Politicians on both sides of the Atlantic are once again talking about rolling back banking regulations to kick-start growth. This article is a timely reminder of why those regulations exist.MMT101.ORG - Learn Modern Monetary Theory (MMT)
Your 4-Step Guide to Understanding the 2008 Financial Crash & Subsequent Recession — From a Modern Monetary Theory (MMT) Perspective
Jim Byrne | MMT Scotland
It's interesting once again how the issue unfolds. This idea that 'regulations' can protect us and the cycle of it. The issue wasn't that at all. The issue is that financial industries are not permitted to go bust, because that's the primary monetary injection mechanism. It shouldn't have mattered if financial firms issued 'liar loans'. All that should have happened is they went bust and anybody they trusted went bust and the capital holders in those operations all lost their shirts. The fail early and fail often approach is how we try new things and grow. Wrapping the whole thing in cotton wool is the way to encourage the growth of institutional inertia and ossification.
ReplyDeleteExactly....
DeleteThis is all BS…
ReplyDeleteThis is monetarist Neil: “ that's the primary monetary injection mechanism.”
ReplyDeleteNothing is “being injected!”…
Of course money is being injected. That's what pushing mortgages at ever increasing multiples is all about. Balance sheet expansion to transfer ever more rent to bankers. And they don't like the competition from government doing something similar.
ReplyDeleteThis is all figurative language BS Neil… this “injecting money” is what causes the crash … the CB monetarist regulator issued reserve balances for govt securities and the depositories don’t have the regulatory capital in minimal proportion to the increased reserve asset balances and they have to liquidate other assets and cease the provision of credit.. they did the same thing in March 2020 and caused that crash…
ReplyDeleteIt’s the same thing these Art degree people believe with fiscal surpluses.., the functional equation is (A-L)/A ≈ 0.1 so when govt runs a surplus they “save the govt money!” in savings accounts at Depositories causing deposit liabilities to increase and the equation target value falls below threshold again causing Depositiries to liquidate assets and cease the credit function… these people think the crash was caused by “draining away too much money!” or some BS… the figure of speech “money!” is REAL to these people.,, we should DOGE them out of existence..,
ReplyDelete"Liar loans" were approved assets by the government. You can't come back now and say that was the problem. That was officially sanctioned bank collateral.
ReplyDeleteI do not understand why they do not fix the reserve at the Fed counting in the regulatory capital equation for credit creation once and for all.
ReplyDeleteBecause people like the author of the linked paper who don’t understand what is going on would consider that ‘deregulation!” and run to Pocahontas to kill it…
ReplyDeleteThey have the RRP facility now that has been stood up and operated over the last few years which seems a viable way to shunt reserve balances away from depositories when the dummy Art degree monetarists “pump in some money!”.., it still creates volatility short term until the depositors can be identified to move their usd savings from bank accounts to money market accounts… see March 2023 eg…
ReplyDelete