As momentous as financial crises have been in the past century, we sometimes forget that major financial crises have occurred for centuries—and often. This new series chronicles mostly forgotten financial crises over the 300 years—from 1620 to 1920—just prior to the Great Depression. Today, we journey back to the 1620s and take a fresh look at an economic crisis caused by the rapid debasement of coin in the states that made up the Holy Roman Empire.FRBNY — Liberty Street
Crisis Chronicles: 300 Years of Financial Crises (1620–1920)
James Narron and David Skeie
(h/t Art Shipman at The New Arthurian Economics)
What? The NY Fed is in favor of precious metals as money?
ReplyDeleteOscillating between sins is NOT repentance.
And some of you, I'd bet, would prefer another gold standard over ethical money creation.
"And some of you, I'd bet, would prefer another gold standard over ethical money creation."
ReplyDeleteC'mon F.Beard, you wouldn't hang around here if you thought we were that stupid.
There's more than one way to solve a problem. You seem to have lost sight of that. Your preferred method MIGHT work…some of us have other ideas.
My preferred method allows other methods including the idiotic use of precious metals as money. But what it doesn't allow is unethical creation of purchasing power, be it private or public.
ReplyDeleteAs L. Randall Wray admits, the requirement that taxes can ONLY be extinguished with fiat is sufficient to give it (fiat) value. So private monies for private debts ONLY can be allowed and SHOULD be allowed to satisfy the need for ETHICAL endogenous money.
Btw, the central bank also creates fiat - for the benefit of the banks. So why don't MMT advocates protest that waste of the monetary sovereign's ability to net create fiat without price inflation? And which allows the banks to generate nation-wide boom-bust cycles by providing the needed reserves?
ReplyDeleteSo we have unethical government money creation and unethical private money creation too.
"unethical creation of purchasing power"
ReplyDeleteI think the unethical part started mainly (in modern times) with the repeal of Glass-Stegall. It allowed banks to become more like casinos than public utilities, which is what they are supposed to be.
Secondly, banks have violated their fiduciary responsibility by making loans that shouldn't have been made, and been exempted from prosecution under the law for profiting from that behavior…the product of a two-tiered justice system.
These kinds of things are products of human error, corruption and greed (not necessarily in that order).
Have you proposed a system where these human traits are erased, minimized or otherwise removed from the equation?
The problem is mainly institutional, rather than systemic.
You seem to be unable to tell the difference.
Secondly, banks have violated their fiduciary responsibility by making loans that shouldn't have been made, ... paul
ReplyDeleteNO ONE is "worthy" of stolen purchasing power. If banks were a legitimate enterprise then they would not need government privileges. And if you say banks are government agents then what right does the government have to transfer purchasing power from the poor to the rich?
As for Glass-Steagall, the urban riots of the 1960s, likely caused by "redlining", occurred long before its repeal.
The Kipper und Wipperzeit is the common name for the economic crisis caused by the rapid debasement of subsidiary, or small-denomination, coin by Holy Roman Empire states in their efforts to finance the Thirty Years’ War.
ReplyDeleteThis is the sort of narrow view that mainstream economists and central bankers like to promote. It's all that "debasement" and irresponsible use of inappropriate state authority over money that is the source of all our problems. One could point out that this 300 year period of recurrent financial crises just happens to coincide with the length of time national (often privatized) central banks have existed. Alexander Del Mar provides a useful corrective for the kind of thinking presented in the Narron and Skeie article:
"Banks have always been regarded by writers on political economy as evidences of progress in a state. Whatever may be the case at the present time, the original establishment of banks in Europe was due to social decay or paralysis rather than to progress. Their single function was to substitute credits in good coins for deposits of worn, clipped, counterfeit, or uncurrent ones ; and they were nowhere established until the decay or misfortunes of the state and the inferior character or bad condition of its coins rendered it unsafe or troublesome for the merchants to accept them. The first of these institutions was the Bank of Barcelona, established either in 1349 or 1401. During the fourteenth century the old coins of Aragon became much worn and clipped, and new ones were frequently issued of a degraded character, so that it became exceedingly difficult to determine their respective values. In a great commercial city like Barcelona this became an unbearable nuisance, which led to the establishment of the bank. Up to that period the coins of Venice, Genoa, and Florence had been kept in good condition and no bank was needed in those cities."
Alexander Del Mar Money and Civilization1886
"And if you say banks are government agents then what right does the government have to transfer purchasing power from the poor to the rich?"
ReplyDeleteF.Beard, as usuaI am in agreement with most of your complaints.
Where we differ is mainly in solutions. Not that I have anything better to offer, mainly because I don't think much about those things…I'm wired to solve system problems, not social ones. The best i can do is look at proposed solutions and try to determine how they will react with the system itself in order to decide if the expected outcome is likely.
Interest is the unethical part of borrowing…it's a tollgate on the use of state money, and as currently constructed the riches transfer to a very small group, yes. Interest is a systemic problem. Pure math and outcomes are heavily weighted towards the power center.
Redlining is an institutional problem…coming from self-reinforcing policies of discrimination…a social problem. It is an issue secondary to or disconnected from the systemic problems with banking.
A fair solution is to eliminate interest as much as possible. I doubt we will find much interest (no pun intended) in that solution. Elizabeth Warren has been promoting that for student loans. This should be the case for anything related to public purpose.
I believe nothing short of that will work (very well), but the current power structure is united in making sure it doesn't happen.
Corruption is the main problem under the current arrangements, . Creating more laws that will be ignored isn't likely to work either.
What is wrong with the banking system can only be changed through education, politics and public engagement.
That will be a long slog.
David,
ReplyDeleteDoes Wray cite DelMar in his book on "money"?
F.,
Aristotle never mentions taxes in his explanation of 'nomisma', he only mentions 'law'.
Rsp,
F.,
ReplyDeleteAristotle claims it was a 'voluntary convention ' which means no taxes were required ....
This is hard for libertarians to admit.... they are always paranoid about 'coercion'...
Rsp
Does Wray cite DelMar in his book on "money"?
ReplyDeleteI doubt it, Matt. The MMT "bigs" seem to be unaware of his contributions, despite his being decades ahead of chartalists like Georg Knapp. Del Mar knew a couple of very important things that people who attempt to write on the history of money miss again and again:
1) Precious metal mining is not profitable. This was first suggested as a general law by Montesquieu and verified by Del Mar, whose profession was mining inspector. Mining over time operates at a loss. This was true even of the Comstock Lode.Thus all talk about valuations of metal monies having meaningful relationship to some cost of production is vacuous.
2) The "price" of precious metals was regulated in terms of what they would trade for each other. This was generally established by the relationship of denominations in coinage laws, not the "cost of production" or the relative supply of the metals. So as long as sovereigns maintained a monopoly on coinage, the price of bullion was also dictated by law and not "the market." To speak of "gold standards" and such reveals, from Del Mar's point of view, a basic monetary illiteracy. It was such illiteracy (as well as crass opportunism) that led to such 17th century "innovations" as the removal of seigniorage fees which had the effect of removing monetary sovereignty from the heads European States and into the hands of banking and mining interests.
Again, Del Mar sees this as a deterioration of basic monetary competence, while most current writers call it evolution and progress.
Interest is the unethical part of borrowing… paul
ReplyDeleteCommon stock as a private money form requires no borrowing, much less at interest.
We can't eliminate usury but there is no excuse for government support for it given the existence of ethical endogenous money forms.
Btw, usury is not necessarily unethical according to the Bible but usury from one's fellow countrymen is (Deuteronomy 23:19-20).