You can now download the book Economia as a pdf file.
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Category Archives: Economies and economics
How Banks Create Money Out of Nothing (Dated version)
Update Dec 2015. This version does not reflect the way modern banks work. A new version is posted here.
[Update 18 March 2010: this is the text-book explanation, but Steve Keen argues persuasively that this is only a minor part of the modern money creation process, most of which is beyond the control of central banks. See Kevin Cox’s comment below, including his proposed remedy.]
A little-known or poorly understood fact about our banking system is that banks create money. Out of nothing.
That in itself need not be a bad thing. We need a medium of exchange, which is the basic function of money, and the money has to come from somewhere. However the creation of new money is buried within our fractional-reserve system of banking. This makes it invisible to most people. Also, banks create the money in the course of making loans, which means they can charge interest on money they create at essentially no cost to themselves. That is a guarantee of unearned profits, even apart from the myriad fees banks charge for other services.
Because the fact and the process are obscure, I post here an explanation of how it comes about.
Cut carbon emissions unilaterally, and boost the economy
It is almost universally believed that reducing Australia�s carbon emissions will be very expensive and therefore our economy will be disadvantaged if our emission reductions get ahead of the rest of the world, but it is not true.
Climate Urgency and Opportunity
[This was sent to the Canberra Times Tuesday. I’ve been busy with my day job for a while, but expect I’ll get more posts up here from now on.]
The Government fails completely to grasp the urgency of the global warming situation. This is obvious every time it speaks about climate. Its views on the economic effect of emission reductions are dominated by those of the polluter industries, and fail completely to take account of the new industries that could and should be developing to replace them. These failures are fundamental failures of leadership, and the failures are critical, because they threaten Austalias future, and the future of industrial civilisation.
Solutions Anyone?
I just sent this to On Line Opinion. It may take a week for it to be posted, if they like it.
Are On Line Opinion readers interested in innovative solutions to major problems? Or do they (you) just want to defend old positions, or have an argument? Or what?
I ask these questions because there have been several pieces recently that present quite innovative ideas or perspectives on solving the economic crisis and/or global warming. Yet four such articles attracted a total of 15 comments. (They are Remaking the economy, 4 comments; Energy Rewards to stimulate the economy, 2; The need for indirect action on climate change, 3; Sustainability will not be sidelined, 6)
The Urgency and the Opportunity
A submission to the Senate Select Committee on Climate Policy, April 2009
[This is punchier than the version I posted 23 March, which was for a different Senate enquiry.]
The Government fails completely to appreciate the urgency of the climate situation, which must be seen in terms of dominos and tipping points. The first big domino seems to be tipping now, and there may soon be no way to prevent or reverse catastrophic warming.
The Government also fails completely to appreciate the opportunity to rapidly reduce emissions while creating an economy that can secure Australians wellbeing indefinitely.
This submission focusses on reframing the policy discussion. It is intentionally brief. Details are irrelevant unless the problem is properly framed.
Continue reading
Neoliberal Pseudo-Science
Also published at Online Opinion.
The Global Financial Collapse, which is rapidly becoming the Global Economic Collapse, is provoking deserved criticism of the neoliberal ideology that has dominated the world for three decades. Prime Minister Kevin Rudd, in his recent debunking of neoliberalism in The Monthly, says markets need to be managed, but clearly many free-marketeers will resist reforms. We therefore need to be very clear. This was not an imperfection. It was not an unfortunate episode in an otherwise glorious record. Neoliberalism is flawed at its core, its performance was mediocre at best, and its failure was inevitable.
Book Extract: Fears and Desires
You might say our present dire condition is just the consequence of human nature, about which not much can be done. To this I say yes, but its due to the worst of human nature, not the best of human nature, and that implies there is something we can change: we can shift the values by which we live.
Last Call on Climate
I tried this on The Monthly magazine over a year ago, twice. Some of it is a little dated, but the essence is not. It covers not just the science and the economics (already unusual), but the nature and culture of science, and the feedbacks that so alarm scientists at present. They didn’t deign even to acknowledge receipt of course. OK, so their writing is excellent, but mine’s not so bad. And if that’s their primary criterion then they’re only providing a form of entertainment, however sophisticated.
There is a discernible pattern in the trajectories of many vanished societies and empires. Their lives were not long, graceful arcs with a gradual rise, a plateau and then a slow decline. Rather, their demise was sudden, and their greatest accomplishments came just before their collapse. The grandest Mayan temples were built near the end of the Mayan civilisation. The pattern of such societies was acceleration into sudden disaster.
GDP Shrinks. Hooray!
In a sane world, a shrinking GDP would be greeted with relief. However the world is not sane, and people suffer when the GDP shrinks, mainly by losing their jobs. Meanwhile, insanity has faltered slightly and disturbing thoughts are being put about. However our leaders are working to ensure normal insanity is restored as quickly as possible.
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