There have been two main proposals to tackle the stressed asset problem of the Indian banks since the beginning of this year. Both proposals are based implicitly on the financial intermediation theory of banking. The alternative credit creation theory of banking opens up other possibilities. One such possibility, put forward here, is to create a "bad bank", with a partial Jubilee financed by zero coupon perpetual bonds.
Japan has just introduced negative rates on reserves, following the example of the Riksbank, the Danish National Bank, the ECB and the Swiss National Bank. The Bank of Japan has of course been doing QE in very large amounts for quite some time now, and interest rates have been close to zero for a long time. But this is its first experiment with negative rates.
But why is the Bank of Japan so intent on cutting interest rates? After all, it has just produced a pretty upbeat forecast for the Japanese economy.
It’s about China, mostly.
I do not have any pretension to detailed knowledge of the Trans-Pacific Partnership Agreement, the newly finalised “free trade” (sic) deal between the US and other (mainly Asian) countries, which excludes China as an act of policy. I am not alone of course in my ignorance, as the deal – shockingly, given its enormous scope and implications - still remains a state secret.
If there is one thing that unites Members of Parliament of left, centre and right, it appears to be a strange religious faith in the dogma, "we must eliminate the deficit and live within our means".
In a current article in Socialist Economic Bulletin, John Ross writes:
John McDonnell, the new Shadow Chancellor, has created something of a stir by his firm opposition to budget deficits to cover current expenditure – writing ‘let me make it absolutely clear that Labour under Jeremy Corbyn is committed to eliminating the deficit and creating an economy in which we live within our means.’
Over the weekend something extraordinary took place in Lagos, Nigeria. Indeed fans of Nigeria are likely to regard it as analagous to the “something wonderful” of the Film 2001 A Space Odyssey.
With China's credit crunch hitting the financial headlines today, it is a good time to look at some of the issues and concerns that are really driving China's political leadership. Right at the top is that of urbanization, in all its aspects and complexity. It is at once an economic, social, demographic and political issue. The scale of the challenge is almost unimaginable to non-Chinese, and awe-inspiring to those of us who have at least had a modest first-hand introduction to the subject. See here for a recent piece in the New York Times on the subject. And this from a recent Nomura note, cited in Financial Times Alphaville (20th June), see here (and also here):
In April, Ann Pettifor was interviewed by the Renegade Economist. They discussed regulating the banks, the rise of the far right in France, economists as “hired guns,” and what we as a society can do about it. Watch the video below to view the whole interview...
The tectonic plates of Australia's economy are shifting, as the mining boom generates the kind of ebullience common to all booms. But cracks are appearing that could quickly overwhelm the gains made by the boom. These expose the Reserve Bank of Australia's flawed management of Australia's financial system. It is worth reminding ourselves that the RBA's role (according to the 1959 Reserve Bank Act) is "to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia … to the maintenance of full employment … and the economic prosperity and welfare of the people..."