Thursday, 11 September 2014

A. Pettifor and Jubilee Scotland opine (unfortunately).

High interest? What are they on about? Interest rates have drifted DOWNWARDS over the last twenty years. In fact the typical mortgagor in the 1980s paid up to THREE TIMES what mortgagors currently pay. Doh.
As to the claim AP makes elsewhere, namely that high interest rates dampen economic growth, that’s not 100% consistent with the fact that growth was better in the 1980s than it’s been over the last 5 years or so during which we’ve “enjoyed” record low interest rates.
And then there’s the claim that letting commercial banks create money is not a problem. In fact when a commercial bank creates money, it then has liabilities that are FIXED in value and assets that can FALL in value. That’s just asking for trouble. Maybe AP and Jubilee Scotland didn’t notice the trillions of dollars of public money used recently to rescue banks. Perhaps they haven't noticed that banks have failed regular as clockwork throughout history and left thousands of people penniless. 

And then there’s the bit about “borrowing for speculation” leading to problems. Well yes, quite. Under full reserve (that’s a system where private banks cannot create money), people can speculate as much as they want, as long as they’re funded by shareholders, not depositors. That way, a collapse in those speculative ventures does not lead to banks collapsing and economic collapse, credit crunches, etc, as pointed out by Mervyn King and Alan Greenspan, not to mention two or three Nobel Laureates. See section 2.32 of the MPRA paper featured at the top of the column on the left.

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