Warren Mosler berriz egon zen Italian, 2014an.
Ikus Warren Mosler Italian, 2014an1.
Hona hemen aurreko sarreraren egida:
xxi) bankuek helburu publikorako lan egin behar dute, ez indize finantzario baterako zeina %1erako onura den2
xxii) bankuak kontrolatu, beraiei zehazki esanez zer permititzen zaien egiten3
xxiii) mugarik gabeko banku likidezia behar da, mugarik gabeko gordailu segurtasuna eta gerriko erregulatzaile sendo bat4
xxiv) gobernu kontratuak birnegoziatu liratan eta jarri interes zeroko tasa politika5
xxv) inflazioaz, zer?6
xxvi) EBZ-n hain ergelak dira?7
xxvii) dena aurrekontu defizit txikiaren arazoan murrizten da8
xxviii) banku mailegu baterako, errenta garrantzitsuagoa da interes tasa txikiagoak baino. Lanpostuak behar dira9
xxix) proposamen batzuk gehiago…10
xxx) hiritarrak dira lehenak: hasi lan bermeko programa iragankor batekin jende guztia berriz lan egiten jartzeko11
xxxi) nola eduki lira sendo12
xxxii) enplegu osoak politika fiskala gidatu behar du13
xxxiii) azken puntu batzuk eta merkataritzazko hitz bat14
Randall Wray-ren iruzkina
MRW | January 28, 2014|
This is an important discussion that Euro countries need to hear.
Ditto our Representatives and Senators. This speech is so clear about how the economy should work and what the purpose of the deficit is that everyone should dump it in their congressmen’s email box pronto. Too bad we don’t have National Living Treasures like they do in Japan15. Mosler would be one.
(Zabaldu, arren)
2 Ingelesez: “So how do we make sure that banks operate for public purpose? There’s no question that they are public institutions, every one of them. All their deposits are insured by the government. They have a government charter. They have guaranteed government liquidity. Government regulates what they can do with their money. They are allowed to what we call, ‘price risks at their interest rate’, and make credit decisions.
So, banks lend only in Lira. Foreign-exchange lending gets highly problematic when it is done by a public institution. You don’t want to let that happen.
Bank lending is to be limited to public purpose, which means you cannot use financial assets as collateral. You can’t borrow against financial assets from the member banks. If somebody in the private sector wants to make a loan, that’s okay. But not the banks with insured deposits. And lending is done by credit analysis and not market prices of the assets underneath. You must lend by credit analysis to serve public purpose. The big thing to remember is, you tell banks what they are allowed to do, and not what they are not allowed to do. When you tell banks what they are not allowed to do, they will always find something you forgot.”
3 Ingelesez: “You tell banks: you can do X and nothing else.
Somewhere in the world they will come up with some branch that will be doing something that you forgot to tell them they can’t do it. So instead, you tell them you can do this and nothing else. That’s the only way you can control the list of what they’re doing. And you better make sure that every regulator is in place and well-trained before you shoot the gun and let the banks start running.”
4 Ingelesez: “You need unlimited bank liquidity, unlimited deposit insurance, and a strong regulatory belt and set of suspenders.
You need continuous unlimited liquidity from the Bank of Italy, unlimited deposit insurance. When you do this, you do not need any interbank lending, so that’s done, over. And every time a bank needs money, or has extra money, the central bank knows about it because they don’t loan to each other. They just go through this channel of the central bank so you can watch it. At the end of the day there is no other way to do it. The countries that did this had no bank liquidity crisis in 2008. Canada, Japan, New Zealand, they had no problem like these countries that didn’t do this. But when banks have unlimited funds, and unlimited liquidity, like I said, you must regulate them and tell them only what they can do. In technical terms, we regulate the asset side and not the liability side.”
5 Ingelesez: “Renegotiate government contracts in Lira and set a zero interest rate policy.
The government contracts will all get renegotiated to Lira. They are competitive for the most part. And the companies are going to need Lira, so there should be no problem. Permanent zero rate policy much like we have today. Today the policy rate of the European Central Bank is very close to zero. It can just be set at zero and left at zero.”
6 Ingelesez: “So what about inflation?
Now, some people are concerned that zero rates might cause inflation. And if you are on the gold standard they probably would. But we have been off that for a long time and it doesn’t apply anymore.
Japan has had zero rate policy for 20 years or more now. They have the highest deficit in the world, over 200% of GDP. They’ve been fighting deflation for 20 years. And they’ve had the lowest interest rates in the world. So maybe those low rates don’t cause inflation. They’ve had the strongest currency in the world. Maybe those zero rates don’t cause the currency to go down.”
7 Ingelesez: “Are they really that dumb at the European Central Bank?
Maybe there’s some connection with the ECB, the European Central Bank, as they lower rates, the currency has been stronger. Is it possible the central banks have it backwards? With all those multiple PhD’s, and all the research, the hundreds of millions of Euro they spend on research, could they have it backwards? All the evidence says yes. And the countries with the higher rates, as they raise rates it doesn’t seem to work. It seems to make inflation worse and the currency low. So what are they overlooking? Who is the largest payer of interest? The government. And what happens when rates go up? Government pays more interest to the economy. And when rates go down governments pay less interest to the economy.”
8 Ingelesez: “It all comes back to the problem of a low budget deficit.
The economy loses interest income when the rates go down, and everybody who has money in the bank knows that. It helps the borrower, but it hurts the saver. But there are more savers than borrowers. The government debt in Italy is over 100% of GDP. That’s mostly somebody’s savings. Okay, that’s all ‘net savings’. When the interest rates goes up, that savings earns more money. When interest rates goes down the economy earns less money on the interest. So when interest rates goes down, the budget deficit goes down, and people earn less money. Did I tell you the low budget deficit is a problem? Yes. So you can see this channel of why it’s a problem.”
9 Ingelesez: “Income is more important for a bank loan than lower interest rates. You need jobs.
So let’s say you go into the bank to borrow money, let’s say I’m the economy and I walk into the bank to borrow money. And the banker says well, rates are down that’s good for your loan, but your income’s down. Which is more important? The income. When incomes are going down, it’s bad.”
10 Ingelesez: “More suggestions…
No issuance of PTP or CCT bonds. There’s no need to. Rates are zero anyway. How do we get the deficit up from 3% to 8%? I’ll just give you an example: we suspend the VAT. Now the deficit is up. It’s like giving everybody a 15% or 10% or 20% pay raise, depending on what you’re buying. So prices are lower. That’s not inflation.
11 INgelesez: “Citizens come first: start a transitional Job Guarantee program to put everyone back to work. The last part here is that the Bank of Italy funds a transition job for anyone willing and able to work. This is critical. People have been unemployed too long. Business prefers to hire people already working. By having a job for anyone willing and able to work, people can show that they are working and get hired by the private sector. In addition, the government can hire people in the private sector for public health and safety, and everything else that is needed.”
12 Ingelesez; “How to keep the Lira strong.
Dynamics of the Lira. Strong Lira from taxation without deposit conversion. If you did convert all the deposits, a lot of people are going to get very angry with Lira and they’re going to sell them for Euro, and they can drive down the currency. And it allows government to purchase the Euro it needs to service its obligations.”
13 Ingelesez: “Full employment must drive your fiscal policy.
Fiscal policy. The right size government is politically determined to meet real public service needs. You decide how many people you want in the public sector to do what you want done. Whatever it costs, that’s what it costs. The taxes are set at the right level so you have full employment. Nine times out of 10 that’s going to mean taxes will be lower than spending. There will be a deficit. There will be times when the private sector is borrowing like crazy to buy houses or cars, and you might need to run a budget surplus. But whatever it is that corresponds to full employment, that’s the right size deficit. And I suggest you got it just about right when the number of people in the transition jobs is about 3% of the labor force. And the trade balance is allowed to adjust to full employment conditions.”
14 Ingelesez: “Some final points and a word on trade.
Caveats
Converting bank deposits risk currency depreciation and inflation. Same with positive interest rates. And tell the banks what they can do and not what they cannot do.
And I’m going to take one minute only on trade. Let me talk about what the real wealth of Italy is. Think of it as your pile of stuff. That’s your real wealth. Goods and services. Everything from potato chips to healthcare. Goods and services. That’s your real wealth. So your real wealth is everything you can produce when everybody’s working. That’s how you get the most real wealth. Plus whatever you import adds to your pile of stuff. Whatever you export subtracts from your pile of real stuff. Now I did not say that exports don’t help the exporters. Yeah, it helps those people. But it is a subtraction of real wealth from the entire economy. The exports are your cost of imports.
Back in the old days we called that ‘real terms of trade’. So to optimize your prosperity, you make everything you can with everybody working, and then you add to that with imports, what people export to you. Then whatever you must export, you try and get as many imports as you can.
If you can export one Ferrari and get four Mercedes, that’s good. If you can export one Ferrari and get five Mercedes, that’s better. Real terms of trade, that’s the important thing. The United States doesn’t even publish the trade deficit or surplus between the states. [The EU is like a collection of US states using a common currency.] Again, it’s a whole session in itself.”
