Tuesday, May 21, 2013

Transforming Finance - 2. Lapavitsas, Chick, Dyson, Dearden

Prof Costas Laparitsas (Univ. of London) began the morning parallel session at One Moorgate Place:  The Fresh Thinking on Debt and Recovery with the theme of the financialization of more and more of life. This leads to the growing accumulation of debt for UK households. The way out of debt is general inflation, debt forgiveness, cancellation or structural economic changes. The credit money theory is not new (see Sir James Steuart) and is not the key to open all doors. Financial activity is the key factor, which leads to credit, which leads to loans. For more understanding he referred to the 'real bills doctrine'. He warned that even 'good loans' can become 'bad loans' further down the road.  A key policy should be the reversing of finacialization with public provisioning in other ways; he warned about the quantity theory of money and mused on the idea of a benevolent dictator to manage the money supply.

Prof Victoria Chick (Univ of London) commenting on the debate on austerity (enforced privation due to public debt reduction) pointing out there is good and bad debt with an illustration   (like this one)  of  UK debt / GDP from 1909 to 2009 showing that current public debt is at a low level historically, with a small uptick at around 60%  compared with pasts peaks around 250%.  Good debt pays for itself if there are productive outcomes which bring rising earnings  and tax back to government. There is plenty for government to invest in from the green agenda. Bad debt causes asset bubbles and, referring to the request to define speculation:  'like art I can tell it when I see it', and often merely involves someone who has the fastest finger on a button. She said we need to move from a cowardly state to a Courageous State as the book by Richard Murphy . However, she observed that no one does money management very well.  She recommended the targeting of nominal GDP.  Keynes did talk about the money supply, see: liquidity preference, and in 1913: that banking policy is the key to the change in economic activity. The question 'who is responsible for money?' is now never asked although it was a big issue at the foundation of the United States. The original position was that the state alone issued coins as money. Now, the banks are given the franchise to create money on the state's behalf  but the crisis has shown that the state will underpin the banks despite what they do with the privilege. A 'state of schizophrenia'. 

Ben Dyson (Positive Money) said whilst public debt is not really a problem currently, private debt is. As this debt is paid down, money is eliminated from the economy - the money supply shrinks. The falsity of the old 'trickle down theory of economics' has been exposed by the financial crisis as per the dictum: 'we are still being trickled on from a great height'.  He suggested an alternative issuing of money in the form of a citizen's dividend.

Nick Dearden (Jubilee Debt Campaign) ran a successful campaign against 'vulture funds' and is involved in lobbying for world debt cancellation, which would have beneficial wealth distribution power.  However as shown by German post-war debt cancellation growth is needed beyond that. The bailout of the Anglo Irish Bank aided billionaire bankers but left generational debt for the people. There is a social struggle on and to sort out competing self-interests we must have good answers, not only: What? but: How? He advocates a debt audit with democratic decisions on which debts should be cancelled.

From the floor: The manufacture of money out of nothing by banks is a massive ideological issue; democracy itself is being killed in the name of economics. 
Conference videos are being posted on Covi 
posted by Charles Bazlinton

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