MONETARY POLICIES
regulations give governments the lowest risk-weighting (zero), so they can borrow from banks at the favored-client rate; and the banks will be happy to lend, because with zero risk-weighting they will need no new capital to back the loans.
Another advantage: “Instead of primary market bond underwriters, such as Goldman Sachs, earning large fees in cosy relationships with semi- privatised public debt management agencies, banks will be the beneficiaries of this business.”
Most important, however, is that with the government as borrower, banks can create the new credit necessary to underwrite new productivity.
For historical precedent, Werner cites the system of short-term bills of trade known as “Mefo Wechsel” issued by semi-public entities in Germany from 1933 onwards. Tese bills were bought by German banks, increasing bank credit creation:
A revolutionary movement needs a revolutionary financial system
[T]he sharp German economic recovery from over 20% unemployment in early 1933 to virtually full employment by the end of 1936 was the result of the ensuing expansion in bank credit creation – in other words,
Federal Reserve, borrowing money created by banks would involve an interest cost. But as Steve Bannon observes, interest rates today are at record lows; and borrowing from banks would have the consummate advantage over borrowing from the bond market that it would expand the pool of bank deposits that are now officially counted as “money” in M2. Tis is what the Fed tried but failed to do with its
hyperinflation. Ellen Brown President of the Public Banking Institute Author of:
Web of Debt and
Te Public Bank Solution FX TRADER MAGAZINE January - March 2017 51
it was the funding of fiscal policy through credit creation that caused the recovery, not fiscal stimulus per se. Japan’s experience of the 1990s has proven how even far larger fiscal expansions will not boost the economy at all if they are not funded by credit creation. [Citing sources.]
Unlike borrowing money created by the
FX
quantitative easing policies: stimulate the economy by expanding the bank lending that expands the money supply.
A revolutionary movement needs a revolutionary financial system. If everything is on the table, as Steven Mnuchin says, the Trump team could consider funding its trillion dollar infrastructure plan with newly-issued credit, whether created by the Treasury or the central bank or
through
g o v er n m en t credit lines with commercial banks. An Andrew Jack son-s t yle president could avoid adding
to
the national debt altogether, by simply issuing an executive order to the Treasury to mint a trillion dollar coin.
As shown
in earlier articles, this could be done without the need for congressional approval
without triggering
and
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