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Wednesday, February 29, 2012
Crooked Timber — Seminar on David Graeber’s Debt – admin notice
Excellent - Well worth reading. Hopefully David Graeber will respond soon. This is the academic dialogue that is often hidden in obscure journals, and arcane language. Hopefully this will see widespread circulation.
Quote: For the last several days, your humble blogger has been writing a number of posts on the Japan model and the Swedish model for handling a financial crisis.
Under the Japan model, governments do everything they can to protect the meaningless bank book capital values. This includes allowing the banks to recognize losses as banks generate earnings to absorb the losses, shielding the banks from market discipline by providing an implied guarantee when regulators proclaim that stress tests show the banks are solvent, and adopting zero interest rate policies.
The Japan model puts the interest of the banks ahead of the interests of society.
Under the Swedish model, governments require the banks to recognize the losses on the excesses in the financial system today. Banks then rebuild their book capital through future retained earnings and equity issuance.
The Swedish model puts the interests of society ahead of the interests of the banks.
Today, I would like to focus on two interesting data points. First, Japan has been following the Japan model for 2+ decades since its credit bubble burst with no end in sight. Second, Iceland has been following the Swedish model for 3 years since its credit bubble burst, the financial crisis is effectively over and it has returned to investment grade.
Which model appears to work better: bend over for the bankers or kick them in the backside?
So why exactly has the US, UK and Eurozone chosen the Japan model?
Bloomberg ran an article on Iceland and the victory of the Swedish model for handling financial crisis. . . . .
Thanks for this Tom, I'll work my way thru these reviews, my short take is that Graeber focuses on "debt as money" and I think the most effective forms of "money" havent relied on the "debt" part, the "debt" aspect is accounting. At least for sure here in the west...
FD: For the record I do not believe their tag line over there: "Out of the crooked timber of humanity, no straight thing was ever made." I dont believe that is the way it works.
Excellent - Well worth reading. Hopefully David Graeber will respond soon. This is the academic dialogue that is often hidden in obscure journals, and arcane language. Hopefully this will see widespread circulation.
ReplyDeleteAlso, ann excellent article - Iceland shows that forcing banks to take losses works to end financial crisis
ReplyDeleteQuote:
For the last several days, your humble blogger has been writing a number of posts on the Japan model and the Swedish model for handling a financial crisis.
Under the Japan model, governments do everything they can to protect the meaningless bank book capital values. This includes allowing the banks to recognize losses as banks generate earnings to absorb the losses, shielding the banks from market discipline by providing an implied guarantee when regulators proclaim that stress tests show the banks are solvent, and adopting zero interest rate policies.
The Japan model puts the interest of the banks ahead of the interests of society.
Under the Swedish model, governments require the banks to recognize the losses on the excesses in the financial system today. Banks then rebuild their book capital through future retained earnings and equity issuance.
The Swedish model puts the interests of society ahead of the interests of the banks.
Today, I would like to focus on two interesting data points. First, Japan has been following the Japan model for 2+ decades since its credit bubble burst with no end in sight. Second, Iceland has been following the Swedish model for 3 years since its credit bubble burst, the financial crisis is effectively over and it has returned to investment grade.
Which model appears to work better: bend over for the bankers or kick them in the backside?
So why exactly has the US, UK and Eurozone chosen the Japan model?
Bloomberg ran an article on Iceland and the victory of the Swedish model for handling financial crisis.
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.
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Thanks for this Tom, I'll work my way thru these reviews, my short take is that Graeber focuses on "debt as money" and I think the most effective forms of "money" havent relied on the "debt" part, the "debt" aspect is accounting. At least for sure here in the west...
ReplyDeleteFD: For the record I do not believe their tag line over there: "Out of the crooked timber of humanity, no straight thing was ever made." I dont believe that is the way it works.
Resp,