by Paul Craig Roberts and Michael Hudson
According to various reports, the Russian government is reconsidering the neoliberal policy that has served Russia so badly since the collapse of the Soviet Union. If Russia had adopted an intelligent economic policy, its economy would be far ahead of where it stands today. It would have avoided most of the capital flight to the West by relying on self-finance.
Washington took advantage of a demoralized Russian government, which looked to Washington for guidance in the post-Soviet era. Thinking that the rivalry between the two countries had ended with the Soviet collapse, Russians trusted American advice to modernize its economy with best-practice Western ideas. Instead, Washington abused this trust, and saddled Russia with an economic policy designed to carve up Russian economic assets and transfer ownership into foreign hands. By tricking Russia into accepting foreign capital and exposing the ruble to currency speculation, Washington made sure that the US could destabilize Russia with capital outflows and assaults on the ruble’s exchange value. Only a government unfamiliar with the neoconservative aim of US world hegemony would have exposed its economic system to such foreign manipulation.
The sanctions that Washington imposed – and forced Europe to impose – on Russia show how neoliberal economics works against Russia. Its call for high interest rates and austerity sank the Russian economy – needlessly. The ruble was knocked down by capital outflows, resulting in the neoliberal central bank squandering Russia’s foreign reserves in an effort to support the ruble but actually supported capital flight.
Even Vladimir Putin finds attractive the romantic notion of a global economy to which every country has equal access. But the problems resulting from neoliberal policy forced him to turn to import substitution in order to make the Russian economy less dependent on imports. It also made Putin realize that if Russia were to have one foot in the Western economic order, it needed to have the other foot in the new economic order being constructed with China, India, and former central Asian Soviet republics.
Neoliberal economics prescribes a dependency policy that relies on foreign loans and foreign investment. This policy creates foreign currency debt and foreign ownership of Russian profits. These are dangerous vulnerabilities for a nation declared by Washington to be “an existential threat to the US.”
The economic establishment that Washington set up for Russia is neoliberal. Most notably, the head of the central bank Elvira Nabiullina, minister of economic development Alexei Ulyukayev, and the current and former finance ministers, Anton Siluanov and Alexei Kudrin, are doctrinaire neoliberals. This crowd wanted to deal with Russia’s budget deficit by selling public assets to foreigners. If actually carried through, that policy would give Washington more control over Russia’s economy.
Opposed to this collection of “junk economists,” stands Sergey Glaziev. Boris Titov and Andrei Klepach are reported to be his allies.
This group understands that neoliberal policies make Russia’s economy susceptible to destabilization by Washington if the US wants to punish the Russian government for not following Washington’s foreign policy. Their aim is to promote a more self-sufficient Russia in order to protect the nation’s sovereignty and the government’s ability to act in Russia’s national interests rather than subjugate these interests to those of Washington. The neoliberal model is not a development model, but is purely extractive. Americans have characterized it as making Russia or other dependencies “hewers of wood and drawers of water” – or in Russia’s case, oil, gas, platinum and diamonds.
Self-sufficiency means not being import dependent or dependent on foreign capital for investment that could be financed by Russia’s central bank. It also means keeping strategic parts of the economy in public, not private, hands. Basic infrastructure services should be provided to the economy at cost, on a subsidized basis or freely, not turned over to foreign owners to extract monopoly rent. Glaziev also wants the ruble’s exchange value to be set by the central bank, not by speculators in the currency market.
Neoliberal economists do not acknowledge that the economic development of a nation with natural resource endowments such as Russia has can be financed by the central bank creating the money required to undertake the projects. They pretend that this would be inflationary. Neoliberals deny the long-recognized fact that, in terms of the quantity of money, it makes no difference whether the money comes from the central bank or from private banks creating money by making loans or from abroad. The difference is that if money comes from private banks or from abroad, interest must be paid to the banks, and profits have to be shared with foreign investors, who end up with some control over the economy.
Apparently, Russia’s neoliberals are insensitive to the threat that Washington and its European vassals pose to the Russian state. On the basis of lies Washington has imposed economic sanctions on Russia. This political demonization is as fictitious as is the neoliberal economic propaganda. On the basis of such lies, Washington is building up military forces and missile bases on Russia’s borders and in Russian waters. Washington seeks to overthrow former Russian or Soviet provinces and install regimes hostile to Russia, as in Ukraine and Georgia. Russia is continually demonized by Washington and NATO. Washington even politicized the Olympic games and prevented the participation of many Russian athletes.
Despite these overt hostile moves against Russia, Russian neoliberals still believe that the economic policies that Washington urges on Russia are in Russia’s interest, not intended to gain control of its economy. Hooking Russia’s fate to Western hegemony under these conditions would doom Russian sovereignty.
TL DR: Don’t drink the snake venom if you want a healthy body.
Venom is safe to drink. It’s poison which should not be ingested.
My 2cts ☺
And yet they tell you not to suck the venom out if a friend’s wound less you envenom yourself ;-)
Because you might suffer from tiny wounds in your oral cavity and are unable to make sure the venom does not reach your bloodstream somehow ;)
Possible, but unlikely, at least with most venoms. Here is why:
1) the amount of venom passed on this way would be minor
2) it would reach small vessels and not reach deep like from a snake-bite
But yes, you are right, a very potent venom ingested can be dangerous and while there are videos of folks on Youtube drinking venom to make a point, I would not recommend doing that :-)
A “sakerian” answer to this would probably be that the aforementioned atlanticist fifth column is still that powerful that Russia is back-tied and has to stick to overall neoliberal doctrines.
To which PCR and other might wonder when, if not now, would the right moment be to purge Russia from this cancer?
Those fifth columnists are blatant traitors. For example former Medvedev advisor Inozemtsev demands more sanctions against Russia “to win the second cold war” in the magazine of the influential German think-tank DGAP. He must really hate Russia and its people. If there was a Vlasov award, he would win it.
“Inozemtsev also insists that banks in EU member nations be obligated “to divest their portfolio investments in Russia.” In addition, the EU should adopt a memorandum “stipulating that EU member states should reduce their imports of Russian gas by 10 to 20 percent annually.” Brussels could forbid Russian citizens “to establish enterprises within the EU;” it could “cancel their rights to dispose of bank accounts with more than 10,000 Euros deposit capital,” or rule “that, for example, Russian-owned real estate must be sold by January 1, 2018.” “A visa ban on all Russian civil servants” could be considered. In principle, the sanctions should be “designed in such a way that they affect millions of Russian citizens.” This is the only way “the Russian middle class” can be wedged into a broad “protest movement” to overthrow the government.[2]
…
According to Inozemtsev, “Russia will become a ‘normal’ country only when its laws will be installed from the outside.”[4] This is an open appeal for the West to subjugate Russia in colonial style.”
http://german-foreign-policy.com/en/fulltext/58935
http://german-foreign-policy.com/en/fulltext/58856
I think instead of the Vlasov awatd (though I do agree he deserves it ). The “life in prison in Kamchatka ” award would be a much better “honor” for him. And he can share “accommodations” with a long list of others of his “ilk” as well. Overlooking,and being “forgiving” ,of these traitors ,seriously needs to be brought to a halt.
That seems like it would help Putin’s faction and hurt Europeans. How many Russian would even establish enterprises in the EU, and how many of those able and willing to are already supportive of the West?
They cannot act unilaterally against the fifth-columnists in the same way Trump cannot act against the globalists by calling for riots/over throw of government less they risk civil war.
Only by maintaining positive public perception can a group carry out actions and decrees without resorting to Marshall law. Directly and aggressive going after the fifth columnists would introduce public anxiety, fed by fifth-column media and other propaganda.
Finally, Russia probably needs a well developed corresponding BRICS funding option setup before it can pivot to it.
Kind of ironic that its Erdogan showing how popular purges are done.
“To which PCR and other might wonder when, if not now, would the right moment be to purge Russia from this cancer?”
YES! And SOON.
My comment to my Moscow contact (from a link or a mention of Friedrich List that I saw here):
“Here is a quote that is relevant to much that is going on in the current international economic system:
[List] famously doubted the sincerity of calls to free trade from developed nations, in particular Britain:
“Any nation which by means of Protectionism>protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth.[11] ”
And here is his comment to me in an email:
”
Free trade gives advantages in trade to developed nations. As I remember, Paul Krugman called it “dynamic comparative advantages” as opposed to the classical principle of “static comparative advantages” formulated by David Ricardo and Bengt Uhlin. The United States and Germany are good examples of successful economic development in the late 19 century due to the effective protectionist regimes. The Russian economy can develop now only if the state applies a similar trade regime.
. . . We are going to dacha now!”
And that is the news from Borodino.
Katherine
There is also subsidization to factor in. For example Serbian crops are cheaper to produce and yet they can’t compete because the EU subsidizes their perfered farmers. So any produce in Serbia farmed locally can’t be sold in Serbia as cheaply even though given an even footing the Serbian goods would be cheaper.
Remember, though, that this is not a sustainable situation. EU agricultural subsidies are going to have to end sooner or later. They are intended to buy social stability in the rich core countries, but the EU is monetizing the cost of these handouts. Eventually, the social disruption caused by defecit-finance-caused crises will outweigh the social costs of angry farmers and their supporters in the minds of the EU planners. Then the subsidies will end.
I don’t know if you are right or wrong, but as far as I can tell, the subsidies have been going on for a long time, if not forever, and because the western industrial/service base is used to support them, they will always be greater then anything Serbia can subsidise it’s farmers with from it’s own industry (destroyed from neoliberal “modernisers”) and it’s underdeveloped service sector that the “modernisers” had no effect on (it improved from the communist/socialist era, but it’s still export oriented (ie cheap labor oriented), like it’s industry.
So, I myself can see it going on for a very long time… A combination of foreign imports (not just form the EU, but other developing countries as well), and a strong competition from within EU can keep serbia’s agricultural sector depressed for a very long time…longer then any of us here in the comments would be willing to wait.
Its all hjasbra. The Russians and the Iranians r well aware of the anglo-zionist game. Russia has already safeguarded itself for the future. IE; It has substituted imports from the west and Turkey ,food imports. It has invested heavily on infrastructure with regards to farming. The antlanacist will be marginalised once the Duma election is finished. Most Russians know where their bread is buttered and it aint with the anglo-zionist.
The whole social, political and economic structure in Russia will change and it will become more Eurasian in nature. The western economic system is imploding as we speak so why would the sage russian people want to keep with a defunct paradigm .
Russia is also “engaging” w/Israel. How does that factor into your calculus?
Why shouldn’t Russia engage with Israelis?
Putin knows what he is doing and why
This is immense news.
Russia gets a lot of heat from its loving admirers, because of its economic principles. And yet, what nation has such a figure as Glazyev as official advisor to the President, patiently making his arguments and waiting for the Security Council to reach a tipping point? Waiting for the country to be stable enough to withstand the backlash involved in achieving this change.
I’m rooting for state finance. Russia will be vastly the richer and stronger for it. But if we think we’ve seen opposition to Russia so far, this is nothing to the hate existing at the root of all evil, that the lovers of money will express against such a transformation.
Pray for the best.
Keep your friends close, enemies even closer. Putin knows that proverb very well. Rogozin was one of his biggest oponents 15 years ago, rememeber?
Well, it clearly appears that Russia effectively took that step.
“On July 25 he mandated that an economic group called the Stolypin Club prepare their proposals to spur growth revival to be presented to the government by the Fourth Quarter of this year…
A broad indication of the kind of proposals the Stolypin group will propose to revive substantial economic growth in Russia and deal with major basic infrastructure deficits that greatly hinder productive enterprise came in a series of proposals Glazyev made in September 2015 to the Russian Security Council, a key advisory body to the President.
There, Glazyev proposed a five-year ‘road map’ to Russia’s economic sovereignty and long-term growth. It was aimed toward building up the country’s immunity to external shocks and foreign influence, and ultimately, toward bringing Russia out of the periphery and into the core of the global economic system. Goals included raising industrial output by 30-35 percent over a five year period, creating a socially-oriented ‘knowledge economy’ via the transfer of substantial economic resources to education, health care and the social sphere, the creation of instruments aimed at increasing savings as a percent of GDP, and other initiatives, including a transition to a sovereign monetary policy.”
http://journal-neo.org/2016/08/02/putin-nyet-to-neo-liberals-da-to-national-development/
The fact that the Group was named after Stolypin, the visionary of a Russian ‘national economy’ (possibly the reason behind his assassination by a Jewish ‘revolutionary’), is indicative. Stolypin is treated in historiography with the same undying hatred as his admirer Solzhenytsin. Stalin was subjected to the same hatred when he introduced the planned economy, puting an end to the plundering of Russia introduced by the NEP (which was one objective of the Bolshevik ‘revolution’).
What is in the plan is the liquidation of NEP2.
Who are the russian betrayers? Please give names of the leasing russian neocons.
Several were mentioned in the article. But here is an article that might explain it even better:
http://www.fort-russ.com/2016/07/the-parallel-state-in-russia.html
Jesus, I feel dumb. Stop posting this informative stuff.
Hi Time!
and regardless of whether or not the US was involved in the coup attempt,
Russia has cornered and wonTurkey. Turkey’s will be in the Silk Road project;
Russia will be setting terms. Organic.
now imagine the effects on:
1) Russia sanctions.
2) NATO unity
3) the German multinationals
4) the stranded Polish and Baltic governments
5) dollar support
..
seems i’m wrong; early, if that
http://johnhelmer.net/?p=16253
23 min summary in the Canadian interview
Kissinger: Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world
The US is the largest debtor nation ever. Stop the military’s paychecks and see how long they continue to fight. Money is digital now. China knows how to accelerate the death of the US economy. Death of King Dollar approaches, it needs a little prodding.
Margaret,
Many like you say, the death of US dollar, US economy is finished due to debt, so on. The US will never accept defeat, that is its nature, and will go nuclear if push comes to shove.
Sergei Glazyev said this in different words years ago when he was offering concrete examples of what the US was doing to Russia at the time and intended for the future: simply erasure of the culture, people, natural and economic riches, everything. Russia was finding this hard to understand. Understood today, just not in all it’s deadly details the US planed since generations, may 8.
Russia always understood that and always resisted. What they probably found hard to understand was that the US are insane to that degree. Definition of insanity: “doing the same thing over and over again and expecting different results”.
Political scientists who’ve analyzed modern America say that it is not a democracy, but instead functions like an oligarchy. They say that ordinary people have no impact on decisions. Former President Jimmy Carter has said that ‘America no longer has a functioning democracy’.
It is clear from this years election campaigns that Americans would gladly turn away from the neoliberal, bankers policy. The most popular candidates have railed against the bankers and their corruption and the planted, banker candidates.
If Americans had any say in their government, they’d also change and resist these policies.
Sorry to go off topic
But does anyone have information on what is happening in Crimea and Donbass.
The attempted terrorism, shooting of two Russian soldiers? Thank you
If you want info on breaking news, you have to go elsewhere. Fort Russ blog is excellent source of breaking Ukie-related news.
Novorossia Today is a great source of news from Donbass!
return to scotts bit few days ago, plus he is doing a sitrep as we speak.
Excellent – agree with every word and concept, described by PCR and Michael Hudson.
The policy of self-reliance, also called “Economy of Resistance” – import substitution, public banking to launch local economy and research with interest free loans, is one of the solutions to get out from the grip of neoliberal globalization.
peter Koenig
Sorry to say this but I have never met an economist who has been right about anything.
One thing is clear economics is not an exact science
What works today – may not work tomorrow.
Russia may need to change its approach – but the Marxist ideology is what caused the downfall of the USSR and the current problems in Latin America.
Russia above all needs to keep its reserves and ensure that it does not increase its debt.
How it does this is up for debate. But the central bank has performed their role well in keeping things stable reducing capital flight and safeguarding the reserves.
I would not describe Russians economy as a neo liberal economy either – it has always been a mixed economy.
Certain names mentioned in this piece show a lack of understanding about who has influence and who does not on economic matters.
”but the Marxist ideology is what caused the downfall of the USSR and the current problems in Latin America. ”
nothing to do with the usa sanction and economic war in latin america by those same
‘patriots’ with condos in miami then…its just marxist economics….riiiight
How do you account for the difference today between the Russian and Venezuelan economies? Both economies have been financially attacked, yet the Russian economy is more resilient that the Venezuelan one. Why ?
“… yet the Russian economy is more resilient that the Venezuelan one. Why?”
Russia’s economy is far more diverse and its oligarchy doesn’t have a death grip on it as in Venezuela, over-reliance on oil revenues to finance the state being Venezuela’s #1 problem. Chavez is also to blame for not purging the oligarchs when he had the opportunity after the events of 2002-03.
The difficulty is that leaders in most countries want to take half-measures.Its difficult for them to realize (and more difficult to accept) that they must clean house totally to remove “all” the fleas from it. I’m sure its hard to sign sentences for dozens of oligarchs to go to prison or the gallows. No matter how much better it would be,and how just for the nation. But sometimes the difficult must be done for the greater benefit of the nation and its people. Yes Chavez should have steeled himself and destroyed the oligarchs that are destroying the nation,but he didn’t .And that must be a lesson for all revolutionary movements in the future. Half measures are never good enough.
It is because they’re virtually all charlatans, ‘educated’ and ‘working’ for the banksters & gangsters, who happen to control the whole (Western) system. It is very simple, though.
Well, Peter Koenig & Glazyev can be called real economists, they sure know what they’re talking about . . . You show a lack of intelligibility. if not worse.
Off the topic of the aforementioned article but also related;
It aggrieves me that article writers still use “Washington…blah, blah, blah” Let’s call the names as they exist. Washington is just as much a vassal, and a mere instrument of vassal making and management. Washington itself is owned as is London as is Rome, et al; we know that.
So why persist with such misnomers?
Unless we change the paradigm basis of our language, we are still going to be stuck in it’s connective historical meanings and its inherent outcomes.
How about we use “Deep State” that exists on earth, not physically located any where in particular, just as we use “Neocons” who exist world wide, Zionism exists world wide, etc.
Let’s get down to the source of the malaise. It’s not a specific group in a specific place we can name, they are international sub-cultures.
If we are to forge a new paradigm in which to exist and then we should be forging its language, its nomenclature.
I can give you a personal example; back in the time of the rise of neo feminism, in the ’70s, the neo feminists often randomly targeting males as misogynists. It was a fad at the time.
But the opposite, ‘misandronists’ was not to be found in the most common, or well used, dictionaries. I know as I went to a major public library to find such.
I got together with a friend, actually a separatist feminist, and we put together ‘misandrony/misandronist’ and very soon such was to be found in new editions of the well used dictionaries. We didn’t submit the word for inclusion in those dictionaries, it just happened to arrive in the latest editions soon after we coined it in a city, as in “the hundredth monkey phenomenon”. (https://en.wikipedia.org/wiki/Hundredth_monkey_effect)
I don’t read Paul Craig Roberts often as he just tells us what we already know in his own words, in the language of the extant paradigm, whereas Pepe Escobar does likewise in his brash and poetic licensed manner, but Pepe makes quite good predictions, tho’ not always do they come off. But Pepe puts forth alterations of the extant paradigm and its language. And The Saker likewise.
I’ll likely get a bunch of criticisms and I welcome them.
President Putin’s wishes for a free trade area from Lisbon to Vladivostock is all very fine and dandy in optimal geopolitical conditions. However, we are not living in optimal geopolitical conditions, we are, sad to say, living in geopolitical conditions of high tension, or even pre-war or hybrid war conditions. This being the case nations have to close their economies and become more self-reliant in what are existential threat to their existence.
It is interesting to note that this is precisely what the United States did after Pearl Harbour in 1941. I am going to be lazy and quote.
”The US war economy did not, as Keynesians imagine, stimulate the private sector, it replaced the free-market and capitalist investment for profit … in many industries corporate executives resisted converting to military production because they did not want to lose consumer market share to competitors who did not convert. Conversion thus became a goal pursued by public officials and labour leaders. Auto companies only fully converted to war production in 1942 and only began substantially contributing to aircraft production in 1943. The bombing of Pearl Harbour was an enormous spur to conversion. From the beginning of preparedness in 1939 through the peak of war production in 1944, the war economy could not be left to the capitalist sector to deliver. To organize the war economy and ensure that it produced the goods needed for war, the Federal government created an array of mobilization agencies which often purchased goods, closely directed to the goods manufacture, and heavily influenced the operation of private companies and whole industries.
The military services were largely able to curtail production destined for civilians (auto-vehicles and many non essential foods) and even for war related but non-military purposes (e.g. textiles and clothing). The Treasury Department introduced the first general income tax in US history, and war bonds were sold to the public. Beginning in 1940, the US government extended income tax to virtually all citizens and collected deductions from wages at source. Those subject to income tax grew from 4 million in 1939 to 43 million in 1945.
With such a large pool of taxpayers, the US government took in $45 billion in 1945. This was an enormous increase over the $8.7 billion in 1941, although it still fell short of the $83 billion spent on the war in 1945. Over the same period Federal tax revenue grew from about 8% of GDP to more than 20%. All told taxes provided about $136.8 billion of the war’s total cost of $304 billion. To cover the other $167.2 billion the Treasury expanded its war bonds programme, which served as a valuable source of revenue for the government. By the time war bond sales ended in 1946, 85 million Americans had purchased more than $185 billion worth of these securities, often through automatic deductions from their paychecks.”
(Michael Roberts – The Long Depression – p57.)
It is abundantly clear that the Anglo-Zionist empire is hostile to the very existence of Russia in its present form. A hybrid war is now taking place which could turn easily into a hot war at any time. Thus all the talk about free markets and free-trade are out of place and out of time. I think Glazyev is absolutely correct in calling for a mobilization of Russia’s people and resources in order to counter the Anglo-Zionist strategic threat or Russia will pay dearly.
In the late 1930s after the Nazi takeover in Germany the Communist Underground – The Red Orchestra – had penetrated the highest positions in the German government defence ministries. Warnings were sent to Stalin about the coming Operation Barbarossa but Stalin ignored these warnings. To make matters worse he ordered a purge of the Soviet officer corps in 1938, weakening Russia’s defences. Thus the Wehrmacht was able to sweep into Russia and up to the gates of Moscow, before Soviet forces could launch a counter-attack.
Russia was insufficiently prepared for war and paid a disproportionate heavy price. If necessary measures are now not undertaken, we could be in for a repeat performance.
“Warnings were sent to Stalin about the coming Operation Barbarossa but Stalin ignored these warnings. To make matters worse he ordered a purge of the Soviet officer corps in 1938, weakening Russia’s defences. Thus the Wehrmacht was able to sweep into Russia and up to the gates of Moscow, before Soviet forces could launch a counter-attack.”
I often wonder if Stalin had connection with some kind of anti-Russian entities at that time. His wife was Jewish, wasn’t she? What of him being Georgian? Does it make a difference?
Nothing to do with jews etc, he was just a bit too paranoid for the good of the country in 1938 and in general (sometimes). He created a system of goverment that could turn personal complexes into industrial complexes though the fiat of goverment order, (and personal will), but also created a deeply distrusting totalitarian environment in the states security aparatus… In essence, not only was Russia backwards industrially and culturally for 50-100 years behind the west, but it also had no reason to not be backwards politically and in leadership quality/style… I took Stalins death to unlock the genie he himself produced and to turn Russia into a more modern country not just industrially, which Stalin succeded, but also politically/leadership wise… A new generation of politicians, that was not molded by the revolutionary years of the 1917-1921 and it’s harshness, but molded by life in socialism itself, would be needed to change that leadership style of the better.
Then of course, came Gorbachov…
If you look at SSSR under Stalin through the lense of 19th century European leaders and countries (Italy, Germany, AusHung, Belgium, France etc), you will find the leaders, the countries and the styles of government not too disimilar in practise… It’s possibly the best way to look at it… That said, after Stalin, it does seem that the leaders skipped a western generation or two straight into “modernity”…regardless of what the western propaganda will tell you.
That the US uses the international financial system as a weapon of war, everyone knows. The chief architect of recent efforts has written a book explaining how the US Treasury does it.
That globalization benefits the elite but can harm others is widely recognized even among mainstream economics, and now even the likes of the IMF and World Bank.
What Russia should do is less clear. Certainly this article is less than clear.
Self-sufficiency is costly. Others seeking greater autonomy within the global economy, such as China, certainly don’t think it a cost worth incurring.
This is true of finance as well as goods. To rely wholly on domestic savers to fund capital investment is a bit drastic. Surely it is better to look first at the feasibility of capital controls?
On basic services, there are alternatives other than subsidy versus foreign monopoly. And does subsidy not risk a misallocation of resources?
I’m not sure how it is possible to fix both the exchange rate and also the interest rate. Those who try, including China, get into a tangle. If the exchange rate is fixed, the interest rate has to adjust to attract the necessary capital flows. If the interest rate is to target domestic prices, the exchange rate has to be allowed to float.
As far as I know, neoliberals do not deny that money is money, however created. This is separate and distinct from the question whether a given rate of growth in the supply of money is inflationary, disinflationary, or deflationary.
There seems to be a conflation of “money” and “credit”. Also, a notion that the central bank can conjure real resources from nothing. Also, that the interest rate is not a price like any other that provides information necessary for the allocation of resources (in this instance between the present and the future). This new monetary theory seems to rely on wishful thinking.
The coherent proposal the authors make, as I understand them, is that all financial intermediation can be nationalized. They don’t say why this is a good idea and whether it is better than all the alternatives.
If Russia is to defend itself from economic warfare, it has to base its policies on sound analysis. The analysis here appears to be at best half-right.
If Russia pulls this off, I want to put my capital into one of their private banks. If that bank fails, bankrupt it. The return I was after I got in Russia because failure kept the money honest. Western capitalism is just a skimming operation and I lose wherever I put my wealth.
All wars are bankers’ wars.
The bottom line for international finance is simple – the creation of money in the pivate domain, which is loaned into the public domain at interest.
Government treasury departments write bonds against workforce potential (resources) and private bankers, under licence from the government, create the public currency (out of nothing) in the private domain, which is loaned into the public domain at interest, upon the government’s promise to pay back the money plus interest even if it has to tax its population to death or sell the soil out from under its population’s feet to do so.
If any country tries to buck the system the international financiers will … go to war. All wars are economic; they begin with a seige (sanctions), then if the seige doesn’t do the needful, the bullets and the bombs start flying.
In August 1914, afraid that ordinary depositors would withdraw their funds from their high-street banks and collapse the national banking system, these international bankers ordered the British Government to create debt free money in the public domain!
The government duly complied, and rolled the debt-free-public-domain-currency-press. The notes were signed by the secretary to the treasury at the time, John Bradbury, and became known as Bradbury pounds. In fact, the British government was in such a hurry to do the international bankers’ bidding that the initial run of notes were printed on one side only! No kidding.
Naturally, when the potential banking crises had been averted, the internatonal bankers told the British government to stop issuing debt free public currency, which, of course, it did, with a touch of the forelock and the shipment of its innocent youth to the slaughterhouse of northern France; Bradbury pounds were consigned to the national memory hole.
Adolf Hitler, duly elected, and nobody’s pawn, probably didn’t know about the Bradbury pound and the fact that the British, whom he so much admired, were willing slaves to the moneymasters and their debt based money system. When he took the fight to international finance … sixty million died … and the killing continues, and will continue, until governments around the world say “no” to this egregious crime angainst humanity.
International finance wants war, war and more war.
Russia, seeks to extricate itself from the international financiers’ death grip while honouring the agreements entered into by its former leaders – but the bankers are not fooled. Russia and such other countries as would trade with Russia will be hard pressed to live and go about their business in peace.
When a bank extends a loan, the customer receives a deposit of money and undertakes to repay it at a later date with interest. The interest is the price for the use of the money. The story you propose is that the customer then lends the money to the government, which in turn promises to repay the money with interest. The government is usually the better credit risk, so has to pay less in interest. So what you are suggesting is that an individual pays a higher rate of interest to borrow from a bank in order to lend to the government and receive a lower rate of interest. There is something wrong with this story.
On the financial crisis of 1914, you will find a more … measured and scholarly account in “Saving the City” by Richard Roberts. As I understand, the crisis was probably triggered by failure of Continental borrowers to repay their short-term bills as the lurch to war disrupted the normal functioning of the international economy. The money markets ground to a halt (analogous to what happened to money markets in 2008 after the sub-prime mortgage market crashed). It is not obvious how this financial market crisis would be solved, not by the extraordinary financial measures the Bank of England and the Treasury took, but by “shipping innocent youth to the slaughterhouse of Northern France”. Is there not something excessively melodramatic and tangential about your story.
As for the second world war and sixty million dead caused by heroic Hitler standing up to the money men…
Alex, I would never suggest that anyone take on debt. Living within one’s means is the principle way in which an individual can oppose those who would enslave us all.
That the scholarly Richard Roberts has the wrong end of the stick in is hand is self-evident from the title of his book ‘Saving the City’. The real story is not about ‘a repayment crisis’ on loans spun from the City Of London money-go-round, it is about the real economy and the real fruits of honest labour deposited in high-street banks: it is ‘a deposit crisis’, caused by fractional reserve banking (the thin end of the usurers’ wedge – no pun intended) and the fact that deposits are not where they ought to be, that is, in the bank vaults.
It would appear that the author has further failed to grasp the significance of the remedy to this 1914 financial crisis in his scholarly work – Treasury Notes: money created free of debt on behalf of the governed and backed by no more than their promise of future poductivity – money backed by real mettle, one might say.
All explained in six minutes: https://www.youtube.com/watch?v=ZsXI38ey-nY There’s really nothing complicated about usury. It is the most pernicious evil.
Academics! Tisk. Who needs ’em?
As for “heroic Hitler standing up to the money men …” international finance is permanently at war with this goodly unverse – type ‘Judea declares war on Germany’ into a search engine of your choice and read through the offerings, here’s one http://www.gilad.co.uk/writings/judea-declares-war-on-obama-by-gilad-atzmon.html
It’s all about the money.
The rumour is that Executive Order 11110, which circulated (debt free) United States Notes alongside Federal Reserve Notes was what did for JFK. I’m inclined to think there’s probably something to the rumour. Saddam Hussein didn’t know what he was getting himself into when he sold Iraqi oil for euros. At least Muammar Gadaffi did know what he was up against when he moved to create the Pan African Gold Dinar.
Vladimir Putin and the SCO must hasten slowly.
Dhunidas
You say that you didn’t suggest anyone take on debt. Yet that is the way banks create money – the “private” money you say is invested in government bonds.
“Saving the City”: If you listen again to the youtube clip you attached, you will find that your source agrees that the measures the government took to avoid a banking collapse did indeed save the City. It’s always worth reading scholarly studies even if you decide in advance that you will disagree with them.
I like “money backed by real mettle”. Is that one of your own? You do know that all government debt is backed ultimately only by the government’s ability to raise taxes?
If banking were all about simple usury, the cost of borrowing would not have fallen consistently with the ever greater efficiency in fractional banking. Financial intermediation is a service that increases the efficiency of the real economy. The rate of interest is the price for that service. In a capitalist economy the service is provided in the main by the private sector – by banks whose motive is to maximize profit. This is the weak link. The banks have a motive to extend too much credit. And we have an interest in avoiding a banking collapse, which would cause the economy to grind to a halt. Moral hazard is meant to be minimized by regulation. It clearly isn’t. Again and again, there are banking crises.
You refer me to an article which merely demonstrates that Gilad Atzmon is capable of utter tosh.
I agree that the US does whatever it takes to defend the role of the U$ in the international economy.
The link to Atzmon was one of many links thrown up by the search on ‘Judea declares war on Germany’. The point being made is that ‘Judea’ declared war on Germany in 1933. Judea, presumably, since there is no such country, being a euphemism for Jews – and ‘Jews’ being a broad brush misnomer for the supra-national financiers, whose interests Hitler threatened, rather than the Gilads and the Esthers who cobble and sew for their daily bread.
What percentage of the population is aware that ‘the Jews’ declared war on Germany in 1933? I think the vast majority of persons would be astonished to learn this. One would hope a few might ask which Jews, and why would ‘the Jews’ do such a thing in 1933.
Whatever else one might say about Gilad Atzmon, it is to his eternal credit that he renounced the ‘religion’ and and the ‘nationality’ foisted on him by his nearest and dearest at birth – it is always worth remembering that we come into this world without papers.
Commercial and investment banking are qualitatively different from private central banking. The fractional reserve lending of commercial banks is reprehensible; loaning out something you haven’t got is plainly not right and bound to end in tears. Investment banking is a financial curate’s egg – there’s no such thing as an egg that’s ‘good in parts’, a bad egg is a bad egg and investment bankers are the obsequious lackeys to the private central banking system which operates as a money creation cartel to the detriment of humanity.
If the creation of money rested where it ought to, that is, with the government, that is, in the public domain, there would be no interest to pay on any money created because the money would be created debt free – we would owe the money to ourselves, if you like, and we are clearly not going to charge ourselves interest, that would be ridiculous.
Publicly created debt free money probably obviates the need for taxation, but if taxation were necessary, some form of land value taxation would probably be the equitable and socially beneficial way forward.
No doubt ‘Saving the City’ contains much worthwhile information regarding the govenmental mechanisms, Banking Acts and the like, by which means the private central banking fraud is perpetrated on an unsuspecting public but in failing to highlight and shout from the rooftops that the British goverment created debt free money just over a hundred years ago the author places himself elsewhere than in the service of his brothers and sisters in servitude. Maybe he should come down from is ivory tower and smell the hoi polloi.
Thanks for appreciating the ‘mettle’. All my own work … but standing on the shoulders of giants.
Publicly created debt free money probably obviates the need for taxation, but if taxation were necessary, some form of land value taxation would probably be the equitable and socially beneficial way forward.
No about taxes being unnecessary.. Yes, georgist taxes on land rental value is correct economics. Rents are the taking of unearned income – no economy can stand this sort of “taking.”
Debt free money is recalled by taxes. Debt money (bank credit) is recalled by its debt instrument.
They circular flow for debt free money is to pay for transactions, then get recalled in taxes, then spent out again by government, usually into inelastic markets.
Debt money as issued by private banks, comes from nothing at moment of hypothecation. When this credit is returned to the ledger, it disappears. What came from nothing returns to nothing.
Earlier a commentor was talking about interest being the cost of a loan. Please consider that private bank credit comes into being with keystrokes at a bank. If a house loan doubles costs, then clearly that is usury – the taking of something for nothing.
Bank credit is actually usury seigniorage, as the principle does not decline in the first accounting cycles of the loan, but instead it passes through to banker’s ledger. From there, it gets first use, buying from the public their goods and wares. What comes from nothing extracts something – the life energy of a population.
Debt free sovereign money is representative of wealth and productivity; bank credit (debt money) is a claim on the future.
Each money type has very different behaviors – they are apples and oranges.
http://www.sovereignmoney.eu
MEFOBILLS
I always find this sort of thing confusing.
You say no taxation is necessary. And you say publicly-created debt-free money will be recalled by taxation. Which is it?
Is the publicly-created debt-free money just notes and coins?
The circular flow you describe: the government issues currency to purchase goods and services. It receives the goods and services. The sellers receive currency. The government then takes the currency back in taxes. In what way is this not expropriation?
You say commercial banks create money at the stroke of a key. What they do at a stroke of a key is enter into a contract with the borrower whereby the borrower gets the use of the money for a period and will then repay it with interest. The interest is the price for the use of the money. The alternative is for everyone to budget within their current income (of publicly-created money which the government will take back). If they have too much, they keep it under the bed (until the government takes it back). If they have too little, they have to wait until someone lends them some – which is a less efficient and more costly way of doing what commercial banks do. How inefficient such an economy would be at identifying and exploiting investment opportunities, and investing savings.
You may say the government can do all this. In other words, nationalize the banking system, which I’ve already said is an option. It is still a banking system, with narrow and broad money. It has nothing to do with publicly-created debt-free money – issuing currency for the government to buy goods and services and taking the currency back in taxation (expropriation), or distributing currency from a “helicopter” (eventually inflationary).
Hello Alex
I was correcting Dhundis in the first paragraph when he said taxes would probably be unnecessary, A certain kind of tax is necessary. That is rent taxes. Think of it like a cancer that needs to be cut out. Rent taxes tax away unearned income. Today, finance insurance and banking have teamed up to create bank credit. Over 80 percent of the money supply is hypothecated into existence against land. Of that money supply 97 percent is bank credit. Industry is where we produce, yet the money supply does not reflect industry.
Rent seeking is rife in the economy today, the takings need to be taxed. Start with Georgist taxes as necessary to any rational economic plan.
Debt free money, to have velocity, must be taxed out of existence. This is what happened in coin history and also with Talley sticks. Sometimes the sovereign would re-melt and reissue coins to pull them out of supply, using the law to make them worthless.
Debt as money fully came into being in 1694 with advent of bank of England. A good way to think of this money type is that it is a negative, where its mirror, the debt instrument is a positive number. When they get together they cancel out.
This is why a bank credit economy is constantly under drain pressure. As soon as loans stop, then the economy continues to drain, and will go into recession/depression. To cancel the debt instrument, a SWAP may happen, where housing, land, patents, are given up in trade.
Nowhere did I say nationalizing the banking system. Banks can remain private, but the money itself at source should be spent into existence by Treasury under law. Treasury must also have “loans” ideally loaned on inelastic markets, to help drain if there is inflation.
Money’s true nature is law.
When human credits and debt relations cancel, it is money that is the vehicle for canceling said relation. Either a good or service can be returned to cancel a debt/credit relation, or money can be paid. Money is a stand in, but is not itself debts or credit. When you return the borrowed lawnmower, the unstated credit/debt relation is cancelled.
That bankster’s have hypnotized everybody to think that money is credit to be created on a double entry ledger, with land attached as collateral is a wonder to behold.
With regards to publicly created money being tangible notes and coins, then NO. Money should have the same attributes whether is is fluxing intangibly as ink on a ledger, or whether it is in physical form.
Our bankster friends like to take their usury in SWAPS, swapping unlike items to their benefit. For example, taking land and real resources in exchange/swap for canceling unnatural ;exponential debts.
Russia has learned the hard way, that swaps become usurious with an exchange rate collapse, especially if debts are denominated in a foreign currency. Exchange rates can be collapsed purposefully, witness George Soros.
Alex, you seem confused on money mechanics when you get a loan at a bank. Maybe this will help: Fractional reserve debt spreading banks DO NOT INTERMEDIATE. They create their credit.
1) you sign a new debt instrument created from nothing 2) Banker goes into the back room and creates new credit from nothing 3) your debt instrument is purchased with this new credit 4) The credit is then “usually” placed in your checking or savings account. This is now a liability to the banker and an asset to you.
The only thing real in this transaction is your life energy.
OK, banks do not intermediate. Has you savings ever declined because somebody else borrowed your money?
Since the days of Salamanca, interest on money was considered OK due to foregoing of purchasing power and opportunity. Think carefully about hypothecation mechanism for debt creation then bank credit, is keystrokes, and then it becomes abundantly clear, you are being duped into slavery. Banker risk is socialized, so further the interest becomes more usury.
Debt free wealth money that is saved by labor and intermediated, then represents past wealth generation. Interest on this form of saved money can be defended as non usurious.
It must be volume and channel controlled, however – as should all money supplies, as a public lawful good.
Sorry about blowing up this thread. I consider it vitally important for future of humanity, that Russia becomes fully Sovereign, including having its own money power.
MEFOBILLS
I do admit to confusion about what you say (and also garbling what you say and mixing it up with what Blue and Dhunidas have said).
Georgism, I thought, was a proposal about taxation. This I understand.
What is the source of your comments on money? The moderators will despair if we prolong this, so could give me some references?
As a footnote: do you really think Mefo bills were some unique solution to financing investment? They look to me like a cross between T-bills and commercial paper.
It is still bizarre how the bankers will have control over especially powerful countries such as UK and US unless they are willing parties themselves. I mean, in what way do these bankers orchestrate wars? The only way they could do that is by tricking nations, even as serious as war is, nations should not jump for war that easily and be trapped for war. Besides, bankers are in small numbers and easy to get rid of compared to a nation population. I am being too logical, but then why not?
I want to add to this, bankers understood the weakness of humans and fall prey to addiction. The more you entangle and make the banking system complex, the less people demand details or clarity (for example the whole subprime issue) because they are already trapped by addiction. The bankers set up also all the methods that leads to entrapment. Until today, nobody challenges bankers.
Saker, sorry can you post this one and delete the previous? Thanks.
It is still bizarre how the bankers will have control over especially powerful countries such as UK and US unless they are willing parties themselves. I mean, in what way do these bankers orchestrate wars? The only way they could do that is by tricking nations, even as serious as war is, nations should not jump for war that easily and be trapped for war. Besides, bankers are in small numbers and easy to get rid of compared to a nation population. I am being too logical, but then why not?
A recent Forbes article has claimed economists make a fatal error in their assumptions. That the banking/finance system is intermediary, when it is actually the generator of money.
This has lead to the ‘virtual economy’, completely divorced from the real economy.
I could be wrong, but your criticism seems to be predicated on the ‘intermediary’ assumption.
The decision on how to create money is therefore political. That appears to be the essential point being made here.
Eimar
I think you are making an important point, but framing it the wrong way.
Commercial banks are not the only financial intermediaries, but they are (more or less) the only ones whose liabilities are used as money. The amount of money they can create is constrained by their need for central bank money in clearing their accounts with each other each day and the price at which the central bank is willing to transact.
The institutional arrangements are indeed in the end political – as I tried to suggest in saying that the banking system could be nationalized.
A nationalized banking system would still face the same constraints – too much money is eventually inflationary, and too little is eventually deflationary. Nominal claims on real assets cannot conjure real assets out of nothing. At any given time, there is a limited amount of real assets to allocate between consumption and investment.
The creation of ‘money’ is a sociopolitical question to be answered in public debate. How are we to do business with one another? We need a medium of exchange in which all can have confidence. When ‘money’ is created in the ‘private domain’ rather than in the ‘public domain’ an obvious problem arises – the man creating money has an economic advantage over the man creating chairs, cutting hair, growing onions, writing poetry etc.
The key element in the exchange of goods and services is trust in the ‘medium’ facilitating the exchange. No man in his right mind would allow his neighbour to control the supply (and cost) of the medium through which he conducts his daily deaings with the world.
It is important to note that the ‘medium of exchange’ need not have any intrinsic value; the ‘tally stick system’ makes the point: it is said that the British empire was built upon this ‘money system’ of notched sticks, which continued for some 700 years until the modern era of private central banking was ushered into existence with the creation of the Bank of England – a private enterprise with a calculated deceit written into its very name.
And herein lies the rub, the creation of money in the private domain can only come about with the active collusion of public officials.
While the creation of the Bank of England in 1694 is buried beneath 300 years of obfuscation the creation of the Federal Reserve System in 1913 is immediately amenable to an investigation of its origins.
The creation of the pubic currency in the private domain, whether it be dollars, euros, pounds or anything else, has not occurred by accident nor without malice aforethought. The political process is bought and paid for by the bankers – in ‘outsourcing’ the creation of money from the public domain into the private domain by decree, our public officials act willfully against the public interest.
Edward G. Griffin does an excellent job of bringing the origins, purpose and effectiveness of the Federal Reserve System to light in his book ‘The Creature From Jykell Island’ – he talks about it here https://www.youtube.com/watch?v=lu_VqX6J93k He’s a bit windy but, hey, no need to rush the blindingly obvious.
I do not share Griffin’s view on the necessity to link the medium of exchange to an extrinsic ‘value’. The value of a public currency is the intrinsic value a nation places in itself though the ‘real economy’. The most important ingredient in any form of public currency is trust, followed by fungibility – goods and services will find their own values and ‘society’ may, at its discretion, determine and control the value of some ‘essential’ goods and services through public debate and agreement.
If, with a bit of aplication, a man of average intelligence cannot understand ‘economics’ then the chances are that his financial adviser is trying to pull the wool over his eyes.
The creation of money is a simple matter, but its simplcity is seldom addressed. The simplicity allows for a stunning sleight of hand, which ‘fast one’ is never brought to the attention of the mesmerised public by the endless parade of mesmerised pundits, politicians and wearisome worthies in the mainstream media spotlight.
The simplicity of the ‘money creation con trick’ is never addressed because one needs a brain wash to see it. I remember a moment in my indoctrination programme: I was sitting with my peers in an ‘economics class’ when the question was posed: “Should we pay off the national debt?” The class sat mute … I shouldn’t speak for my peers but I’m guessing that they, like me, were all thinking ‘yeah! dummkopf’ … but nobody was prepared to stick their neck out and say ‘something stupid’ … so, after a suitably protracted silence for serious deliberation on this matter of national importance we were advised: “No! If we just pay the interest on the national debt we can roll the debt on ad infinitum.”
Laughable! Or it would be if it wasn’t so serious. Apparently, a joke doing the rounds of fascist circles in England during the 1930’s was: ‘What’s the Jewish national anthem?’ Answer: ‘Onward Christian Soldiers!’ That the fascists were concerned with the issue of money as debt is never mentioned by the court historians, fascism is all about jack-boots and thuggery for them.
The peaceful co-existence of human beings is anathema to private central banking. The essay’s reference to ‘hewers of wood and drawers of water’ is the nub – the creation of money as debt is a system of slavery.
Dhunidas
I think you are talking about a genuine problem: how to determine the optimum amount of money. Your analysis I think entirely misguided. It would be way beyond the call of duty for the moderators to wade through the necessary debate between us, so I can’t substantiate that, and you’re welcome just to blow a raspberry.
On the tosh about Judea, I will simply be sententious and sanctimonious. It is easier to peddle prejudice and simplistic explanations than do the hard work of trying to decipher what happened in the past.
I’m still chuckling over “money backed by real mettle” (simple pleasures). It deserves to make it into the economic textbooks.
All this stuff about “Jews” is best approached with a ten-foot bargepole.
There’s nothing “tosh” about the headline ‘Judea declares war on Germany’. It appeared on the front page of the Daily Express, 24th March 1933. What is problematic about questioning the word ‘Judea’ in the headline? Or questioning the background to the headline? Facts do not lie.
Feel free to approach “all this stuff about Jews … with a ten-foot bargepole” it’s better than no approach at all. Please come forward with an open mind.
No aspect of the present or the past should be beyond our scrutiny. We must watch and wait. We must search the archives for evidence of who said what to whom, and who did what to whom. I have posted this link previously http://inconvenienthistory.com/archive/2014/volume_6/number_3/the_great_holocaust_mystery.php Please, Alex, decipher the prejudice. The essay should be required reading for every twelve year old – to inure their young mind against the trauma based psychology of the Holocaust industry that runs rampant in Western school rooms. You do know it is government policy to lie about everything – economics, health, history, physics, and everything sacred – especially to children, they’re so, er, imressionable. A very soft target.
Thinking for oneself is the new black. Get on it!
And we must retain a sense of humour lest we become overwhelmed by the mountain of lies: What is the definition of a Holocaust denier? Someone who has looked at the facts.
Too hot for you, Alex? No problem. You’re in good company. Well, you are in the largest company, for sure. I will not be cowed by the unthinking herd into not calling a spade a spade. In fact, I’m inclined to call a spade an effing shovel – I am sick to death of the lies.
Truth is unifying. Well, Truth with a capital T is indivisible Oneness, but the myriad small illusiory truths of the world in which we find ourselves can only be unifying. I picked-up this line ‘truth is unifying’ from Dr Judy Wood, God bless her; it appeared to be a throw-away line but it struck me deeply for possessing an inherent wisdom.
‘AngloZionist’ is the designated boogeyman on this site and the the term is fully defined here http://vineyardsaker.blogspot.co.uk/2014/09/anglozionist-short-primer-for-newcomers.html Not much to disagree with in my opinion, except perhaps that the “top 1%” is more likely one tenth of one tenth of one percent, or fewer.
Everyone is responsible and no one is to blame. The blame game creates a victim mentality. I have no idea why the victim position is so attractive to so many, but it seems that it is. I do not blame anyone for anything. My experience is not one of victimhood. Not any more.
Zionism is a new phenomenon, a Jewish phenomenon. That it should inveigle world affairs is no surprise – the ‘Jew’ has three thousand years of exilic organisational experience under his belt.
Do not worry about any of it. There is a Divine Plan. It reveals itself in every passing moment. Jews, the tribe, clearly play an important part in this passing show, so too, mass ignorance.
Believe none of what you see and let the surface noise go in one ear and out of the other. Think about the God of your understanding – only God is Real.
“The affairs of the world belong to the One who created it. Men strive to mould it nearer to their hearts’ desire – without first examining the condition of their hearts. The One who created it makes the little men – the Prime Ministers and the Presidents – strut on the stage and wave their arms and shout, putting their lines into their mouths. The same One sits in the audience with the rest of us, pretending surprise as the scenes and acts unfold … Truth is not just beyond the horizon or beyond any number of horizons, and Reality is not just round the next bend in the road or round any number of bends; all journeying unfolds but variations in pattern of the same earthscape (world without end). Journey’s end is in the dust of obedience at the feet of the Perfect Master. Only from pure dust without a trace of humus is there no possibility of the further putting forth of the green shoots of desire when the rain falls.”
Francis Brabazon, page 7, ‘The East-West Gathering’.
There is no more a real national debt in a fiat system than there is a school debt of grades awarded to students who do well on test, homework, and projects, or league debt of points given to teams who score goals, or tape measure debt incurred by measuring out yards of cloth.
The question of how grades or points should be created and distributed, and how long a standard inch should be has nothing to do with the reality which they are used to measure. Money, properly considered, is simply a measure of real current and expected wealth in a real economy.
Blue
Surely there is a national debt. The question is how the government services it and pays it down. In normal circumstances, by taxation and more borrowing. When these become difficult, by “printing money”. At the limit, this causes hyperinflation and a reversion to barter. Or the government defaults.
It takes a bit of a leap to understand the core of MMT and sovereign fiat money because we have been so conditioned to the standard narratives.
There is no need at all for taxes to pay anything, and this has been stated by various bankers and government people — I can’t find the reference at the moment.
All money comes from the government — it is a legal instrument, supported by the need to pay taxes and settle debts (including fines), as well as general acceptance for commerce. L. Randal Wray has a number of lectures about this, as do Stephanie Kelton and others at UMKC economics blog (New Eonomic Perspectives), and Bill Mitchell.
The government has no need to borrow since it can produce fiat money at will. All US money must come either from government spending or outright giving money or loaning money to the private sector. Without ‘debt’ or so-called ‘deficit spending’ the private sector would have no money. The ‘debt’ might just as well be called ‘private savings’ or ‘money in circulation’ or ‘liquidity’, and is nothing like debt owed by one party to another n the private sector or state sector (which can not issue fiat money).
A sovereign fiat government can never be forced to default because it is the sole issuer of currency and can always issue more. Inflation can be a problem, but hyperinflation has always been a fundamental problem with an economy, not fiat currency.
Back when I was the ‘dungeon master’ of Dungeon & Dragons games, I created the games, the terrains, the monsters, and the ‘gold pieces’ the players found by defeating orcs or bugbears. I of course had no need to borrow any of those — I could create it all on the spot, in whatever nature and quantities I chose so as to make an interesting game. That meant monsters who were not too tough or too easy, interesting landscapes, plots, and non-player characters, and ‘treasures’ which neither too rich nor too stingy to keep the players’ interest and make the game fun and work. If I suddenly handed out a zillion gold pieces for nothing the incentive to go adventuring would vanish, and the player who saved up his gold to buy a new sword would be upset, and those engaged in trade, buying and selling, would have no basis to do business, as inflation rose, and their make-believe factories could not produce enough to meet demand. I was never ‘in debt’ to anyone — I just created gold and monsters as I wanted to.
D&D is a role-playing game, made of fantasy and abstractions. The world we live in is less abstract, and yet largely made of abstractions — derivatives and deficit budgets being only at the more abstract end. Yet, even real production is caught in the web, where banksters ‘make money’ by destroying real wealth, and productive utilization is at only 80% while many, many people are unemployed or underemployed, and most of the money is being sat on or speculated on without ever being used to buy tangible things, while many people go without, and investment in real things has gone down the tubes.
National debt is no more real than the gold pieces a player saved to buy his new sword. In D&D the sword is not real, while in our world tangible goods can not be created from just thinking about it (although even some of that is being changed with the ideas about ‘intellectual property’). If you went to the treasury and said you wanted the million dollars the bills in you pocket represented, they would take the money, shred it, and give you another stack of a million dollars, or just a treasury check you could cash at a bank, or credit your bank account. For convenience they keep track of all these transactions and how much currency they issue, and how much tax they collect, but they don’t need to. As dungeon master I never kept track of how many gold pieces were around, or how many monsters — I just paid attention to how well the game was going. My function was to make the game work well for the players.
In terms of our economy, there are physical constraints such as land, crop production, minerals, factories, education levels, and so on, but clearly these are not optimized for efficient production or used well, and we could all be living much better than we do, so that is not the limit we are running into, but rather the abstract systems based on politics, greed, power, ego, unfair distribution of wealth, and the misshapen concepts of economics extant — which is destroying real wealth so that a few can have so much more abstract wealth compared to others.
Our actual national debts and deficits are those of ethics and morality, intelligence, knowledge, human values, and democracy.
Blue
“It takes a bit of a leap…” Of course, I may just be slow (I am). Equally, this could just be gobbledygook (it is).
“There is no need for taxes to pay anything.” “All money comes from the government — it is a legal instrument, supported by the need to pay taxes…” So… no need to pay taxes, no need for money?
“All money comes from the government”. Is this a prescriptive definition? It certainly isn’t descriptive. Most of what currently serves the purpose of money is not government issue.
“The government has no need to borrow since it can produce fiat money at will.” The textbooks tell us that the government can finance its spending by some combination of taxation, borrowing, and printing money. You say that the government needs only the last of these. You say that it can use the printing press to finance its own spending (i.e. purchasing goods and services from the private sector) or it can use the printing press simply to give money to the private sector.
I’m struggling to picture how this works.
The government prints bits of paper and exchanges them for real goods and services. And those who accept the bits of paper do so because they can exchange them with someone else for real goods and services… And bad luck on the last in line who asks the government for something back in exchange for the bits of paper – as you say, all the government will give them is more paper. Someone has won here and someone has lost. The someone who has won is the government. It has extracted real resources without paying for them. This conjuring trick, fortunately, has no place in the real world.
Except – you say that it does: “A sovereign fiat government can never be forced to default because it is the sole issuer of currency and can always issue more.” You say this because you think it has nothing to do with hyperinflation. You assure yourself that it is “a fundamental problem with an economy” not with “fiat currency”. You can tell yourself that, but it doesn’t make it so. Hyperinflation is certainly a fundamental problem with an economy – the fundamental problem is that for whatever reason (civil strife, defeat in war…) the government is no longer able to borrow or tax, and has to rely entirely on printing money. If citizens can avoid tax, and refuse to lend, they can also do without the government’s currency (as has been demonstrated in episode after episode).
Alternatively, you say the government can just gift money to the private sector. How? By “helicopter” (i.e. at random)? Or first come, first served? And be sure to come early and come often? Or is it to be rationed? How is the government to know how much to distribute and how much to each?
Money and finance are inventions that make it easier to trade goods and to invest (trade between the present and the future). It is the oil that allows the machine of the real economy to run smoothly. There are ways it can go wrong. You have to be careful to identify its flaws correctly, otherwise your reforms (your MMT) risk causing more damage than the flaws you seek to remedy.
I am sure that you can tell the difference between a computer game and real life.
It’s important to see the difference between exogenous and endogenous money (and also M1, M2, M3, etc.). ‘High powered’ money is from the government, and all other money depends on that — every other means of exchange is a commodity, unless banks are given legal authority to mint money, which is not the case now.
Steve Keen does talk about the importance of endogenous money (created within the private sector) but that has to balance with their reserves at the fed. Warren Mosler may the best one to explain this. Actual money — not an exchange medium, commodity, scrip, etc. must come from the government to be legal tender, valid for paying taxes, for example. The cash you get from a bank says ‘Federal Reserve Note’ — it’s not a private bank note.
Weed need money, or something similar, as a means of exchange, but the government does need taxes to operate. All taxes paid in dollars (the only legal mode) must first be created into existence by the government, and since it can create as much as it once it obviously does not need dollars from anywhere else — those it previously created.
It’s like a teacher never needing to collect As or Bs or Cs from students to hand out grades after a test — he just creates the grades and can never run out. A teacher may grade too easy or too strict, and mess up the class and students incentive to study of course, but that’s an entirely different consideration from needing to collect grades to give them to other students. If he hands As out too easily he can create a sort of grade inflation.
The amount of money the government should create depends on the economy, and how much money is around which can reflect real production, and be available to for new enterprises or investing in productive capacity, as well as balancing peoples’ attempts to buy with what the supply of goods are. There are real constraints for governmental economic and currency policies, but needing to collect money in taxes is not one of them.
Government can spend as money as it chooses into the economy, but it’s foolish to buy up all the goods people need, which would lead to a price rise, and it can’t buy more of any one good than is being produced.
Hyperinflation:
see http://bilbo.economicoutlook.net/blog/?p=13834
Printing money does not cause inflation
Posted on Thursday, March 17, 2011 by bill
Regarding the US civil war, which helps understanding the issue he says,,
“It wasn’t the printing of the currency notes that was the problem. It was the fact that there were not enough real goods and services available for sale in relation to the rate of growth of nominal spending (on the war effort) that was the problem.
There were additional issues – such as counterfeit notes pushed into the Southern economy by the North and ultimately accepted by the Confederacy as legitimate tender.
But the supply problems were endemic.”
http://www.theatlantic.com/business/archive/2012/03/the-hyperinflation-hype-why-the-us-can-never-be-weimar/254715/
The Hyperinflation Hype: Why the U.S. Can Never Be Weimar
A thorough explanation:
http://www.economonitor.com/lrwray/2011/08/24/zimbabwe-weimer-republic-how-modern-money-theory-replies-to-hyperinflation-hyperventilators-part-1/
Zimbabwe! Weimar Republic! How Modern Money Theory Replies to Hyperinflation Hyperventilators (Part 1)
There is a difference between inflation and hyperinflation, as there is between a fire and an explosion with some different mechanisms at work.
If we look at inflation we can see where much of it — the disconnect between stable price and goods to buy — is the result of the draining of money from the producers (working class) towards capitalists. At this point the working class and manufacturers are seeing debt deflation while the banksters are seeing inflation — rise and bubbles in stock prices for example. There is also price gouging, such as in pharmaceuticals. Deregulation is a major cause of this. Interest is a big cause of inflation — excessive interest where the opportunity cost of loaning money is not covered by return of investments from increased production and/or efficiency. The rentier and financial classes get money without producing commensurate real value.
All of this tends to get rather complicated the further one goes into it. Understanding Georgian economics and rent increases as population and trade centers grow, for instance, along with monopolization of desirable areas of land, is handy when looking at growing divides in wealth, but it takes some time to get into that. Marxian theory is itself voluminous, even without getting into new Marxian thinking and all the distortions and perversions of it claimed by those used his name (such as Soviet state capitalism). Minsky is a study in itself. And none of those include the standard classical or neo-classical economics taught, to the exclusion of others, in virtually all the universities and texts for the last decades. MMT is not actually prescriptive, but describes what actually happens (as Mosler, especially, points out, and Hudson describes with his extensive historic examples). This is theory in the sense of ‘an explanation’ to help understand what goes on — while avoiding the political ideologies. I started with studying what MMT material I could find — darned little of it when I started — and picked up more as I went into it to better understand, and see what the prevalent myths were about at their roots.
If you explore Billyblog (Bill Mitchell), Steve Keen, Warren Mosler, and Neweconomicperspectives.org, you will fairly rapidly get a good basic understanding, however. The last blog, from UMKC economics department is a major source and center of this material. The videos from these people are excellent. A key understanding is that wealth is real, money is just a measurement, accounting tool, and legal fiction.
BTW – off topic — an aside about the Trump comment the Democrats and liberals are saying was a threat to use violence: we just went through Obama appointing a justice to SCOTUS, and the senate not even voting him down but refusing to even hold a hearing on accepting him. Obviously political forces (such as the ‘2nd amendment folks’ are capable of blocking an appointment with no violence at all. Maybe this is what Trump was thinking of — but with him and his lack of coherent speech it’s hard to know for sure what was flitting though his mind. Still, for the liberals and Clinton camp/media to immediately think in terms of violence is fairly characteristic, I think.
Blue
If the moderators can bear it, I’d like to say what I find confusing in what you say, and what I think plain wrong. You can then (again, if the moderators can bear it) put me right, or just sigh and wonder at my obtuseness and move on.
The distinction between different definitions of money is indeed important. High-powered money is a very small proportion of the total money supply in any advanced economy. It is therefore impossible for “endogenous” money, i.e. money created by the private sector, to “balance with” the banking system’s reserves at the central bank (which are merely required for daily clearing – in some countries there is no reserve requirement).
When I pay my taxes, the amount comes off my pay cheque – my employer transfers a sum to my account and a sum to the Revenue’s. No requirement to go to a hole in the wall to get cash.
“Actual money” not a means of exchange? “Money” is whatever is used as a means of exchange, store of value, and unit of account. Pretend money is just not money.
The illusion that the government can persist in purchasing real goods and services simply by printing money is one I have already tried to dispel. It is not enough merely to repeat it.
“The amount of money the government should create depends on the economy” – well, quite. This is precisely what we are debating! How create just enough?
“…and how much money is around which can reflect real production, and be available to for new enterprises or investing in productive capacity,..” This sounds very like the perennial “real bills” doctrine, which motivated the Fed to help turn a market crash in 1929 turn into a full-blown depression. Money is money. It is fully fungible.
“…as well as balancing peoples’ attempts to buy with the supply of goods…” Again, quite. This is what we are debating! Simply restating the problem is not the same as offering a solution.
“Government can spend as money as it chooses into the economy,” No it can’t – which brings us on to inflation and hyperinflation.
“Printing money does not cause inflation.” A bold statement, but false. – As you yourself go on to confirm (while contradicting yourself) ““It wasn’t the printing of the currency notes that was the problem. It was the fact that there were not enough real goods and services available for sale in relation to the rate of growth of nominal spending.” Precisely. Too few real goods and services to meet nominal demand. Too much money chasing too few goods.
“There is a difference between inflation and hyperinflation,” Yes, one is much higher than the other. Inflation can be measured annually. Hyperinflation is easiest to comprehend if quoted monthly or weekly. 30 per cent annual inflation is bad. 30 per cent weekly hyperinflation is on the way to catastrophic. The rest of your paragraph on inflation seems to me incoherent. However, I think I should stop there.
I don’t find the sources you cite make things any clearer.
First, I’m not an expert (but a generalist), so my explanations and understanding are a bit fuzzy yet. It takes a really top expert to explain things simply, in any subject. But a good simple explanation doesn’t mean someone can fully grasp it easily; I remember as a kid people saying only a few physicists could understand Einstein, even though relatively is actually simple — but it took a lot of unlearning of classical physics and hidden assumptions to get it. Now a lot of people understand it because it’s been talked about for a while.
The thing to understand about money is that it is a creation of government. It’s the official stuff, supported by law, and it’s like the bottom stone of an inverted pyramid the rest sits on. Endogenous money — bank credit, IOUs, company bonds, scrip, gold, all of that, is a form of barter of commodities useful for exchange and trade, but all of it is ultimately valued in terms of government issued money.
Start with real economics — actual goods and values, production, consumption, trade, circulation of value or promises of value, etc., without any money involved. I can trade pounds bread, or promises of pounds of bread at a lter time if I am trusted, without money. The whole economy can operate with barter of physical goods or promises of goods, and deals be drawn up among people.
Now, money is convenient — especially for a government who wants to control the economy and get a piece of the action for itself, which is the main root of money creation. It passes laws about it, backed up with the power of law, police, consent of the governed, etc.It gives a standard of abstract value so someone doesn’t lose out on a deal even if the price of bread suddenly drops — the deal is for dollars instead of pounds of bread or buggy whips, with volatile values. Money is supposed to stabilize the economy by providing stable measures of value across all the different goods.
As for government buying stuff by creating money, it pays workers and companies for the stuff, which lets them buy other things, putting people to work creating real value. Ideally it doesn’t buy bombs and blow them up, but buys roads and electrification, which increases production and efficiency. If a primitive village wants to build a road it just does it, people investing some time in road building instead of farming, and it pays them back over time as it’s used to increase efficiency and letting them trade with other villages. In a monetary based culture people don’t that without getting paid, in money, so if there isn’t enough money the road doesn’t get built. The government can fund the road, however, by printing dollars and paying the workers with them. It’s still an investment in the future, to be recouped over time.
If a banker finds the road by giving a loan, it’s similar but he gets a piece of the action from interest — ‘by sitting on his fat assets’.
The workers don’t much care if they are paid by the government, a bank loan, or a right to use the road to transport his crops and benefit from others using the road, as long as they get a return on the investment of labor they make.
If the wheat crop fails one is just as hungry if the promise for bread can’t be kept, or if he runs out of money so he can’t buy bread — it’s the shorted of bread, and other goods. which makes it hard to get the tangible things because there is so much competition from other people trying to get them too. It isn’t money that chases too few goods, but people — saying money chases them is just a figure of speech, which is misleading. It’s like saying ‘let your money work for you’ — it’s isn’t money that’s working, but the people producing things and being exploited by having some of their labor siphoned off by the owners of the means of production. Money can’t produce anything any more than inches or points in a ball game can produce anything — everything produced is done by people working, or looking for and extracting natural resources.
Government ‘debts’ or ‘deficits’ are, by definition of how an accounting balance sheets works, and by sector analysis, credits and money in the private sector (or the foreign sector).
This is like the old Zen story of looking at the finger pointing at the moon instead of the moon being pointed at.
See https://www.youtube.com/watch?v=YnyDRwSqp2E
Bill Mitchell: Demystifying Modern Monetary Theory
and the linked, related, videos at the right of the page, or search on ‘modern monetary theory, videos on googe or youtube. There is one from Wray and another from Mosler listed at the top. Just watch a bunch of them and don’t worry about understanding it all right away, because a lot of it is learning a few basic terms and concepts and getting demystified and demythicated.
For example, understanding the difference between money and medium of exchange. I can trade you baseball cards for a music CD, but neither is money. Money is not wealth, but measurement, and there must be enough inches on a tape measure or pound capacity on a scale to measure the material one want’s to work with. Alan Watts, the zen guy, told a story about carpenters arriving at a job site and being told they couldn’t build a house because ‘we have run out of inches’.
One needs to grasp the basic things, like with relativity understanding that space and time are not two different things, and neither of them are fixed quantities outside a specific inertial frame but relative between the inertial frame and the observer’s frame of reference. There is no point trying to figure out velocity factors and hyperbolic tangents and all that without understanding the assumed context of a relativistic model.
blue on August 14, 2016 · at 4:39 pm UTC
A very long way of saying that you didn’t actually know what you were talking about. No shame in that. I’m done.
I came across the clip while looking at material on chartalism…
beginning of
https://www.youtube.com/watch?v=y7Xh0hY3-sM
Ben Bernanke: As a Literal Fact the Fed is not Printing Money
[from 60 minute interview in 2010]
” … it’s not tax money …we simply use the computer to mark up the size of the account…”
Economic times are hard in Russia, but this is not Putin’s fault. Oil prices (oil is Russia’s major export) are at record lows. Why is this so difficult to understand?
I remember seeing this article or similar one on this site. I remember the discussion about about sale of state assets win Russia. This “sale” of assets is in fact a mandatory investment imposed by the government on the oligarchs to buy a minority stake in certain state owned companies. It is a way for the government to raise funds. Minority stake means the oligarchs don’t have any control.
As for Glazyev, if you want to see his policies in action go take a look at what’s happening to Venezuela: Price controls, hyperinflation, empty supermarkets, rationing..
”Economic times are hard in Russia, but this is not Putin’s fault.” Economic times are hard due to the over-reliance on a hydrocarbon economy. Economic diversification would have helped Russia take the strain of the fall in oil and gas prices. The present policy of import substitution should have begun earlier and had a much wider scope. There were too many complacent officials who thought that $100 dollars per barrel was going to last in perpetuity. Putin is not an economist – and he is a little too infatuated with liberal economic theory in my estimation – and he has obviously been given bad advice by his financial and economic officials.
And please don’t tell me about the immovable 5th column. If they were not up to the job, or their hearts weren’t in what they were supposed to be doing they should have been given early retirement and replaced with the type of advisers who are willing to carry out the necessary reforms. There is no time to lose.
Putin actually has a degree in economics, but so do many western economists with doctorates and beyond who don’t understand it well because academia is so bad at it, with very limited perspectives largely dependent on neo-classical and Chicago School thinking. Michael Hudson points out the history if economics is no longer taught, for instance, and Rick Wolff said he had to learn Marxian economics on his own despite going to Harvard, Stanford, and Yale.
It isn’t just reliance on hydrocarbons though — Russia had been an industrial and agricultural powerhouse but much of that ended when the US agents got into it, and massive corruption also took it’s toll: USSR had massive problems, but much of what was good about it was destroyed, largely by oligarchs (and Yeltsin), many of whom were buttressed by the US manipulations which were designed to destroy Russian power and sovereignty.
Venezuela and Russia, despite both being targets of the US hegemonic forces, are very different countries, however, and can’t be directly compared (much less Venezuela and USSR). Russia’s dependence on oil is exaggerated, however, and so is the extent of economic problems, from which Russia is recovering — despite the ongoing problems with the rest of the world, with virtually all countries hurting, and problems resulting from ties to the falling world economy.
But Serbia Girl; In the same breath referring to the export dependency/oil crash, you blame Venezuela’s troubles on Glazyev’s remedies, when Venezuela’s leadership made the same mistake in relying on the oil money in order to finance social progress, and remained dependent on external supplies of many essentials of daily life. This leaves any system vulnerable to sabotage by sanction, financial manipulation, etc. Given the scurrilous nature of the enemy(us-bankercabal-et al) they pulled stunts like intercepting all the toilet paper to cause discontent, while dumping money into subversive “NGO’s”, media control, paid protesters, etc. Recently the same tactics have set Brazil back irrecoverably. They have no shame. Any state with a desire for safety and sovereignty needs to be as internally self sufficient as possible. Venezuela should never need to import a single sandwich, nor should RF.
Check your history, folks…nations that go to war already heavily in debt always lose.
This needs refuting:
Check your history, folks…nations that go to war already heavily in debt always lose.
Prior to advent of of Federal Reserve European wars terminated when debts rose too high. However, debt money systems allowed creation of almost unlimited amount of “private bank credit.”
The advent of this type of money system, then allowed financing of world war.
Remember, Germany had won WW1 and was willing to go back to status quo with England, until American’s now financed with newly created Federal Reserve, entered the war.
America also put France and England on a debt hook, to then buy American war material. To satisfy debt instruments created from nothing, Gold was claimed in exchange. This is why U.S. ended up with much of Europe’s gold.
Excellent article. Debunks the US/IMF myth that one policy fits all. For a country with abundant of natural resources, it’s important that their development is controlled for the utmost benefits of its people, while simultaneously encouraging domestic entrepreneurs to develop consumer economy.
In fact, living in a world controlled by neocons/neoliberals, free market economy is humbug. The last thing the public should be carried away by is the propaganda that market is the most efficient way to manage and allocate resources. This is bunkum, when bullies have their own economic logic.
In the polls associated with the last (fake, rigged) Democratic presidential nomination campaign, a majority of ‘democrats’ were telling pollsters that they preferred ‘socialism’ (even the fake Bernie kind) to capitalism.
I’d say that could be headlined as “reconsidering neoliberal policy” by US voters.
Note also that campaigning against ‘bankers’ has been the popular theme of the election year. In general, if you want to be popular with American voters, stand up and oppose ‘the bankers’. Note that this also has the effect of getting one blacklisted and attacked by the Banker’s Media.
Of course, polls regularly show that after the US imposes ‘democracy’ with bombs and puts the bankers in charge of a place, that the people say that they are now worse off than before. That was true in the former Soviet Union, and has been true in places like Iraq where the dictator Saddamm was viewed favorably in comparison with the US bankers and their government drones.
oh, promoting Glaziev is of no good for Russia either. You know, really, no central bank can finance economy, no foreign no sovereign. Central bank doesn’t create wealth, it monetize government debt to use debt as money. That is only justified during a resistance to military aggression, but in peace time the debt “money” destruct the market economy and capitalism in a very subtle yet imminent way. We now see a later stage of Western 40 year long debt monetization experiment, with bond yields sinking toward zero threshold. Glaziev and virtually all other Russian economists both right and left are likely blind to the cardinal problem of debt “money” and he just want to run home-made experiment of same sort that is failing in the West before his own eyes. What Russians really have to do is to invite Antal Fekete the old man to advise them on the best possible monetary architecture and how to recreate it for Russia and its partners to warrant decades of steady development.
Great article – and even better news. But this section understates the problem and the injustice:
“Neoliberals deny the long-recognized fact that, in terms of the quantity of money, it makes no difference whether the money comes from the central bank or from private banks creating money by making loans or from abroad. The difference is that if money comes from private banks or from abroad, interest must be paid to the banks, and profits have to be shared with foreign investors, who end up with some control over the economy.” It’s not just the interest that has to be paid when private banks (including the Fed) create credit out of thin air; the victims also have to repay the principle sum. Thus the banksters gobble up the world. If Russia stops this, the biggest scam in all human history, she will do the world an even bigger favour than she has in blocking the Wahhabi/Zio war on Syria.
a short, cogent and professional explanation of Modern Monetary Theory, which is a subtext of the above article, would take your site to the next level. to my amateur understanding, the core problem with MMT is that it has to stay honest.
that’s it, but it’s a lot.
Here is a critique on MMT by Huber. It is false conceit that MMT adherents call themselves as sovereign money advocates:
http://www.sovereignmoney.eu/0-introduction-mmt-and-nct/?rq=mmt
MMT has it that money is credit and debt by its very nature and history. MMT adherents ridicule the notion of debt-free money as ‘dry water’.[5] This again is banking doctrine rather than chartal currency teaching. Money certainly is a medium for paying debt, i.e. to get rid of debt, and thus has of course developed historically in a context of debt of various kinds. Debt and credit existed before monetary units of account were developed, just as such units of account existed long before coin currencies came into existence; yes, and this is another teaching NCT and MMT have in common vis-à-vis classical commodity theories of money. MMT, yet, misrepresents 2,500 years of coin currencies when money typically was not lent into circulation against interest, but spent into circulation by the rulers of the realm free of interest and redemption. Debt money, i.e. the false identity of credit/debt and money, isn’t a natural necessity at all. Modern money can freely be created, and of course it can be spent into circulation debt-free — pure water, so to say, not contingent upon credit and debt at source.
It was the Harvard Boy’s that convinced Russia to turn their economy over to extraction. I’ll give readers one guess as to what ethnic group the (((boys))) belonged to.
An extraction economy is something like Africa. Under neo-liberalism, a country is to go into debt with foreign denominated debt instruments. This then hypothecates new credit denominated in the foreign currency, but the land of Russia, for example, dotted line attaches to the ledger. This then means when the debt cannot be paid then the land can be grabbed. The conceit is that the former credit spent into money supply will be available in future to pay said debt instruments.
Through various exchange rate mechanisms, the “credit” can be made unavailable in future, thus initiation a harvest phase that finance uses to grab land, patents, resources, etc.
Read Perkins book, “Economic Hitman” to get an idea of the mechanism.
Some others here have also noted that economics is not scientific; this is the case when money systems are unscientific. Usually rentiers try to game systems to take unearned income, and their schemes unbalance economies; they also spread hypnotism to continue their rents.
Labor makes their living by adding value to earths “goods.” If the earth is sold overseas in extraction, the Labor is cut out of the economic equation. For example, if platinum is sold from Russia, and used to create high value add goods overseas, then the overseas labor earns the incremental improvement of production, not Russians.
Those winners in Russia, who grabbed the land and oil fields (Yukos) were grabbing the patrimony of a people, and were cutting out Russian labor’s ability to make goods as prices.
So, Hudson and PCR are exactly correct. Russia needs some form of autarky, where their citizens can use their brains and brawn to create goods and services for each other. This then allows Say’s law to work in a circular flow – not draining away purchasing power to foreign economies.
Additionally, if Russia converts to a real sovereign money system, then the money type is low friction and low cost, thus allowing real pricing efficiency,
Russia will be unbeatable.
This article is so incoherent and conflicting with reality; it’s like written by a highschool kid with attention deficit disorder. There people are professors as much as Doctor Pepper is a doctor.
Don’t even know where to start. Can we at least agree on who is liberal and who is conservative in the world of economy? What are they blabbing about? Liberals are the ones advocating printing and not caring about budget deficit. Fiscal conservatives are the ones worrying about the deficit. Mmkay?
Still don’t know where to go from here. Some stuff is obviously idiotic, like – ‘exposing the ruble to currency speculation’. WHAT?? What does this mean? There is no alternative to people trading that currency. You call it speculation, but the companies who do international trade need to exchange currencies, and they will. The Central Bank CANNOT CANNOT CANNOT CANNOT, put it in your heads, CANNOT permanently support an exchange rate that does not reflect market price, UNLESS the Russian Central Bank can print DOLLARS as well. You want to buy dollars at 60R/1USD. Nobody will sell you tho. You offer 70run/1USD, and someone pulls out of mattress and sells you. Where would the Central Bank get all these dollars to satisfy demand??
Another completely idiotic conflation is the conflation of capital and money. Russia’s rubble IS NOT WORLD RESERVE CURRENCY! All printed currency stays INSIDE, and prices rise IMMEDIATELY. Question: how many hyperinflations has Russia had in last 100 years? Just count how many times old money was exchange for new money at 100:1 or 1000:1 ratios. Russian bank CANNOT FINANCE NEW ECONOMIC DEVELOPMENT! Capital is needed NOT PAPER. Central Bank can CREATE PAPER, NOT CAPITAL.
Thank God Putin has more brain than those idiots.
Under the Kaiser, Germany issued their own bank credit into industry. This then created a wealth effect as industry built out, and was able to repay the credit with improved productivity.
Canada circa 1938 to 1974 had a Sovereign money system, where the BOC became a crown bank. All of the stock was held by Ministry of Finance. MOF would direct BOC to spend directly into modes of production. Hence, canals were built out, allowing improved movement of goods and services. A continental railroad was built, and no oligarchy formed. A highway system from East to West was built. By 1974 most Canadians had savings, and were forming small business. There was enough economic surplus such that medical was free. College was very inexpensive because debt free money built out college infrastructure.
In the U.S., the reconstruction finance corporation circa ww2 spent line item money to build out tire plants, aircraft manufacturing and the like. This just popped into being from nothing. This money then went on to pay salaries, and then pay down private debts. The private debts formed during the 20’s were the main reason for the great depression. (People borrowed to gamble in stock market, thus pushing prices stock prices. Banks even put stocks on their double entry ledgers. This would be private credit pushing prices, and note this mechanism is not “perfect pricing” and gives lie to stock market “capital.”)
Roosevelt issued money into electrifying farms (electrical co-ops) prior to war, which exploded farm productivity. Money channeled in this way is win win.
England issued Bradbury Pounds, to then pay down debts. Germany used MEFOBILLS, which were a form of credit that channeled into industry, and then were redeemed for reichmarks money upon discount. Germany had no great depression and had an impressive run of development. These new marks were then taken up in taxes. Schacht was worried about a third inflation in 38 which never happened.
NEO liberal apologists have to create an alternate reality out of alignment with actual history, to spread their hypnotism. One can only surmise that they are funded by usury out of private banking.
Putin is on the right path- PCR and Hudson are correct.
It would certainly have been tempting for Putin and Medvedev to consider neoliberal-ish policies insofar as it relies on ‘external’ capital. If every nation buys into a stake of one another, in theory peace is kept because of interdependence and the fear of losing that stake.
They just misunderstood the part where they aren’t allowed to buy into Western economies and the ownership and flow of wealth was only supposed to go one way; westwards.
Who owns, rules, who trades, prospers, even over rulers.
” Alex on August 14, 2016 · at 6:20 pm UTC
blue on August 14, 2016 · at 4:39 pm UTC
A very long way of saying that you didn’t actually know what you were talking about. No shame in that. I’m done.”
That’s not at all what I said. I have learned a great deal in the years (about 8) since I started researching and studying this material — aside from the economics and related I picked up over the decades before. If you want more than I can give then find a good PhD professor (like the ones I linked to), but if you don’t, then just give up trying to learn about it. I didn’t ask you to take my word for anything — that’s why I provided links (and, apparently, wasted my time trying to explain it). Whatever — I’m going back into hibernation.
Only a few economists get it right. Generally, to get it right, they have to overcome their schooling and indoctrination. In other words, it is a rare combination of genius and independence of mind that is the hallmark of great economists. Overcoming your programming, to then see clearly is very rare in individuals, especially if said individual is paid by corporations or banks to hew a narrative.
Quote from Social Creditor number 33:
http://www.alor.org/The%20Social%20Crediter/Volume%2080/The%20Social%20Crediter%20Vol%2080%20No%203%20May-June%202001.pdf
33. IS IT POSSIBLE THAT ALL THE ORTHODOX ECONOMISTS ARE WRONG,AND THAT DOUGLAS ALONE IS RIGHT?
PERFECTLY POSSIBLE. Up to the time of Copernicus (1473-1543) all philosophers and learned men, and everyone else, believed that the earth was the fixed centre of the planetary system,
and that the sun moved round the earth. They were all wrong and Copernicus alone was right.
This occurrence, in which one man alone has been right and everyone else wrong, has happened time and time again in the history of mankind. It is therefore surprising that so many
people to-day with the examples before them of Copernicus, Kepler, Galileo, Newton, and many others should doubt its possibility in the realm of economics.
So we are supposed to believe that the poor russians knew nothing about how the west carries its economic warfare? And they “trusted” washington? Please.
“Hooking Russia’s fate to Western hegemony under these conditions would doom Russian sovereignty.”………..just as it has in Canada, since long ago.
Meanwhile, the combination of a rising domestic budget deficit and balance-of-payments deficit has given Russian advocates of privatization an argument to press ahead with the sell-offs. The flaw in their logic is their neoliberal assumption that Russia cannot simply monetize its deficit, but needs to survive by selling off more major assets. Also, the firms to be privatized cannot be bought with domestic state bank credit. The aim is to draw “hard cash” into the buyouts – ideally from the foreign currency holdings by oligarchs in London and elsewhere.