(1) Inbertsioak aurrezkia sortzen du, ez alderantziz
Investment Creates Saving, NOT The Other Way Around
Bideoa: https://www.youtube.com/watch?list=PLZJAgo9FgHWajc5BdOP8e75eddFmWhtzh&v=phnqEBEtQEI
Warren Mosler, one of the founder of Modern Money Theory, discussing the relationship between savings and investment. The commonly-held belief is that savings fuels investment. For instance, the bank takes in your money and loans it out to other people, therefore it’s necessary for people to save in order to have investment in the economy. This is actually completely wrong. It not only is incorrect on the mechanics of banking, it isn’t paying attention to the rest of the balance sheets.
Investment (in monetary terms) is better defined as the act of creating assets. This does not require any savings in advance. For instance, if I decide I would like to build a factory, then I can create bonds (investment). These bonds, my IOUs, aren’t widely accepted for payment, so I can sell them to you in exchange for cash, which is widely accepted. Notice what happened: the act of my creating and selling a bond didn’t reduce your savings, it just changed their form (from cash to bonds). Meanwhile, I have savings that I didn’t have before (the cash) which I can then swap for other assets (like factory equipment.) The investment created the savings.
People think that if we encourage more savings, there’ll be more funds for investment. This is wrong. In part because banks don’t lend out your money. Banks lend by creating their own IOUs, which are widely accepted for payment. For instance, if I would like to take a loan to buy factory equipment, I will sell my IOU to the bank, who will purchase it with their own IOU by *simply crediting my account* with funds out of thin air. (See more about that here: https://www.youtube.com/watch?v=G7-j3…)
(And furthermore, the rate at which individuals save their income actually in no way affects the total amount of deposits that banks hold. This is because if you’re not saving your money, then you’re buying something, which means you’re transferring your dollars to somebody else’s account. So they stay in the banking system. Buying stuff does not reduce the amount of savings in the economy, just shifts it around. )
Read Mosler’s book “The Seven Deadly Innocent Frauds of Economic Policy” for free online: http://moslereconomics.com/wp-content…
(2) DTMk dioena politika ekonomikoaz
What Modern Monetary Theory (MMT) Tells Us About Economic Policy
Bideoa: https://www.youtube.com/watch?v=gkn-GQVkYAI
(3) Banku erreformei buruzko eztabaida
Discussion of Bank Reforms
Bideoa: https://www.youtube.com/watch?v=hcx-gFh1Alk
Warren Mosler, on with Steve Grumbine at Real Progressives, discussing reforms of banking. In order to reform banks, we have to first decide what banks are for and what they should and shouldn’t do.
The first purpose of banking is to have a stable payment system. This is infrastructure that undergirds the economy, so that individuals or corporations can make payments. Decades and centuries of experience show that banks on their own cannot create a stable payment system, and instead have a tendency towards bank runs, panics, and financial crises. This is the argument for deposit insurance.
With deposit insurance, the government protects bank customers from their bank. It ensures that even in the event of bank failure, customers can still withdraw or transfer their accounts, stabilizing the payment system. Furthermore, centralized payment clearing at a central bank (where the central bank (like the Fed) makes payments between banks) is necessary to ensure that $1 in every bank will actually be equal to $1.
Once there is deposit insurance and central banking, the banking system becomes dangerous. This is because they have government guarantees behind their actions, so they cannot fail. It’s like letting a gambler loose in a casino, then saying “you get to keep all of your winnings and the government will pay for all of your losses.” It encourages extreme risk-taking. This therefore demands full banking regulation, to ensure that banks aren’t taking advantage of government protection.
The next task of banking is lending. There are many purposes to lending, with probably the most important being the capital development of the economy. So, entrepreneurs and businesses can take out loans in order to finance investment in new technology, jobs, factories, etc. This kind of financing activity is a major contributor to the improvement of quality of life.
One question here is, should banks do this? The private sector is capable of lending even without banks doing it. This is what the bond market does, and what private companies can do to finance their customers’ purchases (think auto loans from a car company).
However, there are 3 key differences between bank lending and other private sector lending. First, because banks are lending their own IOUs rather than lending from a pre-existing pile of cash, this means that lending for the capital development of the economy is not limited by any quantity of saving. Second, because banks are backed up by government guarantees, they don’t have to lend based on the value of the assets, but can lend based on the ability of the borrower to pay. And third, because banking is heavily regulated by government, it is an opportunity for public policy to shape the development of the economy, by encouraging banks to lend for things that serve public purpose, and discouraging (or banning) lending for things that don’t.
Since banks are already functionally public-private-partnerships, should we just nationalize banks and make them all into public institutions? Mosler argues that we should not. The reason is because public banks are subject to political pressures and can make huge losses, therefore public banks are highly susceptible to corruption. With the public-private model, Mosler asserts, the banks have incentive to lend based on risk, not based on political favors.
(4) Baliabideen esleipenaz
Discussion of Progressive Resource Allocation
Bideoa: https://www.youtube.com/watch?v=PaRy0R-IIdg
Warren Mosler, on with Steve Grumbine of Real Progressives, discussing some issues that intersect progressive policies and fiat currencies.
