Martin Wolf says there will be a big financial crash in five years time especially as the US is weakening its financial regulations. He says how the 2008 crash was the worst in history where the economy was only saved by a massive bail out from governments, but the next crash will be even worse.
Ed balls is a classic neoliberal who says that the less government gets involved in the economy the better (except, of course, when bailing out his buddies in the One Percent with their banks).
Thought Fran Boait of Positive Money would be a bit overwhelmed by the two heavyweights, Martin Wolf and Ed Balls, but she just comes straight out with it and says neoliberalism doesn't work while the rich are still getting richer while everyone else is getting poorer.
6 comments:
I wasn’t impressed by Fran’s speech either and nor were some other members of my local Pos Money supporters group. Far as I remember she claimed basically that our dysfunctional bank system was the fault of an excessive reliance on free markets or “neoliberalism” to use the currently fashionable buzz word. Trouble with that argument is that there are a large number of supporters of the existing bank system who are not keen supporters of neoliberalism. I.e. there are reasons to support the existing (fractional reserve) bank system which do not rely on the “free market is best” idea.
Ralph there is no "fractional reserve" bank system.
Clint, Well OK. The phrase "fractional reserve" is often used to describe the existing system, but I agree: "fractional reserve" is not a good description.
Yes, but it makes people believe there is a money multiplier and the whole neoliberal bs lines of thought; the fact loans create deposits is absolutely crucial to drive home again and again
also, it really is not used anymore as far as I can tell since we do not in fact have a fractional reserve system; anyone who uses it does not understand the system we have
The extent to which the existing system is fractional reserve is actually variable. Clearly at the moment with record amounts of reserves sloshing around, the whole fractional reserve idea is irrelevant.
On the other hand if reserves (base money) revered to the level that obtained over 10 years ago (i.e. if QE was reversed), and if there was an outbreak of irrational exuberance with private banks trying to lend more, one option for central banks would be to say "We're not going to let you have any more reserves, so the result will be that interest rates will rise, and we just arn't bothered because the irrational exuberance needs damping down."
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