Between debt and the devil: money, credit, and fixing global finance with Lord Adair Turner
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- Опубліковано 19 вер 2024
- Between Debt and the Devil challenges the belief that we need credit growth to fuel economic growth, and that rising debt is okay as long as inflation remains low. In fact, most credit is not needed for economic growth-but it drives real estate booms and busts and leads to financial crisis and depression. Turner explains why public policy needs to manage the growth and allocation of credit creation, and why debt needs to be taxed as a form of economic pollution. Banks need far more capital, real estate lending must be restricted, and we need to tackle inequality and mitigate the relentless rise of real estate prices. Turner also debunks the big myth about fiat money-the erroneous notion that printing money will lead to harmful inflation. To escape the mess created by past policy errors, we sometimes need to monetize government debt and finance fiscal deficits with central-bank money.
Between Debt and the Devil shows why we need to reject the assumptions that private credit is essential to growth and fiat money is inevitably dangerous. Each has its advantages, and each creates risks that public policy must consciously balance.
Adair Turner is chairman of the Institute for New Economic Thinking and the author of Economics after the Crisis. He lives in London.
Oxford Martin School,
University of Oxford
www.oxfordmartin.ox.ac.uk
Japan, the EU, and even the US have tried fiscal stimulus through deficit spending. How well has this worked? Just look at Japan over the past 20 years as the writer points out, which is counter to his own argument!
There were lots of people who know the 2008 crisis was coming. They were screaming about it for years, but no one would listen.
Everyone on Wall Street knew it was coming because they were selling heavily before all went to hell.
Great talk. Very insightful.
"The Government is not like a household. A government is like a bank. And a government running a balanced budget is like a bank that simply lends back as much as it gets in repayments, therefore the money supply never grows and without that, you don't have a growing economy.
It's one of two ways to create money, and if you don't let government create money by spending more than they take back in taxation (fiscal policy), you have to rely on the private banking system to create the money in the form of credit (monetary policy) and you therefore get private debt bubbles." ~ Prof. Steve Keen
"Government exists to spend. The purpose of government is to serve the general welfare of the citizens, not just the military-industrial complex and the financial class. Didn’t we have a stimulus, oh, eight years ago? It was tiny and has not been entirely spent. As Yellen implied, we need more spending of the non-military kind (what Barney Frank memorably called “weaponized Keynesianism” doesn’t stimulate)."
www.forbes.com/sites/leesheppard/2016/04/02/we-need-fiscal-policy/?fbclid=IwAR02l1AlZGMpapbTOdURjgRknx6Kai-24Z6fXBCXyBolgdgodvjSmYmXAdw#1c4e7dea8b40
EU nations must regain control of their own currencies and their own destinies:
“We’ve got the right to print our own money, that’s the key. Greece lost the power to print their money. If they could print drachmas they’d have other problems, but they would not have a debt problem. And seventeen countries in Europe gave up the right to print their own money. That’s enormously important. And we’ve got the right to print our own money, so our credit is good.” ~ Warren Buffett
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The 40-yr. Wall St/capitalist revolt:
"The bank strategy continues: “If we can privatize the economy, we can turn the whole public sector into a monopoly. We can treat what used to be the government sector as a financial monopoly. Instead of providing free or subsidized schooling, we can make people pay $50,000 to get a college education, or $50,000 just to get a grade school education if families choose to go to New York private schools. We can turn the roads into toll roads. We can charge people for water, and we can charge for what used to be given for free under the old style of Roosevelt capitalism and social democracy.”
This idea that governments should not create money implies that they shouldn’t act like governments. Instead, the de facto government should be Wall Street. Instead of governments allocating resources to help the economy grow, Wall Street should be the allocator of resources - and should starve the government to “save taxpayers” (or at least the wealthy). Tea Party promoters want to starve the government to a point where it can be “drowned in the bathtub.”
But if you don’t have a government that can fund itself, then who is going to govern, and on whose terms? The obvious answer is, the class with the money: Wall Street and the corporate sector. They clamor for a balanced budget, saying, “We don’t want the government to fund public infrastructure. We want it to be privatized in a way that will generate profits for the new owners, along with interest for the bondholders and the banks that fund it; and also, management fees. Most of all, the privatized enterprises should generate capital gains for the stockholders as they jack up prices for hitherto public services.
You can see how to demoralize a country if you can stop the government from spending money into the economy. That will cause austerity, lower living standards and really put the class war in business. So what Trump is suggesting is to put the class war in business, financially, with an exclamation point."
michael-hudson.com/2017/03/why-deficits-hurt-banking-profits/?fbclid=IwAR06awK0L-3z172I_q003EZMVaoAYfqxNg0xqjWXXtFb9mmWMdhOTwqnE4I
I dont understand how this "money-financing" doesnt directly lead into hyperinflation....
+Pratik Padooru
That is because the velocity of money is slow as molasses right now. ( en.wikipedia.org/wiki/Velocity_of_money ). And energy, esp. oil, is cheap. If one of these changes to go up, or even both, you will have inflation, inevitably.
With all due respect to Lord Adair - formidable indeed - he has mis-characterized the Chicago Plan proposal. It never called for and was never meant to end banking at all, it was meant to reform banking by requiring the banks to hold 100 percent reserves, plain and simple. And it provided for the development of that 100 percent reserve basis.
Adair does not get the significance of full-reserve banking , being the foundation for money-creation by the government.
Moving from 5 to Adair's more radical 40 percent reserves would do nothing to add stability to the system.
Adair gets this wrong.
There's no basis given for failing to move directly to do what the Chicago Plan proposed, having the government create and issue all of the money, making the government the economy's lender, and the bankers the borrower, rather than, as at present, the other way around.
Well, for one thing, having more 'required' reserves would also require that the central bank provide those to the banks.
In the meantime, banks continue to make loans by issuing debt, so debt increases.just as it does now, and I thought, from Turner's Mephistopholes paper, that he recognized that "Debt is the problem".
But he doesn't.
So, banks issue more, MORE debt, using CB-provided reserves as basis, and then TSHTF.... KEEE RASH !.
Reserves only protect against bank runs in that case, but most depositors are covered by depository insurance (to $250K) already, so any claimed stability from having enough reserves to complete transactions only provides liquidity to the bank settlement process.
But the debt has grown and not the money to pay more debt, so the borrower has 'nothing' from the deal.
I'm not confusing anything.
If you've read the works that Turner champions (Simons, Fisher and Friedman for example on public fiat money issuance), then you would see why Turner fails to meet the task at hand which IS to separate money from banking.
Economic stability comes from financial stability, YES.
But financial stability comes from monetary stability, and only more money, and less debt, can bring that about.
Thanks for your thoughts here.
MARC STEINER: So where does the money come from, then, to invest in infrastructure, in new businesses, and whatever else has to be invested in?
MICHAEL HUDSON: Well, banks don’t invest. That’s a myth. The pretense is that rescuing the banks rescued the economy. But the banks don’t make loans to the economy. Banks don’t make loans to fund factories. They don’t make loans for infrastructure. They make loans to buy assets already in place. They’re privatizing the structure to take it private, raise the rates the people have to pay for services.
Essentially they lend to raiders taking over corporations. They won’t help a corporation put in more equipment and hire more people, but they’ll lend to a raider to break up a corporation, downsize the labor force, smash it up and leave it a bankrupt shell. That’s the financial management plan. That’s what they teach in business schools.
So the financial management philosophy that we have is diametrically opposed to what’s needed for economic growth. That should be what people are talking about, because more and more economists are warning that given the rising debt ratios, there’s going to be another crisis. What we should be talking about when we look back on the anniversary of Lehman’s bankruptcy is how to handle the next crisis in a way that doesn’t bail out banks, that bails out the economy by writing down the debts.
If banks have bad debts, they’ve made bad loans. Banks used to be conservative and prudent. But if they make imprudent loans and they say, we don’t care the borrower can’t pay because we’ve sold the whole loan off to a pension fund or a German Landesbank, and somebody else is going to take the loss, you have to restructure the banking system and the financial management, and take it out of the hands of bankers to manage.
If you leave the Treasury Department and the Justice Department and the bank regulators in the hands of bankers, they’re going to loot the rest of the economy. They’re going to take everything they can. So you want someone who’s not a banker to actually do the regulation.
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Debunking Those Who Hate Government money creation
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Today's economics students are not taught pluralism (different principles of economic theory), economic history, nor do they discuss money, debt or banks!
“...If you look at mainstream economics there are three things you will not find in a mainstream economic model - Banks, Debt, and Money.
How anybody can think they can analyze capital while leaving out Banks, Debt and Money is a bit to me like an ornithologist trying to work out how a bird flies whilst ignoring that the bird has wings...”
― Steve Keen
God forbid they find out about the corporate coup that ended FDR-style Keynesian fiscal policy:
"The Trilateralist Commission is international...(and)...is intended to be the vehicle for multinational consolidation of the commercial and banking interests by seizing control of the political government of the United States. The Trilateralist Commission represents a skillful, coordinated effort to seize control and consolidate the four centers of power - political, monetary, intellectual, and ecclesiastical."
~ Barry Goldwater, With No Apologies, 1979
"The “nation-state" as a fundamental unit of man’s organized life has ceased to be the principal creative force: International banks and multinational corporations are acting and planning in terms that are far in advance of the political concepts of the nation-state.”
~ Zbigniew Brzezinski, Between Two Ages, 1970
“Economics students are forced to spend so much time with this complex calculus so that they can go to work on Wall St. that there’s no room in the course curriculum for the history of economic thought.
So all they know about Adam Smith is what they hear on CNN news or other mass media that are a travesty of what these people really said and if you don’t read the history of economic thought, you’d think there’s only one way of looking at the world and that’s the way the mass media promote things and it’s a propagandistic, Orwellian way.
The whole economic vocabulary is to cover up what’s really happening and to make people think that the economy is getting richer while the reality is they’re getting poorer and only the top is getting richer and they can only get rich as long as the middle class and the working class don’t realize the scam that’s being pulled off on them.” ~ Michael Hudson