Italian article this am

Misrepresents what I say a bit, but they do have my picture next to JFK!
;)

The IMF: sovereign currency, no longer the monopoly of the banks

Eliminate the public debt of the United States at once, and do the same with Great Britain, Italy, Germany, Japan, Greece. At the same time revive the ‘ economy, stabilize prices and oust the bankers. In a clean and painless, and faster than what you can imagine. With a magic wand? No. With a simple law, but able to replace the current system, in which to create money out of nothing are private banks. We only need a measure requiring the banks to hold a financial reserve real, 100%. To propose two economists at the International Monetary Fund, Jaromir Bene and Michael Kumhof. You, the bank, you want to make money on the loan of money? First you have to prove it really that much money. Too easy to have it by the central bank (which the factory from scratch) and then “extort” families, businesses and entire states, imposing exorbitant interest.

The study of two economists, “The Chicago Plan Revisited,” with “a revolutionary and” scandalous “‘Maria Grazia Bruzzone,” La Stampa “, emphasizes the global resonance of the dossier, that bursts like a bomb on the world capitalist system now jammed. The global debt came the exorbitant sum of 200 trillion, that is 200 trillion dollars, while the world GDP is less than 70 trillion. Translated: the world debt is 300% of gross domestic product of the entire planet. “And to hold this huge mountain of debt – which continues to grow – there are more advanced economies and developing countries,” says the Bruzzone, stressing that “the heart of the problem and the cross” is the highest “power” Japan, Europe and the United States. Hence the sortie “heretical” by Bene and Kumhof: simply write off the debt, it disappears.Sparked the debate was the last IMF report, which points the finger on austerity policies aimed at reducing thepublic debt . Policies that “could lead to recession in the economies ‘, since’ cuts and tax increases depress the ‘economy ‘.

Not only. The IMF would be really worried the crisis that is ravaging the ‘ Europe threatens to be worse than the 2008 financial. The surprise is that even the IMF now thinks that “austerity can be used to justify the privatization of public services,” with consequences “potentially disastrous”. But if the problem is the debt – public, but now “privatized” by finance – you can not delete? Solution already ventilated by the Bank of England, which holds 25% of the British sovereign debt: the Bank of England may reset it by clicking on the computer. Advantages: “You will pay much less interest, it would free up cash and you could make less harsh austerity.” The debate rages on many media, starting from the same “Financial Times”. thread which breaks now the revolutionary proposal of the two IMF economists targati: cancel the debt.

“The Chicago Plan Revisited,” writes Maria Grazia Bruzzone, raises and explores the “Chicago Plan” original, drawn up in the middle of the Great Depression of the ’30s by two other economists, Irving Fisher, Henry Simons of the University of Chicago, the cradle of liberalism . Cancel 100% of the debt? “The trick is to replace our system, where money is created by private banks – for 95-97% of the supply of money – money created by the state. It would mean return to the historical norm, before the English King Charles II put in private hands control of the money available, “back in 1666. It would mean a frontal assault on the “fractional reserve” banking, accused of seigniorage on the issue of currency speculation: if lenders are instead forced to hold 100% of its reserves to guarantee deposits and loans, “pardon the exorbitant privilege of create money out of nothing. ” As a result: “The nation regained control over the availability of money,” and also “reduces the pernicious cycles of expansion and contraction of credit.”

The authors of the first “Plan of Chicago” had thought that the cycles of expansion and contraction of credit lead to an unhealthy concentration of wealth: “They had seen in the early thirties creditors seize farmers effectively bankrupt, grab their lands or comprarsele for a piece of bread. ” Today, the authors of the new edition of this plan argue that the “trauma” of the credit cycle that expands and contracts – caused by private money creation – is a historical fact that is already outlined with Jubilees Debt ancient Mesopotamia, as well as in ancient Greece and even Rome. Sovereign control (the state or the Pope) on currency, recalls Bruzzone, Britain remained so throughout the Middle Ages, until 1666, when it began the era of the cycles of expansion and contraction. With the “bank privatization” of money, add the “Telegraph”, “opened the way for the agricultural revolution, and after the industrial revolution and the biggest leap Economic ever seen “- but it is not the case of” quibbling, “quips the newspaper.

According to the young economists of the IMF, is just a myth – disclosed “innocently” by Adam Smith – that the money has been developed as a medium of exchange based on gold, or related to it. Just as it is a myth, the study points out the IMF, what you learn from books: that is the Fed, the U.S. central bank, to control the creation of the dollar. “In fact, money is created by private banks to 95-97% through loans.” Private banks, in fact, do not lend as owners of cash deposits, the process is exactly the opposite. “Every time a bank makes a loan, the computer writes the loan (plus interest) and the corresponding liability in its balance sheet. But the money that pays the bank has a small part. If it does borrow from another bank, or by the central bank. And the central bank, in turn, creates out of nothing that lends the money to the bank. ”

In the current system, in fact, the bank is not required to have its own reserves – except for a tiny fraction of what it provides. Under a system of “fractional reserve”, each money created out of nothing is a debt equivalent: “Which produces an exponential increase in the debt, to the point that the system collapses on itself.” The economists of the IMF hours overturn the situation. The key is the clear distinction between the amount of money and the amount of credit between money creation and lending. If you impose banks to lend only numbers covered by actual reserves, loans would be fully funded from reserves or profits accrued. At that point, the banks can no longer create new money out of thin air. Generate profits through loans – without actually having a cash reserve – is “an extraordinary and exclusive privilege, denied to other business.”

“The banks – says Maria Grazia Bruzzone – would become what he mistakenly believed to be, pure intermediaries who have to get out their funds to be able to make loans.” In this way, the U.S. Federal Reserve “is approprierebbe for the first time the control over the availability of money, making it easier to manage inflation.” In fact, it is observed that the central bank would be nationalized, becoming a branch of the Treasury, and now the Fed is still owned by private banks. “Nationalizing” the Fed, the huge national debt would turn into a surplus, and the private banks’ should borrow reserves to offset possible liabilities. ” Already wanted to do John Fitzgerald Kennedy, who began to print – at no cost – “dollars of the Treasury,” against those “private” by the Fed, but the challenge of JFK died tragically, as we know, under the blows of the killer of Dallas , quickly stored from “amnesia” of powerful debunking.

Sovereign coin, issued directly by the government, the state would no longer be “liable”, but it would become a “creditor”, able to buy private debt, which would also be easily deleted. After decades, back on the field the ghost of Kennedy. In short: even the economists of the IMF hours espouse the theory of Warren Mosler, who are fighting for their monetary sovereignty as a trump card to go out – once and for all – from financial slavery subjecting entire populations, crushed by the crisis , the hegemonic power of a very small elite of “rentiers”, while the ‘ economic reality – with services cut and the credit granted in dribs and drabs – simply go to hell. And ‘the cardinal assumption of Modern Money Theory supported in Italy by Paul Barnard: if to emit “money created out of nothing” is the state, instead of banks, collapsing the blackmail of austerity that impoverishes all, immeasurably enriching only parasites of finance . With currency sovereign government can create jobs at low cost. That is, welfare, income and hope for millions of people, with a guaranteed recovery of consumption. Pure oxygen ‘s economy . Not surprisingly, adds Bruzzone, if already the original “Chicago Plan”, as approved by committees of the U.S. Congress, never became law, despite the fact that they were caldeggiarlo well 235 academic economists, including Milton Friedman and English liberal James Tobin, the father of the “Tobin tax”. In practice, “the plan died because of the strong resistance of the banking sector.” These are the same banks, the journalist adds the “Print”, which today recalcitrano ahead to reserve requirements a bit ‘higher (but still of the order of 4-6%) required by the Basel III rules, however, insufficient to do deterrent in the event of a newcrisis . Banks: “The same who spend billions on lobbying and campaign contributions to presidential candidates. And in front of the new “Chicago Plan” threaten havoc and that “it would mean changing the nature of western capitalism. ‘” That may be true, admits Bruzzone: “Maybe but it would be a better capitalism. And less risky. ”

The 10th plague brought an end to solvency issues, but not yet output issues

Interesting how Germany gravitating to negative growth came at about the same time Draghi announced the ECB will ‘do whatever it takes’

With the ECB now taking national govt insolvency off the table, and member nation rates coming down accordingly, the reason for deficit reduction- solvency- has fallen by the wayside.

So now the EU is free to adjust deficits for optimal output without the former solvency concerns.

With austerity, every professional forecaster revises his GDP estimate down and unemployment up.

With a proactive increase in the deficit, whether via tax cuts or spending increases, every professional forecaster revises his GDP estimate up and unemployment down.

And so relaxing the stability and growth pact to maybe a 7% deficit limit from the current 3% limit would result in forecasts for rapidly rising GDP and rapidly falling unemployment. And with the output gap as large as it is the increased economies of scale with expanding output will likely further promote price stability.

Yet it’s not even a passing thought.

So with deficits now likely high enough to support growth from current levels, if they’d only leave them alone, instead, continuing efforts to proactively reduce deficits = continued widening pressure on the output gap.

Joerg Asmussen


Karim writes:

Germany’s director at the ECB, Joerg Asmussen, has signaled his full backing of Draghi’s bond purchasing plan reports the Daily Telegraph.

This is one more step in turning the Bundesbank’s opposition into the equivalent of Lacker’s dissent at the FOMC. One dissent cant derail the overwhelming majority. That is especially true now that a fellow countryman also supports the plan. Technically speaking, Asmussen’s position (as an Executive Board Member) is senior to that of the Bundesbank President (Governing Council): Sort of like Janet Yellen vs John Williams.

As background, note Asmussen was a Merkel appointee and had no prior affiliation with the Bundesbank.
See professional career here.

The 10th plague

As previously discussed, action was taken after the disease began infecting the core.

Headlines:
Germany backs Draghi bond plan against Bundesbank
Bundesbank Says German Economy May Cool Further in Second Half
Spain Home Rents Rise, First Time Since January, Fotocasa Says

And, also as previously discussed, I’m watching for signs deficits may be high enough for
euro zone GDP stability this quarter.

Germany backs Draghi bond plan against Bundesbank

By Ambrose Evans-Pritchard

August 20 (Telegraph) — “A currency can only be stable if its future existence is not in doubt,” said Jrg Asmussen, the powerful German member of the ECB’s executive board. Mr Asmussen told the Frankfurter Rundschau that the surge in Club Med bond yields over recent months “reflects fears about the reversibility of the euro, and thus a currency exchange risk” rather than bad economic policies in struggling states. Mr Asmussen confirmed that purchases may be “unlimited” in scale, a far cry from the half-hearted intervention of the past two years, which failed to stem capital flight. The Daily Telegraph can confirm reports in Der Spiegel that ECB technicians are examining plans to cap Spanish and Italian bond yields, among other options.

Bundesbank Says German Economy May Cool Further in Second Half

By Stefan Riecher

August 20 (Bloomberg) — “The prevailing uncertainty in the euro area could have a more negative impact on economic activity in Germany in the second half of the year,” the Bundesbank said in its monthly report. “However, as long as demand for German products from non euro-area countries remains essentially intact, a reversal of the cyclical trend in Germany is highly unlikely.” Growth in Europe’s largest economy slowed to 0.3 percent in the second quarter from 0.5 percent in the first as demand from euro-area trading partners waned. “In addition to ongoing strong construction activity, the outlook for private consumption remains favorable,” the Bundesbank said.

Spain Home Rents Rise, First Time Since January, Fotocasa Says

August 21 (Bloomberg) — Rental prices for Spanish homes rose 0.8 percent in July from June, recording the first monthly increase since January, real-estate website Fotocasa.es and IESE Business School said in an e-mailed statement.

Average rental prices stood at 7.56 euros ($9.38) per square meter, up from 7.49 euros per square meter in June, according to the statement.

Euro-Area Exports Rose 2.4% in June

Unfortunately this is will also be spun as ‘austerity works’ as they don’t realize exports are real costs and imports as real benefits, meaning this is in fact evidence of deteriorating real terms of trade.

And, of course, globally it’s a 0 sum game as for every export there is an equal import. But while we can’t all net export, we can all attempt to net export with overly tight fiscal/low aggregate demand/high unemployment etc. in a very ugly race to the bottom.

Additionally, a rise in net exports from euro zone domestic policy comes with upward pressure on the currency that continues to the point where there are no net exports.

That’s why the ‘export models’ include the govt building foreign exchange reserves, as it sells its currency vs the currency of the region targeted for exports. Hence the growing hoards of $US reserves by all the nations targeting the US for exports.

However, the euro zone, unlike Germany under the mark, doesn’t do that for ideological reasons. They don’t want to buy $US and build $US reserves and give the appearance that the $US is the ‘reserve currency’ backing the euro. And so instead of sustaining net exports, the euro goes up to the point where there are no net exports. Note that the euro appreciated from about 85 to 160 to the dollar during its first decade before backing off to under 120 due to portfolio shifting from blind fear of oblivion. And during that time the currency movement always kept net exports in check.

This is all why the ECB doing ‘whatever it takes’ which means conditional funding to sustain solvency while keeping fiscal ‘overly tight’ is extremely euro friendly.

Euro-Area Exports Rose 2.4% in June, Led by Germany: Economy

By Simone Meier

August 17 (Bloomberg) — Euro-area exports rose for a second month in June, driven by a surge in shipments from Germany, as companies tapped into emerging markets to offset declining demand at home.\

Exports from the 17-nation currency bloc advanced a seasonally adjusted 2.4 percent from May, when they gained 0.4 percent, the European Union’s statistics office in Luxembourg said today. Imports stagnated in the period and the trade surplus widened to 10.5 billion euros ($13 billion) from 6.8 billion euros.

Europe’s economy contracted 0.2 percent in the second quarter as tougher austerity measures pushed at least six member states including Italy and Spain into recession. With households and companies across the region cutting spending, exporters such as L’Oreal SA, the world’s largest cosmetics maker, have relied on faster-growing Asian markets to bolster sales.

“The euro-region economy is undergoing a mild recession,” said Alexander Krueger, chief economist at Bankhaus Lampe KG in Dusseldorf. “The global growth dynamic has eased somewhat, but exports will continue to support development to a certain extent in the second half of the year.”

German exports jumped 6.6 percent in June to 40.9 billion euros, while imports in Europe’s largest economy rose 1.5 percent. Shipments from Italy increased 2 percent in the period.
France and Spain reported gains of 1 percent and 1.4 percent, respectively.

German Economic Model Vindicated by GDP Data

As previously suggested, any sign of stabilization will be twisted into ‘austerity works’ rhetoric.

Yes, austerity has pushed deficits up the ugly way- higher unemployment comp and lower tax payments due to the slowing economy- to the point where the deficits gravitate to levels high enough for euro zone GDP to stabilize and even begin to grow a bit. (Presuming they don’t beat it down again with more austerity, which could very well be the case.)

For whatever reason they can’t seem to grasp the notion that it’s the deficits that support growth, as they fill in the ‘spending gap’ caused by taxes and ‘savings desires’ and that they could use deficits proactively to achieve growth from any starting point short of full employment.

German Economic Model Vindicated by GDP Data

By Catherine Boyle

August 14 (CNBC) — Germany’s reputation as the healthy man of Europe has been reinforced by better-than-expected growth in gross domestic product (GDP – click here for an explanation) for the second quarter, as growth contracted in the broader euro zone.

On Tuesday morning, euro zone GDP data for the second quarter shrank by 0.2 percent, as predicted by analysts polled by Reuters.

Germany, Europe’s biggest economy grew by 0.3 percent between April and July – not a huge leap, but better than most of the euro[EUR=X 1.2349 0.0018 (+0.15%) ] zone – as its export strength continued.

“Germany shows to some degree the way forward to other countries,” Daniel Morris, global strategist at JP Morgan Asset Management, told CNBC Europe’s ” Squawk Box” Tuesday.

“Germany’s point is if you run a low budget deficit you can still have economic growth. You can’t depend so much on government spending, fundamentally it has to be about the competitiveness of the economy, and Germany’s shown that.”

ECB’s Hansson Says Germany Can Be Outvoted on Governing Council


Karim writes:

This is correct. The Bundesbank voting no is technically equivalent to Lacker dissenting at every FOMC meeting this year. It would be a bigger statement if dissents came from the Executive Board (the equivalent of Yellen dissenting vs a regional Fed bank president).

ECB’s Hansson Says Germany Can Be Outvoted on Governing Council

By Ott Ummelas

August 3 (Bloomberg) — European Central Bank policy maker Ardo Hansson, who heads Estonia’s central bank, said Germany c be outvoted on the ECB’s Governing Council.

“There are 23 members in the council and if there will be a vote then everyone’s vote has the same weight in the sense that some questions are solved by a majority,” Hansson told Eesti Rahvusringhaaling radio today when asked if new ECB bond purchases can be approved without German support.

While there was unanimity on the council to investigate options in the coming month, “there could be differing views of details and these would need to be solved in negotiations,” Hansson said. He also said purchases will focus on “relatively short-term debt instruments.”

Eurogroup chair sees decisions soon in debt crisis

Note that past remarks indicate the euro leaders equate ‘success’ with ‘strong euro’, particularly the ECB, with its single mandate.

So with the euro reacting positively to Draghi’s ‘pledge’, which came after a decline in the euro, more of same is encouraged.

Eurogroup chair sees decisions soon in debt crisis

By Geir Moulson

July 29 (AP) — The German and Italian leaders issued a new pledge to protect the eurozone, while the influential eurogroup chairman was quoted Sunday as saying that officials have no time to lose and will decide in the coming days what measures to take.

The weekend comments capped a string of assurances from European leaders that they will do everything they can to save the 17-nation euro. They came before markets open for a week in which close attention will be focused on Thursday’s monthly meeting of the European Central Bank’s policy-setting governing council.

Last Thursday, ECB President Mario Draghi said the bank would do “whatever it takes” to preserve the euro — and markets surged on hopes of action.

German Chancellor Angela Merkel and Italian Premier Mario Monti “agreed that Germany and Italy will do everything to protect the eurozone” in a phone conversation Saturday, German government spokesman Georg Streiter said, a statement that was echoed by Monti’s office.

That was nearly identical to a statement issued Friday by Merkel and French President Francois Hollande, which followed Draghi’s comments.