Money creation

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed
by Andrew Jackson (economist) and Ben Dyson (economist)
Published 15 Nov 2012

Customers at different banks A note on settlement in the reformed system 6.7 Making loans Loan repayments 6.8 How to realign risk in banking Investment Account Guarantees The regulator may forbid specific guarantees 6.9 Letting banks fail THE NEW PROCESS FOR CREATING MONEY 7.1 Who should have the authority to create money? 7.2 Deciding how much money to create: The Money Creation Committee (MCC) How the Money Creation Committee would work Is it possible for the Money Creation Committee to determine the ‘correct’ money supply? 7.3 Accounting for money creation 7.4 The mechanics of creating new money 7.5 Spending new money into circulation Weighing up the options 7.6 Lending money into circulation to ensure adequate credit for businesses 7.7 Reducing the money supply MAKING THE TRANSITION An overview of the process 8.1 The overnight ‘switchover’ to the new system Step 1: Updating the Bank of England’s balance sheet Step 2: Converting the liabilities of banks into electronic state-issued money Step 3: The creation of the ‘Conversion Liability’ from banks to the Bank of England 8.2 Ensuring banks will be able to provide adequate credit immediately after the switchover Funds from customers Lending the money created through quantitative easing Providing funds to the banks via auctions 8.3 The longer-term transition Repayment of the Conversion Liability Allowing deleveraging by reducing household debt Forcing a deleveraging of the household sector UNDERSTANDING THE IMPACTS OF THE REFORMS 9.1 Differences between the current & reformed monetary systems 9.2 Effects of newly created money on inflation and output 9.3 Effects of lending pre-existing money via Investment Accounts Lending pre-existing money for productive purposes Lending pre-existing money for house purchases and unproductive purposes Lending pre-existing money for consumer spending 9.4 Limitations in predicting the effects on inflation and output 9.5 Possible financial instability in a reformed system A reduced possibility of asset price bubbles Central bank intervention in asset bubbles When an asset bubble bursts 9.6 Debt 9.7 Inequality 9.8 Environment 9.9 Democracy IMPACTS ON THE BANKING SECTOR 10.1 Impacts on commercial banks Banks will need to acquire funds before lending The impact on the availability of lending Banks will be allowed to fail The ‘too big to fail’ subsidy is removed The need for debt is reduced, shrinking the banking sector’s balance sheet Basel Capital Adequacy Ratios could be simplified Easier for banks to manage cashflow and liquidity Reducing the ‘liquidity gap’ 10.2 Impacts on the central bank Direct control of money supply No need to manipulate interest rates A slimmed down operation at the Bank of England 10.3 Impacts on the UK in an international context The UK as a safe haven for money Pound sterling would hold its value better than other currencies No implications for international currency exchange Would speculators attack the currency before the changeover?

…

eq. 4.6 This equation says that GDP (the right hand side of the equation) depends upon money spent in the real (non-financial) economy on investment (MI R VI R) and money spent on consumption (MC R VC R). We now have a framework in place to analyse the effects of money creation (via bank lending) when that lending is for either consumer spending or investment purposes. Money creation for productive purposes at full employment What about money creation (via bank lending) for investment in productive capacity i.e. for a business investing to increase its output? As with money creation for consumer spending, this increases the purchasing power in the economy (the MI R portion of MR), but also increases the quantity of goods produced – the productive capacity of the economy.

…

Table of Contents Acknowledgements A note for readers outside the UK Foreword Summary of Key Points INTRODUCTION The structure of this book A SHORT HISTORY OF MONEY 1.1 The origins of money A textbook history The historical reality 1.2 The emergence of banking THE CURRENT MONETARY SYSTEM 2.1 Commercial (high-street) banks The Bank of England 2.2 The business model of banking Understanding balance sheets Staying in business 2.3 Money creation Creating money by making loans to customers 2.4 Other functions of banking Making electronic payments between customers 2.5 Money destruction 2.6 Liquidity and central bank reserves How central bank reserves are created How commercial banks acquire central bank reserves 2.7 Money creation across the whole banking system The money multiplier model Endogenous money theory WHAT DETERMINES THE MONEY SUPPLY? 3.1 The demand for credit Borrowing due to insufficient wealth Borrowing for speculative reasons Borrowing due to legal incentives 3.2 The demand for money Conclusion: the demand for money & credit 3.3 Factors affecting banks’ lending decisions The drive to maximise profit Government guarantees & ‘too big to fail’ Externalities and competition 3.4 Factors limiting the creation of money Capital requirements (the Basel Accords) Reserve ratios & limiting the supply of central bank reserves Controlling money creation through interest rates Unused regulations 3.5 So what determines the money supply?

The New Depression: The Breakdown of the Paper Money Economy
by Richard Duncan
Published 2 Apr 2012

It introduces a third variable in addition to saving and investment, fiat money creation. Therefore, the equations expressing the determinants of the balance on the current account must be rewritten as follows: (Savings + Fiat money creation) > Investment = Current account surplus When a country’s savings when combined with the paper money created by its central bank exceed the amount of its investment, then that country will have a current account surplus that will force other countries that do not create as much paper money to have current account deficits. And, Investment > (Savings + Fiat money creation) = Current account deficit Thus, it has not been a savings imbalance so much as an imbalance in the amount of paper money being created by the world’s central banks that is responsible for the global imbalances that destabilized the world.

…

This program was to be funded entirely by fiat money creation. This resort to money creation should not have come as a surprise to anyone. In a speech six years earlier, Bernanke had proclaimed that printing money was a tool that the Fed could and would use to prevent deflation if that became necessary after the central bank had exhausted its more traditional policy of lowering the federal funds rate, once that rate had been reduced to 0 percent. In that speech, he referred to “Milton Friedman’s famous ‘helicopter drop’ of money” metaphor, which Friedman had used to explain how money creation causes prices to rise. This earned Bernanke the nickname Helicopter Ben.6 And, so, at the end of 2008, the Fed’s helicopters took to the air and began showering the economy with newly created money.

…

Once it had accumulated the foreign currencies, however, in order to earn income on that money, the PBOC had to buy assets denominated in the foreign currencies it had accumulated. By doing so, China’s central bank pumped a significant amount of liquidity into the rest of the world. Therefore, the fiat money creation undertaken by the Fed, ECB, and BOE was targeted at boosting their domestic liquidity, whereas the fiat money creation by the PBOC had the effect of adding to the liquidity of other countries. But which other countries? Because China does not publish a breakdown of its FX reserves, only the PBOC knows for sure. (See Exhibit 5.5.) EXHIBIT 5.5 Annual Change in China’s Foreign Exchange Reserves Source: IMF, International Financial Statistics Exhibit 5.5 shows the annual increase in China’s FX reserves.

Where Does Money Come From?: A Guide to the UK Monetary & Banking System
by Josh Ryan-Collins , Tony Greenham , Richard Werner and Andrew Jackson
Published 14 Apr 2012

INDEX A | B | C | D | E | F G | H | I | K | L | M N | O | P | Q | R | S T | U | V | W allocation, credit 105, 106, 109, 111, 141 anti-Bullionist school 43 Article 101 EC 118 Asset Purchase Facility see Quantitative Easing Babylon 34 bank accounts balances 15, 16 customers’ ownership of money in 11-12 government 153 importance of 138 Bank Charter Act 1833 43 Bank Charter Act 1844 43-5 bank deposits 15, 17, 20-1 Bank of England bank deposits, quotes about 17 bank reserves, control of 19 commercial bank money, little control over 21-2 creation of 41, 42 credit creation for public spending 143-4 demand-driven interest rates 150-1 effecting the market rate of interest 77 electronic money creation 14 foreign exchange reserves 160 Lender of Last Resort 24, 97, 103, 138 LIBOR and 70-1, 83n, 102 money supply 6, 20 Moral Suasion 47 regulation of credit 24 regulation of wider range of financial institutions 49 repurchasing agreements (repos) 78-9, 101 standing facilities 79-80 supply-driven interest rates 150-1 see also cash; central bank money; central bank reserves; liquidity Bank of International Settlements 61 Bank of Japan 80-1, 104, 112 banking central see Bank of England commercial see commercial banks confusion around 11 crises 42-3, 45 earliest systems 34-5 lending 7 liability 11-12, 16, 62, 63, 85, 106 misconceptions of 7 modern, origins of 37-42 online 52-3 perceptions of 11-14 reform, questions to consider 141-2 see also clearing system Banking school 43 banknotes liquidity of 60 sale of 72-4 bartering 29, 30, 32, 32n base money see central bank money Basel Committee on Banking Supervision (BCBS) 52, 93-4, 95 Bernanke, Ben 81n bilateral netting 165 bilateral settlement 64 Bills of Exchange 37, 38n, 137 bonds government 41, 78, 118, 120, 122, 124-5 issuance of 37, 40-2 liquidity of 60 purchase operations 81 Bradbury bills 45-6 Bretton Woods agreement 46, 50 broad money 48, 51, 60-1 building societies 16 Bullionist school 42-3, 44 capital equity 84-5, 87-8, 94 forms of 84 minimum levels required of banks 93-5 own 84, 85, 93-4 retained earnings 93-4 capital adequacy effect on bank credit creation 95 levels 100, 140 leverage ratios 96-7, 97n rules 93-5 capital flows, international 50, 52, 127-33 capitalism 32, 61, 137-8 cash decline in use of 52-3 definition 6, 14 on demand 71, 72 sale of banknotes 72-4 central bank see Bank of England central bank money banks’ liquidity requirements 74-5 comparison with commercial bank money 75-7 definition 6, 14, 60 ratio to commercial bank money 22, 75 central bank reserves definition 6, 14-15 economic growth, little impact on 22 intangibility 67 interbank payments 64-71, 102 lending to commercial banks 21 liquidity for clearing system 65 liquidity of 60 Chartalism 35, 36 Chinese economic reforms 111-12 classical economics 30-1 clearing system Bank of England 64-5 clearing banks 48-9 early banking systems and 34-5 electronic payments 16, 64 goldsmiths 38 interbank 68-9 ratio of reserves held 7 Cobbett, William 44 coinage exchange rates 45 holders and exchangers of 37 silver 37 value of 36 commercial bank money comparison with central bank money 75-7 definition 6, 15 liquidity of 60 modern, creation of 40 ratio of money in circulation 52-3 ratio to base money 22 supply, no limits to 23-4 commercial banks bank accounts with Bank of England 64-5 business loans 106, 107-8 confidence of 23-4, 140 corridor system of reserve targets 83n, 99, 150-1 credit controls 47 credit creation 6, 62-4 credit lending criteria 7-8 credit rationing 105-10 definition 13 deposits 6 determining quantity of central bank reserves 7, 21 fear of insolvency 23-4, 24 financial intermediaries 12-14, 19 IOUs see liability lending criteria 7-8 LIBOR and 70-1, 83n, 102 money creation see money creation mortgages 107 profits 87, 94 regional 42, 43-4 shadow banking 101-2 ‘special profit’ from interest on credit 74 see also capital; credit; liquidity; money creation commodity theory of money 30-3 Competition and Credit Control (CCC) 49-50, 98 compulsory cash-reserve requirements 21 compulsory reserve ratios 98 computer money 14 Consolidated Fund 153-4 Consolidated Fund Extra Receipts (CFERs) 153n Continuous Linked Settlement (CLS) Bank 165-6, 168 corridor system 83n, 99, 150-1 country banks 42, 43-4 crawling pegs 130 credit credit creation see credit creation deregulation of controls on 48-52 direct regulation of 24, 96, 110-12 lending criteria 7-8 leverage ratios 96-7, 97n rationing 105-10 see also Competition and Credit Control (CCC); goldsmiths credit creation allocation 105, 106, 109, 111, 141 bank lending 6 booms 49-50, 51 capital adequacy rules 93-5 fiscal policy links 126-7 liquidity regulation 97-100 money as 34 money created by banks 62-4 quantity theory of 109-10 window guidance 111-12 see also money creation; productive credit creation; unproductive credit creation credit theory of money 33-4 credit unions 16 crowding out 124-6 currency bands 130 Currency school 42-3 currency swaps 162 Davies, Glynn 34, 46, 50 Debt Management Account (DMA) 154-7 Debt Management Office (DMO) 122, 124, 154, 155n, 156 debts 34-5 declining marginal utility 106 deductive reasoning 33n Defoe, Daniel 10 deposits bank 15, 17, 20-1 commercial banks creation of 7 demand 15, 43-4, 64, 65, 138 facilities 79 insurance 76-7 rates 150 receipts 34, 37, 38, 39, 40 deregulation 48-52 digital money 52-3 Discount Window Facility 84 double-entry bookkeeping 63 East Asian Economic Miracle 111-12 electronic money 14, 52-3, 67 endogenous money 103-4, 106, 109 equation of exchange 31n equity capital 84-5, 87-8, 94 eurodollars 50 European Central Bank (ECB) 52, 120-1 European Union (EU) 118-21 eurozone economies 120-1, 132-3 Exchange Equalisation Account (EEA) 158-60 exchange rates foreign 127-33, 158-60, 161, 162-8 government intervention 130-2 regimes 45-53, 129-30 Exchequer Pyramid 153, 154, 156 exogenous money 103-4, 109 Federal Reserve Bank of Chicago 44 Ferguson, Niall 28, 36 financial crisis eurozone 120-1 key questions raised 5-6 North Atlantic 29 originate and distribute model of banking 100-1 as a solvency and liquidity crisis 102-3 subprime mortgages 101, 138 Financial Services Authority (FSA) 99 Financial Services Compensation Scheme (FSCS) 16, 76 fiscal policy see Government Fisher, L. 31n floating currency regimes 130 floor system 152 foreign exchange eurozone 132-3 government intervention 130-2 markets 127-9 payment system 162-8 regimes 129-30 reserves 158-60 trade and speculation 161 transactions 162 foreign interest rate swaps 162 forex transactions 162-8 forwards (forex transaction) 161, 162 fractional reserve banking 7, 37, 38-40, 44 Galbraith, Professor J.K. 58, 146 GDP transactions 24, 51-2, 83, 96, 109-10, 125-6 see also productive credit creation general equilibrium 32 Gilt Edged Market Makers (GEMMs) 122-3, 156 gilts 41, 82, 155-6 gold standard 45-7 Gold Standard Act 1925 46 Golden Period 45 goldsmiths 37, 38-9, 40 Goodhart’s law 61, 138 Government bank accounts 153-60 bonds 41, 78, 118, 120, 122, 124-5 borrowing 122-3, 124-6 intervention to manage exchange rates 130-2 linking fiscal policy to credit creation 126-7 monetary policy 42-5, 47, 49-50, 120-1, 141-2 money creation, bypassing restrictions 119-20 money creation, EU restrictions on 117-19 money-financed fiscal expenditure 144-5 money supply, effect of borrowing on 124-6 productive investment 125-6 spending 123-4 taxation 35-6, 41, 121, 139, 140 Government Banking Service 156 gross non-payment versus payment settlement method 163-4 hedging 161 Herstatt risk 164 high-powered money see central bank money hire purchase houses 48 ICP/Cobden Centre poll 11, 12 imperfect information 7, 105, 107, 140 see also perfect information Impossible Trinity 131-2 Independent Commission on Banking 13 Ingham, Geoffrey 119 Innes, Mitchell 35 insolvency explanation of 86, 87 protection against 93-7 see also solvency interest compound 39 debt, interest-bearing 144-5 legalisation of 41 savings accounts 12 interest rates crowding out 124-6 foreign rate swaps 162 government debt 119 interbank rate 102, 150, 152 LIBOR 70-1, 83n, 102 margin 12 market rate 50, 77 monetary policy and 80-1 negative 80 policy rate 50, 79, 150 intra-day clearing 68 investment banking 13 investors bonds 40-1 government 126 private 125 IOUs see liability Keynes, John Maynard 4, 33, 71 lending cycles of 18-19 facilities 79-80 fractional reserve banking 7, 37, 38-40, 44 rates 150 leverage ratios 96-7, 97n liability 11-12, 16, 62, 63, 85, 106 LIBOR 70-1, 83n, 102 liquidity Bank of England influence on 78 crisis 86-7 Discount Window Facility 84 expectations, centrality to 138-9 financial crisis and 102-3 regulation of 97-100 solvency and 84-7 loans Bank of England influence on 77 business 106, 107-8 central bank 65-6, 78-9 central bank reserves 78-9 commercial banks 6 confidence in borrower to repay 20-1, 140 credit unions 16 in economic downturn 71 goldsmiths 38 maturity transformation 12 risk rating 94 secured 106-7 securitisation 100-1 M0 see central bank money M1, broad money 60 M2, broad money 61 M3, broad money 61 M4, broad money 15, 61 Maastricht Treaty 118-19 margin 12 marginal utility 31-2 market-makers 155 Marx, Karl 32, 39 maturity transformation 12 McKenna, Reginald 4 medium of exchange 29, 35, 38, 52, 139 Mill, John Stuart 30 Minimum Lending Rate (MLR) 50 Minsky, Hyman 33 Modern Monetary Theory (MMT) 121n monetary policy early 42-5 government reforms 49-50 politics of 120-1 reform, questions to consider 141-2 review of 47 Monetary Policy Committee (MPC) 79, 150 money acceptability of 139-40 commodity theory of 30-3 credit theory of 33-4 definition 6, 138-9 efficiency of exchange 30 emergence of modern money 137-8 endogenous 103-4, 106, 109 exogenous 103-4, 109 functions of 29 as information 67 local currency 145-6 marginal utility 31-2 money creation see money creation neutrality of 30-2 role of state in defining 35-7 as social relationship 33-4, 139-40 see also cash; money creation money creation allocation of 105, 106, 109, 111, 141 capital adequacy ratios 95 commercial banks and 6, 61, 64, 139-40 confidence of banks 23-4 creation of, misunderstanding 5 endogenous and exogenous money 103-4, 106, 109 implications for economic prosperity and financial stability 7-8 link to central reserves 7 multiplier model 18-21 securitisation 100-1 shadow banking 101-2 see also credit; Quantitative Easing money supply Bank of England measures of 60-1 control of 20, 48 definition 15 effects on 71 expansion by governments 145 money creation creation see credit; money creation overview 6 money tax 74 Mosler, Warren 36 multiplier model 18-21 national currency 6 National Loans Fund (NLF) 154, 158 National Savings and Investments (NS&I) 154, 158 neoclassical economics 31-4, 51 new money see money creation non-GDP transactions 24, 109 non-PVP method 163-4 Northern Rock 103 Open Market Operations (OMOs) 78, 79, 151 Operational Lending Facility 79-80 options (hedging) 161, 162 orthodox economics 31-4 Outright Monetary Transactions (OMTs) 121 own capital 84, 85, 93-4 payment versus payment (PVP) systems 165-6, 167, 168 pegged exchange rate regimes 130 perfect information 31, 32, 77, 105 see also imperfect information policy rate 50, 79, 150 productive credit creation 24, 111, 142 see also GDP transactions promissory notes 37, 38 Promissory Notes Act 1704 40, 42 PVP systems 165-6, 167, 168 Quantitative Easing (QE) Bank of England 81 bond purchases 81 definition 80-1 effect on economy 82-3 financial assets, purchase of 152 lending, impact on 22, 23 Quantity Theory of Credit 24n, 51, 109-10, 141 real time gross settlement (RTGS) 76, 79 repurchasing agreements (repos) 78-9, 101 reserve accounts 64-5 reserve ratios 19, 20, 21, 49, 51, 98 reserve targeting 150-1 residential mortgage-backed securities (RMBSs) 100-1 retail banking 13 risk management systems 94 safe-deposit boxes 11 savings, investment of 12-13 savings accounts 60 Schumpeter, Joseph 10, 30-1 secondary banking crisis 1974 50 securities 40-1 securitisation 100-1 seigniorage 74 settlement 29, 59, 64, 76, 128n, 162-3, 167-8 shadow banking system 101-2 Simmel, Georg 28 solvency financial crisis and 102-3 regulation of 84-7 see also insolvency; liquidity speculators 161 spots (forex transaction) 162 sterling stock liquidity regime (SLR) 98-100 store of value 29, 33 subordinated debt 85 subprime mortgages 101, 138 supply and demand 31 T-accounts 63 tally sticks 34-5, 41 taxation 35-6, 41, 121, 139, 140 textbook model 18-21 traditional correspondent banking 163-4 Treaty of Maastricht 118-19 Tucker, Paul 21, 106 unit of account 29, 35, 36, 139 unproductive credit creation 24, 111 see also GDP transactions; productive credit creation On Us, with and without settlement risk 167 USA, gold standard 46-7 usury see interest value, measurement of 35 Walras, Leon 31 Ways and Means Advances 117n Wergeld 35 Werner, Richard 44, 81n, 109-10 wholesale banking 13 wholesale money markets 50 window guidance 111-12 WIR credit-clearing circle 145 * ‘Central bank money in the UK economy takes two forms: banknotes and banks’ balances with the Bank of England (reserves).

…

INDEX A | B | C | D | E | F G | H | I | K | L | M N | O | P | Q | R | S T | U | V | W allocation, credit 105, 106, 109, 111, 141 anti-Bullionist school 43 Article 101 EC 118 Asset Purchase Facility see Quantitative Easing Babylon 34 bank accounts balances 15, 16 customers’ ownership of money in 11-12 government 153 importance of 138 Bank Charter Act 1833 43 Bank Charter Act 1844 43-5 bank deposits 15, 17, 20-1 Bank of England bank deposits, quotes about 17 bank reserves, control of 19 commercial bank money, little control over 21-2 creation of 41, 42 credit creation for public spending 143-4 demand-driven interest rates 150-1 effecting the market rate of interest 77 electronic money creation 14 foreign exchange reserves 160 Lender of Last Resort 24, 97, 103, 138 LIBOR and 70-1, 83n, 102 money supply 6, 20 Moral Suasion 47 regulation of credit 24 regulation of wider range of financial institutions 49 repurchasing agreements (repos) 78-9, 101 standing facilities 79-80 supply-driven interest rates 150-1 see also cash; central bank money; central bank reserves; liquidity Bank of International Settlements 61 Bank of Japan 80-1, 104, 112 banking central see Bank of England commercial see commercial banks confusion around 11 crises 42-3, 45 earliest systems 34-5 lending 7 liability 11-12, 16, 62, 63, 85, 106 misconceptions of 7 modern, origins of 37-42 online 52-3 perceptions of 11-14 reform, questions to consider 141-2 see also clearing system Banking school 43 banknotes liquidity of 60 sale of 72-4 bartering 29, 30, 32, 32n base money see central bank money Basel Committee on Banking Supervision (BCBS) 52, 93-4, 95 Bernanke, Ben 81n bilateral netting 165 bilateral settlement 64 Bills of Exchange 37, 38n, 137 bonds government 41, 78, 118, 120, 122, 124-5 issuance of 37, 40-2 liquidity of 60 purchase operations 81 Bradbury bills 45-6 Bretton Woods agreement 46, 50 broad money 48, 51, 60-1 building societies 16 Bullionist school 42-3, 44 capital equity 84-5, 87-8, 94 forms of 84 minimum levels required of banks 93-5 own 84, 85, 93-4 retained earnings 93-4 capital adequacy effect on bank credit creation 95 levels 100, 140 leverage ratios 96-7, 97n rules 93-5 capital flows, international 50, 52, 127-33 capitalism 32, 61, 137-8 cash decline in use of 52-3 definition 6, 14 on demand 71, 72 sale of banknotes 72-4 central bank see Bank of England central bank money banks’ liquidity requirements 74-5 comparison with commercial bank money 75-7 definition 6, 14, 60 ratio to commercial bank money 22, 75 central bank reserves definition 6, 14-15 economic growth, little impact on 22 intangibility 67 interbank payments 64-71, 102 lending to commercial banks 21 liquidity for clearing system 65 liquidity of 60 Chartalism 35, 36 Chinese economic reforms 111-12 classical economics 30-1 clearing system Bank of England 64-5 clearing banks 48-9 early banking systems and 34-5 electronic payments 16, 64 goldsmiths 38 interbank 68-9 ratio of reserves held 7 Cobbett, William 44 coinage exchange rates 45 holders and exchangers of 37 silver 37 value of 36 commercial bank money comparison with central bank money 75-7 definition 6, 15 liquidity of 60 modern, creation of 40 ratio of money in circulation 52-3 ratio to base money 22 supply, no limits to 23-4 commercial banks bank accounts with Bank of England 64-5 business loans 106, 107-8 confidence of 23-4, 140 corridor system of reserve targets 83n, 99, 150-1 credit controls 47 credit creation 6, 62-4 credit lending criteria 7-8 credit rationing 105-10 definition 13 deposits 6 determining quantity of central bank reserves 7, 21 fear of insolvency 23-4, 24 financial intermediaries 12-14, 19 IOUs see liability lending criteria 7-8 LIBOR and 70-1, 83n, 102 money creation see money creation mortgages 107 profits 87, 94 regional 42, 43-4 shadow banking 101-2 ‘special profit’ from interest on credit 74 see also capital; credit; liquidity; money creation commodity theory of money 30-3 Competition and Credit Control (CCC) 49-50, 98 compulsory cash-reserve requirements 21 compulsory reserve ratios 98 computer money 14 Consolidated Fund 153-4 Consolidated Fund Extra Receipts (CFERs) 153n Continuous Linked Settlement (CLS) Bank 165-6, 168 corridor system 83n, 99, 150-1 country banks 42, 43-4 crawling pegs 130 credit credit creation see credit creation deregulation of controls on 48-52 direct regulation of 24, 96, 110-12 lending criteria 7-8 leverage ratios 96-7, 97n rationing 105-10 see also Competition and Credit Control (CCC); goldsmiths credit creation allocation 105, 106, 109, 111, 141 bank lending 6 booms 49-50, 51 capital adequacy rules 93-5 fiscal policy links 126-7 liquidity regulation 97-100 money as 34 money created by banks 62-4 quantity theory of 109-10 window guidance 111-12 see also money creation; productive credit creation; unproductive credit creation credit theory of money 33-4 credit unions 16 crowding out 124-6 currency bands 130 Currency school 42-3 currency swaps 162 Davies, Glynn 34, 46, 50 Debt Management Account (DMA) 154-7 Debt Management Office (DMO) 122, 124, 154, 155n, 156 debts 34-5 declining marginal utility 106 deductive reasoning 33n Defoe, Daniel 10 deposits bank 15, 17, 20-1 commercial banks creation of 7 demand 15, 43-4, 64, 65, 138 facilities 79 insurance 76-7 rates 150 receipts 34, 37, 38, 39, 40 deregulation 48-52 digital money 52-3 Discount Window Facility 84 double-entry bookkeeping 63 East Asian Economic Miracle 111-12 electronic money 14, 52-3, 67 endogenous money 103-4, 106, 109 equation of exchange 31n equity capital 84-5, 87-8, 94 eurodollars 50 European Central Bank (ECB) 52, 120-1 European Union (EU) 118-21 eurozone economies 120-1, 132-3 Exchange Equalisation Account (EEA) 158-60 exchange rates foreign 127-33, 158-60, 161, 162-8 government intervention 130-2 regimes 45-53, 129-30 Exchequer Pyramid 153, 154, 156 exogenous money 103-4, 109 Federal Reserve Bank of Chicago 44 Ferguson, Niall 28, 36 financial crisis eurozone 120-1 key questions raised 5-6 North Atlantic 29 originate and distribute model of banking 100-1 as a solvency and liquidity crisis 102-3 subprime mortgages 101, 138 Financial Services Authority (FSA) 99 Financial Services Compensation Scheme (FSCS) 16, 76 fiscal policy see Government Fisher, L. 31n floating currency regimes 130 floor system 152 foreign exchange eurozone 132-3 government intervention 130-2 markets 127-9 payment system 162-8 regimes 129-30 reserves 158-60 trade and speculation 161 transactions 162 foreign interest rate swaps 162 forex transactions 162-8 forwards (forex transaction) 161, 162 fractional reserve banking 7, 37, 38-40, 44 Galbraith, Professor J.K. 58, 146 GDP transactions 24, 51-2, 83, 96, 109-10, 125-6 see also productive credit creation general equilibrium 32 Gilt Edged Market Makers (GEMMs) 122-3, 156 gilts 41, 82, 155-6 gold standard 45-7 Gold Standard Act 1925 46 Golden Period 45 goldsmiths 37, 38-9, 40 Goodhart’s law 61, 138 Government bank accounts 153-60 bonds 41, 78, 118, 120, 122, 124-5 borrowing 122-3, 124-6 intervention to manage exchange rates 130-2 linking fiscal policy to credit creation 126-7 monetary policy 42-5, 47, 49-50, 120-1, 141-2 money creation, bypassing restrictions 119-20 money creation, EU restrictions on 117-19 money-financed fiscal expenditure 144-5 money supply, effect of borrowing on 124-6 productive investment 125-6 spending 123-4 taxation 35-6, 41, 121, 139, 140 Government Banking Service 156 gross non-payment versus payment settlement method 163-4 hedging 161 Herstatt risk 164 high-powered money see central bank money hire purchase houses 48 ICP/Cobden Centre poll 11, 12 imperfect information 7, 105, 107, 140 see also perfect information Impossible Trinity 131-2 Independent Commission on Banking 13 Ingham, Geoffrey 119 Innes, Mitchell 35 insolvency explanation of 86, 87 protection against 93-7 see also solvency interest compound 39 debt, interest-bearing 144-5 legalisation of 41 savings accounts 12 interest rates crowding out 124-6 foreign rate swaps 162 government debt 119 interbank rate 102, 150, 152 LIBOR 70-1, 83n, 102 margin 12 market rate 50, 77 monetary policy and 80-1 negative 80 policy rate 50, 79, 150 intra-day clearing 68 investment banking 13 investors bonds 40-1 government 126 private 125 IOUs see liability Keynes, John Maynard 4, 33, 71 lending cycles of 18-19 facilities 79-80 fractional reserve banking 7, 37, 38-40, 44 rates 150 leverage ratios 96-7, 97n liability 11-12, 16, 62, 63, 85, 106 LIBOR 70-1, 83n, 102 liquidity Bank of England influence on 78 crisis 86-7 Discount Window Facility 84 expectations, centrality to 138-9 financial crisis and 102-3 regulation of 97-100 solvency and 84-7 loans Bank of England influence on 77 business 106, 107-8 central bank 65-6, 78-9 central bank reserves 78-9 commercial banks 6 confidence in borrower to repay 20-1, 140 credit unions 16 in economic downturn 71 goldsmiths 38 maturity transformation 12 risk rating 94 secured 106-7 securitisation 100-1 M0 see central bank money M1, broad money 60 M2, broad money 61 M3, broad money 61 M4, broad money 15, 61 Maastricht Treaty 118-19 margin 12 marginal utility 31-2 market-makers 155 Marx, Karl 32, 39 maturity transformation 12 McKenna, Reginald 4 medium of exchange 29, 35, 38, 52, 139 Mill, John Stuart 30 Minimum Lending Rate (MLR) 50 Minsky, Hyman 33 Modern Monetary Theory (MMT) 121n monetary policy early 42-5 government reforms 49-50 politics of 120-1 reform, questions to consider 141-2 review of 47 Monetary Policy Committee (MPC) 79, 150 money acceptability of 139-40 commodity theory of 30-3 credit theory of 33-4 definition 6, 138-9 efficiency of exchange 30 emergence of modern money 137-8 endogenous 103-4, 106, 109 exogenous 103-4, 109 functions of 29 as information 67 local currency 145-6 marginal utility 31-2 money creation see money creation neutrality of 30-2 role of state in defining 35-7 as social relationship 33-4, 139-40 see also cash; money creation money creation allocation of 105, 106, 109, 111, 141 capital adequacy ratios 95 commercial banks and 6, 61, 64, 139-40 confidence of banks 23-4 creation of, misunderstanding 5 endogenous and exogenous money 103-4, 106, 109 implications for economic prosperity and financial stability 7-8 link to central reserves 7 multiplier model 18-21 securitisation 100-1 shadow banking 101-2 see also credit; Quantitative Easing money supply Bank of England measures of 60-1 control of 20, 48 definition 15 effects on 71 expansion by governments 145 money creation creation see credit; money creation overview 6 money tax 74 Mosler, Warren 36 multiplier model 18-21 national currency 6 National Loans Fund (NLF) 154, 158 National Savings and Investments (NS&I) 154, 158 neoclassical economics 31-4, 51 new money see money creation non-GDP transactions 24, 109 non-PVP method 163-4 Northern Rock 103 Open Market Operations (OMOs) 78, 79, 151 Operational Lending Facility 79-80 options (hedging) 161, 162 orthodox economics 31-4 Outright Monetary Transactions (OMTs) 121 own capital 84, 85, 93-4 payment versus payment (PVP) systems 165-6, 167, 168 pegged exchange rate regimes 130 perfect information 31, 32, 77, 105 see also imperfect information policy rate 50, 79, 150 productive credit creation 24, 111, 142 see also GDP transactions promissory notes 37, 38 Promissory Notes Act 1704 40, 42 PVP systems 165-6, 167, 168 Quantitative Easing (QE) Bank of England 81 bond purchases 81 definition 80-1 effect on economy 82-3 financial assets, purchase of 152 lending, impact on 22, 23 Quantity Theory of Credit 24n, 51, 109-10, 141 real time gross settlement (RTGS) 76, 79 repurchasing agreements (repos) 78-9, 101 reserve accounts 64-5 reserve ratios 19, 20, 21, 49, 51, 98 reserve targeting 150-1 residential mortgage-backed securities (RMBSs) 100-1 retail banking 13 risk management systems 94 safe-deposit boxes 11 savings, investment of 12-13 savings accounts 60 Schumpeter, Joseph 10, 30-1 secondary banking crisis 1974 50 securities 40-1 securitisation 100-1 seigniorage 74 settlement 29, 59, 64, 76, 128n, 162-3, 167-8 shadow banking system 101-2 Simmel, Georg 28 solvency financial crisis and 102-3 regulation of 84-7 see also insolvency; liquidity speculators 161 spots (forex transaction) 162 sterling stock liquidity regime (SLR) 98-100 store of value 29, 33 subordinated debt 85 subprime mortgages 101, 138 supply and demand 31 T-accounts 63 tally sticks 34-5, 41 taxation 35-6, 41, 121, 139, 140 textbook model 18-21 traditional correspondent banking 163-4 Treaty of Maastricht 118-19 Tucker, Paul 21, 106 unit of account 29, 35, 36, 139 unproductive credit creation 24, 111 see also GDP transactions; productive credit creation On Us, with and without settlement risk 167 USA, gold standard 46-7 usury see interest value, measurement of 35 Walras, Leon 31 Ways and Means Advances 117n Wergeld 35 Werner, Richard 44, 81n, 109-10 wholesale banking 13 wholesale money markets 50 window guidance 111-12 WIR credit-clearing circle 145 * ‘Central bank money in the UK economy takes two forms: banknotes and banks’ balances with the Bank of England (reserves).

…

INDEX A | B | C | D | E | F G | H | I | K | L | M N | O | P | Q | R | S T | U | V | W allocation, credit 105, 106, 109, 111, 141 anti-Bullionist school 43 Article 101 EC 118 Asset Purchase Facility see Quantitative Easing Babylon 34 bank accounts balances 15, 16 customers’ ownership of money in 11-12 government 153 importance of 138 Bank Charter Act 1833 43 Bank Charter Act 1844 43-5 bank deposits 15, 17, 20-1 Bank of England bank deposits, quotes about 17 bank reserves, control of 19 commercial bank money, little control over 21-2 creation of 41, 42 credit creation for public spending 143-4 demand-driven interest rates 150-1 effecting the market rate of interest 77 electronic money creation 14 foreign exchange reserves 160 Lender of Last Resort 24, 97, 103, 138 LIBOR and 70-1, 83n, 102 money supply 6, 20 Moral Suasion 47 regulation of credit 24 regulation of wider range of financial institutions 49 repurchasing agreements (repos) 78-9, 101 standing facilities 79-80 supply-driven interest rates 150-1 see also cash; central bank money; central bank reserves; liquidity Bank of International Settlements 61 Bank of Japan 80-1, 104, 112 banking central see Bank of England commercial see commercial banks confusion around 11 crises 42-3, 45 earliest systems 34-5 lending 7 liability 11-12, 16, 62, 63, 85, 106 misconceptions of 7 modern, origins of 37-42 online 52-3 perceptions of 11-14 reform, questions to consider 141-2 see also clearing system Banking school 43 banknotes liquidity of 60 sale of 72-4 bartering 29, 30, 32, 32n base money see central bank money Basel Committee on Banking Supervision (BCBS) 52, 93-4, 95 Bernanke, Ben 81n bilateral netting 165 bilateral settlement 64 Bills of Exchange 37, 38n, 137 bonds government 41, 78, 118, 120, 122, 124-5 issuance of 37, 40-2 liquidity of 60 purchase operations 81 Bradbury bills 45-6 Bretton Woods agreement 46, 50 broad money 48, 51, 60-1 building societies 16 Bullionist school 42-3, 44 capital equity 84-5, 87-8, 94 forms of 84 minimum levels required of banks 93-5 own 84, 85, 93-4 retained earnings 93-4 capital adequacy effect on bank credit creation 95 levels 100, 140 leverage ratios 96-7, 97n rules 93-5 capital flows, international 50, 52, 127-33 capitalism 32, 61, 137-8 cash decline in use of 52-3 definition 6, 14 on demand 71, 72 sale of banknotes 72-4 central bank see Bank of England central bank money banks’ liquidity requirements 74-5 comparison with commercial bank money 75-7 definition 6, 14, 60 ratio to commercial bank money 22, 75 central bank reserves definition 6, 14-15 economic growth, little impact on 22 intangibility 67 interbank payments 64-71, 102 lending to commercial banks 21 liquidity for clearing system 65 liquidity of 60 Chartalism 35, 36 Chinese economic reforms 111-12 classical economics 30-1 clearing system Bank of England 64-5 clearing banks 48-9 early banking systems and 34-5 electronic payments 16, 64 goldsmiths 38 interbank 68-9 ratio of reserves held 7 Cobbett, William 44 coinage exchange rates 45 holders and exchangers of 37 silver 37 value of 36 commercial bank money comparison with central bank money 75-7 definition 6, 15 liquidity of 60 modern, creation of 40 ratio of money in circulation 52-3 ratio to base money 22 supply, no limits to 23-4 commercial banks bank accounts with Bank of England 64-5 business loans 106, 107-8 confidence of 23-4, 140 corridor system of reserve targets 83n, 99, 150-1 credit controls 47 credit creation 6, 62-4 credit lending criteria 7-8 credit rationing 105-10 definition 13 deposits 6 determining quantity of central bank reserves 7, 21 fear of insolvency 23-4, 24 financial intermediaries 12-14, 19 IOUs see liability lending criteria 7-8 LIBOR and 70-1, 83n, 102 money creation see money creation mortgages 107 profits 87, 94 regional 42, 43-4 shadow banking 101-2 ‘special profit’ from interest on credit 74 see also capital; credit; liquidity; money creation commodity theory of money 30-3 Competition and Credit Control (CCC) 49-50, 98 compulsory cash-reserve requirements 21 compulsory reserve ratios 98 computer money 14 Consolidated Fund 153-4 Consolidated Fund Extra Receipts (CFERs) 153n Continuous Linked Settlement (CLS) Bank 165-6, 168 corridor system 83n, 99, 150-1 country banks 42, 43-4 crawling pegs 130 credit credit creation see credit creation deregulation of controls on 48-52 direct regulation of 24, 96, 110-12 lending criteria 7-8 leverage ratios 96-7, 97n rationing 105-10 see also Competition and Credit Control (CCC); goldsmiths credit creation allocation 105, 106, 109, 111, 141 bank lending 6 booms 49-50, 51 capital adequacy rules 93-5 fiscal policy links 126-7 liquidity regulation 97-100 money as 34 money created by banks 62-4 quantity theory of 109-10 window guidance 111-12 see also money creation; productive credit creation; unproductive credit creation credit theory of money 33-4 credit unions 16 crowding out 124-6 currency bands 130 Currency school 42-3 currency swaps 162 Davies, Glynn 34, 46, 50 Debt Management Account (DMA) 154-7 Debt Management Office (DMO) 122, 124, 154, 155n, 156 debts 34-5 declining marginal utility 106 deductive reasoning 33n Defoe, Daniel 10 deposits bank 15, 17, 20-1 commercial banks creation of 7 demand 15, 43-4, 64, 65, 138 facilities 79 insurance 76-7 rates 150 receipts 34, 37, 38, 39, 40 deregulation 48-52 digital money 52-3 Discount Window Facility 84 double-entry bookkeeping 63 East Asian Economic Miracle 111-12 electronic money 14, 52-3, 67 endogenous money 103-4, 106, 109 equation of exchange 31n equity capital 84-5, 87-8, 94 eurodollars 50 European Central Bank (ECB) 52, 120-1 European Union (EU) 118-21 eurozone economies 120-1, 132-3 Exchange Equalisation Account (EEA) 158-60 exchange rates foreign 127-33, 158-60, 161, 162-8 government intervention 130-2 regimes 45-53, 129-30 Exchequer Pyramid 153, 154, 156 exogenous money 103-4, 109 Federal Reserve Bank of Chicago 44 Ferguson, Niall 28, 36 financial crisis eurozone 120-1 key questions raised 5-6 North Atlantic 29 originate and distribute model of banking 100-1 as a solvency and liquidity crisis 102-3 subprime mortgages 101, 138 Financial Services Authority (FSA) 99 Financial Services Compensation Scheme (FSCS) 16, 76 fiscal policy see Government Fisher, L. 31n floating currency regimes 130 floor system 152 foreign exchange eurozone 132-3 government intervention 130-2 markets 127-9 payment system 162-8 regimes 129-30 reserves 158-60 trade and speculation 161 transactions 162 foreign interest rate swaps 162 forex transactions 162-8 forwards (forex transaction) 161, 162 fractional reserve banking 7, 37, 38-40, 44 Galbraith, Professor J.K. 58, 146 GDP transactions 24, 51-2, 83, 96, 109-10, 125-6 see also productive credit creation general equilibrium 32 Gilt Edged Market Makers (GEMMs) 122-3, 156 gilts 41, 82, 155-6 gold standard 45-7 Gold Standard Act 1925 46 Golden Period 45 goldsmiths 37, 38-9, 40 Goodhart’s law 61, 138 Government bank accounts 153-60 bonds 41, 78, 118, 120, 122, 124-5 borrowing 122-3, 124-6 intervention to manage exchange rates 130-2 linking fiscal policy to credit creation 126-7 monetary policy 42-5, 47, 49-50, 120-1, 141-2 money creation, bypassing restrictions 119-20 money creation, EU restrictions on 117-19 money-financed fiscal expenditure 144-5 money supply, effect of borrowing on 124-6 productive investment 125-6 spending 123-4 taxation 35-6, 41, 121, 139, 140 Government Banking Service 156 gross non-payment versus payment settlement method 163-4 hedging 161 Herstatt risk 164 high-powered money see central bank money hire purchase houses 48 ICP/Cobden Centre poll 11, 12 imperfect information 7, 105, 107, 140 see also perfect information Impossible Trinity 131-2 Independent Commission on Banking 13 Ingham, Geoffrey 119 Innes, Mitchell 35 insolvency explanation of 86, 87 protection against 93-7 see also solvency interest compound 39 debt, interest-bearing 144-5 legalisation of 41 savings accounts 12 interest rates crowding out 124-6 foreign rate swaps 162 government debt 119 interbank rate 102, 150, 152 LIBOR 70-1, 83n, 102 margin 12 market rate 50, 77 monetary policy and 80-1 negative 80 policy rate 50, 79, 150 intra-day clearing 68 investment banking 13 investors bonds 40-1 government 126 private 125 IOUs see liability Keynes, John Maynard 4, 33, 71 lending cycles of 18-19 facilities 79-80 fractional reserve banking 7, 37, 38-40, 44 rates 150 leverage ratios 96-7, 97n liability 11-12, 16, 62, 63, 85, 106 LIBOR 70-1, 83n, 102 liquidity Bank of England influence on 78 crisis 86-7 Discount Window Facility 84 expectations, centrality to 138-9 financial crisis and 102-3 regulation of 97-100 solvency and 84-7 loans Bank of England influence on 77 business 106, 107-8 central bank 65-6, 78-9 central bank reserves 78-9 commercial banks 6 confidence in borrower to repay 20-1, 140 credit unions 16 in economic downturn 71 goldsmiths 38 maturity transformation 12 risk rating 94 secured 106-7 securitisation 100-1 M0 see central bank money M1, broad money 60 M2, broad money 61 M3, broad money 61 M4, broad money 15, 61 Maastricht Treaty 118-19 margin 12 marginal utility 31-2 market-makers 155 Marx, Karl 32, 39 maturity transformation 12 McKenna, Reginald 4 medium of exchange 29, 35, 38, 52, 139 Mill, John Stuart 30 Minimum Lending Rate (MLR) 50 Minsky, Hyman 33 Modern Monetary Theory (MMT) 121n monetary policy early 42-5 government reforms 49-50 politics of 120-1 reform, questions to consider 141-2 review of 47 Monetary Policy Committee (MPC) 79, 150 money acceptability of 139-40 commodity theory of 30-3 credit theory of 33-4 definition 6, 138-9 efficiency of exchange 30 emergence of modern money 137-8 endogenous 103-4, 106, 109 exogenous 103-4, 109 functions of 29 as information 67 local currency 145-6 marginal utility 31-2 money creation see money creation neutrality of 30-2 role of state in defining 35-7 as social relationship 33-4, 139-40 see also cash; money creation money creation allocation of 105, 106, 109, 111, 141 capital adequacy ratios 95 commercial banks and 6, 61, 64, 139-40 confidence of banks 23-4 creation of, misunderstanding 5 endogenous and exogenous money 103-4, 106, 109 implications for economic prosperity and financial stability 7-8 link to central reserves 7 multiplier model 18-21 securitisation 100-1 shadow banking 101-2 see also credit; Quantitative Easing money supply Bank of England measures of 60-1 control of 20, 48 definition 15 effects on 71 expansion by governments 145 money creation creation see credit; money creation overview 6 money tax 74 Mosler, Warren 36 multiplier model 18-21 national currency 6 National Loans Fund (NLF) 154, 158 National Savings and Investments (NS&I) 154, 158 neoclassical economics 31-4, 51 new money see money creation non-GDP transactions 24, 109 non-PVP method 163-4 Northern Rock 103 Open Market Operations (OMOs) 78, 79, 151 Operational Lending Facility 79-80 options (hedging) 161, 162 orthodox economics 31-4 Outright Monetary Transactions (OMTs) 121 own capital 84, 85, 93-4 payment versus payment (PVP) systems 165-6, 167, 168 pegged exchange rate regimes 130 perfect information 31, 32, 77, 105 see also imperfect information policy rate 50, 79, 150 productive credit creation 24, 111, 142 see also GDP transactions promissory notes 37, 38 Promissory Notes Act 1704 40, 42 PVP systems 165-6, 167, 168 Quantitative Easing (QE) Bank of England 81 bond purchases 81 definition 80-1 effect on economy 82-3 financial assets, purchase of 152 lending, impact on 22, 23 Quantity Theory of Credit 24n, 51, 109-10, 141 real time gross settlement (RTGS) 76, 79 repurchasing agreements (repos) 78-9, 101 reserve accounts 64-5 reserve ratios 19, 20, 21, 49, 51, 98 reserve targeting 150-1 residential mortgage-backed securities (RMBSs) 100-1 retail banking 13 risk management systems 94 safe-deposit boxes 11 savings, investment of 12-13 savings accounts 60 Schumpeter, Joseph 10, 30-1 secondary banking crisis 1974 50 securities 40-1 securitisation 100-1 seigniorage 74 settlement 29, 59, 64, 76, 128n, 162-3, 167-8 shadow banking system 101-2 Simmel, Georg 28 solvency financial crisis and 102-3 regulation of 84-7 see also insolvency; liquidity speculators 161 spots (forex transaction) 162 sterling stock liquidity regime (SLR) 98-100 store of value 29, 33 subordinated debt 85 subprime mortgages 101, 138 supply and demand 31 T-accounts 63 tally sticks 34-5, 41 taxation 35-6, 41, 121, 139, 140 textbook model 18-21 traditional correspondent banking 163-4 Treaty of Maastricht 118-19 Tucker, Paul 21, 106 unit of account 29, 35, 36, 139 unproductive credit creation 24, 111 see also GDP transactions; productive credit creation On Us, with and without settlement risk 167 USA, gold standard 46-7 usury see interest value, measurement of 35 Walras, Leon 31 Ways and Means Advances 117n Wergeld 35 Werner, Richard 44, 81n, 109-10 wholesale banking 13 wholesale money markets 50 window guidance 111-12 WIR credit-clearing circle 145 * ‘Central bank money in the UK economy takes two forms: banknotes and banks’ balances with the Bank of England (reserves).

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown
by Detlev S. Schlichter
Published 21 Sep 2011

This factor is bound to make money creation more broad-based and lasting. On the other hand, lowering reserve ratios increases the risk of bank runs and to the extent that other banks do not join in, the ones that are more advanced in the money creation process risk increasing outflows of reserve money to their more conservative competitors, which increases their business risk substantially. In an entirely free market, in which the monetary asset is a nonreplicable commodity, and in which no central bank and state support infrastructure exists, the scope for money creation through fractional-reserve banking is strictly limited as just explained.

…

The type of deflation that Mr. Bernanke, in the previous quote, promises to avoid with potentially unlimited money creation is of an entirely different nature. It is a crisis phenomenon that occurs in an economy that suffers from excessive levels of debt and inflated asset prices. Such an economy must sooner or later experience a deflationary correction. But excessive debt and asset price bubbles are inconceivable without a previous extensive credit boom, which in turn can only result from excessive money creation. Those who argue that “elastic” money is a blessing because we can counter deflation and depression overlook the overwhelming evidence that it is elastic money that is predominantly responsible for creating the dislocations in the first place that make a deflationary depression a risk.

…

When commenting on the substantial expansion of money-induced credit in the years and decades preceding the recent financial crisis, Professor Congdon stated that “central banking allowed banks to reduce their ratios of cash and capital to their assets, and so lowered the cost of finance to non-banks, but … these benefits could be enjoyed only if the central bank had a lender-of-last-resort function.”38 Among financial market participants, it is also readily accepted that extra credit through bank money creation is universally beneficial to the economy. Yet, to assume that this is always the case clearly contradicts the findings of the British Currency School and, even more so, those of the Austrian School of Economics. Ludwig von Mises and his followers have shown convincingly that the long-term effects of the expansion of credit are very different depending on whether credit is backed by saving or backed merely by money creation. If additional credit is extended via money production the additional investment that is being promoted has ultimately no support from the sphere of real resources.

The Production of Money: How to Break the Power of Banks
by Ann Pettifor
Published 27 Mar 2017

The crisis, argues Ms Mellor, ‘reveals that the sovereign power of money creation has been harnessed in the service of the banking sector rather than the people. The time has come for the people to claim that sovereign right and replace debt by democracy.’5 The NGO Positive Money in its publication Creating a Sovereign Monetary System expands on the proposal: The central bank would be exclusively responsible for creating as much new money as was necessary to support non-inflationary growth. It would manage money creation directly, rather than using interest rates to influence borrowing behaviour and money creation by banks (as is the case at present).

…

The latter argued that, ‘proposals for replacing private debt-created money with government-created money are perfectly feasible and would bring substantial benefits.’2 Although I am about to take issue with their specific proposals, I am also clear that today’s monetary reformers must be congratulated. They are taking aim at reckless and greedy bankers. They are generating public debate about a vital area of public policy. And they are excavating knowledge about money creation and the monetary system, knowledge that has long been buried in the field of ‘agnotology’: the study of ignorance-making, the study of the lost and forgotten.3 But money creation has, as earlier explained, long been understood. John Law, the Scottish genius, understood credit or bank money way back in the 1700s. While he is remembered (and vilified) for both a colourful private life and events that spun out of his control in France in 1720, he had a much better understanding of money than his much-celebrated fellow countryman Adam Smith.

…

But, like Keynes, Schumpeter, Minsky and Galbraith, they struggled to share their understanding of credit and money with their colleagues in the economics profession. Given the extraordinary difficulty that many mainstream and orthodox economists face in recognising that bank loans create deposits, today’s money-creation reformers are once again asking the right questions: Why is there public ignorance about money-creation and the monetary system? Who has manufactured this ignorance? And why do mainstream academic economists have a blind spot for credit, money, banks and debt? Above all, monetary reformers demand: Why has the banking system burdened society with vast amounts of oppressive debt, levels of debt that lead to recurrent ‘financial and real crises’?

Green Economics: An Introduction to Theory, Policy and Practice
by Molly Scott Cato
Published 16 Dec 2008

The countries of Latin America are rapidly repaying their debts to the IMF and World Bank, threatening to bankrupt those organizations which rely on debt repayments for their survival. However, it appears unlikely that these problems can be solved without an international conference to renegotiate the Bretton Woods agreement. Money creation: Financially and ecologically unstable In these first two sections we have seen green economists providing vehement critiques of the consequences of the existing monetary system. It seems appropriate now to delve a little deeper into the theory of money creation. At the time of writing the global financial system was suffering the most serious upheaval since the Wall Street Crash, with well-established banks and financial intermediaries collapsing almost on a daily basis.

…

Conclusion Green economists have shown a strong interest in all aspects of monetary reform, from concern for the way a reserve currency system creates geopolitical instability and global poverty, to a critical stance on the distorting and inefficient nature of national money creation. Many of the most prominent green economists have also been involved as pioneers of their own local currency systems. In conclusion it is worth mentioning the ongoing division within green economics concerning the focus of effort in the arena of monetary reform. While the critique is fairly consensual, proposals for change differ. Mary Mellor, Frances Hutchinson, James Robertson and Richard Douthwaite agree that the target for policy effort should be the system of money creation itself. While they all support complementary currencies in the interim, they see them as just that: complementary currencies which should be replaced by a democratized and stable system of money creation.

…

Intellectual roots: Greeks, socialists and anarchists Spiritual dimensions Key figures and ideas Challenging economics in the academy 17 18 19 21 30 3 Economics and Identity Sustainability values, not monetary value The guiding vision: Balance, not growth Economics and relationship Re-embedding economics in nature Not squaring the circle but closing the loop 35 35 38 41 45 47 PART II VISION FOR THE FUTURE 4 Work Will a green economy mean more work or less? Whose work is it anyway? Deskilling and reskilling Greening production and distribution 55 56 59 61 64 vi GREEN ECONOMICS 5 Money The politics of money Money and global injustice Money creation: Financially and ecologically unstable How money wastes people Local currencies for a localized world Conclusion 71 72 74 77 79 81 85 6 Green Business: From Maximizing Profits to a Vision of Conviviality Limitations of market and technological solutions Issues of scale and ownership Learning to switch the lights off Low-carbon growth as the flourishing of the convivial economy 89 90 92 95 98 PART III POLICIES FOR A GREEN ECONOMY 7 The Policy Context The ecological modernization discourse Policy responses to climate change What’s wrong with GDP?

The Blockchain Alternative: Rethinking Macroeconomic Policy and Economic Theory
by Kariappa Bheemaiah
Published 26 Feb 2017

Thus, most central banks construct monetary policies that allow them to uphold a low rate of inflation, which in turn provides stability to the value of their currency. This in turn provides sustainable growth and economic constancy. As money creation and control of its supply play such pivotal roles in an economy, it is no surprise that the central banks play a major role of control in this domain. However, the process of money creation also occurs in commercial banks. In fact, the majority of money in the modern economy is created by commercial banks by issuing debt. Prior to delving into the mechanics of money production and the issuance of debt, we also need to define the types of money that slosh around our economies, namely, broad money and base money.

…

In light of technological unemployment and the fact that private debt ultimately becomes pubic debt and creates debt overhang effects, what needs to be considered is the role of the state in money creation and if it is a better idea to only let the state control the production of money. If this seems too centralized and dictatorial, then the second option is to think about the creation of multiple forms of money that are created by different actors and all of which are recognized and accepted by citizens within a sovereign nation. Both these money creation methods are not new concepts and have been explored and utilized in the past. The difference this time, however, is the cashless form of today’s money and the repercussions an entirely digital money or monies may have.

…

By looking at the Blockchain as a tool that can leverage the advances being made in other disciplines of finance, now popularly cited as Fintech, it allows us to gain a more holistic viewpoint of the role of this technology. Having gained an understanding of how finance is being fragmented in the context of technology, debt and money creation, the third part of this book attempts to determine what the implications of these paradigmatic shifts mean to societal monetary systems. While the reasons for the changes being seen in the sector of finance are often looked upon as independent fluctuations, they are in fact interrelated, and the precipitate of this interaction begets a need for a new definition of economics.

Money: 5,000 Years of Debt and Power
by Michel Aglietta
Published 23 Oct 2018

The fact that there are multiple units of account in the world economy is characteristic of the fragmentation of money, a fragmentation that mainly (but not exclusively) conforms to the boundaries of political sovereignty. Money Creation If individual producers and consumers are to be able to act on the market, they need to have access to a certain quantity of means of payment (expressed in units of account). Money creation is a generic term that indicates individuals’ modalities of accessing such means of payment before the market opens. Once means of payment are made available, this allows individuals to set in motion an activity of production for the market (such as buying raw materials and spending expected income).24 Sales levels will confirm whether this activity was well founded or otherwise.

…

As we will see in Part II, ancient economies were haunted by shortages of the metals that could be minted. They had no experience of debt transferable to third parties, which is to say of scriptural money. When money is issued with a counterparty in credits or the monetisation of financial securities (Table 1.3), which we call capital-money creation, the finality of payments is much more complex. Firstly, the process of money creation is very different. A purely metallic system creates money on the basis of a pre-existing and prior source of wealth: the metal that has already been extracted from the ground. On the contrary, the creation of scriptural money by issuing debts transferable to third parties is only valid if these debts can ultimately be settled.

…

The 2 percent rate would stimulate agricultural and industrial production, creating revenue that would in turn generate tax receipts, which would help to guarantee the solvency of the debt. Law thus had a very modern approach to economics. He wanted to introduce the logic of capitalism in France, based on providing credit through money creation. Money creation had to be based on expected future wealth, and no longer on the past wealth accumulated in precious metals. Seeking to realise this visionary project, with the Prince Regent’s agreement, Law created a bank that issued convertible notes. This was the first time that a bank in France had issued paper-money defined in livres tournois.

Economists and the Powerful
by Norbert Haring , Norbert H. Ring and Niall Douglas
Published 30 Sep 2012

The main difference, of course, is that the proceeds of money printing by agents of the government go to the government and the proceeds of money creation by banks go to the banks (Fisher 1936/2009). Economists acted as key allies of the bankers. They let the ideas of Fisher and Simons fade into oblivion and spent all their effort devising strategies to keep central banks from printing “too much” money while almost completely ignoring the dangers of money creation by banks for price stability and financial stability. The less money central banks create, the more leeway there is for private banks to create money.

…

They have become so normal and ubiquitous that they seem without alternative, yet these practices brought about the latest financial crisis, and most of the other 124 systemic banking crises that economists of the IMF have counted between 1970 and 2007 (Laeven and Valencia 2008). According to one account, money creation by banks emerged as an aberration of deposit banking starting in the 1640s. Some English merchants deposited their gold with goldsmiths or other safe keepers. In order to economize on transaction costs, it was customary to transfer documents of possession rather than the physical gold. The deposit slips started to function as paper money, entirely backed by gold.

…

Because banks do not have to actually have the money that people keep in accounts with them, they can create any amount of money they want. If they give credit to a customer, they simply add to the amount in the 76 ECONOMISTS AND THE POWERFUL customer’s checking account. By the stroke of a pen, the sum of money available for general purchasing has increased by this amount. Fighting over the spoils of money creation Today, the privilege of private banks to create money is no longer seriously debated. The degree of avoidance of the subject smacks of a taboo. Economists and participants in discussions of economic policies take this state of affairs as a given. Yet a look at the early monetary histories of China and of the US clearly shows that the system has never been without alternative.

99%: Mass Impoverishment and How We Can End It
by Mark Thomas
Published 7 Aug 2019

He claimed that there was no such thing, and implied that money creation was impossible despite the fact that the Bank of England has clearly spelled out how it created £375 billion of new money since the Global Financial Crisis in order to stabilize the economy.12 The former Prime Minister’s claim is literally true – there isn’t a tree – but figuratively it is a lie and a very important one. The fact is very simple: money creation is possible, and we have done it recently and on a large scale. When there is risk of inflation, money creation may not be a good policy. When the economy is chronically weak, money creation may be necessary. As Lord Turner, former chairman of the UK’s Financial Services Authority, says in his book, Between Debt and The Devil: … inadequate nominal demand is one of very few problems to which there is always an answer.

…

Of course, the fact that it is possible to create money out of nothing – and indeed that we have done it in the UK and the US when it was needed to give a boost to the economy – does not imply that it would at all times be the right policy. At some level of money creation, inflation would become a problem, so unlimited creation of money is not a panacea. But it is shocking for the head of the UK government to assert that money creation is impossible and that there is no alternative to a programme of austerity during a deep recession. MYTH #5: GOVERNMENTS SHOULD FOLLOW THE SAME ECONOMIC GUIDELINES AS HOUSEHOLDS AND BUSINESSES What every Swabian housewife knows has famously been used by Angela Merkel as a basis for determining how to run a major international bank or to formulate economic policy in the Eurozone.12 Many others have used households as a convenient and easily communicated analogy for a national economy.

…

Moreover, interest rates are near all-time lows. There is simply no factual basis for suggesting that government borrowing is not an option. Politicians in particular do not like to talk about money creation. As we saw in Chapter 9, the Prime Minister of the United Kingdom went so far as to pour scorn on the idea, deriding it as being like a ‘magic money tree’. He claimed that there was no such thing, and implied that money creation was impossible despite the fact that the Bank of England has clearly spelled out how it created £375 billion of new money since the Global Financial Crisis in order to stabilize the economy.12 The former Prime Minister’s claim is literally true – there isn’t a tree – but figuratively it is a lie and a very important one.

Cryptoeconomics: Fundamental Principles of Bitcoin
by Eric Voskuil , James Chiang and Amir Taaki
Published 28 Feb 2020

But this final result is not the outcome of an absence of movements provoked by changes in the money relation. It is rather the outcome of the joint effect of the coincidence of two processes independent of each other. This is a refutation of the idea of money creation as a “stimulus ” [638] to growth, which is correct. Yet it incorrectly assumes money demand and money creation are independent processes. They are explicitly dependent as expressed in the money relation and the law of supply and demand which it echoes. The effect of unrelated interactions is perfectly reversed in this argument, as it can only mask the money relation.

…

The money expended additionally by such a “dishoarding” brings about a tendency toward higher prices in the same way as that flowing from the gold mines [...]. Conversely, prices drop when the supply of money falls [when] the demand for money increases (e.g., through a tendency toward “hoarding,” the keeping of greater cash balances). All money is always owned by someone. Under the above assumption of no money creation, a greater “cash balance” for one person implies a lesser for another. Increased money hoarding implies only a decreased present demand for goods relative to anticipated future demand. Decreased hoarding implies only increased present demand for goods. It is not as if money has been sewn back into the earth.

…

Banks do not, as too many textbooks still suggest, take deposits of existing money from savers and lend it out to borrowers: they create credit and money ex nihilo – extending a loan to the borrower and simultaneously crediting the borrower’s money account. Lord Turner, Chairman of the UK Financial Services Authority until its abolition in March 2013 Stockholm School of Economics Conference on: “Towards a Sustainable Financial System" 12 September 2013 Adherents describe two competing views on money creation. The traditional understanding is naive in relation to their more practical view, as implied by Lord Turner. The theory states that banking inherently creates not only credit, but also money. Naive View Money is created by miners at a material cost, potentially sold to people , and eventually lent to people.

The Joy of Tax
by Richard Murphy
Published 30 Sep 2015

That’s an argument that we should not only hand over ever-increasing responsibility for money creation to our banks but that we should accept whatever the outcome might be of that process – even if it were disastrous for our economy because there would simply not be enough money to keep it going. Is that what we want? This government has a very clear response. It is a resounding no. As important as our banks are we know they have massive weaknesses. And we know that they do not, because they cannot, act in the national interest. So why on earth would anyone argue, as some do, that they should have sole responsibility for money creation? Not only is that politicians running away from their responsibility to act when it is necessary, this is a recipe for economic disaster.

…

In Chapter 2 I demonstrated that most things people think about tax are wrong; it has to be said most things people think about money are wrong too. But at least, in the case of money, the Bank of England has now acknowledged some of the errors, and has even said that almost all the economics textbooks that describe banking are also wrong as a result.7 There are four further points to make about this process of money creation. The first is that there is, very clearly, profit to be made from creating money out of thin air. That’s especially true when money is something that almost everybody wants, and which they are willing to pay to get their hands on, which is why banks can charge interest even though it cost them nothing to create the loan on which the interest is payable.

…

They instead, all too often, picked the fight, raised an army, borrowed the money to pay the soldiers (because this was in the days before they owned their own banks), and then raised the tax to repay the loans. Central banks were in due course created to get rid of the commercial banks as middle-men in this process, but the fact remains that the spending has always come first, and the tax second. So tax cancels the money-creation process, and does not pay for the spend itself. So, counter-intuitive as it may seem, tax is not about money-raising, as most people think. It does not have that function. It reclaims the money the government has already spent. You may think this is a trivial distinction, that reclaiming money spent is effectively the same thing as raising money, but it isn’t, by some way, and the change of perspective has some profound effects.

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist
by Kate Raworth
Published 22 Mar 2017

Page numbers in italics denote illustrations A Aalborg, Denmark, 290 Abbott, Anthony ‘Tony’, 31 ABCD group, 148 Abramovitz, Moses, 262 absolute decoupling, 260–61 Acemoglu, Daron, 86 advertising, 58, 106–7, 112, 281 Agbodjinou, Sénamé, 231 agriculture, 5, 46, 72–3, 148, 155, 178, 181, 183 Alaska, 9 Alaska Permanent Fund, 194 Alperovitz, Gar, 177 alternative enterprise designs, 190–91 altruism, 100, 104 Amazon, 192, 196, 276 Amazon rainforest, 105–6, 253 American Economic Association, 3 American Enterprise Institute, 67 American Tobacco Corporation, 107 Andes, 54 animal spirits, 110 Anthropocene epoch, 48, 253 anthropocentrism, 115 Apertuso, 230 Apple, 85, 192 Archer Daniels Midland (ADM), 148 Arendt, Hannah, 115–16 Argentina, 55, 274 Aristotle, 32, 272 Arrow, Kenneth, 134 Articles of Association and Memoranda, 233 Arusha, Tanzania, 202 Asia Wage Floor Alliance, 177 Asian financial crisis (1997), 90 Asknature.org, 232 Athens, 57 austerity, 163 Australia, 31, 103, 177, 180, 211, 224–6, 255, 260 Austria, 263, 274 availability bias, 112 AXIOM, 230 Axtell, Robert, 150 Ayres, Robert, 263 B B Corp, 241 Babylon, 13 Baker, Josephine, 157 balancing feedback loops, 138–41, 155, 271 Ballmer, Steve, 231 Bangla Pesa, 185–6, 293 Bangladesh, 10, 226 Bank for International Settlements, 256 Bank of America, 149 Bank of England, 145, 147, 256 banking, see under finance Barnes, Peter, 201 Barroso, José Manuel, 41 Bartlett, Albert Allen ‘Al’, 247 basic income, 177, 194, 199–201 basic personal values, 107–9 Basle, Switzerland, 80 Bauwens, Michel, 197 Beckerman, Wilfred, 258 Beckham, David, 171 Beech-Nut Packing Company, 107 behavioural economics, 11, 111–14 behavioural psychology, 103, 128 Beinhocker, Eric, 158 Belgium, 236, 252 Bentham, Jeremy, 98 Benyus, Janine, 116, 218, 223–4, 227, 232, 237, 241 Berger, John, 12, 281 Berlin Wall, 141 Bermuda, 277 Bernanke, Ben, 146 Bernays, Edward, 107, 112, 281–3 Bhopal gas disaster (1984), 9 Bible, 19, 114, 151 Big Bang (1986), 87 billionaires, 171, 200, 289 biodiversity, 10, 46, 48–9, 52, 85, 115, 155, 208, 210, 242, 299 as common pool resource, 201 and land conversion, 49 and inequality, 172 and reforesting, 50 biomass, 73, 118, 210, 212, 221 biomimicry, 116, 218, 227, 229 bioplastic, 224, 293 Birmingham, West Midlands, 10 Black, Fischer, 100–101 Blair, Anthony ‘Tony’, 171 Blockchain, 187, 192 blood donation, 104, 118 Body Shop, The, 232–4 Bogotá, Colombia, 119 Bolivia, 54 Boston, Massachusetts, 3 Bowen, Alex, 261 Bowles, Sam, 104 Box, George, 22 Boyce, James, 209 Brasselberg, Jacob, 187 Brazil, 124, 226, 281, 290 bread riots, 89 Brisbane, Australia, 31 Brown, Gordon, 146 Brynjolfsson, Erik, 193, 194, 258 Buddhism, 54 buen vivir, 54 Bullitt Center, Seattle, 217 Bunge, 148 Burkina Faso, 89 Burmark, Lynell, 13 business, 36, 43, 68, 88–9 automation, 191–5, 237, 258, 278 boom and bust, 246 and circular economy, 212, 215–19, 220, 224, 227–30, 232–4, 292 and complementary currencies, 184–5, 292 and core economy, 80 and creative destruction, 142 and feedback loops, 148 and finance, 183, 184 and green growth, 261, 265, 269 and households, 63, 68 living metrics, 241 and market, 68, 88 micro-businesses, 9 and neoliberalism, 67, 87 ownership, 190–91 and political funding, 91–2, 171–2 and taxation, 23, 276–7 workers’ rights, 88, 91, 269 butterfly economy, 220–42 C C–ROADS (Climate Rapid Overview and Decision Support), 153 C40 network, 280 calculating man, 98 California, United States, 213, 224, 293 Cambodia, 254 Cameron, David, 41 Canada, 196, 255, 260, 281, 282 cancer, 124, 159, 196 Capital Institute, 236 carbon emissions, 49–50, 59, 75 and decoupling, 260, 266 and forests, 50, 52 and inequality, 58 reduction of, 184, 201, 213, 216–18, 223–7, 239–41, 260, 266 stock–flow dynamics, 152–4 taxation, 201, 213 Cargill, 148 Carney, Mark, 256 Caterpillar, 228 Catholic Church, 15, 19 Cato Institute, 67 Celts, 54 central banks, 6, 87, 145, 146, 147, 183, 184, 256 Chang, Ha-Joon, 82, 86, 90 Chaplin, Charlie, 157 Chiapas, Mexico, 121–2 Chicago Board Options Exchange (CBOE), 100–101 Chicago School, 34, 99 Chile, 7, 42 China, 1, 7, 48, 154, 289–90 automation, 193 billionaires, 200, 289 greenhouse gas emissions, 153 inequality, 164 Lake Erhai doughnut analysis, 56 open-source design, 196 poverty reduction, 151, 198 renewable energy, 239 tiered pricing, 213 Chinese Development Bank, 239 chrematistics, 32, 273 Christianity, 15, 19, 114, 151 cigarettes, 107, 124 circular economy, 220–42, 257 Circular Flow diagram, 19–20, 28, 62–7, 64, 70, 78, 87, 91, 92, 93, 262 Citigroup, 149 Citizen Reaction Study, 102 civil rights movement, 77 Cleveland, Ohio, 190 climate change, 1, 3, 5, 29, 41, 45–53, 63, 74, 75–6, 91, 141, 144, 201 circular economy, 239, 241–2 dynamics of, 152–5 and G20, 31 and GDP growth, 255, 256, 260, 280 and heuristics, 114 and human rights, 10 and values, 126 climate positive cities, 239 closed systems, 74 coffee, 221 cognitive bias, 112–14 Colander, David, 137 Colombia, 119 common-pool resources, 82–3, 181, 201–2 commons, 69, 82–4, 287 collaborative, 78, 83, 191, 195, 196, 264, 292 cultural, 83 digital, 82, 83, 192, 197, 281 and distribution, 164, 180, 181–2, 205, 267 Embedded Economy, 71, 73, 77–8, 82–4, 85, 92 knowledge, 197, 201–2, 204, 229, 231, 292 commons and money creation, see complementary currencies natural, 82, 83, 180, 181–2, 201, 265 and regeneration, 229, 242, 267, 292 and state, 85, 93, 197, 237 and systems, 160 tragedy of, 28, 62, 69, 82, 181 triumph of, 83 and values, 106, 108 Commons Trusts, 201 complementary currencies, 158, 182–8, 236, 292 complex systems, 28, 129–62 complexity science, 136–7 Consumer Reaction Study, 102 consumerism, 58, 102, 121, 280–84 cooking, 45, 80, 186 Coote, Anna, 278 Copenhagen, Denmark, 124 Copernicus, Nicolaus, 14–15 copyright, 195, 197, 204 core economy, 79–80 Corporate To Do List, 215–19 Costa Rica, 172 Council of Economic Advisers, US, 6, 37 Cox, Jo, 117 cradle to cradle, 224 creative destruction, 142 Cree, 282 Crompton, Tom, 125–6 cross-border flows, 89–90 crowdsourcing, 204 cuckoos, 32, 35, 36, 38, 40, 54, 60, 159, 244, 256, 271 currencies, 182–8, 236, 274, 292 D da Vinci, Leonardo, 13, 94–5 Dallas, Texas, 120 Daly, Herman, 74, 143, 271 Danish Nudging Network, 124 Darwin, Charles, 14 Debreu, Gerard, 134 debt, 37, 146–7, 172–3, 182–5, 247, 255, 269 decoupling, 193, 210, 258–62, 273 defeat device software, 216 deforestation, 49–50, 74, 208, 210 degenerative linear economy, 211–19, 222–3, 237 degrowth, 244 DeMartino, George, 161 democracy, 77, 171–2, 258 demurrage, 274 Denmark, 180, 275, 290 deregulation, 82, 87, 269 derivatives, 100–101, 149 Devas, Charles Stanton, 97 Dey, Suchitra, 178 Diamond, Jared, 154 diarrhoea, 5 differential calculus, 131, 132 digital revolution, 191–2, 264 diversify–select–amplify, 158 double spiral, 54 Doughnut model, 10–11, 11, 23–5, 44, 51 and aspiration, 58–9, 280–84 big picture, 28, 42, 61–93 distribution, 29, 52, 57, 58, 76, 93, 158, 163–205 ecological ceiling, 10, 11, 44, 45, 46, 49, 51, 218, 254, 295, 298 goal, 25–8, 31–60 and governance, 57, 59 growth agnosticism, 29–30, 243–85 human nature, 28–9, 94–128 and population, 57–8 regeneration, 29, 158, 206–42 social foundation, 10, 11, 44, 45, 49, 51, 58, 77, 174, 200, 254, 295–6 systems, 28, 129–62 and technology, 57, 59 Douglas, Margaret, 78–9 Dreyfus, Louis, 148 ‘Dumb and Dumber in Macroeconomics’ (Solow), 135 Durban, South Africa, 214 E Earning by Learning, 120 Earth-system science, 44–53, 115, 216, 288, 298 Easter Island, 154 Easterlin, Richard, 265–6 eBay, 105, 192 eco-literacy, 115 ecological ceiling, 10, 11, 44, 45, 46, 49, 51, 218, 254, 295, 298 Ecological Performance Standards, 241 Econ 101 course, 8, 77 Economics (Lewis), 114 Economics (Samuelson), 19–20, 63–7, 70, 74, 78, 86, 91, 92, 93, 262 Economy for the Common Good, 241 ecosystem services, 7, 116, 269 Ecuador, 54 education, 9, 43, 45, 50–52, 85, 169–70, 176, 200, 249, 279 economic, 8, 11, 18, 22, 24, 36, 287–93 environmental, 115, 239–40 girls’, 57, 124, 178, 198 online, 83, 197, 264, 290 pricing, 118–19 efficient market hypothesis, 28, 62, 68, 87 Egypt, 48, 89 Eisenstein, Charles, 116 electricity, 9, 45, 236, 240 and Bangla Pesa, 186 cars, 231 Ethereum, 187–8 and MONIAC, 75, 262 pricing, 118, 213 see also renewable energy Elizabeth II, Queen of the United Kingdom, 145 Ellen MacArthur Foundation, 220 Embedded Economy, 71–93, 263 business, 88–9 commons, 82–4 Earth, 72–6 economy, 77–8 finance, 86–8 household, 78–81 market, 81–2 power, 91–92 society, 76–7 state, 84–6 trade, 89–90 employment, 36, 37, 51, 142, 176 automation, 191–5, 237, 258, 278 labour ownership, 188–91 workers’ rights, 88, 90, 269 Empty World, 74 Engels, Friedrich, 88 environment and circular economy, 220–42, 257 conservation, 121–2 and degenerative linear economy, 211–19, 222–3 degradation, 5, 9, 10, 29, 44–53, 74, 154, 172, 196, 206–42 education on, 115, 239–40 externalities, 152 fair share, 216–17 and finance, 234–7 generosity, 218–19, 223–7 green growth, 41, 210, 243–85 nudging, 123–5 taxation and quotas, 213–14, 215 zero impact, 217–18, 238, 241 Environmental Dashboard, 240–41 environmental economics, 7, 11, 114–16 Environmental Kuznets Curve, 207–11, 241 environmental space, 54 Epstein, Joshua, 150 equilibrium theory, 134–62 Ethereum, 187–8 ethics, 160–62 Ethiopia, 9, 226, 254 Etsy, 105 Euclid, 13, 15 European Central Bank, 145, 275 European Commission, 41 European Union (EU), 92, 153, 210, 222, 255, 258 Evergreen Cooperatives, 190 Evergreen Direct Investing (EDI), 273 exogenous shocks, 141 exponential growth, 39, 246–85 externalities, 143, 152, 213 Exxon Valdez oil spill (1989), 9 F Facebook, 192 fair share, 216–17 Fama, Eugene, 68, 87 fascism, 234, 277 Federal Reserve, US, 87, 145, 146, 271, 282 feedback loops, 138–41, 143, 148, 155, 250, 271 feminist economics, 11, 78–81, 160 Ferguson, Thomas, 91–2 finance animal spirits, 110 bank runs, 139 Black–Scholes model, 100–101 boom and bust, 28–9, 110, 144–7 and Circular Flow, 63–4, 87 and complex systems, 134, 138, 139, 140, 141, 145–7 cross-border flows, 89 deregulation, 87 derivatives, 100–101, 149 and distribution, 169, 170, 173, 182–4, 198–9, 201 and efficient market hypothesis, 63, 68 and Embedded Economy, 71, 86–8 and financial-instability hypothesis, 87, 146 and GDP growth, 38 and media, 7–8 mobile banking, 199–200 and money creation, 87, 182–5 and regeneration, 227, 229, 234–7 in service to life, 159, 234–7 stakeholder finance, 190 and sustainability, 216, 235–6, 239 financial crisis (2008), 1–4, 5, 40, 63, 86, 141, 144, 278, 290 and efficient market hypothesis, 87 and equilibrium theory, 134, 145 and financial-instability hypothesis, 87 and inequality, 90, 170, 172, 175 and money creation, 182 and worker’s rights, 278 financial flows, 89 Financial Times, 183, 266, 289 financial-instability hypothesis, 87, 146 First Green Bank, 236 First World War (1914–18), 166, 170 Fisher, Irving, 183 fluid values, 102, 106–9 food, 3, 43, 45, 50, 54, 58, 59, 89, 198 food banks, 165 food price crisis (2007–8), 89, 90, 180 Ford, 277–8 foreign direct investment, 89 forest conservation, 121–2 fossil fuels, 59, 73, 75, 92, 212, 260, 263 Foundations of Economic Analysis (Samuelson), 17–18 Foxconn, 193 framing, 22–3 France, 43, 165, 196, 238, 254, 256, 281, 290 Frank, Robert, 100 free market, 33, 37, 67, 68, 70, 81–2, 86, 90 free open-source hardware (FOSH), 196–7 free open-source software (FOSS), 196 free trade, 70, 90 Freeman, Ralph, 18–19 freshwater cycle, 48–9 Freud, Sigmund, 107, 281 Friedman, Benjamin, 258 Friedman, Milton, 34, 62, 66–9, 84–5, 88, 99, 183, 232 Friends of the Earth, 54 Full World, 75 Fuller, Buckminster, 4 Fullerton, John, 234–6, 273 G G20, 31, 56, 276, 279–80 G77, 55 Gal, Orit, 141 Gandhi, Mohandas, 42, 293 Gangnam Style, 145 Gardens of Democracy, The (Liu & Hanauer), 158 gender equality, 45, 51–2, 57, 78–9, 85, 88, 118–19, 124, 171, 198 generosity, 218–19, 223–9 geometry, 13, 15 George, Henry, 149, 179 Georgescu-Roegen, Nicholas, 252 geothermal energy, 221 Gerhardt, Sue, 283 Germany, 2, 41, 100, 118, 165, 189, 211, 213, 254, 256, 260, 274 Gessel, Silvio, 274 Ghent, Belgium, 236 Gift Relationship, The (Titmuss), 118–19 Gigerenzer, Gerd, 112–14 Gintis, Herb, 104 GiveDirectly, 200 Glass–Steagall Act (1933), 87 Glennon, Roger, 214 Global Alliance for Tax Justice, 277 global material footprints, 210–11 Global Village Construction Set, 196 globalisation, 89 Goerner, Sally, 175–6 Goffmann, Erving, 22 Going for Growth, 255 golden rule, 91 Goldman Sachs, 149, 170 Gómez-Baggethun, Erik, 122 Goodall, Chris, 211 Goodwin, Neva, 79 Goody, Jade, 124 Google, 192 Gore, Albert ‘Al’, 172 Gorgons, 244, 256, 257, 266 graffiti, 15, 25, 287 Great Acceleration, 46, 253–4 Great Depression (1929–39), 37, 70, 170, 173, 183, 275, 277, 278 Great Moderation, 146 Greece, Ancient, 4, 13, 32, 48, 54, 56–7, 160, 244 green growth, 41, 210, 243–85 Greenham, Tony, 185 greenhouse gas emissions, 31, 46, 50, 75–6, 141, 152–4 and decoupling, 260, 266 and Environmental Kuznets Curve, 208, 210 and forests, 50, 52 and G20, 31 and inequality, 58 reduction of, 184, 201–2, 213, 216–18, 223–7, 239–41, 256, 259–60, 266, 298 stock–flow dynamics, 152–4 and taxation, 201, 213 Greenland, 141, 154 Greenpeace, 9 Greenspan, Alan, 87 Greenwich, London, 290 Grenoble, France, 281 Griffiths, Brian, 170 gross domestic product (GDP), 25, 31–2, 35–43, 57, 60, 84, 164 as cuckoo, 32, 35, 36, 38, 40, 54, 60, 159, 244, 256, 271 and Environmental Kuznets Curve, 207–11 and exponential growth, 39, 53, 246–85 and growth agnosticism, 29–30, 240, 243–85 and inequality, 173 and Kuznets Curve, 167, 173, 188–9 gross national product (GNP), 36–40 Gross World Product, 248 Grossman, Gene, 207–8, 210 ‘grow now, clean up later’, 207 Guatemala, 196 H Haifa, Israel, 120 Haldane, Andrew, 146 Han Dynasty, 154 Hanauer, Nick, 158 Hansen, Pelle, 124 Happy Planet Index, 280 Hardin, Garrett, 69, 83, 181 Harvard University, 2, 271, 290 von Hayek, Friedrich, 7–8, 62, 66, 67, 143, 156, 158 healthcare, 43, 50, 57, 85, 123, 125, 170, 176, 200, 269, 279 Heilbroner, Robert, 53 Henry VIII, King of England and Ireland, 180 Hepburn, Cameron, 261 Herbert Simon, 111 heuristics, 113–14, 118, 123 high-income countries growth, 30, 244–5, 254–72, 282 inequality, 165, 168, 169, 171 labour, 177, 188–9, 278 overseas development assistance (ODA), 198–9 resource intensive lifestyles, 46, 210–11 trade, 90 Hippocrates, 160 History of Economic Analysis (Schumpeter), 21 HIV/AIDS, 123 Holocene epoch, 46–8, 75, 115, 253 Homo economicus, 94–103, 109, 127–8 Homo sapiens, 38, 104, 130 Hong Kong, 180 household, 78 housing, 45, 59, 176, 182–3, 269 Howe, Geoffrey, 67 Hudson, Michael, 183 Human Development Index, 9, 279 human nature, 28 human rights, 10, 25, 45, 49, 50, 95, 214, 233 humanistic economics, 42 hydropower, 118, 260, 263 I Illinois, United States, 179–80 Imago Mundi, 13 immigration, 82, 199, 236, 266 In Defense of Economic Growth (Beckerman), 258 Inclusive Wealth Index, 280 income, 51, 79–80, 82, 88, 176–8, 188–91, 194, 199–201 India, 2, 9, 10, 42, 124, 164, 178, 196, 206–7, 242, 290 Indonesia, 90, 105–6, 164, 168, 200 Indus Valley civilisation, 48 inequality, 1, 5, 25, 41, 63, 81, 88, 91, 148–52, 209 and consumerism, 111 and democracy, 171 and digital revolution, 191–5 and distribution, 163–205 and environmental degradation, 172 and GDP growth, 173 and greenhouse gas emissions, 58 and intellectual property, 195–8 and Kuznets Curve, 29, 166–70, 173–4 and labour ownership, 188–91 and land ownership, 178–82 and money creation, 182–8 and social welfare, 171 Success to the Successful, 148, 149, 151, 166 inflation, 36, 248, 256, 275 insect pollination services, 7 Institute of Economic Affairs, 67 institutional economics, 11 intellectual property rights, 195–8, 204 interest, 36, 177, 182, 184, 275–6 Intergovernmental Panel on Climate Change, 25 International Monetary Fund (IMF), 170, 172, 173, 183, 255, 258, 271 Internet, 83–4, 89, 105, 192, 202, 264 Ireland, 277 Iroquois Onondaga Nation, 116 Israel, 100, 103, 120 Italy, 165, 196, 254 J Jackson, Tim, 58 Jakubowski, Marcin, 196 Jalisco, Mexico, 217 Japan, 168, 180, 211, 222, 254, 256, 263, 275 Jevons, William Stanley, 16, 97–8, 131, 132, 137, 142 John Lewis Partnership, 190 Johnson, Lyndon Baines, 37 Johnson, Mark, 38 Johnson, Todd, 191 JPMorgan Chase, 149, 234 K Kahneman, Daniel, 111 Kamkwamba, William, 202, 204 Kasser, Tim, 125–6 Keen, Steve, 146, 147 Kelly, Marjorie, 190–91, 233 Kennedy, John Fitzgerald, 37, 250 Kennedy, Paul, 279 Kenya, 118, 123, 180, 185–6, 199–200, 226, 292 Keynes, John Maynard, 7–8, 22, 66, 69, 134, 184, 251, 277–8, 284, 288 Kick It Over movement, 3, 289 Kingston, London, 290 Knight, Frank, 66, 99 knowledge commons, 202–4, 229, 292 Kokstad, South Africa, 56 Kondratieff waves, 246 Korzybski, Alfred, 22 Krueger, Alan, 207–8, 210 Kuhn, Thomas, 22 Kumhof, Michael, 172 Kuwait, 255 Kuznets, Simon, 29, 36, 39–40, 166–70, 173, 174, 175, 204, 207 KwaZulu Natal, South Africa, 56 L labour ownership, 188–91 Lake Erhai, Yunnan, 56 Lakoff, George, 23, 38, 276 Lamelara, Indonesia, 105–6 land conversion, 49, 52, 299 land ownership, 178–82 land-value tax, 73, 149, 180 Landesa, 178 Landlord’s Game, The, 149 law of demand, 16 laws of motion, 13, 16–17, 34, 129, 131 Lehman Brothers, 141 Leopold, Aldo, 115 Lesotho, 118, 199 leverage points, 159 Lewis, Fay, 178 Lewis, Justin, 102 Lewis, William Arthur, 114, 167 Lietaer, Bernard, 175, 236 Limits to Growth, 40, 154, 258 Linux, 231 Liu, Eric, 158 living metrics, 240–42 living purpose, 233–4 Lomé, Togo, 231 London School of Economics (LSE), 2, 34, 65, 290 London Underground, 12 loss aversion, 112 low-income countries, 90, 164–5, 168, 173, 180, 199, 201, 209, 226, 254, 259 Lucas, Robert, 171 Lula da Silva, Luiz Inácio, 124 Luxembourg, 277 Lyle, John Tillman, 214 Lyons, Oren, 116 M M–PESA, 199–200 MacDonald, Tim, 273 Machiguenga, 105–6 MacKenzie, Donald, 101 macroeconomics, 36, 62–6, 76, 80, 134–5, 145, 147, 150, 244, 280 Magie, Elizabeth, 149, 153 Malala effect, 124 malaria, 5 Malawi, 118, 202, 204 Malaysia, 168 Mali, Taylor, 243 Malthus, Thomas, 252 Mamsera Rural Cooperative, 190 Manhattan, New York, 9, 41 Mani, Muthukumara, 206 Manitoba, 282 Mankiw, Gregory, 2, 34 Mannheim, Karl, 22 Maoris, 54 market, 81–2 and business, 88 circular flow, 64 and commons, 83, 93, 181, 200–201 efficiency of, 28, 62, 68, 87, 148, 181 and equilibrium theory, 131–5, 137, 143–7, 155, 156 free market, 33, 37, 67–70, 90, 208 and households, 63, 69, 78, 79 and maxi-max rule, 161 and pricing, 117–23, 131, 160 and rational economic man, 96, 100–101, 103, 104 and reciprocity, 105, 106 reflexivity of, 144–7 and society, 69–70 and state, 84–6, 200, 281 Marshall, Alfred, 17, 98, 133, 165, 253, 282 Marx, Karl, 88, 142, 165, 272 Massachusetts Institute of Technology (MIT), 17–20, 152–5 massive open online courses (MOOCs), 290 Matthew Effect, 151 Max-Neef, Manfred, 42 maxi-max rule, 161 maximum wage, 177 Maya civilisation, 48, 154 Mazzucato, Mariana, 85, 195, 238 McAfee, Andrew, 194, 258 McDonough, William, 217 Meadows, Donella, 40, 141, 159, 271, 292 Medusa, 244, 257, 266 Merkel, Angela, 41 Messerli, Elspeth, 187 Metaphors We Live By (Lakoff & Johnson), 38 Mexico, 121–2, 217 Michaels, Flora S., 6 micro-businesses, 9, 173, 178 microeconomics, 132–4 microgrids, 187–8 Micronesia, 153 Microsoft, 231 middle class, 6, 46, 58 middle-income countries, 90, 164, 168, 173, 180, 226, 254 migration, 82, 89–90, 166, 195, 199, 236, 266, 286 Milanovic, Branko, 171 Mill, John Stuart, 33–4, 73, 97, 250, 251, 283, 284, 288 Millo, Yuval, 101 minimum wage, 82, 88, 176 Minsky, Hyman, 87, 146 Mises, Ludwig von, 66 mission zero, 217 mobile banking, 199–200 mobile phones, 222 Model T revolution, 277–8 Moldova, 199 Mombasa, Kenya, 185–6 Mona Lisa (da Vinci), 94 money creation, 87, 164, 177, 182–8, 205 MONIAC (Monetary National Income Analogue Computer), 64–5, 75, 142, 262 Monoculture (Michaels), 6 Monopoly, 149 Mont Pelerin Society, 67, 93 Moral Consequences of Economic Growth, The (Friedman), 258 moral vacancy, 41 Morgan, Mary, 99 Morogoro, Tanzania, 121 Moyo, Dambisa, 258 Muirhead, Sam, 230, 231 MultiCapital Scorecard, 241 Murphy, David, 264 Murphy, Richard, 185 musical tastes, 110 Myriad Genetics, 196 N national basic income, 177 Native Americans, 115, 116, 282 natural capital, 7, 116, 269 Natural Economic Order, The (Gessel), 274 Nedbank, 216 negative externalities, 213 negative interest rates, 275–6 neoclassical economics, 134, 135 neoliberalism, 7, 62–3, 67–70, 81, 83, 84, 88, 93, 143, 170, 176 Nepal, 181, 199 Nestlé, 217 Netherlands, 211, 235, 224, 226, 238, 277 networks, 110–11, 117, 118, 123, 124–6, 174–6 neuroscience, 12–13 New Deal, 37 New Economics Foundation, 278, 283 New Year’s Day, 124 New York, United States, 9, 41, 55 Newlight Technologies, 224, 226, 293 Newton, Isaac, 13, 15–17, 32–3, 95, 97, 129, 131, 135–7, 142, 145, 162 Nicaragua, 196 Nigeria, 164 nitrogen, 49, 52, 212–13, 216, 218, 221, 226, 298 ‘no pain, no gain’, 163, 167, 173, 204, 209 Nobel Prize, 6–7, 43, 83, 101, 167 Norway, 281 nudging, 112, 113, 114, 123–6 O Obama, Barack, 41, 92 Oberlin, Ohio, 239, 240–41 Occupy movement, 40, 91 ocean acidification, 45, 46, 52, 155, 242, 298 Ohio, United States, 190, 239 Okun, Arthur, 37 onwards and upwards, 53 Open Building Institute, 196 Open Source Circular Economy (OSCE), 229–32 open systems, 74 open-source design, 158, 196–8, 265 open-source licensing, 204 Organisation for Economic Co-operation and Development (OECD), 38, 210, 255–6, 258 Origin of Species, The (Darwin), 14 Ormerod, Paul, 110, 111 Orr, David, 239 Ostrom, Elinor, 83, 84, 158, 160, 181–2 Ostry, Jonathan, 173 OSVehicle, 231 overseas development assistance (ODA), 198–200 ownership of wealth, 177–82 Oxfam, 9, 44 Oxford University, 1, 36 ozone layer, 9, 50, 115 P Pachamama, 54, 55 Pakistan, 124 Pareto, Vilfredo, 165–6, 175 Paris, France, 290 Park 20|20, Netherlands, 224, 226 Parker Brothers, 149 Patagonia, 56 patents, 195–6, 197, 204 patient capital, 235 Paypal, 192 Pearce, Joshua, 197, 203–4 peer-to-peer networks, 187, 192, 198, 203, 292 People’s QE, 184–5 Perseus, 244 Persia, 13 Peru, 2, 105–6 Phillips, Adam, 283 Phillips, William ‘Bill’, 64–6, 75, 142, 262 phosphorus, 49, 52, 212–13, 218, 298 Physiocrats, 73 Pickett, Kate, 171 pictures, 12–25 Piketty, Thomas, 169 Playfair, William, 16 Poincaré, Henri, 109, 127–8 Polanyi, Karl, 82, 272 political economy, 33–4, 42 political funding, 91–2, 171–2 political voice, 43, 45, 51–2, 77, 117 pollution, 29, 45, 52, 85, 143, 155, 206–17, 226, 238, 242, 254, 298 population, 5, 46, 57, 155, 199, 250, 252, 254 Portugal, 211 post-growth society, 250 poverty, 5, 9, 37, 41, 50, 88, 118, 148, 151 emotional, 283 and inequality, 164–5, 168–9, 178 and overseas development assistance (ODA), 198–200 and taxation, 277 power, 91–92 pre-analytic vision, 21–2 prescription medicines, 123 price-takers, 132 prices, 81, 118–23, 131, 160 Principles of Economics (Mankiw), 34 Principles of Economics (Marshall), 17, 98 Principles of Political Economy (Mill), 288 ProComposto, 226 Propaganda (Bernays), 107 public relations, 107, 281 public spending v. investment, 276 public–private patents, 195 Putnam, Robert, 76–7 Q quantitative easing (QE), 184–5 Quebec, 281 Quesnay, François, 16, 73 R Rabot, Ghent, 236 Rancière, Romain, 172 rating and review systems, 105 rational economic man, 94–103, 109, 111, 112, 126, 282 Reagan, Ronald, 67 reciprocity, 103–6, 117, 118, 123 reflexivity of markets, 144 reinforcing feedback loops, 138–41, 148, 250, 271 relative decoupling, 259 renewable energy biomass energy, 118, 221 and circular economy, 221, 224, 226, 235, 238–9, 274 and commons, 83, 85, 185, 187–8, 192, 203, 264 geothermal energy, 221 and green growth, 257, 260, 263, 264, 267 hydropower, 118, 260, 263 pricing, 118 solar energy, see solar energy wave energy, 221 wind energy, 75, 118, 196, 202–3, 221, 233, 239, 260, 263 rentier sector, 180, 183, 184 reregulation, 82, 87, 269 resource flows, 175 resource-intensive lifestyles, 46 Rethinking Economics, 289 Reynebeau, Guy, 237 Ricardo, David, 67, 68, 73, 89, 250 Richardson, Katherine, 53 Rifkin, Jeremy, 83, 264–5 Rise and Fall of the Great Powers, The (Kennedy), 279 risk, 112, 113–14 Robbins, Lionel, 34 Robinson, James, 86 Robinson, Joan, 142 robots, 191–5, 237, 258, 278 Rockefeller Foundation, 135 Rockford, Illinois, 179–80 Rockström, Johan, 48, 55 Roddick, Anita, 232–4 Rogoff, Kenneth, 271, 280 Roman Catholic Church, 15, 19 Rombo, Tanzania, 190 Rome, Ancient, 13, 48, 154 Romney, Mitt, 92 Roosevelt, Franklin Delano, 37 rooted membership, 190 Rostow, Walt, 248–50, 254, 257, 267–70, 284 Ruddick, Will, 185 rule of thumb, 113–14 Ruskin, John, 42, 223 Russia, 200 rust belt, 90, 239 S S curve, 251–6 Sainsbury’s, 56 Samuelson, Paul, 17–21, 24–5, 38, 62–7, 70, 74, 84, 91, 92, 93, 262, 290–91 Sandel, Michael, 41, 120–21 Sanergy, 226 sanitation, 5, 51, 59 Santa Fe, California, 213 Santinagar, West Bengal, 178 São Paolo, Brazil, 281 Sarkozy, Nicolas, 43 Saumweder, Philipp, 226 Scharmer, Otto, 115 Scholes, Myron, 100–101 Schumacher, Ernst Friedrich, 42, 142 Schumpeter, Joseph, 21 Schwartz, Shalom, 107–9 Schwarzenegger, Arnold, 163, 167, 204 ‘Science and Complexity’ (Weaver), 136 Scotland, 57 Seaman, David, 187 Seattle, Washington, 217 second machine age, 258 Second World War (1939–45), 18, 37, 70, 170 secular stagnation, 256 self-interest, 28, 68, 96–7, 99–100, 102–3 Selfish Society, The (Gerhardt), 283 Sen, Amartya, 43 Shakespeare, William, 61–3, 67, 93 shale gas, 264, 269 Shang Dynasty, 48 shareholders, 82, 88, 189, 191, 227, 234, 273, 292 sharing economy, 264 Sheraton Hotel, Boston, 3 Siegen, Germany, 290 Silicon Valley, 231 Simon, Julian, 70 Sinclair, Upton, 255 Sismondi, Jean, 42 slavery, 33, 77, 161 Slovenia, 177 Small Is Beautiful (Schumacher), 42 smart phones, 85 Smith, Adam, 33, 57, 67, 68, 73, 78–9, 81, 96–7, 103–4, 128, 133, 160, 181, 250 social capital, 76–7, 122, 125, 172 social contract, 120, 125 social foundation, 10, 11, 44, 45, 49, 51, 58, 77, 174, 200, 254, 295–6 social media, 83, 281 Social Progress Index, 280 social pyramid, 166 society, 76–7 solar energy, 59, 75, 111, 118, 187–8, 190 circular economy, 221, 222, 223, 224, 226–7, 239 commons, 203 zero-energy buildings, 217 zero-marginal-cost revolution, 84 Solow, Robert, 135, 150, 262–3 Soros, George, 144 South Africa, 56, 177, 214, 216 South Korea, 90, 168 South Sea Bubble (1720), 145 Soviet Union (1922–91), 37, 67, 161, 279 Spain, 211, 238, 256 Spirit Level, The (Wilkinson & Pickett), 171 Sraffa, Piero, 148 St Gallen, Switzerland, 186 Stages of Economic Growth, The (Rostow), 248–50, 254 stakeholder finance, 190 Standish, Russell, 147 state, 28, 33, 69–70, 78, 82, 160, 176, 180, 182–4, 188 and commons, 85, 93, 197, 237 and market, 84–6, 200, 281 partner state, 197, 237–9 and robots, 195 stationary state, 250 Steffen, Will, 46, 48 Sterman, John, 66, 143, 152–4 Steuart, James, 33 Stiglitz, Joseph, 43, 111, 196 stocks and flows, 138–41, 143, 144, 152 sub-prime mortgages, 141 Success to the Successful, 148, 149, 151, 166 Sugarscape, 150–51 Summers, Larry, 256 Sumner, Andy, 165 Sundrop Farms, 224–6 Sunstein, Cass, 112 supply and demand, 28, 132–6, 143, 253 supply chains, 10 Sweden, 6, 255, 275, 281 swishing, 264 Switzerland, 42, 66, 80, 131, 186–7, 275 T Tableau économique (Quesnay), 16 tabula rasa, 20, 25, 63, 291 takarangi, 54 Tanzania, 121, 190, 202 tar sands, 264, 269 taxation, 78, 111, 165, 170, 176, 177, 237–8, 276–9 annual wealth tax, 200 environment, 213–14, 215 global carbon tax, 201 global financial transactions tax, 201, 235 land-value tax, 73, 149, 180 non-renewable resources, 193, 237–8, 278–9 People’s QE, 185 tax relief v. tax justice, 23, 276–7 TED (Technology, Entertainment, Design), 202, 258 Tempest, The (Shakespeare), 61, 63, 93 Texas, United States, 120 Thailand, 90, 200 Thaler, Richard, 112 Thatcher, Margaret, 67, 69, 76 Theory of Moral Sentiments (Smith), 96 Thompson, Edward Palmer, 180 3D printing, 83–4, 192, 198, 231, 264 thriving-in-balance, 54–7, 62 tiered pricing, 213–14 Tigray, Ethiopia, 226 time banking, 186 Titmuss, Richard, 118–19 Toffler, Alvin, 12, 80 Togo, 231, 292 Torekes, 236–7 Torras, Mariano, 209 Torvalds, Linus, 231 trade, 62, 68–9, 70, 89–90 trade unions, 82, 176, 189 trademarks, 195, 204 Transatlantic Trade and Investment Partnership (TTIP), 92 transport, 59 trickle-down economics, 111, 170 Triodos, 235 Turkey, 200 Tversky, Amos, 111 Twain, Mark, 178–9 U Uganda, 118, 125 Ulanowicz, Robert, 175 Ultimatum Game, 105, 117 unemployment, 36, 37, 276, 277–9 United Kingdom Big Bang (1986), 87 blood donation, 118 carbon dioxide emissions, 260 free trade, 90 global material footprints, 211 money creation, 182 MONIAC (Monetary National Income Analogue Computer), 64–5, 75, 142, 262 New Economics Foundation, 278, 283 poverty, 165, 166 prescription medicines, 123 wages, 188 United Nations, 55, 198, 204, 255, 258, 279 G77 bloc, 55 Human Development Index, 9, 279 Sustainable Development Goals, 24, 45 United States American Economic Association meeting (2015), 3 blood donation, 118 carbon dioxide emissions, 260 Congress, 36 Council of Economic Advisers, 6, 37 Earning by Learning, 120 Econ 101 course, 8, 77 Exxon Valdez oil spill (1989), 9 Federal Reserve, 87, 145, 146, 271, 282 free trade, 90 Glass–Steagall Act (1933), 87 greenhouse gas emissions, 153 global material footprint, 211 gross national product (GNP), 36–40 inequality, 170, 171 land-value tax, 73, 149, 180 political funding, 91–2, 171 poverty, 165, 166 productivity and employment, 193 rust belt, 90, 239 Transatlantic Trade and Investment Partnership (TTIP), 92 wages, 188 universal basic income, 200 University of Berkeley, 116 University of Denver, 160 urbanisation, 58–9 utility, 35, 98, 133 V values, 6, 23, 34, 35, 42, 117, 118, 121, 123–6 altruism, 100, 104 anthropocentric, 115 extrinsic, 115 fluid, 28, 102, 106–9 and networks, 110–11, 117, 118, 123, 124–6 and nudging, 112, 113, 114, 123–6 and pricing, 81, 120–23 Veblen, Thorstein, 82, 109, 111, 142 Venice, 195 verbal framing, 23 Verhulst, Pierre, 252 Victor, Peter, 270 Viner, Jacob, 34 virtuous cycles, 138, 148 visual framing, 23 Vitruvian Man, 13–14 Volkswagen, 215–16 W Wacharia, John, 186 Wall Street, 149, 234, 273 Wallich, Henry, 282 Walras, Léon, 131, 132, 133–4, 137 Ward, Barbara, 53 Warr, Benjamin, 263 water, 5, 9, 45, 46, 51, 54, 59, 79, 213–14 wave energy, 221 Ways of Seeing (Berger), 12, 281 Wealth of Nations, The (Smith), 74, 78, 96, 104 wealth ownership, 177–82 Weaver, Warren, 135–6 weightless economy, 261–2 WEIRD (Western, educated, industrialised, rich, democratic), 103–5, 110, 112, 115, 117, 282 West Bengal, India, 124, 178 West, Darrell, 171–2 wetlands, 7 whale hunting, 106 Wiedmann, Tommy, 210 Wikipedia, 82, 223 Wilkinson, Richard, 171 win–win trade, 62, 68, 89 wind energy, 75, 118, 196, 202–3, 221, 233, 239, 260, 263 Wizard of Oz, The, 241 Woelab, 231, 293 Wolf, Martin, 183, 266 women’s rights, 33, 57, 107, 160, 201 and core economy, 69, 79–81 education, 57, 124, 178, 198 and land ownership, 178 see also gender equality workers’ rights, 88, 91, 269 World 3 model, 154–5 World Bank, 6, 41, 119, 164, 168, 171, 206, 255, 258 World No Tobacco Day, 124 World Trade Organization, 6, 89 worldview, 22, 54, 115 X xenophobia, 266, 277, 286 Xenophon, 4, 32, 56–7, 160 Y Yandle, Bruce, 208 Yang, Yuan, 1–3, 289–90 yin yang, 54 Yousafzai, Malala, 124 YouTube, 192 Yunnan, China, 56 Z Zambia, 10 Zanzibar, 9 Zara, 276 Zeitvorsoge, 186–7 zero environmental impact, 217–18, 238, 241 zero-hour contracts, 88 zero-humans-required production, 192 zero-interest loans, 183 zero-marginal-cost revolution, 84, 191, 264 zero-waste manufacturing, 227 Zinn, Howard, 77 PICTURE ACKNOWLEDGEMENTS Illustrations are reproduced by kind permission of: archive.org

…

At the same time, Eugene Fama’s efficient-market hypothesis – that financial markets are inherently efficient – lost credibility and has been countered by Hyman Minsky’s financial-instability hypothesis – that financial markets are inherently volatile – as we will see in Chapter 4. Lastly, far from playing a supporting role to the productive economy, finance has come to dominate it. In many countries, a small financial elite – based in just a handful of banking and financial firms – controls the public good of money creation and profits handsomely from it, while too often destabilising much of the wider economy in the process. It is time to turn this upside-down scenario the right way up and redesign finance so that it flows in service of the economy and society. Such a redesign also invites a rethink of how money could be created – not just by the market but by the state and the commons too – and Chapters 5, 6 and 7 explore some possibilities for that.

…

Rather than accept growing inequality as a law of economic development, an inevitability that must be endured, twenty-first-century economists will regard it as a failure of economic design, and will seek to make economies far more distributive of the value that they generate. Instead of focusing primarily on redistributing income earned, they will aim to redistribute wealth too – especially the wealth that comes from controlling land, money creation, enterprise, technology and knowledge. And instead of focusing on market and state solutions alone, they will also harness the power of the commons. It’s a fundamental shift in perspective, and it is well under way. The economic rollercoaster ride If humanity is to thrive within the Doughnut, every human being must have the capabilities needed to lead a life of dignity, opportunity and community.

Rethinking the Economics of Land and Housing
by Josh Ryan-Collins , Toby Lloyd and Laurie Macfarlane
Published 28 Feb 2017

1.3 Landownership and economic rent 1.4 Summary of chapters 2 Landownership and property 2.1 Introduction 2.2 Landownership: origins of the theory and forms 2.3 Landownership as freedom: secure title and economic growth 2.4 Landownership as theft: power and economic rent 2.5 Hypothesis: property is liberty, property is theft 2.6 Responses to the ownership paradox 2.7 Conclusion 3 The missing factor: land in production and distribution 3.1 Introduction 3.2 Classical political economy: land and economic rent 3.3 Land tax or separation as a solution to the problem of economic rent 3.4 Neoclassical economics and the conflation of land with capital 3.5 Problems with the neoclassical account: fundamental differences between land and capital 3.6 Political reasons for the disappearance of land from economic theory 3.7 Land and socialism 3.8 Consequences of the conflation of land and capital today 3.9 Conclusion 4 Land for housing: land economics in the modern era 4.1 Introduction 4.2 The Industrial Revolution and the growth of cities 4.3 1900–1970: world wars and the golden age of capitalism 4.4 1970 onwards: the emergence of ‘residential capitalism’ 4.5 The new political economy of housing 4.6 Conclusion 5 The financialisation of land and housing 5.1 Introduction 5.2 House and land prices, income and bank credit 5.3 Mortgage finance, the ‘lifecycle’ model and the role of collateral 5.4 The history of mortgage and real estate finance in the UK 5.5 Macroeconomic effects of the liberalisation of mortgage credit 5.6 The property–credit nexus and financial fragility 5.7 Conclusion 6 Land, wealth and inequality 6.1 Introduction 6.2 Trends in economic inequality 6.3 Traditional explanations for increasing inequality 6.4 The role of land and economic rent in increasing inequality 6.5 Why inequality matters 6.6 Conclusion 7 Putting land back into economics and policy 7.1 Introduction 7.2 Ownership 7.3 Tax reform 7.4 Financial reform 7.5 Reforms to tenure 7.6 Planning reform 7.7 Changes to economics and national accounting 7.8 Conclusion Bibliography Index FIGURES, TABLES AND BOXES Figures 1.1 Real land and house price indices UK 1945–2008 1.2 Residential property wealth as a % of GDP in advanced economies 4.1 New houses built by tenure 4.2 Trends in tenure type from 1918 to 2013 4.3 Ratio of house prices to gross average earnings 4.4 Homeownership and a ‘low supply equilibrium’ 4.5 Tenure change in England, 1971–2015 5.1 Index of house price to disposable income ratios in five advanced economies 5.2 House prices and mortgage debt compared to income in the UK 5.3 Disaggregated nominal credit stocks (loans outstanding) as % of GDP in the UK since 1963 5.4 Share of bank lending by industry sector, 1986–2014 5.5 The house price-credit feedback cycle 5.6 The role of mortgage credit conditions in affecting consumption in the UK 5.7 Home equity withdrawal in the UK, 1970–2015 6.1 Distribution of total UK household wealth: July 2012 to June 2014 6.2 Trends in growth in average wages and labour productivity in developed economies, 1999–2013 6.3 National wealth to national income ratio 1700–2010 6.4 National wealth to national income ratio 1970–2010, excluding capital gains 6.5 Breakdown of net property wealth: Great Britain, 2008/10–2012/14 6.6 Average net property wealth in the UK 6.7 Percentage of income spent on housing costs by tenure type 6.8 Income inequality from 1961 to 2013–14 before and after housing costs 6.9 Change in average house price to earnings across UK regions, 1983–2014 Tables 5.1 Mortgage market structure across sample of ten economies 6.1 Change in net property wealth between 1985 and 1991 6.2 Net property wealth between 1995 and 2005 6.3 Household net property wealth, individuals by age Boxes 1.1 Neoclassical economics 3.1 Other forms of economic rent 3.2 The secret origins of the Monopoly board game 4.1 Sir Ebenezer Howard’s garden cities 4.2 The New Towns programme 4.3 Keynesian economics 4.4 Monetarism 4.5 The Right to Buy 4.6 The speculative house builder model 4.7 Residual land valuation 4.8 Taxes affecting residential property in the UK 5.1 Credit and money creation by the banking system 5.2 What is financialisation? 5.3 How banks and building societies ‘fund’ mortgages 5.4 The parable of Northern Rock 5.5 What is securitisation? 5.6 Hyman Minsky: stability is destabilising 7.1 Hong Kong’s Mass Transit Railway 7.2 Examples of LVT and split-rate property taxes ACKNOWLEDGEMENTS The authors are most grateful to the following individuals for reviewing initial drafts and chapters of the book and providing invaluable suggestions: John Muellbauer, Kate Barker, Alison Wallace, Howard Reed, James Bruges, Allana Yurko, Steve Keen, Michael Kumhof, Nicholas Tideman, Ken Gibb, Bob Colenutt, Duncan Bowie, Paul Gilbert and Giorgos Galanis.

…

This change in the social, political and legal treatment of land was therefore a critical factor in the birth of modern finance, and a vital condition for the economic transformation of the industrial revolution and capitalist production. To this day, in many countries including the UK, lending against landed property (particularly as mortgage lending to homeowners) is the largest source of credit and money creation (see Chapter 5). The role of individual ownership of land as property in economic and social change can be seen throughout modern history. It enabled early industrialists to raise capital to fund investment in new machinery, and played a central role in the post-war restructuring of national economies in Germany, Japan and Korea, where land redistribution and the grant of title to those who worked it (mainly in an agricultural context) spread access to capital (both credit and the means of production) to a much larger proportion of society than had existed previously.

…

When you get a mortgage, money is not taken from the existing supply of money in the economy and hence does not immediately reduce economic activity somewhere else.3 When a bank makes a loan, it creates new credit and money – new purchasing power is added to the economy (see Box 5.1). Via bank lending (credit creation), households are thus able to purchase property even as property prices increase faster than their incomes. Box 5.1: Credit and money creation by the banking system4 When a bank makes a ‘loan’ it creates a new asset and a new liability upon itself at the same time. The bank’s asset is created by it simply typing into its account that the borrower owes it a sum of money: the loan. The bank’s liability is created because it also types into the customer’s account that s/he has a bank deposit of the same amount.

The Social Life of Money
by Nigel Dodd
Published 14 May 2014

At the heart of Hudson’s analysis is the “austerity myth” that relies on a bogus argument about excessive money creation by government as the inevitable path to hyperinflation.56 Historically, banks have tried to block governments from creating money under normal peacetime conditions—for exactly the reasons that Keynes identified in his critique of the rentier class. Government bonds were their safest investment, as the financial sector monopolized public finance for its own ends. Only during the exceptional political circumstances of wartime were they unable to oppose government money creation. More recently, however, the bankers did not oppose the significant levels of money creation ($13 trillion of debt to rescue bad loans and other obligations) that went into the bailout and the quantitative easing (QE) program.

…

According to this view, it is mistaken even to refer to the practice as fractional reserve banking because the link between banks’ lending and reserves is extremely tenuous (Zazzaro 2002; Arena, Graziani, et al. 2004; Graziani 2009; Ponsot and Rossi 2009). A third version, as proposed by the American Monetary Institute—a monetary reform pressure group established in 1996—argues that the power of money creation should be placed in the hands of government, not private banks.32 The argument hinges on making a clean separation between the business of banking on one side and money creation on the other (Ryan-Collins, Greenham, et al. 2012). What, then, is a bank? The examiner’s report on the bankruptcy of Lehman Brothers ran to 2,200 pages. The bank had assets worth $600 billion when it collapsed, leaving a number of major institutional cash funds exposed, alongside 100 hedge funds that had used the bank as their prime broker, several Japanese banks, energy companies, real estate firms, and insurers.

…

In order for this to happen, capital must find some way to “re-establish its footing in the world of socially necessary labour” (Harvey 2006: 293). In Marx’s account, capital can do this either by reattaching itself to gold, or by renewing its connections with commodity production. In Harvey’s version, myriad intermediary measures are involved, incorporating central banks and money creation. But the essential problem remains the same: capital’s value must be restored. During the Bretton Woods era, central banking was premised on the idea of trying to match the quality of money to a measure of social labor, such as the productivity of the economy as a whole. Painful devaluation was frequently the outcome, mainly because national monies cannot be managed in isolation from world money.

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives)
by David Birch
Published 14 Jun 2017

This could be as a means of supplying credit, as envisaged by the Nobel-winning economist Friedrich Hayek in 1970s, or it could be a means of encouraging customer loyalty, as explored by lateral thinker Edward de Bono in the 1990s. There might also be idealistic reasons, as explored by ‘Satoshi Nakamoto’, the mysterious inventor of the cryptographic asset Bitcoin (Vigna and Casey 2015), and others since 2008. I will explore all these possibilities in my ‘5Cs’ of money creation (central banks, commercial banks, companies, communities and cryptography) in more detail later in this book, before settling on a narrative for the ‘next money’ that is likely to surprise you. * * * * He then goes on to describe what are in fact offline pre-authorized debit cards, but that is by-the-by. ** One of the only twelve of these coins known to still exist was acquired by a Texan collector in August 2016 for an undisclosed sum.

…

The private banking system was developing nicely and there was no public demand for a public bank (Chown 1994b). No matter how it happened, the creation of the Bank in 1694 announced a revolutionary settlement between the City and the state and, in effect, the creation of capitalism in its modern sense. The government shared its monopoly on money creation with a private institution and in return obtained a debt manager and access to finance. Both the Tories and the Whigs hated the idea, by the way, as did goldsmiths and pawnbrokers, although luckily their lobby was not strong enough to prevent it (Thornbury 1878). Politicians were concerned that the ‘power of the purse’ would be transferred from the House of Commons to the governor and directors of the Bank (today we think that that is a good thing!)

…

The last major money innovation of that age was the conclusion of the relationship between banks and the state through the monopolization of currency by the central bank. In short, the government took control of monetary policy and the central bank became the sole backer of currency, and in return the commercial banks became responsible for money creation. At this point the commercial banks, the money system and the modern state became fused together: all, in effect, aspects of one another (Lanchester 2016). It was quite a big step. If you look at the United Kingdom as an example, the Bank of England has not always been the sole issuer of banknotes in England and Wales, as it is now.

Rethinking Money: How New Currencies Turn Scarcity Into Prosperity
by Bernard Lietaer and Jacqui Dunne
Published 4 Feb 2013

The new loan for 90 million will, in turn, lead to another deposit for that amount somewhere else, enabling the next bank to provide another loan for 81 million (i.e., 90 percent of 90 million), and so on. This is how what started off as 10 million units of high-powered money can create up to 200 million units in credit money as it trickles down the banking system. A key point to keep in mind is that this entire money-creation process hinges on loans. If all debts were repaid, money would simply disappear, because the entire process of money creation would reverse itself. Reimbursing all loans would automatically use up all the deposits. Even the A Fate Worse Than Debt 41 central bank’s high-powered money would evaporate if the banks were able to repay their debts. There would even be a remaining financial hole, a negative balance reflecting the unpaid interest on all those loans.

…

But the people have never been given the opportunity to discover the advantage [of using another currency].”18 The final argument is about risk. Nationalizing the money creation process cannot be done on a small pilot scale. It must be implemented on a massive national scale or, in the case of the euro, a multinational scale. Any change always involves the risk of unintended consequences. Logically, large-scale change involves greater risk. With these distinctions between the conventional competitive system and the emergent cooperative money system, how would a new divergent monetary ecology work in practical terms? The final argument is about risk. Nationalizing the money creation process cannot be done on a small pilot scale.

…

Zbigniew Brzezinski, President Carter’s national security advisor, sees it also as a geopolitical one: “Not to focus on [this issue] is to ignore a central reality of our times: the massive worldwide political awakening of mankind and its intensifying.”19 Awareness about money and its uses may be the change agent that shifts our society away from collapse and toward renewal. THE PROCYCLICAL MONEY CREATION PROCESS The economy grows or contracts in a series of repetitive expansions (booms) and contractions (busts). Referred to as the business cycle, this pattern comprises an interlude of escalation of above-average economic growth, reaching a peak, followed by a contraction to below-average economic growth, potentially all the way to a depression at the low point.

Currency Wars: The Making of the Next Gobal Crisis
by James Rickards
Published 10 Nov 2011

The Fed could have purchased foreign exchange with newly printed dollars, an operation comparable to modern central bank currency swap lines, thereby expanding both U.S. and foreign reserve positions that could have supported even more money creation. SDRs were created in the 1960s to solve exactly this problem of inadequate reserves encountered in the 1930s. Were a 1930s-style global liquidity crisis to arise again, SDRs could be issued to provide the foreign exchange base from which money creation and trade finance could flow—exactly as they were in 2009. This would be done to head off a global contraction in world trade and a global depression. Again, this kind of money creation can take place without reference to gold at all. Any failure to do so is not a failure of gold; it is a failure of policy.

…

One suspects that Bernanke’s real objection to gold today is not that it was an actual constraint on increasing the money supply in the 1930s but that it could become so at some point today. There was a failure to use all of the money creation capacity that bankers had in the Great Depression, yet that capacity was never unlimited. Bernanke may want to preserve the ability of central bankers to create potentially unlimited amounts of money, which does require the abandonment of gold. Since 2009, Bernanke and the Fed have been able to test their policy of unlimited money creation in real-world conditions. Blaming the Great Depression on gold is like blaming a bank robbery on the teller. The teller may have been present when the robbery took place, but she did not commit the crime.

…

European and Japanese gold presently stored in New York will be confiscated and converted to use in the service of the New Dollar Policy. No doubt the Europeans and Japanese will be given receipts for their former gold, convertible into New Dollars at a new, higher price. Alternatively, the president may eschew a return to gold and use an array of capital controls and global IMF money creation to reliquify and stabilize the situation. This IMF global bailout will not be in old, nonconvertible dollars but in a newly printed global currency called the SDR. Life will go on but the international monetary system will never be the same. This isn’t far-fetched speculation. It has all happened before.

Seventeen Contradictions and the End of Capitalism
by David Harvey
Published 3 Apr 2014

There seems no limit to such possibilities except that imposed by state policies and regulation. When the metallic basis of global moneys was totally abandoned in the 1970s, we indeed found ourselves in a potentially limitless world of money creation and accumulation. Furthermore, the rise of moneys of account and even more importantly of credit moneys (beginning with the simple use of IOUs) places a great deal of money creation in the hands of individuals and the banks rather than in the hands of state institutions. This calls forth regulatory impositions and interventions on the part of the state apparatus in what is often a desperate attempt to manage the monetary system.

…

All of these alternative forms are captive to capital’s struggle to absorb the necessity of its permanent compound growth. It was, I think, no accident that the limits on money creation set by tying it to money commodities like gold and silver broke down in the early 1970s. The pressure of exponential expansion on what was in effect a fixed global supply of metal was simply irresistible at that moment in capital’s historical development. Since then we have lived in a world where the potential limitlessness of money creation can prevail. Before the 1970s the main avenue for capital was to invest in production of value and of surplus value in the fields of manufacturing, mining, agriculture and urbanisation.

…

The absorption of private property rights into a comprehensive project for the collective management of the commons and the dissolution of autocratic and despotic state powers into democratic collective management structures become the only worthy long-term objectives. These objectives make sense when applied to money and credit. The reclamation of money and credit as a form of the democratically regulated commons is imperative if the trend towards autocracy and monetary despotism is to be reversed. Severing the activities of money creation from the state apparatus becomes imperative in the name of strengthening and democratising collective liberties and freedoms. Since the power of the capitalist state rests in part on the twin pillars of a monopoly over the legitimate use of violence and monopoly power over monetary affairs and the currency, the breaking of the latter monopoly would ultimately entail a dissolution (rather than the ‘smashing’) of capitalist state power.

Sacred Economics: Money, Gift, and Society in the Age of Transition
by Charles Eisenstein
Published 11 Jul 2011

Today the era of fractional-reserve banking is over, and money has become pure credit. This is not widely recognized. Many authorities, including most economics textbooks and the Federal Reserve itself,3 still maintain the pretense that reserves are a limiting factor in money creation, but in practice they almost never are.4 Banks’ real constraints on money creation are their total capital and their ability to find willing, creditworthy borrowers—that is, those with either uncommitted earning potential or assets to use as collateral. In other words, social agreements govern the creation of money, primary among them the dictum, encoded in interest, that money should go to those who will make even more of it in the future.

…

The Fed or central bank creates this new money out of thin air, at the stroke of a pen (or computer keyboard). For example, when the Fed bought $290 billion in mortgage-backed securities from Deutsche Bank in 2008, it didn’t use existing money to do it; it created new money as an accounting entry in Deutsche Bank’s account. This is the first step in money creation. Whatever the Fed or central bank purchases, it is always an interest-bearing security. In other words, it means that the money created accompanies a corresponding debt, and the debt is always for more than the amount of money created. The kind of money just described is known as the “monetary base,” or M0.

…

The money system we have today is the manifestation of the scarcity mentality that has dominated our civilization for centuries. When that mentality changes, the money system will change to embody a new consciousness. In our current money system, it is mathematically impossible for more than a minority of people to live in abundance, because the money creation process maintains a systemic scarcity. One man’s prosperity is another man’s poverty. One of the principles of “prosperity programming” is to let go of the guilt stemming from the belief that you can only be wealthy if another is poor, that more for me is less for you. The problem is that under today’s money system it is true!

The End of Alchemy: Money, Banking and the Future of the Global Economy
by Mervyn King
Published 3 Mar 2016

In the course of this book, I will explain the fundamental causes of the crisis and how the world economy lost its balance; how money emerged in earlier societies and the role it plays today; why the fragility of our financial system stems directly from the fact that banks are the main source of money creation; why central banks need to change the way they respond to crises; why politics and money go hand in hand; why the world will probably face another crisis unless nations pursue different policies; and, most important of all, how we can end the alchemy of our present system of money and banking.

…

In bad times, governments may need to issue assets which will be regarded as both acceptable in making payments and reliable as a store of value. To leave the production of money solely to the private sector is to create a hostage to fortune. But there must be confidence in the process that generates changes in money. In an era of paper money, that amounts to trust in the central bank or government that controls money creation. Stability of the value of money The second criterion for money to be able to perform its functions in a capitalist economy is that its value – its purchasing power in terms of goods and services – must be in some sense stable. Defining price stability in a world where new goods and services come along that were not available before is a hazardous undertaking.

…

Only then can money operate as a credible common measuring rod, whether in the Domesday Book or in modern estimates of gross domestic product. Expanding the amount of money in the economy can be either good or bad, depending on the circumstances. Printing paper money can, as described in Goethe’s famous play Faust, be a stimulus to production when times are bad.55 But the alchemy of money creation fosters the illusion of unbounded pleasure and the temptation to issue so much money in good times that the result is not prosperity but rising inflation, leading to economic chaos and the destruction of prosperity. Few countries suffered more from this pact with the devil than Goethe’s own homeland in the hyperinflation of 1923.

Bitcoin: The Future of Money?
by Dominic Frisby
Published 1 Nov 2014

Of course, governments create money through such processes as quantitative easing, but, even so, most money is lent into existence. This power to ‘create’ money through lending is what has made the worlds of banking and finance so large, powerful and rich. Modern money could thus be defined as ‘electronic debt-based fiat currency’. Research by UK think tank Positive Money shows that since 1989, money creation has been growing by 11.5% per annum. Compounded over time, the entire money stock doubles every six years and three months. This used to be what we called inflation, but modern measures of inflation now ignore money supply and instead focus on the prices of certain goods. The morals of such a system – where certain privileged groups get to create money – are dubious.

…

But most of us aren’t. Similarly, the US has seen $800 billion become $16 trillion – a 20-fold increase. Research by think tank Positive Money shows that only about 10% of newly created money goes into the kind of consumer goods tracked by CPI. So all CPI does is measure the effects of about 10% of money creation. What’s more, many of the goods tracked by CPI face the deflationary pressures of competition and improved productivity. For example, computers and other mass-processed goods tend to fall in price. Positive Money’s research also demonstrates that 13% of newly created money has gone into real businesses that create jobs and boost economic growth; 37% into financial markets and 40% into residential and commercial property.

…

Electronic banking, which began in the 1980s and replaced the cash- and cheque-based economy, has made it possible for banks to do this – facilitated by the decision to ignore money-supply growth in measures of inflation. The social consequence of this has been for the financial sector to grow disproportionately large and influential – for banks to have become ‘too big to fail’. More and more people have been drawn to this sector where they can get some kind of exposure to new money creation. But elsewhere, perfectly innocent people lose out because of it. This is from Life After the State: Imagine a tiny economy. There are 20 people in it. Of these, ten each have $1 in cash, so there is $10 in the entire economy. The other ten people each have a house – these are the only assets in the economy and are each priced at $1.

The Scandal of Money
by George Gilder
Published 23 Feb 2016

A devout believer in the power of money, Turner wants central banks to counteract the existing overhang of private credit with the issuance of new money in any volumes needed to maintain “adequate levels of nominal demand.” Within an overall regime of inflation controls and cautions, Turner believes, government money creation is more favorable to growth than is private money creation through fractional reserve banking. To Turner, money creation is a boundless abundance (“a potentially limitless supply,” to quote Milton Friedman), whether the credit is created by private banks or “printed” by the central bank. Turner prefers central bank money because it can be steered away from real estate and other existing assets into new assets.

…

Then the rules push banks toward real estate through near-zero interest rates on debt, through guarantees from Fannie Mae, Freddie Mac, and the Federal Housing Administration, through insurance from the Federal Deposit Insurance Corporation (FDIC), through bans on “red lines” and credit disciplines. Capping it all off is tax deductibility for mortgage interest and $500,000 family home exemptions from capital gains taxes. The self-referential loops of limitless money creation are the fundamental problem. Without reconnecting money to the reality of scarce time, no regulatory regime is going to work. If the ultimate source of the value of money is the scarcity of time, what happens when central banks and governments eclipse the cost of time by spurning every settled measure for money—from gold to interest income?

…

A bubble of current assets inflated by near-zero-interest loans does nothing to fund the future. Retirees face a prospect of shriveled pensions and support and watching their children and grandchildren live slow-motion lives. According to the Fed’s own data, from 2010 to 2015 some 62 percent of Fed money creation was recycled through the banks to the Treasury trough.7 More than 65 percent of the rest went to a few large corporations, which continued to use it to suck up their own shares at a rate of $25 billion per month. Our Federal Reserve System, which gives twelve bankers a monopoly on money, is broken.

End the Fed
by Ron Paul
Published 5 Feb 2011

Sometimes it makes vast new amounts. Sometimes it makes lesser amounts. The money takes a variety of forms and enters the system in various ways. And the Fed does this through techniques such as open-market operations, changing reserve ratios, and manipulating interest rates, operations that all result in money creation. Given that money is one half of every commercial transaction and that whole civilizations literally rise and fall based on the quality of their money, we are talking about an awesome power, one that flies under cover of night. It is the power to weave illusions that appear real as long as they last.

…

In a true free market, however, there tends to be a tradeoff: you can enjoy the service of a money warehouse or you can loan your money to the bank and hope for a return on your investment. You can’t usually have both. The Fed, however, by backing up this fractional-reserve system with a promise of endless bailouts and money creation, attempts to keep the illusion going. Even with a government-guaranteed system of fractional reserves, the system is always vulnerable to collapse at the right moments, namely, when all depositors come asking for their money in the course of a run (think of the scene in It’s a Wonderful Life).

…

The false boom continued through 1918 until the war came to an end. The nation immediately went into recession, followed by another miniature boom-bust cycle from 1920 to 1921. In total, scholars have estimated that only 21 percent of the war was funded through taxation. The remainder was funded by Fed-backed borrowing (56 percent) and outright money creation (23 percent), for a total cost of $33 billion. So we see that the damage that the Fed wrought came rather quickly after its creation. Compared with today, its power was limited then. But the goal of creating a lender of last resort had a devastating effect on our public policy. It inspired the government to dream of ever more power, ever more programs, ever more ambitions.

Value of Everything: An Antidote to Chaos The
by Mariana Mazzucato
Published 25 Apr 2018

Measuring the Wealth of Nations GDP: A Social Convention The System of National Accounts Comes into Being Measuring Government Value Added in GDP Something Odd About the National Accounts: GDP Facit Saltus! Patching Up the National Accounts isn't Enough 4. Finance: A Colossus is Born Banks and Financial Markets Become Allies The Banking Problem Deregulation and the Seeds of the Crash The Lords of (Money) Creation Finance and the ‘Real' Economy From Claims on Profit to Claims on Claims A Debt in the Family 5. The Rise of Casino Capitalism Prometheus (with a Pilot's Licence) Unbound New Actors in the Economy How Finance Extracts Value 6. Financialization of the Real Economy The Buy-back Blowback Maximizing Shareholder Value The Retreat of ‘Patient' Capital Short-Termism and Unproductive Investment Financialization and Inequality From Maximizing Shareholder Value to Stakeholder Value 7.

…

In the late 1990s, supercharged by the IT revolution, the volume of securities trading rocketed. Commercial banks could now use their huge balance sheets, based on customers' deposits, to speculate. Their investment banking arms, along with independent investment banks such as Goldman Sachs, developed financial instruments of increasingly mindblowing complexity. THE LORDS OF (MONEY) CREATION Large financial firms were, however, careful to secure a lightening of regulation, rather than the complete deregulation advocated by free- marketeers such as the Nobel Prize-winning economist Friedrich Hayek. Their reasoning was as follows. To maintain their high profits, the big commercial and investment banks still needed regulators who would keep potential competitors out of the market.

…

Ironically, the disastrous big bank behaviour that triggered the 2008 crash forced regulators (especially in Europe) into further lengthening and complicating an already arduous process for obtaining a new licence, frustrating their plans to unleash a hungry horde of ‘challenger banks'. In issuing licences sparingly, governments and central banks were quietly admitting something they were still reluctant to announce publicly: the extraordinary power of private-sector bank lending to affect the pace of money creation, and therefore economic growth. That banks create money is still a highly contested notion. It was politically unmentionable in 1980s America and Europe, where economic policy was predicated on a ‘monetarism' in which governments precisely controlled the supply of money, whose growth determined inflation.

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned?
by Steve Keen
Published 21 Sep 2011

Both the monetary base and M1 series are generally procyclical and, if anything, the monetary base lags the cycle slightly […] The difference in the behavior of M1 and M2 suggests that the difference of these aggregates (M2 minus M1) should be considered […] The difference of M2–M1 leads the cycle by even more than M2, with the lead being about three quarters […] (Kydland and Prescott 1990: 4) Well before Kydland and Prescott reached this statistical conclusion, the post-Keynesian economist Basil Moore pointed out the implication of the actual money creation process for macroeconomic theory. When macroeconomic models actually considered the role of money, they treated the money supply as an exogenous variable under the direct control of the government – this is an essential feature of Hicks’s IS-LM model, for instance. But since credit money is created before and causes changes in government money, the money supply must instead be endogenous. The ‘Money Multiplier’ model of money creation was therefore a fallacy: This traditional view of the bank money creation process relies on the bank reserves–multiplier relation.

…

Therefore, the neoclassical model is an inadequate basis for modeling and understanding capitalism: The abstract model of the neoclassical synthesis cannot generate instability. When the neoclassical synthesis is constructed, capital assets, financing arrangements that center around banks and money creation, constraints imposed by liabilities, and the problems associated with knowledge about uncertain futures are all assumed away. For economists and policy-makers to do better we have to abandon the neoclassical synthesis. (Ibid.: 5) Clearly, Bernanke shows no such inclination. Even in the aftermath of a financial crisis that took him and the vast majority of neoclassical economists completely by surprise, and which terrified them as much as it bewildered the public, Bernanke and his many neoclassical colleagues still cling to their belief in an economic theory that asserts that events like this could never happen.

…

Friedman’s ‘helicopter’ is of course a parable for the behavior of a central bank (which is not a market actor) that injects money into the system – as Bernanke has himself done twice already, though during the Great Recession rather than when the economy was in ‘a state of equilibrium.’30 But it is a parable which takes for granted that the money supply is completely under the Fed’s control – that it is ‘exogenous’ in the parlance of economics. In contrast, the empirically derived ‘endogenous’ theory of money I’ll outline in Chapter 14 argues that the money supply is largely outside the Fed’s control. However, with his simplistic model of money creation, Friedman decided that the consequence of doubling the money supply would be that nominal prices would ultimately double. Relative prices and real output would be unaffected in the long run, but – in an important qualification compared to Lucas’s later analysis – Friedman conceded that in the interim there could be disturbances to relative prices and the levels of output and employment: It is much harder to say anything about the transition.

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It
by Anat Admati and Martin Hellwig
Published 15 Feb 2013

The euro is the currency of the member states of the euro area, but this currency is issued (“printed”) by the European Central Bank, a supranational institution that is independent of national governments. If the government can pay its debt by means of money creation, there is no risk of default, but the money creation is likely to cause inflation that will make the money itself lose value in real terms. The risk of inflation might lead investors to prefer real estate or stocks. It will not, however, affect the choice between a government bond and a home mortgage, which are both equally affected by the decline in the value of money. In countries where government finance through money creation and inflation are prevalent, there may arise a demand for so-called indexed debt, that is, debt whose nominal value is adjusted over time so as to keep the real value the same relative to some bundle of goods.

…

By saying that central bank money has no default risk we do not mean to imply that central bank money is riskless. There is always a risk that central bank money might lose value. This is, in fact, quite likely if the central bank prints a lot of money. Reinhart and Rogoff (2009) have stressed that money creation’s causing inflation—that is, a devaluation of money relative to real goods—can be understood as a form of government default on domestic debt that has been issued in a home currency. 17. Of course the choice between cash and deposits also reflects differences in convenience. 18. This observation underlies proposals for so-called narrow banking, discussed in Chapter 6, note 38. 19.

…

In the years since 2007, central banks have often accepted securities of dubious quality as collateral or even purchased such securities. Mehrling (2010) emphasizes the positive effects of these measures on bank liquidity without addressing the risks to central banks, and indirectly to taxpayers, of potential losses from such securities. 37. Strictly speaking, this is to be expected only for money creation in excess of the growth of economic activity in the economy. Moreover, in a time of structural change, central bank money might be created without inflationary consequences. For example, since 2008, interbank borrowing and lending have been much reduced because private banks no longer trust each other; because they cannot rely on short-term borrowing, private banks rely much more on deposits with their central bank to meet unforeseen cash needs.

Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies
by Nik Bhatia
Published 18 Jan 2021

The goldsmith will then default if ever faced with a full redemption request. This type of activity is called fractional reserve banking, as opposed to full reserve banking when all deposits have corresponding gold in a vault. Gold exists as the goldsmith’s disciplinary constraint, serving as motivation not to abuse the power of money creation that comes with the public’s confidence in his deposits as a form of cash. Second-layer money is therefore inherently unstable, as the power to create it will always be subject to human abuse, similar to our example of the English goldsmith who abused the public’s confidence in his creditworthiness.

…

New York had become the center of international finance. Shares of companies listed on the New York Stock Exchange were flooded with demand, and capital poured into the United States. This greatly strengthened the global demand for dollars and bolstered the American currency to the world reserve currency echelon. The swarm of money creation that occurred during the roaring twenties was antagonistic toward gold’s disciplinary constraint on money elasticity and conclusively revealed a societal need for the dollar’s decoupling from gold. Categorically, there wasn’t enough gold held by the United States government to furnish the elastic currency it had promised in its enactment.

…

Treasuries, many of which had been newly issued in order to finance enormous deficits resulting from economic recession, tax shortfalls, and corporate bailouts. Large-scale expansion of second-layer money by the Fed was a response to contraction elsewhere in the system; it had to meet the collapse in interbank trust and liquidity with its own reliable liquidity. The Fed called it Quantitative Easing (QE), but we can refer to it as second-layer money creation. Interbank trust only decayed in the years after the financial crisis of 2007–2009. Banks started dialing back their exposure to each other during the fourth quarter of each year to prepare for year-end regulatory snapshots. Divergences in key money market interest rate spreads—like when LIBOR split from Fed Funds and others in August 2007—occurred more often, especially around calendar events such as the end of each quarter and United States tax deadlines.

The New Economics: A Bigger Picture
by David Boyle and Andrew Simms
Published 14 Jun 2009

Social credit, important though its ideas are, believes that money is the key and believes that, by making it ‘real’ in a different sense, then the basic economic problems of society are solved. The new economics urges a greater scepticism about money as a real measure of anything. The other objection to a wholesale state takeover of money creation is that it remains an elite – a democratically elected though centralized one – which decides on the amount of money in circulation. It also leaves the problem intact of money’s faulty measurement of value, which is where the complementary currencies come in. Multiple currencies If, as seems likely, the world is about to plunge into a combination of financial, environmental and energy crises, then a new generation of complementary currencies – using smartcard and mobile phone technology – will probably come more firmly into our lives.

…

Thomas Edison and Henry Ford teamed up in 1922 to urge the US government to create money for major infrastructure interest free, and then withdraw it from circulation as the loan was paid back (see Chapter 10).25 Other alternative economic doctrines, like social credit, suggest that banks should be banned from creating new money in the form of loans, and that it should be issued interest free by governments or their representatives. This is a controversial area, and it is therefore hard to speak for the new economics as a whole. Returning the benefits of money creation to the public would be an improvement. But the idea of nationalizing the money supply fails to adopt the whole new economics critique of money: it still assumes that money is an effective measuring device – and if it is the measurement function of money that is faulty, then we probably need a multiplicity of different kinds of money, operating from the neighbourhood to international level, and operated by different institutions rather than one state-controlled bank (see Chapter 4).

…

This will make currencies safer from sudden collapse, and will also provide an added underpinning to economies in developing countries that are wealthier in raw materials. 7 Create new public money, free of interest, where necessary to cope with unprecedented financial emergencies, and as the basis for loans to rebuild the infrastructure of productive local economies During the financial crisis of July 1914, David Lloyd George did this to underpin the banks. We should not make the mistake that the creation of money in other ways – in the form of bank lending – is somehow the only authentic way of doing it. Private banks have enjoyed a sizable, indirect subsidy through being allowed to create money, and there is no reason why money creation should not happen in the name of direct public benefit. The Bank of England should, for example, exercise its power to create money to provide the loan finance for the new local lending infrastructure. This should be repaid, free of interest, when the task is complete, and then withdrawn from circulation.

The End of Growth: Adapting to Our New Economic Reality
by Richard Heinberg
Published 1 Jun 2011

It turned out that having increasing amounts of money in circulation was a benefit to traders and industrialists during the historical period when all of this was happening — a time when unprecedented amounts of new wealth were being created, first through colonialism and slavery, but then by harnessing the enormous energies of fossil fuels. The last impediment to money’s ability to act as a lubricant for transactions was its remaining tie to precious metals. As long as paper notes were redeemable for gold or silver, the amounts of these substances existing in vaults put at least a theoretical restraint on the process of money creation. Paper currencies not backed by metal had sprung up from time to time, starting as early as the 13th century ce in China; by the late 20th century, they were the near-universal norm. Along with more abstract forms of currency, the past century has also seen the appearance and growth of ever more sophisticated investment instruments.

…

However, units of currency are essentially claims on labor and natural resources — and as those claims multiply (with the growth of the money supply), and as resources deplete, eventually the remaining resources will be insufficient to satisfy all of the existing monetary claims. Those claims will lose value, perhaps dramatically and suddenly. When this happens, paper and electronic currency systems based on money creation through fractional reserve banking will produce results somewhat similar to those of a collapsing Ponzi scheme: the vast majority of those involved will lose much or all of what they thought they had. BOX 1.1 Why Was Usury Banned? In his book Medici Money: Banking, Metaphysics, and Art in Fifteenth-Century Florence, Tim Parks writes: “Usury changes things.

…

Growth that proceeds this way, whether it’s growth in US oil production from 1900 to 1970 or growth in the population of Entamoeba histo-lytica in the bloodstream of a patient with amoebic dysentery, always hits hard limits eventually. With regard to debt, what are those limits likely to be and how close are we to hitting them? A good place to start the search for an answer would be with an exploration of how we have managed to grow our debt so far. It turns out that, in an economy that’s based on money creation through fractional reserve banking, with ever more loans being taken out to finance ever more consumer purchases and capital projects, it is usually possible to repay earlier debts along with the interest attached to those debts. There is never enough money in the system at any one time to repay all outstanding debt with interest; but, as long as total debt (and therefore the money supply as well) is constantly growing, that doesn’t pose a practical problem.

The Bitcoin Standard: The Decentralized Alternative to Central Banking
by Saifedean Ammous
Published 23 Mar 2018

To summarize: the central bank can engage in expansionary monetary policy by (1) reducing interest rates, which stimulates lending and increases money creation; (2) lowering the required reserve ratio, allowing banks to increase their lending, increasing money creation; (3) purchasing treasuries or financial assets, which also leads to money creation; and (4) relaxing lending eligibility criteria, allowing banks to increase lending and thus money creation. Contractionary monetary policy is conducted by reversing these steps, leading to a reduction of the money supply, or at least a reduction in the rate of growth in the money supply. 7 It is always fun to teach my senior students about a hypothetical free market in capital, if only for watching the reaction on their faces when they compare the neat logic of how a free market in capital could work, versus the pseudoscientific Keynesian central planning theories they had the misfortune of learning in their monetary theory class. 8 There is no shortage of alternatives to the Austrian capital theory as an explanation of recessions, yet all of these are largely just the rehashed arguments of monetary cranks from the early 20th century.

…

As the number of payments and settlements conducted in physical gold became an infinitely smaller fraction of all payments, the banks and central banks holding the gold could create money unbacked by physical gold and use it for settlement. The network of settlement became valuable enough that its owners' credit was effectively monetized. As the ability to run a bank started to imply money creation, governments naturally gravitated to taking over the banking sector through central banking. The temptation was always too strong, and the virtually infinite financial wealth this secured could not only silence dissent, but also finance propagandists to promote such ideas. Gold offered no mechanism for restraining the sovereigns, and had to rely on trust in them not abusing the gold standard and the population remaining eternally vigilant against them doing so.

…

By giving the money to the borrower while keeping it available to the depositor, the bank effectively creates new money and that results in an increase in the money supply. This underlies the relationship between money supply and interest rates: when interest rates drop, there is an increase in lending, which leads to an increase in money creation and a rise in the money supply. On the other hand, a rise in interest rates causes a reduction in lending and contraction in the money supply, or at least a reduction in the rate of its growth. Business Cycles and Financial Crises Whereas in a free market for capital the supply of loanable funds is determined by the market participants who decide to lend based on the interest rate, in an economy with a central bank and fractional reserve banking, the supply of loanable funds is directed by a committee of economists under the influence of politicians, bankers, TV pundits, and sometimes, most spectacularly, military generals.

The Death of Money: The Coming Collapse of the International Monetary System
by James Rickards
Published 7 Apr 2014

The Federal Reserve does not understand that money creation can be an irreversible process. At a certain point, confidence in money can be lost, and there is no way to reconstitute it; an entirely new system must rise in its place. A new international monetary system will rise from the ashes of the old dollar system, just as the dollar system rose from the ashes of the British Commonwealth at Bretton Woods in 1944, even before the flames of the Second World War had been extinguished. The crux of the problem in the global financial system today is not money but debt. Money creation is being used as a means to deal with defaulted debt.

…

Then the world looks like a different place; it is a world in debt. This approach to money through the lens of contract is one of many monetary theories. The most influential of these is the quantity theory of money, or monetarism, advocated in the twentieth century by Irving Fisher and Milton Friedman. Monetarism is one of the Fed’s chosen guides to money creation, although the original formulation advocated by Friedman is no longer in vogue. Another approach is the state theory of money, which posits that unbacked paper money has value since the state may demand such money as tax payments. The state may use coercion unto death to collect taxes; therefore citizens work for and value money because it can satisfy the state.

…

Perhaps the most compelling critique of the flaws in nominal GDP targeting and the inflation embedded within it comes from inside the Fed board of governors itself. In February 2013 Fed governor Jeremy Stein offered a highly detailed critique of the Fed’s easy-money policy and obliquely pointed to its greatest flaw: that increased turnover is not the only channel money creation can find, and that other channels include asset bubbles and financial engineering. Stein’s thesis is that a low-interest-rate environment will induce a search for higher yields, which can take many forms. The most obvious form is a bidding up of the price of risky assets such as stocks and housing.

Stocks for the Long Run 5/E: the Definitive Guide to Financial Market Returns & Long-Term Investment Strategies
by Jeremy Siegel
Published 7 Jan 2014

Sector Allocation Around the World Private and Public Capital Conclusion PART III HOW THE ECONOMIC ENVIRONMENT IMPACTS STOCKS Chapter 14 Gold, Monetary Policy, and Inflation Money and Prices The Gold Standard The Establishment of the Federal Reserve The Fall of the Gold Standard Postdevaluation Monetary Policy Postgold Monetary Policy The Federal Reserve and Money Creation How the Fed’s Actions Affect Interest Rates Stock Prices and Central Bank Policy Stocks as Hedges Against Inflation Why Stocks Fail as a Short-Term Inflation Hedge Higher Interest Rates Nonneutral Inflation: Supply-Side Effects Taxes on Corporate Earnings Inflationary Biases in Interest Costs Capital Gains Taxes Conclusion Chapter 15 Stocks and the Business Cycle Who Calls the Business Cycle?

…

The overall trend of the price level has closely tracked that of the money supply normalized for the level of output. FIGURE 14-1 Money and Prices in the United States, 1830–2012 The strong relation between the money supply and consumer prices is a worldwide phenomenon. No sustained inflation is possible without continuous money creation, and every hyperinflation in history has been associated with an explosion of the money supply. There is overwhelming evidence that countries with high monetary growth experience high inflation, while countries with restrained money growth have low inflation. Why is the quantity of money so closely connected to the price level?

…

The responsibilities of the Fed were to provide an “elastic” currency, which meant that in times of banking crises the Fed would become the lender of last resort. In trying times, the central bank would provide currency to enable depositors to withdraw their deposits without forcing banks to liquidate loans and other assets. In the long run, money creation by the Fed was still constrained by the gold standard since the government’s paper currency, or Federal Reserve notes, promised to pay a fixed amount of gold. But in the short run, the Federal Reserve was free to create money as long as it did not threaten the convertibility of Federal Reserve notes to gold at the exchange rate of $20.67 per ounce that prevailed before the Great Depression.

With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don't Pay Enough
by Peter Barnes
Published 31 Jul 2014

The idea of debt-free distribution of money isn’t new. During the Civil War, President Abraham Lincoln, rather than borrowing from banks, paid Union soldiers with freshly minted “greenbacks.” Beginning in the 1930s, a succession of eminent economists, including Irving Fisher and Henry Simons, proposed returning the money-creation function to government.12 Milton Friedman memorably imagined government “helicopter dropping” new money into the economy.13 Recently, Lord Adair Turner, Britain’s former top bank regulator, made a similar proposal, and even Ben Bernanke, former chair of the Fed, floated the idea—not for the United States but for Japan.14 To be sure, the primary concern of these economists and regulators wasn’t to pay dividends; it was to reduce the amount of debt and systemic risk in our economy.

…

I use a 2012 estimate by Robert Pollin and James Heintz of the University of Massachusetts/Amherst that yields the following revenue (assuming a 50 percent drop from 2011 trading volume as a result of the fees):6 Figure A.1: POTENTIAL REVENUE FROM FINANCIAL TRANSACTION FEES Figure 7.1 in chapter 7 uses this $352 billion total (adjusted to $357 billion in 2013 dollars) as the midpoint, with a variance of plus or minus 25 percent for the low and high estimates. I should note that financial transaction fees aren’t the only way to make banks and traders pay for using our financial infrastructure. The International Monetary Fund has argued that other measures might work better.7 With regard to new money creation: from 2001 to 2008 (before the financial crisis), the average yearly increase in what the Federal Reserve calls M2 was $244 billion.8 I use this figure (which is adjusted to 2013 dollars) to calculate the low end of the range in figure 7.1. For the high end I use the average annual change in M2 from 2001 to 2013, which includes several years of “quantitative easing.”

…

See Jobs; Unemployment Energy and Commerce Committee, 109 England, textile machinery in, 18 Environmental Defense Fund, 99 Environmental movement, 134–135 Epstein, Joshua, 31–33 Equity leverage, 47–48 European carbon trading system, 99, 104–105 European Union (EU) universal guaranteed income ideas in, 129–130 value added taxes (VATs) and, 140–141 Euthanasia of the rentier, 56 Everyone-gets-a-share capitalism, 3–4, 42, 126 Externalities, 63–64, 98–99 Extracted rent, 43, 45–57 recycled rent compared, 60 Extreme inequality, 33–34 ExxonMobil, 102 F Facebook, 48 Fair market value, 52 Fallacy of composition, 24–25 Family Assistance Plan, 80–81 Federal Reserve on new money creation, 144 quantitative easing, 22 shared market economy and, 83 FedEx, 26 Fee and dividend program, 115 Financial derivatives, global value of, 57 Financial infrastructure. See also Banks; Stocks and bonds as co-owned wealth, 61 rent from, 142–145 Financial leverage, 47–48 Financial Times (Kay), 53 Financial transaction taxes, 143 Fisher, Irving, 91 Ford, Henry, 8, 19 Ford Motor Company, 18 Foreign Affairs, 130–131 Foreign exchange transitions, value of, 57 Foreign manufacturing, 16 Fossil fuels, 115–116 401(k) plans, 123 Foxconn, 25 Fractional reserve banking, 54, 90 Friedman, Milton, 80–81, 85–87, 91, 119 Fuller, Buckminster, 66 Future scenarios, 135–136 G Galbraith, John Kenneth, 34, 80 Gates, Bill, 48–49, 84 General Motors, jobs at, 23 George, Henry, 4, 51, 66 Germany, 19, 37–38 GI Bill, 16 Glass-Steagall Act of 1933, 54–55 Globalization, 17 Global Warming Solutions, 117 God Bless You, Mr.

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens
by Nicholas Shaxson
Published 11 Apr 2011

This is a well-known principle of so-called “fractional reserve banking,” and if you follow the calculations through you will find that with a 10 percent reserve requirement your $100 theoretically balloons out into $1,000, spread across the economy. Money really is conjured out of thin air like this: This is what banks do. Money is created by the act of lending it. “The process by which money is created is so simple that the mind is repelled,” said the economist J. K. Galbraith. Money creation is not a bad thing in itself. The question is: how much borrowing, and how much money creation, is healthy? Regulators try to control liquidity—making sure that the amount of money sloshing around the system does not grow out of control—by enforcing reserve requirements. But in the unregulated London-based Euromarkets, with no reserve requirements, the first $100 deposit theoretically lets the bank lend out the full $100, which turns into another $100 deposit, leading to another $100 loan, and so on endlessly.

…

Offshore Eurodollars also leak back “onshore,” where reserve requirements will slow down the money-creation machine again. And prudent bankers hold back reserves anyway, even when they do not have to. Controversy has, in fact, raged for decades about how much the Euromarkets contribute to puffing up the amount of money circulating in the world, boosting risk and building unsustainable wobbly pyramids of debt. Yet some things seem clear. An unregulated market allowing potentially endless and unusually profitable money creation will expand and displace regulated banking, and lending will expand into places where it wasn’t previously able to and often to where it shouldn’t be.

…

“Monetarist” theories of tackling economic problems by focusing on the money supply were coming into vogue, just at the time that unregulated Euromarkets, lacking regulation and official checks on banks’ abilities to create money out of thin air, were starting to disrupt the Fed’s efforts to control that very money supply.15 Volcker called for a new cooperative international framework through the Bank for International Settlements, in Switzerland, to get other countries to stamp down on uncontrolled money creation in the offshore system. But New York bankers, in an alliance with the Bank of England and the Swiss National Bank, killed the initiative.16 The bankers of Manhattan began to wield the offshore system as a weapon to attack the New Deal regulations that had so effectively clipped their wings at home.

Endless Money: The Moral Hazards of Socialism
by William Baker and Addison Wiggin
Published 2 Nov 2009

Might the ever more elaborate risk models simply be wings of wax, giving young men like Icarus confidence that they can fly sublimely? For that matter, could the Fed governors be wearing wings of wax as well, now pumping them ever harder though some of the wax has begun to drip off? Part Two ENDLESS MONEY he last century has been one of endless money creation, nearly all of it through the magic of commercial banking, which unbeknownst to most Americans prints money through the creation of new loans that get deposited back into banks as this money is spent on business ventures or consumption. Part 2 begins by discussing what our monetary system looked like prior to the last hundred years, when it was based upon silver and gold.

…

While the Whigs would splinter apart from division on the slavery issue and from the reduced appeal of opposing Jacksonian hard money precepts in an expanding economy, this fundamental change in banking would lay the groundwork for marrying the heavy issuance of public debt and its monetization by printing money through a banking system free of linkage to specie.20 From Greenbacks to Gold The Civil War required heavy spending that could only be supplied by the accumulated wealth of the nation; taxes on goods or income would not be sufficient. Building upon the theme of basing currency on government debt rather than gold, the National Banking Acts of 1863, 1864, and 1865 ushered in the greenback era. Control over money creation was centralized into a select group of national banks in the spring of 1865 through the passage of a 10 percent tax on state bank notes, an imposition made when it became clear these banks did not want to join a new hierarchical federal bank system and be subservient to Wall Street.21 The obligation of national banks to pay out specie on demand was suspended, echoing the precedent set during the preceding war.

…

But it may also be said that Nixon’s abrogation of gold settlement of international accounts in 1971 may have initiated a particularly deleterious chain of events instead of what might have been a more normally shaped recession. Once the markets received a “coup de whiskey” with 14 percent-plus money expansion in 1971 and 1972—to borrow the 1928 phrase of Benjamin Strong—it was a whole different ball game. That period of the early 1970s might be kept in mind when noticing that the two top stretches of rapid money creation (shown in Figures 4.1 and 4.2) preceded the worst financial debacles felt since the Fed was established in 1913. Turning to the one period of low money growth (1929-1940) at the bottom of Figure 4.1, we see the miserable economic performance of the Great Depression. During its first years, the banking system collapsed 78 ENDLESS MONEY Money Supply Inflation 1970–2008 1913–1929 1890–1913 1870–1890 1940–1970 1929–1940 4 2 0 2 4 Growth Rate (%) 6 8 10 Figure 4.2 Money Supply & Inflation Sources: Historical Statistics of the United States; Federal Reserve System Data.

The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance
by Eswar S. Prasad
Published 27 Sep 2021

Confidence in commercial bank money lies in the ability of these banks to convert their deposits into the money of another commercial bank and / or into central bank money as clients demand. Measures of Money in an Economy Measures of the overall amount of money in an economy, referred to as monetary aggregates, serve as both indicators and determinants of economic activity and inflation. Too little money creation, including limited credit creation by commercial banks, can dampen economic activity. Too much money creation can result in rising inflation. Monetary aggregates typically include both outside and inside money—money issued by the central bank as well as bank deposits. Bank deposits come in various forms. They can range from money market accounts and demand deposits, which allow depositors to take money out at will, to longer-term fixed deposits, in which the money is locked in for longer periods (in some cases the deposit can be taken out before the maturity date by paying a penalty).

…

Of course, this reassurance has to be set against the limitless scope of human ingenuity, especially in cases in which major financial incentives are at stake. There is a risk of electronic counterfeiting, through hacking of central bank systems and digital wallets, on an even more massive scale than would be possible with physical currency. Profits from Money Creation Central banks earn direct and indirect revenues from the issuance of cash, which they provide to financial institutions for distribution to their customers. In return, those institutions transfer the corresponding amounts of funds electronically to the central bank. The central bank invests those funds in securities, typically those issued by the national government.

…

The estimated cost of adding security features to the latest polymer bank notes in Canada is on p. 6 of this report: Bank of Canada, Information on the Prevalence of Counterfeiting in Canada and Its Impact on Victims and Society, May 2014, https://www.bankofcanada.ca/wp-content/uploads/2014/05/prevalence-victim-impact.pdf. Profits from Money Creation The costs of printing US dollar bills range from 7.7 cents per note for $1 and $2 bills to 19.6 cents per note for $100 bills (most other bills cost around 16 cents per note; the higher cost for higher-denomination bills likely reflects the additional security features built into them). See https://www.federalreserve.gov/faqs/currency_12771.htm.

Big Debt Crises
by Ray Dalio
Published 9 Sep 2018

This “printing” takes the form of central bank purchases of government securities and nongovernment assets such as corporate securities, equities, and other assets, which is reflected in money growing at an extremely fast rate at the same time as credit and real economic activity are contracting. Traditional economists see that as the velocity of money declining, but it’s nothing of the sort. What is happening at such times is that credit destruction is being offset by money creation. If the balance between replacing credit and actively stimulating the economy is right, this isn’t inflationary. But there is such a thing as abusive use of stimulants. Because stimulants work so well relative to the alternatives, there is a real risk that they can be abused, causing an “ugly inflationary deleveraging” (like the Weimar hyperinflation of the 1920s, or those in Argentina and Brazil in the 1980s).

…

Printing money/debt monetization and government guarantees are inevitable in depressions in which interest rate cuts won’t work, though these tools are of little value in countries that are constrained from printing or don’t have assets to back printing up and can’t easily negotiate the redistributions of the debt burdens. All of the deleveragings that we have studied (which is most of those that occurred over the past hundred years) eventually led to big waves of money creation, fiscal deficits, and currency devaluations (against gold, commodities, and stocks). In different cases, policy makers have varied which exact combination of the levers they used, typically as a function of the nature of their monetary systems. The chart below conveys the archetypal path of money printing in deflationary deleveragings over the 21 cases.

…

In the end, policy makers always print. That is because austerity causes more pain than benefit, big restructurings wipe out too much wealth too fast, and transfers of wealth from haves to have-nots don’t happen in sufficient size without revolutions. Also, printing money is not inflationary if the size and character of the money creation offsets the size and character of the credit contraction. It is simply negating deflation. In virtually all past deleveragings, policy makers had to discover this for themselves after they first tried other paths without satisfactory results. History has shown that those who did it quickly and well (like the US in 2008–09) have derived much better results than those who did it late (like the US in 1930–33).

The End of Money: Counterfeiters, Preachers, Techies, Dreamers--And the Coming Cashless Society
by David Wolman
Published 14 Feb 2012

Yet how different is Kim Jong Il’s counterfeiting, really, from the decision to spend $700 billion in borrowed money to kick-start economic growth, from creating more than $1 trillion out of thin air to help clean up the housing bubble crisis?18 That may sound blasphemous, but Americans have a long tradition of skepticism about money creation, forgeries or otherwise. In 1837 John Quincy Adams said that the only thing separating counterfeiters from bank directors is that the former are more skilled and modest. “It requires more talent to sign another man’s name than one’s own and the counterfeiter does at least his work in the dark, while the suspenders of specie payments brazen in the face of day, and laugh at the victims and dupes, who have put faith in their promises.”19 Back then, of course, there wasn’t a single clearly defined national currency.

…

“It requires more talent to sign another man’s name than one’s own and the counterfeiter does at least his work in the dark, while the suspenders of specie payments brazen in the face of day, and laugh at the victims and dupes, who have put faith in their promises.”19 Back then, of course, there wasn’t a single clearly defined national currency. Yet today’s efforts to defend against counterfeiters are vestiges of bygone eras of confusions about banknotes’ authenticity and suspicion about the alchemy of money creation. Through this prism, Kim Jong Il is merely adding a few million drops into the ocean that is the money supply. Depending on how finely you slice it, supernotes are real money—medium of exchange, store of value, unit of account, and so on. Illicit, sure, and they do hurt the Little Guy if he accepts one and then loses money because of it.

…

“I can’t answer that,” she says. “But you’re not retired, right?” “Right.” IN OCTOBER OF 2008, the króna suffered a near fatal crisis of faith. Because those three private banks’ losses dwarfed the national economy, the central bank couldn’t come to their rescue as lender of last resort. Despite the alchemy of money creation, central banks are still limited to creating money in their national currency. Issuing more króna to try and absorb the banks’ gargantuan debt wouldn’t have worked because those króna couldn’t buy anything. Iceland was forced to approach the International Monetary Fund hat in hand and accept a last-minute loan from Russia to stave off bankruptcy.

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis
by Tim Lee , Jamie Lee and Kevin Coldiron
Published 13 Dec 2019

The idea that the stock market rose so much over 2013–2014 purely because the Fed pumped so much money into the economy is not credible. If the markets were really inflated by the Fed’s extreme money creation, then prices of commodities, goods and services, and wages would have risen eventually also. Instead, commodity prices were broadly weak over the period, and the gold price, often considered an indicator of monetary inflation, was markedly weak. Rather than inflation, there were persistent fears of the risk of deflation. To believe that Federal Reserve money creation can drive up equity prices, but not drive up other prices, is to believe that the Fed can create real wealth.

…

If it issues a dollar bond that is bought by a US hedge fund that, in turn, finances the purchase of the bond from a bank, or if it is bought by the bank itself, then there is, again, an increase in dollar credit and money. The “mispricing of risk”—the assumption that the lira will not depreciate in line with the interest rate differential—results in greater credit and money creation than would otherwise be the case. The principle of covered interest parity states that there should be no arbitrage profit to be had from borrowing in the lower interest rate currency to invest in the higher rate currency while fully hedging the currency risk. For example, if the interest rate spread between Turkey and the United States is 10 percent, then the one-year forward exchange rate for the dollar versus the lira should be 10 percent higher.

…

Index Page numbers followed by f indicate figures; t indicate tables. anti-carry crashes, 170 anti-carry regimes, 165, 171–172, 210, 212 carry regime similarities to, 173–175 monetary perspective on, 168–170 signs of end of, 215 AQR Capital, 79 arbitrage, covered interest parity principle and, 21 Asian financial crisis, 23–25 global financial crisis compared with, 30 asset prices business cycle and, 126 carry regime and, 204 distortion of, 7 inflation of, 113–114 options and, 147 recessions and declines in, 6 assets under management (AUM), 74 by sovereign wealth funds, 75 Australia capital inflows, 40, 40f, 42 credit and net claims, 40, 40f credit growth, 40f, 41 interest rate spreads and, 41–42, 60–61 Australian dollar, 30 capital flows into, 62 returns on, 97, 97f bailouts, 197–199, 203 Bain and Company, 80 balance of payments, Turkey, 45 Bank for International Settlements (BIS), 15, 17, 22 carry portfolio position comparison with, 63, 63t on corporate use of carry strategies, 80 currency liquidity data, 62 net claims data, 41 Bank of Japan (BOJ), 26, 216 quantitative easing policies by, 31 Bank of Korea, 197 bank runs, 218 banking system, money creation by, 109 bank-run dynamics, 65 Bhattacharya, Utpal, 142 bid-ask spread, 158–159, 167 big breaks, 184 BIS. See Bank for International Settlements BOJ. See Bank of Japan Brazil, 19, 39, 55n6, 65–66 current account, 31 Brazilian real, 11, 30, 66 Bretton Woods system, 218 Brownian noise, 97, 97f Bruno, Valentina, 80–81 bubble-boom economies, carry bubble conditions and, 39 business cycle carry and global, 2 carry bubbles and, 127–134 carry crashes and, 127–134 carry influence on, 57, 69 carry regime and, 125–127 money supply and, 125–126 Caballero, Ricardo, 59 call options, 146–147 Cambridge Associates, 79 capital asset pricing model, 99 Capital in the Twenty-First Century (Piketty), 219 221 222 capital inflows, Australia, 40, 40f, 42 capitalism, 195, 219, 220 carry central banks’ role in, 5–8 compensation incentives for, 70–72 corporate use of, 80–83 as cumulative advantage, 181–184 defining, 2 as flow from weak to strong, 179–181 global business cycle and, 2 hedge funds as agents of, 72–73 insidious structural aspects of, 200–205 leverage importance to, 70–72 lost opportunity to lean against, 220 as luck compounded, 184–186 monetary policy and, 3 as naturally occurring phenomenon, 88 necessary amounts of, 174 omnipresence of, 190–191 as power, 191–192 as rent-seeking, 175–177 rise of, 1 volatility, 86 carry bubbles, 6, 7 business cycle and, 127–134 credit bubbles and, 37–38, 41 credit demand and, 114 disguised, 134–140 economic indicators distorted by, 44–45 economic problems obscured by, 44 inflation and, 39 monetary conditions and, 39 nonmonetary assets and, 169 Ponzi schemes and, 140–143 as risk mispricing, 142 Turkey, 42–46 carry crashes, 6 Asian financial crisis and, 23–25 bailouts limiting losses from, 203 business cycle and, 127–134 carry trade returns and, 36 deflation and, 7, 170 deflation shock and, 121–124 in emerging economies, 201 incentive changes and, 84 inevitability of, 34–35, 108 leverage and, 96–98 liquidity and, 128 money supply and, 122–123 INDEX of 1998, 25–26 Turkey, 42–46 Turkish lira, of 2018, 45 of 2008, 30, 31 Volmageddon, 98, 161 yen melt-up and, 23–24 carry portfolios backtesting, 65–67 BIS data comparison with, 63, 63t constructing, 49–50 lessons from historical study of, 64–65 losses in, 51–56, 54f carry regime, 2 anti-carry regime similarity to, 173–175 asset prices and, 204 business cycle and, 125–127 central bank policies and, 86–89, 107, 208, 210 central bank power and, 123 central banks and collapses of, 215–216 central banks weakened by, 7 debt levels and, 168 defining, 107–108 deflation and, 113–121, 203, 210, 213 development of, 127, 134 economic growth and, 209 economic imbalances from, 201 financial market structure and, 7 fragility of, 201 monetary equilibrium and, 169 monetary growth and, 169 monetary perspective on, 168–170 money in, 108–113 nonmonetary assets and, 112, 114, 122 resource allocation and, 114–115 risk mispricing and, 134–140 S&P 500 importance to, 86–87, 87f theoretical alternative to, 166–168 vanishing point and, 116, 195, 209–210 volatility signs of ending, 214–218 carry trade.

Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies
by Jeremy J. Siegel
Published 18 Dec 2007

-Based Companies 182 PART 3 HOW THE ECONOMIC ENVIRONMENT IMPACTS STOCKS Chapter 11 Gold, Monetary Policy, and Inflation 187 Money and Prices 189 The Gold Standard 191 The Establishment of the Federal Reserve 191 The Fall of the Gold Standard 192 Postdevaluation Monetary Policy 193 Postgold Monetary Policy 194 The Federal Reserve and Money Creation 195 How the Fed’s Actions Affect Interest Rates 196 Stocks as Hedges against Inflation 199 Why Stocks Fail as a Short-Term Inflation Hedge 201 Higher Interest Rates 201 Nonneutral Inflation: Supply-Side Effects 202 Taxes on Corporate Earnings 202 Inflationary Biases in Interest Costs 203 Capital Gains Taxes 204 Conclusion 205 Chapter 12 Stocks and the Business Cycle 207 Who Calls the Business Cycle?

…

The overall trend of the price level has closely tracked that of the money supply normalized for the level of output. 190 PART 3 How the Economic Environment Impacts Stocks FIGURE 11–1 Money and Price Indexes in the United States, 1830 through December 2006 The strong relation between the money supply and consumer prices is a worldwide phenomenon. No sustained inflation is possible without continuous money creation, and every hyperinflation in history has been associated with an explosion of the money supply. There is overwhelming evidence that countries with high monetary growth experience high inflation, while countries with restrained money growth have low inflation. Why is the quantity of money so closely connected to the price level?

…

Yet just 20 years afterward, the government redeemed each and every one of those notes in gold, completely reversing the inflation of the Civil War period. 192 PART 3 How the Economic Environment Impacts Stocks currency to enable depositors to withdraw their deposits without forcing banks to liquidate loans and other assets. In the long run, money creation by the Fed was still constrained by the gold standard since the government’s paper currency, or Federal Reserve notes, promised to pay a fixed amount of gold. But in the short run, the Federal Reserve was free to create money as long as it did not threaten the convertibility of Federal Reserve notes to gold at the exchange rate of $20.67 per ounce.

The Euro and the Battle of Ideas
by Markus K. Brunnermeier , Harold James and Jean-Pierre Landau
Published 3 Aug 2016

The French response was to devise ways for Europe to develop its own capacity to respond by affecting the external valuation of its currency. Germans were skeptical and preferred to think of their currency as limiting rather than enhancing the room for maneuver: currency was a “cannot do that” instrument. Their view followed from the monetary character of a federation: federations need to restrict money creation because it could affect incomes in a disparate way. Monetary instability in the past decisively helped to threaten or even to blow apart fragile political systems. The monetary authority never simply agrees to convert every outstanding obligation into money. Instead, it will decide that some industries, or some banks, or some political authorities need to be kept going for the good of the general community and that their debts should as a consequence be monetized.

…

French officials were very much aware of German opposition. They may have thought it was mainly of a legal and formal nature and could therefore be circumvented by a properly designed scheme. After all, Germany had accepted the financing of governments by banks, themselves funded by an unlimited liquidity provision by the Eurosystem. In terms of money creation and monetary impact, there was no big difference. Furthermore, other central banks around the world were purchasing public debt on a large scale. Once the liquidity approach to the crisis gained credence, it was only a matter of time before calls were formulated for the ECB to take more decisive action and stabilize public-debt markets.

…

The savings banks have a high degree of public trust and are widely seen as offering superior banking services to ordinary customers, but they are also the major source of credit for the small and medium-sized—often family-owned—business sector (Mittelstand) that constitutes one of the key features of the German model for industrial success. The Process of Money Creation Banks lend to borrowers and create credit and money simultaneously. As a concrete example, suppose that a borrower goes to a bank and asks for, say, a mortgage of €1 million. If the bank is willing to grant the mortgage, it will credit the borrower €1 million in the form of deposits. Assets and liabilities of the bank have thus expanded simultaneously, and the bank has in essence created its own funding through the very process of lending.

Paper Promises
by Philip Coggan
Published 1 Dec 2011

And, of course, if it is worthless, it loses all value as both a unit of account and medium of exchange. So a bit like the porridge of Goldilocks, we want a money supply that is not too hot (commonplace), not too cold (scarce) but ‘just right’. Mankind has tried to find that balance in many different ways. Some politicians and voters have been tempted by money creation in the same way that the French regent was tempted by John Law. Modern economists mostly agree that monetary stimulus can be effective in reviving the economy. The twenty-first-century tactic of quantitative easing is a high-tech version of the same theory. Imagine, however, that you are a creditor or a merchant selling goods.

…

Galbraith wrote, ‘If the history of commercial banking belongs to the Italians and of central banking to the British, that of paper money issued by a government belongs indubitably to the Americans.’ The rival histories of America and France also give some clues to the central question of whether money creation enhances trade, or whether more trade forced men to find ways of expanding the supply of money. It is fairly clear from the history of France that the initial paper money experiments were failures. In America, however, the creation of money and debt may have been desperate expedients but were justified by the country’s future growth.

…

The bank may demand immediate repayment of loans, refuse to refinance loans when they become due, or simply charge a higher interest rate and impose more stringent conditions when the loan is renewed. This explains why problems for the banks ripple throughout the economy. If we think back to John Law’s reasoning, we can see why this must be so. If money creation encourages trade by giving people more incentive to purchase goods, then money destruction must discourage trade. For nineteenth-century economists, however, John Law’s experiment was a classic example of economic folly. They knew that the only way of ensuring sound money was to base it on gold, and that is the subject of the next chapter. 3 Going for Gold ‘Precious metals alone are money.

The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics
by William R. Easterly
Published 1 Aug 2002

Lower interest rates on government debt reduce the budgetdeficit but also reduce the reserves available when the pension plan begins to run deficits later in its life cycle.28The government will have to honor the net pension liabilities, so the negative real interest rate scheme just redistributes spending from today to tomorrow.29 There aresimilar tricks thegovernmentcanperform on other reform conditions. To meet an inflation target, the government can keep the budget deficit unchanged but substitute debt financing for money creation.It can keep doing this until the debt burden becomes too great and lenders are no longer willing to lend.Then the government isforced to resort to printing money and inflation allover again. But this time money creation and inflation proceed at a higher rate, because the government now needs to service the debt that accumulated in the meantime.30 All the government has accomplished is to lower inflation today at the cost of higher inflation tomorrow.

…

Any factor that breeds polarization will worsen policy, and thus cause lower growth. For example, interest groups in multiethnic coalitions in Ghana may have reached the following compromise: each interest group representative will be in charge of one policy. One will determine the black market exchange rate, another will determine the rate of money creation and inflation, a third will determine the budget deficit, and a fourth will determine the negative real interest rate. Under this compromise, each interest group representative will choose its policy so as to maximize itsown take, without considering how its choice will affect the take of the others.

…

This lowers the take of official 1, in charge of the black market premium, because his revenue base comes from exporters forced to deliver their sales at the official ex- 260 Chapter 13 change rate. Official 1 resells the proceeds at the black market exchange rate to get his profits. If less money is being brought into the country from exporters, he will get less of a profit. Official 2 also has a lowertake, because there is more revenue from money creation the higher the amount of money kept in the country. With money kept outside the country, official 2 gets less revenue from the ”inflation tax.” And official 3 is not able to set as high a budget deficit, because domestic financing of the budget deficit also comes from financial assets kept inside the country.

Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets
by Brett Scott
Published 4 Jul 2022

These are delivered to the central bank, which will store them ready to be issued out. Trying to steal banknotes from a central bank is like trying to steal a promise not yet uttered. This is what happens in the 2017 Netflix series Money Heist, which portrays a group of renegades who lay siege to a Spanish government money-printer. The series should rather be called Forced Money Creation, because – as we have already discussed – the notes are not money until they leave the issuer. Cash will normally exit the central bank when commercial banks order it in anticipation of requests from their own customers to get cash from the ATM or bank branch. Anticipating this process can be tricky: while the daily ebb and flow of demand for cash out of ATMs may be relatively predictable, there can be anomalies.

…

A question that remains is why these watchers would take the time to do this. I characterised Bitcoin as a two-pronged attack on the banking system. So far my description points only to its first prong – its decentralised nature – but the final piece of the puzzle will take us to that second prong: the promotion of an unchangeable token supply. In the banking system money creation is conceptually separate from money movement. As we saw here, a bank issues chips when, for example, its loan department decides to extend credit. Those chips can then be reassigned between accounts through its payments department, which is a separate division in the bank with separate employees.

…

Aadhar system, 44, 97, 169 abacuses, 159 ‘Abracadabra’, 50 accelerators, 17 active choice, 125 Acxiom, 109 Adventures of a Banknote, The (Bridges), 65 Aesop, 45–6 AirBnB, 150 Alameda, California, 102 alcohol, 102, 118, 170 Alexa, 147, 150 Alibaba, 2, 7, 114, 150, 178 Alipay, 114 Alphabet, see Google alt-coins, 13, 217–18 Althusser, Louis, 86 Amazon, 1, 2, 7, 133, 147, 149, 150, 174, 177, 249–50 Alexa, 147, 150 anti-cash lobbying, 41–2, 254 CBDCs and, 243, 244 Coin, 236 Pay, 150 Amazon region, 130, 176, 247, 249 American Revolutionary War (1775–83), 60 Ames Research Center, 153 Amnesty International, 222 Amsterdam, Netherlands, 128–9 Amy, 147 anarchism, 7, 14, 106, 183, 191, 193, 215 anarcho-capitalism, 14, 184 Andes, 96, 129 anthropology, 124 anti-feminism, 226 anti-Semitism, 225, 262 anti-statism, 42, 184, 215–16 antidotes, 52–4 Apollo 11 mission (1969), 153 Apple, 7, 125 apps and, 141 Card, 150 data, 108 Pay, 78, 125, 130 Super Bowl advert (1984), 8 apps, 1, 2, 7, 17, 27, 40, 125, 139–51, 232 data collection, 165–6 interfaces, 139–51 ArcelorMittal, 24 Aria, 169 Armer, Paul, 105–6 Art of Not Being Governed, The (Scott), 228 artificial intelligence (AI), 8, 11, 17, 108, 114, 147, 153–72, 175, 252 biases, 167 credit-scoring, 17, 160, 162–3, 167, 168, 170 data analysis, 108, 153–72 interfaces, 146–8 Asimov, Isaac, 161, 170 Assange, Julian, 183 Assemblage, New York City, 226 Astana, Kazakhstan, 227–9 Athens, Greece, 131 ATMs (automatic teller machines), 32, 34, 35, 36, 39, 48, 61, 62, 248 CIT industry, 62 closure of, 32, 39, 48, 83, 84, 85, 132 crises and, 36, 244 note denominations, 62 profitability, 39 Atwood, Margaret, 117 austerity, 193 Australia, 118 Austria, 7, 109 authoritarianism, 111, 118, 168 automatic payments, 149 automation, 9, 10, 33, 41–2, 99, 123, 126, 133, 137, 142–3, 232 apps, 139–51, 232 artificial intelligence, 153–72 automation of, 153–4 surveillance, 112, 114, 153–72 aviaries, 171 Azure cloud, 233 Back to the Future (1985 film), 198 Baidu, 7, 178 Bangladesh, 32 Bank for International Settlements, 79 Bank Identification Codes (BIC), 76 Bank of America, 38, 75, 147 Bank of England, 40, 242, 243 banking sector, 38–9, 65–82 accounts, 31, 35, 46, 66, 132, 205–6 artificial intelligence, 153–72 ATMs, see ATMs bailouts, 113 centralisation of power, 15, 180–83 closures of ATMs/branches, 32, 39, 48, 83, 84, 85, 132 cloudmoney, 64, 66–82 data, 108–9, 156–7 deposits, 66–7, 69 electronic trading platforms, 158 exiting, 39, 48, 61, 63, 68, 83 federated frontline, 136–8, 147 high-street banks, 39–40, 158 interbank markets, 138, 231 interfaces, 138–51 international transfers, 74–6, 108, 179 Internet banking, 76–7, 139 investment banks, 6, 17, 22–3, 26, 113, 157–8 loans, 70–71, 107, 159 money creation, 59–63, 67–72, 202 operating system, 141–2 secondary system, 50, 63–4 sub-currencies, 72–3 transfers, 72–8 banknotes, 59–63 cash-in-transit companies, 62 counterfeiting of, 60–61 denominations, 62 polymer, 65 Bannon, Steve, 225, 234 Barclays, 38, 72–3, 116 base money, 69 beggars, 115 Better Than Cash Alliance, 34–5, 37, 45, 93, 96, 131 biases, 167 bicycles, 89, 90 Big Bouncers, 114, 170 Big Brother, 113–15 Big Butlers, 114, 170–71 Bill & Melinda Gates Foundation, 44–5 biometrics, 44, 150, 169 biotechnology, 10, 11 Bitcoin, 13–15, 16, 184–5, 187–210, 211–18 blockchain technology, 13–15, 185, 189–90, 195, 197–202 Cash fork (2017), 214, 217 climate change and, 226 as commodity, 206–10, 213–14, 217, 246, 256 countertradability, 209–10, 213, 256–7 decentralisation, 14, 15, 189–94, 196, 258 fixed supply, 191–3, 206 gold comparison, 192–3, 207, 214 millenarianism and, 212, 213 mining, 203–4, 212–13 politics and, 191–3, 211–12, 215–17 proof-of-work, 203–4 public addresses, 194–5 speculation on, 213 syncing, 195–7, 200–202, 231 techno-clerks, 194–5, 196–7, 202–4, 212–13 wallets, 194–5 White Paper (2008), 13, 184–5, 187, 191 Bitcoin Cash, 214–15, 217, 226 Bitcoin Gospel, The (2015 film), 211 Blade Runner 2049 (2017 film), 10 blockchain, 13–15, 185, 189–90, 195, 197–202, 219–26, 258–60 decentralisation, 14, 15, 189–94, 196, 230, 234, 255, 258–60 distributed ledger technology (DLT), 229–46, 258 mutual credit systems and, 260 blood diamonds, 222 Bloomberg, 109 Body of Glass (Piercy), 150 BP, 24, 26, 28 bread-making machine, 164 Bridges, Thomas, 65 British Airways, 29–30 British Bankers Association, 83 Brixton Market, London, 177 Bulgaria, 13 Bundesbank, 35, 47 bureaucracy, 179 Burning Man, 101 busking, 90–91 Buterin, Vitalik, 221, 223 California Ideology, 180 Camberwell, London, 128 Cambridge Symposium on Economic Crime, 111 Cambridge University, 97 Canada, 35 Canary Wharf, London, 17–18, 20, 41, 62, 211 cannabis, 101–3 capitalism, 2, 10, 47, 65, 98–9, 173–4 blockchain and, 15–16, 231–46, 256, 258 charging up, 22–5 core vs. periphery, 28, 248 giant parable, 54–5, 63–4, 188 growth, 123, 126–7, 249 surveillance, 33, 114, 180, 250 carbon credits, 222 CARE, 131 cargo cults, 255–6 Caritas, 131 carnivals, 257 cars, 87–90 cash, 22, 29–48 banking sector and, see banking sector banknotes, 59–63 central banks and, 42–5, 254 crime and, 36, 42–3, 45, 81, 112 crises and, 36, 61 cycle, 63, 68 demonetisations, 43 fintech industry and, 41–2 hoarding, 36 issuance of, 59–63 libertarians and, 215 payments companies and, 39–41 refusal of, 29–30, 40, 41, 43, 84, 128, 133 social class and, 91–9 tax evasion and, 42, 43, 45, 46 thresholds, 42 transactional usage, 36 cash-in-transit companies, 62 ‘cash or card?’

The Asian Financial Crisis 1995–98: Birth of the Age of Debt
by Russell Napier
Published 19 Jul 2021

The more the local central banks had to intervene to assure the rise of their currencies in line with the US dollar, the more the money creation process outlined earlier would be reversed. In their intervention, the central banks would shrink bank reserves and thus constrain the ability of the local commercial banks to lend and create money. In May 1995, few considered that such a dynamic would occur. It was argued that the flow of capital into Asia was so large that even if the US dollar was rising, there was still likely to be intervention to slow the appreciation of the local currency and thus the money creation dynamic would still be intact. As it turned out, the US dollar had reached a multi-year low in early 1995 and had begun a prolonged appreciation in value that played a key role both in forcing central banks to defend their exchange rates and in slowing capital flows into the region.

…

Today we might call this action by the central banks quantitative easing with the central banks’ balance sheets creating ever more commercial bank reserves as its holdings of government debt, in this case the debt primarily of the US government, expanded. In Asia, the local commercial banking systems responded to this increase in their available reserves in the way that one would expect, and they accelerated their loan growth and their money creation. That commercial banks, and not central banks, create most of the money we spend every day is a fact that is still not fully understood properly by all investors. The most eloquent description of how they do so still comes from the pen of John Kenneth Galbraith: The process by which banks create money is so simple that the mind is repelled.

…

In normal circumstances a strong US dollar would have been negative for the local liquidity conditions as the local central banks intervened to force their currencies higher in line with the US currency. However, the rise of the US dollar and the decline of the yen accelerated the ‘carry’ trade capital inflows into Asia and meant that, even in a rising US dollar environment, there were rapid rises in foreign exchange reserves and money creation. These capital flows more than offset the negatives for the region associated with a rising US dollar. The problem was that they were reliant upon the Japanese banks being prepared to lend yen for such speculation, and also that the borrower was not making capital losses on their investments in Asia.

Basic Income: A Radical Proposal for a Free Society and a Sane Economy
by Philippe van Parijs and Yannick Vanderborght
Published 20 Mar 2017

This idea has usually been dismissed as relying on simplistic economics and as overlooking the deleterious effect of the inflationary pressures its implementation would generate. However, Â�there are two sound rationales for funding Â�either a very modest or a temporary basic income through money creation.43 The first one, articulated most systematically by Joseph Huber, supposes that central banks can regain, at the expense of private banks, the monoÂ�poly of money creation. They can then issue drawing rights to all residents. If Â�these match the annual growth of the real economy, they Â�will not cause inflation. If they exceed it, they Â�will, but a moderate, non-Â�accelerating inflation rate is arguably a good Â�thing to “grease” cyclical fluctuations and structural change.

…

The minor one is the risk of inflation. It can be dealt with very briefly. Funding a basic income by redistributing purchasing power within some population, BASIC INCOME as in most proposals, cannot be expected to generate an overall inflationary pressure, as would funding it by transfers from abroad or by money creation. However, some local inflationary pressure can be expected. To an extent that �will vary greatly with the choices made as to the level of the basic income, what it replaces, and how exactly it is funded, � there � will be some re� distribution from relatively high earners to relatively low earners, especially part-�time workers, and to the beneficiaries of low social transfers.

…

They amount to funding the basic incomes of the Cherokee and the Macau residents out of an unintended donation by outsiders, American and Chinese gamblers, respectively. If Â�there is, next to natuÂ�ral resources, any major way of funding a basic income without taxation, it can only be through money creation. From an early 152 Economi cally Sus tai na ble? Fund i ng, E xper i men ts, and Trans itions stage, several proponents of a basic income advocated its funding through printing fresh currency. Thus, in the 1930s, Major Douglas’s “Social Credit” movement in the United Kingdom and Jacques Duboin’s “distributist” movement in France (both discussed in chapter 4) shared the conviction that the best way to prevent the crises of overproduction generated by technical proÂ�gress was to distribute purchasing power straight to the population instead of relying on the operation of the private banking system.

The Lords of Easy Money: How the Federal Reserve Broke the American Economy
by Christopher Leonard
Published 11 Jan 2022

The extraordinary had become routine. The distorted had become ordinary. The massive bailout had become the tool of daily maintenance. “They’re trapped!” he said about the Fed. What he meant was that the Fed was trapped by its own past actions. It was committed to a level of intervention and money creation that would have once seemed wildly improbable. This was what it took to keep basic markets functioning. Hoenig had been portrayed, during 2010, as an inflexible person, even an unsophisticated person, when he voted against quantitative easing and 0 percent rates. One of his chief warnings was that quantitative easing would be very difficult to undo once it started.

…

Some of the most important emergency measures the Fed had deployed during the spring would now be made semipermanent. While the Main Street Lending Program was sputtering to a quiet end, other parts of the bailout would endure. The Fed would keep interest rates at zero, and would now conduct $120 billion in quantitative easing every month for the foreseeable future. That was about a decade’s worth of money creation, at historic rates, conducted every thirty days. It would continue, Powell said, until “substantial further progress has been made” toward healing the economy. When that might occur was anyone’s guess. Powell said the Fed would continue to intervene as long as price inflation didn’t rise above 2 percent for an extended period of time, an eventuality that he said was unlikely in the near future.

…

They could let the risky structures fall, or intervene once again with more quantitative easing and emergency programs. Powell faced a similar choice when money rushed out of risky assets in late 2018, and he chose the path of creating more money to soothe markets. This encouraged more speculation and asset inflation. Hoenig believed that the Fed would almost certainly once again choose the path of money creation if debt prices rose and markets teetered. “You see the complications we’re building for ourselves going forward,” Hoenig said. Hoenig kept churning out his essays and his white papers. He was seventy-four years old, and at the end of his career his ideas didn’t seem much more popular than they were before.

Magic Internet Money: A Book About Bitcoin
by Jesse Berger
Published 14 Sep 2020

This effect suggests that the first recipients of newly created money, by virtue of their proximity to the point of origin, are conveniently positioned to benefit from its creation. For all intents and purposes, spending or investing new currency before it permeates through the economy raises prices for those who are the last to use it. This means that being close to the source of money creation is a distinct advantage, while those who are farthest from it are disadvantaged. Furthermore, the use of national currencies is enforced by legal tender laws, which for many countries dictate that local fiat must be accepted as a means of payment for debts, public charges, taxes, and dues. This is the antithesis of fair competition and free market principles, since it self-servingly deters the use of alternatives.

…

Isabel Allende, Zorro The opposing styles of monetary governance reviewed in this chapter could be summed up as follows: whereas fiat is building walls, Bitcoin is building bridges. The legacy monetary system has established moats to legally insulate and institutionalize its control over zero-cost money creation, distribution, and governance. On the other hand, Bitcoin is costly to produce, its value is open to the public for discovery, its distribution is fulfilled by the collaborative power of free markets, and its governance is represented and enforced by its constituents. Those who support, transact with, and value Bitcoin do so at their own risk, as has been the case since its inception.

The Currency Cold War: Cash and Cryptography, Hash Rates and Hegemony
by David G. W. Birch
Published 14 Apr 2020

I am wondering if we need to explore ways to increase economic activity within communities at the expense of inter-community transaction costs as a response to inequality and the unrest that it may cause. This has several implications, because if communities rather than individuals become central to money creation, then these currencies will be imbued with the values of the communities that create them. New York, New York The idea of cities creating currencies that are optimized to meet their requirements rather than those of the nation state may seem far-fetched. But look at the current proposal from New York State Assembly member Ron Kim, Senator Julia Salazar and Cornell law professor Robert Hockett for what has been called a ‘public Venmo’ for New York.

…

Yao described what has been dubbed the two tier approach, noting that to offset the shock an independent digital currency system would send through the current banking system (and to protect the investments in infrastructure made by commercial banks), one possibility might be to incorporate digital currency wallet attributes into the existing commercial bank account system, ‘so that electronic currency and digital currency are managed under the same account’ (Knight 2017). I understand his rationale completely. The Chinese central bank wants the efficiencies that come with having a digital currency but also understands the implications of removing the exorbitant privilege of money creation from the commercial banks. If the commercial banks cannot create money by creating credit, then they can only provide loans from their deposits. Imagine if Bitcoin were the only currency in the world. I would still need to borrow a few of them to buy a new car, but since Barclays cannot create them, it must content itself with lending me Bitcoins it has taken in deposit from other people.

…

Having the same monetary policy for Spain and Slovakia will be nothing compared with having the same monetary policy for Earth and Alpha Centauri Planet 9. The money of the global village will not be limited to a few national or supranational central banks. The technologies discussed in part 2 mean that literally anyone can now create money. Communities rather than individuals will become central to money creation, and these currencies will be imbued with the values of the communities that create them. I might choose to save Islamic e-Dinars that are backed by gold. You might choose to save kWh$$$ that are backed by renewable electricity. We will still be able to do business together, because exchanges on our AI smartphones shall make it so.

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth
by Michael Jacobs and Mariana Mazzucato
Published 31 Jul 2016

In practice, in the UK and European Union, legal and institutional arrangements are designed to prevent the expansion of the money supply through government spending. But many economists would accept the fundamental argument that monetary expansion is key to achieving sufficient nominal demand growth, and that state money creation may be preferable to private bank credit creation. For a good discussion, see J. A. Turner, Between Debt and the Devil: Money, Credit, and Fixing Global Finance, Princeton, NJ, Princeton University Press, 2015. 36 The original account of market failure is in K. Arrow, An Extension of the Basic Theorems of Classical Welfare Economics, paper presented at the Second Berkeley Symposium on Mathematical Statistics and Probability, Berkeley, 1951. 37 G.

…

As Marvin Goodfriend has put it in relation to the ending of the gold-dollar standard underpinning international monetary relations in the early 1970s: ‘With the collapse of Bretton Woods, for the first time in modern history, all the world’s currencies were de-linked from gold or any other commodity. The lack of any formal constraint on money creation contributed to nervousness about inflation.’13 Orthodox economists, informed by the quantity theory of money, felt that monetary policy-makers should ensure that the quantity of money available in the economy did not contribute to inflation. The push to mandate central banks to target inflation can be understood as a way to establish some anchor for the value of ‘fiat money’.

…

Wray, Why Minsky Matters: An Introduction to the Work of a Maverick Economist, Princeton, NJ, Princeton University Press, 2015. 9 Wray, Modern Money Theory. 10 It should be noted that within the European Union the Maastricht Treaty places legal limits on the ability of governments to increase public spending through money creation; but in principle those countries within the EU which have retained their own currencies could do so. 11 Wray, Modern Money Theory. See also L. R. Wray, Understanding Modern Money: The Key to Full Employment and Price Stability, Cheltenham, Edward Elgar, 1998; E. Tymoigne and L. R. Wray. Modern Money Theory 101, Working Paper No. 778, Levy Economics Institute, November 2013. 12 G.

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis
by James Rickards
Published 15 Nov 2016

There are other snowflakes. The Dollar Shortage Gold is not the only money in short supply; there is a global dollar shortage also, and it grows worse by the day. An acute phase of the dollar shortage will manifest soon as defaults, deflation, and bank failures. The reflationary policy response will include money creation, debt monetization, and ice-nine lockdowns of financial institutions and money market funds. The conflict between countervailing forces of deflation and reflation is vast, and will be highly destructive of accumulated wealth. The suggestion of a dollar shortage may seem strange. The Federal Reserve created more than $3.3 trillion of new money between 2008 and 2015.

…

This makes sense. When bond yields are negative, gold is more attractive because gold has no yield. A greater negative yield on TIPS should correlate with a higher dollar price for gold, and it does. Negative real yields, and a higher dollar price of gold, are early warning signs of inflation. Given massive money creation by central banks around the world, higher inflation expectations are reasonable. The odd man out in the trio is the ten-year Treasury note. Principal on these notes is not inflation protected, so investors seek higher coupons or buy notes at a discount in order to gain inflation protection. The yield to maturity on a ten-year note represents some combination of credit risk (typically low) and inflation risk (variable based on economic conditions).

…

Central banks assumed they could normalize rates before the next panic struck. The time to normalize rates was late 2009. Now it’s too late. The next crisis will come before the current easing cycle has been reversed. Central banks will be defenseless except through the use of massive new quantitative easing programs. This new money creation binge will test the outer limits of confidence in central bank money. In addition to this list of catalysts from gold, debt, deflation, and default, there are exogenous threats that emerge in geopolitical space and spill over quickly into financial panics. These threats include conventional wars, cyberwars, assassinations, prominent suicides, power grid outages, and terror attacks.

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis
by Martin Wolf
Published 24 Nov 2015

Piergiorgio Alessandri and Andrew Haldane of the Bank of England have estimated that the total value of the support offered to the crisis-hit financial system by the relevant central banks and governments, as of mid- to late-2009, was 18 per cent of Eurozone GDP, 73 per cent of US GDP, 74 per cent of UK GDP and, taken together, 25 per cent of world GDP. The support was extremely heterogeneous in nature, consisting of direct capital infusions, money creation, used to purchase a wide range of different assets, guarantees and insurance.42 According to the International Monetary Fund, the direct impact on gross public debt of post-crisis support for the financial sector up to early 2012 was 38.5 per cent of GDP for Ireland, 6.7 per cent for Belgium, 5.7 per cent for the UK, 4.9 per cent for the Netherlands and 3.2 per cent for the US.43 Yet it is impossible to measure the scale of the measures either by the sums promised or by the far smaller sums used.

…

Second, 100 per cent reserve banking would eliminate the possibility of bank runs: banks would be completely safe. Third, if the government financed itself by issuing money at zero interest, rather than borrowing at interest, debt interest and net government debt would fall dramatically. Indeed, in almost all countries, government would become a net creditor. Finally, since money creation would no longer need private debt, the level of such debt could fall dramatically. Indeed, in the transition, the government could use the excess of the total supply of money over its own debts to fund a dramatic decline in private debt, through buy-backs. I would add to these benefits that the extinction of conventional bank-created money would almost certainly shrink the financial sector, reduce the aggregate incomes earned by bankers and so improve the distribution of income.

…

Krishna Guha, ‘Action to Address “root” Causes, Financial Times, 15 October 2008. 41. Paulson, On the Brink, pp. 349–50. 42. Piergiorgio Alessandri and Andrew Haldane, ‘Banking on the State’, November 2009, http://www.bankofengland.co.uk/publications/Pages/speeches/2009/409.aspx, p. 23. In the case of the US, Mr Haldane listed $3.8tn in money creation and $0.2tn in ‘collateral swaps’, both from the Federal Reserve. He also listed $2.1tn in ‘guarantees’, $3.7tn in ‘insurance’ and $0.7tn in ‘capital infusions’ (from the TARP), all of which came from the government. The total came to $10.5tn. 43. International Monetary Fund, Fiscal Monitor, April 2012, www.imf.org, Table 7. 44.

Stigum's Money Market, 4E
by Marcia Stigum and Anthony Crescenzi
Published 9 Feb 2007

PART ONE Some Fundamentals Copyright © 2007, 1990, 1983, 1978 by The McGraw-Hill Companies, Inc. Click here for terms of use. CHAPTER 2 Funds Flows, Banks, and Money Creation Copyright © 2007, 1990, 1983, 1978 by The McGraw-Hill Companies, Inc. Click here for terms of use. As preface to a discussion of banking, a few words should be said about the U.S. capital market, how banks create money, and the Fed’s role in controlling money creation. This will provide background for Chapters 6 and 7, which cover domestic and Eurobanking, and Chapter 9, where we examine in greater detail the Fed’s role. Roughly defined, the U.S. capital market is composed of three major parts: the stock market, the bond market, and the money market.

…

To the many market participants who gave, with grace and enthusiasm, their time that I might write this story Marcia Stigum To all the survivors, who despite obstacles and challenges in their daily lives, each day find the inner strength to endure and to excel To my beautiful wife, Cynthia, and our enchanting daughters, Brittany, Victoria, and Isabella To my nurturing parents, Anita and Joseph, my brother Joseph and my sisters Theresa, Gina, and Nicole, to all of my family and friends, and to the great city of New York Anthony Crescenzi CONTENTS PREFACE ACKNOWLEDGMENTS Chapter 1 Introduction PART 1 SOME FUNDAMENTALS Chapter 2 Funds Flows, Banks, and Money Creation Funds Flows in the U.S. Capital Market Financial Intermediaries Banks, a Special Intermediary The Federal Reserve’s Role Extending the Fed’s Reach Review in Brief Chapter 3 The Instruments in Brief Dealers and Brokers U.S. Treasury Securities Federal Agency Securities Federal Funds Repos and Reverses Eurodollars FRAs Commercial Paper Interest-Rate Swaps Options Certificates of Deposit and Deposit Notes Bankers’ Acceptances Loan Participations Medium-Term Notes Municipal Notes Mortgage-Backed, Pass-Through Securities Review in Brief Chapter 4 Bond Valuation Zero-Coupon Bonds Coupon-Bearing Bonds Bond Equivalent Yield The Yield Curve Fluctuations in a Bond’s Price Price Volatility Advanced Topics Chapter 5 Duration and Convexity Duration Macaulay’s Duration Modified Duration The Yield Value of The Price Value of an 01 Immunizing a Portfolio Convexity Review in Brief PART 2 THE MAJOR PLAYERS Chapter 6 The Banks: Domestic Operations A Money Market Bank Managing a Money Market Bank Today’s Changed Environment Banking as Four Businesses The Business of Trading Corporate Finance The Domestic Treasury The Distribution Business Bank Capital Adequacy Bank Regulation Industrial Loan Corporations Bank Holding Companies Review in Brief Appendix to Chapter 6: The Banking Acts That Matter Chapter 7 The Banks: Eurodollar Operations Eurodollar Transactions in T-Accounts A Eurodollar Loan A Eurodollar Placement with a Foreign Bank History of the Market Eurocurrency Deposits The Market Today Eurodollar Banking Centers The Preeminence of London Size of the Market The Major Players: Global Banks Overview of Bank Euro Operations LIBOR, LIBID, LIMEAN Running a Bank’s Eurobook The Interbank Placement Market The Eurodollar Time-Deposit Market Risks and Limits Medium-Term Money Euro Lending Eurodollar Bank Loans Syndicated Loans The Eurobond Market Running a Eurodollar Book The Role of Eurodollar CDs The Eurodollar Placement Book The Use of Off–Balance Sheet Items FRAs Interest-Rate Swaps Off–Balance Sheet Items as Substitutes Eurocurrency Swaps Bank of England Regulation Sovereign Risk in London Lender of Last Resort Foreign Bank Operations in the United States International Banking Facilities (IBFs) Review in Brief Chapter 8 The Treasury and the Federal Agencies U.S.

…

It is intended for people working in banks, in dealerships, and in other financial institutions; for people running liquidity portfolios; and for accountants, lawyers, students, and others who have an interest in the markets discussed. The book begins with an introduction to what goes on in fixed-income financial markets—financial intermediation and money creation—plus an introduction to how fixed-income securities work, including various concepts of yield, the meaning and importance of the yield curve and the messages embedded in it, and the concepts and calculation of duration and convexity. Next, the book analyzes the operations (domestic and Eurodollar) of money center banks, of money market dealers and brokers, of the Federal Reserve, and of managers of liquidity portfolios.

The Democracy Project: A History, a Crisis, a Movement
by David Graeber
Published 13 Aug 2012

This view came to be widely embraced by televange-lists like Pat Robertson, who referred to supply-side economics as “the first truly divine theory of money creation.” Gilder took it further, arguing that contemporary information technology was allowing us to overcome our old materialistic prejudices and understand that money, like power, is really a matter of faith—faith in the creative power of our principles and ideas.18 Others, like the anonymous Bush aide, extend the principle to faith in the decisive application of military force. Both recognize an intimate link between the two (as do the heretics of the right, Ayn Rand’s materialist acolytes and Ron Paul–style libertarians, who object to both the current system of money creation and its links to military power).

…

During the heyday of the bubble economy of the 1990s, an endless stream of new radical theoretical approaches emerged in academia—performance theory, Actor-Network Theory, theories of immaterial labor—all converging around the theme that reality itself is whatever can be brought into being by convincing others that it’s there.o Granted, one’s average entertainment executive might not be intimately familiar with the work of Michel Foucault—most have probably barely heard of him, unless they were literature majors in college—but neither is the average churchgoing oil executive likely to be familiar with the details of Gilder’s theories of money creation. These are both, as I remarked, the ultimate theological apotheoses of habits of thought that are pervasive within what we called “the 1 percent,” an intellectual world where even as words like “bribery” or “empire” are banished from public discourse, they are assumed at the same time to be the ultimate basis of everything.

Money and Government: The Past and Future of Economics
by Robert Skidelsky
Published 13 Nov 2018

Without freedom to import and export gold, gold could not serve as an international means of payment; without rules to limit the issue of paper money to the quantity of their gold reserves, central banks could easily run out of gold. The gold standard was designed to force governments and countries to ‘live within their means’. The fact that it put money creation beyond the reach of governments was widely seen as its chief virtue. As Herbert Hoover put it in 1933: ‘we have gold because we cannot trust governments’. The gold standard also forced countries to live within their means by depriving them of gold if they didn’t. As David Hume had pointed out, a country which imported more than it exported would, literally, run out of money.

…

Secondly, by 1900 the gold standard was on the way to becoming a ‘managed’ standard, as central banks started to use changes in bank rate, variations in reserve requirements, open-market operations and central bank co-operation to offset gold flows. 25 It was increasingly recognized that commercial banks could manufacture money by creating bank deposits. But as long as the central bank had the means of regulating the rate of money creation by the commercial banks, the existence of credit money seemed to pose no danger to its ability to control prices. The heroic faith in the QTM as a short-run stabilization policy instrument, even though the QTM was palpably untrue in the shortrun, is explained by the urgency of its therapeutic ambitions.

…

To enshrine them at the heart of the EU signified the ambition of its founding fathers to create a state, or ‘political union’. But the state has not arrived. The competences of the EU’s central institutions, the scope of its rules, have been constantly expanded, but their accountability has not kept pace. Instead of democratic accountability there 375 A N e w M ac roe c onom ic s are rules against money creation, fiscal deficits, unfair competition and so on. But strong rules and weak states are a contradiction in terms. Complaints about the ‘democratic deficit’ have been growing and have exploded in powerful anti-European populist movements. The rules started to crumble as soon as they were put to the test in 2008–10.

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State
by Paul Tucker
Published 21 Apr 2018

James Buchanan, whom we first met in part II, advocated not only rules-based control of the supply of money but also a ban on leveraged private sector banking, which served no monetary purpose once an economy had migrated from a commodity (gold) standard to fiat money and so had autonomy in avoiding monetary shortages. He wanted the power of money creation to be reserved entirely for the state.3 Others, by contrast, positively embraced private money creation but wanted to keep the state out of it, allowing the normal rules of commercial life to operate without any safety net, described by Buchanan as “anarchy.”4 The real world in which we live involves both state money creation and private money creation, with the state underpinning the private system via deposit insurance and the lender of last resort. Whether a principled case exists for the involvement of independent central banks in that complicated world is exactly the kind of question that our Multiple-Mission Constraints (MMCs) are meant to help address.

…

One of the earliest steps toward our modern state was the demand of medieval parliaments to approve the king’s desire to levy extra taxes. It remains at the heart of the separation of powers. That separation would be undermined if the executive government could use a power to print money as a substitute for legalized taxation. If the executive branch controlled the money creation power, it would at the very least be able to defer its need to go to the legislature for extra “supply,” and at worst could inflate away the real burden of its debts to reduce the amount of taxation requiring parliamentary or congressional sanction. In other words, it could usurp the legislature’s prerogatives.

…

So Volcker’s normative stipulation must rest on something special about the nature of their interest in the financial system, which stems, essentially, from the place of banking in the monetary system and that of central banks in the banking system. Fractional-Reserve Banking: Private Liquidity Insurance and Money Creation An economy’s banking system provides liquidity insurance to the rest of the economy (to households and businesses). Banks do this by allowing customers to withdraw deposits on demand and to draw down committed lines of credit on demand. Their capability to provide this liquidity insurance stems from their deposit liabilities being treated by us (people and businesses) as money.

The Curse of Cash
by Kenneth S Rogoff
Published 29 Aug 2016

The word refers to the difference between the face value of coins minted by the government and the cost of inputs, including both materials and production costs. Unbacked paper fiat currency just takes the practice to a higher level. According to the Federal Reserve, it costs 12.3 cents to make a $100 bill and 4.9 cents to make a $1 bill.1 As seigniorage goes, Marco Polo’s description of paper money creation as alchemy was not far off. Between 2006 and 2015, the US government earned 0.40% of GDP per year by printing new notes and spending them. For 2015, it earned just under $70 billion, right on the 10-year average as a percentage of GDP. The European Central Bank earned 0.55% per year, which, benchmarked by 2015 GDP, would be roughly 60 billion euros ($66 billion).

…

It is all very civilized, and if the central bank has significant independence, the system is far more than window dressing, as we shall discuss at length in chapter 12. From an accounting point of view, however, the three-stage process boils down to the same thing as if the government just purchased goods directly with its money creation. (One can occasionally find autocratic and populist governments today that still sometimes do things the medieval way, dispensing with the niceties of open market operations and having the central bank ship truckloads of cash directly to the government to spend. The Kirchner era in Argentina (2003–2015) famously had little regard for central bank independence.)

…

The basic problem is that ramping up inflation takes time, because goods markets and labor markets adjust much more slowly than financial markets do. This differential makes it much harder to use modest shifts in monetary policy to significantly default on government debt. It is not as if the government can just push a money creation button and achieve surgically precise defaults through inflation. If the government appears to be starting a significant run-up in inflation, investors will start charging a premium immediately, long before inflation actually rises. Put differently, the slow adjustment of goods markets works in favor of a monetary policy aimed at short-run stimulus, precisely because prices and wages take time to adjust.

The City
by Tony Norfield

If the total flows for individual banks do not balance, the banks with surplus funds usually lend them out to those with deficits.9 How does this extra $200,000, or any of the other funds created by banking operations, tally with the production of value in the economy? Wouldn’t economic life be much easier if all you had to do was to use the credit that the bank has just created for you? There is a catch, of course. The catch is that while money creation in the banking system offers flexibility – you do not need to have already earned the money you spend today – there is still a potential reckoning with the production of value. It is a potential reckoning because the timing is not pre-determined. Depending on your status in the world economy, the reckoning might be a long way off.10 The link between value production and what credit creation enables you to buy is not really broken, only stretched – and the risk, especially for a weak country, is that the stretched elastic will snap back.

…

However, these are incomplete observations, and the impression is given elsewhere that the credit system plays the role of gathering up existing surplus funds (e.g., Karl Marx, Capital, Volume 1, London: Lawrence & Wishart, 1974, p. 587). Suzanne de Brunhoff has offered the most systematic account of Marx’s views on bank credit creation, something rarely discussed. See her Marx on Money, New York: Urizen Books, 1976, especially p. 94. Money creation is specifically a banking operation. Non-bank financial companies cannot create deposits. Mike Hall has an interesting critique of the Marxist literature for ignoring bank credit creation in his essay ‘On the Creation of Money and the Accumulation of Bank-Capital’, Capital & Class, 48, Autumn 1992. 8There are often several ways of organising transfers of funds between accounts, but this is the basic mechanism. 9The Bank of England has produced a very helpful explanation of credit creation in the modern economy, one that notes how economics textbooks are misleading when they give the example of a bank lending out 90 per cent of an original deposit and keeping back 10 per cent as a reserve, etc.

…

Mike Hall has an interesting critique of the Marxist literature for ignoring bank credit creation in his essay ‘On the Creation of Money and the Accumulation of Bank-Capital’, Capital & Class, 48, Autumn 1992. 8There are often several ways of organising transfers of funds between accounts, but this is the basic mechanism. 9The Bank of England has produced a very helpful explanation of credit creation in the modern economy, one that notes how economics textbooks are misleading when they give the example of a bank lending out 90 per cent of an original deposit and keeping back 10 per cent as a reserve, etc. BoE, ‘Money Creation in the Modern Economy’, Bank of England Quarterly Bulletin, Q1, 2014. Another BoE article describes the different interbank payments systems: ‘The Bank of England’s Real-Time Gross Settlement infrastructure’, Bank of England Quarterly Bulletin, Q3, 2012. 10On this point, see Chapter 8 especially. 11Marx, Capital, Volume 3, Chapter 29. 12It is also possible for some capitalists to get securities as a form of indirect payment for services to a company, as with some start-up ventures.

The Future of Money
by Bernard Lietaer
Published 28 Apr 2013

While it was much mom convenient to exchange the rounds instead of the chickens on market days, the new game also had the unintended side effect of actively discouraging me spontaneous cooperation that war traditional in the village. Instead, me new money game was generating a systemic undertow of competition among all the participants. This is how today's money system pits the participants in the economy against each other. This story isolates the role of interest - the eleventh round - as part of the money creation process, and its impact on the participants. When the bank creates money by providing you with your Pound 100,000 mortgage loan, it creates only the principal when it credits your account. However, it expects you to bring back Pound 200,000 over the next twenty years or so, if you don't, you will lose your house.

…

This is the convoluted mechanism by which the deal struck between governments and the banking system is implemented, and why 'your' money ultimately involves the entire banking system of your country. Money and debt are therefore literally the two sides of the same coin. If we all were to repay all our debts, money would disappear from our world, because the entire process of money creation illustrated in the 'money alchemy' would reverse itself. Reimbursing all the loans (the left side of the graph in the sidebar) would indeed automatically use up all the deposits (on the right side). Even the central bank's high-powered money would evaporate if the government were able to repay its debts.

…

'There have been two major changes, the first at the end of the Middle Ages when the printing of paper began to supplement the minting of coins, and the second in our own time when electronic money transfer was invented."" We know in retrospect that the first change enabled banks to take away from ruling sovereigns the lead role in money creation, but what will the second change create? A titanic struggle has begun in relation to the control of emerging forms of money. Banks are now acting mostly like computerised telecommunications companies. But companies involved in telecommunications, computer hardware and software, credit card processing, Internet shopping, even cable television, have also discovered that they can perform many of the services of the banks.

Prosperity Without Growth: Foundations for the Economy of Tomorrow
by Tim Jackson
Published 8 Dec 2016

Proposals for such systems are currently under consideration in Iceland and in Switzerland.40 ‘When economists of the calibre of Simons, Fisher, Friedman, Keynes and Bernanke have all explicitly argued for a potential role for [sovereign money], and done so while believing that the effective control of inflation is central to a well-run market economy’, argues Adair Turner in a characteristically guarded tone, ‘we would be unwise to dismiss this policy option out of hand’.41 What’s at stake here is the nature of money itself as a vital social good. Money facilitates commercial exchange; it provides the basis for social investment; it has the power to stabilise or destabilise the economy. Handing the power of money creation over to commercial interests is a recipe for financial instability, social inequality and political impotence. Reclaiming that right in the national interest is a powerful tool in the struggle for a lasting and inclusive prosperity. The economy of tomorrow The boom and bust economy of the last century has created financial instability, increased social inequality and led to environmental degradation and resource depletion.

…

INDEX Locators in italic refer to figures absolute decoupling 84–6; historical perspectives 89–96, 90, 92, 94, 95; mathematical relationship with relative decoupling 96–101, 111 abundance see opulence accounting errors, decoupling 84, 91 acquisition, instinctive 68 see also symbolic role of goods adaptation: diminishing marginal utility 51, 68; environmental 169; evolutionary 226 advertising, power of 140, 203–4 Africa 73, 75–7; life-expectancy 74; philosophy 227; pursuit of western lifestyles 70; growth 99; relative income effect 58, 75; schooling 78 The Age of Turbulence (Greenspan) 35 ageing populations 44, 81 agriculture 12, 148, 152, 220 Aids/HIV 77 algebra of inequality see inequality; mathematical models alienation: future visions 212, 218–19; geographical community 122–3; role of the state 205; selfishness vs. altruism 137; signals sent by society 131 alternatives: economic 101–2, 139–40, 157–8; hedonism 125–6 see also future visions; post-growth macroeconomics; reform altruism 133–8, 196, 207 amenities see public services/amenities Amish community, North America 128 An Inquiry into the Nature and Causes of the Wealth of Nations (Smith) 123, 132 angelised growth see green growth animal welfare 220 anonymity/loneliness see alienation anthropological perspectives, consumption 70, 115 anti-consumerism 131 see also intrinsic values anxiety: fear of death 69, 104, 115, 212–15; novelty 116–17, 124, 211 Argentina 58, 78, 78, 80 Aristotle 48, 61 The Art of Happiness (Dalai Lama) 49 arts, Baumol’s cost disease 171–2 assets, stranded 167–8 see also ownership austerity policies xxxiii–xxxv, 189; and financial crisis 24, 42–3; mathematical models 181 Australia 58, 78, 128, 206 authoritarianism 199 autonomy see freedom/autonomy Ayres, Robert 143 backfire effects 111 balance: private interests/common good 208; tradition/innovation 226 Bank for International Settlements 46 bank runs 157 banking system 29–30, 39, 153–7, 208; bonuses 37–8 see also financial crisis; financial system basic entitlements: enterprise as service 142; income 67, 72–9, 74, 75, 76, 78; limits to growth 63–4 see also education; food; health Basu, Sanjay 43 Baumol, William 112, 147, 222, 223; cost disease 170, 171, 172, 173 BBC survey, geographical community 122–3 Becker, Ernest 69 Belk, Russ 70, 114 belonging 212, 219 see also alienation; community; intrinsic values Bentham, Jeremy 55 bereavement, material possessions 114, 214–15 Berger, Peter 70, 214 Berry, Wendell 8 Better Growth, Better Climate (New Climate Economy report) 18 big business/corporations 106–7 biodiversity loss 17, 47, 62, 101 biological perspectives see evolutionary theory; human nature/psyche biophysical boundaries see limits (ecological) Black Monday 46 The Body Economic (Stuckler and Basu) 43 bond markets 30, 157 bonuses, banking 37–8 Bookchin, Murray 122 boom-and-bust cycles 157, 181 Booth, Douglas 117 borrowing behaviour 34, 118–21, 119 see also credit; debt Boulding, Elise 118 Boulding, Kenneth 1, 5, 7 boundaries, biophysical see limits (ecological) bounded capabilities for flourishing 61–5 see also limits (flourishing within) Bowen, William 147 Bowling Alone (Putnam) 122 Brazil 58, 88 breakdown of community see alienation; social stability bubbles, economic 29, 33, 36 Buddhist monasteries, Thailand 128 buen vivir concept, Ecuador xxxi, 6 built-in obsolescence 113, 204, 220 Bush, George 121 business-as-usual model 22, 211; carbon dioxide emissions 101; crisis of commitment 195; financial crisis 32–8; growth 79–83, 99; human nature 131, 136–7; need for reform 55, 57, 59, 101–2, 162, 207–8, 227; throwaway society 113; wellbeing 124 see also financial systems Canada 75, 206, 207 capabilities for flourishing 61–5; circular flow of the economy 113; future visions 218, 219; and income 77; progress measures 50–5, 54; role of material abundance 67–72; and prosperity 49; relative income effect 55–61, 58, 71, 72; role of shame 123–4; role of the state 200 see also limits (flourishing within); wellbeing capital 105, 107–10 see also investment Capital in the 21st Century (Piketty) 33, 176, 177 Capital Institute, USA 155 capitalism 68–9, 80; structures 107–13, 175; types 105–7, 222, 223 car industry, financial crisis 40 carbon dioxide emissions see greenhouse gas emissions caring professions, valuing 130, 147, 207 see also social care Cat on a Hot Tin Roof (Williams) 213 causal path analysis, subjective wellbeing 59 Central Bank 154 central human capabilities 64 see also capabilities for flourishing The Challenge of Affluence (Offer) 194 change see alternatives; future visions; novelty/innovation; post-growth macroeconomics; reform Chicago school of economics 36, 156 children: advertising to 204; labour 62, 154; mortality 74–5, 75, 206 Chile xxxiii, xxxvii, 58, 74, 74, 75, 76 China: decoupling 88; GDP per capita 75; greenhouse gas emissions 91; growth 99; life expectancy 74; philosophy 7; post-financial crisis 45–6; pursuit of western lifestyles 70; relative income effect 58; resource use 94; savings 27; schooling 76 choice, moving beyond consumerism 216–18 see also freedom/autonomy Christian doctrine see religious perspectives chromium, commodity price 13 Cinderella economy 219–21, 224 circular economy 144, 220 circular flow of the economy 107, 113 see also engine of growth citizen’s income 207 see also universal basic income civil unrest see social stability Clean City Law, São Paulo 204 climate change xxxv, 22, 47; critical boundaries 17–20; decoupling 85, 86, 87, 98; fatalism 186; investment needs 152; role of the state 192, 198, 201–2 see also greenhouse gas emissions Climate Change Act (2008), UK 198 clothing see basic entitlements Club of Rome, Limits to Growth report xxxii, xxxiii, 8, 11–16, Cobb, John 54 collectivism 191 commercial bond markets 30, 157 commitment devices/crisis of 192–5, 197 commodity prices: decoupling 88; financial crisis 26; fluctuation/volatility 14, 21; resource constraints 13–14 common good: future visions 218, 219; vs. freedom and autonomy 193–4; vs. private interests 208; role of the state 209 common pool resources 190–2, 198, 199 see also public services/amenities communism 187, 191 community: future visions of 219–20; geographical 122–3; investment 155–6, 204 see also alienation; intrinsic values comparison, social 115, 116, 117 see also relative income effect competition 27, 112; positional 55–61, 58, 71, 72 see also struggle for existence complexity, economic systems 14, 32, 108, 153, 203 compulsive shopping 116 see also consumerism Conference of the Parties to the UN Framework Convention on Climate Change (CoP21) 19 conflicted state 197, 201, 209 connectedness, global 91, 227 conspicuous consumption 115 see also language of goods consumer goods see language of goods; material goods consumer sovereignty 196, 198 consumerism 4, 21, 22, 103–4, 113–16; capitalism 105–13, 196; choice 196; engine of growth 104, 108, 120, 161; existential fear of death 69, 212–15; financial crisis 24, 28, 39, 103; moving beyond 216–18; novelty and anxiety 116–17; post-growth economy 166–7; role of the state 192–3, 196, 199, 202–5; status 211; tragedy of 140 see also demand; materialism contemplative dimensions, simplicity 127 contraction and convergence model 206–7 coordinated market economies 27, 106 Copenhagen Accord (2009) 19 copper, commodity prices 13 corporations/big business 106–7 corruption 9, 131, 186, 187, 189 The Cost Disease: Why Computers get Cheaper and Health Care Doesn’t (Baumol) 171, 172 Costa Rica 74, 74, 76 countercyclical spending 181–2, 182, 188 crafts/craft economies 147, 149, 170, 171 creative destruction 104, 112, 113, 116–17 creativity 8, 79; and consumerism 113, 116; future visions 142, 144, 147, 158, 171, 200, 220 see also novelty/innovation credit, private: deflationary forces 44; deregulation 36; financial crisis 26, 27, 27–31, 34, 36, 41; financial system weaknesses 32–3, 37; growth imperative hypothesis 178–80; mortgage loans 28–9; reforms in financial system 157; spending vs. saving behaviour of ordinary people 118–19; and stimulation of growth 36 see also debt (public) credit unions 155–6 crises: of commitment 192–5; financial see financial crisis critical boundaries, biophysical see limits (ecological) Csikszentmihalyi, Mihalyi 127 Cuba: child mortality 75; life expectancy 74, 77, 78, 78; response to economic hardship 79–80; revolution 56; schooling 76 Cushman, Philip 116 Dalai Lama 49, 52 Daly, Herman xxxii, 54, 55, 160, 163, 165 Darwin, Charles 132–3 Das Kapital (Marx) 225 Davidson, Richard 49 Davos World Economic Forum 46 Dawkins, Richard 134–5 de Mandeville, Bernard 131–2, 157 death, denial of 69, 104, 115, 212–15 debt, public-sector 81; deflationary forces 44; economic stability 81; financial crisis 24, 26–32, 27, 37, 41, 42, 81; financial systems 28–32, 153–7; money creation 178–9; post-growth economy 178–9, 223 Debt: The First Five Thousand Years (Graeber) 28 decoupling xix, xx, xxxvii, 21, 84–7; dilemma of growth 211; efficiency measures 84, 86, 87, 88, 95, 104; green growth 163, 163–5; historical perspectives 87–96, 89, 90, 92, 94, 95; need for new economic model 101–2; relationship between relative and absolute 96–101 deep emission and resource cuts 99, 102 deficit spending 41, 43 deflationary forces, post-financial crisis 43–7, 45 degrowth movement 161–3, 177 demand 104, 113–16, 166–7; post-financial crisis 44–5; post-growth economy 162, 164, 166–9, 171–2, 174–5 dematerialisation 102, 143 democratisation, and wellbeing 59 deposit guarantees 35 deregulation 27, 34, 36, 196 desire, role in consumer behaviour 68, 69, 70, 114 destructive materialism 104, 112, 113, 116–17 Deutsche Bank 41 devaluation of currency 30, 45 Dichter, Ernest 114 digital economy 44, 219–20 dilemma of growth xxxi, 66–7, 104, 210; basic entitlements 72–9, 74, 75, 76, 78; decoupling 85, 87, 164; degrowth movement 160–3; economic stability 79–83, 174–6; material abundance 67–72; moving beyond 165, 166, 183–4; role of the state 198 diminishing marginal utility: alternative hedonism 125, 126; wellbeing 51–2, 57, 60, 73, 75–6, 79 disposable incomes 27, 67, 118 distributed ownership 223 Dittmar, Helga 126 domestic debt see credit dopamine 68 Dordogne, mindfulness community 128 double movement of society 198 Douglas, Mary 70 Douthwaite, Richard 178 downshifting 128 driving analogy, managing change 16–17 durability, consumer goods 113, 204, 220 dynamic systems, managing change 16–17 Eastern Europe 76, 122 Easterlin, Richard 56, 57, 59; paradox 56, 58 eco-villages, Findhorn community 128 ecological investment 101, 166–70, 220 see also investment ecological limits see limits (ecological) ecological (ecosystem) services 152, 169, 223 The Ecology of Money (Douthwaite) 178 economic growth see growth economic models see alternatives; business-as-usual model; financial systems; future visions; mathematical models; post-growth macroeconomics economic output see efficiency; productivity ‘Economic possibilities for our grandchildren’ (Keynes) 145 economic stability 22, 154, 157, 161; financial system weaknesses 34, 35, 36, 180; growth 21, 24, 67, 79–83, 174–6, 210; post-growth economy 161–3, 165, 174–6, 208, 219; role of the state 181–3, 195, 198, 199 economic structures: post-growth economy 227; financial system reforms 224; role of the state 205; selfishness 137 see also business-as-usual model; financial systems ecosystem functioning 62–3 see also limits (ecological) ecosystem services 152, 169, 223 Ecuador xxxi, 6 education: Baumol’s cost disease 171, 172; and income 67, 76, 76; investment in 150–1; role of the state 193 see also basic entitlements efficiency measures 84, 86–8, 95, 104, 109–11, 142–3; energy 41, 109–11; growth 111, 211; investment 109, 151; of scale 104 see also labour productivity; relative decoupling Ehrlich, Paul 13, 96 elasticity of substitution, labour and capital 177–8 electricity grid 41, 151, 156 see also energy Elgin, Duane 127 Ellen MacArthur Foundation 144 emissions see greenhouse gas emissions employee ownership 223 employment intensity vs. carbon dioxide emissions 148 see also labour productivity empty self 116, 117 see also consumerism ends above means 159 energy return on investment (EROI) 12, 169 energy services/systems 142: efficiency 41, 109–11; inputs/intensity 87–8, 151; investment 41, 109–10, 151–2; renewable xxxv, 41, 168–9 engine of growth 145; consumerism 104, 108, 161; services 143, 170–4 see also circular flow of the economy enough is enough see limits enterprise as service 140, 141–4, 158 see also novelty/innovation entitlements see basic entitlements entrepreneur as visionary 112 entrepreneurial state 220 Environmental Assessment Agency, Netherlands 62 environmental quality 12 see also pollution environmentalism 9 EROI (energy return on investment) 12, 169 Essay on the Principle of Population (Malthus) 9–11, 132–3 evolutionary map, human heart 136, 136 evolutionary theory 132–3; common good 193; post-growth economy 226; psychology 133–5; selfishness and altruism 196 exchange values 55, 61 see also gross domestic product existential fear of death 69, 104, 115, 212–15 exponential expansion 1, 11, 20–1, 210 see also growth external debt 32, 42 extinctions/biodiversity loss 17, 47, 62, 101 Eyres, Harry 215 Fable of the Bees (de Mandeville) 131–2 factor inputs 109–10 see also capital; labour; resource use fast food 128 fatalism 186 FCCC (Framework Convention on Climate Change) 92 fear of death, existential 69, 104, 115, 212–15 feedback loops 16–17 financial crisis (2008) 6, 23–5, 32, 77, 103; causes and culpability 25–8; financial system weaknesses 32–7, 108; Keynesianism 37–43, 188; nationalisation of financial sector 188; need for financial reforms 175; role of debt 24, 26–32, 27, 81, 179; role of state 191; slowing of growth 43–7, 45; spending vs. saving behaviour of ordinary people 118–21, 119; types/definitions of capitalism 106; youth unemployment 144–5 financial systems: common pool resources 192; debt-based/role of debt 28–32, 153–7; post-growth economy 179, 208; systemic weaknesses 32–7; and wellbeing 47 see also banking system; business-as-usual model; financial crisis; reform Findhorn community 128 finite limits of planet see limits (ecological) Fisher, Irving 156, 157 fishing rights 22 flourishing see capabilities for flourishing; limits; wellbeing flow states 127 Flynt, Larry 40 food 67 see also basic entitlements Ford, Henry 154 forestry/forests 22, 192 Forrester, Jay 11 fossil fuels 11, 20 see also oil Foucault, Michel 197 fracking 14, 15 Framework Convention on Climate Change (FCCC) 92 France: GDP per capita 58, 75, 76; inequality 206; life-expectancy 74; mindfulness community 128; working hours 145 free market 106: financial crisis 35, 36, 37, 38, 39; ideological controversy/conflict 186–7, 188 freedom/autonomy: vs. common good 193–4; consumer 22, 68–9; language of goods 212; personal choices for improvement 216–18; wellbeing 49, 59, 62 see also individualism Friedman, Benjamin 176 Friedman, Milton 36, 156, 157 frugality 118–20, 127–9, 215–16 fun (more fun with less stuff) 129, 217 future visions 2, 158, 217–21; community banking 155–6; dilemma of growth 211; enterprise as service 140, 141–4, 147–8, 158; entrepreneur as visionary 112; financial crisis as opportunity 25; and growth 165–6; investment 22, 101–2, 140, 149–53, 158, 169, 208; money as social good 140, 153–7, 158; processes of change 185; role of the state 198, 199, 203; timescales for change 16–17; work as participation 140, 144–9, 148, 158 see also alternatives; post-growth macroeconomics; reform Gandhi, Mahatma 127 GDP see gross domestic product gene, selfish 134–5 Genuine Progress Indicator (GPI) 54, 54 geographical community 122–3 Germany xxxi; Federal Ministry of Finance 224–5; inequality 206; relative income effect 58; trade balance 31; work as participation 146 Glass Steagal Act 35 Global Commodity Price Index (1992–2015) 13 global corporations 106–7 global economy 98: culture 70; decoupling 86–8, 91, 93–5, 95, 97, 98, 100; exponential expansion 20–1; inequality 4, 5–6; interconnectedness 91, 227; post-financial crisis slowing of growth 45 Global Research report (HSBC) 41 global warming see climate change Godley, Wynne 179 Goldman Sachs 37 good life 3, 6; moral dimension 63, 104; wellbeing 48, 50 goods see language of goods; material goods; symbolic role of goods Gordon, Robert 44 governance 22, 185–6; commons 190–2; crisis of commitment 192–5, 197; economic stability 34, 35; establishing limits 200–8, 206; growth 195–9; ideological controversy/conflict 186–9; moving towards change 197–200, 220–1; post-growth economy 181–3, 182; power of corporations 106; for prosperity 209; signals 130 government as household metaphor 30, 42 governmentality 197, 198 GPI (Genuine Progress Indicator) 54, 54 Graeber, David 28 Gramm-Leach-Bliley Act 35 Great Depression 39–40 Greece: austerity xxxiii–xxxiv, xxxvii, 43; energy inputs 88; financial crisis 28, 30, 31, 77; life expectancy 74; schooling 76; relative income effect 58; youth unemployment 144 Green Economy initiative 41 green: growth xxxvii, 18, 85, 153, 166, 170; investment 41 Green New Deal, UNEP 40–1, 152, 188 greenhouse gas emissions 18, 85, 86, 91, 92; absolute decoupling 89–92, 90, 92, 98–101, 100; dilemma of growth 210–11; vs. employment intensity 148; future visions 142, 151, 201–2, 220; Kyoto Protocol 18, 90; reduction targets 19–20; relative decoupling 87, 88, 89, 93, 98–101, 100 see also climate change Greenspan, Alan 35 gross domestic product (GDP) per capita 3–5, 15, 54; climate change 18; decoupling 85, 93, 94; financial crisis 27, 28, 32; green growth 163–5; life expectancy 74, 75, 78; as measure of prosperity 3–4, 5, 53–5, 54, 60–1; post-financial crisis 43, 44; post-growth economy 207; schooling 76; wellbeing 55–61, 58 see also income growth xxxvii; capitalism 105; credit 36, 178–80; decoupling 85, 96–101; economic stability 21, 24, 67, 80, 210; financial crisis 37, 38; future visions 209, 223, 224; inequality 177; labour productivity 111; moving beyond 165, 166; novelty 112; ownership 105; post-financial crisis slowing 43–7, 45; prosperity as 3–7, 23, 66; role of the state 195–9; sustainable investment 166–70; wellbeing 59–60; as zero sum game 57 see also dilemma of growth; engine of growth; green growth; limits to growth; post-growth macroeconomy growth imperative hypothesis 37, 174, 175, 177–80, 183 habit formation, acquisition as 68 Hall, Peter 106, 188 Hamilton, William 134 Hansen, James 17 happiness see wellbeing/happiness Happiness (Layard) 55 Hardin, Garrett 190–1 Harvey, David 189, 192 Hayek, Friedrich 187, 189, 191 health: Baumol’s cost disease 171, 172; inequality 72–3, 205–6, 206; investment 150–1; and material abundance 67, 68; personal choices for improvement 217; response to economic hardship 80; role of the state 193 see also basic entitlements Heath, Edward 66, 82 hedonism 120, 137, 196; alternatives 125–6 Hirsch, Fred xxxii–xxxiii historical perspectives: absolute decoupling 86, 89–96, 90, 92, 94, 95; relative decoupling 86, 87–9, 89 Holdren, John 96 holistic solutions, post-growth economy 175 household finances: house purchases 28–9; spending vs. saving behaviour 118–20, 119 see also credit household metaphor, government as 30, 42 HSBC Global Research report 41 human capabilities see capabilities for flourishing human happiness see wellbeing/happiness human nature/psyche 3, 132–5, 138; acquisition 68; alternative hedonism 125; evolutionary map of human heart 136, 136; intrinsic values 131; meaning/purpose 49–50; novelty/innovation 116; selfishness vs. altruism 133–8; short-termism/living for today 194; spending vs. saving behaviour 34, 118–21, 119; symbolic role of goods 69 see also intrinsic values human rights see basic entitlements humanitarian perspectives: financial crisis 24; growth 79; inequality 5, 52, 53 see also intrinsic values hyperbolic discounting 194 hyperindividualism 226 see also individualism hyper-materialisation 140, 157 I Ching (Chinese Book of Changes) 7 Iceland: financial crisis 28; life expectancy 74, 75; relative income effect 56; response to economic hardship 79–80; schooling 76; sovereign money system 157 identity construction 52, 69, 115, 116, 212, 219 IEA (International Energy Agency) 14, 152 IMF (International Monetary Fund) 45, 156–7 immaterial goods 139–40 see also intrinsic values; meaning/purpose immortality, symbolic role of goods 69, 104, 115, 212–14 inclusive growth see inequality; smart growth income 3, 4, 5, 66, 124; basic entitlements 72–9, 74, 75, 76, 78; child mortality 74–5, 75; decoupling 96; economic stability 82; education 76; life expectancy 72, 73, 74, 77–9, 78; poor nations 67; relative income effect 55–61, 58, 71, 72; tax revenues 81 see also gross domestic product INDCs (intended nationally determined commitments) 19 India: decoupling 99; growth 99; life expectancy 74, 75; philosophy 127; pursuit of western lifestyles 70; savings 27; schooling 76 indicators of environmental quality 96 see also biodiversity; greenhouse gas emissions; pollution; resource use individualism 136, 226; progressive state 194–7, 199, 200, 203, 207 see also freedom/autonomy industrial development 12 see also technological advances inequality 22, 67; basic entitlements 72; child mortality 75, 75; credible alternatives 219, 224; deflationary forces 44; fatalism 186; financial crisis 24; global 4, 5–6, 99, 100; financial system weaknesses 32–3; post-growth economy 174, 176–8; role of the state 198, 205–7, 206; selfishness vs. altruism 137; symbolic role of goods 71; wellbeing 47, 104 see also poverty infant mortality rates 72, 75 inflation 26, 30, 110, 157, 167 infrastructure, civic 150–1 Inglehart, Ronald 58, 59 innovation see novelty/innovation; technological advances inputs 80–1 see also capital; labour productivity; resource use Inside Job documentary film 26 instant gratification 50, 61 instinctive acquisition 68 Institute for Fiscal Studies 81 Institute for Local Self-Reliance 204 institutional structures 130 see also economic structures; governance intended nationally determined commitments (INDCs) 19 intensity factor, technological 96, 97 see also technological advances intentional communities 127–9 interconnectedness, global 91, 227 interest payments/rates 39, 43, 110; financial crisis 29, 30, 33, 39; post-growth economy 178–80 see also credit; debt Intergovernmental Panel on Climate Change (IPCC) 18, 19, 201–2 International Energy Agency (IEA) 14, 152 International Monetary Fund (IMF) 45, 156–7 intrinsic values 126–31, 135–6, 212; role of the state 199, 200 see also belonging; community; meaning/purpose; simplicity/frugality investment 107–10, 108; ecological/sustainable 101, 152, 153, 166–70, 220; and innovation 112; loans 29; future visions 22, 101–2, 140, 149–53, 158, 169, 208, 220; and savings 108; social 155, 156, 189, 193, 208, 220–3 invisible hand metaphor 132, 133, 187 IPAT equation, relative and absolute decoupling 96 IPCC (Intergovernmental Panel on Climate Change) 18, 19, 201–2 Ireland 28; inequality 206; life expectancy 74, 75; schooling 76; wellbeing 58 iron cage of consumerism see consumerism iron ore 94 James, Oliver 205 James, William 68 Japan: equality 206; financial crisis 27, 45; life expectancy 74, 76, 79; relative income effect 56, 58; resource use 93; response to economic hardship 79–80 Jefferson, Thomas 185 Jobs, Steve 210 Johnson, Boris 120–1 Kahneman, Daniel 60 Kasser, Tim 126 keeping up with the Joneses 115, 116, 117 see also relative income effect Kennedy, Robert 48, 53 Keynes, John Maynard/Keynesianism 23, 34, 120, 174, 181–3, 187–8; financial crisis 37–43; financial system reforms 157; part-time working 145; steady state economy 159, 162 King, Alexander 11 Krugman, Paul 39, 85, 86, 102 Kyoto Protocol (1992) 18, 90 labour: child 62, 154; costs 110; division of 158; elasticity of substitution 177, 178; intensity 109, 148, 208; mobility 123; production inputs 80, 109; structures of capitalism 107 labour productivity 80–1, 109–11; Baumol’s cost disease 170–2; and economic growth 111; future visions 220, 224; investment as commitment 150; need for investment 109; post-growth economy 175, 208; services as engine of growth 170; sustainable investment 166, 170; trade off with resource use 110; work-sharing 145, 146, 147, 148, 148, 149 Lahr, Christin 224–5 laissez-faire capitalism 187, 195, 196 see also free market Lakoff, George 30 language of goods 212; material footprint of 139–40; signalling of social status 71; and wellbeing 124 see also consumerism; material goods; symbolic role of goods Layard, Richard 55 leadership, political 199 see also governance Lebow, Victor 120 Lehman Brothers, bankruptcy 23, 25, 26, 118 leisure economy 204 liberal market economies 106, 107; financial crisis 27, 35–6 life expectancy: and income 72, 73, 74, 77–9, 78; inequality 206; response to economic hardship 80 see also basic entitlements life-satisfaction 73; inequality 205; relative income effect 55–61, 58 see also wellbeing/happiness limits, ecological 3, 4, 7, 11, 12, 20–2; climate change 17–20; decoupling 86; financial crisis 23–4; growth 21, 165, 210; post-growth economy 201–2, 226–7; role of the state 198, 200–2, 206–7; and social boundaries 141; wellbeing 62–63, 185 limits, flourishing within 61–5, 185; alternative hedonism 125–6; intrinsic values 127–31; moving towards 215, 218, 219, 221; paradox of materialism 121–23; prosperity 67–72, 113, 212; role of the state 201–2, 205; selfishness 131–8; shame 123–4; spending vs. saving behaviour 118–21, 119 see also sustainable prosperity limits to growth: confronting 7–8; exceeding 20–2; wellbeing 62–3 Limits to Growth report (Club of Rome) xxxii, xxxiii, 8, 11–16 ‘The Living Standard’ essay (Sen) 50, 123–4 living standards 82 see also prosperity Lloyd, William Forster 190 loans 154; community investment 155–6; financial system weaknesses 34 see also credit; debt London School of Economics 25 loneliness 123, 137 see also alienation long-term: investments 222; social good 219 long-term wellbeing vs. short-term pleasures 194, 197 longevity see life expectancy love 212 see also intrinsic values low-carbon transition 19, 220 LowGrow model for the Canadian economy 175 MacArthur Foundation 144 McCracken, Grant 115 Malthus, Thomas Robert 9–11, 132–3, 190 market economies: coordinated 27, 106; liberal 27, 35–6, 106, 107 market liberalism 106, 107; financial crisis 27, 35–6; wellbeing 47 marketing 140, 203–4 Marmot review, health inequality in the UK 72 Marx, Karl/Marxism 9, 189, 192, 225 Massachusetts Institute of Technology (MIT) 11, 12, 15 material abundance see opulence material goods 68–9; identity 52; language of 139–40; and wellbeing 47, 48, 49, 51, 65, 126 see also symbolic role of goods material inputs see resource use materialism: and fear of death 69, 104, 115, 212–15; and intrinsic values 127–31; paradox of 121–3; price of 126; and religion 115; values 126, 135–6 see also consumerism mathematical models/simulations 132; austerity policies 181; countercyclical spending 181–2, 182; decoupling 84, 91, 96–101; inequality 176–8; post-growth economy 164; stock-flow consistent 179–80 Mawdsley, Emma 70 Mazzucato, Mariana 193, 220 MDG (Millennium Development Goals) 74–5 Meadows, Dennis and Donella 11, 12, 15, 16 meaning/purpose 2, 8, 22; beyond material goods 212–16; consumerism 69, 203, 215; intrinsic values 127–31; moving towards 218–20; wellbeing 49, 52, 60, 121–2; work 144, 146 see also intrinsic values means and ends 159 mental health: inequality 206; meaning/purpose 213 metaphors: government as household 30, 42; invisible hand 132, 133, 187 Middle East, energy inputs 88 Miliband, Ed 199 Mill, John Stuart 125, 159, 160, 174 Millennium Development Goals (MDG) 74–5 mindfulness 128 Minsky, Hyman 34, 35, 40, 182, 208 MIT (Massachusetts Institute of Technology) 11, 12, 15 mixed economies 106 mobility of labour, loneliness index 123 Monbiot, George 84, 85, 86, 91 money: creation 154, 157, 178–9; and prosperity 5; as social good 140, 153–7, 158 see also financial systems monopoly power, corporations 106–7 The Moral Consequences of Economic Growth (Friedman) 82, 176 moral dimensions, good life 63 see also intrinsic values moral hazards, separation of risk from reward 35 ‘more fun with less stuff’ 129, 217 mortality fears 69, 104, 115, 212–15 mortality rates, and income 74, 74–6, 75 mortgage loans 28–9, 35 multinational corporations 106–7 national debt see debt, public-sector nationalisation 191; financial crisis 38, 188 natural selection 132–3 see also struggle for existence nature, rights of 6–7 negative emissions 98–9 negative feedback loops 16–17 Netherlands 58, 62, 206, 207 neuroscientific perspectives: flourishing 68, 69; human behaviour 134 New Climate Economy report Better Growth, Better Climate 18 New Deal, USA 39 New Economics Foundation 175 nickel, commodity prices 13 9/11 terrorist attacks (2001) 121 Nordhaus, William 171, 172–3 North America 128, 155 see also Canada; United States Norway: advertising 204; inequality 206; investment as commitment 151–2; life expectancy 74; relative income effect 58; schooling 76 novelty/innovation 104, 108, 113; and anxiety 116–17, 124, 211; crisis of commitment 195; dilemma of growth 211; human psyche 135–6, 136, 137; investment 150, 166, 168; post-growth economy 226; role of the state 196, 197, 199; as service 140, 141–4, 158; symbolic role of goods 114–16, 213 see also technological advances Nudge: Improving Decisions about Health, Wealth, and Happiness (Thaler and Sunstein) 194–5 Nussbaum, Martha 64 nutrient loading, critical boundaries 17 nutrition 67 see also basic entitlements obesity 72, 78, 206 obsolescence, built in 113, 204, 220 oceans: acidification 17; common pool resources 192 Offer, Avner 57, 61, 71, 194, 195 oil prices 14, 21; decoupling 88; financial crisis 26; resource constraints 15 oligarchic capitalism 106, 107 opulence 50–1, 52, 67–72 original sin 9, 131 Ostrom, Elinor and Vincent 190, 191 output see efficiency; gross domestic product; productivity ownership: and expansion 105; private vs. public 9, 105, 191, 219, 223; new models 223–4; types/definitions of capitalism 105–7 Oxfam 141 paradoxes: materialism 121–3; thrift 120 Paris Agreement 19, 101, 201 participation in society 61, 114, 122, 129, 137; future visions 200, 205, 218, 219, 225; work as 140–9, 148, 157, 158 see also social inclusion part-time working 145, 146, 149, 175 Peccei, Aurelio 11 Perez, Carlota 112 performing arts, Baumol’s cost disease 171–2 personal choice 216–18 see also freedom/autonomy personal property 189, 191 Pickett, Kate 71, 205–6 Piketty, Thomas 33, 176, 177 planetary boundaries see limits (ecological) planning for change 17 pleasure 60–1 see also wellbeing/happiness Plum Village mindfulness community 128 Polanyi, Karl 198 policy see governance political leadership 199 see also governance Political Economy Research Institute, University of Massachusetts 41 pollution 12, 21, 53, 95–6, 143 polycentric governance 191, 192 Poor Laws 10 poor nations see poverty population increase 3, 12, 63, 96, 97, 190; Malthus on 9–11, 132–3 porn industry 40 Portugal 28, 58, 88, 206 positional competition 55–61, 58, 71, 72 see also social comparison positive feedback loops 16–17 post-growth capitalism 224 post-growth macroeconomics 159–60, 183–4, 221; credit 178–80; degrowth movement 161–3; economic stability 174–6; green growth 163–5; inequality 176–8; role of state 181–3, 182, 200–8, 206; services 170–4; sustainable investment 166–70 see also alternatives; future visions; reform poverty 4, 5–6, 216; basic entitlements 72; flourishing within limits 212; life expectancy 74, 74; need for new economic model 101; symbolic role of goods 70; wellbeing 48, 59–60, 61, 67 see also inequality; relative income effect power politics 200 predator–prey analogy 103–4, 117 private credit see credit private vs. public: common good 208; ownership 9, 105, 191, 219, 223; salaries 130 privatisation 191, 219 product lifetimes, obsolescence 113, 204, 220 production: inputs 80–1; ownership 191, 219, 223 productivity: investment 109, 167, 168, 169; post-growth economy 224; services as engine of growth 171, 172, 173; targets 147; trap 175 see also efficiency measures; labour productivity; resource productivity profits: definitions of capitalism 105; dilemma of growth 211; efficiency measures 87; investment 109; motive 104; post-growth economy 224; and wages 175–8 progress 2, 50–5, 54 see also novelty/innovation; technological advances progressive sector, Baumol’s cost disease 171 progressive state 185, 220–2; contested 186–9; countering consumerism 202–5; equality measures 205–7, 206; governance of the commons 190–2; governance as commitment device 192–5; governmentality of growth 195–7; limit-setting 201–2; moving towards 197–200; post-growth macroeconomics 207–8, 224; prosperity 209 prosocial behaviour 198 see also social contract prosperity 1–3, 22, 121; capabilities for flourishing 61–5; and growth 3–7, 23, 66, 80, 160; and income 3–4, 5, 66–7; limits of 67–72, 113, 212; materialistic vision 137; progress measures 50–5, 54; relative income effect 55–61, 58, 71, 72; social perspectives 2, 22, 48–9; state roles 209 see also capabilities for flourishing; post-growth macroeconomics; sustainable prosperity; wellbeing prudence, financial 120, 195, 221; financial crisis 33, 34, 35 public sector spending: austerity policies 189; countercyclical spending strategy 181–2, 182; welfare economy 169 public services/amenities: common pool resources 190–2, 198, 199; future visions 204, 218–20; investment 155–6, 204; ownership 223 see also private vs. public; service-based economies public transport 41, 129, 193, 217 purpose see meaning/purpose Putnam, Robert 122 psyche, human see human nature/psyche quality, environmental 12 see also pollution quality of life: enterprise as service 142; inequality 206; sustainable 128 quality to throughput ratios 113 quantitative easing 43 Queen Elizabeth II 25, 32, 34, 37 quiet revolution 127–31 Raworth, Kate 141 Reagan, Ronald 8 rebound phenomenon 111 recession 23–4, 28, 81, 161–3 see also financial crisis recreation/leisure industries 143 recycling 129 redistribution of wealth 52 see also inequality reforms 182–3, 222; economic structures 224; and financial crisis 103; financial systems 156–8, 180 see also alternatives; future visions; post-growth economy relative decoupling 84–5, 86; historical perspectives 87–9, 89; relationship with absolute decoupling 96–101, 111 relative income effect 55–61, 58, 71, 72 see also social comparison religious perspectives 9–10, 214–15; materialism as alternative to religion 115; original sin 9, 131; wellbeing 48, 49 see also existential fear of death renewable energy xxxv, 41, 168–169 repair/renovation 172, 220 resource constraints 3, 7, 8, 11–15, 47 resource productivity 110, 151, 168, 169, 220 resource use: conflicts 22; credible alternatives 101, 220; decoupling 84–9, 92–5, 94, 95; and economic output 142–4; investment 151, 153, 168, 169; trade off with labour costs 110 retail therapy 115 see also consumerism; shopping revenues, state 222–3 see also taxation revolution 186 see also social stability rights: environment/nature 6–7; human see basic entitlements risk, financial 24, 25, 33, 35 The Road to Serfdom (Hayek) 187 Robinson, Edward 132 Robinson, Joan 159 Rockström, Johan 17, 165 romantic movement 9–10 Roosevelt, Franklin D. 35, 39 Rousseau, Jean Jacques 9, 131 Russia 74, 76, 77–80, 78, 122 sacred canopy 214, 215 salaries: private vs. public sector 130, 171; and profits 175–8 Sandel, Michael 150, 164, 218 São Paulo, Clean City Law 204 Sardar, Zia 49, 50 Sarkozy, Nicolas xxxi, 53 savage state, romantic movement 9–10 savings 26–7, 28, 107–9, 108; investment 149; ratios 34, 118–20, 119 scale, efficiencies of 104 Scandinavia 27, 122, 204 scarcity, managing change 16–17 Schumpeter, Joseph 112 Schwartz, Shalom 135–6, 136 schooling see education The Science of Desire (Dichter) 114 secular stagnation 43–7, 45, 173 securitisation, mortgage loans 35 security: moving towards 219; and wellbeing 48, 61 self-development 204 self-expression see identity construction self-transcending behaviours see transcendence The Selfish Gene (Dawkins) 134–5 selfishness 133–8, 196 Sen, Amartya 50, 52, 61–2, 123–4 service concept/servicization 140–4, 147–8, 148, 158 service-based economies 219; engine of growth 170–4; substitution between labour and capital 178; sustainable investment 169–70 see also public services SFC (stock-flow consistent) economic models 179–80 shame 123–4 shared endeavours, post-growth economy 227 Sheldon, Solomon 214 shelter see basic entitlements shopping 115, 116, 130 see also consumerism short-termism/living for today 194, 197, 200 signals: sent out by society 130, 193, 198, 203, 207; social status 71 see also language of goods Simon, Julian 13 simplicity/simple life 118–20, 127–9, 215–16 simulations see mathematical models/simulations slow: capital 170; movement 128 smart growth 85, 163–5 see also green growth Smith, Adam 51, 106–7, 123, 132, 187 social assets 220 social boundaries (minimum standards) 141 see also basic entitlements social care 150–1 see also caring professions social comparison 115, 116, 117 see also relative income effect social contract 194, 198, 199, 200 social inclusion 48, 69–71, 114, 212 see also participation in society social investment 155, 156, 189, 193, 208, 220–3 social justice 198 see also inequality social logic of consumerism 114–16, 204 social stability 24, 26, 80, 145, 186, 196, 205 see also alienation social status see status social structures 80, 129, 130, 137, 196, 200, 203 social tolerance, and wellbeing 59, 60 social unrest see social stability social wage 40 social welfare: financial reforms 182–3; public sector spending 169 socialism 223 Sociobiology (Wilson) 134 soil integrity 220 Solon, quotation 47, 49, 71 Soper, Kate 125–6 Soros, George 36 Soskice, David 106 Soviet Union, former 74, 76, 77–80, 78, 122 Spain 28, 58, 144, 206 SPEAR organization, responsible investment 155 species loss/extinctions 17, 47, 62, 101 speculation 93, 99, 149, 150, 154, 158, 170; economic stability 180; financial crisis 26, 33, 35; short-term profiteering 150; spending: behaviour of ordinary people 34, 119, 120–1; countercyclical 181–2, 182, 188; economic stability 81; as way out of recession 41, 44, 119, 120–1; and work cycle 125 The Spirit Level (Wilkinson and Pickett) 71, 205–6 spiritual perspectives 117, 127, 128, 214 stability see economic stability; social stability stagflation 26 stagnant sector, Baumol’s cost disease 171 stagnation: economic stability 81–2; labour productivity 145; post-financial crisis 43–7, 45 see also recession state capitalism, types/definitions of capitalism 106 state revenues, from social investment 222–3 see also taxation state roles see governance status 207, 209, 211; and possessions 69, 71, 114, 115, 117 see also language of goods; symbolic role of goods Steady State Economics (Daly) xxxii steady state economies 82, 159, 160, 174, 180 see also post-growth macroeconomics Stern, Nicholas 17–18 stewardship: role of the state 200; sustainable investment 168 Stiglitz, Joseph 53 stock-flow consistent (SFC) economic models 179–80 Stockholm Resilience Centre 17, 201 stranded assets 167–8 see also ownership structures of capitalism see economic structures struggle for existence 8–11, 125, 132–3 Stuckler, David 43 stuff see language of goods; material goods; symbolic role of goods subjective wellbeing (SWB) 49, 58, 58–9, 71, 122, 129 see also wellbeing/happiness subprime lending 26 substitution, between labour and capital 177–178 suffering, struggle for existence 10 suicide 43, 52, 77 Sukdhev, Pavan 41 sulphur dioxide pollution 95–6 Summers, Larry 36 Sunstein, Cass 194 sustainability xxv–xxvi, 102, 104, 126; financial systems 154–5; innovation 226; investment 101, 152, 153, 166–70, 220; resource constraints 12; role of the state 198, 203, 207 see also sustainable prosperity Sustainable Development Strategy, UK 198 sustainable growth see green growth sustainable prosperity 210–12; creating credible alternatives 219–21; finding meaning beyond material commodities 212–16; implications for capitalism 222–5; personal choices for improvement 216–18; and utopianism 225–7 see also limits (flourishing within) SWB see subjective wellbeing; wellbeing/happiness Switzerland 11, 46, 157; citizen’s income 207; income relative to wellbeing 58; inequality 206; life expectancy 74, 75 symbolic role of goods 69, 70–1; existential fear of death 212–16; governance 203; innovation/novelty 114–16; material footprints 139–40; paradox of materialism 121–2 see also language of goods; material goods system dynamics model 11–12, 15 tar sands/oil shales 15 taxation: capital 177; income 81; inequality 206; post-growth economy 222 technological advances 12–13, 15; decoupling 85, 86, 87, 96–8, 100–3, 164–5; dilemma of growth 211; economic stability 80; population increase 10–11; role of state 193, 220 see also novelty/innovation Teilhard de Chardin, Pierre 8 terror management, and consumption 69, 104, 115, 212–15 terrorist attacks (9/11) 121 Thailand, Buddhist monasteries 128 Thaler, Richard 194 theatre, Baumol’s cost disease 171–2 theology see religious perspectives theory of evolution 132–3 thermodynamics, laws of 112, 164 Thich Nhat Hanh 128 thrift 118–20, 127–9, 215–16 throwaway society 113, 172, 204 timescales for change 16–17 tin, commodity prices 13 Today programme interview xxix, xxviii Totnes, transition movement 128–9 Towards a Green Economy report (UNEP) 152–3 Townsend, Peter 48, 61 trade balance 31 trading standards 204 tradition 135–6, 136, 226 ‘Tragedy of the commons’ (Hardin) 190–1 transcendence 214 see also altruism; meaning/purpose; spiritual perspectives transition movement, Totnes 128–9 Triodos Bank 156, 165 Trumpf (machine-tool makers) Germany 146 trust, loss of see alienation tungsten, commodity prices 13 Turkey 58, 88 Turner, Adair 157 21st Conference of the Parties to the UN Framework Convention on Climate Change (2015) 19 UBS (Swiss bank) 46 Ubuntu, African philosophy 227 unemployment 77; consumer goods 215; degrowth movement 162; financial crisis 24, 40, 41, 43; Great Depression 39–40; and growth 38; labour productivity 80–1; post-growth economy 174, 175, 183, 208, 219; work as participation 144–6 United Kingdom: Green New Deal group 152; greenhouse gas emissions 92; labour productivity 173; resource inputs 93; Sustainable Development Strategy 198 United Nations: Development Programme 6; Environment Programme 18, 152–3; Green Economy initiative 41 United States: credit unions 155–6; debt 27, 31–32; decoupling 88; greenhouse gas emissions 90–1; subprime lending 26; Works Progress Administration 39 universal basic income 221 see also citizen’s income University of Massachusetts, Political Economy Research Institute 41 utilitarianism/utility, wellbeing 50, 52–3, 55, 60 utopianism 8, 38, 125, 179; post-growth economy 225–7 values, materialistic 126, 135–6 see also intrinsic values Veblen, Thorstein 115 Victor, Peter xxxviii, 146, 175, 177, 180 vision of progress see future visions; post-growth economy volatility, commodity prices 14, 21 wages: and profits 175–8; private vs. public sector 130, 171 walking, personal choices for improvement 217 water use 22 Wealth of Nations, An Inquiry into the Nature and Causes (Smith) 123, 132 wealth redistribution 52 see also inequality Weber, Axel 46 welfare policies: financial reforms 182–3; public sector spending 169 welfare of livestock 220 wellbeing/happiness 47–50, 53, 121–2, 124; collective 209; consumer goods 4, 21, 22, 126; growth 6, 165, 211; intrinsic values 126, 129; investment 150; novelty/innovation 117; opulence 50–2, 67–72; personal choices for improvement 217; planetary boundaries 141; relative income effect 55–61, 58, 71, 72; simplicity 129; utilitarianism 50, 52–3, 55, 60 see also capabilities for flourishing western lifestyles 70, 210 White, William 46 Whybrow, Peter 68 Wilhelm, Richard 7 Wilkinson, Richard 71, 205–6 Williams, Tennessee 213 Wilson, Edward 134 wisdom traditions 48, 49, 63, 128, 213–14 work: as participation 140–9, 148, 157, 158; and spend cycle 125; sharing 145, 146, 149, 175 Works Progress Administration, USA 39 World Bank 160 World Values Survey 58 youth unemployment, financial crisis 144–5 zero sum game, growth as 57, 71

…

INDEX Locators in italic refer to figures absolute decoupling 84–6; historical perspectives 89–96, 90, 92, 94, 95; mathematical relationship with relative decoupling 96–101, 111 abundance see opulence accounting errors, decoupling 84, 91 acquisition, instinctive 68 see also symbolic role of goods adaptation: diminishing marginal utility 51, 68; environmental 169; evolutionary 226 advertising, power of 140, 203–4 Africa 73, 75–7; life-expectancy 74; philosophy 227; pursuit of western lifestyles 70; growth 99; relative income effect 58, 75; schooling 78 The Age of Turbulence (Greenspan) 35 ageing populations 44, 81 agriculture 12, 148, 152, 220 Aids/HIV 77 algebra of inequality see inequality; mathematical models alienation: future visions 212, 218–19; geographical community 122–3; role of the state 205; selfishness vs. altruism 137; signals sent by society 131 alternatives: economic 101–2, 139–40, 157–8; hedonism 125–6 see also future visions; post-growth macroeconomics; reform altruism 133–8, 196, 207 amenities see public services/amenities Amish community, North America 128 An Inquiry into the Nature and Causes of the Wealth of Nations (Smith) 123, 132 angelised growth see green growth animal welfare 220 anonymity/loneliness see alienation anthropological perspectives, consumption 70, 115 anti-consumerism 131 see also intrinsic values anxiety: fear of death 69, 104, 115, 212–15; novelty 116–17, 124, 211 Argentina 58, 78, 78, 80 Aristotle 48, 61 The Art of Happiness (Dalai Lama) 49 arts, Baumol’s cost disease 171–2 assets, stranded 167–8 see also ownership austerity policies xxxiii–xxxv, 189; and financial crisis 24, 42–3; mathematical models 181 Australia 58, 78, 128, 206 authoritarianism 199 autonomy see freedom/autonomy Ayres, Robert 143 backfire effects 111 balance: private interests/common good 208; tradition/innovation 226 Bank for International Settlements 46 bank runs 157 banking system 29–30, 39, 153–7, 208; bonuses 37–8 see also financial crisis; financial system basic entitlements: enterprise as service 142; income 67, 72–9, 74, 75, 76, 78; limits to growth 63–4 see also education; food; health Basu, Sanjay 43 Baumol, William 112, 147, 222, 223; cost disease 170, 171, 172, 173 BBC survey, geographical community 122–3 Becker, Ernest 69 Belk, Russ 70, 114 belonging 212, 219 see also alienation; community; intrinsic values Bentham, Jeremy 55 bereavement, material possessions 114, 214–15 Berger, Peter 70, 214 Berry, Wendell 8 Better Growth, Better Climate (New Climate Economy report) 18 big business/corporations 106–7 biodiversity loss 17, 47, 62, 101 biological perspectives see evolutionary theory; human nature/psyche biophysical boundaries see limits (ecological) Black Monday 46 The Body Economic (Stuckler and Basu) 43 bond markets 30, 157 bonuses, banking 37–8 Bookchin, Murray 122 boom-and-bust cycles 157, 181 Booth, Douglas 117 borrowing behaviour 34, 118–21, 119 see also credit; debt Boulding, Elise 118 Boulding, Kenneth 1, 5, 7 boundaries, biophysical see limits (ecological) bounded capabilities for flourishing 61–5 see also limits (flourishing within) Bowen, William 147 Bowling Alone (Putnam) 122 Brazil 58, 88 breakdown of community see alienation; social stability bubbles, economic 29, 33, 36 Buddhist monasteries, Thailand 128 buen vivir concept, Ecuador xxxi, 6 built-in obsolescence 113, 204, 220 Bush, George 121 business-as-usual model 22, 211; carbon dioxide emissions 101; crisis of commitment 195; financial crisis 32–8; growth 79–83, 99; human nature 131, 136–7; need for reform 55, 57, 59, 101–2, 162, 207–8, 227; throwaway society 113; wellbeing 124 see also financial systems Canada 75, 206, 207 capabilities for flourishing 61–5; circular flow of the economy 113; future visions 218, 219; and income 77; progress measures 50–5, 54; role of material abundance 67–72; and prosperity 49; relative income effect 55–61, 58, 71, 72; role of shame 123–4; role of the state 200 see also limits (flourishing within); wellbeing capital 105, 107–10 see also investment Capital in the 21st Century (Piketty) 33, 176, 177 Capital Institute, USA 155 capitalism 68–9, 80; structures 107–13, 175; types 105–7, 222, 223 car industry, financial crisis 40 carbon dioxide emissions see greenhouse gas emissions caring professions, valuing 130, 147, 207 see also social care Cat on a Hot Tin Roof (Williams) 213 causal path analysis, subjective wellbeing 59 Central Bank 154 central human capabilities 64 see also capabilities for flourishing The Challenge of Affluence (Offer) 194 change see alternatives; future visions; novelty/innovation; post-growth macroeconomics; reform Chicago school of economics 36, 156 children: advertising to 204; labour 62, 154; mortality 74–5, 75, 206 Chile xxxiii, xxxvii, 58, 74, 74, 75, 76 China: decoupling 88; GDP per capita 75; greenhouse gas emissions 91; growth 99; life expectancy 74; philosophy 7; post-financial crisis 45–6; pursuit of western lifestyles 70; relative income effect 58; resource use 94; savings 27; schooling 76 choice, moving beyond consumerism 216–18 see also freedom/autonomy Christian doctrine see religious perspectives chromium, commodity price 13 Cinderella economy 219–21, 224 circular economy 144, 220 circular flow of the economy 107, 113 see also engine of growth citizen’s income 207 see also universal basic income civil unrest see social stability Clean City Law, São Paulo 204 climate change xxxv, 22, 47; critical boundaries 17–20; decoupling 85, 86, 87, 98; fatalism 186; investment needs 152; role of the state 192, 198, 201–2 see also greenhouse gas emissions Climate Change Act (2008), UK 198 clothing see basic entitlements Club of Rome, Limits to Growth report xxxii, xxxiii, 8, 11–16, Cobb, John 54 collectivism 191 commercial bond markets 30, 157 commitment devices/crisis of 192–5, 197 commodity prices: decoupling 88; financial crisis 26; fluctuation/volatility 14, 21; resource constraints 13–14 common good: future visions 218, 219; vs. freedom and autonomy 193–4; vs. private interests 208; role of the state 209 common pool resources 190–2, 198, 199 see also public services/amenities communism 187, 191 community: future visions of 219–20; geographical 122–3; investment 155–6, 204 see also alienation; intrinsic values comparison, social 115, 116, 117 see also relative income effect competition 27, 112; positional 55–61, 58, 71, 72 see also struggle for existence complexity, economic systems 14, 32, 108, 153, 203 compulsive shopping 116 see also consumerism Conference of the Parties to the UN Framework Convention on Climate Change (CoP21) 19 conflicted state 197, 201, 209 connectedness, global 91, 227 conspicuous consumption 115 see also language of goods consumer goods see language of goods; material goods consumer sovereignty 196, 198 consumerism 4, 21, 22, 103–4, 113–16; capitalism 105–13, 196; choice 196; engine of growth 104, 108, 120, 161; existential fear of death 69, 212–15; financial crisis 24, 28, 39, 103; moving beyond 216–18; novelty and anxiety 116–17; post-growth economy 166–7; role of the state 192–3, 196, 199, 202–5; status 211; tragedy of 140 see also demand; materialism contemplative dimensions, simplicity 127 contraction and convergence model 206–7 coordinated market economies 27, 106 Copenhagen Accord (2009) 19 copper, commodity prices 13 corporations/big business 106–7 corruption 9, 131, 186, 187, 189 The Cost Disease: Why Computers get Cheaper and Health Care Doesn’t (Baumol) 171, 172 Costa Rica 74, 74, 76 countercyclical spending 181–2, 182, 188 crafts/craft economies 147, 149, 170, 171 creative destruction 104, 112, 113, 116–17 creativity 8, 79; and consumerism 113, 116; future visions 142, 144, 147, 158, 171, 200, 220 see also novelty/innovation credit, private: deflationary forces 44; deregulation 36; financial crisis 26, 27, 27–31, 34, 36, 41; financial system weaknesses 32–3, 37; growth imperative hypothesis 178–80; mortgage loans 28–9; reforms in financial system 157; spending vs. saving behaviour of ordinary people 118–19; and stimulation of growth 36 see also debt (public) credit unions 155–6 crises: of commitment 192–5; financial see financial crisis critical boundaries, biophysical see limits (ecological) Csikszentmihalyi, Mihalyi 127 Cuba: child mortality 75; life expectancy 74, 77, 78, 78; response to economic hardship 79–80; revolution 56; schooling 76 Cushman, Philip 116 Dalai Lama 49, 52 Daly, Herman xxxii, 54, 55, 160, 163, 165 Darwin, Charles 132–3 Das Kapital (Marx) 225 Davidson, Richard 49 Davos World Economic Forum 46 Dawkins, Richard 134–5 de Mandeville, Bernard 131–2, 157 death, denial of 69, 104, 115, 212–15 debt, public-sector 81; deflationary forces 44; economic stability 81; financial crisis 24, 26–32, 27, 37, 41, 42, 81; financial systems 28–32, 153–7; money creation 178–9; post-growth economy 178–9, 223 Debt: The First Five Thousand Years (Graeber) 28 decoupling xix, xx, xxxvii, 21, 84–7; dilemma of growth 211; efficiency measures 84, 86, 87, 88, 95, 104; green growth 163, 163–5; historical perspectives 87–96, 89, 90, 92, 94, 95; need for new economic model 101–2; relationship between relative and absolute 96–101 deep emission and resource cuts 99, 102 deficit spending 41, 43 deflationary forces, post-financial crisis 43–7, 45 degrowth movement 161–3, 177 demand 104, 113–16, 166–7; post-financial crisis 44–5; post-growth economy 162, 164, 166–9, 171–2, 174–5 dematerialisation 102, 143 democratisation, and wellbeing 59 deposit guarantees 35 deregulation 27, 34, 36, 196 desire, role in consumer behaviour 68, 69, 70, 114 destructive materialism 104, 112, 113, 116–17 Deutsche Bank 41 devaluation of currency 30, 45 Dichter, Ernest 114 digital economy 44, 219–20 dilemma of growth xxxi, 66–7, 104, 210; basic entitlements 72–9, 74, 75, 76, 78; decoupling 85, 87, 164; degrowth movement 160–3; economic stability 79–83, 174–6; material abundance 67–72; moving beyond 165, 166, 183–4; role of the state 198 diminishing marginal utility: alternative hedonism 125, 126; wellbeing 51–2, 57, 60, 73, 75–6, 79 disposable incomes 27, 67, 118 distributed ownership 223 Dittmar, Helga 126 domestic debt see credit dopamine 68 Dordogne, mindfulness community 128 double movement of society 198 Douglas, Mary 70 Douthwaite, Richard 178 downshifting 128 driving analogy, managing change 16–17 durability, consumer goods 113, 204, 220 dynamic systems, managing change 16–17 Eastern Europe 76, 122 Easterlin, Richard 56, 57, 59; paradox 56, 58 eco-villages, Findhorn community 128 ecological investment 101, 166–70, 220 see also investment ecological limits see limits (ecological) ecological (ecosystem) services 152, 169, 223 The Ecology of Money (Douthwaite) 178 economic growth see growth economic models see alternatives; business-as-usual model; financial systems; future visions; mathematical models; post-growth macroeconomics economic output see efficiency; productivity ‘Economic possibilities for our grandchildren’ (Keynes) 145 economic stability 22, 154, 157, 161; financial system weaknesses 34, 35, 36, 180; growth 21, 24, 67, 79–83, 174–6, 210; post-growth economy 161–3, 165, 174–6, 208, 219; role of the state 181–3, 195, 198, 199 economic structures: post-growth economy 227; financial system reforms 224; role of the state 205; selfishness 137 see also business-as-usual model; financial systems ecosystem functioning 62–3 see also limits (ecological) ecosystem services 152, 169, 223 Ecuador xxxi, 6 education: Baumol’s cost disease 171, 172; and income 67, 76, 76; investment in 150–1; role of the state 193 see also basic entitlements efficiency measures 84, 86–8, 95, 104, 109–11, 142–3; energy 41, 109–11; growth 111, 211; investment 109, 151; of scale 104 see also labour productivity; relative decoupling Ehrlich, Paul 13, 96 elasticity of substitution, labour and capital 177–8 electricity grid 41, 151, 156 see also energy Elgin, Duane 127 Ellen MacArthur Foundation 144 emissions see greenhouse gas emissions employee ownership 223 employment intensity vs. carbon dioxide emissions 148 see also labour productivity empty self 116, 117 see also consumerism ends above means 159 energy return on investment (EROI) 12, 169 energy services/systems 142: efficiency 41, 109–11; inputs/intensity 87–8, 151; investment 41, 109–10, 151–2; renewable xxxv, 41, 168–9 engine of growth 145; consumerism 104, 108, 161; services 143, 170–4 see also circular flow of the economy enough is enough see limits enterprise as service 140, 141–4, 158 see also novelty/innovation entitlements see basic entitlements entrepreneur as visionary 112 entrepreneurial state 220 Environmental Assessment Agency, Netherlands 62 environmental quality 12 see also pollution environmentalism 9 EROI (energy return on investment) 12, 169 Essay on the Principle of Population (Malthus) 9–11, 132–3 evolutionary map, human heart 136, 136 evolutionary theory 132–3; common good 193; post-growth economy 226; psychology 133–5; selfishness and altruism 196 exchange values 55, 61 see also gross domestic product existential fear of death 69, 104, 115, 212–15 exponential expansion 1, 11, 20–1, 210 see also growth external debt 32, 42 extinctions/biodiversity loss 17, 47, 62, 101 Eyres, Harry 215 Fable of the Bees (de Mandeville) 131–2 factor inputs 109–10 see also capital; labour; resource use fast food 128 fatalism 186 FCCC (Framework Convention on Climate Change) 92 fear of death, existential 69, 104, 115, 212–15 feedback loops 16–17 financial crisis (2008) 6, 23–5, 32, 77, 103; causes and culpability 25–8; financial system weaknesses 32–7, 108; Keynesianism 37–43, 188; nationalisation of financial sector 188; need for financial reforms 175; role of debt 24, 26–32, 27, 81, 179; role of state 191; slowing of growth 43–7, 45; spending vs. saving behaviour of ordinary people 118–21, 119; types/definitions of capitalism 106; youth unemployment 144–5 financial systems: common pool resources 192; debt-based/role of debt 28–32, 153–7; post-growth economy 179, 208; systemic weaknesses 32–7; and wellbeing 47 see also banking system; business-as-usual model; financial crisis; reform Findhorn community 128 finite limits of planet see limits (ecological) Fisher, Irving 156, 157 fishing rights 22 flourishing see capabilities for flourishing; limits; wellbeing flow states 127 Flynt, Larry 40 food 67 see also basic entitlements Ford, Henry 154 forestry/forests 22, 192 Forrester, Jay 11 fossil fuels 11, 20 see also oil Foucault, Michel 197 fracking 14, 15 Framework Convention on Climate Change (FCCC) 92 France: GDP per capita 58, 75, 76; inequality 206; life-expectancy 74; mindfulness community 128; working hours 145 free market 106: financial crisis 35, 36, 37, 38, 39; ideological controversy/conflict 186–7, 188 freedom/autonomy: vs. common good 193–4; consumer 22, 68–9; language of goods 212; personal choices for improvement 216–18; wellbeing 49, 59, 62 see also individualism Friedman, Benjamin 176 Friedman, Milton 36, 156, 157 frugality 118–20, 127–9, 215–16 fun (more fun with less stuff) 129, 217 future visions 2, 158, 217–21; community banking 155–6; dilemma of growth 211; enterprise as service 140, 141–4, 147–8, 158; entrepreneur as visionary 112; financial crisis as opportunity 25; and growth 165–6; investment 22, 101–2, 140, 149–53, 158, 169, 208; money as social good 140, 153–7, 158; processes of change 185; role of the state 198, 199, 203; timescales for change 16–17; work as participation 140, 144–9, 148, 158 see also alternatives; post-growth macroeconomics; reform Gandhi, Mahatma 127 GDP see gross domestic product gene, selfish 134–5 Genuine Progress Indicator (GPI) 54, 54 geographical community 122–3 Germany xxxi; Federal Ministry of Finance 224–5; inequality 206; relative income effect 58; trade balance 31; work as participation 146 Glass Steagal Act 35 Global Commodity Price Index (1992–2015) 13 global corporations 106–7 global economy 98: culture 70; decoupling 86–8, 91, 93–5, 95, 97, 98, 100; exponential expansion 20–1; inequality 4, 5–6; interconnectedness 91, 227; post-financial crisis slowing of growth 45 Global Research report (HSBC) 41 global warming see climate change Godley, Wynne 179 Goldman Sachs 37 good life 3, 6; moral dimension 63, 104; wellbeing 48, 50 goods see language of goods; material goods; symbolic role of goods Gordon, Robert 44 governance 22, 185–6; commons 190–2; crisis of commitment 192–5, 197; economic stability 34, 35; establishing limits 200–8, 206; growth 195–9; ideological controversy/conflict 186–9; moving towards change 197–200, 220–1; post-growth economy 181–3, 182; power of corporations 106; for prosperity 209; signals 130 government as household metaphor 30, 42 governmentality 197, 198 GPI (Genuine Progress Indicator) 54, 54 Graeber, David 28 Gramm-Leach-Bliley Act 35 Great Depression 39–40 Greece: austerity xxxiii–xxxiv, xxxvii, 43; energy inputs 88; financial crisis 28, 30, 31, 77; life expectancy 74; schooling 76; relative income effect 58; youth unemployment 144 Green Economy initiative 41 green: growth xxxvii, 18, 85, 153, 166, 170; investment 41 Green New Deal, UNEP 40–1, 152, 188 greenhouse gas emissions 18, 85, 86, 91, 92; absolute decoupling 89–92, 90, 92, 98–101, 100; dilemma of growth 210–11; vs. employment intensity 148; future visions 142, 151, 201–2, 220; Kyoto Protocol 18, 90; reduction targets 19–20; relative decoupling 87, 88, 89, 93, 98–101, 100 see also climate change Greenspan, Alan 35 gross domestic product (GDP) per capita 3–5, 15, 54; climate change 18; decoupling 85, 93, 94; financial crisis 27, 28, 32; green growth 163–5; life expectancy 74, 75, 78; as measure of prosperity 3–4, 5, 53–5, 54, 60–1; post-financial crisis 43, 44; post-growth economy 207; schooling 76; wellbeing 55–61, 58 see also income growth xxxvii; capitalism 105; credit 36, 178–80; decoupling 85, 96–101; economic stability 21, 24, 67, 80, 210; financial crisis 37, 38; future visions 209, 223, 224; inequality 177; labour productivity 111; moving beyond 165, 166; novelty 112; ownership 105; post-financial crisis slowing 43–7, 45; prosperity as 3–7, 23, 66; role of the state 195–9; sustainable investment 166–70; wellbeing 59–60; as zero sum game 57 see also dilemma of growth; engine of growth; green growth; limits to growth; post-growth macroeconomy growth imperative hypothesis 37, 174, 175, 177–80, 183 habit formation, acquisition as 68 Hall, Peter 106, 188 Hamilton, William 134 Hansen, James 17 happiness see wellbeing/happiness Happiness (Layard) 55 Hardin, Garrett 190–1 Harvey, David 189, 192 Hayek, Friedrich 187, 189, 191 health: Baumol’s cost disease 171, 172; inequality 72–3, 205–6, 206; investment 150–1; and material abundance 67, 68; personal choices for improvement 217; response to economic hardship 80; role of the state 193 see also basic entitlements Heath, Edward 66, 82 hedonism 120, 137, 196; alternatives 125–6 Hirsch, Fred xxxii–xxxiii historical perspectives: absolute decoupling 86, 89–96, 90, 92, 94, 95; relative decoupling 86, 87–9, 89 Holdren, John 96 holistic solutions, post-growth economy 175 household finances: house purchases 28–9; spending vs. saving behaviour 118–20, 119 see also credit household metaphor, government as 30, 42 HSBC Global Research report 41 human capabilities see capabilities for flourishing human happiness see wellbeing/happiness human nature/psyche 3, 132–5, 138; acquisition 68; alternative hedonism 125; evolutionary map of human heart 136, 136; intrinsic values 131; meaning/purpose 49–50; novelty/innovation 116; selfishness vs. altruism 133–8; short-termism/living for today 194; spending vs. saving behaviour 34, 118–21, 119; symbolic role of goods 69 see also intrinsic values human rights see basic entitlements humanitarian perspectives: financial crisis 24; growth 79; inequality 5, 52, 53 see also intrinsic values hyperbolic discounting 194 hyperindividualism 226 see also individualism hyper-materialisation 140, 157 I Ching (Chinese Book of Changes) 7 Iceland: financial crisis 28; life expectancy 74, 75; relative income effect 56; response to economic hardship 79–80; schooling 76; sovereign money system 157 identity construction 52, 69, 115, 116, 212, 219 IEA (International Energy Agency) 14, 152 IMF (International Monetary Fund) 45, 156–7 immaterial goods 139–40 see also intrinsic values; meaning/purpose immortality, symbolic role of goods 69, 104, 115, 212–14 inclusive growth see inequality; smart growth income 3, 4, 5, 66, 124; basic entitlements 72–9, 74, 75, 76, 78; child mortality 74–5, 75; decoupling 96; economic stability 82; education 76; life expectancy 72, 73, 74, 77–9, 78; poor nations 67; relative income effect 55–61, 58, 71, 72; tax revenues 81 see also gross domestic product INDCs (intended nationally determined commitments) 19 India: decoupling 99; growth 99; life expectancy 74, 75; philosophy 127; pursuit of western lifestyles 70; savings 27; schooling 76 indicators of environmental quality 96 see also biodiversity; greenhouse gas emissions; pollution; resource use individualism 136, 226; progressive state 194–7, 199, 200, 203, 207 see also freedom/autonomy industrial development 12 see also technological advances inequality 22, 67; basic entitlements 72; child mortality 75, 75; credible alternatives 219, 224; deflationary forces 44; fatalism 186; financial crisis 24; global 4, 5–6, 99, 100; financial system weaknesses 32–3; post-growth economy 174, 176–8; role of the state 198, 205–7, 206; selfishness vs. altruism 137; symbolic role of goods 71; wellbeing 47, 104 see also poverty infant mortality rates 72, 75 inflation 26, 30, 110, 157, 167 infrastructure, civic 150–1 Inglehart, Ronald 58, 59 innovation see novelty/innovation; technological advances inputs 80–1 see also capital; labour productivity; resource use Inside Job documentary film 26 instant gratification 50, 61 instinctive acquisition 68 Institute for Fiscal Studies 81 Institute for Local Self-Reliance 204 institutional structures 130 see also economic structures; governance intended nationally determined commitments (INDCs) 19 intensity factor, technological 96, 97 see also technological advances intentional communities 127–9 interconnectedness, global 91, 227 interest payments/rates 39, 43, 110; financial crisis 29, 30, 33, 39; post-growth economy 178–80 see also credit; debt Intergovernmental Panel on Climate Change (IPCC) 18, 19, 201–2 International Energy Agency (IEA) 14, 152 International Monetary Fund (IMF) 45, 156–7 intrinsic values 126–31, 135–6, 212; role of the state 199, 200 see also belonging; community; meaning/purpose; simplicity/frugality investment 107–10, 108; ecological/sustainable 101, 152, 153, 166–70, 220; and innovation 112; loans 29; future visions 22, 101–2, 140, 149–53, 158, 169, 208, 220; and savings 108; social 155, 156, 189, 193, 208, 220–3 invisible hand metaphor 132, 133, 187 IPAT equation, relative and absolute decoupling 96 IPCC (Intergovernmental Panel on Climate Change) 18, 19, 201–2 Ireland 28; inequality 206; life expectancy 74, 75; schooling 76; wellbeing 58 iron cage of consumerism see consumerism iron ore 94 James, Oliver 205 James, William 68 Japan: equality 206; financial crisis 27, 45; life expectancy 74, 76, 79; relative income effect 56, 58; resource use 93; response to economic hardship 79–80 Jefferson, Thomas 185 Jobs, Steve 210 Johnson, Boris 120–1 Kahneman, Daniel 60 Kasser, Tim 126 keeping up with the Joneses 115, 116, 117 see also relative income effect Kennedy, Robert 48, 53 Keynes, John Maynard/Keynesianism 23, 34, 120, 174, 181–3, 187–8; financial crisis 37–43; financial system reforms 157; part-time working 145; steady state economy 159, 162 King, Alexander 11 Krugman, Paul 39, 85, 86, 102 Kyoto Protocol (1992) 18, 90 labour: child 62, 154; costs 110; division of 158; elasticity of substitution 177, 178; intensity 109, 148, 208; mobility 123; production inputs 80, 109; structures of capitalism 107 labour productivity 80–1, 109–11; Baumol’s cost disease 170–2; and economic growth 111; future visions 220, 224; investment as commitment 150; need for investment 109; post-growth economy 175, 208; services as engine of growth 170; sustainable investment 166, 170; trade off with resource use 110; work-sharing 145, 146, 147, 148, 148, 149 Lahr, Christin 224–5 laissez-faire capitalism 187, 195, 196 see also free market Lakoff, George 30 language of goods 212; material footprint of 139–40; signalling of social status 71; and wellbeing 124 see also consumerism; material goods; symbolic role of goods Layard, Richard 55 leadership, political 199 see also governance Lebow, Victor 120 Lehman Brothers, bankruptcy 23, 25, 26, 118 leisure economy 204 liberal market economies 106, 107; financial crisis 27, 35–6 life expectancy: and income 72, 73, 74, 77–9, 78; inequality 206; response to economic hardship 80 see also basic entitlements life-satisfaction 73; inequality 205; relative income effect 55–61, 58 see also wellbeing/happiness limits, ecological 3, 4, 7, 11, 12, 20–2; climate change 17–20; decoupling 86; financial crisis 23–4; growth 21, 165, 210; post-growth economy 201–2, 226–7; role of the state 198, 200–2, 206–7; and social boundaries 141; wellbeing 62–63, 185 limits, flourishing within 61–5, 185; alternative hedonism 125–6; intrinsic values 127–31; moving towards 215, 218, 219, 221; paradox of materialism 121–23; prosperity 67–72, 113, 212; role of the state 201–2, 205; selfishness 131–8; shame 123–4; spending vs. saving behaviour 118–21, 119 see also sustainable prosperity limits to growth: confronting 7–8; exceeding 20–2; wellbeing 62–3 Limits to Growth report (Club of Rome) xxxii, xxxiii, 8, 11–16 ‘The Living Standard’ essay (Sen) 50, 123–4 living standards 82 see also prosperity Lloyd, William Forster 190 loans 154; community investment 155–6; financial system weaknesses 34 see also credit; debt London School of Economics 25 loneliness 123, 137 see also alienation long-term: investments 222; social good 219 long-term wellbeing vs. short-term pleasures 194, 197 longevity see life expectancy love 212 see also intrinsic values low-carbon transition 19, 220 LowGrow model for the Canadian economy 175 MacArthur Foundation 144 McCracken, Grant 115 Malthus, Thomas Robert 9–11, 132–3, 190 market economies: coordinated 27, 106; liberal 27, 35–6, 106, 107 market liberalism 106, 107; financial crisis 27, 35–6; wellbeing 47 marketing 140, 203–4 Marmot review, health inequality in the UK 72 Marx, Karl/Marxism 9, 189, 192, 225 Massachusetts Institute of Technology (MIT) 11, 12, 15 material abundance see opulence material goods 68–9; identity 52; language of 139–40; and wellbeing 47, 48, 49, 51, 65, 126 see also symbolic role of goods material inputs see resource use materialism: and fear of death 69, 104, 115, 212–15; and intrinsic values 127–31; paradox of 121–3; price of 126; and religion 115; values 126, 135–6 see also consumerism mathematical models/simulations 132; austerity policies 181; countercyclical spending 181–2, 182; decoupling 84, 91, 96–101; inequality 176–8; post-growth economy 164; stock-flow consistent 179–80 Mawdsley, Emma 70 Mazzucato, Mariana 193, 220 MDG (Millennium Development Goals) 74–5 Meadows, Dennis and Donella 11, 12, 15, 16 meaning/purpose 2, 8, 22; beyond material goods 212–16; consumerism 69, 203, 215; intrinsic values 127–31; moving towards 218–20; wellbeing 49, 52, 60, 121–2; work 144, 146 see also intrinsic values means and ends 159 mental health: inequality 206; meaning/purpose 213 metaphors: government as household 30, 42; invisible hand 132, 133, 187 Middle East, energy inputs 88 Miliband, Ed 199 Mill, John Stuart 125, 159, 160, 174 Millennium Development Goals (MDG) 74–5 mindfulness 128 Minsky, Hyman 34, 35, 40, 182, 208 MIT (Massachusetts Institute of Technology) 11, 12, 15 mixed economies 106 mobility of labour, loneliness index 123 Monbiot, George 84, 85, 86, 91 money: creation 154, 157, 178–9; and prosperity 5; as social good 140, 153–7, 158 see also financial systems monopoly power, corporations 106–7 The Moral Consequences of Economic Growth (Friedman) 82, 176 moral dimensions, good life 63 see also intrinsic values moral hazards, separation of risk from reward 35 ‘more fun with less stuff’ 129, 217 mortality fears 69, 104, 115, 212–15 mortality rates, and income 74, 74–6, 75 mortgage loans 28–9, 35 multinational corporations 106–7 national debt see debt, public-sector nationalisation 191; financial crisis 38, 188 natural selection 132–3 see also struggle for existence nature, rights of 6–7 negative emissions 98–9 negative feedback loops 16–17 Netherlands 58, 62, 206, 207 neuroscientific perspectives: flourishing 68, 69; human behaviour 134 New Climate Economy report Better Growth, Better Climate 18 New Deal, USA 39 New Economics Foundation 175 nickel, commodity prices 13 9/11 terrorist attacks (2001) 121 Nordhaus, William 171, 172–3 North America 128, 155 see also Canada; United States Norway: advertising 204; inequality 206; investment as commitment 151–2; life expectancy 74; relative income effect 58; schooling 76 novelty/innovation 104, 108, 113; and anxiety 116–17, 124, 211; crisis of commitment 195; dilemma of growth 211; human psyche 135–6, 136, 137; investment 150, 166, 168; post-growth economy 226; role of the state 196, 197, 199; as service 140, 141–4, 158; symbolic role of goods 114–16, 213 see also technological advances Nudge: Improving Decisions about Health, Wealth, and Happiness (Thaler and Sunstein) 194–5 Nussbaum, Martha 64 nutrient loading, critical boundaries 17 nutrition 67 see also basic entitlements obesity 72, 78, 206 obsolescence, built in 113, 204, 220 oceans: acidification 17; common pool resources 192 Offer, Avner 57, 61, 71, 194, 195 oil prices 14, 21; decoupling 88; financial crisis 26; resource constraints 15 oligarchic capitalism 106, 107 opulence 50–1, 52, 67–72 original sin 9, 131 Ostrom, Elinor and Vincent 190, 191 output see efficiency; gross domestic product; productivity ownership: and expansion 105; private vs. public 9, 105, 191, 219, 223; new models 223–4; types/definitions of capitalism 105–7 Oxfam 141 paradoxes: materialism 121–3; thrift 120 Paris Agreement 19, 101, 201 participation in society 61, 114, 122, 129, 137; future visions 200, 205, 218, 219, 225; work as 140–9, 148, 157, 158 see also social inclusion part-time working 145, 146, 149, 175 Peccei, Aurelio 11 Perez, Carlota 112 performing arts, Baumol’s cost disease 171–2 personal choice 216–18 see also freedom/autonomy personal property 189, 191 Pickett, Kate 71, 205–6 Piketty, Thomas 33, 176, 177 planetary boundaries see limits (ecological) planning for change 17 pleasure 60–1 see also wellbeing/happiness Plum Village mindfulness community 128 Polanyi, Karl 198 policy see governance political leadership 199 see also governance Political Economy Research Institute, University of Massachusetts 41 pollution 12, 21, 53, 95–6, 143 polycentric governance 191, 192 Poor Laws 10 poor nations see poverty population increase 3, 12, 63, 96, 97, 190; Malthus on 9–11, 132–3 porn industry 40 Portugal 28, 58, 88, 206 positional competition 55–61, 58, 71, 72 see also social comparison positive feedback loops 16–17 post-growth capitalism 224 post-growth macroeconomics 159–60, 183–4, 221; credit 178–80; degrowth movement 161–3; economic stability 174–6; green growth 163–5; inequality 176–8; role of state 181–3, 182, 200–8, 206; services 170–4; sustainable investment 166–70 see also alternatives; future visions; reform poverty 4, 5–6, 216; basic entitlements 72; flourishing within limits 212; life expectancy 74, 74; need for new economic model 101; symbolic role of goods 70; wellbeing 48, 59–60, 61, 67 see also inequality; relative income effect power politics 200 predator–prey analogy 103–4, 117 private credit see credit private vs. public: common good 208; ownership 9, 105, 191, 219, 223; salaries 130 privatisation 191, 219 product lifetimes, obsolescence 113, 204, 220 production: inputs 80–1; ownership 191, 219, 223 productivity: investment 109, 167, 168, 169; post-growth economy 224; services as engine of growth 171, 172, 173; targets 147; trap 175 see also efficiency measures; labour productivity; resource productivity profits: definitions of capitalism 105; dilemma of growth 211; efficiency measures 87; investment 109; motive 104; post-growth economy 224; and wages 175–8 progress 2, 50–5, 54 see also novelty/innovation; technological advances progressive sector, Baumol’s cost disease 171 progressive state 185, 220–2; contested 186–9; countering consumerism 202–5; equality measures 205–7, 206; governance of the commons 190–2; governance as commitment device 192–5; governmentality of growth 195–7; limit-setting 201–2; moving towards 197–200; post-growth macroeconomics 207–8, 224; prosperity 209 prosocial behaviour 198 see also social contract prosperity 1–3, 22, 121; capabilities for flourishing 61–5; and growth 3–7, 23, 66, 80, 160; and income 3–4, 5, 66–7; limits of 67–72, 113, 212; materialistic vision 137; progress measures 50–5, 54; relative income effect 55–61, 58, 71, 72; social perspectives 2, 22, 48–9; state roles 209 see also capabilities for flourishing; post-growth macroeconomics; sustainable prosperity; wellbeing prudence, financial 120, 195, 221; financial crisis 33, 34, 35 public sector spending: austerity policies 189; countercyclical spending strategy 181–2, 182; welfare economy 169 public services/amenities: common pool resources 190–2, 198, 199; future visions 204, 218–20; investment 155–6, 204; ownership 223 see also private vs. public; service-based economies public transport 41, 129, 193, 217 purpose see meaning/purpose Putnam, Robert 122 psyche, human see human nature/psyche quality, environmental 12 see also pollution quality of life: enterprise as service 142; inequality 206; sustainable 128 quality to throughput ratios 113 quantitative easing 43 Queen Elizabeth II 25, 32, 34, 37 quiet revolution 127–31 Raworth, Kate 141 Reagan, Ronald 8 rebound phenomenon 111 recession 23–4, 28, 81, 161–3 see also financial crisis recreation/leisure industries 143 recycling 129 redistribution of wealth 52 see also inequality reforms 182–3, 222; economic structures 224; and financial crisis 103; financial systems 156–8, 180 see also alternatives; future visions; post-growth economy relative decoupling 84–5, 86; historical perspectives 87–9, 89; relationship with absolute decoupling 96–101, 111 relative income effect 55–61, 58, 71, 72 see also social comparison religious perspectives 9–10, 214–15; materialism as alternative to religion 115; original sin 9, 131; wellbeing 48, 49 see also existential fear of death renewable energy xxxv, 41, 168–169 repair/renovation 172, 220 resource constraints 3, 7, 8, 11–15, 47 resource productivity 110, 151, 168, 169, 220 resource use: conflicts 22; credible alternatives 101, 220; decoupling 84–9, 92–5, 94, 95; and economic output 142–4; investment 151, 153, 168, 169; trade off with labour costs 110 retail therapy 115 see also consumerism; shopping revenues, state 222–3 see also taxation revolution 186 see also social stability rights: environment/nature 6–7; human see basic entitlements risk, financial 24, 25, 33, 35 The Road to Serfdom (Hayek) 187 Robinson, Edward 132 Robinson, Joan 159 Rockström, Johan 17, 165 romantic movement 9–10 Roosevelt, Franklin D. 35, 39 Rousseau, Jean Jacques 9, 131 Russia 74, 76, 77–80, 78, 122 sacred canopy 214, 215 salaries: private vs. public sector 130, 171; and profits 175–8 Sandel, Michael 150, 164, 218 São Paulo, Clean City Law 204 Sardar, Zia 49, 50 Sarkozy, Nicolas xxxi, 53 savage state, romantic movement 9–10 savings 26–7, 28, 107–9, 108; investment 149; ratios 34, 118–20, 119 scale, efficiencies of 104 Scandinavia 27, 122, 204 scarcity, managing change 16–17 Schumpeter, Joseph 112 Schwartz, Shalom 135–6, 136 schooling see education The Science of Desire (Dichter) 114 secular stagnation 43–7, 45, 173 securitisation, mortgage loans 35 security: moving towards 219; and wellbeing 48, 61 self-development 204 self-expression see identity construction self-transcending behaviours see transcendence The Selfish Gene (Dawkins) 134–5 selfishness 133–8, 196 Sen, Amartya 50, 52, 61–2, 123–4 service concept/servicization 140–4, 147–8, 148, 158 service-based economies 219; engine of growth 170–4; substitution between labour and capital 178; sustainable investment 169–70 see also public services SFC (stock-flow consistent) economic models 179–80 shame 123–4 shared endeavours, post-growth economy 227 Sheldon, Solomon 214 shelter see basic entitlements shopping 115, 116, 130 see also consumerism short-termism/living for today 194, 197, 200 signals: sent out by society 130, 193, 198, 203, 207; social status 71 see also language of goods Simon, Julian 13 simplicity/simple life 118–20, 127–9, 215–16 simulations see mathematical models/simulations slow: capital 170; movement 128 smart growth 85, 163–5 see also green growth Smith, Adam 51, 106–7, 123, 132, 187 social assets 220 social boundaries (minimum standards) 141 see also basic entitlements social care 150–1 see also caring professions social comparison 115, 116, 117 see also relative income effect social contract 194, 198, 199, 200 social inclusion 48, 69–71, 114, 212 see also participation in society social investment 155, 156, 189, 193, 208, 220–3 social justice 198 see also inequality social logic of consumerism 114–16, 204 social stability 24, 26, 80, 145, 186, 196, 205 see also alienation social status see status social structures 80, 129, 130, 137, 196, 200, 203 social tolerance, and wellbeing 59, 60 social unrest see social stability social wage 40 social welfare: financial reforms 182–3; public sector spending 169 socialism 223 Sociobiology (Wilson) 134 soil integrity 220 Solon, quotation 47, 49, 71 Soper, Kate 125–6 Soros, George 36 Soskice, David 106 Soviet Union, former 74, 76, 77–80, 78, 122 Spain 28, 58, 144, 206 SPEAR organization, responsible investment 155 species loss/extinctions 17, 47, 62, 101 speculation 93, 99, 149, 150, 154, 158, 170; economic stability 180; financial crisis 26, 33, 35; short-term profiteering 150; spending: behaviour of ordinary people 34, 119, 120–1; countercyclical 181–2, 182, 188; economic stability 81; as way out of recession 41, 44, 119, 120–1; and work cycle 125 The Spirit Level (Wilkinson and Pickett) 71, 205–6 spiritual perspectives 117, 127, 128, 214 stability see economic stability; social stability stagflation 26 stagnant sector, Baumol’s cost disease 171 stagnation: economic stability 81–2; labour productivity 145; post-financial crisis 43–7, 45 see also recession state capitalism, types/definitions of capitalism 106 state revenues, from social investment 222–3 see also taxation state roles see governance status 207, 209, 211; and possessions 69, 71, 114, 115, 117 see also language of goods; symbolic role of goods Steady State Economics (Daly) xxxii steady state economies 82, 159, 160, 174, 180 see also post-growth macroeconomics Stern, Nicholas 17–18 stewardship: role of the state 200; sustainable investment 168 Stiglitz, Joseph 53 stock-flow consistent (SFC) economic models 179–80 Stockholm Resilience Centre 17, 201 stranded assets 167–8 see also ownership structures of capitalism see economic structures struggle for existence 8–11, 125, 132–3 Stuckler, David 43 stuff see language of goods; material goods; symbolic role of goods subjective wellbeing (SWB) 49, 58, 58–9, 71, 122, 129 see also wellbeing/happiness subprime lending 26 substitution, between labour and capital 177–178 suffering, struggle for existence 10 suicide 43, 52, 77 Sukdhev, Pavan 41 sulphur dioxide pollution 95–6 Summers, Larry 36 Sunstein, Cass 194 sustainability xxv–xxvi, 102, 104, 126; financial systems 154–5; innovation 226; investment 101, 152, 153, 166–70, 220; resource constraints 12; role of the state 198, 203, 207 see also sustainable prosperity Sustainable Development Strategy, UK 198 sustainable growth see green growth sustainable prosperity 210–12; creating credible alternatives 219–21; finding meaning beyond material commodities 212–16; implications for capitalism 222–5; personal choices for improvement 216–18; and utopianism 225–7 see also limits (flourishing within) SWB see subjective wellbeing; wellbeing/happiness Switzerland 11, 46, 157; citizen’s income 207; income relative to wellbeing 58; inequality 206; life expectancy 74, 75 symbolic role of goods 69, 70–1; existential fear of death 212–16; governance 203; innovation/novelty 114–16; material footprints 139–40; paradox of materialism 121–2 see also language of goods; material goods system dynamics model 11–12, 15 tar sands/oil shales 15 taxation: capital 177; income 81; inequality 206; post-growth economy 222 technological advances 12–13, 15; decoupling 85, 86, 87, 96–8, 100–3, 164–5; dilemma of growth 211; economic stability 80; population increase 10–11; role of state 193, 220 see also novelty/innovation Teilhard de Chardin, Pierre 8 terror management, and consumption 69, 104, 115, 212–15 terrorist attacks (9/11) 121 Thailand, Buddhist monasteries 128 Thaler, Richard 194 theatre, Baumol’s cost disease 171–2 theology see religious perspectives theory of evolution 132–3 thermodynamics, laws of 112, 164 Thich Nhat Hanh 128 thrift 118–20, 127–9, 215–16 throwaway society 113, 172, 204 timescales for change 16–17 tin, commodity prices 13 Today programme interview xxix, xxviii Totnes, transition movement 128–9 Towards a Green Economy report (UNEP) 152–3 Townsend, Peter 48, 61 trade balance 31 trading standards 204 tradition 135–6, 136, 226 ‘Tragedy of the commons’ (Hardin) 190–1 transcendence 214 see also altruism; meaning/purpose; spiritual perspectives transition movement, Totnes 128–9 Triodos Bank 156, 165 Trumpf (machine-tool makers) Germany 146 trust, loss of see alienation tungsten, commodity prices 13 Turkey 58, 88 Turner, Adair 157 21st Conference of the Parties to the UN Framework Convention on Climate Change (2015) 19 UBS (Swiss bank) 46 Ubuntu, African philosophy 227 unemployment 77; consumer goods 215; degrowth movement 162; financial crisis 24, 40, 41, 43; Great Depression 39–40; and growth 38; labour productivity 80–1; post-growth economy 174, 175, 183, 208, 219; work as participation 144–6 United Kingdom: Green New Deal group 152; greenhouse gas emissions 92; labour productivity 173; resource inputs 93; Sustainable Development Strategy 198 United Nations: Development Programme 6; Environment Programme 18, 152–3; Green Economy initiative 41 United States: credit unions 155–6; debt 27, 31–32; decoupling 88; greenhouse gas emissions 90–1; subprime lending 26; Works Progress Administration 39 universal basic income 221 see also citizen’s income University of Massachusetts, Political Economy Research Institute 41 utilitarianism/utility, wellbeing 50, 52–3, 55, 60 utopianism 8, 38, 125, 179; post-growth economy 225–7 values, materialistic 126, 135–6 see also intrinsic values Veblen, Thorstein 115 Victor, Peter xxxviii, 146, 175, 177, 180 vision of progress see future visions; post-growth economy volatility, commodity prices 14, 21 wages: and profits 175–8; private vs. public sector 130, 171 walking, personal choices for improvement 217 water use 22 Wealth of Nations, An Inquiry into the Nature and Causes (Smith) 123, 132 wealth redistribution 52 see also inequality Weber, Axel 46 welfare policies: financial reforms 182–3; public sector spending 169 welfare of livestock 220 wellbeing/happiness 47–50, 53, 121–2, 124; collective 209; consumer goods 4, 21, 22, 126; growth 6, 165, 211; intrinsic values 126, 129; investment 150; novelty/innovation 117; opulence 50–2, 67–72; personal choices for improvement 217; planetary boundaries 141; relative income effect 55–61, 58, 71, 72; simplicity 129; utilitarianism 50, 52–3, 55, 60 see also capabilities for flourishing western lifestyles 70, 210 White, William 46 Whybrow, Peter 68 Wilhelm, Richard 7 Wilkinson, Richard 71, 205–6 Williams, Tennessee 213 Wilson, Edward 134 wisdom traditions 48, 49, 63, 128, 213–14 work: as participation 140–9, 148, 157, 158; and spend cycle 125; sharing 145, 146, 149, 175 Works Progress Administration, USA 39 World Bank 160 World Values Survey 58 youth unemployment, financial crisis 144–5 zero sum game, growth as 57, 71

Anatomy of the Bear: Lessons From Wall Street's Four Great Bottoms
by Russell Napier
Published 18 Jan 2016

The problem for those allocating capital was that, in practice, something very different occurred. From the creation of the Federal Reserve System in November 1914 to June 1920 the “elastic” money was stretched and the stock of money more than doubled. To complicate matters further for investors, the Fed’s role in money-creation was inconsistent and unpredictable. FIGURE 3. SOURCES OF CHANGE IN HIGH-POWERED MONEY Source: Friedman And Schwartz High-powered money (also known as the monetary base) is a term for a combination of all the forms of money, over which the Federal Reserve has almost complete control.

…

This mechanism continued to impact the growth of high-powered money after the creation of the Fed, but the Fed could also act independently to influence high-powered money. Over the years, equity investors have watched the performance of high-powered money as a leading indicator of future trends in the economy, inflation and the stock market. As we can see from Figure 3, the Federal Reserve System played only a minor role in money-creation prior to US entry into the war. The initial surge in the growth of high-powered money was due to a major gold inflow as belligerent governments purchased goods, liquidated investments and borrowed money. This process produced a turnaround in the US international investment position. A deficit of $3.7 billion in 1914 became a surplus of similar size by 1919.

…

The flow of gold to the US ceased. In this period the increase in the monetary gold stock now played a negligible role in the increase in high-powered money. A second monetary change due to the US entry into the war was the government’s need to finance the military. Although taxes rose, revenue was insufficient. Money creation through the central bank now played a role in enabling the government to raise finance domestically. Investors now had to understand the role of the elastic currency in propping up government finances rather than preventing the liquidity crises for which it had been designed. How “elastic” would be the new currency in this situation and, assuming the US won the war, what would be the magnitude of its subsequent contraction?

How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy
by Mehrsa Baradaran
Published 5 Oct 2015

Michael McLeay, Amar Radia, and Ryland Thomas, “Money Creation in the Modern Economy,” Quarterly Bulletin 54 (Bank of England, 2014): 16, accessed November 9, 2014, www.bankofengland.co.uk/publications/Pages/quarterlybulletin/2014/qb14q1.aspx. 10. Standard and Poor’s Global Credit Portal, “Repeat after Me: Banks Cannot and Do Not ‘Lend Out’ Reserves,” August 13, 2013, accessed November 9, 2014, www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=1177975&SctArtId=176005&from=CM&nsl_code=LIME&sourceObjectId=8163576&sourceRevId=1&fee_ind=N&exp_date=20230814-23:17:33. 11. McLeay, Radia, and Thomas, “Money Creation,” 16. 12.

…

“By influencing the level of interest rates in the economy, the [central bank’s] monetary policy affects how much households and companies want to borrow. This occurs both directly, through influencing the loan rates charged by banks, but also indirectly through the overall effect of monetary policy on economic activity in the economy.” McLeay, Radia, and Thomas, “Money Creation,” 16. 14. See Peter Conti-Brown, The Structures of the Federal Reserve Independence (Princeton, NJ: Princeton University Press, 2015). 15. See Kimberly Amadeo, “What is Quantitative Easing: How the Federal Reserve Created Massive Amounts of Money,” About News, October 14, 2014, accessed March 13, 2015, useconomy.about.com/od/glossary/g/Quantitative-Easing.htm; “What is Quantitative Easing?

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis
by Kevin Mellyn
Published 30 Sep 2009

Central banks can make loans or buy market instruments from the banks. Banks in turn can multiply thedeposit money they receive simply by making more loans to customers. Banks, in other words, are unique because only they can create money, deposit money, on their ledgers that other businesses and people can spend. Money Creation For example, if you take out a loan from a bank, what really happens is that the bank either creates deposit money in your account or it pays someone else in deposit money that the bank creates on your behalf, as with a home or auto loan. This is money that did not exist before. The money you owe the bank is essentially new money in the economy.

…

See also ‘‘black swans’’ Long Term Credit Bank (LTCB), Japan, 170 195 196 Index Mackay, Charles, Great Popular Delusions and the Madness of Crowds, 136 Madoff, Bernard, 23, 175 Main Street, 1, 91, 104, 144, 176, 187 Manias, xviii–xx, 27, 109, 136–138 Manufacturers Hanover Trust Company, 148, 158 margin lending, 110 market capitalization, 47, 51, 70, 126, 159, 183 markets 19–22, 24–28, 40–41, 60, 72, 107, 111, 117–119, 124, 126–127, 150, 165–169, 175–176; 179–189; defined, xi–xx; functions, 18–28; history of, 75, 79–89, 135–145; how to play, 50–56; irrational, 52–53, 156–57; real estate market downturn and ‘‘Billy Bob’’ banking crisis, 131–32; secondary, 44 MBS (Mortgage Backed Securities), 57 Medici, 79 Meyer, Martin, Bankers, The, 143 MMA (Money Market Account), 130 models, uses in finance, 21, 25, 27, 63–65, 69–70, 99–100, 138, 152, 166, 171, 177, 182; faith in, 4, 58, 66, 68, 71–72, 74 MOF (Ministry of Finance, Japan), 167 money, creation of, 13; defined, x, xi, 117; history of, xv–xvi, 33–34, 77–80; function of, xii–xv; money supply, types of xv, xvii–xviii, 4, 8–9, 83, 92, 148, 155; value of, 4. See also Credit money, Coinage, Commodity money, Deposit money, Paper money money market, 4, 6, 13, 23, 41–42, 84, 86–87, 90, 102, 106, 108, 110, 130, 150, 167 monoline credit insurers, 66 monopoly, 65, 81, 84–85, 95–96, 124; clearing and settlement, 13; deposit taking, 12, 15, 19, 90 Monte dei Paschi di Siena, bank, 79 ‘‘moral hazard,’’ 128–129, 181 Morgan Bank, 87, 108, 142–143 Morgan, J.P., 103, 105, 121, 164 Mortgages, 7, 18, 25, 35, 41, 55–58, 61–64, 66, 71–73, 110, 113, 121, 130–134, 142, 165, 176, 185, 187 NASDAQ, 165 National Accounts (US), 6, 113 National Bank Act of 1864 (US), 38 negotiable instrument, 10, 33, 35, 38–39, 130, 145 New Deal, 56, 114, 117, 126, 128, 130, 141–143, 154, 158–159, 162–163, 166, 176, 181–182, 184, 187, 189 Newton, Sir Isaac, 137 Nikkei, stock index, 168, 171 Nixon, Richard M., 154–155 Northern Rock, 86 NOW (Negotiable Order of Withdrawal) account, 130 off-shore banking centers, 150 open market operations, 107–108, 145 OPM or ‘‘Other People’s Money,’’ 15–19, 22, 26–27, 39, 46, 61, 71, 87–88, 92–93, 104, 129, 144–145, 150, 165, 167 Index ‘‘options,’’ 54–55, 75, 77 overdraft, 37–38, 61, 78, 89–90 Pac-Man banking, 157, 159 panics, xix–xx, 2, 5, 19, 45, 48, 98, 102, 109–10, 121, 136, 140–141, 150, 164, 183; of 1873, 5, 103; of 1907, 103; of 2008, 52; use of, 139 ‘‘paper money,’’ xiv–xvi, 14, 29, 33, 35, 83, 97.

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank
by John Tamny
Published 30 Apr 2016

It merely increases government demand at the expense of reduced demand among those who produced the wealth. Monetarism is just another variant of Keynesianism that similarly, and incorrectly, assumes that demand is the source of growth. In reality, demand is the result of growth; demand springs from production. Money creation for money’s sake won’t drive production, and hence it won’t drive up demand. Money creation targeted at a lack of production is the same as shifting that same quantity of money to where there is growth. Adam Smith put it well in The Wealth of Nations: “The same quantity of money cannot long remain in a country in which the value of annual produce diminishes.”11 Since production is light in Detroit and Baltimore, any attempt by the Fed or some billionaire to increase the supply of money in either city would fail rather quickly.

Red-Blooded Risk: The Secret History of Wall Street
by Aaron Brown and Eric Kim
Published 10 Oct 2011

That had to happen eventually, unless some organization had stepped in to provide a clearinghouse and broader economic backing to the contracts than tulips. We’ll discuss in Chapter 10 how this is exactly what developed around 1850 in the center of North America. I see some form of money creation, or attempted money creation, in all bubbles. In Chapter 16 we’ll see the power of stock option currency in the Internet bubble. In the housing bubble that popped in 2007 all kinds of new currencies were created, as we’ll see in Chapter 10. I started this chapter talking about exponentials and may have ended it seeming like a bubble apologist.

…

Nevertheless, whenever Americans got far enough away from authority, they opened wildcat or soft money banks using the old principles. Counterfeiters were folk heroes up to the time of the Civil War, just as bank robbers became folk heroes afterward and again during the Great Depression. As governments became more accustomed to paper money, most of them took it over and declared a monopoly on money creation. This took place in the United States during and shortly after the Civil War. Governments understood paper money even less than they understood silver coin money. So they played their old tricks of debasement—which is absurdly easy with paper money; you just print more, or make extravagant, unfunded promises that you can keep only by printing even more—and wage and price controls.

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order
by Paul Vigna and Michael J. Casey
Published 27 Jan 2015

By bringing society’s myriad debts and claims into the central ledger of a single bank, the bankers created a powerful, new centralized system of trust. With the help of their specialized intermediating services, strangers that previously had no way of trusting each other enough to do business could now do so. In effect, the Medici created a high-powered system of money creation—money being not a physical currency but a system for organizing, expanding, and sharing society’s debts and payments. It made way for an explosion in mercantile trade, which in turn created the wealth and capital that would finance the projects from which great civilizations would grow and conquer the world.

…

The bills financed shipments—say of shoes made in Venice to an importer in Bruges—that enriched the manufacturer, but the real profit spinner lay in trading the paper, a lesson that would be passed down through generations of bankers to the present day. For the first time, a private-sector community had come up with a de facto money-creation machine. This direct threat to the sovereignty of monarchs gave rise to a political clash as the kings and queens of Europe feared that their monopoly powers were being eroded. But the bankers didn’t want political power per se. They were pragmatic businessmen, as they would prove to be for centuries afterward.

…

As we saw, economists treat the creation of debt by banks as fundamental to the creation of private money—without them, they say, cash would just be circulating through the economy without turning on the multiplier effect of credit creation. Whenever you swipe your credit card during your shopping rounds, you are participating in that money creation. The problem is not debt per se—credit is a vital lubricant for the economy—it’s the complexity of the system for clearing that debt. By handing Starbucks your card, you’re not so much transferring money as creating a series of IOUs between you, your bank, Starbucks’ bank, and Starbucks. Once checks and wire transfers are added into the mix, this constant sharing and offsetting of credits and debits leaves banks with giant balances to be reconciled and settled at the end of each day.

Money Free and Unfree
by George A. Selgin
Published 14 Jun 2017

Part II, “Before the Fed,” begins with two papers examining the harmful long-run consequences of the Civil War monetary reforms inspired by the Northern government’s desperate search for wartime revenue, and ends with a revisionist account of the reform efforts that resulted in the passage of the Federal Reserve Act. Part III, “The Federal Reserve Era,” begins with an overview of the rise and fall of the gold standard, which was supposed to constrain the Fed’s powers of money creation, but which was instead gradually dismantled following the Fed’s establishment. This overview is followed by a chapter assessing the Fed’s record during its first century, and another reviewing Fed officials’ tendency to misrepresent that record. The section ends with a paper that argues for streamlining the Federal Reserve’s operating system, while making it work equally well both in normal times and during crises, by dispensing with both the primary dealer system and discount window lending, while having the Fed purchase private as well as government securities by means of auctions open to numerous bank and nonbank counterparties

…

Fiscal considerations can thus account for governments allowing competitive deposit-taking (subject to statutory reserve requirements and other devices aimed at directly or indirectly taxing bank deposits) while suppressing redeemable private bank notes. MONETARY REPUDIATION AND THE TIME-INCONSISTENCY PROBLEM Governments, as we have noted above, may sometimes seek revenue through a surprise inflation that acts as a “capital levy” on money. The capital levy is imposed by a deliberate short-run burst of money creation. Holders of cash balances experience a loss of real wealth as the price level jumps more than expected. Such a capital levy makes it possible to generate more real revenue in the short run, but at the cost of smaller steady-state seigniorage once the public recognizes the risk of a high-inflation period occurring and therefore holds less real base money at any given nonpeak inflation rate than it would hold if the inflation rate were viewed as stable.

…

Jr. (1996) “Wildcat Banking, Banking Panics, and Free Banking in the United States.” Federal Reserve Bank of Atlanta Economic Review 81 (1): 1–20. Dwyer, G. P. Jr., and Gilbert, A. R. (1989) “Bank Runs and Private Remedies.” Federal Reserve Bank of St. Louis Economic Review (May/June): 43–61. Dwyer, G. P. Jr., and Saving, T. R. (1986) “Government Revenue from Money Creation with Government and Private Money.” Journal of Monetary Economics 17 (2): 239–49. Dynan, K. E.; Elmendorf, D. W.; and Sichel, D. E. (2006) “Can Financial Innovation Help to Explain the Reduced Volatility of Economic Activity?” Journal of Monetary Economics 53 (1): 123–50. Economopoulos, A. (1994) “A Discriminating Taste for Money: An Examination of the New York Antebellum Banking Market.”

Crisis and Dollarization in Ecuador: Stability, Growth, and Social Equity
by Paul Ely Beckerman and Andrés Solimano
Published 30 Apr 2002

In its efforts during the year to absorb liquidity, the Central Bank had built up a massive stock of short-term remunerated liabilities at high interest rates. This meant that the Central Bank’s policy approach had perverse consequences: As interest rates rose, the Central Bank itself had to pay higher interest charges and had to create money to do so—so that monetary tightening actually led to money creation. This was symptomatic of the reality that, by this advanced stage in the crisis, the monetary authorities had lost the capacity to control the money supply, exchange rate, and price level. With the sucre now depreciating significantly every day, the only alternative to dollarizing was clearly hyperinflation, which would have ended with dollarization in any case.

…

Senator Connie Mack has argued that the United States should share seigniorage with countries adopting the dollar. 3. This section draws on Moreno Villalaz’ analyses of the Panamanian monetary system (1997, 1999a, 1999b. 4. Argentina’s recent banking crisis illustrates the point in a different way. Under its convertibility rules, Argentina’s Central Bank’s money-creation capacity was restricted, but it could and did borrow dollars abroad and used the proceeds as a lender of last resort. 5. From the time it was drafted, the Ecuadoran media have referred to this law as the “Trolleybus Law,” that is, more all-encompassing than an “omnibus” law. 6. The sucre retains a de jure legal status under the Constitution, partly because amending the Constitution would have been too contentious and lengthy a process. 7.

How Capitalism Saved America: The Untold History of Our Country, From the Pilgrims to the Present
by Thomas J. Dilorenzo
Published 9 Aug 2004

Consequently, many businesses do borrow more, which provides them with new funds that are used to invest more, start up new enterprises, expand existing businesses, and much more. The economy now has more capital goods than consumption goods. But the businesses have been fooled. Savings have not really increased; the central bank’s money creation has caused the interest rate to decline. Businesses will eventually find that there is not sufficient consumer demand for the products produced with their additional capital investments; that is, businesses have made wasteful investments during the “boom” phase of the business cycle. Some businesses, therefore, will have to be liquidated.

…

As economist Frank Fetter explained, “Foreign loans were glorified by the same political leaders who wanted bigger and better trade restrictions, entirely oblivious to the problems involved in the repayment of such loans. . . . A tremendous volume of foreign loans made possible exports far in excess of imports.”36 But the Fed’s burst of money creation was pretty much over by the end of 1929. “From that time onward,” Rothbard writes, “the money supply remained level. . . . And therefore, from that time onward, a depression to adjust the economy was inevitable.”37 The bust was caused by government, not capitalism. Ludwig von Mises understood that the booming stock market and the strong economy reflected the inflation in the price of capital assets, and he foresaw what was about to happen.

The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All
by Martin Sandbu
Published 15 Jun 2020

One is the inefficient provision of electronic money transfers by private financial institutions, especially across borders. Another is the danger of some initiatives for private global e-money, such as the Libra proposed by Facebook. 17. Michael McLeay, Amar Radia, and Ryland Thomas, “Money Creation in the Modern Economy,” Bank of England Quarterly Bulletin, 2014, Q1, https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy. 18. For an analysis of such “limited-purpose banking,” see Laurence Kotlikoff, Jimmy Stewart Is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking, Hoboken, NJ: John Wiley and Sons, 2010. 19.

The Politics of Bitcoin: Software as Right-Wing Extremism
by David Golumbia
Published 25 Sep 2016

In a typically dismissive and sweeping piece on Falkvinge.net devoted to the question of whether “blockchain technology [can] help build a foundation for real democracy,” where “real democracy” is contrasted to representative democracy and Bitcoin is posited “as the new First Amendment app,” Nozomi Hayase (2015) discusses the “tyranny of central banks” and writes, “In tracing the history of money creation in the United States, attorney and author Ellen Brown [2008] revealed that the real trigger for the Revolutionary War was King George’s ban on the printing of local money in the American colonies. She described how after independence was won, the King’s economic subservience was not achieved by force but instead by the British bankers persuading the American people to take their paper money.”

The Enigma of Capital: And the Crises of Capitalism
by David Harvey
Published 1 Jan 2010

It then relies on the gap between the cost of its services and the interest rate offered to savers and the interest rate or fees it charges to users to sustain its own profitability. But banks can also lend out more than they borrow. It makes a difference if banks lend out three or thirty times what they have on deposit. Increased leveraging meant quite simply money creation within the banking system and rapidly rising profits. In the run-up to the present crisis, the profitability of the financial sector surged. The percentage of total profits in the US attributable to financial services rose from around 15 per cent in 1970 to 40 per cent by 2005. The credit system and the institutions that specialise in the assemblage and dispensation of money power therefore become more rather than less significant over time.

…

And it is at this point that capitalism has to create external power in order to save itself from its own internal contradictions. It needs to re-create the equivalent of the external feudal or non-capitalist gold reserve that it has historically fed upon. This it does by locating the power of infinite money creation within a neofeudal institution like the Federal Reserve. The realisation problem and the threat of underconsumption never goes away. But the problem of falling profits and devaluations due to lack of effective demand can be staved off for a while through the machinations of the credit system.

Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace
by Matthew C. Klein
Published 18 May 2020

Around the same time, the Bank of England decided to raise its discount rate from 4 percent to 4.5 percent to reverse the outflows of its gold reserves. In August, it raised its discount rate again to 5 percent. At first the increase in rates and reduction in deposits in the private banking system had little effect because English banks increased their own money creation to compensate for the Bank of England’s tightening. They simply made more loans and issued more notes and currency relative to their fixed supplies of gold reserves. Once news of the specie circular reached England, however, the Bank of England’s directors decided that they would no longer lend to British banking houses with “excessive” American exposure.

…

The Mexican economic historian Carlos Marichal writes that during this period “all the Latin American states were besieged by the European moneylenders, who urged them into the financial fray. Under the circumstances, it is not surprising that few politicians or bankers took precautions to deal with a possible abrupt change in the international economic climate.”23 Once again, rapid European money creation led to a burst of speculative activity in distant markets, followed by an expansion of international lending, followed automatically by soaring trade imbalances. Among the worst afflicted in trade was the newly established German Empire, which saw its trade account thrown into massive deficit as its increasingly valuable currency drove manufacturers out of global markets.

Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy
by George Gilder
Published 16 Jul 2018

You need a microscope, exploring inside the cells of individual companies to find the pure tones of true technology advance. Since Einstein used the concept to calculate the spontaneous gigahertz jiggling of molecules, Markov chains accelerated to gigahertz frequencies have enabled scientists to dominate a world economy ruled by chaotic money creation from central banks. Now, in the Google system of the world, technologists imagine that computer velocity conveys computer intelligence, that if you shuffle the electrons fast enough you can confer consciousness and creativity on dumb machines. The idea, however, that human brains, the world’s most compact and effective thinking systems, are actually random machines is not really very bright.

…

Thus Satoshi enabled the creation of money on the Net and used the money to pay “miners” to validate its transactions. Recorded in a public distributed ledger, the transactions are mathematically “hashed” into chains of blocks that form an immutable database published across the Internet. Unchangeable records of transactions constitute a form of money. But governments do not like private money creation. So Satoshi carefully preserved his anonymity. As the Cypherpunk poster James Donald put it soon after Satoshi announced bitcoin, “To avoid pressure, the network has to avoid any central point at which pressure can be applied. Recall Nero’s wish that Rome had a single throat that he could cut.

The Man Who Knew: The Life and Times of Alan Greenspan
by Sebastian Mallaby
Published 10 Oct 2016

Inflation hit 3.5 percent in 1966, then stayed at 3 percent or above for two decades. Greenspan’s monetarism, and his dissent from the economics of the New Frontier, owed something to Milton Friedman.40 In A Program for Monetary Stability, published in 1960, Friedman had emphasized the destabilizing power of excess money creation, recommending that the central bank should target monetary growth that roughly matched output growth—in the absence of such a rule, discretionary policy would lead to inflation.41 In 1963, the year Greenspan sent out his letters, Friedman and his coauthor, Anna Schwartz, followed up with an enduring statement in favor of laissez-faire, A Monetary History of the United States.

…

The way Greenspan saw things, the money panics of the nineteenth century had actually been salutary.45 They had inflicted brief contractions on the economy, to be sure. But they had also been a boon, for they had disrupted the inflation of asset bubbles. Thanks to the money panics, banks were regularly reminded not to let money creation run ahead of gold reserves, which meant that they would never pump out enough cash to fuel a truly dangerous bubble. It followed that the nation’s leaders had derived exactly the wrong lesson from history. Noticing that the money panics came on when banks ran short of reserves, politicians thought that “the cure to these money panics . . . was to prevent the banking system from running out of reserves.

…

Prices would stabilize “not because politicians become wise and courageous, or because some economist invents an easy and painless way to slow inflation,” he explained, but “because Americans generally, especially the middle class, are getting so fed up with inflation that the federal government will be compelled to adopt effective inflation-slowing policies.”18 Commenting on the Saturday Night Special later in October, Greenspan had nothing but respect for Volcker, whom he praised as “a tough guy.” But he regretted that the fight against inflation had not been pressed further. If the goal was to discipline wild money creation, the government needed to clamp down on federal subsidies for mortgages.19 Among the politicians channeling the public’s inflation rage was Greenspan’s new acquaintance, Ronald Reagan. In November 1979, a month after the Volcker shock, Reagan formally launched his campaign for the presidency.

Other People's Money: Masters of the Universe or Servants of the People?
by John Kay
Published 2 Sep 2015

Bankers discovered that they need keep only a fraction of the deposits placed with them in ready cash. Depositors would believe that they could access their money whenever they liked, although if they all did so at the same time, they could not. The liquidity illusion in finance has a variety of forms and different names – maturity transformation, fractional reserve banking, and even ‘money creation’. These esoteric terms contribute to the widespread notion that there is something mysterious and different about money, banking and finance. Yet there is nothing special about the idea of a service available on demand if, and only if, not many people take advantage of that availability. My mother could always obtain an extra pint of milk; but if everyone on the milkman’s round tried, most of them could not.

…

.: Hyperion 220 Loomis, Carol 108 lotteries 65, 66, 68, 72 Lucas, Robert 40 Lynch, Dennios 108 Lynch, Peter 108, 109 M M-Pesa 186 Maastricht Treaty (1993) 243, 250 McCardie, Sir Henry 83, 84, 282, 284 McGowan, Harry 45 Machiavelli, Niccolò 224 McKinley, William 44 McKinsey 115, 126 Macy’s department store 46 Madoff, Bernard 29, 118, 131, 132, 177, 232, 293 Madoff Securities 177 Magnus, King of Sweden 196 Manhattan Island, New York: and Native American sellers 59, 63 Manne, Henry 46 manufacturing companies, rise of 45 Marconi 48 marine insurance 62, 63 mark-to-market accounting 126, 128–9, 320n22 mark-to-model approach 128–9, 320n21 Market Abuse Directive (MAD) 226 market economy 4, 281, 302, 308 ‘market for corporate control, the’ 46 market risk 97, 98, 177, 192 market-makers 25, 28, 30, 31 market-making 49, 109, 118, 136 Markets in Financial Instruments Directive (MIFID) 226 Markkula, Mike 162, 166, 167 Markopolos, Harry 232 Markowitz, Harry 69 Markowitz model of portfolio allocation 68–9 Martin, Felix 323n5 martingale 130, 131, 136, 139, 190 Marx, Groucho 252 Marx, Karl 144, 145 Capital 143 Mary Poppins (film) 11, 12 MasterCard 186 Masters, Brooke 120 maturity transformation 88, 92 Maxwell, Robert 197, 201 Mayan civilisation 277 Meade, James 263 Means, Gardiner 51 Meeker, Mary 40, 167 Melamed, Leo 19 Mercedes 170 merchant banks 25, 30, 33 Meriwether, John 110, 134 Merkel, Angela 231 Merrill Lynch 135, 199, 293, 300 Merton, Robert 110 Metronet 159 Meyer, André 205 MGM 33 Microsoft 29, 167 middleman, role of the 80–87 agency and trading 82–3 analysts 86 bad intermediaries 81–2 from agency to trading 84–5 identifying goods and services required 80, 81 logistics 80, 81 services from financial intermediaries 80–81 supply chain 80, 81 transparency 84 ‘wisdom of crowds’ 86–7 Midland Bank 24 Milken, Michael 46, 292 ‘millennium bug’ 40 Miller, Bill 108, 109 Minuit, Peter 59, 63 Mises, Ludwig von 225 Mittelstand (medium-size business sector) 52, 168, 169, 170, 171, 172 mobile banking apps 181 mobile phone payment transfers 186–7 Modigliani-Miller theorem 318n9 monetarism 241 monetary economics 5 monetary policy 241, 243, 245, 246 money creation 88 money market fund 120–21 Moneyball phenomenon 165 monopolies 45 Monte Carlo casino 123 Monte dei Paschi Bank of Siena 24 Montgomery Securities 167 Moody’s rating agency 21, 248, 249, 313n6 moral hazard 74, 75, 76, 92, 95, 256, 258 Morgan, J.P. 44, 166, 291 Morgan Stanley 25, 40, 130, 135, 167, 268 Morgenthau, District Attorney Robert 232–3 mortality tables 256 mortgage banks 27 mortgage market fluctuation in mortgage costs 148 mechanised assessment 84–5 mortgage-backed securities 20, 21, 40, 85, 90, 100, 128, 130, 150, 151, 152, 168, 176–7, 284 synthetic 152 Mozilo, Angelo 150, 152, 154, 293 MSCI World Bank Index 135 muckraking 44, 54–5, 79 ‘mugus’ 118, 260 multinational companies, and diversification 96–7 Munger, Charlie 127 Munich, Germany 62 Munich Re 62 Musk, Elon 168 mutual funds 27, 108, 202, 206 mutual societies 30 mutualisation 79 mutuality 124, 213 ‘My Way’ (song) 72 N Napoleon Bonaparte 26 Napster 185 NASA 276 NASDAQ 29, 108, 161 National Economic Council (US) 5, 58 National Employment Savings Trust (NEST) 255 National Institutes of Health 167 National Insurance Fund (UK) 254 National Provincial Bank 24 National Science Foundation 167 National Westminster Bank 24, 34 Nationwide 151 Native Americans 59, 63 Nazis 219, 221 neo-liberal economic policies 39, 301 Netjets 107 Netscape 40 Neue Markt 170 New Deal 225 ‘new economy’ bubble (1999) 23, 34, 40, 42, 98, 132, 167, 199, 232, 280 new issue market 112–13 New Orleans, Louisiana: Hurricane Katrina disaster (2005) 79 New Testament 76 New York Stock Exchange 26–7, 28, 29, 31, 49, 292 New York Times 283 News of the World 292, 295 Newton, Isaac 35, 132, 313n18 Niederhoffer, Victor 109 NINJAs (no income, no job, no assets) 222 Nixon, Richard 36 ‘no arbitrage’ condition 69 non-price competition 112, 219 Norman, Montagu 253 Northern Rock 89, 90–91, 92, 150, 152 Norwegian sovereign wealth fund 161, 253 Nostradamus 274 O Obama, Barack 5, 58, 77, 194, 271, 301 ‘Obamacare’ 77 Occidental Petroleum 63 Occupy movement 52, 54, 312n2 ‘Occupy Wall Street’ slogan 305 off-balance-sheet financing 153, 158, 160, 210, 250 Office of Thrift Supervision 152–3 oil shock (1973–4) 14, 36–7, 89 Old Testament 75–6 oligarchy 269, 302–3, 305 oligopoly 118, 188 Olney, Richard 233, 237, 270 open market operations 244 options 19, 22 Organisation for Economic Co-operation and Development (OECD) 263 Osborne, George 328n19 ‘out of the money option’ 102, 103 Overend, Gurney & Co. 31 overseas assets and liabilities 179–80, 179 owner-managed businesses 30 ox parable xi-xii Oxford University 12 P Pacific Gas and Electric 246 Pan Am 238 Paris financial centre 26 Parliamentary Commission on Banking Standards 295 partnerships 30, 49, 50, 234 limited liability 313n14 Partnoy, Frank 268 passive funds 99, 212 passive management 207, 209, 212 Patek Philippe 195, 196 Paulson, Hank 300 Paulson, John 64, 109, 115, 152, 191, 284 ‘payment in kind’ securities 131 payment protection policies 198 payments system 6, 7, 25, 180, 181–8, 247, 259–60, 281, 297, 306 PayPal 167, 168, 187 Pecora, Ferdinand 25 Pecora hearings (1932–34) 218 peer-to-peer lending 81 pension funds 29, 98, 175, 177, 197, 199, 200, 201, 208, 213, 254, 282, 284 pension provision 78, 253–6 pension rights 53, 178 Perkins, Charles 233 perpetual inventory method 321n4 Perrow, Charles 278, 279 personal financial management 6, 7 personal liability 296 ‘petrodollars’ 14, 37 Pfizer 96 Pierpoint Morgan, J. 165 Piper Alpha oil rig disaster (1987) 63 Ponzi, Charles 131, 132 Ponzi schemes 131, 132, 136, 201 pooled investment funds 197 portfolio insurance 38 Potts, Robin, QC 61, 63, 72, 119, 193 PPI, mis-selling of 296 Prebble, Lucy: ENRON 126 price competition 112, 219 price discovery 226 price mechanism 92 Prince, Chuck 34 private equity 27, 98, 166, 210 managers 210, 289 private insurance 76, 77 private sector 78 privatisation 39, 78, 157, 158, 258, 307 probabilistic thinking 67, 71, 79 Procter & Gamble 69, 108 product innovation 13 property and infrastructure 154–60 protectionism 13 Prudential 200 public companies, conversion to 18, 31–2, 49 public debt 252 public sector 78 Q Quandt, Herbert 170 Quandt Foundation 170 quantitative easing 245, 251 quantitative style 110–11 quants 22, 107, 110 Quattrone, Frank 167, 292–3 queuing 92 Quinn, Sean 156 R railroad regulation 237 railway mania (1840s) 35 Raines, Franklin 152 Rajan, Raghuram 56, 58, 79, 102 Rakoff, Judge Jed 233, 294, 295 Ramsey, Frank 67, 68 Rand, Ayn 79, 240 ‘random walk’ 69 Ranieri, Lew 20, 22, 106–7, 134, 152 rating agencies 21, 41, 84–5, 97, 151, 152, 153, 159, 249–50 rationality 66–7, 68 RBS see Royal Bank of Scotland re-insurance 62–3 Reagan, Ronald 18, 23, 54, 59, 240 real economy 7, 18, 57, 143, 172, 190, 213, 226, 239, 271, 280, 288, 292, 298 redundancy 73, 279 Reed, John 33–4, 48, 49, 50, 51, 242, 293, 314n40 reform 270–96 other people’s money 282–5 personal responsibility 292–6 principles of 270–75 the reform of structure 285–92 robust systems and complex structures 276–81 regulation 215, 217–39 the Basel agreements 220–25 and competition 113 the origins of financial regulation 217–19 ‘principle-based’ 224 the regulation industry 229–33 ‘rule-based’ 224 securities regulation 225–9 what went wrong 233–9 ‘Regulation Q’ (US) 13, 14, 20, 28, 120, 121 regulatory agencies 229, 230, 231, 235, 238, 274, 295, 305 regulatory arbitrage 119–24, 164, 223, 250 regulatory capture 237, 248, 262 Reich, Robert 265, 266 Reinhart, C.M. 251 relationship breakdown 74, 79 Rembrandts, genuine/fake 103, 127 Renaissance Technologies 110, 111, 191 ‘repo 105’ arbitrage 122 repo agreement 121–2 repo market 121 Reserve Bank of India 58 Reserve Primary Fund 121 Resolution Trust Corporation 150 retirement pension 78 return on equity (RoE) 136–7, 191 Revelstoke, first Lord 31 risk 6, 7, 55, 56–79 adverse selection and moral hazard 72–9 analysis by ‘ketchup economists’ 64 chasing the dream 65–72 Geithner on 57–8 investment 256 Jackson Hole symposium 56–7 Kohn on 56 laying bets on the interpretation of incomplete information 61 and Lloyd’s 62–3 the LMX spiral 62–3, 64 longevity 256 market 97, 98 mitigation 297 randomness 76 socialisation of individual risks 61 specific 97–8 risk management 67–8, 72, 79, 137, 191, 229, 233, 234, 256 risk premium 208 risk thermostat 74–5 risk weighting 222, 224 risk-pooling 258 RJR Nabisco 46, 204 ‘robber barons’ 44, 45, 51–2 Robertson, Julian 98, 109, 132 Robertson Stephens 167 Rockefeller, John D. 44, 52, 196 Rocket Internet 170 Rogers, Richard 62 Rogoff, K.S. 251 rogue traders 130, 300 Rohatyn, Felix 205 Rolls-Royce 90 Roman empire 277, 278 Rome, Treaty of (1964) 170 Rooney, Wayne 268 Roosevelt, Franklin D. v, 25, 235 Roosevelt, Theodore 43–4, 235, 323n1 Rothschild family 217 Royal Bank of Scotland 11, 12, 14, 24, 26, 34, 78, 91, 103, 124, 129, 135, 138, 139, 211, 231, 293 Rubin, Robert 57 In an Uncertain World 67 Ruskin, John 60, 63 Unto this Last 56 Russia defaults on debts 39 oligarchies 303 Russian Revolution (1917) 3 S Saes 168 St Paul’s Churchyard, City of London 305 Salomon Bros. 20, 22, 27, 34, 110, 133–4 ‘Salomon North’ 110 Salz Review: An Independent Review of Barclays’ Business Practices 217 Samuelson, Paul 208 Samwer, Oliver 170 Sarkozy, Nicolas 248, 249 Savage, L.J. 67 Scholes, Myron 19, 69, 110 Schrödinger’s cat 129 Scottish Parliament 158 Scottish Widows 26, 27, 30 Scottish Widows Fund 26, 197, 201, 212, 256 search 195, 209, 213 defined 144 and the investment bank 197 Second World War 36, 221 secondary markets 85, 170, 210 Securities and Exchange Commission (SEC) 20, 64, 126, 152, 197, 225, 226, 228, 230, 232, 247, 292, 293, 294, 313n6 securities regulation 225–9 securitisation 20–21, 54, 100, 151, 153, 164, 169, 171, 222–3 securitisation boom (1980s) 200 securitised loans 98 See’s Candies 107 Segarra, Carmen 232 self-financing companies 45, 179, 195–6 sell-side analysts 199 Sequoia Capital 166 Shad, John S.R. 225, 228–9 shareholder value 4, 45, 46, 50, 211 Sharpe, William 69, 70 Shell 96 Sherman Act (1891) 44 Shiller, Robert 85 Siemens 196 Siemens, Werner von 196 Silicon Valley, California 166, 167, 168, 171, 172 Simon, Hermann 168 Simons, Jim 23, 27, 110, 111–12, 124 Sinatra, Frank 72 Sinclair, Upton 54, 79, 104, 132–3 The Jungle 44 Sing Sing maximum-security gaol, New York 292 Skilling, Jeff 126, 127, 128, 149, 197, 259 Slim, Carlos 52 Sloan, Alfred 45, 49 Sloan Foundation 49 small and medium-size enterprises (SMEs), financing 165–72, 291 Smith, Adam 31, 51, 60 The Wealth of Nations v, 56, 106 Smith, Greg 283 Smith Barney 34 social security 52, 79, 255 Social Security Trust Fund (US) 254, 255 socialism 4, 225, 301 Société Générale 130 ‘soft commission’ 29 ‘soft’ commodities 17 Soros, George 23, 27, 98, 109, 111–12, 124, 132 South Sea Bubble (18th century) 35, 132, 292 sovereign wealth funds 161, 253 Soviet empire 36 Soviet Union 225 collapse of 23 lack of confidence in supplies 89–90 Spain: property bubble 42 Sparks, D.L. 114, 283, 284 specific risk 97–8 speculation 93 Spitzer, Eliot 232, 292 spread 28, 94 Spread Networks 2 Square 187 Stamp Duty 274 Standard & Poor’s rating agency 21, 99, 248, 249, 313n6 Standard Life 26, 27, 30 standard of living 77 Standard Oil 44, 196, 323n1 Standard Oil of New Jersey (later Exxon) 323n1 Stanford University 167 Stanhope 158 State Street 200, 207 sterling devaluation (1967) 18 stewardship 144, 163, 195–203, 203, 208, 209, 210, 211, 213 Stewart, Jimmy 12 Stigler, George 237 stock exchanges 17 see also individual stock exchanges stock markets change in organisation of 28 as a means of taking money out of companies 162 rise of 38 stock-picking 108 stockbrokers 16, 25, 30, 197, 198 Stoll, Clifford 227–8 stone fei (in Micronesia) 323n5 Stone, Richard 263 Stora Enso 196 strict liability 295–6 Strine, Chancellor Leo 117 structured investment vehicles (SIVs) 158, 223 sub-prime lending 34–5, 75 sub-prime mortgages 63, 75, 109, 149, 150, 169, 244 Summers, Larry 22, 55, 73, 119, 154, 299 criticism of Rajan’s views 57 ‘ketchup economics’ 5, 57, 69 support for financialisation 57 on transformation of investment banking 15 Sunday Times 143 ‘Rich List’ 156 supermarkets: financial services 27 supply chain 80, 81, 83, 89, 92 Surowiecki, James: The Wisdom of Crowds xi swap markets 21 SWIFT clearing system 184 Swiss Re 62 syndication 62 Syriza 306 T Taibbi, Matt 55 tailgating 102, 103, 104, 128, 129, 130, 136, 138, 140, 152, 155, 190–91, 200 Tainter, Joseph 277 Taleb, Nassim Nicholas 125, 183 Fooled by Randomness 133 Tarbell, Ida 44, 54 TARGET2 system 184, 244 TARP programme 138 tax havens 123 Taylor, Martin 185 Taylor Bean and Whitaker 293 Tea Party 306 technological innovation 13, 185, 187 Tel Aviv, Israel 171 telecommunications network 181, 182 Tesla Motors 168 Tetra 168 TfL 159 Thai exchange rate, collapse of (1997) 39 Thain, John 300 Thatcher, Margaret 18, 23, 54, 59, 148, 151, 157 Thiel, Peter 167 Third World debt problem 37, 131 thrifts 25, 149, 150, 151, 154, 174, 290, 292 ticket touts 94–5 Tobin, James 273 Tobin tax 273–4 Tolstoy, Count Leo 97 Tonnies, Ferdinand 17 ‘too big to fail’ 75, 140, 276, 277 Tourre, Fabrice ‘Fabulous Fab’ 63–4, 115, 118, 232, 293, 294 trader model 82, 83 trader, rise of the 16–24 elements of the new trading culture 21–2 factors contributing to the change 17–18 foreign exchange 18–19 from personal relationships to anonymous markets 17 hedge fund managers 23 independent traders 22–3 information technology 19–20 regulation 20 securitisation 20–21 shift from agency to trading 16 trading as a principal source of revenue and remuneration 17 trader model 82, 83 ‘trading book’ 320n20 transparency 29, 84, 205, 210, 212, 226, 260 Travelers Group 33, 34, 48 ‘treasure islands’ 122–3 Treasuries 75 Treasury (UK) 135, 158 troubled assets relief program 135 Truman, Harry S. 230, 325n13 trust 83–4, 85, 182, 213, 218, 260–61 Tuckett, David 43, 71, 79 tulip mania (1630s) 35 Turner, Adair 303 TWA 238 Twain, Mark: Pudd’nhead Wilson’s Calendar 95–6 Twitter 185 U UBS 33, 134 UK Independence Party 306 unemployment 73, 74, 79 unit trusts 202 United States global dominance of the finance industry 218 house prices 41, 43, 149, 174 stock bubble (1929) 201 universal banks 26–7, 33 University of Chicago 19, 69 ‘unknown unknowns’ 67 UPS delivery system 279–80 US Defense Department 167 US Steel 44 US Supreme Court 228, 229, 304 US Treasury 36, 38, 135 utility networks 181–2 V value discovery 226–7 value horizon 109 Van Agtmael, Antoine 39 Vanderbilt, Cornelius 44 Vanguard 200, 207, 213 venture capital 166 firms 27, 168 venture capitalists 171, 172 Vickers Commission 194 Viniar, David 204–5, 233, 282, 283, 284 VISA 186 volatility 85, 93, 98, 103, 131, 255 Volcker, Paul 150, 181 Volcker Rule 194 voluntary agencies 258 W wagers and credit default swaps 119 defined 61 at Lloyd’s coffee house 71–2 lottery tickets 65 Wall Street, New York 1, 16, 312n2 careers in 15 rivalry with London 13 staffing of 217 Wall Street Crash (1929) 20, 25, 27, 36, 127, 201 Wall Street Journal 294 Wallenberg family 108 Walmart 81, 83 Warburg 134 Warren, Elizabeth 237 Washington consensus 39 Washington Mutual 135, 149 Wasserstein, Bruce 204, 205 Watergate affair 240 ‘We are the 99 per cent’ slogan 52, 305 ‘We are Wall Street’ 16, 55, 267–8, 271, 300, 301 Weber, Max 17 Weill, Sandy 33–4, 35, 48–51, 55, 91, 149, 293, 314n40 Weinstock, Arnold 48 Welch, Jack 45–6, 48, 50, 52, 126, 314n40 WestLB 169 Westminster Bank 24 Whitney, Richard 292 Wilson, Harold 18 windfall payments 14, 32, 127, 153, 290 winner’s curse 103, 104, 156, 318n11 Winslow Jones, Alfred 23 Winton Capital 111 Wolfe, Humbert 7 The Uncelestial City 1 Wolfe, Tom 268 The Bonfire of the Vanities 16, 22 women traders 22 Woodford, Neil 108 Woodward, Bob: Maestro 240 World Bank 14, 220 World.Com bonds 197 Wozniak, Steve 162 Wriston, Walter 37 Y Yellen, Janet 230–31 Yom Kippur War (1973) 36 YouTube 185 Z Zurich, Switzerland 62

Samuelson Friedman: The Battle Over the Free Market
by Nicholas Wapshott
Published 2 Aug 2021

about, generally, 254, 311 deficit spending, 257–58, 333 Economic Stimulus Act of 2008, 277 election in 2000, 254 military service avoided by, 49 tax cuts, 255, 257, 258–59 business cycle Friedman on, 128, 137, 140 Keynesian management of, 20, 95, 140, 281 Samuelson on, 14, 72, 122, 171 Butler, Samuel, 57, 313 Byrd, Robert L., 283–84 Callaghan, James, 227, 228–29, 230, 232 Cambridge Circus, 39–41, 93, 290, 310 Campaign Guide for 1987, The, 247 Capitalism and Freedom (Friedman), 45–49, 115, 173, 197, 215–16 Carter, Jimmy, 151, 175, 176–78, 191, 192, 199 Centre for Policy Studies (CPS), 233, 238, 243 Chamberlain, Neville, 63, 64, 314 Cheney, Richard (Dick), 49, 205, 258, 312 Chicago Boys, 159, 160 Chicago School, 14–15, 37–38, 70, 73, 82–83, 207, 304 see also specific individuals Chile, 159–61, 168–69, 222, 327, 328 Churchill, Winston, 218, 232, 234 CIA actions against Allende, 159, 327 Clark, John M., 14, 28, 308 Clean Air Act, 251 Clemens, Samuel (Mark Twain), 83, 317 Clinton, Bill, 211, 251–53, 257, 271, 291, 333 Cliveden, 1, 301 Cold War, 19, 209–10, 252 Compton, Karl Taylor, 20, 306 Connally, John, 148, 149, 325 Conscience of a Conservative, The (Bozell), 139 “Contract with America,” 251–52 Corporation for Public Broadcasting, 85 cost-push inflation, 121, 124, 152 COVID-19 pandemic, 285–89, 292, 342 credit swaps, 263–64 “Daisy Ad, The,” 52 deflation effect on cash balances, 128 Great Depression, 107 interest rates and, 110, 256, 263 printing money as cure, 256, 266 stimulus to prevent, 279 DeLay, Tom, 253 demand-pull inflation, 77, 121–22, 124 Despres, Emile, 207, 332 Dickens, Charles, 57, 313 Director, Aaron, 11, 13–14, 27, 35–36, 304, 307 discount rate, 104, 186–87, 188, 212, 282 disinflation, 195, 202, 256 Disraeli, Benjamin, 232 Douglas, Paul, 14, 82, 304 du Cann, Edward, 236, 336 Duke University, 282–84 Eckaus, Risha, 284 econometrics, 28, 33 Economic Consequences of the Peace, The (Keynes), 62 Economic Recovery Tax Act of 1981, 333 Economics: An Introductory Analysis (Samuelson) 1st edition (1948), 7, 18–19, 20, 71, 73–74, 76–77, 218, 257 3rd edition (1955), 171 5th edition (1961), 171–72, 219 7th edition (1967), 72, 206 8th edition (1970), 173 9th edition (1973), 172 11th edition (1980), 173, 221 12th edition (1985), 172 14th edition (1992), 206 15th edition (1995), 172 18th edition (2004), 172–73 Capitalism and Freedom commended, 49 on inflation and unemployment, 120 Keynesian economics in, 7, 18–19 Laffer Curve, 206 neoclassical synthesis, 21 Phillips Curve, 115 revisions, 8, 20, 24, 49, 74 on Soviet economy, 218, 219–21 Economic Stimulus Act of 2008, 277 Eisenhower, Dwight, 4–5, 23, 145, 256 Elements of Economics, The (Tarshis), 19 Elizabeth (queen), 230 Elliott, Osborn, 3–5, 7–8, 9, 24, 53, 223–24, 301 Ellis, Howard S., 133, 323 Encyclopædia Britannica, 101, 102–3, 319–20 “End of Laissez-Faire, The” (Keynes), 65 Engerman, Stanley L., 224 Essays in Positive Economics (Friedman), 43–44 Fannie Mae (Federal National Mortgage Association), 272, 273–75 Federal Reserve control of bank reserves, 188, 190, 191 discount rate, 104, 186–87, 188, 212, 282 federal funds rate, 181, 186–87, 188, 190, 192, 263 Federal Open Market Committee (FOMC), 181, 188, 212 Federal Reserve Act, 108–9, 321 fixed dollar price and, 23 high interest rates suggested to control inflation, 122, 123 interest rate cuts during financial freeze, 276 interest rate cuts to prevent recession, 255–56 interest rates and Great Depression, 34–35, 44, 103, 104, 257 interventions during financial freeze of 2007–8, 273–77 intervention to keep dollar steady, 175 lag between action and result, 113, 131 as lender of last resort, 276–77 limited effect of monetary policy, 108–9, 131, 135–36 mandate to control inflation, 109, 178 mandate to minimize unemployment, 108, 178 monetary targets, 181, 182–83, 184–86, 188–89, 192–93, 195–96 money creation opposed by Friedman, 70 money supply and Great Depression, 34–35, 44, 47, 257 prime rate, 194–95 quantitative easing, 263, 280–81, 324 see also monetary policy Feldstein, Martin Stuart, 340 Fforde, John, 245 financial crises and panics, list of, 316 financial freeze of 2007–8 effects of complex economy, 279–80 Fannie and Freddie, 272, 273–75 Federal Reserve interventions, 273–77 housing prices, decline, 272 interest rate cuts, 276 Lehman Brothers, 275 leveraging by banks, 272 mortgage delinquencies, 272 origin and causes, 271 severity of, 270, 278–79 subprime loans, 273 Troubled Asset Relief Program (TARP), 276, 278 unemployment, 278–79 fiscal policy coordination with monetary policy, 133 Friedman on, 108, 110, 116, 134–35, 153, 196 Keynes and, 19, 106–8 Samuelson and, 20, 72, 172 Fogel, Robert, 82, 224, 317 Ford, Gerald, 175, 177, 329 Foundations of Economic Analysis (Samuelson), 16, 20, 162 France, Anatole, 85–86 Freddie Mac (Federal Home Loan Mortgage Corporation), 272, 273–75 Freedman, Ralph, 18 Freedom and Reality (Powell), 238 Freeman, Harold, 16 Free to Choose (Friedman and Friedman), 197–98, 215, 237 Freud, Sigmund, 57 Friedman, David, 27, 269, 290, 307, 334, 342 Friedman, Jenő Saul, 25, 26 Friedman, Milton advice to Nixon, 142–43, 147, 148 advice to Thatcher’s economic ministers, 240–41, 242, 244 AEA address, 106–16, 118, 132, 144, 197, 323 agreement to write for Newsweek, 8–9, 53 article not published by Keynes, 28–29 Bernanke and, 261, 262–63, 271 birth, 25, 303 in Cambridge, 38–40, 93 Cambridge Circus and, 39–40, 93 campaign to disprove Keynes, 94, 98 capitalism defended by, 45–49 computer algorithm idea for the Fed, 193, 200 conservative Republicans and, 49–50, 51–52, 73 consumption function, 29, 44, 100, 103, 289 death, 264–65, 303 debate with Heller, 116 deficits opposed by, 210–11 democracy and economics, 70–71, 77–78, 79 departure from Newsweek, 225–26 desire to have his ideas tested, 137, 138, 178 differences from Hayek, 37–38 on disagreements among economists, 55 disappointment in Nixon, 117, 141, 143, 214 disproof of Phillips Curve, 111–12, 114–15, 170 at Division of Tax Research, 32 on easy-to-understand theories, 44, 60–61 Encyclopædia Britannica article on Keynes, 101–3 exchange with Pigou, 28–29 failure of monetary theories, 213–14 federal bailouts opposed by, 201 Federal Reserve money creation opposed by, 70 fellowships, 28, 38 final column published, 266 first meeting with Samuelson, 27 on fiscal policy, 108, 110, 116, 134–35, 153, 196 on floating dollar, 148 on freedom and liberty, 79–80, 86, 221 on free love, 334 free-market evangelism, 57, 77, 78 free trade and, 141, 150, 291–92 George H.

…

about, generally, 254, 311 deficit spending, 257–58, 333 Economic Stimulus Act of 2008, 277 election in 2000, 254 military service avoided by, 49 tax cuts, 255, 257, 258–59 business cycle Friedman on, 128, 137, 140 Keynesian management of, 20, 95, 140, 281 Samuelson on, 14, 72, 122, 171 Butler, Samuel, 57, 313 Byrd, Robert L., 283–84 Callaghan, James, 227, 228–29, 230, 232 Cambridge Circus, 39–41, 93, 290, 310 Campaign Guide for 1987, The, 247 Capitalism and Freedom (Friedman), 45–49, 115, 173, 197, 215–16 Carter, Jimmy, 151, 175, 176–78, 191, 192, 199 Centre for Policy Studies (CPS), 233, 238, 243 Chamberlain, Neville, 63, 64, 314 Cheney, Richard (Dick), 49, 205, 258, 312 Chicago Boys, 159, 160 Chicago School, 14–15, 37–38, 70, 73, 82–83, 207, 304 see also specific individuals Chile, 159–61, 168–69, 222, 327, 328 Churchill, Winston, 218, 232, 234 CIA actions against Allende, 159, 327 Clark, John M., 14, 28, 308 Clean Air Act, 251 Clemens, Samuel (Mark Twain), 83, 317 Clinton, Bill, 211, 251–53, 257, 271, 291, 333 Cliveden, 1, 301 Cold War, 19, 209–10, 252 Compton, Karl Taylor, 20, 306 Connally, John, 148, 149, 325 Conscience of a Conservative, The (Bozell), 139 “Contract with America,” 251–52 Corporation for Public Broadcasting, 85 cost-push inflation, 121, 124, 152 COVID-19 pandemic, 285–89, 292, 342 credit swaps, 263–64 “Daisy Ad, The,” 52 deflation effect on cash balances, 128 Great Depression, 107 interest rates and, 110, 256, 263 printing money as cure, 256, 266 stimulus to prevent, 279 DeLay, Tom, 253 demand-pull inflation, 77, 121–22, 124 Despres, Emile, 207, 332 Dickens, Charles, 57, 313 Director, Aaron, 11, 13–14, 27, 35–36, 304, 307 discount rate, 104, 186–87, 188, 212, 282 disinflation, 195, 202, 256 Disraeli, Benjamin, 232 Douglas, Paul, 14, 82, 304 du Cann, Edward, 236, 336 Duke University, 282–84 Eckaus, Risha, 284 econometrics, 28, 33 Economic Consequences of the Peace, The (Keynes), 62 Economic Recovery Tax Act of 1981, 333 Economics: An Introductory Analysis (Samuelson) 1st edition (1948), 7, 18–19, 20, 71, 73–74, 76–77, 218, 257 3rd edition (1955), 171 5th edition (1961), 171–72, 219 7th edition (1967), 72, 206 8th edition (1970), 173 9th edition (1973), 172 11th edition (1980), 173, 221 12th edition (1985), 172 14th edition (1992), 206 15th edition (1995), 172 18th edition (2004), 172–73 Capitalism and Freedom commended, 49 on inflation and unemployment, 120 Keynesian economics in, 7, 18–19 Laffer Curve, 206 neoclassical synthesis, 21 Phillips Curve, 115 revisions, 8, 20, 24, 49, 74 on Soviet economy, 218, 219–21 Economic Stimulus Act of 2008, 277 Eisenhower, Dwight, 4–5, 23, 145, 256 Elements of Economics, The (Tarshis), 19 Elizabeth (queen), 230 Elliott, Osborn, 3–5, 7–8, 9, 24, 53, 223–24, 301 Ellis, Howard S., 133, 323 Encyclopædia Britannica, 101, 102–3, 319–20 “End of Laissez-Faire, The” (Keynes), 65 Engerman, Stanley L., 224 Essays in Positive Economics (Friedman), 43–44 Fannie Mae (Federal National Mortgage Association), 272, 273–75 Federal Reserve control of bank reserves, 188, 190, 191 discount rate, 104, 186–87, 188, 212, 282 federal funds rate, 181, 186–87, 188, 190, 192, 263 Federal Open Market Committee (FOMC), 181, 188, 212 Federal Reserve Act, 108–9, 321 fixed dollar price and, 23 high interest rates suggested to control inflation, 122, 123 interest rate cuts during financial freeze, 276 interest rate cuts to prevent recession, 255–56 interest rates and Great Depression, 34–35, 44, 103, 104, 257 interventions during financial freeze of 2007–8, 273–77 intervention to keep dollar steady, 175 lag between action and result, 113, 131 as lender of last resort, 276–77 limited effect of monetary policy, 108–9, 131, 135–36 mandate to control inflation, 109, 178 mandate to minimize unemployment, 108, 178 monetary targets, 181, 182–83, 184–86, 188–89, 192–93, 195–96 money creation opposed by Friedman, 70 money supply and Great Depression, 34–35, 44, 47, 257 prime rate, 194–95 quantitative easing, 263, 280–81, 324 see also monetary policy Feldstein, Martin Stuart, 340 Fforde, John, 245 financial crises and panics, list of, 316 financial freeze of 2007–8 effects of complex economy, 279–80 Fannie and Freddie, 272, 273–75 Federal Reserve interventions, 273–77 housing prices, decline, 272 interest rate cuts, 276 Lehman Brothers, 275 leveraging by banks, 272 mortgage delinquencies, 272 origin and causes, 271 severity of, 270, 278–79 subprime loans, 273 Troubled Asset Relief Program (TARP), 276, 278 unemployment, 278–79 fiscal policy coordination with monetary policy, 133 Friedman on, 108, 110, 116, 134–35, 153, 196 Keynes and, 19, 106–8 Samuelson and, 20, 72, 172 Fogel, Robert, 82, 224, 317 Ford, Gerald, 175, 177, 329 Foundations of Economic Analysis (Samuelson), 16, 20, 162 France, Anatole, 85–86 Freddie Mac (Federal Home Loan Mortgage Corporation), 272, 273–75 Freedman, Ralph, 18 Freedom and Reality (Powell), 238 Freeman, Harold, 16 Free to Choose (Friedman and Friedman), 197–98, 215, 237 Freud, Sigmund, 57 Friedman, David, 27, 269, 290, 307, 334, 342 Friedman, Jenő Saul, 25, 26 Friedman, Milton advice to Nixon, 142–43, 147, 148 advice to Thatcher’s economic ministers, 240–41, 242, 244 AEA address, 106–16, 118, 132, 144, 197, 323 agreement to write for Newsweek, 8–9, 53 article not published by Keynes, 28–29 Bernanke and, 261, 262–63, 271 birth, 25, 303 in Cambridge, 38–40, 93 Cambridge Circus and, 39–40, 93 campaign to disprove Keynes, 94, 98 capitalism defended by, 45–49 computer algorithm idea for the Fed, 193, 200 conservative Republicans and, 49–50, 51–52, 73 consumption function, 29, 44, 100, 103, 289 death, 264–65, 303 debate with Heller, 116 deficits opposed by, 210–11 democracy and economics, 70–71, 77–78, 79 departure from Newsweek, 225–26 desire to have his ideas tested, 137, 138, 178 differences from Hayek, 37–38 on disagreements among economists, 55 disappointment in Nixon, 117, 141, 143, 214 disproof of Phillips Curve, 111–12, 114–15, 170 at Division of Tax Research, 32 on easy-to-understand theories, 44, 60–61 Encyclopædia Britannica article on Keynes, 101–3 exchange with Pigou, 28–29 failure of monetary theories, 213–14 federal bailouts opposed by, 201 Federal Reserve money creation opposed by, 70 fellowships, 28, 38 final column published, 266 first meeting with Samuelson, 27 on fiscal policy, 108, 110, 116, 134–35, 153, 196 on floating dollar, 148 on freedom and liberty, 79–80, 86, 221 on free love, 334 free-market evangelism, 57, 77, 78 free trade and, 141, 150, 291–92 George H.

The Limits of the Market: The Pendulum Between Government and Market
by Paul de Grauwe and Anna Asbury
Published 12 Mar 2017

.  THE L IMI TS OF TH E MAR KET Box .. Lender of Last Resort and Inflation When a central bank buys government bonds, it does so by issuing new money. Will this not lead to inflation and currency depreciation? This is a question asked by many people. The answer is that in normal times excessive money creation does lead to inflation, but the times we have seen since the financial crisis of  are not normal. The financial crisis was characterized by reticence on the part of the financial institutions, after the excesses of the wild bubble years, in providing credit to businesses and households. All they want is to accumulate as much liquidity as possible in order to be armed against the next crisis.

Bit by Bit: How P2P Is Freeing the World
by Jeffrey Tucker
Published 7 Jan 2015

Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone. What’s very striking about this paragraph is that there is not even one mention of the currency unit itself. There is only the mention of the problem of double-spending (which is to say, the problem of inflationary money creation). The innovation here, even according to the words of its inventor, is the payment network, not the coin. The coin or digital unit only expresses the value of the network. It is an accounting tool that absorbs and carries the value of the network through time and space. This network is the blockchain.

Money for Nothing
by Thomas Levenson
Published 18 Aug 2020

* To step well ahead of this historical moment, in modern, postmetallic-money states, there’s a more direct way to deal with government shortfalls: states can simply create money through a variety of central bank operations. One controversial form of such money creation was used during the Great Recession that began in late 2007, so-called quantitative easing, in which central banks buy financial assets—bonds and other forms of debt—and thereby inject money created by the central bank into the broader financial marketplace; that “new” money is then available for use in the economy as a whole. The same money-creation power can in principle be used to pay back any official obligation expressed in that nation’s currency; the risk of paying off the entire US debt in this way would be inflation and a rapid depreciation of the value of the US dollar against any other currency.

The Tyranny of Nostalgia: Half a Century of British Economic Decline
by Russell Jones
Published 15 Jan 2023

A government deficit is necessarily mirrored by an equivalent private sector surplus. Monetary policy is less effective than fiscal policy during a slump. A government can buy goods and services without the need to collect taxes or issue debt. Interest costs can be constrained through money creation. Government spending and money creation need only be limited to the extent that employment becomes ‘over-full’, thereby encouraging inflation. Should inflation arise, it can readily be controlled by higher taxation and bond issuance to remove excess liquidity. The core inference and contention of MMT is, therefore, that the budget deficit and public sector indebtedness should be allowed to adjust to the level necessary to secure full employment.

An Empire of Wealth: Rise of American Economy Power 1607-2000
by John Steele Gordon
Published 12 Oct 2009

In 1790 there were only three state-chartered banks empowered to issue paper money, including Hamilton’s Bank of New York, but these notes had only local circulation. Hamilton reasoned that if the Bank of the United States accepted these local notes at par, other banks would too, greatly increasing the area in which they would circulate. And if the BUS refused the notes of a particular bank, because of irregularities or excess money creation, other banks would refuse them as well, helping to keep the state banks on the straight and narrow. Hamilton had learned not to like the idea of the government itself issuing paper money, knowing that in times of need the government would be unable to resist the temptation to solve its money problems by simply printing it.

…

They are sometimes too agreeable to their friends, sometimes too optimistic, sometimes too greedy, sometimes dishonest. Just as with politicians, once he is possessed of the magic power to create money, the banker’s temptation to create too much is always strong. This is precisely why Alexander Hamilton thought the country needed a central bank: to discipline the state banks and prevent excess money creation. And this is also, of course, why many of the country’s new commercial bankers resented the Bank of the United States that constrained their activities. At the turn of the nineteenth century, obtaining a bank charter required an act of the state legislature. This of course injected a powerful element of politics into the process and invited what today would be called corruption but then was regarded as business as usual.

Profiting Without Producing: How Finance Exploits Us All
by Costas Lapavitsas
Published 14 Aug 2013

Regulation and the residual strength of incumbent forms of credit money have limited its spread. Even in this respect, however, the emergence of e-money proper has reflected the peculiar importance of the circuits of personal income in financialized capitalism, briefly discussed in Chapter 2 and more fully explored in the rest of this book. Remarkably, the potential for spontaneous money creation represented by technological and institutional changes within financialized capitalism has been more fully apparent in developing countries. E-money proper has come into its own in a swathe of countries in Africa and Asia based particularly on telecommunications enterprises. The spread of mobile telephony has provided the underpinnings of acceptability, and thus of ‘moneyness’, for e-money in developing countries.

…

There is no mystery in this respect: banks seek to acquire promises to pay made by others in exchange for their own; hence, other things equal, they would be more likely to succeed if bank promises were shorter-term, thus entailing quicker return to the money form.47 At the limit, a bank’s promises to pay become credit money with absolute liquidity. They are deposits and banknotes payable on sight. ‘Maturity transformation’ is thus an integral aspect of capitalist banking; it is the ‘banking’ side of money creation by banks. Therefore, banks are in constant need of liquid assets to meet pressures generated by the holders of liabilities who are requesting payment. The standard way for banks to deal with the demands of liquidity is to keep reserves of liquid assets, which are, however, costly since they tend to have a low return; banks can also obtain liquidity by selling assets, which is even more costly, particularly when liquidity has to be obtained urgently; banks, finally, can borrow liquidity in the open markets for loanable capital.

The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge
by Faisal Islam
Published 28 Aug 2013

‘The best thing the Labour government did [to boost the economy] was to engineer a sterling devaluation without anyone really noticing,’ said one UK bank chief executive. The Bank of England’s economists calculated that the first £200 billion of QE alone saw a depreciation in sterling against other major currencies of 4 per cent. China and Brazil were concerned about the impact of this money creation on their economies, through competitive depreciations, rising commodity prices and unsustainable flows of hot money. The Brazilian finance minister talked about a new era of ‘currency wars’. At the central bankers’ central bank, the Bank for International Settlements in Basel, Switzerland, arguments raged between the emerging and the developed world.

…

I am old enough to remember that, when this treaty was written in the early 1990s, some of the countries around that table were actually doing what you suggest doing now, namely some of the central banks of these countries were financing the government expenditure of their governments through money creation, and the consequences were there for all of us to see. That is why, in a sense, this treaty embodies the best tradition of the Deutsche Bundesbank, whereby monetary financing has always been prohibited.’ Yet at the same time, one trillion euros were being ploughed into the Eurozone banking system via the LTRO (long-term refinancing operations).

The Finance Curse: How Global Finance Is Making Us All Poorer
by Nicholas Shaxson
Published 10 Oct 2018

Another reason was that they allowed banks to create new money out of thin air without any official restraint. The banking system in any country constantly creates new money when banks make new loans to customers. As the US economist J. K. Galbraith put it, ‘the process by which money is created is so simple that the mind is repelled’. To stop banks running amok, governments put brakes on money creation by enforcing reserve requirements, which restrict how much they can lend out in relation to their deposits. But the Euromarkets had none of these brakes. Eurodollar lending, a Bank of England memo noted, ‘is not controlled, as regards amount, nature or tenor: reliance is placed on the commercial prudence of the lenders’.

…

See ‘MF Global trustee reviewing firm’s practice of repledging collateral’, Reuters Financial Regulatory Forum, 21 December 2011. On Ernst & Young earning $150 million, see Richard Brooks, Bean Counters: The Triumph of the Accountants and How They Broke Capitalism, Atlantic Books, 2018, pp.131–3. 36. As with money creation by the banking system, which is kept in check by reserve requirements, so rehypothecation is theoretically kept in check by the ‘haircuts’ involved in repo. Therefore, for Lehman’s Repo 105, the bank would have to pledge $105 in collateral in exchange for $100 in cash. An IMF paper in 2010 estimated that just before the crisis hit US banks were getting over $4 trillion in funding via rehypothecation and said the shadow banking system – the parts that fall outside bank regulation – was 50 per cent bigger than people had previously thought because they had ignored rehypothecation.

Global Financial Crisis
by Noah Berlatsky
Published 19 Feb 2010

In fact since the late 1940s US households have saved between 6 and 10 percent of US GDP, but after 1998 household savings began plummeting, to reach nearly zero by 2007—something which had never before happened. 69 The Global Financial Crisis Meanwhile in China, as foreign currency poured into the country via its trade surplus, the PBC had to create yuan to purchase the inflow. In China most new money creation ends up in banks, who primarily fund investment, as consumer lending is a negligible part of bank lending. The PBC tried to constrain excess credit growth, but it surged anyway, mostly off balance sheet, in rapid loan growth among policy banks, exempt from the loan constraints, or in the unregulated informal banking sector.

End This Depression Now!
by Paul Krugman
Published 30 Apr 2012

The reason “printing money”—actually, the Fed’s purchase of assets with funds created by fiat, but close enough—can lead to inflation is that the credit expansion these Fed purchases set in motion leads to higher spending and higher demand. And this tells you immediately that the way money-printing causes inflation runs through a boom that causes the economy to overheat. No boom, no inflation; if the economy stays depressed, don’t worry about the inflationary consequences of money creation. What about stagflation, the infamous condition in which inflation is combined with high unemployment? Yes, that sometimes happens. “Supply shocks”—things like harvest failures or oil embargoes—can cause prices of raw materials to rise even though the broader economy is depressed. And these price increases can turn into a more general inflation if lots of workers have pay contracts that are indexed to the cost of living, as was the case in the 1970s, the decade of stagflation.

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression
by Richard A. Posner
Published 30 Apr 2009

The reason a financial crisis is such a downer is that the usual means by which the Federal Reserve pulls the economy out of a recession is by expanding the supply of money so that interest rates fall, which stimulates borrowing and hence, because most borrowing is for spending, whether on consumption or production, economic output. But the Federal Reserve does its money creation through the banks, and if the banks have solvency problems that make them reluctant to lend, the Fed's efforts to expand the money supply are impeded. To understand the central role of the banks' problems in our economic plight, we need to understand the contemporary meaning of "bank" and how that meaning was produced by the movement to deregulate the financial industry.

Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs
by Andy Kessler
Published 1 Feb 2011

So to make up for lower velocity, to keep the economy from shrinking like a raisin, Fed chairman Ben Bernanke began increasing the monetary base to increase the amount of money. But it’s hard. Even with bailout funds, banks didn’t want to lend, so their 10:1 increase of Fed money didn’t happen—let alone the 50:1 Bear Stearns money creation. So Bernanke started buying U.S. Treasuries, with cash, to increase the money supply. Which is pretty funny since he is also selling U.S. Treasuries to fund stimuli and budget deficits and . . . Hey, wait a second, can’t he just print $10 trillion and retire all the U.S. Treasury debt? Uh, yeah, sure.

Swimming With Sharks: My Journey into the World of the Bankers
by Joris Luyendijk
Published 14 Sep 2015

Equally unhelpful is the code of silence smothering or distorting signals coming from inside the sector, and the fact that in school you hardly learn a thing about the theory and practice of the financial system. I don’t think I’m alone in having been taught more about the ancient Egyptians than about the banks or our system of money creation. The general ignorance about the current threat posed by the financial system came across very clearly every time anyone asked me at parties, over dinner or at the school gates what had surprised me most about ‘those bankers’. The question often came with a cynical laugh as if nothing genuinely serious was at stake; they seemed to anticipate my answer would be ‘greed’, ‘cocaine’ or ‘arrogance’.

Money Mischief: Episodes in Monetary History
by Milton Friedman
Published 1 Jan 1992

In 1975, he appointed some of these economists to his cabinet. They cut government spending and employment sharply, repriva-tized enterprises that had been taken over by the Allende government, and removed controls on prices, wages, imports, and exports. These changes permitted a drastic reduction in money creation. Inflation promptly slowed. As measured by the deflator implicit in calculating real gross domestic product (GDP), inflation fell from 694 percent in 1974 to half that (342 percent) in 1975 and to less than 46 percent in 1979. After a difficult transitional year, during which real income fell by 13 percent, the economy boomed.

Broken Markets: A User's Guide to the Post-Finance Economy
by Kevin Mellyn
Published 18 Jun 2012

The answer is called professional or proprietary trading if you are a banker, but raw speculation or gambling if you are almost anyone else. Going back to our movie, remember that this vast disparity between the financial economy and the real economy is essentially new—a product of financial innovation on one hand and the severing of the last constraints on money creation on the other. The 1920s bubble economy was based on stock prices vastly outpacing any realistic future productions and profits by the companies involved. These inflated stock price values were multiplied by excessive borrowing against them, both for speculative purchase of more stock on credit (so-called margin loans by stock brokers) and for consumption and real estate investment.

Unhappy Union: How the Euro Crisis - and Europe - Can Be Fixed
by John Peet , Anton La Guardia and The Economist
Published 15 Feb 2014

See Il Fatto Quotidiano at: www.ilfattoquotidiano.it/2011/09/10/cucu-la-merkel-e-%E2%80%9Cinchiavabile%E2%80%9D/156545/ 5Moody’s announcement on July 23rd 2012, available at: www.moodys.com/research/Moodys-changes-the-outlook-to-negative-on-Germany-Netherlands-Luxembourg--PR_251214 6Speech by Mario Draghi, president of the European Central Bank, at the Global Investment Conference in London, July 26th 2012, available at: www.ecb.europa.eu/press/key/date/2012/html/sp120726.en.html 7“Money Creation and Responsibility”, speech by Jens Weidmann, September 18th 2012, available at: www.bundesbank.de/Redaktion/EN/Reden/2012/2012_09_20_weidmann_money_creaktion_and_responsibility.html 8“Banking union must be built on firm foundations”, Wolfgang Schäuble, Financial Times, May 12th 2013, available at: www.ft.com/cms/s/0/8bdaf6e8-b89f-11e2-869f-00144feabdc0.html#axzz2uvQwaeg2 7 The changing balance of power 1The best account of the Delors period is Delors: Inside the House that Jacques Built by Charles Grant (Nicholas Brealey, 1994). 2One of the first proponents of getting parliamentary groups to nominate their candidates for the presidency of the Commission was Simon Hix in What’s Wrong with Europe and How to Fix It (Polity, 2008) 3See article on extremist parties in Europe published in The Economist, January 4th 2014, available at: www.economist.com/news/briefing/21592666-parties-nationalist-right-are-changing-terms-european-political-debate-does 4This is discussed in Can Germany be Saved?

The Sport and Prey of Capitalists
by Linda McQuaig
Published 30 Aug 2019

It could also play a strategic role in helping the province transition to a greener energy future by providing low-cost loans for renewable energy and energy efficiency programs. “We believe money and its creation should be seen as a form of a public utility,” they write, “whereby the creation of money through credit benefits the greatest number of people at the least possible cost to society.”17 Instead, our society delegates that money-creation role — with its enormously lucrative returns — exclusively to private banks, where it benefits a tiny number of people at considerable cost to the rest of us. It is hard to think of a corporate sector that wields more power or reaps more wealth in Canada than the private banking industry. And while the Big Six national banks — RBC, Scotiabank, BMO, TD, CIBC, and National — are lauded in business and political circles for their stability, there is surprisingly little political debate or inquiry into how well they are serving the interests of Canadians.

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present
by Jeff Madrick
Published 11 Jun 2012

In 1953, he maintained in one of his few philosophical essays that the accuracy of a model’s assumptions or the details of its workings do not matter, only whether the model accurately predicts the future. Perhaps in anticipation of his future findings, he argued that if there was a statistical relationship between money and GDP, it would suffice for purposes of public policy, even if one couldn’t explain exactly how it worked. Money creation in a modern economy is too complex to fit the simple Friedman model, however. The Federal Reserve does not just press a button and produce more money. When original monetarism arose a few centuries earlier, new supplies of gold were often the driving force behind money expansion, not a complex banking system of reserves.

…

If an economic model passed statistical test, it was good enough, argued Friedman, but the central flaw was that such statistical tests were based on history. Without a cogent theory about what truly caused the results, it would be hard to assess how departures from history affected economic relationships. Abraham Hirsch and Neil De Marchi, Milton Friedman: Theory and Practice (New York: Harvester Wheatsheaf, 1990), pp. 138–45. 48 MONEY CREATION IN A MODERN ECONOMY: Robert J. Gordon, ed., Milton Friedman’s Monetary Framework: A Debate with His Critics (Chicago: University of Chicago Press, 1970). 49 YET FRIEDMAN HIMSELF WROTE: Hirsch and De Marchi, Milton Friedman, pp. 229, 230. 50 IF THE SAME AMOUNT OF MONEY: Velocity equaled GDP divided by the money supply; in the general Friedman-Schwartz case, GDP divided by currency and checking accounts. 51 “TO ME IT SEEMS STRANGE”: The late James Tobin was and remains the most perceptive and diligent critic of the work.

The Dollar Meltdown: Surviving the Coming Currency Crisis With Gold, Oil, and Other Unconventional Investments
by Charles Goyette
Published 29 Oct 2009

Similarly, a resumption in commercial bank lending will release this “powerful tool” of bank reserves, a powerful engine of monetary expansion and dollar destruction. Whatever it takes. Stagflation Is there a state that mediates between depressed economic conditions and intense market liquidity operations; between high unemployment and new money creation; a state that includes trillions of dollars having disappeared in bankruptcies and foreclosures and yet sees increasing consumer prices as a result of monetary inflation? There is a term for such a state: stagflation. As the name implies, stagflation is a period of economic stagnation accompanied by inflation.

The Inequality Puzzle: European and US Leaders Discuss Rising Income Inequality
by Roland Berger , David Grusky , Tobias Raffel , Geoffrey Samuels and Chris Wimer
Published 29 Oct 2010

And if the traders leave, they take their ability to make money with them and they will make money with a competitor. When one of my engineers leaves, if he doesn’t have the plant, technical equipment, etc., if he makes more money with me than the competition, I mean, if he creates more value from me than the competition, if he leaves, it doesn’t mean that going to another plant he will have the same money creation potential. So there is a rationale for paying the trader a lot. I don’t know how much the answer I received is true or not. It’s probably true to some extent, it’s probably exaggerated to some extent. But anybody who can be paid at a commission rate is going to make lots of money over time, and any company that has been paying its salesmen on a commission rate knows that after a while, if the business grows, then you have to reset the counter because then your sales people get over-paid.

The Global Minotaur
by Yanis Varoufakis and Paul Mason
Published 4 Jul 2015

The largest private lawsuit in US history involved Walmart’s alleged underpayment of, and failure to promote, more than 1.5 million women workers. 4. New Economics Foundation (2006) Growth Isn’t Working: The unbalanced distribution of benefits and costs from economic growth, London. 5. High interest rates, corporate America’s success in squeezing labour costs, Wall Street’s private money-creation skills, rising US household debt, and the dwindling living standards of the average American worker. 6. Even though, as explained in the previous chapter, the truth was rather different: behind the scenes, the US government had acquiesced rather happily to the oil price rises. 7. The previous chapter highlighted how brutal the Global Minotaur proved toward the average American.

Talk on the Wild Side
by Lane Greene
Published 15 Dec 2018

Here I record only the fact and the inference that can be derived from it. The Jews are entering into what they believe to be their inheritance. Gwynne’s theories don’t stop there. Another book of his, called Banks and Money, is described by its traditionalist Catholic publisher as proving that “money creation by the worldwide banking system is immoral and suicidal, though useful and even indispensable for bringing about the ‘New World Order’.” (Banks and Money is, for reasons unknown, unavailable in the British Library, although the British Library is required by law to have a copy of every book published in Britain.)

Less Is More: How Degrowth Will Save the World
by Jason Hickel
Published 12 Aug 2020

Over time this would put a huge dent in total debt levels, bring our money system back in line with ecology, and allow us to shift to a post-growth economy without causing a financial crisis.52 A second group argues that we need to go further, and abolish debt-based currency altogether. Instead of letting commercial banks create credit money, we could have the state create it – free of debt – and then spend it into the economy instead of lending it into the economy. The responsibility for money creation could be placed with an independent agency that is democratic, accountable and transparent, with a mandate to balance human well-being with ecological stability. Newly created money could be distributed partly in the form of a universal basic income: an idea that is becoming increasingly popular.

Machinery of Freedom: A Guide to Radical Capitalism
by David Friedman
Published 2 Jan 1978

While such frauds are certainly possible in private banking (and elsewhere in the economy) there is no obvious reason to expect them to be common, especially in a modern economy with well-developed institutions for generating and transmitting information on the financial condition of firms. If such a problem did develop in a private system, one consequence might be a preference by depositors for banks that were not protected by limited liability. Two further arguments are sometimes made for why money creation cannot be private; both, I think, are mistaken. The first is that competition is impossible since without a uniform money every transaction requires the intervention of a money changer. But this argument confuses standardization with monopoly. It is certainly convenient for the monies of different firms to exchange at a ratio of one to one, just as it is convenient for nuts made by one firm to fit bolts made by another, but this does not require that all money, or all nuts and bolts, be made by the same firm.

Everything for Everyone: The Radical Tradition That Is Shaping the Next Economy
by Nathan Schneider
Published 10 Sep 2018

That’s why, when it comes to monetary policy, average Argentinians and Ecuadorians today can talk circles around average North Americans, who have lived through decades of well-behaved dollars. Here, we mistake money for a constant, for something real and stable, rather than a complex of fickle debt relations. But that can change. The old populist farmers demanded more democratic means of money creation, and now tempestuous digital currencies have come to represent billions of dollars in value. People tired of banknotes, or simply seeking to keep their money under their control, are setting up alternatives to state-issued tender. From the Brixton Pound, in an immigrant neighborhood of London, to Ithaca Hours and BerkShares in the northeastern United States, local currency schemes are turning up even in currency monocultures.

The Pay Off: How Changing the Way We Pay Changes Everything
by Gottfried Leibbrandt and Natasha de Teran
Published 14 Jul 2021

______________________________________________________________________ 1 For contactless payments, Transport for London (TfL) has a limit on how much you pay for journeys in a single day or week. Once you reach the capped amount, they won’t charge you more regardless of how many journeys you make. 3. Not so simple: the fundamental challenges of payment You might well conclude at this point that all this money-creation magic is merely a smoke screen thrown up by bankers to justify their existence and rationalise their pay. After all, if payments are just changes to bits and bytes in digital ledgers, shouldn’t we leave them to software engineers to handle? You’re not the only one to think along those lines. Indeed, $70 billion payment start-up Stripe is based on the premise ‘that payments is a problem rooted in code, not finance’: it is built on just seven lines of code.

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay
by Guy Standing
Published 13 Jul 2016

Over $150 billion left China in just one month in 2015, mainly through Macau and underground banks.13 Capital inflows to China and other emerging markets have also generated considerable private credit. According to Matt King of Citigroup, emerging economies accounted for three-quarters of global ‘private money creation’ between 2010 and 2015. Flows of $8 trillion into those economies generated $5 trillion of credit annually.14 Much of that went into fuelling property bubbles at home and abroad. Ben Bernanke, former chair of the US Federal Reserve, and economists at the International Monetary Fund (IMF) are among those arguing that the combination of loose monetary policy, financial innovation and the savings glut in emerging market economies is responsible for housing price bubbles in Britain, the USA and elsewhere.15 This has contributed to the growth of wealth inequality and a revival of landlordism.

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World
by Sandra Navidi
Published 24 Jan 2017

Elizabeth Bernstein, “The Friendship Bank: How and Why Even the Most Giving Friend Expects Payback,” Wall Street Journal, Sept. 23, 2013, http://online.wsj.com/news/articles/SB10001424052702304713704579093141120660698. 25. Matthew D. Lieberman, Social: Why Our Brains Are Wired to Connect (New York: Crown, 2013), Kindle locations 3711-16, Kindle edition. CHAPTER 3 1. Michael McLeay, Amar Radia and Ryland Thomas, “Money Creation in the Modern Economy,” Quarterly Bulletin, Bank of England, 2014. 2. For reference, see also: Ralph Atkins, “Central Banks Shift into Shares as Low Rates Hit Revenues,” Financial Times, June 15, 2014, https://next.ft.com/content/d9dfad02-f462-11e3-a143-00144feabdc0. 3. David Wessel, In FED We Trust: Ben Bernanke’s War on the Great Panic (New York: Random House, 2009), 129, Kindle edition; Ben S.

Postcapitalism: A Guide to Our Future
by Paul Mason
Published 29 Jul 2015

These reflexes have become so ingrained in the thinking of millions that, when they no longer worked, it induced paralysis. It is news to some people that banks ‘create’ money, but they always have done: they have always lent out more cash than there was in the safe. In the pre-1971 system, though, there were legal limits to such money creation. In the USA, for savings that could be withdrawn at any time, banks had to hold $20 in cash against every $100 of deposits. Even if one in every five people rushed to the bank to take all their money out, there would still be enough.19 At every stage in its design, the neoliberal project removed those limits.

Broke: How to Survive the Middle Class Crisis
by David Boyle
Published 15 Jan 2014

That something else may be to create the money we need to defend our national civilization, aware that — to make that possible without creating rampant inflation — two other reforms will also be needed. The banks will have to be prevented from creating money, as they create most of the money we use now.[17] We will also need to have a much more equal society, otherwise the money will simply flow to the richest again. Whether this inversion of the money-creation status quo would be possible or desirable remains to be decided by debate — but the debate needs to start now. What most of these twelve points have in common is that they are not just a political programme; they amount to a call to action for the middle classes themselves. They will have to create the businesses and institutions capable of clawing back some kind of future for a civilized life.

The Divide: A Brief Guide to Global Inequality and Its Solutions
by Jason Hickel
Published 3 May 2017

But there’s an even more interesting approach we might try: we could abolish debt-based currency altogether. Instead of letting commercial banks create our money, we could have the state create it – free of debt – and then spend it into the economy instead of lending it into the economy. The responsibility for money creation could be placed with an independent agency that is democratic, accountable and transparent. Banks would still be able to lend money, of course, but they would have to back it with 100 per cent reserves, dollar for dollar. This is not a fringe proposal. It made headlines in 2012 when it was proposed by a couple of progressive IMF economists, who pointed out that such a system would dramatically reduce both public and private debt and therefore make the global economy more stable.27 In the United Kingdom, a campaigning group called Positive Money has generated quite a bit of popular excitement around the idea

What's Next?: Unconventional Wisdom on the Future of the World Economy
by David Hale and Lyric Hughes Hale
Published 23 May 2011

It would be much better if central banks took active and aggressive steps to boost their quantity of money. This would help asset prices, and rises in asset prices could then convert loan loss write-offs into loan loss write-backs. This would be a simple, painless, and wholly welcome form of bank recapitalization. One might criticize this idea on the basis that deliberate money creation is inflationary. However, in current circumstances, it would be antidisinflationary. Contrary to the opinion of Alan Greenspan, Martin Feldstein, Allan Meltzer, and other American monetary conservatives in mid-2009, the big threat to the recovery in 2010 was not a return of inflation but a continuation and intensification of deflation.

The Evolution of Everything: How New Ideas Emerge
by Matt Ridley

By the time it reaches ordinary people, the money is worth less. This outward percolation is known as the Cantillon Effect – after Richard Cantillon, who noticed that the creation of paper money in the South Sea Bubble benefited those closest to the source first. Frisby argues that the process of money creation by an expansionary government effectively redistributes money from the poor to the rich. ‘This is not the free market at work, but a gross, unintended economic distortion caused by the colossal government intervention.’ The strange obsession that politicians have with determining the price of one currency in terms of another, rather than letting such a price emerge, has always baffled me.

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems
by Linda Yueh
Published 4 Jun 2018

It is possible that the way banks finance themselves today has increased the impact of the financial accelerator on lending activity. Historically, banks have been viewed as institutions that intermediate between savers (their depositors) and borrowers (those who take out loans). Banks today, though, are less dependent on deposits for money creation. Global money markets are substantial and provide a large source of wholesale funding to financial institutions. What this means is that banks themselves may not be dissimilar to other borrowers. Banks that are well capitalized are likely to be able to raise wholesale funds at lower interest rates than those that are poorly capitalized.

The Great Economists: How Their Ideas Can Help Us Today
by Linda Yueh
Published 15 Mar 2018

It is possible that the way banks finance themselves today has increased the impact of the financial accelerator on lending activity. Historically, banks have been viewed as institutions that intermediate between savers (their depositors) and borrowers (those who take out loans). Banks today, though, are less dependent on deposits for money creation. Global money markets are substantial and provide a large source of wholesale funding to financial institutions. What this means is that banks themselves may not be dissimilar to other borrowers. Banks that are well capitalized are likely to be able to raise wholesale funds at lower interest rates than those that are poorly capitalized.

New Laws of Robotics: Defending Human Expertise in the Age of AI
by Frank Pasquale
Published 14 May 2020

First, they believe governments would ideally save more than they spend. Second, they assume a realm of economic activity that preexists government. To fund its activities, government must tax the private income and capital generated by markets. Third, they predict disaster for governments whose money creation is unmoored from the constraint of private demand for their debts. What the gold standard once did, the golden handcuffs of the bond market now achieve: ensuring that states only issue a stable amount of currency. Another approach, called modern monetary theory (MMT), aims to upend this common sense of money at every turn by emphasizing the power of governments relative to other institutions.60 A household cannot tax thousands of other households in order to support itself; government can.

The Ascent of Money: A Financial History of the World
by Niall Ferguson
Published 13 Nov 2007

Before we can answer these questions properly, we need to introduce the other key components of the financial system: the bond market, the stock market, the insurance market, the real estate market and the extraordinary globalization of all these markets that has taken place over the past twenty years. The root cause, however, must lie in the evolution of money and the banks whose liabilities are its key component. The inescapable reality seems to be that breaking the link between money creation and a metallic anchor has led to an unprecedented monetary expansion - and with it a credit boom the like of which the world has never seen. Measuring liquidity as the ratio of broad money to outputj over the past hundred years, it is very clear that the trend since the 1970s has been for that ratio to rise - in the case of broad money in the major developed economies from around 70 per cent before the closing of the gold window to more than 100 per cent by 2005.44 In the eurozone, the increase has been especially steep, from just over 60 per cent as recently as 1990 to just under 90 per cent today.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis
by Anatole Kaletsky
Published 22 Jun 2010

Such trust could be restored only by the government because only the government, in modern societies, has the ability to levy taxes or print the money with which all debts and deposits can be repaid. This brings us to the nub of the government’s relationship with finance. The government monopoly on money creation in a modern capitalist economy is comparable to the government monopoly on the use of violence in a civilized society. The role of the finance ministry and central bank in quelling a banking panic and protecting savings is analogous to the role of the police and army in putting down civil riots and protecting property.

America's Bank: The Epic Struggle to Create the Federal Reserve
by Roger Lowenstein
Published 19 Oct 2015

Strong attempted to navigate these turbulent monetary seas, but his death in 1928 left the Fed without a capable hand at the tiller. The next year, Warburg, who monitored the Fed like an anxious parent, criticized the agency’s weakened leadership for letting stock market operators seize the reins of money creation. He warned that if their “orgies of unrestrained speculation” were permitted to spread—that is, if credit continued to flow to the stock market and to other speculative assets—it would lead to a general depression throughout the country. Three years later, during the depths of the Great Depression, the sixty-four-year-old Warburg died in New York City.

Ayn Rand Cult
by Jeff Walker
Published 30 Dec 1998

Anyone who can write the articles he wrote back in the 1960s, while he was associated with Ayn Rand—saying that you never can have a stable economy, you can never have economic freedom, and you can never have justice as long as you have a central bank and as long as you’re not on a gold standard—and then turn around and become the head of the most powerful engine of paper money creation in the world has got to have some kind of problem. I don’t know if he needs therapy or . . . condemnation.” Of the gold exchange standard approximating Rand’s pure gold standard, Greenspan would say in the 1990s, “If you have a number of countries who are unwilling to abide by fixed exchange rates then you can’t impose a gold standard.”

Seven Crashes: The Economic Crises That Shaped Globalization
by Harold James
Published 15 Jan 2023

Johnson announced, in anticipation of the June 2021 G7 meeting at Carbis Bay, Cornwall, that “[v]accinating the world by the end of next year would be the single greatest feat in medical history.” He promised one billion additional doses of vaccine.2 But delivering vaccines is harder than simply generating more money. There was thus plenty of money creation, but a shortfall in the physical products—medications, vaccines—needed to combat the virus. In a crisis originating in a collapse of demand, it is important simply to spark more activity, as any sort of demand will have an impact and revive confidence. The Covid crisis was not primarily about a random absence of effective demand.

Inflated: How Money and Debt Built the American Dream
by R. Christopher Whalen
Published 7 Dec 2010

Wartime Inflation and Debt Finance Friedman and Schwartz record that between 1939 and 1948, wholesale prices in the United States more than doubled and the money stock had nearly tripled, resulting in stiff inflation at the consumer level.71 But even though these statistics may seem eye-popping, the degree of inflation experienced during and after WWII was less than either the Civil War or WWI—although the money creation was greater in WWII. Gold poured into the United States during WWII as nations in Europe and around the globe sought a refuge for their monetary assets. By the time the Japanese attacked Pearl Harbor on December 7, 1941, the United States had created a rationed economy and many consumer goods became unavailable until after the war.

Wealth and Poverty: A New Edition for the Twenty-First Century
by George Gilder
Published 30 Apr 1981

It is only then that the normal struggles of citizens for advancement result in an inflationary spiral of claims on a stagnant pool of goods and services. What matters, once again, is the supply side—expanding and improving the pool of products by promoting new opportunities, rather than propping up old auto companies and hyping the market for existing land and housing. The recognition that monetary and fiscal prodigality—deficit spending and money creation—is only the proximate cause of inflation in America, and that it is not altogether regrettable at a time of steadily rising taxes, will come hard to many conservatives. But it is a necessary recognition if appropriate policies are to be adopted. Most of the monetarist analyses, for all their insights on what inflation is, tend to lose track of what inflation does.

The Power of Gold: The History of an Obsession
by Peter L. Bernstein
Published 1 Jan 2000

As the volume of banknotes replaced the coinage of government in daily circulation, the supply of money in daily use was now joined directly to the volume of credit provided by the privately owned banking system. In essence, the private sector overtook the public sector as the primary engine of money creation. Although most money in use today is in the form of checking accounts rather than paper currency, the basic eighteenth-century relationship between bank credit and money supply remains intact. By the end of the eighteenth century, in fact, a rising share of money was already being held in the form of checks and deposits much as we know them today.

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society
by Will Hutton
Published 30 Sep 2010

Banks could use the interbank markets to raise finance for almost any activity as long as they could put up the necessary collateral or had a sufficiently high credit rating. They could then use the over-the-counter markets in derivatives to hedge the risk they were assuming. The whole basis of banking and money creation was being reinvented. The banks, as much as the governments, had become sources of liquidity creation as long as there were providers of cash for any given collateral and counter-parties ready to hedge the risks in the derivative markets. As everybody was individually guarding against risk, luminaries like Alan Greenspan claimed that the system as a whole was not risky, even as it created a growing mountain of credit and debt.

Radical Uncertainty: Decision-Making for an Unknowable Future
by Mervyn King and John Kay
Published 5 Mar 2020

And as we write, the financial press is full of perhaps the thinnest story since tulips to give rise to a bubble – the imagined future takeover of the world monetary system by crypto-currencies. Like other popular fictions, the Bitcoin phenomenon combines several perennial narratives – in this case, a libertarian vision of a world free of state intervention, the power of a magic technology, and the mystery of ‘money creation’. Round-up at Jackson Hole In the 1980s, bond markets, once staid backwaters of the financial system, became the focus of an exciting new narrative based on securitisation. The idea was that lending institutions – banks, mortgage providers and finance companies – could package their loans into tradeable securities and sell them, mainly to other financial institutions.

The Alchemists: Three Central Bankers and a World on Fire
by Neil Irwin
Published 4 Apr 2013

“has been stretched and, in some cases, disregarded”: “Too Close to State Financing via the Money Press,’” Der Spiegel, August 29, 2012, http://www.spiegel.de/international/europe/spiegel-interview-with-bundesbank-president-jens-weidmann-a-852285.html. “Mephistopheles stirs up the general elation even further”: “Money Creation and Responsibility,” speech at the 18th colloquium of the Institute for Bank-Historical Research (IBF) in Frankfurt, September 18, 2012, http://www.bundesbank.de/Redaktion/EN/Reden/2012/2012_09_20_weidmann_money_creaktion_and_responsibility.html. “I think that, in my job as president”: Mario Draghi, press conference, September 6, 2012, http://www.ecb.int/press/pressconf/2012/html/is120906.en.html.

Countdown: Our Last, Best Hope for a Future on Earth?
by Alan Weisman
Published 23 Sep 2013

Under our current monetary system, the only alternative to that is endless growth. So one absolute thing we have to change is the whole nature of the monetary system.” So how might we do that? “It’s fairly simple. It’s a change that’s been proposed by economists for centuries. We deny banks the right to create money.” Instead, Farley says, money creation would go back to where it used to be. “We restore that right to the government. It can spend money into existence on public goods, like rebuilding our infrastructure, our education systems, our sewage systems, and restoring our watersheds and forests. Or it can loan money into existence to state governments and local governments or to central industries, like renewable energy systems—but at zero interest.

The Third Pillar: How Markets and the State Leave the Community Behind
by Raghuram Rajan
Published 26 Feb 2019

It also proved reliable in funding the government’s short-term needs, which enhanced the public’s perception that the government would not run short of funds. Greater surety about the availability of funds to the government enhanced the public’s confidence that long-term government debt would be a safe investment. Over time, the Bank of England lost its banking monopoly, but it became England’s central bank and retained a monopoly over money creation. And finally, the South Sea Company, which was granted the dubious monopoly of trading with the South Seas (where there was little trade), helped in putting government finances on a sustainable track in a very fortuitous way.35 The initial issuances of government debt after the Glorious Revolution were in the form of very high interest annuities that could not be redeemed by the government.

The Long Twentieth Century: Money, Power, and the Origins of Our Times
by Giovanni Arrighi
Published 15 Mar 2010

US monetary policies in the 1970s were instead attempting to entice capital to keep the material expansion of the US-centered capitalist world-economy going, notwithstanding the fact that such an expansion had become the primary cause of rising costs, risks, and uncertainty for corporate capital in general and US corporate capital in particular. Not surprisingly, only a fraction of the liquidity created by the US monetary authorities found its way into new trade and production facilities. Most of it turned into petrodollars and Eurodollars, which reproduced themselves many times over through the mechanisms of private interbank money creation and promptly re-emerged in the world economy as competitors of the dollars issued by the US government. In the last resort, this growing competition between private and public money benefited neither the US government nor US business. On the one hand, the expansion of the private supply of dollars set an increasingly larger group of countries free from balance of payments constraints in the competitive struggle over the world’s markets and resources, and thereby undermined the seignorage privileges of the US government.

The Price of Time: The Real Story of Interest
by Edward Chancellor
Published 15 Aug 2022

Government spending financed by the central bank would be ‘a potent weapon in the fights against inequality, poverty and economic stagnation’.6 The anarchist Proudhon had argued much the same in his debate with Bastiat. As theory, these notions were scorned by mainstream economists. As a matter of practical policy, however, the Magic Money Tree was given a good shake. Over the course of 2020, the US federal deficit touched $4 trillion, a sum matched almost dollar for dollar by the Fed’s new money creation. THE EVERYTHING BUBBLE REVISITED Whole populations dispersed into their lockdown bubbles – social bubbles, support bubbles, class bubbles and travel bubbles. The financial markets led the way. Wall Street’s meltdown was followed by an even more dramatic melt-up. Asset price bubbles proliferated: bubbles in stocks and bonds, in real estate and household wealth, in cryptocurrencies and digital art, in luxury goods (supercars and Swiss watches) and household pets (Cockapoos selling for $5,000 a pup), and in collectibles (baseball and Pokémon trading cards).

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right
by George R. Tyler
Published 15 Jul 2013

“Federal dollars spent should be paid for out of revenue [but] … the taxing rule was eliminated in the early 1980’s by the jihad prayers of supply-side economists.”5 The notion that tax cuts work this way has been discredited time and again by US economic history; only a John Law would argue that cutting tax rates from, say, 30 percent to 15 percent will spark a sufficient boom to replace the lost tax revenue. Early acolytes brought a religious fervor, making George Gilder’s 1981 Wealth and Poverty a best-seller; media evangelist Pat Robertson argued that supply-side economics “was the first truly divine theory of money creation.”6 President Reagan himself was indifferent about whether this canard was accurate because, as former Republican US Senator Bob Packwood of Oregon explained, Reagan “wanted lower rates and didn’t care how we got there.”7 The lower taxes he and the Bush presidents implemented have not produced an economic renaissance, however, only deep national debt and a nation that consumes too much and invests too little.

Debt: The First 5,000 Years
by David Graeber
Published 1 Jan 2010

Economists who distrust religion will always fail to comprehend the modes of worship by which progress is achieved. Chance is the foundation of change and the vessel of the divine.28 Such effusions inspired evangelists like Pat Robertson to declare supply-side economics “the first truly divine theory of money-creation.”29 Meanwhile, for those who could not simply create money, there was a quite different theological dispensation. “Debt is the new fat,” Margaret Atwood recently remarked, struck by how much the advertisements that surround her daily on the bus in her native Toronto had abandoned their earlier attempts to make riders panic about the creeping terrors of sexual unattractiveness, but instead turned to providing advice on how to free oneself from the much more immediate terrors of the repo man: There are even debt TV shows, which have a familiar religious-revival ring to them.

The Atlantic and Its Enemies: A History of the Cold War
by Norman Stone
Published 15 Feb 2010

It became legal to hold dollars (or Marks), and the Turkish currency was devalued, from 47 to 80 lire against the dollar; there were fourteen further devaluations up to May 1981, as the government did not bother with the exchange rate. This meant, for the banks, very easy money indeed, as you just shifted in and out of Turkish money as and when, making a huge profit if you happened to have warning that a devaluation was forthcoming. Interest rates were unnaturally high, in Turkish money, and inflation or Turkish paper-money creation tended to rise faster than the dollar. Given the world recession that continued until the turn of 1982-3, the liberalization in Turkey was not an easy matter, and the money that it generated, given the odd combination of liberalization and restriction, produced profiteers and Ponzi (pyramid) schemes.

Capital in the Twenty-First Century
by Thomas Piketty
Published 10 Mar 2014

Note that there is no such thing as a “money printing press” in the following sense: when a central bank creates money in order to lend it to the government, the loan is recorded on the books of the central bank. This happens even in the most chaotic of times, as in France in 1944–1948. The money is not simply given as a gift. Again, everything depends on what happens next: if the money creation increases inflation, substantial redistribution of wealth can occur (for instance, the real value of the public debt can be reduced dramatically, to the detriment of private nominal assets). The overall effect on national income and capital depends on the impact of policy on the country’s overall level of economic activity.