Opaque, dysfunctional and corrupt credit markets are hazardous to America's health.Read it at AlterNet
How Out-of-Control Credit Markets Threaten Liberty, Democracy and Economic Security
by Edward Harrison | Credit Writedowns
Ed is getting out on AlterNet with Marshall and others, sounding the alarm more widely.
12 comments:
Even transparent, functional, and "honest" credit expansion, threatens economic security.
Ed Harrison is Austrian-school.
Yes, he has put up posts on MMT and MMT for Austrians at CW.
Similar to John Carney, but not a Lib as far as I know. He's a friend of Marshall.
Harrison and Carney are probably closer to MMR than MMT I would assume.
He kind of charts his own course between MMT and Austrian school. Sort of what you'd get if you stripped Austrian school down to a bare chassis of preference for small government, concern over malinvestment and a strong stance against low rates then dropped in the engine and transmission of MMT's monetary descriptions and analysis.
MMT works for neo-liberals too. Not just pinko, commie, socialist types.
Replace Government stimulus with tax cuts.
Replace JG (employment buffer) with unemployment buffer... Et voila!
Wouldn't he have to discard a lot of Austrian theories to make MMT fit though.
"Wouldn't he have to discard a lot of Austrian theories to make MMT fit though."
If he did, I dont think he has ever disclosed this... but I would agree that it would seem to me you would have to discard some things if we take Bob Roddis and/or Major Freedom as a model for the typical Austrian worldview...
rsp,
"MMT works for neo-liberals too."
Only for those neo-liberals who like full employment.
Many don't, however.
Kalecki noted this long ago, when he observed that capitalists may well prefer a high level of unemployment even if this hurts their profits, because workers are easier to control when jobs are scarce.
Capitalism isn't only about profits and sales. It's also about power and class domination.
That isn't one of Harrison's better articles. He ends his article with three suggestions, none of which are much use. First he says we need to end bailouts. Well of course! The $64k question is: HOW?
Second, he wants banks better capitalised. Well now, three months prior to the collapse of Northern Rock, the best capitalised bank in Britain according to the criteria then in force was . . . . . Northern Rock! I.e the authorities are plain incapable of determining what constitutes decent capitalisation. And Bankia, the Spanish bank, passed the Euro “stress tests” a few months before deciding they needed about 20bn Euros to avoid collapse. The authorities are clueless!
Harrison’s third suggestion is that “we need to enforce regulations through sound regulatory oversight”. Zzzzzzz. We also need to improve road safety, education, care for the elderly. I could go on for another thousand words.
Full reserve banking would make redundant the existence of central banks, interest rate central planning, bail outs, deposit insurance (no excuse to insure derivatives either), etc. redundant and a free market banking system would be allowed to exist where bad decisions will make your bank go chapter 11.
Next problem would be to solve shadow banking and non-financed written liabilities (naked short positions), specially on derivative markets. Strict bankruptcy rules would have to established: no-bail out to clear positions and separation between deposit institutions (banks) and market-making derivative institutions (sell side investment banks). Glass-Steagall back.
Off course nothing of this will happen in practice so we will have other major crisis and more corporate welfare in the future. You can't reform oligarchies and plutocracies, they collapse because of dysfunctional social fabric and endemic corruption and institutional criminogenic environment.
This is way western societies (at least) are doomed and we will have revolutions and wars in the future if nothing changes and we consolidate the current regimes.
Jose:"Kalecki noted this long ago, when he observed that capitalists may well prefer a high level of unemployment even if this hurts their profits, because workers are easier to control when jobs are scarce. Capitalism isn't only about profits and sales. It's also about power and class domination."
Just a feudalism creates privilege for landowners, capitalism creates privilege for wealth. Today, land and capital are both considered capital, and capital has come to include financial capital as well as non-financial. This creates a social structure that is hierarchical and a lot of people like it that way because it benefits them.
However, the privileged seek to rationalize and justify social hierarchy, and they employ the intelligentsia to develop the arguments and to promulgate them as "truth," whatever truthiness (h/t Steven Colbert) prevails at the time.
So feudalism was justified as religious truth in the Middle Ages, and capitalism is justified as scientific truth in this era. Generally, the rationalization is based on "the natural order."
Major_Freedom said...
Even transparent, functional, and "honest" credit expansion, threatens economic security.
yes yes, there is a law of nature that says that an expanding population and growing economy will do with a fixed volume of credit.
PeterP:
yes yes, there is a law of nature that says that an expanding population and growing economy will do with a fixed volume of credit.
I don't think you understand what I meant by "credit expansion." I mean credit issued that is beyond the quantity of voluntary savings, i.e. banks issuing credit ex nihilo.
Credit expansion does not mean an increase in the quantity of credit per se. If more money is produced, and more money is lent as a result, then this is not what I call credit expansion.
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