G: And anyone who thinks the essential problem is “the monetary paradigm” should be careful throwing around the word stupid.
Me: When all of the leading thinkers and reformers such as Modern MONETARY Theory, Keen’s showing that Minsky was right about FINANCIAL instability, Hudson’s observations of the parasitical nature of present FINANCE and the efficacy of the gifting of DEBT jubilee’s in history, Ellen Brown’s attempts at FINANCIAL structural reform with state/public BANKING and Graeber’s history of DEBT…all revolve around and point at the MONETARY and FINANCIAL paradigm of DEBT ONLY…then the Martians are probably laughing if not rolling on the floor when we intellectualize endlessly while missing the salient and most relevant point.
G: Craig, you are lumping a large number of disparate things together. I knew Minsky was right before most people had heard of him. I had lunch with him once back in the early 90s – lot of fun.. It’s true that excess resources from a social point of view are used up in excessively large financial sectors. None of that establishes that the essential problem is that monetary creation is associated with credit creation…….
Me: Where to begin?
“It’s true that excess resources from a social point of view are used up in excessively large financial sectors. None of that establishes that the essential problem is that monetary creation is associated with credit creation.”
Yes it does. Do you believe in competition? Then why are you not in favor of paradigmatic competition? Oh, you’re for regulatory and (perhaps) structural financial reform…apparently because you cannot or will not look at the much wider, deeper and transformationally beneficial effects of an entire pattern change.
“Moreover it is not so easy to construct and calibrate a state-driven alternative.”
Not really, so long as one is conscientious about doing thorough market analysis and consciously and ethically adhering to aspects of the concept behind the new paradigm, namely the natural philosophical concept of grace.
“If you subsidise producers of consumption goods on condition they lower or do not raise prices, you raise the real wage.”
I’m not doing that. I’m assisting retailers and consumers AT retail sale which would benefit EVERY business model, except private banking/finance of course.
“To do that successfully you need to know how much labour productivity will be rising and how much of the extra income wage-earners will save and how much spend.”
Most if not all of that is rendered irrelevant because of the fact that a directly distributive money system that has terminally dealt with the old paradigm problems of inflation, unemployment and wide spread individual monetary scarcity. You can still account all of that, but the new paradigm ENDS the paradox of thrift and greatly homogenizes the fallacy of composition.
“And are you going to abolish private banking?”
I’m going to abolish private money creation by private banks. As I’ve said before intermediation of priorly created and saved money and profits that have been priorly garnered from the actually productive process would be allowed as investment is a legitimate financial business model. However, the non-profit national bank will not loan funds to anyone or any enterprise that could or would be immediately aggregated and used for speculative purposes by private investment firms. Relatively smallish individual loans for speculative investment, depending upon its stated purpose may actually be funded, but not for any ethically rancid things like hardcore pornography or wildly de-stabilizing nonsense like derivatives or synthetic derivatives etc.
“A state monopoly bank that lent out workers’ deposits would still generate additional deposits as its loans were spent.
Would not be allowed as per above.
“Looks as if you would need exchange controls too.”
Why would a start up or even a failed business that can correct its business plan want to borrow at interest from abroad when it could do so at 0% here? And if a smallish amount percentage-wise were allowed it probably wouldn’t be a problem anyway. Dare say it would be severely scrutinized.
“But the absence of a cost of capital was one of the reasons for inefficiency and waste in the Soviet system.”
I don’t think that was the actual reason. It was mostly corruption, idiot ideology and lack of awareness of how to implement the better new paradigm.
“Investment has an opportunity cost in foregone consumption spending and that should carry a price. A state bank would not normally make interest free loans.”
Old paradigm thinking.
“The tendency to speculative excess.in capitalist finance can be counteracted by appropriate regulation as long as the state is not captured by financial interests. More of investment can be managed in the public sector, as Minsky argued. Distributional issues can be tackled in various ways including tax and transfer. In attempting to solve a range of problems with a single magical solution, ignoring all the practical difficulties, I don’t think you serve the cause of reform.”
Impermanent and generally shallow reformist ideology and old paradigm thinking that hasn’t yet cognited on the concept behind the new paradigm and the significance of a high percentage discount/rebate monetary policy at retail sale.