Thursday, November 8, 2012

Brilliant Positive Money meeting in Newcastle.

We had a great Positive Money meeting in Newcastle last night. About 100 people there (organised by Gary Brooks and funded by the ESRC.)

There were two talks, one by Dr Alberto Montagnoli, Senior lecturer in banking and finance at the University of Sterling. The second was by Mary Mellor, Emeritus Professor of Sociology (Northumbria University).

Alberto ran thru the history of money (tally sticks and all that). Mary is a very lively speaker. Her main point was that money is a social construct: money exists largely because it is backed by the state  (think trillion dollar bail outs of banking systems). That being the case, what right do private banks have to create money? She says none, and I agree.

She is very much left of centre politically, but she’s pretty good at distinguishing her own political views from strictly economic considerations.

The Powerpoint files that accompanied the two talks should be available shortly. I’ll put the links here in due course.

Mary produced two interesting charts. One showed that the total amount of money devoted to recent bank bailouts exceeded the amount of money expended in World War II. I’m not sure whether that was on an inflation adjusted basis. Plus the two figures are not comparable in that wars consume REAL RESOURCES whereas bank bailouts primarily involve book –keeping entries (though obviously there are implications for real resource allocation). But the comparison with World War II is startling nevertheless.

She also produced a chart showing the huge amount borrowed over the last decade or so by U.K. financial institutions, relative to borrowing by government or households. By contrast, the role played by financial institutions in other countries is much smaller.

She has a good grasp of the point made by advocates of Modern Monetary Theory, namely that for countries that issue their own currencies, national debts are pretty much of an irrelevance. Personally I’d take that point further, and argue that any such country ought to make a PROFIT out of its national debt. That is, it ought to arrange matters so that inflation slightly exceeds interest paid on its debt. That way, the relevant country profits at the expense of its creditors (exactly what the U.K. has done over the last three years or so).

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