Money supply growth – ignore it at your peril

As mentioned in a previous post, the Fed decided in early 2006 to kill the M3 measure of the money supply. It is difficult to measure money and costly however scrapping broad money measures is tantamount to saying that money supply growth doesn’t matter.

The monetarist view of economics says that Continue reading “Money supply growth – ignore it at your peril”

A whole generation of talent wasted

Top graduates have flocked to the financial services sector for decades. Employment in this sector has ballooned. These jobs have not been created to support the two key roles of the financial sector  – allowing money to be used efficiently as a method of payment and lending to solvent borrowers – but to play at the casino table that was created by ever more lax regulation in the face of global competition for the provision of financial services.

The financial sector will massively Continue reading “A whole generation of talent wasted”

Parrallels with pyramid selling or MLM

Pyramid selling or multi-level marketing has some interesting aspects to it and some firms have applied these aspects to their distribution models very effectively. Others have applied them less effectively and even dangerously. One sector that has applied some of the principles of pyramid selling is the financial services sector. Here’s how. Continue reading “Parrallels with pyramid selling or MLM”

The consumer and corporate sector need the funds not the banking system!

Keynes is famous because he prescribed that at times of depression the Government needs to step in and spend where others won’t.

The correct response today is to prepare over the coming weeks a signiificant series of internationally coordintated measures to avoid depression. Any money spent on “unblocking the financial system” will be wasted. Continue reading “The consumer and corporate sector need the funds not the banking system!”

A part-nationalisation! How does that help?

The UK Government today announced that it would make £50bn available to take stakes in UK banks. It also committed a further £350 in support of liquidity and lending in the money markets to free up the “plumbing of the banking system”.

Total cost £400bn.

I am very supportive of a wholesale nationalisation of the banking system however only as a last resort and for all banks.

By “a last resort” this means only when Continue reading “A part-nationalisation! How does that help?”

The banking plumbing is bunged up! For banks yes! Let them fail!

I am sorry but I just do not buy in to the Governments reaction today and its justification.

Everyone fears a recession – of course. After years of debauched consumerism financed by mad levels of lending and debt, consumers have had enough and now moving to cost cutting and savings. They do NOT want to borrow and should definitely not be encouraged to do so.

The Director-General of the CBI, Richard Lambert, said on BBC News this evening Continue reading “The banking plumbing is bunged up! For banks yes! Let them fail!”

Monetarism is back after a decade or more but too late to save the day!

For more than a decade monetarism has largerly been ignored. US broad money supply (M2) has doubled in a decade and credit fuelled massive increases in household debt and asset prices.

Now the pyramid game has come to an end and monetarism seems to be making a come back  – “Governments must reduce interest rates and support the banking system otherwsie we will end up repeating the mistakes of policy makers following the 1929 crash!”.

This is wishful thinking and it is way too late Continue reading “Monetarism is back after a decade or more but too late to save the day!”

Bail-out bill through – so why is the stock market not reacting postively?

Well of course the argument is that if it hadn’t passed things would have been even worse. This is patently not true. At its first pass, when voted out, markets fell to the level they are at now. This was before there was any hope of the bill being resubmitted. Continue reading “Bail-out bill through – so why is the stock market not reacting postively?”

The ripple effect OR bail out the banks otherwise you will all suffer!

The ripple effect has been used very effectively to rally support for the banking bail-out in the US. The argument goes as follows, “bail-out the banks now otherwise the financial sector, the very heart of capitalism, will fail and doom will befall all that walk the earth!”. This argument is entirely false and here is why. Continue reading “The ripple effect OR bail out the banks otherwise you will all suffer!”