Reuters’ story that SAFE told its banks they should be as obstructive as possible in meeting customer demands for foreign currency, but should absolute not divulge the reason why, certainly succeeded in causing a stir in markets. Continue reading
Tag Archives: Money
Banks DO Create Money
For those who will not take my word for it that banks do create deposits by lending money, let me quote you a little Roepke from a footnote (p113) to his 1936 work, ‘Crises & Cycles’:
“The process [of credit creation] is now clearly explained in any text-book on economics, banking or money (especially recommendable is Hartley Withers’ Meaning of Money). A fuller treatment may be found in the following books: R. G. Hawtrey, op. cit.; J. M. Keynes, A Treatise on Money, pp. 23-49 : C. A. Philips, Bank Credit, New York, 1920; W. F. Crick, “The Genesis of Bank Deposits,” Economica, June 1927, and F. A. von Hayek, Monetary Theory and the Trade Cycle, London,1933.”
Flow My Tears, the Policeman Said
I was recently flattered to be asked how I envisaged the dreaded ‘helicopter money’ working if it were not to simply add further to commercial banks’ already crippling mass of deadweight liabilities and assets, given that not only would printing it up in physical form be tortuous but that cash itself is only one conveniently heinous crime away from being proscribed altogether. Continue reading
A Trap of their Own Making
As we have laid out in some detail in our professional work, it is clear that Chinese banks have entirely lost their inhibitions about creating money these past twelve months. It is equally clear that once such money is called into existence, someone must be caught in the act of holding it when a balance sheet snapshot is taken, however eager their desire to ‘pass the bad or depreciating half-crown to the other fellow’ may be and thus regardless of what the fate of that money will be an instant after the shutter has closed on the statistical camera. Continue reading
Positively Natural – Pt IV
TOMORROW, AND TOMORROW, AND TOMORROW
So, one last time, let us lay out the argument developed above in the hope of eliminating all obscurity, for it is a pivotal one and therefore one which must be well understood if we are to challenge the very substance of the perilous theorizing of our Lords and Masters.
With positive real rates – which, we must again emphasize, simply imply that the instantaneous price ratio between goods today and goods tomorrow is greater than unity – the primal temptation is for the consumer to eat as much as he can, even including his seed corn, and so to yield to the pleasures of the moment in disregard of the needs of the morrow.
Positively Natural – Pt III
NO REMEDY IN THIS CONSUMPTION OF THE PURSE
But the sort of reasoning we developed in the last of this series is alien to much of today’s mainstream, many of whose members succumb to the long-dispelled, circular fallacies of the productivity argument. Yet more of them adhere to what Dennis Robertson wickedly derided as Keynes’ Cheshire Cat theory of ‘liquidity preference’ (‘The rate of interest is what it is because it is expected to be other than it is. But if it is not expected to be other than it is, there is nothing to tell us why it is what it is… [it is] a grin without a cat’).
Positively Natural – Pt II
THE NET THAT SHALL ENMESH THEM ALL
Now, the foregoing may be all well and good, but it is also the case that any such consignment of goods is open to a multitude of what economists call ‘rivalrous’ uses. If this is not true for that rare, individual batch of highly purpose-specific goods which we may have under consideration in some particular instance it will nonetheless still hold for the earlier, typically less use-constrained goods of which that batch is partially comprised, as well as for the later, more shop-ready goods to which it will in turn give rise and whose own market valuation, as we have seen, will help determine the price of their antecedents
Positively Natural – Pt I
THE CASE FOR POSITIVE INTEREST
An Austrian rebuttal of Summers et al, in four parts
THE TIME IS OUT OF JOINT
Over the years, any number of psychological experiments have been conducted in order to validate – or at least to give a veneer of academic corroboration to – a truth already well established by practical experience; namely, that we humans must continually struggle to overcome our basic animal instinct to seek instant gratification of our wants.
Money, Macro & Markets – The Archive
Regular readers will know that the articles published here are but a small subset of the detailed work I undertake to analyse economic and political developments and their effects on markets. In order to give some idea of the scope of this, presented below is an archive of past issues of the Austrian School-informed, in-depth monthly publication, ‘Money, Macro & Markets’ in addition to which I compile twice monthly updates as the ‘Midweek Macro Musings’ which are also made available on a complimentary basis to subscribers to the former letter.
The Road to Canossa
That the artificial interest rates in evidence in our hugely distorted capital and money markets can be made negative in nominal as well as in real terms is, alas, the curse of the modern age. Though entirely at odds with natural order – as we have repeatedly tried to make plain – they are also a curse that we are unlikely to have lifted any time soon, especially not in a Europe where there is no effective restraint to be had upon the exercise of his awful powers by the likes of a fanatic like Draghi.