Monday, February 11, 2013

Argentina's Financial Collapse - Past Is Prologue

The following rather stunning documentary provides a critical insight into what Europe (and Argentina once again) could well be progressing towards. There is a reason we highlight the 'scariest chart in Europe' as that of youth unemployment and with the central banks printing money at ever increasing paces and the next round of global competitive devaluation beginning, the debt slaves will suffer ever more. In 2001, Argentina collapsed; after many years of apathy in the country, the insurrection exploded. As TopDocumentary notes, the spontaneous revolt of 'faceless' people meant saucepans were being banged in every neighborhood.

Friday, October 19, 2012

Guest Post: Should Central Banks Cancel Government Debt?

Readers may recall that Ron Paul once surprised everyone with a seemingly very elegant proposal to bring the debt ceiling wrangle to a close. If you're all so worried about the federal deficit and the debt ceiling, so Paul asked, then why doesn't the treasury simply cancel the treasury bonds held by the Fed? After all, the Fed is a government organization as well, so it could well be argued that the government literally owes the money to itself. He even introduced a bill which if adopted, would have led to the cancellation of $1.6 trillion in federal debt held by the Fed.

Monday, October 15, 2012

Money is a "social convention"

A few weeks ago we noted Bundesbank president and ECB governing council member Jens Weidmann's analogy between the Faustian bargain offered by a money-printing Mephistopheles in Goethe's classic prose and today's ubiquitous oh-so-tempting short-term solution to everyone's pain. His full speech (below), while a little dramatic, should indeed strike fear into many with its clarity. The financial power of a central bank is unlimited in principle; it does not have to acquire beforehand the money it lends or uses for payments. Many believe Goethe was portraying the modern economy with its creation of paper money as a continuation of alchemy by other means. While traditional alchemists attempted to turn lead into gold, in the modern economy, paper was made into money. Indeed, the fact that central banks can create money out of thin air, so to speak, is something that many observers are likely to find surprising and strange, perhaps mystical and dreamlike, too  – or even nightmarish. Of course, Weidmann concludes, it is important that central bankers, who are in charge of a public good – in this case, stable money – bolster public confidence by explaining their policies.

Monday, September 24, 2012

Guest Post: QE For the People - What Else Could We Buy With $29 Trillion?

Forget Euro and Pound - What About Local Currencies?

German Chancellor Angela Merkel maybe be trying her utmost to keep Greece in the euro, but a high school teacher from Bavaria may have found a better solution and is pitching the idea to Greek politicians.

Economics teacher, Christian Gelleri, started a local currency in 2003 with his students in the small town of Prien am Chiemsee, around 50 miles south of Munich. The currency has performed so well that on Wednesday he was invited to travel to the Greek region of Macedonia to show local politicians how it could keep them from leaving the euro.

"We see complementary local currencies as an answer to balance differences between regions within a currency zone," he told "We have very big differences in the euro zone when you compare a region like Munich with Thessaloniki [in Greece]."

His idea doesn't stop at Greece and he believes it could prevent the euro zone break up in the long run.

The idea is called "express money" that would be issued by governments. It would have fast circulation with a 2 percent levy for hoarding notes with a 10 percent charge for conversion into euros. A supporting document co-written by Gelleri reminds readers that doubling monetary velocity, doubles gross national product.

He recommends a complementary currency on a national level in Greece and even if they did break from the euro, he believes that local currencies could be used alongside the drachma to strengthen poorer areas.

And Gelleri has plenty of experience, the currency he created - the Chiemgauer - will celebrate its 10-year jubilee next year.

"With a turnover of 6 million euros last year and a growth rate of 20 percent we see a continuous and very positive development," he said.

The amount of local currencies across Europe has now reached 104, all of which are listed on This week Bristol, a city in southwest England, launched the latest of these - the Bristol Pound.
The project is backed by the Bristol Pound Community Interest Company who initially set the exchange rate which is simply one-to-one with the pound sterling.

A secure printing firm creates the notes, seven main outlets then issues them and 350 independently owned businesses in the region will be accepting them in the coming weeks. They hope 1000 businesses will sign up to the scheme by the end of the first year.

A business consultant who lives in the area, Ross Parker, isn't so keen on the idea saying it won't change people's spending habits or the amount of money they have.
"The Bristol Pound is linked to the U.K. pound, and neither the Bristol Pound, nor other local currencies would survive without such a link," he told "There is no reason why people would trust their local council to stand behind any currency if they can't trust their central bank."

Dr Gill Seyfang, an academic from the University of East Anglia in the U.K., who lectures on sustainable consumption, has a more positive outlook for the Bristol Pound.

She sees it as being more professionally-organized, more useful and better marketed than previous attempts. There's a clear reason why these local currencies are appearing according to Seyfang.

"As people find that more of their needs are simply not met by national (and international) currencies, then naturally people look to new, innovative financial solutions," she told

"These initiatives always spring up in times of economic recession," she said, citing the "stamp scrip" that begun in the American state of Iowa during the 1930s Great Depression.

Thursday, September 20, 2012

$62.7 Trillion In Net Worth: Here Is The Latest US Household Balance Sheet

Moments ago, the Fed released its latest Z.1, aka the Flow of Funds, which is the primary source of information of that one component of modern finance which all modern economists continue resolutely to ignore because it blows all their anachronistic theories on monetary theory out of the water: shadow banking data. But more on that later. for now, here is the graphic summary of that most important of conventional data points updated every quarter: the US household balance sheet, and specifically the net worth of the US consumer, which in Q2 declined from a 4 year high of $63 trillion to $62.7 trillion, on a $900 billion drop in financial assets, offset by a $400 billion hike in real estate assets. Most importantly, and the reason why to the CTRL-P operator the only thing that matters is the stock market, of a total of $76.1 trillion in assets, only $24.2 trillion are tangible: i.e., real estate and durable goods. The remainder, $51.9 trillion or 68.2% of total, is Financial assets. It is this number that is the sole target of Bernanke's "monetary policy" and which must be inflated at any and all cost.

Thursday, September 13, 2012

Steve Keen: New Zealand Seminar: Schumpeter, Minsky & Endogenous Money

Steve Keen: This is probably the most detailed seminar I have given on my views on monetary macroeconomics. I begin with the data that, back in December 2005, led me to expect that a huge economic crisis was imminent: the ratio of private debt to GDP. Then I explain why this ratio matters, in contrast to the arguments that Neoclassical economists put that only the distribution of debt matters. This takes me through the empirical data, the theories of Schumpeter and Minsky, and the mathematics needed to prove that “aggregate demand equals income plus the change in debt” is correct, and that this does not involve double-counting.