Comments on: A breakthrough speech on monetary policy http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/ Sat, 03 Jan 2015 16:42:55 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: nixonfan http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/#comment-1003 Sat, 15 Jun 2013 20:52:41 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=265#comment-1003 No need to give it away. Use it to fully monetize the deficit and then to buy things such non-bank assets as houses, land, etc. M2 will rise, and so will prices.

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By: ClintBallinger http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/#comment-863 Fri, 22 Mar 2013 14:07:55 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=265#comment-863 @PseudoTurtle

Hyperinflation, as opposed to low normal inflation, is caused by a government that is weakened in some way so as to lose its power to tax its citizens, such as losing a war or extreme corruption.

The ability to tax a citizenry is what gives a government’s currency value.

Read, for example:

Hyperinflation – It’s More than Just a Monetary Phenomenon

http://papers.ssrn.com/sol3/papers.cfm?a bstract_id=1799102

Cheers, Clint Ballinger http://clintballinger.edublogs.org/

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By: bambi60 http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/#comment-855 Mon, 18 Mar 2013 21:24:05 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=265#comment-855 @PseudoTurtle..Are you serious? Using Wikipedia as your go to source? Your stupidity is beyond reproach!

Inflation is based on these variables:

Supply and demand for money vs. supply and demand for goods and services — four variables. The supply of money is only one of those variables.

Changing any of the other variables could prevent/cure inflation.

Not to say that at some time in the future, sufficient economic stimulus couldn’t cause inflation. It could. However, we are a long way from that point, as witness long-term interest rates. The immediate problem is recession.

Since millions of people suffer today because of recession, why be afraid that the “medicine,” at some distant point, would cure the recession so well, we’d have inflation?

First step: Cure the recession. If and when inflation occurs, we have plenty of tools to cure it.

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By: MikeRiddell http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/#comment-790 Wed, 27 Feb 2013 12:19:41 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=265#comment-790 Simply giving money to people without expecting anything in return misses a much bigger opportunity.

People could be ‘paid’ in funny-money for undertaking work that benefits local communities. Community hubs could be charged with distributing the money and the amount of “pay” would represent the amount of time given by the person to the community.

This has the advantage of making local economies more productive and more competitive, as well as acting as a kind of rewards or incentive scheme that motivates people to contribute to the common good.

If this ‘ethical’ currency were to be digitised, then it could be used by its owners to buy things from vendors that are eager to sell excess stock or spare capacity without having to go ‘on-sale’ and thus eroding brand value.

In other words, the currency would disguise the discount and in the hands of the merchant represent positive social impact also known as corporate social responsibility.

@mikeriddell62

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By: iangreensteer http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/#comment-789 Mon, 25 Feb 2013 23:19:01 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=265#comment-789 The good thing about the article and some of the comments above is the focus that *** in theory all money should be created by government rather than commercial banks (who got the bulk of the money for centuries) ***. but time will be required to adjust. great strides have been made in UK to get perceptions altered – but confusion still reigns.

At first they (commercial banks mainly get the interest, then as loans (credit money) are paid off, usually money devalues all the while – the principal payments get bigger in proportion. I have not seen this pointed out clearly yet. Economists commentators (and politicians)rely on confusion to maintain their roles in an inefficient system. It is not economical at all at the moment in the West and *** the Far East are chasing after an outdated model ! ***. INSTEAD why not use the system as it could have been intended for much less inflation, even if it takes time to get there. Europe to contract: YES as should the USA! A lot. BELOW is a solution for a balanced economy and an accelerated investment with More QE money but only for the Green kind of Transition investments (i.e. only to get us off oil quicker and into a more careful use of stable money value that encourages savings Only slight growth in house prices, say less than 1% p.a. and solid investments – particularly renewable energy, heat store floors from solar, sustainable transport (and a lot less of it) that increase their real value. Here is the SCRIPT: in steps

Towards a Fairer Society, Gas security and Warmth 1page
Given that as bank lending recovers the commercial banks will be making substantial amounts of new money by this process without any of this being diverted to the public purse except for normal taxation, why not create some warmth of feeling? As Mervyn King, Governor of the Bank of England has said in 2007 “there’s an un-level playing field between the finance sector and other businesses”. Government could get a bit more revenue by these means without a tax increase and a fairer return to small savers:

1. Government amending the rules to get a clear separation between new money and existing money, at the same time protecting all deposits of cash (whether electronic or otherwise ) to protect the public/small businesses – see “100% Registered Money” TWD Davies (available by return, just by emailing ian[dot]greenwood[at]phonecoop[dot]coop) . In this way protection can return – cost-free.
2. Government setting a flow of some of all commercially-created money to the public purse. This could be done by the Bank of England setting up a new account to ensure ring-fencing and charging the base rate of interest for all new money created each year by commercial bodies including supermarkets and finance cos such as general motors. Over time this will grow and then stabilise as all the new loans are accounted for, allowing specific public investments and offsets as needed for poorer folk – for example if “luxury” taxes were implemented. [there also could be some claw-back of previously created money in some cases] ****!!This then offers the huge advantage of a feedback mechanism for less to the banks in bouyant times – i e to stop overheating of the economy in future !! ****. The main cause of the credit bubble was the inability of being able to quickly control the economy when it began to “heat” and then “cook”. Indeed the immediate effect of raising base interest rates is currently to increase commercial bank profits – at least in the short term, making it harder to control inflation as the money cycles back through. With this new measure, inflation could be easier to control due to rectification of a missing feedback loop. As bank profits get bigger they could be made to pay a higher proportion (as base rate goes up) AUTOMATICALLY. Who got the money from house price booms when it’s only a house-worth of money but the value of that money in house-price terms is declining? Only banks. This has been a cause of divides within what should be a global and happy society – once a well-rounded set of facts are fully understood.
Economic cycles could do with being moderated and these proposals offer a simple way to achieve that and a way to immediately start it. Feeling warm?.

3. a) With limited initial grants available to all for fuper-insulation, the economy could be quite quickly regenerating in a more wholesome direction towards sustainability by a much bigger effort of retro-fitting houses and other buildings (see “Every Town an Eco Town” offering 50% gas savings (and walls at a tenth or twentieth of current losses – same email). –We prepared how to do this for the Office of Climate Change now DECC in UK who appear to have pretty well gone off on a wrong (slow) track with the so-called Green Deal to the glee of big companies who will make a packet (like EAGA previously. It is a deal to mainly support big business and finance. Whereas we could be training people and getting on with a more widespread info and do-it programme – be in touch for honest good-value advice much of it over the phone! as for the number/appointment time by email if necessary]. Training people to do it, whether as builders or as DIYers, reducing “impulse” journeys in vehicles and shopping/drinking themselves to oblivion as a pastime, with savings resulting – invested COULD BE A MAJOR SOCIAL BENEFIT. 3b) A new [even voluntary?] code could be introduced for banks to encourage their customers to borrow for the retro-fit purpose if the banks were to offer some of their resulting “free” money as a refund towards such a purpose. Our points 1-4 could stimulate healthy *** degrowth in the purely frivolous areas *** as well as regrowth in the right direction by helping energy efficiency, saving gas. Why not be in touch for free advice/details – how this all works, both financially and technically? a simple set of diagrams.
4. As an extra bonus to working people why can not government put a floor on interest rates below which savings interest cannot go to reduce reliance later on declining pensions. that would be GOVERNING what they are supposed to be for. The “fat-cat” pensions can afford to come down, while those with meagre savings or wishing to make wholesome investments need to be rewarded more.
The NEW Make-It Zone IN UK shows how with a bit of extra help such energy efficiency then allows a sensible underground heat storage system (of summer-solar = Central Warming). This new Centre for on-the-ground Education for youth is also FOR Designer-Makers oldprintworks.org – while making a living. Helping others can then become a valuable contribution to quick understanding/global security (especially needed for Youth) – to avoid further climate change and energy/”security” stress.
For more information, Ian Greenwood, Founder: make-it sustainable ltd STEERglobal and Greenwood Structures, civil engineers. +44 (0)121 449 0278 [or +44(0)7702 569 077].
“We ignore the rise of the super-rich at our peril” in the book “Who Runs Britain” 2009 Robert Peston BBC

Appendix 1 The making of New Money:
Money creation as loans are issued
“A deposit created through lending [via the banking system] is a debt that has to be repaid (if demanded by the lender – but why would they do it – it kills the goose that is laying the golden money eggs) just the same as a debt that has been created through the re-issue of another customer’s deposit of loans or checks with the bank. Of course they do not really pay out loans [entirely] from the money they receive as deposits. If they did that no additional money would be created. What they do when they make loans is to accept promissory notes as credits to the borrowers transaction account.” Federal Reserve Bank, Chicago, Modern Money Mechanics p 6.

Statistic: £1.5 billion in hard cash created by the UK government/Bank of England in 2006 [website statistic] was trivial compared to an estimated £30 billion from housing loans and £80 billion total created by the UK’s commercial banks in the same year (James Robertson’s estimate) some of which would be for international purposes. This built up to create the unstable situations of recent years. In the UK domestic economy it is estimated that in 2006 an amount of “free” money created as housebuyer loans might be in the region of £30 billion – see below. But without a clear separation by registering money creation this is difficult to pin down exactly. While this was going on, the numerical value of the housing stock may have risen but its real value was also overblown by the reselling of imports – FALSE VALUE (going in GDP statistics) into importers pockets, but much of it also offshore. Lack of clarity concealed by inefficiencies in the banking system allowing these higher prices to be paid (high expenses/bonuses paid to bankers trickle down)and created extra “services”. In 2010/11/12/13 and beyond we need a steady contraction of house price multiples – back to 2 and 3 times first-time buyers’ typical annual incomes and this is slowly being achieved as wages catch up a bit for them (the super-rich still clean up) (See Housing Minister’s comments reported in Observer on 2 -1-2011) Affordable in the late 1970s if one was frugal as the UK will have to be. Rather than the high interest rates then to try to control inflation, why not in 2011 aim for a few percent Base Rate directed to the public purse allowing the finance markets to compete around 1% or two percent mark-up as the building societies used to do? They were well rewarded before they were allowed to create money, so if that privilege is maintained, they should also pay base rates to the public purse. (Aim for base rate of 3% to encourage investment and max mark-up to banks of 2% for secure loans and 3% for less secure loans? They can compete around those levels.)

The amendment proposed by our STEERglobal group to the UK government (first made in April 2007) is that a charge should be made for any element of free money created by banks thus reducing inflationary tendencies because of the long-term investments then enabled. This charge can be altered up or down. Instead of Quantitative Easing by supporting bond prices and therefore bank profits, wouldn’t it be better to directly fund suitable projects or at least the materials for them? Such a move to charge was proposed initially before the credit crunch [the “sub-prime crisis” began shortly after our suggestion] wiped out large amounts of credit money. A simple diversion should be made of the Base Rate of interest on any “free” money. “Growth can then be focussed on REAL GROWTH as much as possible. and back to work FOR LESS. eg a weekly visit to the swimming pool and running/cycling as a means to get places. minimal energy use with Super-insulation – references available.

By fixing the diversion to follow the Base Rate as set by the Bank of England’s Monetary Policy Committee from time to time, there would be an automatic feedback loop to reduce “froth” (Professor Congdon’s words [LSE] in a letter to Financial Times around 2006 after the economy had been overheating for years). As we say in our conclusion below there is unnecessary hesitation and confusion over investment policy because of the lack of clarity over money creation.

It is perfectly possible for the existing system to issue money as current practice and government to charge for it via the central bank with minimal inflation using QE and the above system of return of some of the commercial money as it is created via base rates. that would bring stability to the EU and USA as well as AUStralia etc. i offer it as Balanced Economics.

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By: changeling http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/#comment-786 Thu, 21 Feb 2013 20:20:18 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=265#comment-786 Perhaps we now need a stimulus program that requires banks to start crediting individual bank accounts to the tune of $300 per month unless they meet a certain lending threshold.

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By: MayorJoeQuimby http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/#comment-785 Sun, 17 Feb 2013 13:56:50 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=265#comment-785 WHY THIS CAUSES MORE HARM THAN GOOD:

1. Let’s say you have 10 people group A with $100 and group B with $100. You print $100 and hand it to group A. Group A now has $200/man and group B still has $100 a man.

The net result is *precisely* the same as having taken $50 from Group B!

PRINTING MONEY IS A TAX on holders of money.

So when group A and group B go to the grocery store to buy milk, they suddenly find it has gone up dramatically! Why? Because the store owner knows they were given more money. So group A now pays $7 for milk instead of $3.50. Then, when group A has bought all its milk, group B (if they have succumbed and purchased half-gallons), will see the price lowered – AFTER the printing of money stops.

This is the very definition of not only hyper-inflation but theft as well as moral hazard as speculators and debtors are repeatedly favored over savings and SAVINGS is supposed to form the basis for investment and growth.

Printing money not only has never worked, it NEVER WILL. There is ZERO serious economic support for printing. The Fed’s QE amounts to a monstrous credit injection and potential money in the economy.

But printing money is theft of mine and was once punishable by death. I hope those who support such madness accept the results (anarchy, collapse of governments and civil wars) rather than the simple (but painful) burning off of excess credit.

Societies suffer greatly from credit collapses. Societies are TORN APART by deficits supported by raw unsupported printing.

Tread carefully, keyboard jockeys.

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By: NeilLanc http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/#comment-784 Fri, 15 Feb 2013 11:43:59 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=265#comment-784 At last. Not only did some economists see this crisis coming usng accounting models (Bezemer, 2009), but those same models show that QE is ‘pushing on string’…. keeping asset prices high, and yields low. It only takes a simple accounting model, with a few assumptions about wages, spending and prices, to show that bank bailouts are less effective at increasing GDP than a straightforward Keynesian boost (more business lending) and bailing out households:
http://www.economics-ejournal.org/econom ics/journalarticles/2012-34
I can only hope that these models become more mainstream, and the idea that deposits create loans gets consigned to the dustbin. Let’s start a grown up conversation about how to restructure domestic debts… and how to ensure equity for those more cautious (hedging) households and firms that didn’t jumped on the leverage/capital gains bandwagon.

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By: scipw http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/#comment-782 Thu, 14 Feb 2013 20:14:51 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=265#comment-782 Wow, people this is much more simple than yall are making it…

Production = Wealth
Consumption != Wealth

Doesn’t matter how much fiat money you give people in a specific country (USA, UK, whoever); the simple fact is that production leads to wealth. Eventually the countries that are producing goods will refuse to accept the currency of non-producers (consumption societies, aka USA more every day). Their currencies are not backed by any real value (produced goods and service, etc.).

And before any of you can say it, “free money” consumption does not stimulate production because why would people work if they can get money for free? You eliminated the one thing that encourages people to produce: a “not free” paycheck.

This argument over who should get the free money is moot since it completely ignores this most basic and obvious economic law (not theory): Production = Wealth.

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By: derryl http://blogs.reuters.com/anatole-kaletsky/2013/02/07/a-breakthrough-speech-on-monetary-policy/#comment-778 Mon, 11 Feb 2013 23:38:08 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=265#comment-778 Every time a bank makes a loan or purchases a government security, the bank funds the loan or asset purchase by “creating” new bank deposit money. In our banking and money system as it has been operated these past 100 years, our money “comes from” bank lending, which is bank money creation. The critics of Turner’s proposal that the government create some money of its own, rather than continuing the practice of allowing private bankers an exclusive monopoly on money creation, seem unaware of the simple fact of where our money currently comes from. Every bank loan is essentially the “printing” of new money. Where is the shock, where is the outrage, where is the shrill fear of hyperinflation, when private banks create tens of trillions of dollars to fund mortgage lending and consumer loans and government bond puchases? Why is it not frightening that private banks have already ‘printed’ 10s of trillions of dollars, but the end is surely nigh when someone suggests that maybe the government should print a few trillion of its own?
Or do you guys simply not know that banks create the money that they lend?

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