R A Werner: 3 Beneficial allocation of money
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- Опубликовано: 19 авг 2024
- The issuing of credit feeds economic growth. What could the Coalition Government do to promote growth? Professor Werner says that the credit creation which provides the new money needed for an economy is neutral when made, but its uses bring good or bad outcomes. Good outcomes without inflation arise when the new money is fed to productive uses, which might for example use new technology to provide products or services with a greater value that the total value of the inputs used. Bad outcomes arise when the new credit is made available for consumers who use it to buy goods and services and this brings price inflation as more money chases the same goods. Another bad outcome is feeding credit to speculative markets in assets such as stock markets, derivative markets or property markets. Here the flow of funds is merely creating an inflationary bubble which inevitably turns into a crash as prices of these assets cannot rise without new credit creation feeding them. Whilst good productive credit creation produces its own income stream to fund the investment costs, speculative booms produce no such income and are not sustainable. He says that there is need for intervention to allocate money in the right direction and curtail it in the bad. He says that the outcome of letting 'the market' decide such things has manifestly failed as seen in the recent global crash. Unregulated credit creation allocation tends to produce bigger and bigger banks that seem for a while attractive in their profitability but do not serve the needs of smaller firms. Far Eastern economies have shown that allocated credit creation into productive schemes works for the good of all. Letting the market decide these things, as at present, really means that we are letting banks decide who should get the credit created and they obviously put their own commercial interests ahead of the wider needs of the whole economy. Prof Werner says that whilst a Green Bank is a good idea, why stop there when, as in the UK several of the biggest banks are now owned by the government for the taxpayer? Now that ownership is vested in the govenment it is a political decision as to whether the banking system is made to work for the good of all and bring a legacy of sustainability or left just to recover itself and continue working with just the needs of the banks themselves in mind.
really wish they taught us this in highschool, at the very least basic economics. much more valuable than they presume
“What you have today is the economy imagines that the financial sector, the real estate speculators [FIRE sector] are part of the economy and part of GDP instead of being an overhead, a tumor…” ~ Michael Hudson
What an important thing to know and learn about, yet astoundingly few viewers over ten years time.
Nevertheless many thanks for the pleasant.lecture and its understandability for the common viewer.
Excellen Videos - how does the whole series not have more views.
People are more interested in the Kardashian.
Sadly, the coalition government paid no attention to this at all, I suspect they didn't even listen to Professor Werner. To me, it is interesting that such a highly qualified and experienced academic and economist can explain something so clearly that almost anyone should be able to understand it. Even more interesting that he does not appear to be invited onto mainstream TV given his ability to articulate this. I have little time for conspiracy theories but it would seem that the media and banks both don't want this point of view to be heard, and the same should be said of the main political party MPs too. You have to conclude that the main beneficiaries of bad credit are the banks, it's hard to see how it assists the majority of the population. Of course the population of the UK have become obsessed with the value of their property as an investment when property should be viewed as a basic need. The current political and banking policy of encouraging the lending of money for the buy to rent market and many multiples of borrower incomes is disastrous for young people who are priced out of buying and faced with sky high rents. No government since the Blair government from 1997 has done anything of substance to redress this situation. A cynical explanation of this is that the politicians are in the pockets of the banks and other financial groups who donate to their parties or offer minsters lucrative directorships when they leave politics. A less cynical explanation is that MPs fear the potential consequences of falling house prices creating negative equity, widespread repossessions and a painful period of adjustment affecting many which the media would then blame on the policy makers threatening their chances of re-election. We all know how much politicians will do anything to hold onto power once they have it, to hell with what's in the best interest of the nation.
The banks do not create credit, credit means belief, trust, confidence, the banks trust you and convert the the asset backed promissory note into a form of money which is accepted in commerce. Because the bank has confidence in the client and issues the so called loans. But credit and the amount of loan is not the same thing.
Adelchi Di Palma so banks are merely facilitators if credit.. they do not loan money.. we create money.. the bank steals that credit and call it a loan to themselves with interest..?
@@mattys1563 In a way, this is correct. You (as a borrower) create money by issuing a bond, an obligation to repay. Bank purchases this bond with the money he creates. Voila, you owe them money.
@@ampulka Yeah.. except the bank never offers any consideration.. so.. we owe them nothing.. as you say.. you create money.. the bank merely publishes the representations.. as the money never existed.. the bank cant claim it as theirs.. and add interest.. If you and I monetise bonds... why would we allow a bank to claim that new creation as a debt to them, which they then profit on, and add interest.. It is merely as you say an accounting record between two parties who offer consideration.. one offers property.. one offers his/ her future time and energy.. one hs a credit, one has a negative balance to zero.. -1 + 1 .. there is no third party, except to credit check, record and publish..
How would we get a car?
Despite all monetary policies. Despite all the money printed, the money circulating in the market is deflationary, that is, it is a constraint. This constraint money causes hyperinflation in the long run. There are 4 main reasons why money is a constraint:
1- Strong monetary policies of central banks.
2- Using the credit created by the banks in financial transactions and as consumer credit. In both cases, the velocity of circulation of money is almost zero. Not used for real economic activity.
3- 90/10 rule applicable to money due to wrong tax policies. Around the world, 10% of the population controls 90% of the money.
4- The vast majority of countries have a current account deficit every year and therefore the money constantly flows out of the domestic market.
Deflationary money, that is, constraint money, is the force that attracts rats. It ties the hands of both workers and businesses. This results in low wages and poor employment.
It only works for monopolies, i.e. big companies and international traders. Why this total situation results in inflation, that is, high prices, is another matter.
Interesting thank you
whatever the govt bank can do for goodness, why can't the commercial bank
Can someone help to explain to me what he means by "with more goods and services there would be no inflation" ?
I thought inflation was caused by increase in the money supply..?
Ah is it because higher supply will mean cheaper prices giving more purchasing powe rot the consumer, and thus no inflation
Inflation has 2 meanings. One is a growth in the money supply, a strict technical approach. The layman takes inflation to mean higher prices and less purchasing power per unit of money. So inflation is a term that can mislead if not specified by the speaker as to which sense is being used.
Remember years ago televisions costing thousands of dollars and the same TV costing a few hundred today. Both improvements and lower production cost is possible by reinvesting profits and bank credit towards research and new production means.
This is investment derived from profits directed towards research and new technology.
Wall Street "investors" want emphasis on dividends and stock buybacks for short term profits.
Businesses borrowing from local banks become partners and theoretically the bank has self interest in maintaining the health of the business long term.
They want the loan payed and they want new loans for future business.
"The good outcome we want; when banks create new money (purchasing power) by extending loans and creating credit, they give the receiver the right to lay claim on limited resources. And of course where the dangers also is... " what dangers?
inflation, asset bubbles and literally death
Loans, credit to small businesses makes sense to create jobs, growth, tax revenues etc. Banks create money by these loans. Does Venture Capital create money as well, is it the same thing?
No, venture capital uses existing money supply of investors. It is much more risky to VC firms to invest money compared to banks as banks create money and take very little risk.
How do credit card companies work differently than banks? are they actually the same thing? do credit card companies also just create money? (with no deposits!)
credit card companies are intermediaries between consumer and a bank. When you use your credit card, credit is created by a bank who is kind of behind the scene.
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