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André Kühnlenz has written an interesting post “Willkommen im Klub, liebes Euroland, … willkommen bei uns Drogendealern!” on his blog WeitwinkelSubjektiv. My understanding is, that Andre wants to explain the mystery that is national savings. Unfortunately he starts off with some confused statements about another mystery, which is household savings. Because this confusion is widespread (also among bankers, who should know better), I’ll try a brief answer in English. André writes (my translation):

Who, for example, brings his savings to the bank, gives the bank a loan. The bank uses the deposit to finance investment loans, installment loans for home purchases or major purchases or the bank invests our savings in securities (sort of credit too).

André’s claim in the first sentence is: if you deposit money in your savings account, you give the bank a loan. I’m aware that in the fiasco that is the Eurozone after the pillage rescue of Cyprus the notion, that a deposit is a loan to a bank is the latest fad. But is this true? In a very limited and narrow sense we might say so. The deposit is an asset for you and a liability for the bank. But that’s it. First we must consider how the majority of deposits come into existence. Bank loans create bank deposits.

If André walks into his bank A applying for a 10k consumer credit and bank A approves his credit application a deposit of 10k is created in André’s checking account. Would André consider his new deposit of 10k as a loan to bank A? Certainly no. Now because André isn’t some funny guy who takes out a loan just for having a new deposit he’ll use the 10k for some purchase or investment. And because he’s a cool guy he might consider buying my shiny Harley second hand.

By doing so André transfers his 10k to my checking account at bank B. Shall I consider my new 10k deposit as a loan to bank B? Again certainly no. Not only is my balance sheet unchanged. I’ve traded one asset (my Harley) for another asset (my 10k deposit). But I’ve also provided my bank B not only with a new liability but also with the corresponding asset, the 10k CB reserves which are transferred from bank A to B. By doing so I made my bank B 100% whole.

Which brings me to the next claim of André: that banks use our deposits to make loans or buy securities. Again in a very limited and narrow sense we might say so. But again that’s it. First we must consider how banks make loans. Banks create loans out of thin air, expanding the asset and liability side of their balance sheets simultaneously, constrained by the amount of capital they hold and the capital requirements enforced by the regulatory regime.

When André shows up at the loan desk of his bank A, the loan officer will assess the creditworthiness of André and depending on the risk appetite of the bank will decide YES or NO. But the loan officer will not call via his red telephone the backoffice whether the bank has enough deposits to extend a loan to André.The bank only takes care ex post once André wires me the 10k of its proper reserve position to clear the wire transfer between bank A and B. Bank lending isn’t reserve constrained.

Finally what really disturbes me about this new fad, that deposits are loans, is: it makes me responsible for business transactions which aren’t my business at all. This is like me and André trading a hammer for a screw driver and later on André trading his hammer for a lasso. He can’t then come back to me asking: Hey, I want my screw driver back because with the lasso I can’t hammer a nail.

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Economist Juan Torres López has written an Op-Ed for the Spanish Daily El Pais, which was meanwhile retracted by El Pais. Granted: The headline

Angela Merkel, like Hitler, has declared war on the rest of the continent now to secure their economic living space

is brutal populism and very exaggerated. That said, this op-ed tells us nonetheless something about the mood in Europe. And the actual content of the op-ed, highlighting the flaws of the Eurozone, is mostly on the spot. I’ve saved the Google Translation of the op-ed.


Germany vs. Europe

Angela Merkel, like Hitler, has declared war on the rest of the continent now to secure their economic living space

Juan Torres López 23 Mar 2013 - 21:42 CET

It is significant that usually talk of “punishment” to refer to measures that Merkel and her ministers impose on the countries most affected by the crisis.

They tell their compatriots who have to punish our irresponsibility for our waste and not pay our debts now the Germans. But the reasoning is false because the irresponsible people have not been to that Merkel is determined to punish but German banks who protects and those of other countries they lent, they do with irresponsibility, to gain billions.

The European economic groups managed to establish a model of monetary union very imperfect and asymmetric quickly reproduced and enlarged original inequalities between economies that were involved. And thanks to its huge investment capacity and the great power of governments large Northern companies were able to keep many companies and even entire sectors of the periphery countries, such as Spain. That caused huge trade deficits and surpluses in the latter especially in Germany and to a lesser extent in other countries.

In parallel, the policies of successive German governments concentrated more income on top of the social pyramid, increasing its already high level of savings. From 1998 to 2008 the wealth of the richest 10% of Germany from 45% to 53% of the total, 40% below the 46% to 40% and the poorest 50% from 4% to 1%.

These circumstances made available to German banks huge amounts of money. But instead of dedicating it to improve the German domestic market and the situation of lower income levels, they used (about 704,000 million euros until 2009, according to the Bank for International Settlements) to finance the debt of Irish banks, the Spanish property bubble, the corporate debt or to speculate Greek, which made private debt in peripheral Europe is fired and that German banks are loaded with toxic assets (900,000 million euros in 2009).

At the outbreak of the crisis were seriously disrupted but got their insolvency, rather than appear as the result of his great recklessness and irresponsibility (which never refers Merkel), is presented as the result of waste and public debt countries where banks were those who had served. The Germans quickly withdrew their money from these countries, but the debt remained in the balance sheets of the banks. Merkel emerged as the champion of German bankers and help launched two strategies. A, bailouts, they sold like they were aimed at saving the country, but actually consist of giving governments loans money paying people to pass it on to domestic banks so that they recover as soon as possible and pay immediately the Germans. Another, prevent the ECB root cut off speculative attacks against the debt of the periphery to the rise in risk premiums of others down the cost is financed with Germany.

Merkel, like Hitler, has declared war on the rest of Europe, now to secure their economic living space. We punished to protect their corporations and banks and to hide the shame to their constituents of a model that has made the poverty level in the country is the highest in the past 20 years, that 25% of employees earn less than 9.15 euros / hour, or half of the population it is concerned, as I said, a miserable 1% of the national wealth.

The tragedy is the massive collusion between pan-European financial interests that dominate our government, and that these, rather than defend with patriotism and dignity, betray us to act as mere extras Merkel.

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Der Tanz der Geier" — coole Arte Doku über den Finanzsektor. Dank dem Neoliberalismus sind die Banken außer Rand und Band. "Heads I Win, Tails You Lose". Wird sich das ändern? Nicht in einer (finanz)marktkonformen Demokratie.

My new Friday Night Special Movie Series! It’s time to relax (Popcorn! & Beer!), put your feet up on the couch, lay back, and entertain yourself with some video about all the economic blunder and misery in the world.

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I tried to see what was the first and most important of those social fictions. For that, more than any other, was the one I should try to subjugate, try to render powerless. The most important, at least in our day and age, is money.

How could I subjugate money, or to be more precise, the power and tyranny of money? I could do so by freeing myself from its influence and rendering it powerless over me. Do you understand? I was the one combating it; if I were to render it powerless over everyone, that would not be subjugating it but destroying it because that would be putting an end once and for all to the fiction of money.

I have already established that a social fiction can only be destroyed by social revolution and dragged along with the other social fictions in the fall of bourgeois society.

How could I make myself superior to money? The simplest way was to remove myself from its sphere of influence, that is, from civilisation; to go into the country and live off roots and drink spring water; to walk around naked and live as the animals live.

But this, apart from the obvious difficulties involved, would not be combating a social fiction; it would not be combating anything, it would be running away. It’s true that anyone who avoids joining in a fight also avoids being defeated by it. Morally, though, he is defeated, precisely because he did not fight.

There had to be another way, a way that would involve fighting not fleeing. How could I subjugate money by fighting it? How could I shrug off its influence and tyranny over me without avoiding contact with it? There was only one way forward, I would have to acquire money, I would have to acquire enough of it not to feel its influence, and the more I acquired the freer I would be from that influence.

When I saw this clearly, with all the force of my anarchist convictions and all the logic of a clear-thinking man, only then did I enter the present phase - the commercial and banking phase - of my anarchism.

The Anarchist Banker”, Fernando Pessoa
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Die Frankfurter Rundschau hat heute einen Artikel über die Osloer Polizei und warum sie so beliebt ist auf Twitter (sie hat fast 80.000 Follower). Dank ihrem trockenen Humor. “Humor” - ein Wort das im Wortschatz eines deutschen Polizisten gar nicht vorkommt. Einer der Beispiel-Tweets von der Osloer Polizei:

Fahrzeug wegen Verdachts des Fahrens unter Alkoholeinfluss gestoppt. Hat sich als Grieche entpuppt, der zum ersten Mal auf den winterlichen norwegischen Straßen unterwegs ist.

Mir ist in meiner Studentenzeit einmal etwas Ähnliches passiert. Wir hatten einen indischen Gast-Kommilitonen - strenger Veganer und Alkohol war TABU. Mit anderen Worten der optimale Kollege für Studenten-Sauftour zu den Brauereien in Tschechien. Wir machen also zu viert mit Auto eine Reise zum Gral der Braukunst: die Budějovický Budvar.

Auf dem Rückweg nach Wien haben drei sich den Rausch ausgeschlafen und Namit war am Steuer. Irgendwann bin ich aufgewacht und es kam zu folgenden Dialog: >Namit, what’s wrong? Is the car broken? >No. >OK. So why are we driving in walking speed? >It’s snowing. >Sure it is. But the car has winter tires. >And? >We can drive at least 80 km/h. >No. >Why not? >Because I’ve never seen snow in my whole life. And it scares the shit out of me. >OK. Go on. We’ll switch once I’m sober again. >Good.

Wir sind dann bis nach der österreichischen Grenze im Schritttempo durch die tschechische Pampa gekurvt mit einem Fahrer, dem die Panik über den ersten Schneefall in seinem Leben wahrscheinlich einige Lebensjahre gekostet hat. Zum Glück macht das in seinem Fall nicht so viel. Er wird sowieso wiedergeboren oder es wartet das Nirwana.

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Der Wirtschaftsphilosoph schreibt einen Beitrag über Hans-Hermann Hoppe und seine “sokratische” kindische Methodik. Da ist es vielleicht ganz passend und lustig wenn ich über meine Erlebnisse mit Hans-Hermann Hoppe berichte. Prof. Hoppe ist ein “Ökonom” der österreichischen Schule der Nationalökonomie oder was radikale libertäre US Denker wie Murray Rothbard daraus gemacht haben. Auf jeden Fall habe ich vor ein paar Jahren ein 3-tägiges Seminar mit Hans-Hermann Hoppe an der Wirtschaftsuniversität Wien mitgemacht.

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Dank der Piraten gibt es den Vorschlag, dass die deutsche Bundesregierung sich endlich um das Projekt der friedlichen Kolonisierung des Mars kümmern soll bevor die barbarischen chinesischen Schlitzaugen auch auf dem Mars das Sagen haben. Ich nutze diesen grandiosen Einfall um in sehr vereinfachter Form die verschiedenen Finanzierungsformen für so ein Staatsprojekt (im Rahmen der derzeitigen ökonomischen [falschen] Doktrin) zu diskutieren.

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Ich habe dem Wirtschaftsphilsophen und dem Wirtschaftswurm das Thema “Ist ökonomische Ungleichheit ein (Haupt?)Grund für die ökonomische Krise” für die Februar Ökonomen-Blogparade vorgeschlagen. Nun wollte ich die #ÖBP mit einem längeren Beitrag eröffnen, das klappt aber nicht, da ich morgen nach Zürich muss. (Zum Geldzählen. Muss kurz nachprüfen ob sich eh nichts an der ökonomischen Ungleichheit geändert hat.) Deshalb eröffne ich die #ÖBP mit einer Grafik. This, ladies and gentlemen, is our problem:

Diese Grafik ist aus dem letzten “Global Wage Report 2012-13” der ILO. Wie die ILO pikanterweise anmerkt tragen besonders die USA, Japan und Deutschland zu dieser Entwicklung - dass die Löhne & Gehälter nicht mit der Produktivität mitwachsen - bei. Um es kurz zu machen: es wird Einkommen von unten nach oben verteilt. Die Löhne & Gehälter stagnieren und die Profite explodieren. Das ist ein grundsätzliches Problem des Kapitalismus. Mehr dazu in einem späteren Beitrag.

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Heute hat Wirtschaftswurm seinem Ärger über Keynesianer mit dem Beitrag “Warum ich Keynesianer hasse" so richtig Luft gemacht. Wenn ich ihn richtig verstehe, ist sein zentraler Vorwurf die Obsession der Keynesianer mit der ökonomischen Messgröße BIP (Bruttoinlandsprodukt). Fair enough. Als Post-Keynesianer stellen sich mir dann natürlich einige Fragen wenn ich über diesen Vorwurf nachdenke.

Wenn die Messgröße BIP für unsere ordoliberalen deutschen Freunde so unwichtig ist, dann frage ich mich: Wieso jammern sie dauernd über zu hohe Staatsschulden gemessen am BIP? Wieso klagen sie dauernd über ausufernde Staatsdefizite gemessen am BIP? Wieso protestieren sie wütend gegen Vertragsbrüche in der Eurozone? Wir erinnern uns: das 3% Staatsdefizit und das 60% Staatsschulden Maastricht Kriterium wird auch gemessen am BIP. How comes, Dear Arne?

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«You will never balance the Budget through measures which reduce the national income.  The Chancellor would simply be chasing his own tail – or cloven hoof!  The only chance of balancing the Budget in the long run is to bring things back to normal, and so avoid the enormous Budget charges arising out of unemployment … Even if you take the Budget as your test, the criterion of whether the economy would be useful or not is the state of employment … I do not believe that measures which truly enrich the country will injure the public credit … It is the burden of unemployment and the decline in the national income which are upsetting the Budget. Look after the unemployment, and the Budget will look after itself.» — John Maynard Keynes

Keynes in a 1933 radio debate (bold mine). Apparently the Troika and German Finance Ministry disagree with Keynes and instead insist, that this time is different and the then failed Treasury View will now work miracles.