The FED has no way of re-balancing or raising rates without crashing the markets. The FED doesn’t want to take the blame. Not again. Even though the markets are crying out for a correction. There is no discipline. The level of incontinence is unprecedented. QE has got to stop. But how? One would like new tools for damage control at one’s disposal.
Then there are all these top money brains in “we must save capitalism now” mode. One is considering the previously unmentionable: money. One is toying with a serious re-think.
Thirdly one can see that Henry Ford moment coming. With digital central bank money tuning up to a race with China, certain questions will be near impossible to avoid. Same with fending off commercial digital currencies. Imagine bitcoin actually had a decent payment system?
Veiled value talk is wafting from the unprecedented practices of mixing fiscal and monetary into creative credit cocktails. De facto direct financing keeps reshuffling its covers but indignant resistance against systemic obfuscation can only grow. Sooner or later the Magic Money Tree may yet have to be unveiled. Not as MMT’s stately incontinence. Nor the Fed’s balance sheet. But the banks’ crediting accounts.
Loans creating savings? OMG. No more savings & loans?
Ur-Post-Keynesian 101 has crept into The Economist.
The money brains got there some time ago and are intent on using this monetary moment for some creative disruption of the capitalising core. Use the crash for a systemic correction. Say no more.
Watch out for the FED’s digital debit account coming to your cash screen soon – with or without some of the bells and whistles that could be played as options to more or less re-shuffle the whole system into digital fintech diversity?
Just the follow the money…
… “… as Cuy Sheffield, head of cryptocurrency projects at global payments company Visa points out: “Central bank digital currency… is one of the most important trends for the future of money and payments over the next decade. Regardless of anyone’s personal views of whether it’s good or bad, the reality is that global interest in it is not going away. [CBDC’s will have] major implications for privacy, monetary sovereignty, geopolitics, and financial inclusion, as well as global adoption of crypto dollars and bitcoin.” So ignoring digital currencies altogether is likely to be a mistake for central banks at a time where economies are becoming cashless and the pandemic has created a clear bias towards digitised payments.
Another impact of CBDCs could be the US dollar losing its crown as the world’s reserve currency now that China has launched its digital yuan, analysts at investment bank JPMorgan say in a note. “There is no country with more to lose from the disruptive potential of digital currency than the United States. This revolves primarily around US dollar hegemony. Issuing the global reserve currency and the medium of exchange for international trade in commodities, goods, and services conveys immense advantages”, the analysts say.”
capx.co/ 33AD 4/2021 Economics lessons from Emperor Tiberius By Dr George Maher
The idea that trade imbalances are more likely to be the result of credit imbalances than of savings imbalances ignores the role of savings imbalances in creating credit imbalances. When a surplus country demands to be paid for its trade surplus with claims on American assets, the U.S. economy must adjust to create these assets—and one of the most common ways it does so is by expanding credit.
… I sent out a rather long tweet in response to a very good article in the Economist called “Why It Is Misleading to Blame Financial Imbalances on a Saving Glut.” I later received a lot of positive responses asking me to expand my discussion further. … The Economist article illustrates just how much confusion there is over the accounting identities that describe the balance of payments. The piece starts out by reminding readers of a reference Ben Bernanke made in 2005, when he was chair of the Federal Reserve, to a “remarkable reversal in the flows of credit” to emerging economies, particularly in East Asia. These countries had begun to save more than they invested at home, morphing into a “net supplier of funds” to other parts of the world. He called this a “saving glut.”
The article then cites a number of economists, including Michael Kumhof of the Bank of England and Andrej Sokol of the European Central Bank, who were dissatisfied with the concept and called for, as the Economist put it, “a careful distinction between flows of saving and flows of finance. … The two are not the same,” they continued. “They need not even move together. The implication is that Mr. Bernanke may have got things the wrong way around.” …”
observer.com 11/2019 How Digital Currency Could Be China’s Ultimate Soft-Power Tool By Chris Roberts
see also ALTernative currencies