Modern Monetary Theory and the economic crisis

andrew wrote: »

Please do keep this stuff coming; I havn't had a chance to read much of it but it's interesting

nesf wrote: »

It's a discussion forum, if people aren't discussing it with you...

At the autumn conference, the Greens adopted a resolution calling for “a programme of reform to remove the power to create money from private banks, and to fully restore the supply of our national currency to democratic and public control so that it can be issued free of debt and directed to environmentally and socially beneficial areas.”
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"The existing banking system is undemocratic, unfair and highly damaging. Banks not only create money, they also decide how it is first used – and have used this power to fund financial speculation and reckless mortgage lending, rather than to finance investment in productive businesses. Through the interest charged on the loans on which all credit is based, the current banking system increases inequality. It also regularly causes economic crises: banks create and lend more and more money until the level of debt becomes unsustainable, boom turns to bust, and the taxpayer bails out banks that are ‘too big to fail.’ Finally, the need to service the growing mountain of debt on which our money is based is a key driver of unsustainable economic growth that is destroying the environment."
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Reclaiming seignorage for public benefit has been a serious idea among many progressive economists for years. A notable figure in this regard is James Robertson, the founder of the new economic foundation in Great Britain, in 1986, who has championed this issue for years. Robertson’s most recent book Future Money explains how re-gaining public control over how new money is created and circulated could result in “an annual savings to all citizens of the UK of £75bn, and second in a one-off benefit to the public purse totalling £1.5bn over a three-year transition period.”

Austerity budgets could be made moot if the public were to reclaim the right of seignorage for public benefit. As it now stands, some 97 percent of new money in the UK is created by banks through lending, resulting in enormous profits in the form of interest. Between 2004 and 2010, British banks created £1.1 trillion in new money. Writes Robertson: “Had the Government been able to create this money instead, then it would have been able to repay 80 percent of national debt of the UK Government.”
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As Robertson explains, public seignorage would allow us to avoid “the hidden tax that we all pay to commercial banks as interest on the bank account money in circulation.” And we could “profiting from the one-off increase in public revenue by converting the money supply now created by commercial banks as debt into money created free of debt by the Bank of England. In the short term this would relieve the unjust ‘austerity’ now being inflicted on the poorer sections of society. In the longer term it would create a fairer and more efficient economy for everyone in a 21st-century society.”

KyussBishop wrote: »

On a related topic to the central bank issue, there is a recently formed group in Ireland, the Public Banking Forum Ireland, who (as you guess) advocate a public bank.
They recently had a talk in Ireland from Ellen Brown (who holds views about money, different but similar to the threads topic); she posted up her presentation for that talk, which is very interesting:
http://ellenbrown.com/2013/10/16/public-banking-forum-of-ireland-power-point-the-irish-debt-crisis-time-to-think-outside-the-box/

In that presentation, there is a particularly interesting take on the modern history of central banks, which I have not learned about before, and how their regulatory system is (voluntarily I believe) centralized with the Bank of International Settlements.

It seems that Canada joining BIS, was the means by which their Public Bank was reigned in, and how the Canadian government was made to rely more on private banks for funding their national debt (which is far more costly in terms of interest, and thus far less sustainable, as the presentation explains).

Labarbapostiza wrote: »

It's more or less, the work of Milton Friedman. MMT is managing an economy through managing the money supply. It's headache inducing the wrong headed ideas people have about it, but essentially it comes down to managing inflation. Reducing the money supply through CB interest rates to curb inflation, and then in a depression printing money via QE to stop deflation.

When fully applied, it means poor people (that's most of us) pay for a depression through austerity, strangely this also means a massive transfer of wealth from the poor to the rich in bad times, because money is being printed. And when the good times come, the poor receive few to none of the benefits, because the interest rates are kranked up to keep them precariously on the edge of falling onto the dole queue.

Most people who have an opinion of Milton Friedmann, believe he was evil, this includes the rich people who love him. I believe he was just an idiot.

Labarbapostiza wrote: »

No, lots of the new stuff being bandied about is in fact the old stuff; Friedman. Friedman could be quite contradictory. So, he could be for a basic income, in the form of a negative tax, but against a welfare payment from social security. His right-wing supporters tended to hear what they wanted to hear and tune out the rest.

He was hypersensitive to criticism and would never admit to flaws or possible mistakes in his theory. After the 1973 coup in Chile, Pinochet asked for his assistance in putting together an economic program. Friedman helped, but later when it proved to have been an unmitigated disaster, Friedman distanced himself from it. The guy had issues.

The fundamental problem with Friedman's ideas, is the can, and have, been used to make the rich richer, and everyone else poorer. But I have a strong feeling they could be rewired for both a reverse of inequality, austerity, and propel real economic growth.

OttoPilot wrote: »

I see today that Ireland's GDP growth is predicted to be .8% above the EU average this year. Also with strong growth in the US and maybe the UK, it's seems very possible we could beat the .3% predicted difference next year. If we are growing faster than our currency partners what problems could this cause?

With the OECD calling for a rates cut to 0% could this fuel another boom in this country and eventual bust when rates rise? Fair enough, as a whole, the Eurozone could probably do with an interest rate cut, but is it what's best for Ireland given our economy seems to be somewhat out of sync with the rest of Europe? This is similar to the conditions which lead to the Celtic Tiger boom and bust fuelled by unnaturally low interest rates thanks to the ECB.