Theoretical Basis For Austerity Destroyed By The BOE? : Tue Mar 25, 2014 1:06 pm  

Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called "Money Creation in the Modern Economy", co-authored by three economists from the Bank's Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window. http://www.theguardian.com/commentisfre ... -austerity

Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called "Money Creation in the Modern Economy", co-authored by three economists from the Bank's Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window. http://www.theguardian.com/commentisfre ... -austerity

[DaveO]

Re: Theoretical Basis For Austerity Destroyed By The BOE? : Tue Mar 25, 2014 1:53 pm  

I read the article and some of the comments that followed. I particularly liked this one from CaptCrash:

I think the unsaid thing in all of this is that fact that money is something to encourage trade, it is nothing more than an agreed stored value, and the rich hoard theirs (accumulated in offshore accounts, art, possessions, mud patches (land) and mud piles (property) with an agreed value with those "in the know".

It is this hoarding and circulation of the bulk of the wealth in the upper echelons of society, and their desire to collect more of it, which creates problems for the rest of us.

1) They remove money from circulation, and do not want it devalued, hence objections to printing money, inflation, and QE.
2) They object to redistribution,
3) Almost at any time, they could in theory liquidate their holdings and spend, spend spend, creating a devaluation of currency for the rest of us.

All money is debt, and all debt is expected to be repaid, even if the goods and services upon which the money was first exchanged has long since lost value.

In other words, inflation and money printing are always required to effectively redistribute the available supply of money in the absence of taxation to do the job.

This is seems quite intuitive to me as we already know there is enough money being held by individuals and companies (doing nothing but sit there) to wipe out the deficit tomorrow.

So instead of freeing that money up somehow we tread carefully printing money (quantitative easing) to increase the money supply but no too much so as to encourage inflation but it also isn't enough to prevent the need for Austerity.

It makes you wonder why when you read quotes like this from the article:

Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn't know how banking really works, because if they did, "there'd be a revolution before tomorrow morning".

why there hasn't been a revolution since 2008!

Re: Theoretical Basis For Austerity Destroyed By The BOE? : Tue Mar 25, 2014 9:42 pm  

I am beginning to be impressed by how many are realising what a con trick/Ponzi scheme is being perpetrated as "sound economics"
Whist the right wing still prefer "religion" to be taught from an early age at school they would have an apoplectic fit if simple economics was taught.
It still is amazing though how many confuse concepts with reality.

Re: Theoretical Basis For Austerity Destroyed By The BOE? : Wed Mar 26, 2014 1:27 am  

Anybody who thinks high inflation is somehow a good thing and wouldn't affect poorer people far more than the well off is kidding themselves.

Re: Theoretical Basis For Austerity Destroyed By The BOE? : Wed Mar 26, 2014 7:50 am  

The article linked to is bizarre. The author either does not understand what he is writing about or cannot express himself. Slanted tripe.

Re: Theoretical Basis For Austerity Destroyed By The BOE? : Wed Mar 26, 2014 7:51 am  

The article linked to is bizarre. The author either does not understand what he is writing about or cannot express himself. Slanted trios.

[DaveO]

Re: Theoretical Basis For Austerity Destroyed By The BOE? : Wed Mar 26, 2014 3:35 pm  

BrisbaneRhino wrote:

Anybody who thinks high inflation is somehow a good thing and wouldn't affect poorer people far more than the well off is kidding themselves.

Given no one suggested indulging in high inflation why the above comment?

Re: Theoretical Basis For Austerity Destroyed By The BOE? : Thu Mar 27, 2014 3:49 pm  

To me this makes alot more sense that The Guardian writer's piece: http://www.cityam.com/article/139586475 ... -you-think

To me this makes alot more sense that The Guardian writer's piece: http://www.cityam.com/article/139586475 ... -you-think

Re: Theoretical Basis For Austerity Destroyed By The BOE? : Thu Mar 27, 2014 9:20 pm  

Dally wrote: To me this makes alot more sense that The Guardian writer's piece: http://www.cityam.com/article/139586475 ... -you-think When you take a step back you realize that over 97% of the money in the global monetary system is in fact bank created IOU's, all pensions are IOU's, government bonds are IOU's etc. The global debt combined is currently 313% of global GDP. There is no way the fast majority of these debts can be paid back. The battle now is who's IOU's are honored and who's IOU's get thrown on the scrapheap. The banks are making damn sure their IOU's keep their value at the expense of our pensions and wages.

Dally wrote: To me this makes alot more sense that The Guardian writer's piece: http://www.cityam.com/article/139586475 ... -you-think When you take a step back you realize that over 97% of the money in the global monetary system is in fact bank created IOU's, all pensions are IOU's, government bonds are IOU's etc. The global debt combined is currently 313% of global GDP. There is no way the fast majority of these debts can be paid back. The battle now is who's IOU's are honored and who's IOU's get thrown on the scrapheap. The banks are making damn sure their IOU's keep their value at the expense of our pensions and wages.