We've just got the news about the agreement in Paris during the COP 21 meeting. OK, there has definitely been some progress, but as George Monbiot puts it "By comparison to what it could have been, it’s a miracle. By comparison to what it should have been, it’s a disaster."
Fixing climate change is going to require a great deal of investment in renewable energy, conservation measures etc. But even the $100 billion that was supposed to be provided by the richer countries to help the third world has caused an enormous amount of wrangling.
But the solutions were already there. According to the French Financial Minister Michel Sapin last Wednesday, the 10 European Countries that have been pushing to introduce financial transaction taxes are hoping to raise between 10 and 15 billion euros a year. He said "We want this 10 to 15 billion to go to developing countries, in particular to fight the effects of climate warming".
If just 10 countries hope to raise that much, the obvious question is what could be raised if everyone joined in? Even the figures for financial transactions reported in the BIS annual figures exceeded $11 quadrillion in 2014, and those figures are clearly hopelessly far off the mark since they fail to include a number of major players like LCH Clearnet Ltd and the Options Clearing Corporation.
But let's just take the conservative $11 quadrillion figure given by BIS. That's $11,000,000,000,000,000. The $100 billion that the nations at the COP 21 meeting in Paris is 100,000 times smaller. And that means that you could finance the whole budget for climate change with a global financial tax of just 0.0001%.
And further more, the rich countries are only talking about $100 billion between now and 2020. An FTT of 0.0001% could raise the same sum every year!
Why, for Christ's sake, was this solution not even mentioned in Paris??? It would have been the perfect occasion for everyone to agree on a simple way to fix things. But now, we will be back to George Osborne and the City doing absolutely everything in their power to block the introduction of an FTT. They even plan to attack the plans of the 10 European countries who would like to use an FTT to help fight climate change. Osborne said "We can challenge this financial tax in the European court if this implicates other states including the United Kingdom".
Frankly, there are times where I am ashamed to be British. This is one of them.
12 Dec 2015
6 Dec 2015
More on Adair Turner's proposals and the taboo of overt money creation by governments
Since publishing his excellent book "Between Debt and the Devil: Money, Credit and Fixing Global Finance", Adair Turner has been very busy. He gave a conference at the World Bank on the 4th of November that you can watch online here. And there is another interesting conference that you can watch that took place at the Oxford Martin School on the 24th of November.
In both talks, he makes a strong argument for the idea that states and central banks can and should directly produce money debt free, and inject that money into the economy. And he also asks the question of why that simple idea, proposed by such economists as Milton Friedman in papers in 1948 and 1960 has remained taboo.
For me, the reason that the idea has been taboo is simple. The financial system is run by bankers and their associates who profit enormously from a system where they have an effective monopoly on money creation. They try to convince us that allowing governments to create money would immediately lead to Zimbabwe style hyperinflation. But this argument is total bogus.
No, the real reason is simple, and is evident when you look at two simple facts that I have repeatedly stressed here on my blog. And if Lord Turner was ever to read this, I would love to know what he makes of them.
The first is the fact that, ever since the creation of the Bank of England in 1694, the UK's taxpayers have been paying an average of 4% of GDP every year to the banking system in the form of interest payments on public sector debt alone. You don't have to take my word for it. Just look at the graph on a website called www.ukpublicspending.co.uk.
The average cost has been 4%, but there were times when the amount was more than double that figure- for example between 1814 and 1824, and between 1922 and 1933. For 2015 the figure will be 2.9%, but thanks to the fact that Cameron and Osborne have managed to add an extra £625 billion in debt in just 5 years, the value will be 3.17% next year, even if interest rates stay low.
When you realize that the (a) the banks that lent the UK government the money can just create the money out of thin air, and (b) that there was never anything to stop the government producing their own money debt free, you realize just how absurb the whole thing has been.
The second important fact is the realization that while European Governments have borrowed no less than €7.8 trillion in the last 20 years, a whopping €6.7 trillion of that - namely 86% - was used only to pay the interest payments on public sector debt. Imagine that. Essentially ALL the excessive borrowing of our governments has been used to keep the bankers happy.
So, Adair, do tell me. What do you think is the reason for the taboo concerning overt money creation by governments? Would you agree that the number one reason, without the slightest doubt, is that the vested interests will do everything in their power to keep that particular gravy train on the rails. It has been that way in the UK since 1694. But it now high time that we put an end to what I believe should be denounced as the most lucrative racket ever devised.
I thank you wholelheartedly for finally telling everyone, including the World Bank and the Oxford Martin School that there simply are no reasons for not changing the system. The sooner the better.
In both talks, he makes a strong argument for the idea that states and central banks can and should directly produce money debt free, and inject that money into the economy. And he also asks the question of why that simple idea, proposed by such economists as Milton Friedman in papers in 1948 and 1960 has remained taboo.
For me, the reason that the idea has been taboo is simple. The financial system is run by bankers and their associates who profit enormously from a system where they have an effective monopoly on money creation. They try to convince us that allowing governments to create money would immediately lead to Zimbabwe style hyperinflation. But this argument is total bogus.
No, the real reason is simple, and is evident when you look at two simple facts that I have repeatedly stressed here on my blog. And if Lord Turner was ever to read this, I would love to know what he makes of them.
The first is the fact that, ever since the creation of the Bank of England in 1694, the UK's taxpayers have been paying an average of 4% of GDP every year to the banking system in the form of interest payments on public sector debt alone. You don't have to take my word for it. Just look at the graph on a website called www.ukpublicspending.co.uk.
The average cost has been 4%, but there were times when the amount was more than double that figure- for example between 1814 and 1824, and between 1922 and 1933. For 2015 the figure will be 2.9%, but thanks to the fact that Cameron and Osborne have managed to add an extra £625 billion in debt in just 5 years, the value will be 3.17% next year, even if interest rates stay low.
When you realize that the (a) the banks that lent the UK government the money can just create the money out of thin air, and (b) that there was never anything to stop the government producing their own money debt free, you realize just how absurb the whole thing has been.
The second important fact is the realization that while European Governments have borrowed no less than €7.8 trillion in the last 20 years, a whopping €6.7 trillion of that - namely 86% - was used only to pay the interest payments on public sector debt. Imagine that. Essentially ALL the excessive borrowing of our governments has been used to keep the bankers happy.
So, Adair, do tell me. What do you think is the reason for the taboo concerning overt money creation by governments? Would you agree that the number one reason, without the slightest doubt, is that the vested interests will do everything in their power to keep that particular gravy train on the rails. It has been that way in the UK since 1694. But it now high time that we put an end to what I believe should be denounced as the most lucrative racket ever devised.
I thank you wholelheartedly for finally telling everyone, including the World Bank and the Oxford Martin School that there simply are no reasons for not changing the system. The sooner the better.
Christian Felber : Change Everything - Creating an Economy for the Common Good
My thanks to my cousin Chris for pointing me to an interview on the Renegades website with Christian Felber, an Austrian alternative economist and university lecturer. He co-founded the NGO Attac Austria and initiated a movement callled "Economy for the Common Good".
I was very intrigued, and immediately rushed to get a copy of Christian's book "Change Everything - Creating an Economy for the Common Good" which is actually the English Translation (published in June 2015) of a book originally published in German in 2012 under the title "Die Gemeinwohl-Okonomie. Aktualisierte und erweiterte Neuausgabe"
I've just finished reading it and I was very impressed. As Eric Maskin notes in the forewood, "Christian Felder thinks big. Not content with marginal change, he proposes a thorough overhaul of our capitalist system. In his world, companies still earn profits. But they are driven not be revenues and costs, but by their Common Good balance sheet, which evaluates them on how cooperative they are with other companies, whether their products and services satisfy human needs, and how humane their working conditions are. A company is awarded Common Good points accordingly, and its score is published, so that customers know whom they are dealing with. A good score also entitles the company to favourable government treatment: lower taxes, better borrowing terms and more public contracts. "`
Could this actually work? I think it could. One of the first striking points that Felber makes is that in many countries, the constitution specifically puts "the Common Good" as the central justification for everything. And yet, businesses act as if the only criterion is financial profit.
Felber proposes that all businesses could be encouraged to generate a "Common Good Balance Sheet" that gives positive and negative points according to the way they function. Here is a simplified version of a recent iteration of the proposal that shows how you can score points for "good" behaviour, and lose a lot for "bad" ones.
The book demonstrates that while this may seem revolutionary, there are actually a large number of actors in the economy that already work in this sort of way. He gives a whole list of examples of cooperatives across the world that have been very successful, including perhaps the most famous one - Mondragon in Spain, that has an annual turnover of €15 billion. He also points out that Non-profit Organisations (NPOs) currently employ around 31 million people, of whom 20 million are paid employees. In the USA, the non-profit secotr contributed an estimated $887 billion to the economy in 2012, comprising 5.4% of the country's GDP, and accounts for 9.2% of all wages and salaries.
Is it so ridiculous to imagine that such structures, clearly aimed at the "common good" rather than maximising profits, could become the norm in the future?
Felber's proposals would not require banning companies that are only aimed at maximising profits for their shareholders. But, with suitably constructed rules, such companies would simply lose out in the longer term. I was indeed very much convinced that his proposals could really "Change Everything"!
I was very intrigued, and immediately rushed to get a copy of Christian's book "Change Everything - Creating an Economy for the Common Good" which is actually the English Translation (published in June 2015) of a book originally published in German in 2012 under the title "Die Gemeinwohl-Okonomie. Aktualisierte und erweiterte Neuausgabe"
I've just finished reading it and I was very impressed. As Eric Maskin notes in the forewood, "Christian Felder thinks big. Not content with marginal change, he proposes a thorough overhaul of our capitalist system. In his world, companies still earn profits. But they are driven not be revenues and costs, but by their Common Good balance sheet, which evaluates them on how cooperative they are with other companies, whether their products and services satisfy human needs, and how humane their working conditions are. A company is awarded Common Good points accordingly, and its score is published, so that customers know whom they are dealing with. A good score also entitles the company to favourable government treatment: lower taxes, better borrowing terms and more public contracts. "`Could this actually work? I think it could. One of the first striking points that Felber makes is that in many countries, the constitution specifically puts "the Common Good" as the central justification for everything. And yet, businesses act as if the only criterion is financial profit.
Felber proposes that all businesses could be encouraged to generate a "Common Good Balance Sheet" that gives positive and negative points according to the way they function. Here is a simplified version of a recent iteration of the proposal that shows how you can score points for "good" behaviour, and lose a lot for "bad" ones.
The book demonstrates that while this may seem revolutionary, there are actually a large number of actors in the economy that already work in this sort of way. He gives a whole list of examples of cooperatives across the world that have been very successful, including perhaps the most famous one - Mondragon in Spain, that has an annual turnover of €15 billion. He also points out that Non-profit Organisations (NPOs) currently employ around 31 million people, of whom 20 million are paid employees. In the USA, the non-profit secotr contributed an estimated $887 billion to the economy in 2012, comprising 5.4% of the country's GDP, and accounts for 9.2% of all wages and salaries.
Is it so ridiculous to imagine that such structures, clearly aimed at the "common good" rather than maximising profits, could become the norm in the future?
Felber's proposals would not require banning companies that are only aimed at maximising profits for their shareholders. But, with suitably constructed rules, such companies would simply lose out in the longer term. I was indeed very much convinced that his proposals could really "Change Everything"!
Dear Mr. Draghi - let's have €60 billion a month of Unconditional Basic Income for the Eurozone's citizens
On Thursday 3rd December 2015, Mario Draghi, the president of the European Central Bank announced that they would be extending the bank's Asset Purchase Program. I quote:
This is actually very good news. As far as I can see, it should now be perfectly possible for regional governments to emit a form of bond that they could sell to that nice Mr Draghi and get real Euros in return.
So, how about the following scheme? We know that the ECB is going to create €60 billion every month until at least March 2017. Given that the Eurozone's population in 2015 is 338,335,120, that means just over €177 for every man, woman and child in the Eurozone every month (and a total of €2660 each between January 2016 and March 2017).
Every region in the Eurozone should set up a citizen's bank for all the citizens living in the region. Every month, they could create bonds with a value of €177 times the population of the region. They would sell those bonds to the ECB, and use the money to make direct payments of debt-free money to the Citizens in their region.
For example, I live in the Midi-Pyrénées Region of France, which has a population of just under 3 million. So, every month, the Midi-Pyrénées Citizens bank could emit €532 million of bonds, that would be sold to the ECB. The bonds would say that the Region promises to pay the sum with interest at 0.0% after a period that would be as long as possible. How about on the 1st January 2116, for example?
If every Regional government in the Eurozone did the same thing, the €60 billion that Draghi is creating would go somewhere useful - namely into peoples bank accounts, rather than fueling yet more asset inflation.
People would no doubt use some of the €60 billion to simply pay off debts, which would actually mean that there would be no inflationary effect at all. But even the remaining money would mainly get spent into the economy, by allowing people to buy things like food, clothes, as well as paying for vital things like the rent. They proportion that would end up fueling inflation would be negliable. Note the huge difference with the current situation, where Draghi's €60 billion a month goes essentially to the fuel speculation in the financial markets.
Importantly, for the citizens receiving the money, it would be effectively debt free - they would not have to pay the money back - ever! We would at last be starting the switch from a money system in which roughly 97% of the money in circulation is in the form of interest bearing debt, to one where an increasing proportion will be "real" money that would never need to be paid back - at least not until 2116!
Could this really work? I think so.
The main problem would be the possiblity that there could be some restrictions on what sort of debt instruments the ECB is prepared to buy up. However, I doubt that such restrictions actually exist. I bet that currently, the ECB is probably happy to buy up any old rubbish that the commercial banks can find lying around. The whole point of the operation is to boost the markets, so I see absolutely no reason why a bond generated by a Regional authority could not be accepted. And as for the idea of a 0.0% interest rate, can I remind you that the ECB just decided to have a negative interest rate on deposits with the bank. I quote Mario Draghi again:
So, there you have it. A perfectly plausible way for Mario Draghi to use the €60 billion of newly minted ECB money that he is able to create every month in an intelligent way. QE for People is quite doable right now. What are we waiting for?
"as regards non-standard monetary policy measures, we decided to extend the asset purchase programme (APP). The monthly purchases of €60 billion under the APP are now intended to run until the end of March 2017, or beyond, if necessary"The other interesting announcement was that they are now prepared to finance directly regional and local governments. Again, I quote:
"we decided to include, in the public sector purchase programme, euro-denominated marketable debt instruments issued by regional and local governments located in the euro area in the list of assets that are eligible for regular purchases by the respective national central banks."Yes, that's right. While the ECB is not allowed to finance national governments directly because of the infamous Article 123 of the Lisbon Treaty, paragraph 2 of that article states that those rules don't apply to "publicly owned credit institutions". Here are the relevant texts:
So, there you are! The ECB has decided that regional and local governments can be included.
1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.
This is actually very good news. As far as I can see, it should now be perfectly possible for regional governments to emit a form of bond that they could sell to that nice Mr Draghi and get real Euros in return.
So, how about the following scheme? We know that the ECB is going to create €60 billion every month until at least March 2017. Given that the Eurozone's population in 2015 is 338,335,120, that means just over €177 for every man, woman and child in the Eurozone every month (and a total of €2660 each between January 2016 and March 2017).
Every region in the Eurozone should set up a citizen's bank for all the citizens living in the region. Every month, they could create bonds with a value of €177 times the population of the region. They would sell those bonds to the ECB, and use the money to make direct payments of debt-free money to the Citizens in their region.
For example, I live in the Midi-Pyrénées Region of France, which has a population of just under 3 million. So, every month, the Midi-Pyrénées Citizens bank could emit €532 million of bonds, that would be sold to the ECB. The bonds would say that the Region promises to pay the sum with interest at 0.0% after a period that would be as long as possible. How about on the 1st January 2116, for example?
If every Regional government in the Eurozone did the same thing, the €60 billion that Draghi is creating would go somewhere useful - namely into peoples bank accounts, rather than fueling yet more asset inflation.
People would no doubt use some of the €60 billion to simply pay off debts, which would actually mean that there would be no inflationary effect at all. But even the remaining money would mainly get spent into the economy, by allowing people to buy things like food, clothes, as well as paying for vital things like the rent. They proportion that would end up fueling inflation would be negliable. Note the huge difference with the current situation, where Draghi's €60 billion a month goes essentially to the fuel speculation in the financial markets.
Importantly, for the citizens receiving the money, it would be effectively debt free - they would not have to pay the money back - ever! We would at last be starting the switch from a money system in which roughly 97% of the money in circulation is in the form of interest bearing debt, to one where an increasing proportion will be "real" money that would never need to be paid back - at least not until 2116!
Could this really work? I think so.
The main problem would be the possiblity that there could be some restrictions on what sort of debt instruments the ECB is prepared to buy up. However, I doubt that such restrictions actually exist. I bet that currently, the ECB is probably happy to buy up any old rubbish that the commercial banks can find lying around. The whole point of the operation is to boost the markets, so I see absolutely no reason why a bond generated by a Regional authority could not be accepted. And as for the idea of a 0.0% interest rate, can I remind you that the ECB just decided to have a negative interest rate on deposits with the bank. I quote Mario Draghi again:
"as regards the key ECB interest rates, we decided to lower the interest rate on the deposit facility by 10 basis points to -0.30%. The interest rate on the main refinancing operations and the rate on the marginal lending facility will remain unchanged at their current levels of 0.05% and 0.30% respectively.Given that negative interest rates are apparently ok, we might even say that the Regional bonds could have a negative interest rate such that, on the 1st of January 2116, there would be nothing left to pay!
So, there you have it. A perfectly plausible way for Mario Draghi to use the €60 billion of newly minted ECB money that he is able to create every month in an intelligent way. QE for People is quite doable right now. What are we waiting for?
Subscribe to:
Comments (Atom)