Comments on Maison Fleury: QE in EZ: a war of necessity

Sry for tedious posts - der spiegel report here: ...

2011-11-17T11:42:04.611-08:00

Sry for tedious posts - der spiegel report here:

http://www.spiegel.de/international/europe/0,1518,797584,00.html

... tinkering with plans for a referendum.

2011-11-17T11:40:55.613-08:00

... tinkering with plans for a referendum.

Thanks for the rundown on MMT. The chicken-and-e...

2011-11-17T11:39:51.256-08:00

Thanks for the rundown on MMT.

The chicken-and-egg position on creation of debt/money may be sound theory.

My objection to it is practical: the printing authority is assumed to be capable of preventing malinvestment in the process. I don't think that factors in human nature!

I wonder if the QE pedal can be pressed in europe. EFSF or ECB balance sheet expansion surely requires commitment from the German taxpayer, and their supreme court has said that commitment can't be made without a referendum.

Maybe there's a fancy way of getting round the electorate, but I haven't seen any real suggestions.

Can't find the link, but der spiegel reports that German politicians are only tinkerin

chris, I don't really welcome blatant spam but...

2011-11-14T00:31:03.882-08:00

chris, I don't really welcome blatant spam but did read through the marketing literature that comes with the site. It boils down to banks emit debt and are not constrained by reserves. The banking system can create (and has) created infinite liquidity. IN SHORT ANOTHER BOOK HAMMERING THE FACT THAT BANKS CREATE MONEY ****OUT OF NOTHING****

Of course the discourse after that is straighforward
1/ WHY DO THE BANKS GET INTEREST ON THAT MONEY? they just create it out of thin air and they impose a 5% tax on the real economy? WHY?
2/ Of course the banking theory says that it is because they manage risk (as your book claims). That of course is laughable in the face of CDO structure and the fact that the banking system was a machine incentivized to create volume as it passed on the risk.
3/ Naked CDS make a further joke of that claim (that banks manage risk) as you can make the case that some bankers were in fact creating securities to blow and then papering up in naked CDS in front. Shameful. Borderline illegal (should be). And just a psychopathic behavior posing as "greed is OK no?". Paulson was lionized. To me he is a criminal.
4/ When the debt defaults (which it is bound to do) the BANK GETS TO FORECLOSE THE ASSET. So the banks creates money out of nothing and then GETS THE GOOD (for nothing).

This is why I trust the hard line communist analysis of the banking system, when all is good and nice the defrauding of the real economy by the banking system goes un-noticed, when the shit hits the fan, the true PREDATORY/PARASITIC behavior becomes blatant. Of course the difficulty is WHO GETS TO DO THAT THEN? governments? that would be worse, I think.

try this for a money creation primer: http://www.p...

2011-11-14T00:18:49.622-08:00

try this for a money creation primer:
http://www.positivemoney.org.uk/where-does-money-come-from-book/

I have read the book by Wray (the bible of MMT). ...

2011-11-13T13:16:41.205-08:00

I have read the book by Wray (the bible of MMT). I found it both exciting and deeply frustrating.

1/ Exciting: it is a clear eyed explanation of how the dark mechanisms of banking and money creation work. Be ready for many 'myths' to be shattered. I think it boils down the following insight: debt is issued first and reserves sought later. in other words, the banks create all the money they want. There is no such thing as the classic equality of investments == savings, or fractional reserve banking as a way to limit debt. The factual part I find VERY educative.

2/ Frustrating;
a/ it is antiquated, does not deal with most of the modern tools like derivatives. So very incomplete. A generalization of MMT should include TRUE monetary levels.
b/ It is EXTREMELY pompous from a writing standpoint. The MMT'ers have a way of wrapping themselves in academic jargon and fake complexity. c/ While, again, I do like the factual presentation on the banking system no matter how incomplete, I find myself shaking my head in disbelief at the ultra-leftist political ramblings that follow the factual presentation. They still call it MMT which to me is a mistake. Half the book is about mechanics of fiat money and the rest is about "let's print as much money as needed to have free everything for the whole wide world". As someone who has saved money and lives on that, I find myself vomiting a bit in my mouth at some passages.
d/ Some of the main guys do post on NC from time to time, I have tried several times to engage in earnest discussion with them on points I see lacking. (for example Foreign Exchange: we see depreciation of currency which voids the effects of printing, so the whole edifice falls apart when your government cannot steal from another government). Like mormons they just ignore you. Comes across as "white tower looking down" when you can just poke holes the size of airports through some of the political reasoning.

All in all I am grateful for the book, would recommend it for those that have time and interest but I do believe it will go down as a marxist fad for the expanded political programs. Note that because of the ultra-left connotations they do have a critical eye on the banking system and that is educative and refreshing. I had been looking for a clear explanation of modern banking and this closest to it.

Hi. Good blog. Just followed a link from naked ca...

2011-11-13T10:31:59.881-08:00

Hi. Good blog.

Just followed a link from naked capitalism comments.

Do you have a post setting out your position on modern monetary theory?

Would be helpful.