<blockquote>'..It is exceptional and rare to see a management team open themselves up to a dialog and even critique..'
- Lila Murphy,
An Open Letter to the Management of the Resources Companies I Will Meet This Conference Season, February 21, 2012</blockquote>
'This afternoon, former Bundesbank Vice President and ECB Executive Board member Juergen Stark warned that public finances in advanced economies were in “dire straits” and that fiscal deficits were “unsustainable.” He was also critical of the ECB bond purchase program, warning that “intervention in the sovereign bond markets postponed adjustment requirements.”..'<blockquote>'In my initial CBB back in 1999, I trumpeted the need for a Contemporary Theory of Money and Credit. Some thirteen years later, I lament that the void remains as large as ever. Mr. Matthews’ Washington Post article highlighted “Modern Monetary Theory,” an alternative economic framework with Keynesian roots that is receiving heightened attention in our age of unrelenting government stimulus. I will not be jumping on board.
..
..To this day, the economic community fails to appreciate key monetary dynamics from the nineties – issues that remain just as relevant today. The federal government ran a small surplus in 1998, a surplus of about $100bn in 1999 and one approaching $200bn in 2000. There was talk of paying down the entire federal debt. Economists and policymakers alike were oblivious to momentously destabilizing developments in “money” and Credit. We’ve made little analytical headway since.
..
I’m not sure how a modern monetary theory can be relevant without delving deeply into the profound role the evolution of GSE and Wall Street finance had on U.S. and global finance; on the fiscal position of the U.S. and advanced economies; on our asset markets, economic structure and on financial fragility more generally. To focus on federal spending, surpluses and deficits at the expense of recognizing the momentous distortions wrought by Washington finance (Treasury, GSE and Federal Reserve – OK, throw in the IMF and World Bank) is a failure of analytical diligence.
The 2008 crisis and subsequent economic and financial fragilities were a direct consequence of a historic Bubble in mortgage finance. Washington’s fingerprints were all over the mispricing of finance that fueled near-catastrophic asset market distortions and economic maladjustment. It was an abject failure in policymaking. Those that have called for even greater government involvement in our economy and markets are content to disregard past mistakes. For those of us paying attention, there’s no doubt that we want Washington extricated from monkeying with market pricing mechanisms.
The lack of respect for “money” and moneyness is a primary issue I have with most monetary analysis. They don’t get it. From the perspective of my analytical framework, money is both powerful and precious. Historically, sound money has been as rare as government-induced monetary inflation has been commonplace. The biggest risk coming out of the 2008 crisis was that runaway Washington fiscal and monetary stimulus would destroy Creditworthiness at the heart of our monetary system. We're well on our way. Throughout history, mistakes in monetary management have tended to beget only bigger mistakes.
..
Fine, economists can sit around and debate deficit spending and the role of fiscal stimulus in recessions and recoveries. Meantime, there is scant discussion of the extraordinary monetary backdrop and untested experimental nature of monetary management. Governments have assumed unprecedented roles in the marketplace, much to the advantage of a multi-Trillion global leveraged speculating community. Government market backstops have been instrumental in the mushrooming of global derivative positions to the hundreds of Trillions. A financial insurance marketplace of unfathomable scope has been operating on the flimsy premise of liquid and continuous securities markets. Meanwhile, most economists, “monetary” and otherwise, argue that tame inflation ensures that there is little risk associated with ongoing massive government stimulus and market intervention.
Most today fail to appreciate the potential catastrophic consequences of a crisis of confidence in “money” – a crisis of confidence in the moneyness of government debt and associated obligations. I sense little appreciation for the momentous role played by “money” as the core foundation of overall global Credit – or for Credit as the fuel for global economic activity. We saw again in 2011 how abruptly things can begin to unravel when the marketplace perceives that policymakers don’t have the situation under control. We’ve witnessed, as well, how quickly aggressive concerted global policy responses can transform de-risking/de-leveraging back to re-risking/re-leveraging. In a span of a few weeks, problematically illiquid markets morphed right back into liquidity abundance and speculative excess.
..
This afternoon, former Bundesbank Vice President and ECB Executive Board member Juergen Stark warned that public finances in advanced economies were in “dire straits” and that fiscal deficits were “unsustainable.” He was also critical of the ECB bond purchase program, warning that “intervention in the sovereign bond markets postponed adjustment requirements.” I’m with Mr. Stark on this – and I’m with the German economic viewpoint more generally. Indeed, my analytical framework draws heavily from the “Austrian”/German perspective of the overriding importance of stable money and Credit. The Germans well appreciate the danger of monetary inflation, flawed policymaking doctrine, economic maladjustment and Bubbles. And most American economists believe the Germans remain hopelessly fixated on the Weimar hyperinflation experience. I fear our economic community remains hopelessly fixated on flawed economics.'
- Doug Noland,
Contemporary Monetary Analysis, February 24, 2012</blockquote>
'.. why has our generation seen the creation of so many and so varied “Machines from Hell?” Mad scientists have been with us since Frankenstein; why has this era been so fertile of their economic Doomsday Machines?'<blockquote>'Two questions remain. First, why has our generation seen the creation of so many and so varied “Machines from Hell?” Mad scientists have been with us since Frankenstein; why has this era been so fertile of their economic Doomsday Machines?
The central answer appears to lie in the area of fiat money and its cousin bank deposit insurance, which a decade ago seemed unassailable and benign parts of our modern economic system. Under a Gold Standard without deposit insurance (or under any other monetary/banking system that ensures quasi-constant monetary values without state risk assumption) most of the Machines break down before they can do too much damage. Greek budget deficits would have become impossible to finance long before 2008.Chinese banks that created excessive bad debts would have suffered bank runs back in 2005-06. Quantitative Easing would quickly have caused an exodus of gold supplies, creating a massive deflationary recession. Equity returns would consist primarily of dividends and debt yields would be stable, so actuarial black holes in pension and medical insurance systems would become apparent while they were still manageable. Financial engineering and creative risk management would be so obviously dangerous to a bank’s well-being that sophisticated depositors would withdraw funding well before retail depositors began to panic. Machines from Hell were always in danger of appearing in a fiat money system, but their proliferation derived from the burst of money growth and speculative activity after 1995, which was caused by central bank laxity in the face of internet-driven deflation.'
- Martin Hutchinson,
Machines From Hell, February 20, 2012</blockquote>
*** Chartalism<blockquote>'What indeed? Although Draghi didn't mention it, at the end of the road of central bank monetization of government debt there always awaits the utter destruction of the currency. The Chartalism influenced German Reichsbank under Rudolf von Havenstein did after all employ precisely this method, with predictable results.'
- Acting Man,
ECB President Mario Draghi – A First Impression, November 4, 2011
'Rudolf von Havenstein and his advisors were all academics that had likewise convinced themselves of the validity of a dangerous inflationary doctrine. They were big fans of chartalism – which today is known as 'modern monetary theory' (MMT) – the statist monetary crankism thought up by Georg Friedrich Knapp a few years prior to Havenstein's stint as president of the German Reichsbank. Remarkably, this school of thought has recently made quite a comeback under its new, more spiffy sounding name. It's still the same dangerous nonsense though.'
- Acting Man,
More Monetary Experimentation Is On Its Way, August 31, 2011
'It is important to realize that the idea that the ECB should be enabled to emulate the Fed and the BoE in implementing a mild form of Chartalism is not only not going to solve the basic problem, it is going to make it worse..'
- Acting Man (
Source), November 30, 2011
'..what is wrong with chartalism (or 'MMT' as it calls itself nowadays). It is nothing but old-fashioned, pseudo-scientific and long discredited inflationist monetary crankery. The economy is not just a 'game of numbers', it is about entrepreneurs economizing and allocating scarce resources as efficiently as possible. Anything that disturbs this process can only lead to disaster (some proposals lead to disaster faster than others – Auerback seems eager to take a short-cut).'
- Acting Man,
Chartalist Fantasies, September 26, 2011
'It is quite astonishing that the forces in favor of statism and interventionism continue to be as strong as they undoubtedly are. Even obscure economic sects such as Chartalism (today generally associated with 'neo-Keynesianism', although its ideas clearly predate it) have been revived in an effort to add (allegedly) 'new' dimensions to the endless tinkering of the ruling political and bureaucratic classes with the economy.
Statist propaganda has managed to divert attention from the true authors of the calamity (who have the chutzpa to now pose as our saviors), while simultaneously blaming the
'free market' and
'laissez-faire ideology' for having caused the crisis. George Reisman has
skilfully demolished this myth, but he was probably preaching to the choir..'
- Acting Man,
Interventionism vs. Markets – The Struggle Continues, December 19, 2011</blockquote>
Context '..a truly stable financial and monetary system for the twenty-first century..'<blockquote>
'..victimized by the schemes of inflationists..' 2011
'..the structural damage the last credit boom has wrought..' 2011
'..central banks worldwide are rendered insolvent..' - '..[there] will emerge a new global economy that is stronger and healthier, provides better living standards..' 2011
(Dutch) Haptopraxeologie: Bazaarmodel - Oostenrijkse School, Haptonomie, Plasma Kosmologie (29 mei, 2011)</blockquote>