Now he does not use the word credit deflation, be he describes its conditions, and comes up with a solution: intensify fascism! What do you expect form a lifelong wonk?
Also, the proposal to "remove the fixed exchange rate" rather lets one large cat out of the bag. In essence, remove the last check on fascist banking. (Fascism is the term for big govt/big business unity, and no more loaded than communism or capitalism. Fascism is more likely in capitalism, and free markets cannot exist in any of the above "isms".)
My three counter-proposals would be:
1. Deregulate banking and money. Citi, Bof A, Wells would be gone in a week, and a million new banks would crop up.
2. With banking deregulation, private companies would issue currencies based on assets. Communities would control these banks, like the old savings and loan.
3. Well, #2 is a subset of #1, and my #3 would be the same as #1... just deregulate banking, for all banking regulations serve the regulated. There are no banking regulations that do not have the permission of Bank of America. We are getting hammered by the regulators owned by the regulated.
Feel free to forward this by email to three of your friends.
Fundamentally, the ELB problem comes down to cash. According to Buiter, the ELB only exists at all due to the existence of cash, which is a bearer instrument that pays zero nominal rates. Why have your money on deposit at a negative rate that reduces your wealth when you can have it in cash and suffer no reduction?
Cash therefore gives people an easy and effective way of avoiding negative nominal rates.
Buiter's note suggests three ways to address this problem:
Abolish currency.
Tax currency.
Remove the fixed exchange rate between currency and central bank reserves/deposits.
Yes, Buiter's solution to cash's ability to allow people to avoid negative deposit rates is to abolish cash altogether. (Note that he's far from being the first to float this idea. Ken Rogoff has given his endorsement to the idea as well, as have others.)Note the specific problem... in deflation the longer before you pay, the more you get for your money. So the fascist response is don't let you have money (he means currency, but precision is not appreciated in economics.) If top players from GE to Citi are working on a solution, there must be a problem. If I seem to be addressing credit deflation excessively, I'd say you are missing the import (I love that pun!) of the event.
Also, the proposal to "remove the fixed exchange rate" rather lets one large cat out of the bag. In essence, remove the last check on fascist banking. (Fascism is the term for big govt/big business unity, and no more loaded than communism or capitalism. Fascism is more likely in capitalism, and free markets cannot exist in any of the above "isms".)
My three counter-proposals would be:
1. Deregulate banking and money. Citi, Bof A, Wells would be gone in a week, and a million new banks would crop up.
2. With banking deregulation, private companies would issue currencies based on assets. Communities would control these banks, like the old savings and loan.
3. Well, #2 is a subset of #1, and my #3 would be the same as #1... just deregulate banking, for all banking regulations serve the regulated. There are no banking regulations that do not have the permission of Bank of America. We are getting hammered by the regulators owned by the regulated.
Feel free to forward this by email to three of your friends.
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