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The Lunatics Are Running the Asylum: Draghi’s Money Printing Bazooka
Submitted by Pater Tenebrarum via Acting-Man blog,
The Utterly Absurd Becomes the “New Normal”
“Bankers at the World Economic Forum in Davos are applauding the European Central Bank’s announcement of quantitative easing. Some said they were pleased the ECB’s plan, to buy about €60 billion a month in government bonds, is larger than expected. “It was positive and it was needed,” said Francisco Gonzalez, chairman of Spain’s BBVA. “Having said that, governments have to keep with reforms for the plan to meet its purpose,” he added.”
The ECB surprised markets today by unveiling a slightly larger than expected “QE” program. Yesterday’s leak of the decision referred to money printing to the tune of €50 billion per month, so the actual announcement of a €60 billion per month program was seen as a “positive surprise”. Just think about this for a moment. The charlatans running the central bank announce that they will make a grandiose effort to debase their confetti currency even further by printing a huge amount of additional money every month, and this is greeted as a “positive surprise” and is “applauded by bankers”. It should be glaringly obvious by now that the lunatics are running the asylum.

This time it will work! Mr. Draghi unwraps the chief weapon of the John Law School of Economics, which has been failing with unwavering regularity since at least the times of Roman Emperor Diocletian.
Image author unknown
The Charlatans of Inflationism
We know of a number of people who will be pleased (and will probably begin to cry for even more money printing shortly) – among them is Martin Wolf at the Financial Times. This breeding ground of hoary inflationism has been regaling its readers with long discredited (but quite popular) economic balderdash for several years already. Just prior to the ECB announcement, Mr. Wolf wrote the umpteenth editorial exhorting central bankers to print as much money as possible. In his opening salvo, he commented on the SNB’s wise, if belated, decision to finally stop printing unlimited amounts of Swiss francs to shore up the failing euro. Needless to say, this decision did not please Mr. Wolf.
“These are exciting times in European central banking. Last Thursday the Swiss National Bank suddenly terminated its successful peg to the euro. This week the European Central Bank is expected to announce its program of quantitative easing. The SNB has embraced the risk of deflation from which the ECB wishes to escape.
[…]
Why end a policy that had delivered such enviable stability? The obvious answer is that the SNB feared huge inflation if it remained pegged to the euro, particularly after QE began — and bigger losses on foreign currency assets the later the peg was dropped. Neither fear is compelling, as Willem Buiter, Citigroup chief economist, argues. It is possible to hold down the value of a currency one creates oneself forever. It is true that the SNB’s balance sheet is already large, at about 85 per cent of gross domestic product. But it had stabilised, and as Mr Buiter notes: “There is no technical limit on the size of the central bank’s balance sheet, in absolute terms or relative to GDP.”
This is a case of one charlatan quoting another to buttress his case. Mr. Buiter, it may be remembered, is the man who went as far as invoking the ideas of utter monetary cranks like Silvio Gesell as possible “solutions” to the crisis of 2008 ff., thereby outing himself as a monetary crank as well. This cannot be put in a more polite manner.
Wolf then launches into a presentation of his “better ideas” – quite typical for armchair central planners who feel the constant urge to dispense advice to monetary bureaucrats. In order to avert all the negative consequences of its interventionism, Wolf believes the SNB should not have stopped intervening, but should instead have adopted a long list of additional interventionist measures, so as to “fix” the “unintended consequences” of the initial intervention. Here is one of them that strikes us as especially despicable and typical of the thinking of the statist mountebanks infesting the mainstream financial press nowadays:
“More interesting would have been a decision to go further in the direction of negative interest rates than the minus 0.75 per cent now imposed.
To make such a move stick, the authorities would have had to place limits on withdrawals from bank accounts or move entirely to electronic money, to prevent people from protecting their purchasing power by moving into cash. Needless to say, such radical ideas would horrify the prudent burghers of Switzerland.”
This idea should “horrify prudent burghers” everywhere, not just in Switzerland and Germany. We have seen the idea of banning cash currency mentioned quite frequently in recent years, and we have little doubt that it is a long term goal of the ruling elite. It would be one of the most tyrannical measures of recent memory. A country implementing such a policy could no longer be called “free” by any stretch of the imagination. Wolf wants cash to be banned so as to make it absolutely impossible for people to protect the purchasing power of their savings, while forcing them to keep their money with fractionally reserved banks (i.e., inherently insolvent institutions), whether they want to or not. What a swell guy.
Regarding the ECB and its then still upcoming QE decision, Wolf explains the alleged necessity of the coming money printing orgy as follows:
“QE is going to horrify the burghers of Germany, too. But it must now happen since it is the only way still available for the ECB to meet its definition of price stability. Its credibility is at stake. So, too, is the eurozone’s economy. Everything is fine in Germany. But Germany is not the eurozone. Everything is less fine elsewhere.
The eurozone is in a slump, afflicted by the “chronic demand deficiency syndrome” that is the world economy’s biggest current weakness. Core inflation is 0.7 per cent, far below the ECB target of “below but close to” to 2 per cent. Five-year inflation expectations have fallen to 1.6 per cent.
(emphasis added)
We have no idea why “core inflation” of 0.7 percent or 5 year inflation expectations are supposed to be “too low”. In fact, we believe it is still too high. In a progressing economy, prices should be falling and the real value of incomes should be rising. It is not clear to us why making people poorer by X% every year is supposed to be a boon (more on this further below).
In any case, money supply growth in the euro area was booming already before the QE announcement, so there certainly is plenty of monetary inflation. As can be seen below, the year-on-year growth rate of the euro area’s true money supply has recently accelerated to almost 7.5%. This is a lot less than the double-digit growth rates that accompanied the dangerous boom that blew up so spectacularly in 2008, but it is more than enough to distort prices across the economy and once again lead to malinvestment on a grand scale. This situation is now set to become even worse.
Euro area true money supply (red line), plus year-on-year rate of change (blue line) – click to enlarge.
The so-called “chronic demand deficiency syndrome” is a figment of Mr. Wolf’s overactive imagination. Consumers have nigh endless demand for all sorts of things. There can never be a problem with demand as long as there are still unsatisfied human wants. The members of the elite who are meeting in Davos this week to discuss such pressing non-issues as “global warming”, have reportedly sashayed there on at least 200 privately owned jets. We are willing to wager that many consumers harbor a demand for a privately owned jet. Their problem is not that their demand is somehow “deficient”. Their problem is that they cannot pay for it.
The policy advocated by Wolf – money printing – can not create a single iota of real wealth. It can only bring about an illusory prosperity by inciting more asset bubbles and even more misallocation of scarce capital. In short, it will destroy wealth rather than creating it. Contrary to what Wolf and others of his ilk seem to believe, wealth is not growing through consumption, but production. Consumption is the goal of production, but it cannot possibly precede it. Keynesians like Wolf are constantly putting the cart before the horse.
Good Keynesian that he is, Wolf doesn’t forget to remind us that not only is more money printing required, but also more deficit spending. Never mind that the euro area faced a near terminal crisis a mere three years ago due to its burgeoning government debt! He does however mention what strikes us as an interesting idea in his final sentence:
Similarly, the resolute opposition of the German establishment to fiscal deficits even when the yield on its own 30-year bonds is 1.1 per cent — virtually free money — hampers the use of fiscal policy throughout the eurozone. The emphasis on the wickedness of debt, regardless of what it costs, is pathological. No other adjective will do.
It is all up to the ECB. It may well fail, not because it is too independent but because it is not independent enough. Similarly, the euro zone may fail, not because of irresponsible profligacy but rather because of pathological frugality. In the end, the ECB must try to do its job. If Germany cannot stand that, it may need to consider its own Swiss exit.
(emphasis added)
So let us get this straight: the euro zone almost blew up in an intractable systemic crisis because market participants realized that there exists no honest way of repaying the public debt that has been amassed. Only by printing money can “confidence” in the ability to support this debt be maintained, i.e., by erecting a Potemkin village of paper claims that is bound to eventually being blown away by a strong gust of wind from the continuum commonly referred to as “reality”.
Germany’s insistence to bring this debt under control is somehow “pathological”? Does Wolf really believe that actors in the economy can be conned with monetary parlor tricks forever and ever? Besides, what evidence is there for “frugality” in euro-land? Euro zone public debt has continued to hit new record highs every year and the debts and deficits of the great majority of member countries are light years from the limits theoretically imposed by the Maastricht treaty.
Lastly, Germany should indeed ponder an exit from the euro area. It does get an export subsidy out of the euro, but frankly, it doesn’t need one. People all over the world would no doubt continue to buy German goods without it. We bet they are not sufficiently “demand deficient” just yet to abandon their desire for the products of German engineering. However, if Germany were to exit the euro zone, who would bail out all the deadbeats? Santa Claus?
We’d actually love to see how a euro-zone without Germany would “work”. Keep in mind that if Germany were to exit, it would be followed within a few days or weeks by several others, such as e.g. Finland and the Netherlands, who don’t wish to be hyper-inflated to the Wolfian version of prosperity.
The Dragon Speaks
Just prior to the QE announcement, Mario Draghi was interviewed by German newspaper “Die Zeit”. This interview was quite interesting and revealing. We learn for instance that Draghi’s inheritance was inflated into nothingness by Italy’s government in the 1970s, because a court instructed the guardian of his siblings to invest the money in “risk free” treasury bills – a fine example of expropriation by financial repression, i.e., precisely the policy Draghi himself now pursues:
Die Zeit: “Didn’t that inflation erode what your father left as inheritance?”
Mario Draghi: “What we inherited was not very large, but enough for his three children to study. The first time I returned to Italy in 1976 I found that the equivalent of a few hundred euros was all that remained of our inheritance. This was because the family court judge had instructed the guardian of my two younger siblings to invest the money in fixed-interest Treasury bills. And that made all the money disappear into thin air.”
Die Zeit: “So you should actually understand why people in Germany are so afraid of inflation.”
Draghi: “That is precisely the point: in Germany, some people say of me – ah, that Italian, he is sure to fuel inflation in the German economy! And I explain to them that their experience of inflation dates back to the 1920s, while mine is far more recent. Those were difficult years.”
What Draghi seemingly doesn’t realize is that inflation of the money supply can act on consumer prices with a very significant lag. It is true that consumer price inflation seems a very distant threat right now, but the more production is undermined by credit bubbles and the bigger the pile of money sitting in accounts becomes, the more likely it becomes that a tipping point will be reached and confidence in the currency evaporates. Then it will however be too late to do anything about it.
Draghi then insists that he is not engaged in financial repression. His policies sure are robbing savers, but that is supposedly “not the intention”:
Draghi: “Let me be clear: central bank policy is not about punishing German savers, and it is not about rewarding weak countries. The European Central Bank’s mandate is to achieve an inflation rate of just below 2% for the euro area as a whole. To fulfill that at this time, it must keep interest rates low and must work towards an expansionary monetary policy which accompanies growth. That’s the point, not punishment or rewards. But sometimes it is hard to explain this to everyone in Germany, including in discussions with some politicians…”
Die Zeit: “What are they saying to you?”
Draghi: “They say: in that way you are removing their incentive to push through reforms.”
Die Zeit: “And isn’t that true? Italy and France are two examples.”
Draghi: “Our job is not and cannot consist of taking on the reform tasks of individual governments – not least since we lack the democratic mandate to do so. Do you believe then that it would be better for German savers if we tried to raise interest rates?”
(emphasis added)
There can be no question that savers are in fact “punished” by these policies and incidentally, their declining incomes actually exert a negative influence on their demand, the very thing Draghi purportedly seeks to revive. As to the fact that loose monetary policy by the ECB removes the incentive for countries like France and Italy to pursue reform, who can doubt it? This is most definitely the case and it will make the next crisis situation all the worse.
Draghi then discusses the “deflation bogey” – never mind that there actually is no deflation in the euro area anyway. In a handful of countries, consumer prices as measured by their governments are declining ever so slightly, but compared to the devaluation of money that preceded this mild decline in prices, it is certainly nothing even worth mentioning.
The “terrible deflation danger” in the euro area as per the harmonized consumer price index – click to enlarge.
Draghi not surprisingly employs the same argumets that we keep hearing everywhere else, theories for which no proof exists, but which we are supposed to accept as inviolable and self-evident truths. In reality they are simply long refuted shibboleths of the Keynesian Cult with no visible connection to the real world.
Die Zeit: “Why do we need inflation anyway, even if it is very low?”
Draghi: “Yes, why? We’ve learnt this lesson from Japan. In Japan there wasn’t this 2% objective, and in the 1990s prices began to fall. The problem was not that prices were falling, but that people thought that they would never rise again, they would keep falling further and further. So they stopped buying things, because they thought they could get them even more cheaply at a later date. Production fell, so prices fell even further, and so the economy became slower and slower. We are not in that situation, yet.”
Die Zeit: “That’s what we call deflation.”
Draghi: “Yes, what I described is a negative deflationary spiral. The only thing that counters this is the credibility of our inflation objective — the attainment of which requires the continuation of our expansionary monetary policy.”
Die Zeit: “But you have already given us this expansionary monetary policy!”
Draghi: “Our expansionary monetary policy has already contributed to a turnaround in the growth of loans to firms. But that is not enough. […]”
(emphasis added)
The parallels to Japan worth mentioning are the following: first of all, just like Japan, we have experienced a deeply damaging credit bubble and asset price boom due to previous “expansionary monetary policy”. In other words, Draghi proposes to “fix” the problem by committing the same error again, only on a far grander scale. The other parallel are demographic trends, the graying of society. It should be obvious that for an aging society inflation is especially damaging, as retirees have to live on fixed incomes.
Draghi’s interpretation of what occurred in Japan is encapsulated in these sentences: “So they stopped buying things, because they thought they could get them even more cheaply at a later date. Production fell, so prices fell even further, and so the economy became slower and slower.”
People manifestly do not “stop buying things because prices are falling”. This is an utterly absurd contention. Have falling prices for computers and smart phones kept anyone from buying these items? How is it possible that these are booming growth industries, when the prices of their products are continually declining? Unless Draghi and others making such assertions don’t explain convincingly why this seemingly magical exception to their theory exists, they have no leg to stand on.
Will people stop eating when the price of food is expected to fall? Will they postpone life saving operations because they might cost less next year? Again, the idea that people will stop consuming if consumer prices trend down is neither theoretically nor empirically provable. In fact, it is complete hokum. That overall consumption in Japan has been declining may well have something to do with its demographic situation, but it certainly has nothing to do with the microscopic declines in prices that have occasionally occurred in some years (currently prices are rising at nearly 3% year-on-year in Japan, and consumption has nosedived at the same time – fancy that!).
The idea that prices will then fall even further because “production is declining” makes even less sense. Prices are falling when fewer goods are produced? On which planet? Not on this one, at least not ceteris paribus. If the supply of an item declines while the demand for it remains unchanged, its price will rise, not fall. It is almost as if Draghi has forgotten even the most simple economic concepts. Besides, what does Japan have to show for implementing QE several times, and its government spending money with both hands? Only one thing as far as we are concerned: the fundamental building blocks of a crisis so profound it could eventually take down the entire global economy.
Has Japan become poorer because its currency was strong and prices didn’t rise much? Of course not. What has made the Japanese relatively worse off compared to what could have been are precisely the policies advocated by people like Wolf and Draghi. To be fair, Draghi is not blind to the fact that major economic reform is required, but we will leave you with one more comment he made in the interview that is an even bigger head-scratcher than what has come before:
Die Zeit: So we now have credit with an interest rate close to zero. In addition to that, we now have the unbelievable blessing of falling oil prices that many countries are enjoying, which is not down to you though. Despite all this, the crisis countries are only making slow progress, if at all. Do you not sometimes have your own doubts as to whether your measures are truly working?
Draghi: You see, the falling oil prices are a good thing but to the extent that they have a negative impact on people’s inflation expectations not a good thing at all. The danger is that people may start believing that we will not go back to an inflation rate of 2% very soon, not even in five years and this by itself would have a recessionary effect. Shall I show you what the expectations’ curve for the inflation rate looks like? It is actually astonishing.
(emphasis added)
This is truly the pièce de résistance. Falling oil prices are of course an unalloyed blessing for the euro area, no ifs and buts about it. The euro area imports practically all its oil – i.e., it is purely on the consumption side of the oil trade. Contrary to the US, there is no shale oil industry that will see its junk debt go into default. For every consumer and producer in Europe, major cost savings on a largely non-discretionary expense have just been attained. This will lead to more spending on discretionary items, higher savings rates, bigger profit margins, and so forth.
How on earth can one even think this is bad? How can it possibly have a “recessionary effect”? Who cares about the nonsensical and completely arbitrary 2% inflation target? What’s so great about debasing money’s purchasing power at this rate anyway?
These may seem like rhetorical questions, but we can answer at least one of them: while there is nothing in economic theory that can possibly justify debasing money at an arbitrary percentage every year, such debasement is greatly favoring the current establishment, above all over-indebted governments. Their aim is to confiscate a part of their citizens’ savings through the back door via the “inflation tax” and inflate away the real value of their debt. This is designed to enable them to continue spending and growing the leviathan State. That is really all there is to it.
Incidentally, inflationary policy also redistributes wealth in such a way that the rich become richer and the poor become poorer (it should be obvious that the poorest strata of the population are suffering the most from the devaluation of money), a topic we have discussed extensively before and will no doubt have occasion to revisit again.
Conclusion:
Given that already surging money supply growth rates in the euro area are now bound to increase at an even stronger rate, economic activity as measured by aggregate statistics is bound to pick up eventually. It is always important to keep in mind though that quantitatively measurable “activity” as such is not telling us anything about its quality. The boom prior to the 2008 crisis was also characterized by a measurable increase in “activity”, but as it turned out, most of it was merely a complete waste of scarce capital.
There is no reason to assume that this time will be different. These boom-bust sequences will continue until the economy is structurally undermined to such an extent that monetary intervention cannot even create the illusory prosperity of a capital-consuming boom anymore.
The bankers applauding Draghi’s actions today will come to rue them tomorrow.

Bazooka man Draghi, taking aim at the euro.
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Destructive.
Nahhh.. Moar like Elmer Fudd
Diocles Caesar Gaius Aurelius Valerius Diocletianus Augustus was an amateur.
Commando! The height of cinema.
"A rising tide lifts all squids"
~ Mario Draghi former Goldman Sachs Vice Chairman in charge of Vice
The bankers applauding Draghi’s actions today will come to rue them tomorrow.
I doubt it. They'll all have retired to the Cayman Islands by then, on their 300-ft yachts.
Flay them alive.
Just a suggestion.
Rue.......interesting. Like Rue de Madeleine. Great spot for a guillotine for rueing banksters.
#ECB
10 T -2017?
will end up like Zimbabwe Dollar:
latest: http://tersee.com/#!q=ecb&t=text
did he launch it backwards and blow up the shit behind him? a bad portent, indeed.
JP Morgan adds gold for Natural Resources fund
The only thing missing from Super Mario in the above pic is a quote. Something like "I'll Be Back" (with QE2) or whatever.
Pissing out a deflationary brushfire.
Ain't gonna do shit, mark my words.
This EUQE (promounced yuke) is going to buy all the good collateral, and not the worst of the worst. Retarded.
At least the FED scooped up the shittiest stuff (ABS) as well as treasuries.
pods
not so fast
Federal Reserve bought GSE MBS
GSEs are quasi fedgov outfits ... always had an implied guarantee of fedgov ... when the crisis hit china was knee deep in gse mbs ... Bernanke made its guarantee explicit when he announced mbs purchases (and barely a whimper from congress) ... geithner put The Administration stamp of approval on it christmas eve 2009 when US Treasury announced backstopping any and all GSE losses for the next 3 years
As I recall, F&F had an EXPLICIT disclaimer there was no guarantee of them by the Fed.gov. There can be no implied guarantee when there is an explicit non guarantee.
http://www.investinginbonds.com/learnmore.asp?catid=9&subcatid=94
That aside, and not condoning what the FED did, at least the FED went after the worst of the worst to stem the implosion.
The EU way of having so many disclaimers about quality of the stinky ass bonds is that it won't work. Not that the FED's plan worked, but it is working until it doesnt.
I am absolutely not trying to argue the benefit of QE, as we know who really benefits.
But trying to stem a credit implosion by only buying the lowest risk debt will actually make the situation worse. It will merely take good collateral out of the system.
pods
yeah, well, you see what happened to your "EXPLICIT"
as expected
no way was Fedgov going to let china be bagholders (counted on them - at least then - to buy much of our debt)
rules are made to be broken
Oh I agree. Those bonds were sold with a wink and a nod.
I merely referenced them in terms of how effective QE would be in terms of staving off the credit implosion.
pods
We only know the general outlines so far but the devil is in the details and we don't know exactly how they are going to do it, except for Greece of course, who is already pre-fucked....
There is no way in hell that anyone with an IQ greater than 2 didn't know or think that Mario was going to do what he did and will keep doing!
Seriously what did "they" think he would do? Introduce constraint? If there is anyone in the financial world that thought that, then they are completly delusional. Mario sent out all the signals over and over again.
This "shit" is getting more and more serious and the blow-off is gonna hurt...a lot!
"There is no way in hell that anyone with an IQ greater than 2 didn't know or think that Mario was going to do what he did and will keep doing!"
I disagree. There is propably only 1 in 1000 people who have any clue wtf is going on. For everybody else there is deflate-gate.
Here's an idea that will generate inflation..... put the "money" in the hands os the people. But, we all know that generating infaltion is not the real goal. The real goal is to enrich the real owners of western world, preserve the debt and the status quo.
I don't see how such people keep it going when their own shills/puppets start saying shit like "savers serve no useful purpose".
There is a code among thieves, until there isn't.
You're right. " Savers serve no useful purpose..." is a statement confirming that the currency has already been debased considerably.
Of what use are prudent savers (or upright citizens) when money can be made from nothing by government mandarins to benefit the parasitic banking/corporate/insurer class while the police state and media machine maintain order?
Well, it should be clear to everyone that all the free money has simply gone to the bankers, financiers, and the political puppets.
I don't worry too much about my local commissioners, tax collectors and law enforcement. I know many of them by name and I know that they want to live in peace for the most part.
Your children will be placed in the custody of Carl's Junior
Fattened up for further processing
In Hitlers Germany it was useless eaters. Fast forward to now
It's useless savers and prudent, responsible people.
Also known as "useless eaters" actually.
Nazi economics seems alive and well over there!
If this article and the newspaper interview had any merit they would ask "where is your European Treasury Department Mr. Moneyprinter?"
Where are the cash markets to raise capital in the EZ? I fail to see any.
I see a lot of "Government Borrowers" of course.
Of course if ISIS attacks what assurances do I have....
They don't get it, your economy is in deflation FOR A REASON you idiots . QE isn't a miracle-cure for the terminally moribund.
See https://thebusinesspanda.wordpress.com/2015/01/23/germany-gets-the-balan...
WHERE IS THE DEFLATION?
In the assets you can't afford
Had to stop reading right here,
Why do otherwise intelligent people carry water for the evil fucks running the world? Does he really think Draghi is that stupid?
The only thing useful today are degenerate gamblers going all in on full margin.
Free Jon Corzine!
King Dollar doing its "godzilla thru tokyo" thing ... again
Rate Oddity (re-mix of David Bowie’s first hit single):
Plunge Control to Major Draghi:
Take your happy pills and on turn the spigot on
3 … 2 … 1 … Lift-off
This is Plunge Control to Major Draghi:
You've hardly made the grade
And the Germans want to know whose loss they’ll share
Now it's time to print more money, if you dare
“This is Major Draghi to Plunge Control
I'm hearing cries of ‘More!’
The EUR’s floating in a most peculiar way
And the DAX looks very different today
For here am I printing just like Greenspan, flying above the world
The helicopter’s blue, and I’ve got more work to do
Though I've tossed 500 billion euros, they haven’t had their fill
And I think the markets know which way to go
Tell the Greeks I hate them very much . . . they know”
Plunge Control to Major Draghi:
Your market's red! There's something wrong …
Can you hear me, Major Draghi? Can you hear me, Major Draghi? Can you . . .
". . . here am I crashing with my big plan
Greek yields to the Moon
Merkel’s face is blue, and there's nothing I can do."
What he's doing is clearly illegal.
this shouldn`t be done above the law, and dictated above everything else!
Due process or jail.... i`d choose the latter!
Tylers,
“This is a case of one charlatan quoting another to buttress his case. Mr. Buiter, it may be remembered, is the man who went as far as invoking the ideas of utter monetary cranks like Silvio Gesell as possible “solutions” to the crisis of 2008 ff., thereby outing himself as a monetary crank as well. This cannot be put in a more polite manner.”
Let me be impolite: Silvio Gessell’s thesis was on floating money. This type issued into the money supply without a debt instrument, and was pumped back out with taxes.
He was not a crank, and was entirely correct when looking at this money type.
He was weak on credit theory though. So, by dismissing Gesell, you also dismiss important erudition with regards to how money works.
Also, your article doesn’t discuss details about Treasury emissions. For example, if a Tbill or other government sovereign debt instrument is issued as new deficit spending, it then finds QE money eventually. This increases the money supply.
If QE money pulls and existing bond out of the secondary market, it only changes the composition of the money supply to more credit as money, and less bonds. These bonds then vector into the reserve channels of banks. There they then transfer onto the FED’s balance sheet, and banker then holds money. This money on reserves is now paid interest to keep a rate collapse toward zero.
Mostly QE changes the composition of money supply and increases public debt on ledger at central bank. The path of QE is into bank reserve channels, who then buy bonds, and bond holders then have their interest rates lowered. (Bond price up interest rates down.)
Lower interest rates have a knock on effect, or so the bankers think, whereby the sheeple will go out and take out a loan.
A credit money system like we have does not work like a system envisioned by Gesell. Apples and Oranges. Gesell actually had scientific money that matched the needs of consumption and production. Demurrage was applied to keep velocity up and break the linkage between hoarding and transaction medium.
Most economists that dismiss Gesell are themselves often mouthpieces for their employer, or have not been exposed to theory, or are so entrenched in their bad education they cannot learn.
Paul Krugman, a pure inflationist, is a crank on the same level with that most famous crank, Silvio Gesell.
My question: Do Gesell and Krugman and Draghi and Yellen propose “free money” for all or just for the bankers? You see, the variable rate on my USbank card for a cash “advance” is 23.99%. Is this “free”?
“Free money may turn out to be the best regulator of the velocity of circulation of money, which is the most confusing element in the stabilization of the price level. Applied correctly it could in fact haul us out of the crisis in a few weeks ... I am a humble servant of the merchant Gesell.”
—Prof. Dr. Irving Fisher, economist at Yale University New Haven/US
“Gesell is the founder of the free economy, an economic outsider who nevertheless was recognized by Keynes, in a certain sense, as his forerunner. He is therefore still considered to be above all a Keynesian economist, even a kind of hyper-Keynesian, that is to say, an advocate of a school that propagates the lowest (nominal) interest rate possible as a means of avoiding crises. Gesell, however, also recognized that the problem of a crisis cannot be solved solely by reducing the rates of interest... Gesell suggests, therefore, as the necessary correlative to the introduction of ‘free money’ ... the introduction of ‘free land’... Gesell's chief work thus carries the title ‘A Natural Economic Order Through Free Land (!) and Free Money’. It proves that the real aspects of an economy – that is to say, the claim on land or resources – must never be lost from view, even if primary importance is attached to monetary factors. This was recognized more clearly by Gesell than by Keynes."
—Prof. Dr. Hans C. Binswanger, economist at the College of Economic and Social Sciences Academy at St. Gallen/Switzerland[13]
John Maynard Keynes adopted some of the ideas of Gesell, saying at one point: "I believe that the future will learn more from the spirit of Gesell than it will learn from that of Marx".
“In 1919, Gesell was called on to take part in the Bavarian Soviet Republic by Ernst Niekisch. The republic offered him a seat in the Socialization Commission and then appointed him the People's Representative for Finances. Gesell chose the Swiss mathematician Theophil Christen and the economist Ernst Polenske as his assistants and immediately wrote a law for the creation of Freigeld. His term of office lasted only 7 days. After the bloody end of the Soviet Republic, Gesell was held in detention for several months until being acquitted of treason[1] by a Munich court because of the speech he gave in his own defense. Because of his participation in the Soviet Republic, Switzerland denied him the opportunity to return to his farm in Neuchâtel…”
“We would especially like to certify our great esteem for pioneers such as Proudhon, Walras, and Silvio Gesell, who accomplished the great reconciliation of individualism and collectivism that the economic order we are striving for must rest upon.”
—Prof. Dr. Maurice Allais, economist at the University of Paris/France[8]
From the above link:
“Taking selfishness into account, Gesell called for free, fair business competition with equal chances for all. This included the removal of all legal and inherited privileges. Everyone should rely only on his personal abilities in order to make a living. In the "natural economic order" which he aimed for, the most talented people would have the highest income, without distortion by interest and rent charges. The economic status of the less talented would also improve, because they would not be forced to pay interest and rent charges. According to Gesell, this would lead to an equalization between the poor and the rich. Further, there would be more means available to help the poor because the higher average income would mean that everyone would have enough money to spare what was necessary to help.
“According to some authors, the theory of Silvio Gesell explains the ongoing development trends in the financial industry better than any other economic doctrine.[3] So the negative real and sometimes nominal interest rates which have been forcedly set up to stimulate economies is an indirect form of the demurrage fee proposed by Gesell.”
http://en.wikipedia.org/wiki/Silvio_Gesell
What a slide, from Keynes to Gesell, on "the way to serfdom," to the banker-controlled, socialsit one-world government.
The joke is the total QE being added globally is not enough to generate the total inflation needed globally to make this ever work. The QE with no rules on who does what and how much became purely a currency manipulation that has backlashes when other countries are forced to combat their losing competativeness.
This is trhe question the central bankers need to ask.
So how much value needs to be created annually to generate the level of global inflation needed to make this policy work averaging it out. Well the total global value etc. and you got to include all the derivatives, sovereign debts etc. that all need supporting by some % of interest.
1% on 600 trillion, what do you reckon? That is 6 trillion QE / leveraged loans etc. to make it work. Try 2% that would be 12 trillion then. The true total global debt is seriouslyt being lied about and untill this is honestly calculated they have no chance of applying a big bazooka at this witrh any chance of success.
AND THAT IS WHY QE HAS NOT WORKED AS EXPECTED BY CENTRAL BANKS.
LOL, banksters don't understand value. You might as well be asking your dog.
who remembers this quote:
“It’s too easy to think that the ECB can replace governments’ action, or lack of it, by printing money,” Draghi said. “That’s not going to happen.” (2012)
2015 is the year of capitulation.
Expect everything they've been saying for the past 6 years to get tossed aside and expediency to be embraced.
just like the CBs that have 'surprised' almost everyone with zigs when everyone expected zags.
The bankers will rue nothing. Draghi is doing their bidding. Pure madness revealed.
“Let me issue and control a nation’s money and I care not who writes the laws.”
Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.
“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” The Rothschild brothers of London writing to associates in New York, 1863.
The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity. - Abraham Lincoln
Lincoln was assassinated. Kennedy had the same idea, he was assassinated.
“The death of Lincoln was a disaster for Christendom. There was no man in the United States great enough to wear his boots and the bankers went anew to grab the riches. I fear that foreign bankers with their craftiness and tortuous tricks will entirely control the exuberant riches of America and use it to systematically corrupt civilization.” Otto von Bismark (1815-1898), German Chancellor, after the Lincoln assassination.
Prophetic words from Bismark.
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)
“I believe that banking institutions are more dangerous to our liberties than standing armies.” – Thomas Jefferson
… The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating. -Thomas Jefferson
Despite these warnings, Woodrow Wilson signed the 1913 Federal Reserve Act. A few years later he wrote: I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men. -Woodrow Wilson
When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” – Napoleon Bonaparte, Emperor of France, 1815
“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.” — Sir Josiah Stamp, Director of the Bank of England (appointed 1928). Reputed to be the 2nd wealthiest man in England at that time.
It's print and rates go negative until your currency goes to crap.