Richard Werner

R A Werner Princes of the Yen  R A Werner New Macro Paradigm  where money from   R A Werner Neue Wirtschaftspolitik

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wikipedia   Richard Andreas Werner (born 1967) is a German banking and development economist who is a university professor at De Montfort University.  He has proposed the “Quantity Theory of Credit”, or “Quantity Theory of Disaggregated Credit”, which disaggregates credit creation used for the real economy (GDP transactions) on the one hand, and financial transactions on the other hand.[1] In 1995, he proposed a new monetary policy to swiftly deal with banking crises, which he called ‘Quantitative Easing’, published in the Nikkei. [2] He also first used the expression “QE2” in public, referring to the need to implement ‘true quantitative easing’ as an expansion in credit creation.[3] His 2001 book ‘Princes of the Yen’ was a number one general bestseller in Japan. In 2014 he published the first empirical evidence that each bank creates credit when it issues a new loan. 

sciencedirect.com 2016 Richard A Werner : A lost century in Economics: Three theories of banking and the conclusive evidence

more research publications are at


 youtube 2021 Richard Werner interviewed by D D Booth : How Banks Work


tandfonline.com/  2019 Werner’s Typology of Banking Theories  review by Ib Ravn

Abstract : This paper examines and critiques a highly illuminating typology of three banking theories. The typology was proposed by Richard A. Werner, and it identifies the financial intermediation theory, the fractional reserve theory and the credit creation theory. Two experiments testing them are reviewed, as well as the explanation offered by Werner for retaining only the credit creation theory. Werner’s research is unique in that it tracks actual bank records during a loan transaction. Yet, his conclusion—that banks individually can create credit—downplays the key role of the collectivity of banks in enabling borrowers to use their credit for making payments. Two neglected contexts for the three theories are proposed: one historical, involving monetary regimes, the other systemic, involving interbank clearing arrangements. It is found that the three theories are associated with different monetary regimes (relating to specie, reserves, and account money, respectively) and, despite Werner’s rejection of two of them, they all remain appropriate in proportion to the prevalence of the respective monies in the case at hand.   read/download gg-pdf here


hushhushvideo.com/blog  2/2016 Princes of the Yen Daiwa Foundation Screening & Discussion

45 minute version of the documentary Princes of the Yen: Central Banks and the Transformation of the Economy, edited for the Daiwa Foundation screening, which was organised by Richard Werner. There was a a discussion following the screening between Richard Werner and Mr Kawakami of the Ministry of Finance (Japan), the transcript for this is below.


sciencedirect.com/  2015  A lost century in Economics: Three theories of banking and the conclusive evidence by R A Werner   

Highlights

  • The three theories of how banks function and whether they create money are reviewed
  • A new empirical test of the three theories is presented
  • The test allows to control for all transactions, delivering clear-cut results.
  • The fractional reserve and financial intermediation theories of banking are rejected
  • Capital adequacy based bank regulation is ineffective, credit guidance preferable
  • This is shown with the case study of Barclays Bank creating its own capital
  • Questions are raised concerning the lack of progress in economics in the past century
  • Policy implications: borrowing from abroad is unnecessary for growth

Abstract 

How do banks operate and where does the money supply come from? The financial crisis has heightened awareness that these questions have been unduly neglected by many researchers. During the past century, three different theories of banking were dominant at different times: (1) The currently prevalent financial intermediation theory of banking says that banks collect deposits and then lend these out, just like other non-bank financial intermediaries. (2) The older fractional reserve theory of banking says that each individual bank is a financial intermediary without the power to create money, but the banking system collectively is able to create money through the process of ‘multiple deposit expansion’ (the ‘money multiplier’). (3) The credit creation theory of banking, predominant a century ago, does not consider banks as financial intermediaries that gather deposits to lend out, but instead argues that each individual bank creates credit and money newly when granting a bank loan. The theories differ in their accounting treatment of bank lending as well as in their policy implications. Since according to the dominant financial intermediation theory banks are virtually identical with other non-bank financial intermediaries, they are not usually included in the economic models used in economics or by central bankers. Moreover, the theory of banks as intermediaries provides the rationale for capital adequacy-based bank regulation. Should this theory not be correct, currently prevailing economics modelling and policy-making would be without empirical foundation. Despite the importance of this question, so far only one empirical test of the three theories has been reported in learned journals. This paper presents a second empirical test, using an alternative methodology, which allows control for all other factors. The financial intermediation and the fractional reserve theories of banking are rejected by the evidence. This finding throws doubt on the rationale for regulating bank capital adequacy to avoid banking crises, as the case study of Credit Suisse during the crisis illustrates. The finding indicates that advice to encourage developing countries to borrow from abroad is misguided. The question is considered why the economics profession has failed over most of the past century to make any progress concerning knowledge of the monetary system, and why it instead moved ever further away from the truth as already recognised by the credit creation theory well over a century ago. The role of conflicts of interest and interested parties in shaping the current bank-free academic consensus is discussed. A number of avenues for needed further research are indicated.


youtube  2011 R A Werner:  Where money comes from – Charles Bazlinton:  Prof Richard Werner explains the fundamentally important process of money creation which is essential for economic growth in modern economies. He says that privately owned commercial banks create well over 90% of the money supply.

more Richard Werner youtube videos here


scholar.google.co.uk  2005  New Paradigm in Macroeconomics – Solving the Riddle of Japanese Macroeconomic Performance  by Richard A. Werner


amazon.de  2007  Neue Wirtschaftspolitik: Was Europa aus Japans Fehlern lernen kann  Richard A Werner

Im Jahr 1990 erlebte Japan eine nie gekannte Wirtschaftskrise. Binnen Jahresfrist verlor der Nikkei-Index über 40 Prozent. Die fallenden Börsen schlugen bis auf den Immobilienmarkt durch. Banken sperrten Kredite, Firmen mussten Insolvenz anmelden, Grundstückspreise fielen, bis sie 1996 in den Städten 50 Prozent unter den Höchstwerten vor 1990 lagen. Noch heute spürt Japan die Folgen dieser Krise. Richard A. Werner war über ein Jahrzehnt in Japan und erlebte hautnah das Entstehen dieser Krise und die Versuche, die Rezession zu bekämpfen, mit. In seinem Werk zieht er die Parallelen zwischen der damaligen Situation in Asien und unserer heutigen in Europa. Er zeigt, mit welchen politischen und wirtschaftlichen Strategien, Japan der damaligen Situation Herr zu werden versuchte, welche Fehler gemacht wurden und was erfolgreich war.

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money creation


youtube   2015 Banks don’t lend money, they create it: Demystifying monetary and banking terminology by Ib Ravn

“Banks create account money in the process called “lending”, so why is that term still used? What money is and what banks do are quite mystifying to many people. Richard A. Werner has proposed three theories of banking: Banking as financial intermediation, fractional reserve banking, and the credit creation theory of banking. I argue that they are suitable to three different banking systems: warehouse banking, banks with gold reserves and pure account-money banks.

A certain historical progression may be identified between these three banking systems, and this helps explain why terms from older forms (warehouse banking and gold-reserve banks) persist today. Additionally, banks have a vested interest in not being too candid about what goes on behind the bank counter, in that the popular warehouse theory of banking legitimizes the charging of interest: Depositors must be compensated for the unavailability of their funds, right? I conclude by proposing some relevant changes in banking and monetary terminology.”


Im Jahr 1990 erlebte Japan eine nie gekannte Wirtschaftskrise. Binnen Jahresfrist verlor der Nikkei-Index über 40 Prozent. Die fallenden Börsen schlugen bis auf den Immobilienmarkt durch. Banken sperrten Kredite, Firmen mussten Insolvenz anmelden, Grundstückspreise fielen, bis sie 1996 in den Städten 50 Prozent unter den Höchstwerten vor 1990 lagen. Noch heute spürt Japan die Folgen dieser Krise. Richard A. Werner war über ein Jahrzehnt in Japan und erlebte hautnah das Entstehen dieser Krise und die Versuche, die Rezession zu bekämpfen, mit. In seinem Werk zieht er die Parallelen zwischen der damaligen Situation in Asien und unserer heutigen in Europa. Er zeigt, mit welchen politischen und wirtschaftlichen Strategien, Japan der damaligen Situation Herr zu werden versuchte, welche Fehler gemacht wurden und was erfolgreich war.