes back much earlier than the founding of Gang 8 by a number of years. It almost certainly dates back originally, even if not yet labelled QTC, to when I was working in banking, 1979 to 1986.

 

And I'm sure the basic concept goes back far earlier than that anyway. As I did mention in the posting on Friday, Geoffrey and I both reckon there are very clear hints of it in Keynes's "Control of Borrowing Act" which he arranged to put through Parliament way back in 1946. About ten years ago I went right through Keynes's private papers at the Public Records Office in Kew here in London - or such of them as have survived  - to try and find any further clues on his formulation of the original parliamentary bill. 

 

Either Keynes's private papers have been filleted or, as I suspect, Keynes was deliberately keeping quiet about his true intent until the legislation was safely on the Statute Book. Sadly he did not live to see that day. Had he done so I'm quite sure he would have wanted to indicate to the banks, and as much more recently I would wish to indicate to the banks, that the aim of his crafty legislation was to monitor how much of their credit goes into genuine expansion of the economy, how much of it goes into consumer spending, and how much of it goes into Asset Price Inflation. The 1946 Control of Borrowing Act makes very little sense otherwise.

 

Unlike the more dirigiste Keynes, my preference would be to go down the Accountancy Rules route, and simply require banks to publish that vital information as part of the public reporting of their results. As head of PR at two major banks I've done enough of the publishing of bank results myself in my time, before I spent the next five years (1986-1990) as the group's spokesman on all financial matters, inter alia writing the results at BAT Industries - then Britain's third largest industrial company. I always did the words while a young finance director, Martin Broughton, did the numbers. (Martin is nowadays Chairman of British Airways.)  That five years of quarterly reporting was a masterclass in the byzantine financial and corporate politics which lie behind seemingly innocent Quarterly Results.

 

Thus I am convinced much could be deduced from such declaration by the banks.  In a very similar vein, Geoffrey Gardiner would dearly like to see British banks publish retrospectively their true results during the critical years between the wars, by revealing all the internal transfers to and from inner reserves, which for many years Britain permitted them to do to mask their true activities.

 

When I arrived in Hong Kong  as (among other things)  HSBC's top spokesman in early 1984, I was intrigued to see just how much its undeclared transfers between undeclared gross profits and undeclared internal reserves, then still permissible under Hong Kong banking law if no longer under British banking law, enabled the bank to build a worldwide reputation of rock solid stability.

 

The existence of such transfers, if not their amount, was just quietly mentioned in HSBC's published accounts. In fact the bank was doing pretty well, not least because it had failed to move quickly enough to join in the frenzy for "sovereign lending" pursued among US money centre, and UK high street and commercial banks, a frenzy which landed them in it up to their necks in the early-mid 1980s.

 

Anyone who believes for one moment that excessive banking greed before tragic banking setback is an invention of just the past ten years is sadly mistaken.  There had been another such frenzy in the mid 1970s which practically brought down National Westminster Bank here in the UK, and certainly caused the demise of assorted secondary banks.

 

I'm rather inclined to the Tomassonian view in economics that there is very little which is truly new under the sun. Go digging hard enough and you can probably find layer upon layer of quasi-antecedents, with varying names, for just about anything.

 

Chris Meakin

London


#14405 From: Dirk Bezemer <d.j.bezemer@...>
Date: Wed Nov 11, 2009 11:15 am
Subject: Re: [RE: On the intellectual history of the quality theory of credit / the Quantity Theory of Disaggregated Credit]
p233369
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Ah Yes - I have been trying to locate that Frisch book ever since.

Dirk

Arno Mong Daastoel wrote:
> Dear gang8sters,
>
> I will not bother you with repetitions, so I will only suggest to
> include in the historic account the first "Nobel" Laureate in economics,
> Ragnar Frisch and his "Oslo Channel" model regarding credit dirigism. He
> is clear and outspoken.. For references see:
> http://finance.groups.yahoo.com/group/gang8/message/13467
> (Much of "his" most original ideas were nicked from Bertram Dybvad
> Brochman, a deeply religious agronomist and parliamentarian.- such as
> the ideas on "eco-circ", economic circulation.)
>
> Secondly, I would suggest looking at Alexander Hamilton, 1791, regarding
> establishing a national bank in order to finance "internal improvements"
> meaning in particular infrastructure (read large).
>
> The secret Friedrich List seminar in 1931 Germany also stands out in
> then regard, with speeches by several economists.
>
> As a more personal comment, this difference between un/productive uses
> of credit, appeared to me as sound when I read Roscher in 1994, and
> later I realised the implications for inflation/deflation when I made a
> more detailed argument for using (Norw.) oil revenue for infrastructure
> (1997, the national business daily, "Dagens Næringsliv").
>
> What happened later here, was that the Norw. "populist" party, the
> Progress Party (still second largest) ordered the National Statistical
> Bureau to make new calculations, resulting from a differentiation of
> public expenditures, as to whether they were consumption or investment.
> The results were very interesting and supported.both the Progress
> Party's arguments (and implicitly our's)
>
> Yours,
> Arno
>
>
>
>
>
>

#14404 From: Arno Mong Daastoel <arno@...>
Date: Tue Nov 10, 2009 9:47 pm
Subject: [RE: On the intellectual history of the quality theory of credit / the Quantity Theory of Disaggregated Credit]
arnomd
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Send Email Send Email
 
Dear gang8sters,

I will not bother you with repetitions, so I will only suggest to
include in the historic account the first "Nobel" Laureate in economics,
Ragnar Frisch and his "Oslo Channel" model regarding credit dirigism. He
is clear and outspoken.. For references see:
http://finance.groups.yahoo.com/group/gang8/message/13467
(Much of "his" most original ideas were nicked from Bertram Dybvad
Brochman, a deeply religious agronomist and parliamentarian.- such as
the ideas on "eco-circ", economic circulation.)

Secondly, I would suggest looking at Alexander Hamilton, 1791, regarding
establishing a national bank in order to finance "internal improvements"
meaning in particular infrastructure (read large).

The secret Friedrich List seminar in 1931 Germany also stands out in
then regard, with speeches by several economists.

As a more personal comment, this difference between un/productive uses
of credit, appeared to me as sound when I read Roscher in 1994, and
later I realised the implications for inflation/deflation when I made a
more detailed argument for using (Norw.) oil revenue for infrastructure
(1997, the national business daily, "Dagens Næringsliv").

What happened later here, was that the Norw. "populist" party, the
Progress Party (still second largest) ordered the National Statistical
Bureau to make new calculations, resulting from a differentiation of
public expenditures, as to whether they were consumption or investment.
The results were very interesting and supported.both the Progress
Party's arguments (and implicitly our's)

Yours,
Arno

#14403 From: "Kevin Donnelly" <kevin.donnelly87@...>
Date: Tue Nov 10, 2009 9:16 pm
Subject: Re: On the intellectual history of the quality theory of credit / the Quantity Theory of Disaggregated Credit
kevin.donnelly87@...
Send Email Send Email
 
In my advancing (declining?) years (I'm now 81) there are now very few
people with whom I can have face to face conversation on these issues. An
occasional phone chat with Ken Palmerton has been the only way to supplement
the valuable exchanges between Gang members, plus some excellent recent
books.
     Yet one "heresy" still comes to mind; that banks create money/credit out
of nothing.  There are refs to it in the Soddy archive @ wherever, and a
lingering recollection that in Mein Kampf Hitler referred to his "discovery"
of Gottfried Feder's work on the distinction between speculative and
productive capital.  These sources abound on the internet.  My searches ran
out around the names of  Oswald Mosley in his early days as an MP, Soddy of
course, Montagu Norman, Keynes, Schacht, and a curious interlude from the
"phony war" in early 1940, when questions were asked in the House of
Commons about the RAF leaflet raids over Germany, and why RAF bombers were
not attacking German aircraft and armament  factories.  The parliamentary
answer was that these facilities were private property not goverment
property, a distinction not shared by the Nazis in their destructive 500
bomber raid on Coventry in November 1940, the subject of a recent excellent
BBC radio documentary.  This is the same BBC that let A.R. Orage make a
broadcast on Poverty in Plenty on November 5th 1934, basically on Social
Credit, published in the Listener and still I think available on the web.
That Orage died in his sleep that night is merely another mystery.  I'll
follow the quality of credit discussion/mystery as long as I can.
             Kevin
----- Original Message -----
From: "Dirk Bezemer" <d.j.bezemer@...>
To: <gang8@yahoogroups.com>
Sent: Monday, November 09, 2009 10:37 AM
Subject: [gang8] On the intellectual history of the quality theory of credit
/ the Quantity Theory of Disaggregated Credit


> Hi All,
>
> Just to dig out another four of Chris' layers:
>
> In his Treatise on Money, Keynes had written on separate financial and
> industrial circulations of money. He dropped the notion, as most of his
> sound monetary ideas, in the General Theory, where they would have
> wrecked his attempts to attract orthodox economists to his effective
> demand theory.
>
> But Keynes probably fully understood the different effects of productive
> and financial credit (and would have understood consumer credit for what
> it is). In the 1920s he was in close contact with Reichsbank President
> Hjalmar Schacht who already in 1926 emphasized that credit was to go to
> productive ends, and fully implemented credit direction policies when he
> was again made Reichsbank Chairman in 1933.
>
> Where did Schacht pick up this idea? From his banker's experience, quite
> likely, but perhaps also from writings by Rudolf Hilferding who already
> in 1910 had written on the separate roles of speculation credit,
> circulation credit and production credit. Significantly, he argued that
> production ultimately supporting speculation, so that speculation
> without growth of productive power is doomed - as I argued in my
> Thursday's FT article.
>
> And Hilferding, in turn, learned much from Marx (Kapital, vol II, ch 17).
>
> And Marx certainly read Roscher (1854). Michael Hudson, in a 1995
> article, described how Roscher postulated an evolution of credit towards
> increasingly productive applications (and failed to anticipate the
> proliferation of war debt and other public debt, consumer debt,
> corporate takeover financing and other non-productive uses of credit).
>
> Neither was this original - Schumpeter (1954) considered Roscher as only
> a rehash of the ideas of others, such as Sismondi (1814/1824). Arno's
> bibliography notes that Roscher's Principles… book Sections CCXI and
> CCXII are devoted to the two types of consumption: productive and
> unproductive and that Roscher says that this classification originally
> is Plato's (in The Republic, VIII).
>
> So to my mind, separate analysis of credit for productive and
> unproductive purposes is age old and came into sharp focus (but in
> heterodox economics only) with Marx, Roscher, Hilferding, Schumpeter,
> Keynes. It lived on in heterodox writings but never entered the orthodox
> discourse. Richard's is the most explicit analysis of the issue I know of.
>
> Any additions?
>
> Dirk
>
>
> Ercouncil@... wrote:
>>
>> Richard Werner  writes:
>> "This sounds like my Quantity Theory of Disaggregated Credit. When  did
>> you
>> formulate yours? Have you taken a look at my formulations and empirical
>> support?"
>> Hi Richard:
>> I think it's safe to say it  the Quality Theory of Credit mentioned by me
>> yet  again in Friday's post was originally labelled as such many years
>> ago.
>> It has been explained numerous times here on Gang 8, more or less  since
>> the
>> Gang was originally founded in September  1998.
>>
>> Gunnar's very meticulous analysis of early  economic theory would I am
>> sure
>> trace the basic concept back much  earlier than that; what I call the
>> Quality Theory of Credit (QTC)  as a replacement for the standard
>> Quantity Theory
>> of Money (QTM) also goes  back much earlier than the founding of Gang 8
>> by
>> a number of years.  It almost certainly dates back originally, even if
>> not
>> yet labelled  QTC, to when I was working in banking, 1979 to 1986.
>>
>> And I'm sure the basic  concept goes back far earlier than that anyway.
>> As
>> I  did mention in the posting on  Friday, Geoffrey and I both reckon
>> there
>> are very clear hints of it in Keynes's  "Control of Borrowing Act" which
>> he
>> arranged to put through Parliament  way back in 1946. About ten years ago
>> I
>> went right through Keynes's private  papers at the Public Records Office
>> in
>> Kew here in London - or such of them  as have survived  - to try and find
>> any
>> further clues on his  formulation of the original parliamentary bill.
>>
>> Either Keynes's private papers  have been filleted or, as I suspect,
>> Keynes
>> was deliberately keeping quiet  about his true intent until the
>> legislation
>> was safely on the Statute Book.  Sadly he did not live to see that day.
>> Had
>> he done so I'm quite sure he would  have wanted to indicate to the banks,
>> and as much more recently I would  wish to indicate to the banks, that
>> the
>> aim of his crafty legislation was to  monitor how much of their credit
>> goes
>> into genuine expansion of the economy, how  much of it goes into consumer
>> spending, and how much of it goes into Asset Price  Inflation. The 1946
>> Control
>> of Borrowing Act makes very little sense  otherwise.
>>
>> Unlike the more dirigiste Keynes, my  preference would be to go down the
>> Accountancy Rules route, and simply require  banks to publish that vital
>> information as part of the public  reporting of their results. As head of
>> PR at
>> two major banks I've done enough of  the publishing of bank results
>> myself in
>> my time, before I spent the next five  years (1986-1990) as the group's
>> spokesman on all financial matters, inter  alia writing the results at
>> BAT
>> Industries - then Britain's third largest  industrial company. I always
>> did the
>> words while a young finance director,  Martin Broughton, did the numbers.
>> (Martin is nowadays Chairman of British  Airways.)  That five years of
>> quarterly reporting was a masterclass in the  byzantine financial and
>> corporate
>> politics which lie behind seemingly innocent  Quarterly Results.
>>
>> Thus I am convinced much could be deduced  from such declaration by the
>> banks.  In a very similar vein, Geoffrey  Gardiner would dearly like to
>> see
>> British banks publish retrospectively their  true results during the
>> critical
>> years between the wars, by revealing  all the internal transfers to and
>> from
>> inner reserves, which for many years  Britain permitted them to do to
>> mask
>> their true activities.
>>
>> When I arrived in Hong Kong  as (among other things)   HSBC's top
>> spokesman
>> in early 1984, I was intrigued to see just how much  its undeclared
>> transfers between undeclared gross profits and  undeclared internal
>> reserves, then
>> still permissible under Hong Kong banking law  if no longer under British
>> banking law, enabled the bank to build a worldwide  reputation of rock
>> solid
>> stability.
>>
>> The existence of such transfers, if not  their amount, was just quietly
>> mentioned in HSBC's published accounts. In  fact the bank was doing
>> pretty
>> well, not least because it had failed to  move quickly enough to join in
>> the
>> frenzy for "sovereign lending" pursued  among US money centre, and UK
>> high
>> street and commercial banks, a frenzy which  landed them in it up to
>> their necks
>> in the early-mid 1980s.
>>
>> Anyone who believes for one moment that  excessive banking greed before
>> tragic banking setback is an invention of just  the past ten years is
>> sadly
>> mistaken.  There had been another such  frenzy in the mid 1970s which
>> practically brought down National Westminster Bank  here in the UK, and
>> certainly
>> caused the demise of assorted secondary  banks.
>>
>> I'm rather inclined to the Tomassonian  view in economics that there is
>> very little which is truly new under the sun. Go  digging hard enough and
>> you
>> can probably find layer upon layer of  quasi-antecedents, with varying
>> names,
>> for just about anything.
>>
>> Chris Meakin
>> London
>>
>>
>>
>
>
>
> ------------------------------------
>
> The gang8 list is devoted to Creditary Economics.
> To unsubscribe, email: gang8-unsubscribe@yahoogroups.com
>
> Yahoo! Groups Links
>
>
>

#14402 From: Gunnar Tómasson <gunnar.tomasson@...>
Date: Tue Nov 10, 2009 5:30 pm
Subject: RE: So now we all know what"creditary economics" really means
gunnar.tomasson
Offline Offline
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Dear Chris.

 

Let me add a few words on the “common sense” aspect of “creditary economics”.

 

In my case, it goes back to my pre-university days at Verzlunarskóli Íslands (The Commercial College of Iceland) in Reykjavík where I was a student from 1954-1960.  From 1955 onwards economics and accounting were part of each year’s curriculum.  As it happens, I took to economics as fish takes to water and in one year´s final exam I became the first student in the school's history to receive the equivalent of 100% on my final economics exam.

 

Somewhere along the line, I and one of the school's all-time brightest students and my class-mate (Ragnheiður Briem, later a Ph. D. in linguistics from the University of Michigan as I recall it) had a chat about economics.  Its attraction to me, I said, was that it was rooted in common sense ("almenn skynsemi") and was concerned with its application in the cause of the welfare of society as a whole.   

 

As noted by John Stuart Mill in mid-19th century, the “most general principles” of all branches of theoretical science are the last to be arrived at.

 

In my own case, Mill's observation is reflected in the concepts of Final Demand Inflation – a short-hand expression for the source of profit/interest on production credit in entrepreneurial market economies and Common Sense Creditary Economics – the route whereby one arrives at a logically coherent overview of what, in his preface to the General Theory, Keynes termed the "technical monetary details" of what I have termed "the creditary approach to the monetary aspects of production in entrepreneurial market economies".

 

Gunnar   

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Ercouncil@...
Sent: 10. nóvember 2009 11:55
To: gang8@yahoogroups.com
Subject: [gang8] So now we all know what"creditary economics" really means

 

 

,

 

Dear Gang:

It's only fair to sit back and let Gunnar do the chapter and verse, because he's far better at it than anyone else. I have been delighted he has chosen to adopt the term "creditary economics" to label what, as he rightly says, is at one and the same time one of the earliest, yet one of the most ignored, notions in economics.

 

I'm delighted because 'creditary'  was a term coined by me in a long telephone conversation with Geoffrey Gardiner, he in Knutsford Cheshire, me in Dulwich London, in May 1994 - if anyone is interested in precedent. For a day or so Geoff after that didn't actually like the new term but he eventually came round. At least it said what we both wanted to say.

 

And for anyone who is keen on precedents, the first ever public outing of the word 'creditary' was in a letter published in the Financial Times, used both in its headline and in its text, on Monday 10 July 1995. That was over three years before the Gang8 even came into existence (September 1998); The writer of that letter in the Financial Times was the undersigned.

 

A lecture I gave at the British Museum on Mesopotamian Economics, in September 1996, was called "Creditary Economics" and introduced the term in its proper context. Geoffrey Gardiner was also present on that occasion and it was his excellent Internet summary of the Lecture which first brought our interest to the attention of someone called Michael Hudson in New York!  Much flowed from that connection, including Gang8 two years later. 

 

I mention this only because the alternative "definitions" of creditary down the years concocted by people who did not know what they were talking about have varied from fanciful to ludicrous. One need look no further than the early entries in Wikipedia and elsewhere.

 

The Oxford English Dictionary is in no doubt about the proper meaning, however.  My letter to its offices spelling all this out is dated 19 November 1998. Since the Science Editor of the OED happens to be a good friend of mine, he has since shown me the very file where my original letter sits in Oxford (among about three million others explaining words which have still to be accepted into the dictionary) until such time as the OED editors consider 'creditary' to have achieved sufficient currency for it to be included in their definitive explanation of the English language.  

 

Regards

Chris Meakin


#14401 From: Ercouncil@...
Date: Tue Nov 10, 2009 11:55 am
Subject: So now we all know what"creditary economics" really means
econrescouncil
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,
 
Dear Gang:
It's only fair to sit back and let Gunnar do the chapter and verse, because he's far better at it than anyone else. I have been delighted he has chosen to adopt the term "creditary economics" to label what, as he rightly says, is at one and the same time one of the earliest, yet one of the most ignored, notions in economics.
 
I'm delighted because 'creditary'  was a term coined by me in a long telephone conversation with Geoffrey Gardiner, he in Knutsford Cheshire, me in Dulwich London, in May 1994 - if anyone is interested in precedent. For a day or so Geoff after that didn't actually like the new term but he eventually came round. At least it said what we both wanted to say.
 
And for anyone who is keen on precedents, the first ever public outing of the word 'creditary' was in a letter published in the Financial Times, used both in its headline and in its text, on Monday 10 July 1995. That was over three years before the Gang8 even came into existence (September 1998); The writer of that letter in the Financial Times was the undersigned.
 
A lecture I gave at the British Museum on Mesopotamian Economics, in September 1996, was called "Creditary Economics" and introduced the term in its proper context. Geoffrey Gardiner was also present on that occasion and it was his excellent Internet summary of the Lecture which first brought our interest to the attention of someone called Michael Hudson in New York!  Much flowed from that connection, including Gang8 two years later. 
 
I mention this only because the alternative "definitions" of creditary down the years concocted by people who did not know what they were talking about have varied from fanciful to ludicrous. One need look no further than the early entries in Wikipedia and elsewhere.
 
The Oxford English Dictionary is in no doubt about the proper meaning, however.  My letter to its offices spelling all this out is dated 19 November 1998. Since the Science Editor of the OED happens to be a good friend of mine, he has since shown me the very file where my original letter sits in Oxford (among about three million others explaining words which have still to be accepted into the dictionary) until such time as the OED editors consider 'creditary' to have achieved sufficient currency for it to be included in their definitive explanation of the English language.  
 
Regards
Chris Meakin

#14400 From: Gunnar Tómasson <gunnar.tomasson@...>
Date: Tue Nov 10, 2009 2:47 am
Subject: RE: The ins and outs of Quantitative Easing
gunnar.tomasson
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Dear Richard.

 

As IMF staff member from 1966 to 1989, I was denied authorization to circulate my working papers within the Fund.

 

For, as my former Department Director A. Shakour Shaalan explained, “Mr. Tomasson thinks he is right and the world is wrong."

 

At present, Mr. Shaalan is the Dean of the IMF's Executive Board.

 

Mr. Shaalan's assessment of my ideas mirrors comments on a paper of mine of my former IMF colleague [now Sir] Andrew Crockett.

 

Later, Andrew – a Bank of England economist – served as Managing Director of the Bank of International Settlements.

 

Attached is the first section of a paper I wrote in 1988, entitled 'Monetary Theory Revisited'.

 

This section provides a bird’s-eye view of ideas which A.S.S./A.C judged to be off-the-wall.

 

In the second section, I sought to relate my theoretical conclusions to the IMF’s operational work.

 

I failed to elicit comments from the IMF’s Economic Councillor at the time on either section.

 

Gunnar

 

 

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Dr. Richard Werner
Sent: 9. nóvember 2009 20:22
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Dear Gunnar,

 

Many thanks.

 

What is the bibliographic reference for your working paper on Common Sense Creditary Economics back in the late 1970s/early 1980s?

Warm regards,

Richard


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Gunnar Tomasson
Sent: Tuesday, November 10, 2009 2:11 AM
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Dear Richard.

 

Briefly on the following:

As far as I could see in 1991 and 1992, when I first formulated this properly and was curious whether anyone had done so before me, I could not find anybody prior to me.

Comment.

This was also my experience in the 1970s.

It struck me as incredible that the straight-forward concepts which comprise Common Sense Creditary Economics had not occurred to any previous economist.

Therefore, I made a thorough search of the literature in the IMF's first-class library.

And working backward from the 1970s, I found nothing worthwhile until I came to Jeremy Bentham in the first decade of the 19th century, whose collected economic writings were published in 1951 (?) by the Royal Economic Society at the suggestion of Keynes as its President.

Gunnar

 

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Dr. Richard Werner
Sent: 9. nóvember 2009 19:38
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Dear Chris,  (Dear Gunnar,)

 

Thanks for coming back to me on this. So your statement goes back to around 1998? You may wish to take a look at my academic article on this published in 1997 in Kredit und Kapital (in English) (submitted 1995; circulated as discussion paper since 1992 and presented at the 1993 Royal Economic Society annual conference, and discussed prominently in the Economist, June 1993).(it has the pedigree of having been rejected by AER, JMCB and the other top US journals in the years 1991 to 1995; those referee comments look more foolish every day).

 

I’d be curious to see Gunnar’s publications on this in the 1986 to 1990 period that you mention. Gunnar? I would be keen to get the references and take a look at the publications. I will be sure to cite you all over if you came first in a publication or publicised discussion paper.

 

In general think we have to distinguish between the pedigree of the general intellectual concepts (which ultimately will be 5000 years old, as old as banking) and the actual, precise formulation of how different types of credit affect what.

 

As far as I could see in 1991 and 1992, when I first formulated this properly and was curious whether anyone had done so before me, I could not find anybody prior to me.

 

In my work, I give an overview of writers who have been in print with some sort of discussion about the idea of a qualitative distinction of the use of money. Keynes, for instance, suggested to divide ‘money’ - and he meant bank deposits - into an industrial and ‘speculative’ circulation. Thus he is not in print concerning the disaggregation of credit.

 

Some bits from my quantity equation of disaggregated credit:

 

From MV = PQ (the correct quantity equation); substitute the modern form of ‘money’, namely credit; then disaggregate credit as follows:

Real circulation: CrVr = PrQr

Financial circulation: CfVf = PfQf

 and for PrQr we can substitute the standard PY (nominal GDP).

 

Little r and little f are subscripts to denote these 2 types of circulation.

 

I define financial circulation credit as the credit extended for transactions that are not part of GDP – to my knowledge this means almost exclusively financial, speculative and certain types of real estate transactions.

I distinguish between productive and unproductive credit as follows:

1. Credit for financial circulation is always unproductive.

2. Credit for real circulation must be disaggregated further for this distinction, as it can be both productive and unproductive, depending on whether it is real circulation credit for consumption (C, or Gc) or real circulation credit for investment

 

I pose causation to run from credit, which is always supply-determined, to nominal GDP (real circulation) and asset markets (asset prices and transaction volumes, financial circulation).

 

In the same paper I discuss the formation of asset inflation/asset bubbles due to rising financial circulation, which always must result in banking crises, since, as I point out (and as Dirk recently has quoted me in the FT), financial circulation credit does not create goods and services and hence does not have sustainable income streams to service the loan let alone repay the principal – only asset price gains give the illusion that all is fine.

 

There is more; for instance the not small matter that I test the model comprehensively in the case of the world’s no. 2 economy, and competitively against the key mainstream approaches (in a general to specific downward reduction application of time series econometrics, excluding the possibility of spurious correlation and other statistical problems).

The framework is soundly supported empirically, while alternative theories are soundly rejected by the data. The direction of causation running from credit to the rest of the economy is also supported. It also solves many of the mainstream ‘anomalies’ such as the alleged ‘velocity decline’, the ineffectiveness of fiscal and interest rate policies, the formation of asset prices, banking crises etc.

 

Given that I produced and published this almost 20 years ago, perhaps high time to post it on gang8… It is of course restated and elaborated in other publications, such as the 2005 book called New Paradigm in Macroeconomics, which I had been told had been widely read and discussed by gang8 at the time…?

 

Regards,

Richard

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Ercouncil@aol.com
Sent: Monday, November 09, 2009 5:51 AM
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Richard Werner writes:
"This sounds like my Quantity Theory of Disaggregated Credit. When did you formulate yours? Have you taken a look at my formulations and empirical support?"

Hi Richard:
I think it's safe to say it the Quality Theory of Credit mentioned by me yet again in Friday's post was originally labelled as such many years ago. It has been explained numerous times here on Gang 8, more or less since the Gang was originally founded in September 1998. 

 

Gunnar's very meticulous analysis of early economic theory would I am sure trace the basic concept back much earlier than that; what I call the Quality Theory of Credit (QTC) as a replacement for the standard Quantity Theory of Money (QTM) also goes back much earlier than the founding of Gang 8 by a number of years. It almost certainly dates back originally, even if not yet labelled QTC, to when I was working in banking, 1979 to 1986.

 

And I'm sure the basic concept goes back far earlier than that anyway. As I did mention in the posting on Friday, Geoffrey and I both reckon there are very clear hints of it in Keynes's "Control of Borrowing Act" which he arranged to put through Parliament way back in 1946. About ten years ago I went right through Keynes's private papers at the Public Records Office in Kew here in London - or such of them as have survived  - to try and find any further clues on his formulation of the original parliamentary bill. 

 

Either Keynes's private papers have been filleted or, as I suspect, Keynes was deliberately keeping quiet about his true intent until the legislation was safely on the Statute Book. Sadly he did not live to see that day. Had he done so I'm quite sure he would have wanted to indicate to the banks, and as much more recently I would wish to indicate to the banks, that the aim of his crafty legislation was to monitor how much of their credit goes into genuine expansion of the economy, how much of it goes into consumer spending, and how much of it goes into Asset Price Inflation. The 1946 Control of Borrowing Act makes very little sense otherwise.

 

Unlike the more dirigiste Keynes, my preference would be to go down the Accountancy Rules route, and simply require banks to publish that vital information as part of the public reporting of their results. As head of PR at two major banks I've done enough of the publishing of bank results myself in my time, before I spent the next five years (1986-1990) as the group's spokesman on all financial matters, inter alia writing the results at BAT Industries - then Britain's third largest industrial company. I always did the words while a young finance director, Martin Broughton, did the numbers. (Martin is nowadays Chairman of British Airways.)  That five years of quarterly reporting was a masterclass in the byzantine financial and corporate politics which lie behind seemingly innocent Quarterly Results.

 

Thus I am convinced much could be deduced from such declaration by the banks.  In a very similar vein, Geoffrey Gardiner would dearly like to see British banks publish retrospectively their true results during the critical years between the wars, by revealing all the internal transfers to and from inner reserves, which for many years Britain permitted them to do to mask their true activities.

 

When I arrived in Hong Kong  as (among other things)  HSBC's top spokesman in early 1984, I was intrigued to see just how much its undeclared transfers between undeclared gross profits and undeclared internal reserves, then still permissible under Hong Kong banking law if no longer under British banking law, enabled the bank to build a worldwide reputation of rock solid stability.

 

The existence of such transfers, if not their amount, was just quietly mentioned in HSBC's published accounts. In fact the bank was doing pretty well, not least because it had failed to move quickly enough to join in the frenzy for "sovereign lending" pursued among US money centre, and UK high street and commercial banks, a frenzy which landed them in it up to their necks in the early-mid 1980s.

 

Anyone who believes for one moment that excessive banking greed before tragic banking setback is an invention of just the past ten years is sadly mistaken.  There had been another such frenzy in the mid 1970s which practically brought down National Westminster Bank here in the UK, and certainly caused the demise of assorted secondary banks.

 

I'm rather inclined to the Tomassonian view in economics that there is very little which is truly new under the sun. Go digging hard enough and you can probably find layer upon layer of quasi-antecedents, with varying names, for just about anything.

 

Chris Meakin

London


1 of 1 File(s)


#14399 From: "Dr. Richard Werner" <werner@...>
Date: Tue Nov 10, 2009 1:22 am
Subject: RE: The ins and outs of Quantitative Easing
rawjapan2005
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Send Email Send Email
 

Dear Gunnar,

 

Many thanks.

 

What is the bibliographic reference for your working paper on Common Sense Creditary Economics back in the late 1970s/early 1980s?

Warm regards,

Richard


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Gunnar Tomasson
Sent: Tuesday, November 10, 2009 2:11 AM
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Dear Richard.

 

Briefly on the following:

As far as I could see in 1991 and 1992, when I first formulated this properly and was curious whether anyone had done so before me, I could not find anybody prior to me.

Comment.

This was also my experience in the 1970s.

It struck me as incredible that the straight-forward concepts which comprise Common Sense Creditary Economics had not occurred to any previous economist.

Therefore, I made a thorough search of the literature in the IMF's first-class library.

And working backward from the 1970s, I found nothing worthwhile until I came to Jeremy Bentham in the first decade of the 19th century, whose collected economic writings were published in 1951 (?) by the Royal Economic Society at the suggestion of Keynes as its President.

Gunnar

 

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Dr. Richard Werner
Sent: 9. nóvember 2009 19:38
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Dear Chris,  (Dear Gunnar,)

 

Thanks for coming back to me on this. So your statement goes back to around 1998? You may wish to take a look at my academic article on this published in 1997 in Kredit und Kapital (in English) (submitted 1995; circulated as discussion paper since 1992 and presented at the 1993 Royal Economic Society annual conference, and discussed prominently in the Economist, June 1993).(it has the pedigree of having been rejected by AER, JMCB and the other top US journals in the years 1991 to 1995; those referee comments look more foolish every day).

 

I’d be curious to see Gunnar’s publications on this in the 1986 to 1990 period that you mention. Gunnar? I would be keen to get the references and take a look at the publications. I will be sure to cite you all over if you came first in a publication or publicised discussion paper.

 

In general think we have to distinguish between the pedigree of the general intellectual concepts (which ultimately will be 5000 years old, as old as banking) and the actual, precise formulation of how different types of credit affect what.

 

As far as I could see in 1991 and 1992, when I first formulated this properly and was curious whether anyone had done so before me, I could not find anybody prior to me.

 

In my work, I give an overview of writers who have been in print with some sort of discussion about the idea of a qualitative distinction of the use of money. Keynes, for instance, suggested to divide ‘money’ - and he meant bank deposits - into an industrial and ‘speculative’ circulation. Thus he is not in print concerning the disaggregation of credit.

 

Some bits from my quantity equation of disaggregated credit:

 

From MV = PQ (the correct quantity equation); substitute the modern form of ‘money’, namely credit; then disaggregate credit as follows:

Real circulation: CrVr = PrQr

Financial circulation: CfVf = PfQf

 and for PrQr we can substitute the standard PY (nominal GDP).

 

Little r and little f are subscripts to denote these 2 types of circulation.

 

I define financial circulation credit as the credit extended for transactions that are not part of GDP – to my knowledge this means almost exclusively financial, speculative and certain types of real estate transactions.

I distinguish between productive and unproductive credit as follows:

1. Credit for financial circulation is always unproductive.

2. Credit for real circulation must be disaggregated further for this distinction, as it can be both productive and unproductive, depending on whether it is real circulation credit for consumption (C, or Gc) or real circulation credit for investment

 

I pose causation to run from credit, which is always supply-determined, to nominal GDP (real circulation) and asset markets (asset prices and transaction volumes, financial circulation).

 

In the same paper I discuss the formation of asset inflation/asset bubbles due to rising financial circulation, which always must result in banking crises, since, as I point out (and as Dirk recently has quoted me in the FT), financial circulation credit does not create goods and services and hence does not have sustainable income streams to service the loan let alone repay the principal – only asset price gains give the illusion that all is fine.

 

There is more; for instance the not small matter that I test the model comprehensively in the case of the world’s no. 2 economy, and competitively against the key mainstream approaches (in a general to specific downward reduction application of time series econometrics, excluding the possibility of spurious correlation and other statistical problems).

The framework is soundly supported empirically, while alternative theories are soundly rejected by the data. The direction of causation running from credit to the rest of the economy is also supported. It also solves many of the mainstream ‘anomalies’ such as the alleged ‘velocity decline’, the ineffectiveness of fiscal and interest rate policies, the formation of asset prices, banking crises etc.

 

Given that I produced and published this almost 20 years ago, perhaps high time to post it on gang8… It is of course restated and elaborated in other publications, such as the 2005 book called New Paradigm in Macroeconomics, which I had been told had been widely read and discussed by gang8 at the time…?

 

Regards,

Richard

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Ercouncil@aol.com
Sent: Monday, November 09, 2009 5:51 AM
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Richard Werner writes:
"This sounds like my Quantity Theory of Disaggregated Credit. When did you formulate yours? Have you taken a look at my formulations and empirical support?"

Hi Richard:
I think it's safe to say it the Quality Theory of Credit mentioned by me yet again in Friday's post was originally labelled as such many years ago. It has been explained numerous times here on Gang 8, more or less since the Gang was originally founded in September 1998. 

 

Gunnar's very meticulous analysis of early economic theory would I am sure trace the basic concept back much earlier than that; what I call the Quality Theory of Credit (QTC) as a replacement for the standard Quantity Theory of Money (QTM) also goes back much earlier than the founding of Gang 8 by a number of years. It almost certainly dates back originally, even if not yet labelled QTC, to when I was working in banking, 1979 to 1986.

 

And I'm sure the basic concept goes back far earlier than that anyway. As I did mention in the posting on Friday, Geoffrey and I both reckon there are very clear hints of it in Keynes's "Control of Borrowing Act" which he arranged to put through Parliament way back in 1946. About ten years ago I went right through Keynes's private papers at the Public Records Office in Kew here in London - or such of them as have survived  - to try and find any further clues on his formulation of the original parliamentary bill. 

 

Either Keynes's private papers have been filleted or, as I suspect, Keynes was deliberately keeping quiet about his true intent until the legislation was safely on the Statute Book. Sadly he did not live to see that day. Had he done so I'm quite sure he would have wanted to indicate to the banks, and as much more recently I would wish to indicate to the banks, that the aim of his crafty legislation was to monitor how much of their credit goes into genuine expansion of the economy, how much of it goes into consumer spending, and how much of it goes into Asset Price Inflation. The 1946 Control of Borrowing Act makes very little sense otherwise.

 

Unlike the more dirigiste Keynes, my preference would be to go down the Accountancy Rules route, and simply require banks to publish that vital information as part of the public reporting of their results. As head of PR at two major banks I've done enough of the publishing of bank results myself in my time, before I spent the next five years (1986-1990) as the group's spokesman on all financial matters, inter alia writing the results at BAT Industries - then Britain's third largest industrial company. I always did the words while a young finance director, Martin Broughton, did the numbers. (Martin is nowadays Chairman of British Airways.)  That five years of quarterly reporting was a masterclass in the byzantine financial and corporate politics which lie behind seemingly innocent Quarterly Results.

 

Thus I am convinced much could be deduced from such declaration by the banks.  In a very similar vein, Geoffrey Gardiner would dearly like to see British banks publish retrospectively their true results during the critical years between the wars, by revealing all the internal transfers to and from inner reserves, which for many years Britain permitted them to do to mask their true activities.

 

When I arrived in Hong Kong  as (among other things)  HSBC's top spokesman in early 1984, I was intrigued to see just how much its undeclared transfers between undeclared gross profits and undeclared internal reserves, then still permissible under Hong Kong banking law if no longer under British banking law, enabled the bank to build a worldwide reputation of rock solid stability.

 

The existence of such transfers, if not their amount, was just quietly mentioned in HSBC's published accounts. In fact the bank was doing pretty well, not least because it had failed to move quickly enough to join in the frenzy for "sovereign lending" pursued among US money centre, and UK high street and commercial banks, a frenzy which landed them in it up to their necks in the early-mid 1980s.

 

Anyone who believes for one moment that excessive banking greed before tragic banking setback is an invention of just the past ten years is sadly mistaken.  There had been another such frenzy in the mid 1970s which practically brought down National Westminster Bank here in the UK, and certainly caused the demise of assorted secondary banks.

 

I'm rather inclined to the Tomassonian view in economics that there is very little which is truly new under the sun. Go digging hard enough and you can probably find layer upon layer of quasi-antecedents, with varying names, for just about anything.

 

Chris Meakin

London


#14398 From: Gunnar Tómasson <gunnar.tomasson@...>
Date: Tue Nov 10, 2009 1:10 am
Subject: RE: The ins and outs of Quantitative Easing
gunnar.tomasson
Offline Offline
Send Email Send Email
 

Dear Richard.

 

Briefly on the following:

As far as I could see in 1991 and 1992, when I first formulated this properly and was curious whether anyone had done so before me, I could not find anybody prior to me.

Comment.

This was also my experience in the 1970s.

It struck me as incredible that the straight-forward concepts which comprise Common Sense Creditary Economics had not occurred to any previous economist.

Therefore, I made a thorough search of the literature in the IMF's first-class library.

And working backward from the 1970s, I found nothing worthwhile until I came to Jeremy Bentham in the first decade of the 19th century, whose collected economic writings were published in 1951 (?) by the Royal Economic Society at the suggestion of Keynes as its President.

Gunnar

 

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Dr. Richard Werner
Sent: 9. nóvember 2009 19:38
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Dear Chris,  (Dear Gunnar,)

 

Thanks for coming back to me on this. So your statement goes back to around 1998? You may wish to take a look at my academic article on this published in 1997 in Kredit und Kapital (in English) (submitted 1995; circulated as discussion paper since 1992 and presented at the 1993 Royal Economic Society annual conference, and discussed prominently in the Economist, June 1993).(it has the pedigree of having been rejected by AER, JMCB and the other top US journals in the years 1991 to 1995; those referee comments look more foolish every day).

 

I’d be curious to see Gunnar’s publications on this in the 1986 to 1990 period that you mention. Gunnar? I would be keen to get the references and take a look at the publications. I will be sure to cite you all over if you came first in a publication or publicised discussion paper.

 

In general think we have to distinguish between the pedigree of the general intellectual concepts (which ultimately will be 5000 years old, as old as banking) and the actual, precise formulation of how different types of credit affect what.

 

As far as I could see in 1991 and 1992, when I first formulated this properly and was curious whether anyone had done so before me, I could not find anybody prior to me.

 

In my work, I give an overview of writers who have been in print with some sort of discussion about the idea of a qualitative distinction of the use of money. Keynes, for instance, suggested to divide ‘money’ - and he meant bank deposits - into an industrial and ‘speculative’ circulation. Thus he is not in print concerning the disaggregation of credit.

 

Some bits from my quantity equation of disaggregated credit:

 

From MV = PQ (the correct quantity equation); substitute the modern form of ‘money’, namely credit; then disaggregate credit as follows:

Real circulation: CrVr = PrQr

Financial circulation: CfVf = PfQf

 and for PrQr we can substitute the standard PY (nominal GDP).

 

Little r and little f are subscripts to denote these 2 types of circulation.

 

I define financial circulation credit as the credit extended for transactions that are not part of GDP – to my knowledge this means almost exclusively financial, speculative and certain types of real estate transactions.

I distinguish between productive and unproductive credit as follows:

1. Credit for financial circulation is always unproductive.

2. Credit for real circulation must be disaggregated further for this distinction, as it can be both productive and unproductive, depending on whether it is real circulation credit for consumption (C, or Gc) or real circulation credit for investment

 

I pose causation to run from credit, which is always supply-determined, to nominal GDP (real circulation) and asset markets (asset prices and transaction volumes, financial circulation).

 

In the same paper I discuss the formation of asset inflation/asset bubbles due to rising financial circulation, which always must result in banking crises, since, as I point out (and as Dirk recently has quoted me in the FT), financial circulation credit does not create goods and services and hence does not have sustainable income streams to service the loan let alone repay the principal – only asset price gains give the illusion that all is fine.

 

There is more; for instance the not small matter that I test the model comprehensively in the case of the world’s no. 2 economy, and competitively against the key mainstream approaches (in a general to specific downward reduction application of time series econometrics, excluding the possibility of spurious correlation and other statistical problems).

The framework is soundly supported empirically, while alternative theories are soundly rejected by the data. The direction of causation running from credit to the rest of the economy is also supported. It also solves many of the mainstream ‘anomalies’ such as the alleged ‘velocity decline’, the ineffectiveness of fiscal and interest rate policies, the formation of asset prices, banking crises etc.

 

Given that I produced and published this almost 20 years ago, perhaps high time to post it on gang8… It is of course restated and elaborated in other publications, such as the 2005 book called New Paradigm in Macroeconomics, which I had been told had been widely read and discussed by gang8 at the time…?

 

Regards,

Richard

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Ercouncil@aol.com
Sent: Monday, November 09, 2009 5:51 AM
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Richard Werner writes:
"This sounds like my Quantity Theory of Disaggregated Credit. When did you formulate yours? Have you taken a look at my formulations and empirical support?"

Hi Richard:
I think it's safe to say it the Quality Theory of Credit mentioned by me yet again in Friday's post was originally labelled as such many years ago. It has been explained numerous times here on Gang 8, more or less since the Gang was originally founded in September 1998. 

 

Gunnar's very meticulous analysis of early economic theory would I am sure trace the basic concept back much earlier than that; what I call the Quality Theory of Credit (QTC) as a replacement for the standard Quantity Theory of Money (QTM) also goes back much earlier than the founding of Gang 8 by a number of years. It almost certainly dates back originally, even if not yet labelled QTC, to when I was working in banking, 1979 to 1986.

 

And I'm sure the basic concept goes back far earlier than that anyway. As I did mention in the posting on Friday, Geoffrey and I both reckon there are very clear hints of it in Keynes's "Control of Borrowing Act" which he arranged to put through Parliament way back in 1946. About ten years ago I went right through Keynes's private papers at the Public Records Office in Kew here in London - or such of them as have survived  - to try and find any further clues on his formulation of the original parliamentary bill. 

 

Either Keynes's private papers have been filleted or, as I suspect, Keynes was deliberately keeping quiet about his true intent until the legislation was safely on the Statute Book. Sadly he did not live to see that day. Had he done so I'm quite sure he would have wanted to indicate to the banks, and as much more recently I would wish to indicate to the banks, that the aim of his crafty legislation was to monitor how much of their credit goes into genuine expansion of the economy, how much of it goes into consumer spending, and how much of it goes into Asset Price Inflation. The 1946 Control of Borrowing Act makes very little sense otherwise.

 

Unlike the more dirigiste Keynes, my preference would be to go down the Accountancy Rules route, and simply require banks to publish that vital information as part of the public reporting of their results. As head of PR at two major banks I've done enough of the publishing of bank results myself in my time, before I spent the next five years (1986-1990) as the group's spokesman on all financial matters, inter alia writing the results at BAT Industries - then Britain's third largest industrial company. I always did the words while a young finance director, Martin Broughton, did the numbers. (Martin is nowadays Chairman of British Airways.)  That five years of quarterly reporting was a masterclass in the byzantine financial and corporate politics which lie behind seemingly innocent Quarterly Results.

 

Thus I am convinced much could be deduced from such declaration by the banks.  In a very similar vein, Geoffrey Gardiner would dearly like to see British banks publish retrospectively their true results during the critical years between the wars, by revealing all the internal transfers to and from inner reserves, which for many years Britain permitted them to do to mask their true activities.

 

When I arrived in Hong Kong  as (among other things)  HSBC's top spokesman in early 1984, I was intrigued to see just how much its undeclared transfers between undeclared gross profits and undeclared internal reserves, then still permissible under Hong Kong banking law if no longer under British banking law, enabled the bank to build a worldwide reputation of rock solid stability.

 

The existence of such transfers, if not their amount, was just quietly mentioned in HSBC's published accounts. In fact the bank was doing pretty well, not least because it had failed to move quickly enough to join in the frenzy for "sovereign lending" pursued among US money centre, and UK high street and commercial banks, a frenzy which landed them in it up to their necks in the early-mid 1980s.

 

Anyone who believes for one moment that excessive banking greed before tragic banking setback is an invention of just the past ten years is sadly mistaken.  There had been another such frenzy in the mid 1970s which practically brought down National Westminster Bank here in the UK, and certainly caused the demise of assorted secondary banks.

 

I'm rather inclined to the Tomassonian view in economics that there is very little which is truly new under the sun. Go digging hard enough and you can probably find layer upon layer of quasi-antecedents, with varying names, for just about anything.

 

Chris Meakin

London


#14397 From: "Dr. Richard Werner" <werner@...>
Date: Tue Nov 10, 2009 12:38 am
Subject: RE: The ins and outs of Quantitative Easing
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Dear Chris,  (Dear Gunnar,)

 

Thanks for coming back to me on this. So your statement goes back to around 1998? You may wish to take a look at my academic article on this published in 1997 in Kredit und Kapital (in English) (submitted 1995; circulated as discussion paper since 1992 and presented at the 1993 Royal Economic Society annual conference, and discussed prominently in the Economist, June 1993).(it has the pedigree of having been rejected by AER, JMCB and the other top US journals in the years 1991 to 1995; those referee comments look more foolish every day).

 

I’d be curious to see Gunnar’s publications on this in the 1986 to 1990 period that you mention. Gunnar? I would be keen to get the references and take a look at the publications. I will be sure to cite you all over if you came first in a publication or publicised discussion paper.

 

In general think we have to distinguish between the pedigree of the general intellectual concepts (which ultimately will be 5000 years old, as old as banking) and the actual, precise formulation of how different types of credit affect what.

 

As far as I could see in 1991 and 1992, when I first formulated this properly and was curious whether anyone had done so before me, I could not find anybody prior to me.

 

In my work, I give an overview of writers who have been in print with some sort of discussion about the idea of a qualitative distinction of the use of money. Keynes, for instance, suggested to divide ‘money’ - and he meant bank deposits - into an industrial and ‘speculative’ circulation. Thus he is not in print concerning the disaggregation of credit.

 

Some bits from my quantity equation of disaggregated credit:

 

From MV = PQ (the correct quantity equation); substitute the modern form of ‘money’, namely credit; then disaggregate credit as follows:

Real circulation: CrVr = PrQr

Financial circulation: CfVf = PfQf

 and for PrQr we can substitute the standard PY (nominal GDP).

 

Little r and little f are subscripts to denote these 2 types of circulation.

 

I define financial circulation credit as the credit extended for transactions that are not part of GDP – to my knowledge this means almost exclusively financial, speculative and certain types of real estate transactions.

I distinguish between productive and unproductive credit as follows:

1. Credit for financial circulation is always unproductive.

2. Credit for real circulation must be disaggregated further for this distinction, as it can be both productive and unproductive, depending on whether it is real circulation credit for consumption (C, or Gc) or real circulation credit for investment

 

I pose causation to run from credit, which is always supply-determined, to nominal GDP (real circulation) and asset markets (asset prices and transaction volumes, financial circulation).

 

In the same paper I discuss the formation of asset inflation/asset bubbles due to rising financial circulation, which always must result in banking crises, since, as I point out (and as Dirk recently has quoted me in the FT), financial circulation credit does not create goods and services and hence does not have sustainable income streams to service the loan let alone repay the principal – only asset price gains give the illusion that all is fine.

 

There is more; for instance the not small matter that I test the model comprehensively in the case of the world’s no. 2 economy, and competitively against the key mainstream approaches (in a general to specific downward reduction application of time series econometrics, excluding the possibility of spurious correlation and other statistical problems).

The framework is soundly supported empirically, while alternative theories are soundly rejected by the data. The direction of causation running from credit to the rest of the economy is also supported. It also solves many of the mainstream ‘anomalies’ such as the alleged ‘velocity decline’, the ineffectiveness of fiscal and interest rate policies, the formation of asset prices, banking crises etc.

 

Given that I produced and published this almost 20 years ago, perhaps high time to post it on gang8… It is of course restated and elaborated in other publications, such as the 2005 book called New Paradigm in Macroeconomics, which I had been told had been widely read and discussed by gang8 at the time…?

 

Regards,

Richard

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Ercouncil@...
Sent: Monday, November 09, 2009 5:51 AM
To: gang8@yahoogroups.com
Subject: RE: [gang8] The ins and outs of Quantitative Easing

 

 

Richard Werner writes:
"This sounds like my Quantity Theory of Disaggregated Credit. When did you formulate yours? Have you taken a look at my formulations and empirical support?"

Hi Richard:
I think it's safe to say it the Quality Theory of Credit mentioned by me yet again in Friday's post was originally labelled as such many years ago. It has been explained numerous times here on Gang 8, more or less since the Gang was originally founded in September 1998. 

 

Gunnar's very meticulous analysis of early economic theory would I am sure trace the basic concept back much earlier than that; what I call the Quality Theory of Credit (QTC) as a replacement for the standard Quantity Theory of Money (QTM) also goes back much earlier than the founding of Gang 8 by a number of years. It almost certainly dates back originally, even if not yet labelled QTC, to when I was working in banking, 1979 to 1986.

 

And I'm sure the basic concept goes back far earlier than that anyway. As I did mention in the posting on Friday, Geoffrey and I both reckon there are very clear hints of it in Keynes's "Control of Borrowing Act" which he arranged to put through Parliament way back in 1946. About ten years ago I went right through Keynes's private papers at the Public Records Office in Kew here in London - or such of them as have survived  - to try and find any further clues on his formulation of the original parliamentary bill. 

 

Either Keynes's private papers have been filleted or, as I suspect, Keynes was deliberately keeping quiet about his true intent until the legislation was safely on the Statute Book. Sadly he did not live to see that day. Had he done so I'm quite sure he would have wanted to indicate to the banks, and as much more recently I would wish to indicate to the banks, that the aim of his crafty legislation was to monitor how much of their credit goes into genuine expansion of the economy, how much of it goes into consumer spending, and how much of it goes into Asset Price Inflation. The 1946 Control of Borrowing Act makes very little sense otherwise.

 

Unlike the more dirigiste Keynes, my preference would be to go down the Accountancy Rules route, and simply require banks to publish that vital information as part of the public reporting of their results. As head of PR at two major banks I've done enough of the publishing of bank results myself in my time, before I spent the next five years (1986-1990) as the group's spokesman on all financial matters, inter alia writing the results at BAT Industries - then Britain's third largest industrial company. I always did the words while a young finance director, Martin Broughton, did the numbers. (Martin is nowadays Chairman of British Airways.)  That five years of quarterly reporting was a masterclass in the byzantine financial and corporate politics which lie behind seemingly innocent Quarterly Results.

 

Thus I am convinced much could be deduced from such declaration by the banks.  In a very similar vein, Geoffrey Gardiner would dearly like to see British banks publish retrospectively their true results during the critical years between the wars, by revealing all the internal transfers to and from inner reserves, which for many years Britain permitted them to do to mask their true activities.

 

When I arrived in Hong Kong  as (among other things)  HSBC's top spokesman in early 1984, I was intrigued to see just how much its undeclared transfers between undeclared gross profits and undeclared internal reserves, then still permissible under Hong Kong banking law if no longer under British banking law, enabled the bank to build a worldwide reputation of rock solid stability.

 

The existence of such transfers, if not their amount, was just quietly mentioned in HSBC's published accounts. In fact the bank was doing pretty well, not least because it had failed to move quickly enough to join in the frenzy for "sovereign lending" pursued among US money centre, and UK high street and commercial banks, a frenzy which landed them in it up to their necks in the early-mid 1980s.

 

Anyone who believes for one moment that excessive banking greed before tragic banking setback is an invention of just the past ten years is sadly mistaken.  There had been another such frenzy in the mid 1970s which practically brought down National Westminster Bank here in the UK, and certainly caused the demise of assorted secondary banks.

 

I'm rather inclined to the Tomassonian view in economics that there is very little which is truly new under the sun. Go digging hard enough and you can probably find layer upon layer of quasi-antecedents, with varying names, for just about anything.

 

Chris Meakin

London


#14396 From: Gunnar Tómasson <gunnar.tomasson@...>
Date: Mon Nov 9, 2009 10:41 pm
Subject: Common Sense Creditary Economics
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Dear Gang.

 

Chris wrote:

 

Gunnar's very meticulous analysis of early economic theory would I am sure trace the basic concept back much earlier than that; what I call the Quality Theory of Credit (QTC) as a replacement for the standard Quantity Theory of Money (QTM) also goes back much earlier than the founding of Gang 8 by a number of years. It almost certainly dates back originally, even if not yet labelled QTC, to when I was working in banking, 1979 to 1986.

 

And I'm sure the basic concept goes back far earlier than that anyway.

 

And was right on the money!

 

The Quality Theory of Credit - a.k.a. Common Sense Creditary Economics - was first formulated by Jeremy Bentham.

 

I noted the point in a working paper on Common Sense Creditary Economics back in the late 1970s/early 1980s.

 

See paragraph III below. 

 

In "The Institute of Political Economy," Bentham also outlined in summary form the essence of the ideas on the analytical links between "fresh" money, employment, output, and prices, whose "propriety" James Mill had questioned:

 

I.                 "If the fresh money, on the occasion of the first employment or expenditure made of it, is employed in purchases, the immediate effect of which is to make an immediate addition to the mass of really productive capital, it then makes by the amount of such purchase a clear addition to the growing mass of real wealth, beyond what would have existed otherwise." [71]        

II.               "If the fresh money, on the occasion of the first employment or expenditure made of it, is employed in purchases, the immediate effect of which is not to make any immediate addition to the mass of really productive capital, it then makes no addition to the growing mass of real wealth." [72]


III.             "No sooner, however, does it ["fresh money"] pass on from this its primary destination (that of adding to real capital) to the other, viz. that of adding to unproductive consumption, than its power of producing an addition to the mass of the matter of real wealth is at an end: thenceforward and for ever it keeps on contributing by its whole amount to the encrease of prices, in the same manner as if from the mines it had come in the first instance into an unproductive hand without passing through any productive one." [73]

 

As noted in several earlier postings, Bentham’s ideas were effectively censored by James Mill and remained unknown until the publication in the early 1950s of his manuscripts on economics. 

 

I touched on this in my working paper as follows:

 

The circumstances of the times, and Keynes' ability to give common sense ideas the form of analytical economics, made the General Theory an effective vehicle for bringing economic theory, for a moment, out of its ivory tower into contact with the real world.

 

"We have to remember," Hicks concluded, "that the Keynesian Revolution was not just a revolution in economic theory.  Keynes was a prophet, or propagandist; there were many audiences to which he was addressing himself.  He was selling his policy to politicians and public, by Essays in Persuasion and by newspaper articles galore.  The General Theory was his way of selling his policy to professional economists.  It is tailored, most skilfully tailored, to their habit of mind…The General Theory is a brilliant squeezing of dynamic economics into static habits of thought." [57]

 

            Another such "prophet" had preceded Keynes, presenting the "simple fundamental ideas" of the General Theory to the same audience some 130-140 years earlier.

 

            Lacking Keynes' skills at "tailoring" the message to "static habits of thought," however, this author's impact on professional economists has remained minimal.

 

            A few years after Keynes' death, and at his personal urging, this "prophet's" manuscripts on economic issues were published by the Royal Economic Society. [58]

 

            "A very superior man," was Adam Smith's reported view of this classical "Keynes," [59] and David Ricardo thought very highly of his ideas.  However, James Mill, father of John Stuart Mill and Ricardo's mentor, exercised his "authority" to suppress his writings.

 

            The story involves a manuscript, written around 1800, translated into French with a view to its publication on the continent.  In 1810, the translator approached James Mill for an "authoritative" view on the work's merits before deciding on its publication.

 

            Mill was not much impressed.  Writing to Ricardo, he held the work to be "in some respects…too elementary - in others too abstruse - the premises and conclusions are not placed in the most lucid order, and the views are not always correct." [50]

 

"I do not think it will do for publication," he concluded gravely, adding: "I shall thank you to jot down your remarks [on the work] - and to make them pretty minute.  Because as my opinion will be followed…in regard to the propriety of publishing, I shall be glad to have my opinion fortified by yours." [61]

 

            In his reply letter, Ricardo showed his mind to be much more flexible on issues of economic scholarship than might appear from the account that Keynes would later give of his intellectual exchanges with Malthus. [62]

 

"I have read," Ricardo wrote, "more than half of the MS which you sent to me with which I have been very much pleased.  As far as I am able to judge it contains some very able and just views of the subject on which it treats, which I should be sorry should be wholly lost to the public; but at the same time I am of opinion that it contains some radical defects which will prevent it, as a whole, from effecting much good without considerable alterations." [63]

           

            Ricardo then listed some of these "radical defects," but concluded his letter to James Mill as follows:

 

"These are a few of the principles which have struck me as radically wrong in the work which I have perused.  It contains however much that is excellent and I should be sorry if we should lose what is good because some error may be mixed with it." [64]

 

            Mill's advice with respect to the "propriety" of the work's publication was heeded.  It would remain "wholly lost to the public" for another 142 years.

 

The author, "a very superior man," was Jeremy Bentham.

 

***

 

In 1982, as also noted on earlier occasions, I presented Common Sense Creditary Economics in a lecture in Iceland at the invitation of the Icelandic Chamber of Commerce, whose Chairman – engineer Ragnar Halldórsson – understood the concept immediately after I had been asked to present some of my monetary ideas to a Board meeting of the Chamber of Commerce a few weeks earlier.

 

At the Board meeting, Ragnar commented that Common Sense Creditary Economics represented a sea-change in monetary economics which was no less radical than the Einsteinian revolution in theoretical physics.

 

The best and brightest of Iceland's monetary economists and the country’s premier commercial banker presented a critique of my ideas at the lecture.

 

The other day, I came across his letter of November 5, 1982 which he wrote to me after my return from Iceland to Washington.

 

It is a brief letter and reads as follows (my translation):

 

Dear Gunnar,

 

Herewith I send you the comments I made in connection with your lecture to the Chamber of Commerce the other day.  I am sorry to have overlooked letting you see these comments before they were presented, but they had not been fully prepared until the day before.

 

It is no secret that we, your colleagues here in Iceland, reacted with some concern to your lecture.  The members of the Chamber of Commerce and politicians will draw no other conclusions from what you say but that capital for industry need not cost anything and its supply need not be subject to any constraint.  I hope that you understand that I had no other choice but to remove all doubts on this matter, but of course I tried to do it objectively.

 

With best regards,

 

Yours sincerely etc.

 

***

 

Gunnar


#14395 From: Dirk Bezemer <d.j.bezemer@...>
Date: Mon Nov 9, 2009 12:16 pm
Subject: Re: On the intellectual history of the quality theory of credit / the Quantity Theory of Disaggregated Credit
p233369
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Thanks, Arthur. Yes of course, the Real Bills Doctrine is perhaps the
most widely known nomer for this view. Of course, since 1945, it has
been regarded as "thoroughly discredited" (Mishkin, 2000) among
mainstream economists! (as wikipedia told me).


Dirk

  Edwards wrote:
> In my research thesis I looked at this issue with reference to the
> idea of 'Due' and 'Undue' credit. I brought in Meakin's idea of a
> Quality Theory of Credit and also reviewed some of the discussion
> about Real Bills Doctine and Productive Credit Doctrine in the context
> of the distinction between the the notion of counterpart and
> counterparty. The main reference for my research is Rudolf Steiner's
> 1922 Economics Lectures that differentiate between Real and Personal
> Credit (summarised in the attached) - he also makes reference to
> Roscher and Hilferding. Earlier this year we published a piece by Arno
> Daastol on the subject entitled 'Nothing New Under the Sun?'
>
> Given the pedigree of the subject and its obviously crucial
> significance it remains something of a mystery why it gets very little
> air time. I would be interested to see the results of your
> 'intellectual history if you decide to compile additions.
> best,
> Arthur Edwards
>
>
> On 9 Nov 2009, at 10:37, Dirk Bezemer wrote:
>
>> Hi All,
>>
>> Just to dig out another four of Chris' layers:
>>
>> In his Treatise on Money, Keynes had written on separate financial and
>> industrial circulations of money. He dropped the notion, as most of his
>> sound monetary ideas, in the General Theory, where they would have
>> wrecked his attempts to attract orthodox economists to his effective
>> demand theory.
>>
>> But Keynes probably fully understood the different effects of productive
>> and financial credit (and would have understood consumer credit for what
>> it is). In the 1920s he was in close contact with Reichsbank President
>> Hjalmar Schacht who already in 1926 emphasized that credit was to go to
>> productive ends, and fully implemented credit direction policies when he
>> was again made Reichsbank Chairman in 1933.
>>
>> Where did Schacht pick up this idea? From his banker's experience, quite
>> likely, but perhaps also from writings by Rudolf Hilferding who already
>> in 1910 had written on the separate roles of speculation credit,
>> circulation credit and production credit. Significantly, he argued that
>> production ultimately supporting speculation, so that speculation
>> without growth of productive power is doomed - as I argued in my
>> Thursday's FT article.
>>
>> And Hilferding, in turn, learned much from Marx (Kapital, vol II, ch
>> 17).
>>
>> And Marx certainly read Roscher (1854). Michael Hudson, in a 1995
>> article, described how Roscher postulated an evolution of credit towards
>> increasingly productive applications (and failed to anticipate the
>> proliferation of war debt and other public debt, consumer debt,
>> corporate takeover financing and other non-productive uses of credit).
>>
>> Neither was this original - Schumpeter (1954) considered Roscher as only
>> a rehash of the ideas of others, such as Sismondi (1814/1824). Arno's
>> bibliography notes that Roscher's Principles… book Sections CCXI and
>> CCXII are devoted to the two types of consumption: productive and
>> unproductive and that Roscher says that this classification originally
>> is Plato's (in The Republic, VIII).
>>
>> So to my mind, separate analysis of credit for productive and
>> unproductive purposes is age old and came into sharp focus (but in
>> heterodox economics only) with Marx, Roscher, Hilferding, Schumpeter,
>> Keynes. It lived on in heterodox writings but never entered the orthodox
>> discourse. Richard's is the most explicit analysis of the issue I
>> know of.
>>
>> Any additions?
>>
>> Dirk
>>
>>
>> Ercouncil@... wrote:
>>>
>>> Richard Werner  writes:
>>> "This sounds like my Quantity Theory of Disaggregated Credit. When
>>> did you
>>> formulate yours? Have you taken a look at my formulations and empirical
>>> support?"
>>> Hi Richard:
>>> I think it's safe to say it  the Quality Theory of Credit mentioned
>>> by me
>>> yet  again in Friday's post was originally labelled as such many
>>> years ago.
>>> It has been explained numerous times here on Gang 8, more or less
>>> since the
>>> Gang was originally founded in September  1998.
>>>
>>> Gunnar's very meticulous analysis of early  economic theory would I
>>> am sure
>>> trace the basic concept back much  earlier than that; what I call the
>>> Quality Theory of Credit (QTC)  as a replacement for the standard
>>> Quantity Theory
>>> of Money (QTM) also goes  back much earlier than the founding of
>>> Gang 8 by
>>> a number of years.  It almost certainly dates back originally, even
>>> if not
>>> yet labelled  QTC, to when I was working in banking, 1979 to 1986.
>>>
>>> And I'm sure the basic  concept goes back far earlier than that
>>> anyway. As
>>> I  did mention in the posting on  Friday, Geoffrey and I both reckon
>>> there
>>> are very clear hints of it in Keynes's  "Control of Borrowing Act"
>>> which he
>>> arranged to put through Parliament  way back in 1946. About ten
>>> years ago I
>>> went right through Keynes's private  papers at the Public Records
>>> Office in
>>> Kew here in London - or such of them  as have survived  - to try and
>>> find any
>>> further clues on his  formulation of the original parliamentary bill.
>>>
>>> Either Keynes's private papers  have been filleted or, as I suspect,
>>> Keynes
>>> was deliberately keeping quiet  about his true intent until the
>>> legislation
>>> was safely on the Statute Book.  Sadly he did not live to see that
>>> day. Had
>>> he done so I'm quite sure he would  have wanted to indicate to the
>>> banks,
>>> and as much more recently I would  wish to indicate to the banks,
>>> that the
>>> aim of his crafty legislation was to  monitor how much of their
>>> credit goes
>>> into genuine expansion of the economy, how  much of it goes into
>>> consumer
>>> spending, and how much of it goes into Asset Price  Inflation. The
>>> 1946 Control
>>> of Borrowing Act makes very little sense  otherwise.
>>>
>>> Unlike the more dirigiste Keynes, my  preference would be to go down
>>> the
>>> Accountancy Rules route, and simply require  banks to publish that
>>> vital
>>> information as part of the public  reporting of their results. As
>>> head of PR at
>>> two major banks I've done enough of  the publishing of bank results
>>> myself in
>>> my time, before I spent the next five  years (1986-1990) as the group's
>>> spokesman on all financial matters, inter  alia writing the results
>>> at BAT
>>> Industries - then Britain's third largest  industrial company. I
>>> always did the
>>> words while a young finance director,  Martin Broughton, did the
>>> numbers.
>>> (Martin is nowadays Chairman of British  Airways.)  That five years of
>>> quarterly reporting was a masterclass in the  byzantine financial
>>> and corporate
>>> politics which lie behind seemingly innocent  Quarterly Results.
>>>
>>> Thus I am convinced much could be deduced  from such declaration by the
>>> banks.  In a very similar vein, Geoffrey  Gardiner would dearly like
>>> to see
>>> British banks publish retrospectively their  true results during the
>>> critical
>>> years between the wars, by revealing  all the internal transfers to
>>> and from
>>> inner reserves, which for many years  Britain permitted them to do
>>> to mask
>>> their true activities.
>>>
>>> When I arrived in Hong Kong  as (among other things)   HSBC's top
>>> spokesman
>>> in early 1984, I was intrigued to see just how much  its undeclared
>>> transfers between undeclared gross profits and  undeclared internal
>>> reserves, then
>>> still permissible under Hong Kong banking law  if no longer under
>>> British
>>> banking law, enabled the bank to build a worldwide  reputation of
>>> rock solid
>>> stability.
>>>
>>> The existence of such transfers, if not  their amount, was just quietly
>>> mentioned in HSBC's published accounts. In  fact the bank was doing
>>> pretty
>>> well, not least because it had failed to  move quickly enough to
>>> join in the
>>> frenzy for "sovereign lending" pursued  among US money centre, and
>>> UK high
>>> street and commercial banks, a frenzy which  landed them in it up to
>>> their necks
>>> in the early-mid 1980s.
>>>
>>> Anyone who believes for one moment that  excessive banking greed before
>>> tragic banking setback is an invention of just  the past ten years
>>> is sadly
>>> mistaken.  There had been another such  frenzy in the mid 1970s which
>>> practically brought down National Westminster Bank  here in the UK,
>>> and certainly
>>> caused the demise of assorted secondary  banks.
>>>
>>> I'm rather inclined to the Tomassonian  view in economics that there is
>>> very little which is truly new under the sun. Go  digging hard
>>> enough and you
>>> can probably find layer upon layer of  quasi-antecedents, with
>>> varying names,
>>> for just about anything.
>>>
>>> Chris Meakin
>>> London
>>>
>>>
>>>
>>
>>
>>
>> ------------------------------------
>>
>> The gang8 list is devoted to Creditary Economics.
>> To unsubscribe, email: gang8-unsubscribe@yahoogroups.com
>>
>> Yahoo! Groups Links
>>
>>
>>
>
>
> The Friends of Associative Economics Bulletin:
> http://www.cfae.biz/ae_bulletin/
>
>
>
>
>
>
>
>

#14394 From: Dirk Bezemer <d.j.bezemer@...>
Date: Mon Nov 9, 2009 10:56 am
Subject: Interactions between Monetary and Fiscal Policies
p233369
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hi All,

They are asking for full papers by nov 15.

Richard, would your monetisation paper fit in?

best,

Dirk


Interactions between Monetary and Fiscal Policies
Madrid, Spain
from February 26, 2010 to February 27, 2010
Deadline for paper submissions: November 15, 2009
JEL classification(s): E, F, H
Further information at: http://www.bde.es/doctrab/confere/confee_31.htm

#14393 From: Dirk Bezemer <d.j.bezemer@...>
Date: Mon Nov 9, 2009 10:37 am
Subject: On the intellectual history of the quality theory of credit / the Quantity Theory of Disaggregated Credit
p233369
Offline Offline
Send Email Send Email
 
Hi All,

Just to dig out another four of Chris' layers:

In his Treatise on Money, Keynes had written on separate financial and
industrial circulations of money. He dropped the notion, as most of his
sound monetary ideas, in the General Theory, where they would have
wrecked his attempts to attract orthodox economists to his effective
demand theory.

But Keynes probably fully understood the different effects of productive
and financial credit (and would have understood consumer credit for what
it is). In the 1920s he was in close contact with Reichsbank President
Hjalmar Schacht who already in 1926 emphasized that credit was to go to
productive ends, and fully implemented credit direction policies when he
was again made Reichsbank Chairman in 1933.

Where did Schacht pick up this idea? From his banker's experience, quite
likely, but perhaps also from writings by Rudolf Hilferding who already
in 1910 had written on the separate roles of speculation credit,
circulation credit and production credit. Significantly, he argued that
production ultimately supporting speculation, so that speculation
without growth of productive power is doomed - as I argued in my
Thursday's FT article.

And Hilferding, in turn, learned much from Marx (Kapital, vol II, ch 17).

And Marx certainly read Roscher (1854). Michael Hudson, in a 1995
article, described how Roscher postulated an evolution of credit towards
increasingly productive applications (and failed to anticipate the
proliferation of war debt and other public debt, consumer debt,
corporate takeover financing and other non-productive uses of credit).

Neither was this original - Schumpeter (1954) considered Roscher as only
a rehash of the ideas of others, such as Sismondi (1814/1824). Arno's
bibliography notes that Roscher's Principles… book Sections CCXI and
CCXII are devoted to the two types of consumption: productive and
unproductive and that Roscher says that this classification originally
is Plato's (in The Republic, VIII).

So to my mind, separate analysis of credit for productive and
unproductive purposes is age old and came into sharp focus (but in
heterodox economics only) with Marx, Roscher, Hilferding, Schumpeter,
Keynes. It lived on in heterodox writings but never entered the orthodox
discourse. Richard's is the most explicit analysis of the issue I know of.

Any additions?

Dirk


Ercouncil@... wrote:
>
> Richard Werner  writes:
> "This sounds like my Quantity Theory of Disaggregated Credit. When  did you
> formulate yours? Have you taken a look at my formulations and empirical
> support?"
> Hi Richard:
> I think it's safe to say it  the Quality Theory of Credit mentioned by me
> yet  again in Friday's post was originally labelled as such many years ago.
> It has been explained numerous times here on Gang 8, more or less  since the
> Gang was originally founded in September  1998.
>
> Gunnar's very meticulous analysis of early  economic theory would I am sure
> trace the basic concept back much  earlier than that; what I call the
> Quality Theory of Credit (QTC)  as a replacement for the standard Quantity
Theory
> of Money (QTM) also goes  back much earlier than the founding of Gang 8 by
> a number of years.  It almost certainly dates back originally, even if not
> yet labelled  QTC, to when I was working in banking, 1979 to 1986.
>
> And I'm sure the basic  concept goes back far earlier than that anyway. As
> I  did mention in the posting on  Friday, Geoffrey and I both reckon there
> are very clear hints of it in Keynes's  "Control of Borrowing Act" which he
> arranged to put through Parliament  way back in 1946. About ten years ago I
> went right through Keynes's private  papers at the Public Records Office in
> Kew here in London - or such of them  as have survived  - to try and find any
> further clues on his  formulation of the original parliamentary bill.
>
> Either Keynes's private papers  have been filleted or, as I suspect, Keynes
> was deliberately keeping quiet  about his true intent until the legislation
> was safely on the Statute Book.  Sadly he did not live to see that day. Had
> he done so I'm quite sure he would  have wanted to indicate to the banks,
> and as much more recently I would  wish to indicate to the banks, that the
> aim of his crafty legislation was to  monitor how much of their credit goes
> into genuine expansion of the economy, how  much of it goes into consumer
> spending, and how much of it goes into Asset Price  Inflation. The 1946
Control
> of Borrowing Act makes very little sense  otherwise.
>
> Unlike the more dirigiste Keynes, my  preference would be to go down the
> Accountancy Rules route, and simply require  banks to publish that vital
> information as part of the public  reporting of their results. As head of PR
at
> two major banks I've done enough of  the publishing of bank results myself in
> my time, before I spent the next five  years (1986-1990) as the group's
> spokesman on all financial matters, inter  alia writing the results at BAT
> Industries - then Britain's third largest  industrial company. I always did
the
> words while a young finance director,  Martin Broughton, did the numbers.
> (Martin is nowadays Chairman of British  Airways.)  That five years of
> quarterly reporting was a masterclass in the  byzantine financial and
corporate
> politics which lie behind seemingly innocent  Quarterly Results.
>
> Thus I am convinced much could be deduced  from such declaration by the
> banks.  In a very similar vein, Geoffrey  Gardiner would dearly like to see
> British banks publish retrospectively their  true results during the critical
> years between the wars, by revealing  all the internal transfers to and from
> inner reserves, which for many years  Britain permitted them to do to mask
> their true activities.
>
> When I arrived in Hong Kong  as (among other things)   HSBC's top spokesman
> in early 1984, I was intrigued to see just how much  its undeclared
> transfers between undeclared gross profits and  undeclared internal reserves,
then
> still permissible under Hong Kong banking law  if no longer under British
> banking law, enabled the bank to build a worldwide  reputation of rock solid
> stability.
>
> The existence of such transfers, if not  their amount, was just quietly
> mentioned in HSBC's published accounts. In  fact the bank was doing pretty
> well, not least because it had failed to  move quickly enough to join in the
> frenzy for "sovereign lending" pursued  among US money centre, and UK high
> street and commercial banks, a frenzy which  landed them in it up to their
necks
> in the early-mid 1980s.
>
> Anyone who believes for one moment that  excessive banking greed before
> tragic banking setback is an invention of just  the past ten years is sadly
> mistaken.  There had been another such  frenzy in the mid 1970s which
> practically brought down National Westminster Bank  here in the UK, and
certainly
> caused the demise of assorted secondary  banks.
>
> I'm rather inclined to the Tomassonian  view in economics that there is
> very little which is truly new under the sun. Go  digging hard enough and you
> can probably find layer upon layer of  quasi-antecedents, with varying names,
> for just about anything.
>
> Chris Meakin
> London
>
>
>

#14392 From: Ercouncil@...
Date: Sun Nov 8, 2009 11:51 pm
Subject: RE: The ins and outs of Quantitative Easing
econrescouncil
Offline Offline
Send Email Send Email
 

Richard Werner writes:
"This sounds like my Quantity Theory of Disaggregated Credit. When did you formulate yours? Have you taken a look at my formulations and empirical support?"

Hi Richard:
I think it's safe to say it the Quality Theory of Credit mentioned by me yet again in Friday's post was originally labelled as such many years ago. It has been explained numerous times here on Gang 8, more or less since the Gang was originally founded in September 1998. 
 
Gunnar's very meticulous analysis of early economic theory would I am sure trace the basic concept back much earlier than that; what I call the Quality Theory of Credit (QTC) as a replacement for the standard Quantity Theory of Money (QTM) also goes back much earlier than the founding of Gang 8 by a number of years. It almost certainly dates back originally, even if not yet labelled QTC, to when I was working in banking, 1979 to 1986.
 
And I'm sure the basic concept goes back far earlier than that anyway. As I did mention in the posting on Friday, Geoffrey and I both reckon there are very clear hints of it in Keynes's "Control of Borrowing Act" which he arranged to put through Parliament way back in 1946. About ten years ago I went right through Keynes's private papers at the Public Records Office in Kew here in London - or such of them as have survived  - to try and find any further clues on his formulation of the original parliamentary bill. 
 
Either Keynes's private papers have been filleted or, as I suspect, Keynes was deliberately keeping quiet about his true intent until the legislation was safely on the Statute Book. Sadly he did not live to see that day. Had he done so I'm quite sure he would have wanted to indicate to the banks, and as much more recently I would wish to indicate to the banks, that the aim of his crafty legislation was to monitor how much of their credit goes into genuine expansion of the economy, how much of it goes into consumer spending, and how much of it goes into Asset Price Inflation. The 1946 Control of Borrowing Act makes very little sense otherwise.
 
Unlike the more dirigiste Keynes, my preference would be to go down the Accountancy Rules route, and simply require banks to publish that vital information as part of the public reporting of their results. As head of PR at two major banks I've done enough of the publishing of bank results myself in my time, before I spent the next five years (1986-1990) as the group's spokesman on all financial matters, inter alia writing the results at BAT Industries - then Britain's third largest industrial company. I always did the words while a young finance director, Martin Broughton, did the numbers. (Martin is nowadays Chairman of British Airways.)  That five years of quarterly reporting was a masterclass in the byzantine financial and corporate politics which lie behind seemingly innocent Quarterly Results.
 
Thus I am convinced much could be deduced from such declaration by the banks.  In a very similar vein, Geoffrey Gardiner would dearly like to see British banks publish retrospectively their true results during the critical years between the wars, by revealing all the internal transfers to and from inner reserves, which for many years Britain permitted them to do to mask their true activities.
 
When I arrived in Hong Kong  as (among other things)  HSBC's top spokesman in early 1984, I was intrigued to see just how much its undeclared transfers between undeclared gross profits and undeclared internal reserves, then still permissible under Hong Kong banking law if no longer under British banking law, enabled the bank to build a worldwide reputation of rock solid stability.
 
The existence of such transfers, if not their amount, was just quietly mentioned in HSBC's published accounts. In fact the bank was doing pretty well, not least because it had failed to move quickly enough to join in the frenzy for "sovereign lending" pursued among US money centre, and UK high street and commercial banks, a frenzy which landed them in it up to their necks in the early-mid 1980s.
 
Anyone who believes for one moment that excessive banking greed before tragic banking setback is an invention of just the past ten years is sadly mistaken.  There had been another such frenzy in the mid 1970s which practically brought down National Westminster Bank here in the UK, and certainly caused the demise of assorted secondary banks.
 
I'm rather inclined to the Tomassonian view in economics that there is very little which is truly new under the sun. Go digging hard enough and you can probably find layer upon layer of quasi-antecedents, with varying names, for just about anything.
 
Chris Meakin
London

#14391 From: "Dr. Richard Werner" <werner@...>
Date: Sun Nov 8, 2009 12:11 pm
Subject: RE: The ins and outs of Quantitative Easing
rawjapan2005
Offline Offline
Send Email Send Email
 

Hi Chris,

 

This sounds like my Quantity Theory of Disaggregated Credit. When did you formulate yours? Have you taken a look at my formulations and empirical support? (most recently New Paradigm in Macroeconomics, Palgrave Macmillan, 2005; first proposed 1991).

 

 

Warm regards,

Richard

 


From: gang8@yahoogroups.com [mailto:gang8@yahoogroups.com] On Behalf Of Ercouncil@...
Sent: Friday, November 06, 2009 1:59 PM
To: gang8@yahoogroups.com
Subject: [gang8] The ins and outs of Quantitative Easing

 

 

..

 

 

From Chris Meakin, Friday 6 November 2009

 

 

Hi Guys  :

Someone please tell me I've got this wrong, but my reading of what is happening in the UK at the moment is approximately as follows. If some of you have already covered these points in earlier postings, please point me in the right direction. As it happens I went to see Geoffrey Gardiner in Swindon on Wednesday, and you all know what happens when Geoffrey and I get together; after all one side-effect was to create or at least name the Gang of Eight way back in September 1998.

 

1. Interest rates

These are back in fashion as the Philosopher's Stone of Political Economy, only this time around it is ultra low interest rates which are all the rage, rather than ultra high rates as in the past.

 

It seems to me that as soon as misguided politicians and wheeler-dealing central bankers start monkeying around with interest rates, one of the first things that happens is that funds start to flow internationally. Michael Hudson and I go way back on agreeing that it is such capital flows, coupled with the inter-day dealings of Forex dealers of the big banks, primarily in London, which really shape exchange rates - far more so than the pathetic trickle (relatively speaking) of foreign exchange actually required for physical trade.

 

Such financial markets are extremely sensitive to interest rates, and when rates go down, the big money goes elsewhere. When rates go up the big money flows in. It used to be called hot money. Obviously such flows are dictated, not so much by the absolute level of interest rates, but rather by their relative levels as they vary between one international haven for big funds and another. So right now there is, for example, relatively little fun to be had in chasing low rates in London versus low rates in New York.  But here in Britain the overall effect, if anything, would be to starve our financial markets of large funds.

 

2. Quantitative Easing

If farting about with interest rates is one of the oldest games in Moneyville, Quantitative Easing must surely be one of the newest, or so they think. In a nutshell, as I understand it, the Bank of England conjures credit out of thin air in massive amounts, writes it into its own balance sheet, and then uses the proceeds to buy financial securities from the major banks - so the banks suddenly have loads more new money to lend.

 

Now in the magical paradise inhabited by that mastermind among bankers, that 21st century answer to Sir Thomas Gresham or J M Keynes, our Chancellor Alastair Darling probably reckons he has hit on a really clever wheeze. Low interest rates sucking money out of the British system, while QE is spitting  it back in again. Wow. Everything is just about in balance. Sadly it doesn't quite work like that.

 

3. Which theory would you prefer, sir?

As old hands here on Gang8 know to their cost, I have never been one for the Quantity Theory of Money - nor has Geoffrey: if you haven't already done so, do read his chapter on the subject in his book. I personally prefer the November 1993 edition to the more recent one, but no matter.

 

The trouble with the QTM is that it only counts the number of beans, it never considers what they taste like. There is some money, credit rather, which if pumped into the industrial sector will finance more efficient production (thus improving profits for the entrepreneur) which process also reduces costs (same thing) and in our competitive world, sooner or later reduces prices. Reducing the price level is a phenomenon known to economists as deflation.

 

Yet there is some other money, credit rather, which if pumped into equities, private housing or assets generally, obeys a more specialist version of the QTM and causes Asset Price Inflation. In our inter-reactive world sooner or later that asset money finds its way into the general economy where more money now chases the same quantity of goods and services. That will generate a phenomenon know to economists as inflation. 


See ?  It all depends on the flavour of the monetary beans, not just their quantity. Their flavour can determine whether they cause inflation, or deflation, or do neither. Which is why I have long advocated scrapping the QTM and replacing it with a Quality Theory of Credit. Using just such a handy tool, the Japanese did wonders to rebuild their economy after WW2. Geoffrey and I also believe Keynes was thinking along exactly parallel lines with his Control of Borrowing Bill,  until he unfortunately dropped dead while it was still working its way through the British Parliament in 1946. Sadly Keynes was no longer around to explain its fiendishly clever purpose.  The Japanese would have understood anyway.

 

4. The real role of Interest Rates

Thus farting about with interest rates is at best a very blunt tool for dealing with inflation, and in extremis can actually be counter-productive. It all depends on time, place and any knock-on effects. Yet there is another function of interest rates which is not relative to time and place, but which is constant, inviolable and very slow moving, Interest rates are actually the discount rate on risk. And unless you can shift the likelihood of risk, there is very little point trying to shift the discount  rate on risk. 

 

That is why the British banks and building societies (savings and loans if you mother tongue is American) have steadfastly ignored the King-Darling low interest pantomime. They know what rate they must charge to cover their actual risk on lending to the consumer sector, and it damn well ain't anywhere near a half per cent.

 

In fact what the British banks and building societies are currently doing is saying "Thank you very much, Messrs Darling and King. You are enabling us to pick up wholesale finance at dirt cheap prices, and we will continue lending it to our retail consumers at realistic prices, and thus pocket the substantial profit on the spread." 

 

What do banks do with profits ? They divide them between two worthy causes, their declared profits and their loan loss provision. The balance is critical. Run the loan loss provision unrealistically low to boost profits, and you could put the bank in jeopardy. Run the profits too low to boost loan loss provision, and you could put the bank in jeopardy from the jackals of the takeover world. It is a very fine balancing act.

 

5. The present game in town

The British banks, like many of their American counterparts, have in recent years played ducks and drakes with the quality of their loan book - Gang Eighters were already warning about America's sub-prime fiasco long before it actually erupted. So give these shaky banks a nice fat chance to replenish their Loan Loss Provisions and they are going to snatch you hand off.  Which sensible correction they have done consistently in this era of low interest rates, simultaneously paying off large loans from anxious governments which at one point were terrified about The End Of The World As We Know It

 

Meantime the banks are still making life difficult for would-be mortgage borrowers, chiefly because they are grabbing a window of opportunity to restructure the quality of their loan portfolio. Meantime all those juicy Quantitative Easing goodies are finding their way, not into the consumer sector as the Darling-King Axis Of Folly might wish, but straight back into the wholesale financial markets where the banks had them in the first place. So we have a Stock market boom at present which is widely known as a Sucker's Rally, and a Quantitative Easing game which bears an uncanny resemblance to Ring O Ring O Roses.

 

6. So what happens next?

A Stock Market boom must run out of steam when it runs out of suckers. Quantitative Easing will burst the Bank of England's balance sheet if it goes on too long, and then we would all be in the shit. The King-Darling dream club might keep kidding themselves they can already see green shoots of economic recovery, but they could just as easily be seeing green drips from the window box of their own unripe economic wisdom.

 

Otherwise the future, as always, is for the birds. It is always a matter of Who Blinks First. Economic prophets who think they know who will blink first are right, at best, 50 per cent of the time if there are two blinkers, 33 per cent of the time if there are three blinkers, and 25 per cent of the time if there are four blinkers. And so on ad infinitum.

 

Chris Meakin

Chris Meakin

 

eeConomc porohbalance.  

 

5. The present game


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