Monday, March 25, 2013

Kean on the "Roving Cavaliers of Credit" or How Bankers got to Rule the World.


For anyone who is still wedded to the idea that banks do not “print money” and push up the price of assets, totally unrestrained by the size of the economy.

Kean on the "Roving Cavaliers of Credit" or How Bankers got to Rule the World.
“”In some ways these conclusions are unremarkable: banks make money by extending debt, and the more they create, the more they are likely to earn. But this is a revolutionary conclusion when compared to standard thinking about banks and debt, because the money multiplier model implies that, whatever banks might want to do, they are constrained from so doing by a money creation process that they do not control.
However, in the real world, they do control the creation of credit. Given their proclivity to lend as much as is possible, the only real constraint on bank lending is the public’s willingness to go into debt. In the model economy shown here, that willingness directly relates to the perceived possibilities for profitable investment—and since these are limited, so also is the uptake of debt.
But in the real world—and in my models of Minsky’s Financial Instability Hypothesis—there is an additional reason why the public will take on debt: 

the perception of possibilities for private gain from leveraged speculation on asset prices.”"

Kean describes exactly the real world effects of current monetary policy.

Both Cyprus and Greece show how  Democracy can be overturned at the wim of bankers trying to protect their income, from pushing up asset prices, with loans they should never have been allowed to make, with money they have produced out of thin air. A power only a democratically controlled Government should have.

Recent moves towards legislation, to take money from us to bail out failing banks, again, by the New Zealand Government , shows who our politicians really work for!

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