Wednesday, November 30, 2011

Richard Werner at OccupyLSX St Paul's

One observation on UK Chanclleor George Osborne's Autumn Statement (leader in The Times) is that there is 'the recognition that the drought in lending is a serious threat to growth'. Let's get back to first principles by quoting from Prof Richard Werner a world leading champion for democratically accountable credit creation.  

Note: Credit creation has to happen  for lending to happen and for any sort of growth to happen, sustainable or not.

Here is Werner in his book 
New Paradigm in Macroeconomics p339-341.
The fundamental principles of monetary policy... are not difficult... : to minimise inflation and maximise real economic growth, credit should be created and allocated primarily for productive purposes. Consumer credit and speculative credit will result in consumer price or asset price inflation and hence should be avoided.

Werner states that the current credit creation institutions may not be the way forward for the above good outcomes:  
Allowing privately-owned central banks [e.g. the US FED] , for instance, is unlikely to be the right type of incentive structure to ensure alignment of sectarian and overall interests. But even publicly-owned central banks  [e.g.the Bank of England] will not be sufficient, if they can obtain a large degree of de facto independence.
Once the facts of credit creation and its potential are more widely known, democratic processes can be used to decide upon the goals that should be achieved and the most suitable mechanism to achieve them. A clever use of institutional design and credit allocation will allow far more ambitious goals to be implemented than has so far been the case. Not only recessions, unemployment and boom-bust cycles, but also poverty and destitution can in principle be eliminated.

Werner mentions possibilities that a 'democratically accountable credit control mechanism' might achieve:
  • environmentally sustainble, stable economic growth
  • environmentally friendly energy sources
  • the creation of green urban spaces and leisure areas
  • research and investment in the above
  • a credit for each child administered for specific purposes such as education 
On page 172 Werner summarises some of his researches:
We conclude that bankers had managed to do what kings, emperors and alchemists had failed to do - they were creating money.  They had found the philosopher's stone.
p358 note 19
When governments needed money and could not raise taxes further, they believed they had no choice but to borrow from bankers. But of course the bankers were doing nothing that the kings and rulers could have done themselves. ...In the case of lending to kings, this meant that bankers could exert influence on national policies. Bankers were the masters who created and allocated purchasing power.
The world-wide Occupy movement is now rallying support for a fundamental rethink of finance and banking. All Occupiers and supporters have in Richard Werner's findings and suggestions the key to achieving that change. Werner is booked in to St Paul's Tent City University at OccupyLSX for a talk on Thu Dec 8th 11.30am. 
(Message to George Osborne: Send a friend to listen in.)

See the Richard Werner interviews on YouTube 

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