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The necessary illusionists

How money keeps its magic

Funny thing about money. It is supposed to be a bedrock of stability but it feeds on illusions. So much monetary policy relies on trickery.  The elite know things that the unwashed masses do not. Such as money illusion. The success of devaluation rests on tricking the masses. But tell a central banker he or…
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No to Vollgeld, Yes to Ikon!

How to reform the production of money

There was a basic flaw in the Vollgeld “sovereign money” proposal rejected by the Swiss in a referendum last Sunday. An arrangement that gives the state or its agencies exclusive power to create money,  oversee bank accounts and direct lending to the economy  is hostile to capitalism. It cannot produce the assurance needed to allow the…
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The capture of money

Why people do not trust it

Money is a near-universal social institution. It  evolved to support human cooperation and to control and coordinate the life of humankind. Like other core institutions, such as marriage and language, the forms that money takes may differ widely. The values and norms governing money’s use, and the practices associated with it, also vary widely. For…
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10-year retrospective: Lessons 7, 8, 9

Three more lessons! That's the lot

7. Neglect of international causes This is the most fatal flaw, as it is the one least understood  by economists, governments or bankers. My interpretation of the crisis emphasises its international dimensions – not only in the rapid spread of the crisis but also in its root causes (see Lesson 3). Yet this perspective is…
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10-Year retrospective: Lesson 6

The State has rewarded bad behaviour and bad banks

6. Expect more bad bankers and bad banks How has the state punished the financial industry for its crimes,  corruption and anti-social behaviour? By showering it with subsidies, privileges,  perks and by offering it protection from an angry public. And by reducing its profitability and capacity to change by piling new regulatory layers and requirements….
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10-Year retrospective: Lesson 5

Banks have not regained public trust

5. Banking can only be reformed from within This is another unavoidable lesson. Banking has not been reformed by actions taken by the state, central banks or regulators since the crisis. Indeed they have set back the prospects for improvement. There were two main strands in the policy response to the crisis. One was monetary…
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10-Year retrospective: Lesson 4

People know injustice when they see it

4. The people will have revenge The countries worst affected by the financial crisis, the United States and especially the United Kingdom, have since experienced severe political turbulence. I believe this can be directly traced back to the financial crisis and the way it was dealt with by governments, central banks and the financial elite….
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10-Year retrospective: Lesson 3

Why reform must be international

Gradually, inch by painful inch, the central bankers are losing their clothes – the comforting ideology that has enveloped them like a warm garment for more than a generation. This is the ideology, or “regime”, of central bank independence and inflation targeting (CBI+IT). Oh, how shy they are! Look how they hold onto any scraps!…
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10-Year retrospective: Lesson 2

Central banks into milch cows

A leading economist has predicted that central banks will  not remain independent much longer. His forecast was made  at  a Bank of England conference called to celebrate – yes – 20 years of independence. Guests included Mrs Theresa May, the Prime Minster. It was opened by the Governor, Mark Carney, who drew a different, but…
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10-Year retrospective: Lesson 1

The first in a series on lessons of the global financial crisis

The financial crisis showed up the defects of monetary models. These in turn reflected a flawed idea of money. That is why central banks failed to anticipate the crisis and could not deal with it effectively when it arrived. That is the message of The Money Trap. The lead-up to the crisis was marked by…
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