- Home
- Blog
Blog
Foray into an area reserved too: money - Part 3
On 04/10/2014
Foray into an area reserved too: money - Part 3
I come back on a very good study by ATTAC independent group that not only returns to the basic historical that led us to the current economic situation of the entire planet, but was widely anticipated and explained the risks that have occurred since the book which dates from 2004 ... the group continues its observations and interventions, and I am personally quite agree with their conclusions, and history:
II) after
Cash and aggregates, another world
Bank money is being expanded significantly, we now distinguish the current means of payment, that everyone uses every day, and everything that can be a financial capital, such as shares of a listed company or a passbook. This led to the definition of monetary aggregates associated with liquidity, that is to say, the availability of means of payment.
The aggregate more "liquid", called M1, or all of the circulating currency, includes all means of payment available immediately, that is to say the currency and accounts.
The second aggregate M2 is M1 which we add all the credit in the short term, that is to say, the sums deposited in booklets or on deposit accounts available within less than two years. A particular amount can go from one aggregate to another, for example a deposit ticket handed over the counter to be set to a libretto goes from M1 to M2. And if, as in M2, the bank lends, it puts on a deposit account and it returns to M1.
To form M3, M2 is added to other debt securities and money market securities, which are pure credits.
The total domestic debt includes all loans, whether in the form of bank loans or issuing securities, and whether loans to companies, governments or individuals.
Some figures do understand that the circulating currency, that are manipulated every day, and that comes to mind when it comes to money, is actually almost nothing compared to all those credits which the economy depends , that is to say with respect to all payment methods: in 1999, the M1 aggregate was evaluated, France, 358 billion euros, while total domestic debt was nearly six times larger, nearly 2,100 billion euros, ... more a half times the gross domestic product!
Payment methods used for transactions in the financial markets are a much greater than the only currency circulating amount. Especially since these transactions involve all kinds of marketable securities, not only bonds issued by companies to finance their investments, and are of the credit, but also on the actions that are of Deeds. We will return.
There is thus much more money is owed to the banks than is outstanding. It is clear that the debt can never be completely refunded if anyone (individuals, industrial, commercial or government) who have a credit in a bank decide to repay their bank, not only all the money would be needed and he n 'there would have any more outstanding, but in addition, it is no longer sufficient, it still miss much. But how to pay when you do not have the money? - Borrowing from a bank, that it will pay interest, etc. It's a vicious circle, open to the infinite spiral.
The banking system, guard rails?
The Bank of France was in charge of bringing some serious organization.
We discussed the fact that it is the issuing legal tender Institute, that is to say, it is what controls the production of coins and notes. It is through payments at commercial banks that these "species" enter circulation: When these banks fail to "cash" for their clients, or they are buying "cash" already in circulation "is refinancing" with d 'private financial institutions (the interbank market), if they are addressed to the Central Bank. This then plays them for the role of "lender of last resort" by providing the monetary base in exchange for debt that they had "boarded" and are then called "rediscounting". The monetary base and created against party debt is called credit money first level.
On the other hand it is the Central Bank, which holds the current accounts of all commercial banks (said secondary to distinguish in this hierarchy) including the Treasury. It is the "bank of banks" which it requires him to file the required reserve fiat currency, it relates to their accounts and that it included in its liabilities. These reserves, the amount of which depends on the size of each bank, that is to say that this credit bank issues were, originally instituted to compel banks to ensure in cases of massive requests lawful money from their customers.
This feature is the way that has been found to allow the Central Bank to put pressure on money creation ex nihilo by secondary banks and other financial institutions. But note well that this is only an indirect pressure, changes in the rate of reserves allows the central bank to encourage or restrain money creation by commercial banks.
And looking more closely, one discovers that there are two types of interest rates, according to the lender and the borrower.
When it is the clients who lend to banks (current accounts, savings, savings plans housing), it comes to lending rates. To attract people's savings, these rates are guaranteed and often regulated, but they are low or even zero in the case of traditional checking accounts. The flexibility of banks on the deposit rates is low.
But when on the contrary it is the financial intermediaries who open credit to their customers, they apply their so-called lending rates, and although the money, they say, has no odor, these rates are fixed this time "the head of the customer", they depend on the "quality of the borrower," that is to say its ability to pay. In fact there is a benchmark lending rate, said the base rate, which is linked to interest rates, those refinancing of banks with the central bank. This base rate is the same for everyone, but it represents only what is required for borrowers "first class", those with their bank feels they "have deep pockets." For other clients, banks charge a margin above the base rate, margin increases as the customer is considered less safe. And in addition to these interest lending rates, banks are generally charge their customers various fees, commission fees, management fees, records, etc., which are rarely displayed, and can vary greatly from bank to another. These free rate can be very high; we simply say that a broker takes a "usurious" rates when including commissions, it exceeds 33% of the average rate as estimated by surveys!
Confiscated democracy
Until the early 1980s, most of the financing of the economy was so effected by credits granted by banks and financial institutions. Or they belonged mainly to the public sector. In France, in 1984, the nationalized banks
controlled 87% of deposits and 76% of appropriations. This is called "the economy of debt administered."
The scheme, in the "war boom" has created an environment adapted to the needs of the economy by promoting the rapid growth of productive investment. May grant certain sectors preferential funding, through soft loans, lower than market prices, the policy had a little control over the economy. Although banks, abandoned long ago, money creation was largely and indirectly regulated by the Central Bank, which provided as "the credit crunch". And the state maintained by the intermediary, "some" control over the country's financial activity.
And then, wham, in a few years, all this has been upset in the name of an ideology that is imposed on all so-called "developed, one after the other economies:
In the mid-80s, under the pressure of Think Tanks (20) inspired economists such as those of the Chicago school, in the wake of monetarist Milton Friedman or Friedrich von Hayek, the regime gave way to the regime "economy liberalized financial markets. "
(20) Read about Evangelicals market by Keith Dixon.
By 1985 the share of administered rate loans was gradually réduite.En 1987 is the credit crunch that has been deleted. And in 1989 it was the turn of exchange controls.
Meanwhile, in 1986, the nationalized banks and major financial institutions have been privatized. (YH: Historically, it is the "left" who did the work that the "right" could not do before with President Valery Giscard d'Estaing, although the movement was Inrush by changing laws President Pompidou ...)
At the same time was created the "single capital market", which means that all transactions, whether in cash, short or long term, are now available to all economic agents, whether or non-financial, whether domestic or foreign.
The great, the super, hyper-capital market
The creation of the "unique" capital market was the explosion of a market multiple ... who devoted the stranglehold of finance on the economy, the more total grip that even the state was subjected to this market by Act 1993 (see above "when the state is forced to borrow from the private").
Enumerate, without insisting, its multiple facets.
For starters, its interbank market allows banks to arrange them, one may have available cash that others need. It is for the Central Bank to fix the so-called policy rates: the rate "refinancing on the interbank market," who serves as a reference, and both said rate "ease" the ceiling and floors between which the interest rate may change. In fact, these rates vary from day to day, so it's not monetary policy that requires the interbank market, but the law of supply and demand, that is to say the law market.
The market in which the public usually hears about is the financial market, ie the Exchange. Two kinds of securities (or "securities") are not bought and sold there: shares of companies "listed" and bonds.
Buying shares in a company that is buying a portion of its capital. This obviously raises the risk if the successful business, its rating, or rather the symbol of its shares goes up and it is possible to realize a gain if you manage to sell more expensive they have been purchased. It can also happen if the benefits are very high, the shareholders' meeting decides to pay a fraction (a dividend) to all shareholders. But nothing is guaranteed and the company can see its shares lower, for example if a rumor suggests that it has problems. In exchange for the risk that they share and the shareholders are entitled to participate in the election of the Board of Directors of the company appoints its boss and is supposed to control. But this usually happens between "large" shareholders, insiders, and small does not make weight (a recent exception landmark: small shareholders of Eurotunnel just succeeded to agree to change the direction, the behavior had proved truly catastrophic).
By buying bonds issued by a company, it is no longer to become co-owner, but to lend him money. Indeed, when a company needs a loan and does not wish to approach a bank, it issues bonds by pledging on the duration and interest rate of the loan. Thus assured of compensation and reimbursement to date, the buyer of such debt securities takes much less risk than buying a stock and it has, therefore, no right to intervene in the internal company policy.
Financial markets are thus used to pump the savings into big business. And the pump running so strong that in 2003 it had pumped into the world a whopping 19.554 billion dollars (compared to the global GDP was about 30,000 billion).
The explosion of financial markets was also reflected by the birth of a new business, the contracts that are traded on the derivatives market and serve the businesses protect themselves against a variety of financial risks, such as changes in interest rates, fluctuations in exchange rates and even took raw materials.
For all those "financial products", there are the new home market in the second hand market. This is the first, also called primary market, new furniture securities are offered to the public, while the secondary market traded securities previously issued and sold (possibly by professional speculators).
Since 1991, the national market dung beetle is organized into sections: there is the first market, the official, whose values are determined on a daily basis, the secondary market was created in 1983 for SMEs (small and medium enterprises ), the new market, opened in 1996, facing the financing of "ups" technology, and OTC on companies that are not yet or no longer listed on the official market the market.
Finally include the mortgage market, which facilitates the real estate financing by giving credit institutions the opportunity to sell their mortgages. This market has led to an innovation in the United States, known as securitization of receivables. Basically, say it allows lenders (banks and other credit organizations) to refinance by selling their receivables to non-bank investors and thus more safely manage the risks associated with these loans.
The stated aim of all these transformations, which constitute what is called a revolution, was to facilitate the comparison of all global supply and demand of capital in any form whatsoever. No longer reserved for banks choose to invest it is now exercised by "the invisible hand of the market" under the pretext that such a market on a global scale was the key to development and prosperity, the poor countries would have access to the rich countries. It was the end of poverty ...
The reality is the opposite of those promises: it is the big companies in rich countries that have benefited from this type of development, at the expense of the poor. Because the operation of the "main" is a fable, explains a witness JEStiglitz, and
can trust him since he was responsible for policy development as Vice-President of the World Bank, in 1997-1999.
Here is what this expert, Professor in five prestigious universities (Yale, Oxford, Stanford, Princeton and Columbia): "The famous" hand
invisible ", regulating the market? It is invisible because it does not exist. The market will not regulate itself. The "trickle" dear to Reagan, for whom the rich getting richer "trickles" always on the poor? This is simply not true. "(21)
Money has become ... capital (e)
In 1999, almost all banks in France as in all industrialized countries, had returned to the private sector and the capital markets have taken in managing the economy, a growing share compared to bank financing. Rest assured, banks will have lost nothing, they just expanded their activities to otherwise participate in the global economy, playing an additional role through financial markets. For example, whether the sale of new shares at an IPO or a capital increase or a bond issue, companies are forced to go through the through a bank, in which they must then, of course, pay a corresponding commission. This does not mean that banks have so far given their privilege of opening credits ex nihilo. In this area, the coverage rate (22), fixing a limit, is somehow a bridle on their neck. They recognize that the reserve requirement is for them a guarantee against bankruptcy, but if the strap is too tight, they fear that their investor clients to look elsewhere, that is to say in the financial markets, their funding. This shows that investment, that is to say, the dynamism of the economy even more dependent on this rate since the great turning "the economy liberalized financial markets." In addition, major American banks have established their risk assessment systems, allowing them to determine their reserve ratio which is obviously not without consequences on competition between banks themselves. And so it was that the era of "Cooke ratio" (c = 0.8) just ended with an agreement in Basel May 11, 2003: the ratio "Basel II" is not universal, it will be flexible. And it will, as the saying Professor at Dauphine (former CEO of Paribas) "the best investment" by "paying the risks one by one", it will increase the flexibility of the American giant. (YH: proven today (2014): Goldman Saks and JP Morgan for example, even with a few setbacks ... hold the world in their hands!)
Even without understanding the meaning and scope of these reforms, the public can see in the daily news bulletins, and for several years, that the movements of the stock market have the spotlight, and even those usually before football which is saying something! We see it as encouraging ordinary people to play its future on the Exchange, to persuade him that nothing beats the market to earn him the fortune he must dream.
The financial turmoil has indeed left the capital rein and the economy has been put at their service. But the promised fruits of this windfall spreading over the so-called developing countries are not at the rendezvous. The anti-globalization movement calling for a moratorium during which it would be possible to review these benefits. This moratorium is still denied, and during that time, the United Nations Programme for Development (UNDP) found that 840 million people still suffer from malnutrition in a world that has never produced so much ... (in 2003). - 1 billion in 2010 ...
Credit "old" to the "modern" credit
All these changes thus represent a radical change in monetary habits. But this change is insidious because the vast majority of the population still do see a value in the currency used to buy real economic assets, and possibly subject to delay purchases. Yes, and we will come back, there is more trade in goods, economic exchange has become the sale-purchase of a good or service against the currency, whose nature is different. Of these transactions, the most common, everyday, are a relatively small amount, so that the public sees money as the circulating currency. He is not aware that the currency has become a symbol experts call the consideration of financial capital. Now this symbol hides immense power over the real economy, and it is a decision tool used however irrationally, because we know that on THE market became single, motivation rather reminiscent
Players at the casino than responsible for the future of the world.
Be changed without the mechanisms of money creation, assignment of banks have been expanded, diversified and extended to other financial institutions, also denied acting brilliantly on the economy in general, but always with the sole aim their own interest. And capitalism was able to deploy his imagination, inventing new markets where it is now possible to make a fortune or to ruin by selling or buying of risk, options, etc. Speculation is an art reserved for insiders, which the common people could be adversely affected, but he can not know.
Thus, for millennia, Assyrians to the Iron Lady, or roughly 2,000 years prior to 2000 years AD, credit corresponded to the delay between the choice of a purchase and payment; but, as expressed F. Rachline (23), "on departure and arrival, regardless of the credit period, a material made weight," emphasizing the fact that these terms banking have always been linked commercial or agricultural activities, then they never resulted in a stand-alone business, purely speculative, as is the case now. This "credit to the old" just to make room for a pure credit "is not based on anything other than himself," an advance as a bridgehead to be launched over a river whose the other side, if it exists, is invisible.
The franc to the euro
The principle of competition having been placed at the heart of the construction of the European Community, it was inevitable that, from its inception, the euro is under a single "control" the Market. The creation of the euro has not changed much of the way of money creation. Worse, public oversight tends to disappear a little more. The European Central Bank (ECB) now determines the discount rate of the euro, but it is not over run by elected than was the Bank of France and is less likely than ever to master the changes in the money supply. Its President is required to complete independence vis-à-vis the government, it should not obey their instructions, it does not even make their own.
One goal has been imposed by the Maastricht Treaty: prevent inflation exceeds 2% per year ... not to penalize investors.
Everything happens as if the financial and the "economists" in their service, were a world apart, an international statesman species exerting its own policy. The state organization of its own and manage its affairs independently (24). In Europe, for example, the government is the Executive Board of the ECB, it establishes its financial laws, it has its prefects, it is the national central banks, its electors, it is the Finance Ministers of States and its citizens are financial operators.
Note, however, a difference between the role assigned to the ECB and that of his American counterparts, the EDF. In Europe, the Maastricht Treaty requires each independently the ECB to ensure inflation and governments to reduce their deficit, whatever the circumstances. While in the United States, the relationship between the Fed and the administration are more flexible, is what has allowed President GW Bush to cut taxes while increasing military spending to a record deficit already mentioned . Europe and copy its neoliberal revolution in the United States, but adding a pinch, on this point, which hinders a priori its competitiveness against its biggest rival!
"Your money interests me!"
This unprecedented growth of international finance has revolutionized the global economy. Whereas before "the function of the international financial system to finance world trade and balance of payments, international financial flows have experienced explosive growth, no relation to the needs of the global economy" (25 ). In 1998, for example, 1.600 billion, equivalent to the annual GDP of France, have passed every day by the foreign exchange markets. These financial transactions are on average 50 times higher than those related to trade in goods and services.
International finance is derived from the financing of the economy to follow its own logic now, as denounced Passet "When the banker informed us, in an ad that had its moment of glory, that our money" interests ", it is our money that is, but it is he who derives power and influence. One can say the same for all institutions that concentrate our payment methods: banks and brokerage firms, pension funds, savings manager by which employees intend to finance their future pensions, hedge funds or fund performance, made for the purpose purely speculative, mutual funds, functioning as our Fund. These institutions concentrate a "firepower" formidable, much higher than that of the states "(26). Financial institutions (banks, insurance companies, investment funds and other pension funds) have objective search for the best performance from one currency to another, euros, dollars, yen for dollars, action to another, from one obligation to another. And it is to put these financial flows away from national taxation, protecting financial crime, that were created tax havens.
Anonymity money and banking secrecy and money allow the lucrative investment money, clean or dirty (that of drugs, weapons, mafia, etc.), so that companies and terrorists use the same ways to grow their finances.
Proposed by the Liberal Tobin to put some regulatory tax would penalize transfers that hedge the foreign exchange market and not those that are brought about by the exchange of international trade, as the former are distinguished by their frequency second "the long term, says one of these speculators, it gives me ten minutes! "
Evolving IMF: protect investors, not people.
In 1944 at Bretton Woods, was created when the International Monetary Fund (IMF) to regulate the international monetary market, the right of individuals and companies to invest abroad leurscapitaux was limited by most countries, including the United States, to prevent the
speculative harm trade relations. But asset managers have pressured Republicans backed governments a wealthy voters (Reagan and Bush), for the lifting of such barriers. After that it's the Democratic administration (Clinton) who took the Republican initiative to fund its election campaigns; and the IMF charter was amended ... It then became, in the words of the most moderate, the manager of the credit system, with the objective in the short term to assist international creditors, and in the long term, to increase the return on their capital. For cons, the IMF is not affected by the domestic debt, for example, that consumer unien states that on average, at the end of 2002 was 40% of its income.
This brings us to the problem of Third World debt. Indeed, what's going to happen when the economy of a country, usually third world is sick and its local companies are forced to borrow abroad? - The IMF is involved because "outside of a conditioned IMF agreement, there is no possible international loan" and it requires borrowing governments to take, under the name of "structural adjustment pacts" (NOT) the necessary measures to ensure as soon as possible repayment of international creditors, that is to say, to maintain the value of the local currency. These measures, which involve privatization, austerity to limit imports and facilitate exports, reduced government spending and disruption of productive investments, resulting in increased unemployment and declining production, thus income, etc. form the so-called Washington Consensus. They are in the logic of the credit system, even if they are disastrous for the population. Because the IMF was not designed to help people in struggling countries, but to avoid international lenders to be harmed, that is to say, not to be repaid in full and with interest.
Investors stressed the risk to demand even higher interest it seems possible that the borrower country may not be able to repay them. But the worst part is that it's not them who take this risk, because if, despite PAS, a country can not pay, the IMF pays, and at taxpayer expense!
(21) Joseph E. Stiglitz, in When capitalism loses his head, ed Fayard, 2003
(22) See above "creation ex nihilo by banks
(23) Francis Rachline, "Let the money. Capitalism and alchemy of the future. "
(24) Details are provided on the organization of the ECB in the book The European Central Bank, and Francesco Papadia Carlo Santini. But this little book, published by Banqueéditeur and written by two bankers, the first of the European Central Bank, the second of the Bank of Italy is mainly a defense, uncritically, the directives given to the ECB by the Treaty Maastricht. For analysis and criticism, read The euro without Europe, how to see No. 61, January-February 2002, ed Le Monde Diplomatique.
(25) D.Plihon, the new capitalism.
(26) In Passet, In Praise of globalism. Chapter I, the real masters of the world, pages 31-32.
first conclusions
At this stage of our study we can conclude that at least two misconceptions are widespread. First they most often argue as if there was a fixed amount of money and should "do with." When in fact, such a constraint is exercised over the state. It also seems that many people are convinced that it is the government of a country that determines the mass of the currency in circulation, whereas it is in contrast to privately owned banks that issue bank money, which benefit and, in addition, the power to choose the beneficiaries of this windfall.
We realized that since it can be created easily by simple games paperwork, money-symbol has lost the guarantee that was his link with a wealth materialized. The development, first gradual, insidious, but has accelerated in recent decades, makes one see today (written in 2003 and unchanged since ...)
• monetary creation defies political decision, it has no general interest objective and increases inequality;
• creation mode that does not allow, for example, to finance a public-but not "profitable" utility, because it could not repay, nor, a fortiori, pay interest linked to the creation bank. Include thousands of examples of the dramatic consequences of the need to return any funding. For example, basic research: there is only the state that can fund basic scientific research that does not result immediately or never on a market and profitable application. In the particular case of medicine, private pharmaceutical companies, more and more large, research funding so-called "carriers", expected a rich clientele drugs, and they require market exclusivity through patents; by cons, research on diseases called "orphan" because rare is abandoned, potential customers are not sufficient to attract the investment! Constantly encountered similar situations in all areas: a common, or region, is facing a clear need, such as the construction of a bridge, a nursery or a highway for which existing skills, architects, workers available, and all materials and machinery needed. Lacks the credit. The construction can not be done because the human needs do not control the creation of money and the government are subject to these constraints;
• that this method of money creation does not weigh only this directly on society in all public areas: it requires any business that needs credit to repay more than it borrowed. This requirement directs the choice of companies which are thus induced either to offset their increased costs by "savings" made about working conditions or neglect "by economy" precautions deemed too expensive, either to adjust their selling prices in order to pay the interest on their loans, in which case it is the customers who pay the interest, so that pay an annuity to the banking system.
Inability to fund unprofitable business obligation earnings growth, the need to reduce costs, this method of money creation weighs on society in all areas of health, working conditions, environment, knowledge, evolution, culture ...
Which should lead public opinion to ask a few questions:
• Where does the choice of method of money creation?
- No political debate is at its origin.
• A there was spontaneous?
- History has shown on several occasions (including in France, two coups Napoleonic) pressure on those in power to impose the privileges banks still enjoy.
• This choice is it immutable?
- Nothing to do, especially not the money, it has changed throughout its history ... (YH: and there was even, there are only 450 more years, entire civilizations that passed by...)
Sources: http://www.france.attac.org/
To be continued in Part IV
Yves Herbo
Foray into an area reserved too: money - Part 2
On 02/10/2014
Foray into an area reserved too: money - Part 2
I come back on a very good study by ATTAC independent group that not only returns to the basic historical that led us to the current economic situation of the entire planet, but was widely anticipated and explained the risks that have occurred since the book which dates from 2004 ... the group continues its observations and interventions, and I am personally quite agree with their conclusions, and history:
See beginning Part 1
I) after
Creation ex nihilo by banks
Explain this effect with an example:
Let's say you make a deposit of 1,000 euro notes (also called base money "first level") with your bank. Not only that bank can then use its discretion to those 1,000 euros, knowing that you must (it is written in his books), but also because of the deposit, it is allowed to open, for another customer, a credit in the amount slightly lower, the difference being which corresponds to "reserve requirements". If this reserve is 10 to 100, a "reserve ratio" or "coverage" c = 0.1, your deposit of 1,000 euros allows your bank to open 1,000 x (1 -0.1) = 900 euros of extra credit (or credit second level) for another client. The latter, by spending it, draws a check which will inevitably lead to a bank, or another, and it will then open, too, an additional credit of 90 900 less mandatory reserve or 810 euro credit graduate level. The bank will therefore 900 + 810 = 1,710 euros on its deposit account. At the fourth level of the chain of credit from another bank will create even 729 euros, 656 euros a fifth, etc. This is a mathematical series whose theory shows that the sum of all these appropriations from the initial 1,000 euros is 1 / c, in this case 1/0,1 = 10 times the initial amount. In other words, if the reserve requirement imposes a coverage c, banks can increase the credit they create the multiplier N = 1 / c.
Until the 1970s, each country was free to set its own coverage. But the activity of banks has become increasingly international, it was necessary to harmonize these rates. The first agreement was signed in Basel in 1974 and a common value was first adopted by a dozen major Western countries, and then accepted by over 100 countries in 1988, it is the ratio Cooke which set the mandatory reserve c = 8%. This system gave then to the secondary banks the opportunity to multiply 12.5 by the amount of bank money in circulation.
The only limit to creation is the risk to the bank if ready for clients unable to repay, to be drawn into their bankruptcy. This "cover" had no other purpose than to avoid the danger to banks.
Arbitrary power, unknown and dangerous
This privilege to pay N times more than what is given to them give private banks and other credit institutions arbitrary power over the economy: they have the choice of customers for whom they are creating this currency, and they are taking full benefit by the interest that they require. While they do not bear all the risk because funds that are open and are private money without warranty, unlike the monetary base.
This is a huge hidden power, so misunderstood, because private money and monetary supply the same accounts, which can be drawn from the same checks. And private currency and legal tender blend for use, credits are created ex nihilo indeed change for those receiving checks as payment, regardless how were provisioned accounts on which the checks are drawn .
Everything is fine as long as customers have confidence in the banking system. But when they all come at the same time withdraw "liquid" supposedly equivalent to their holdings, it is the collapse of the system and ruin it for all its customers, as was seen in late 2001 in Argentina, s' occurred in 1998 in Russia earlier in Thailand and Malaysia, and Indonesia, etc. Where to next?
Or credit institutions not only have the power to create money and bring it back to them, which allows them to buy what they want, but they at the same time, an interest in the heritage of their debtors when they are failing. To understand it, still use an example: you have a field and you need 10,000 euros to build your house on it; you are forced to borrow it for the 10,000 euros to your bank. This one, for you open the credit, do not take them to another customer. She enrolled in the accounts that you owe him 10,000 euros, plus so much per cent interest (which, ultimately, can, say, 18,000 euros), and it takes a mortgage on your property. If, ultimately, you pay him 18,000 euros, it will void your debt, but it will collect 8,000 euros in interest.
And if you can not adjust the 18,000 euros, she is entitled to be paid on the sale, which it will force you, your property or your home. So that the permission given to banks to create counterfeit money, forgiveness, private money, makes them winners in all cases unless they have lent to insolvent clients.
It includes all the efforts, surveys, advertisements, procedures, often in collusion with real estate agents and other traders (who are licensees in sales to organized credit is the case for car dealers) to organize hunting to customers who pay to get the maximum, even for ... plucking. The fight against excessive debt is to discipline the customers trapped, but not to prohibit such practices. We can also understand why the offices of banks are beautiful buildings ... Compare the office in which you receive your bank to enter into a credit, with the "local" in which you received the teacher of your children to talk about their future !!
How else by these creations of money ex nihilo, companies such as France Telecom, Vivendi and how many more would they have been able to buy as "asset" to the point that their companies have found themselves in debt for tens of billions euro ...? Who can not make millions, but to borrow so many billions?
These examples point to the role of credit throughout the economy. And this preview is staggering. We discovered that the banking organizations that produce nothing tangible, actually, thanks to this private money they create from scratch (so to speak ...), control of the destinies of nations and the global economy : they can control the world's monetary resources, lead governments to beg, they can even handle, and therefore make or break entire nations.
Imagine, this is pure fiction, a landmark of the banks sufficiently venal politician to accept to borrow money to build up a formidable machine to destroy it incites then to plunder an entire country to repay its debt before collapsing ... it will be time when it lends money to the country to rebuild and make sure that taxpayers pay him interest ... this leads us to think of the financial obligations of the state.
The Treasury
The institution responsible for enforcing the budget law, which establishes, for each calendar year, the income and expenditure of the State is the Treasury. This mission asks her two balance problems. For one thing everyday, because the amount of revenue the state on any given day is obviously not equal to that of spending by him on the same day. On the other hand the annual state budget is rarely balanced, it is almost always in deficit, so the Treasury has to ensure all expenditure, also play a role of treasurer, not just a manager, for find additional funding to tax revenue, which is the additional public debt.
How does the Treasury to carry out these two balances? It features first in coin, since the state has control of its manufacture as we remembered.
But it makes very little since the amount of all parts is hardly one percent of the money in circulation. Most of the money available to the Treasury is essentially entry form, but, unlike other banks, without the right to create. This currency is made up of deposits on behalf of the Treasury and postal checking accounts (CCP). The former are made by the Treasury correspondents. Before 1 January 2002 any individual could be corresponding Treasury, that is to say have an account, but since then, it is forbidden and Treasury correspondents are no longer exclusively, as public or semi-public and local authorities. By against, any individual, association, and any corporation, public or not, can have a CCP. These accounts are managed, such as bank accounts, by post (8), but they are included in liabilities of the Treasury
Explain this: when you have an income, such as wages or retirement, you can choose to file either a bank account or on a PCB. If you choose a bank account, the bank at which you are registered for this sum of its liabilities, which means that it agrees to pay you (and you trust it) and records at the same time this sum to his credit, which means that it becomes the owner, allowing him to dispose of, for example to lend or open loans, which earn interest to its shareholders. If you choose an account to Giro, the Post included this amount in liabilities of the Treasury, which means that the State agrees to reimburse you (which is guaranteed a priori more serious than that of a bank private), the Treasury can then dispose, but unlike the commercial banks not to open new credit and only to smooth, day to day, the revenue and expenditure of the state.
And by the way that all citizens, let alone any officer, did not scruple to choose a CCP for help rather public services that affect us all, that the private interests of banks, especially since none of those -Ci is nationalized, that is to say that the state does not endorse. It is likely that this attitude results, again, ignorance of the public vis-à-vis all these mechanisms, ignorance coupled with a state maintained by preconceptions mind: for example the Post is often referred contemptuously as the "bank for the poor", which does not make sense. (YH: Note here that even the Post has lost its status as an intermediary with the state and has since been privatized by the last French Liberal governments!)
dollar-toliet-paper.jpg
When the state is forced to borrow private ...
Since the deposits on the Treasury accounts are not resources for the state, one wonders what additional resources compared to the tax revenue the state treasurer may find when the budget is in deficit. We discover that the bank of the state has another disadvantage compared to commercial banks. Among the functions of the Central Bank, we will come back, it is the "lender of last resort" for all commercial banks who can call her when they need funding.
One naturally thinks that the banker of France may, like others, seek, if necessary, at the Banque de France. It was possible, and then it gave a credit to the government directly on behalf of the Treasury, which corresponded to a direct creation of central bank money.
But the Act of August 4, 1993 ended that possibility by redefining the status of the Bank of France (which like many other banks had been nationalized in 1945). To prepare for the Economic and Monetary Union in Europe, this law required the independence of central banks vis-à-vis governments. In Article 3 prohibits the Bank of France "to allow overdrafts or to grant any other type of credit to the Treasury or any other agency or public enterprise." The Bank of the State and was barred means that banks of all individuals and all businesses have! Incidentally such a transfer of part of the powers of government had been ruled unconstitutional by the Constitutional Council ... Never mind, we found an arrangement!
So what resources he remains in the state, which must make public investments that can potentially benefit many generations, while its current revenues can not insure?
Of course, the government may decide to "selling the family silver", while supplies last, that is to say, selling its real estate (9), privatize public enterprises, selling shares that still holds the State eg Air France, EDF, SNCF, etc.
And, of course, bring in private.
The Treasury issues for the purpose of treasury bills, negotiable medium-term, 2-7 years, and longer-term obligations. So the people who can afford it can move without risk, money to the state, and it is required not only to repay maturing but also to find additional resources to pay for their interests , which are also guaranteed.
The State thus puts a secure investment available, maybe not richer because they prefer better and faster returns, but of all those who have more money than they have the immediate use.
And since the banks, they have retained the right to create money, they can, like other private credit establishments, such as American pension funds or other ... pay the State to draw interest guaranteed!
In short, as it is not part of the "credit institutions that are approved by the monetary authorities to create bank money" and he abandoned most of its sovereign right to coin money, the state is obliged, when tax revenues are insufficient to invest in the public domain and to finance the public service, to borrow from the private organizations. And taxpayers should therefore repay, by paying more interest.
In a manual collection "Fundamental" Hachette higher learning, which is the collection "Library Basic Law student politics, economics and management," written by a professor at the University of Strasbourg, we read that when a community of payment, France for example, financing needs that exceed their ability to pay, "it is the role" of the financial system to address this imbalance by money creation, which is the mechanism by the banking system which meets the needs when fundraising is not enough. Point. It is taught as if it were a law of nature, an obligation as unavoidable as gravitation. It seems to ignore or consider that it is without significance since no allusion is made, the fact that this is how the currency created condemns all taxpayers to pay an annuity to financial institutions ...
So anyone wondering if it's not, on the contrary, the bank of the State should have the sole right to create money, even, of course, to limit this right by rules so that the currency of the public interest is created within the productive capacity of the country, but in the public interest without payment to private.
Served by a private taxpayer cash
It's not that the money is created ex nihilo is abnormal. It is absolutely necessary that a currency is created prior to production, it is natural that funds are advanced and used to allow the provision of means of production. What is intolerable is to give some individuals the power to decide these investments to make a profit for them and paid for by taxpayers.
Because these interest payments, called elegantly debt service, are far from being of the order of magnitude of "overheads". Instead, it is amazing to see their importance, what can be done easily by reading simply sheet sent annually by the Ministry of Finance with the declaration of income. This service is in effect one of the most important budget lines:
In 2001, after the biggest expense, one devoted to preparing for the future, that is to say, the education and research (21%), had five budget lines of the same size (between 12 and 13%) and the debt service, or 240 billion francs, was one of them! The taxpayer then paid almost as much to pay such interest, arising from the choice of method of creating our money, as for the whole of justice, security, environment, culture and agriculture (ie 244 billion francs)!
For 2003, the planned distribution of state spending, the largest share is still, thankfully, one that prepares for the future, 21% for education, research and development. The second line, or 15%, is expected to benefit local communities (the government has undertaken to discharge the state on them, it must be a part of their budget back). And the debt service comes third row just behind, with 12% of the budget is flush with spending for national defense (10). Thus the state has spent more in 2003 for "the service of the public debt" to ensure that employment and solidarity, or 10% of the budget (11). Taxpayers paid 2% more to pay the rent to private and to try to reduce the "social fracture" ... (YH = talking 2003 here ... but listen to these politicians who speak only of rigor and 'increases in taxes, VAT, debt repayment over the world in 2012 ... as if it had not been done for ages, to no avail ...)
Comparing the budget revenues, we find that two-thirds of income taxes from taxpayers are used to pay the interest to private individuals.
(9) even consider selling public buildings, such as prefectures, town halls or schools ... probably subsequently rented to the owner? (Yh = note in Greece in 2012, it became possible to hire the services and equipment of the national police ... that the majority of Greek ports and rail services have moved to private interests and completely .. Chinese. ...)
*
All countries today are in debt, but the cake back in the United States whose national debt already reached 6.116 billion dollars in August 2000, but the deficit has been greatly increased by the tax cuts, by d other fiscal measures and increased military spending of the administration of GW Bush. In October 2003 it reached 400 billion a year, the forecast of Congress adjusted on November 17, posing 480 billion for 2004 (12), not foreseeing a possible balance, we do not know, moreover, how that from 2012 (YH today we know that it's even worse and we no longer talk about balance but "limitations"). To finance the debt of the federal government, the United States obviously looking to sell in dollar government bonds. They are already for a mere 3.500 billion. But in recent years, the US Treasuries were mostly bought, not by a few rich Americans (who now prefer to invest in Europe, where interest rates are higher ...), but many (40%) by Central Banks Japan and China.
Although we talk a lot more, the debt of the least developed countries is less than that of the world's richest country known, but it exceeds 2.500 billion in total. That of France rose from 1.782 billion francs (271.66 billion euros) in 1990 to € 948 billion in 2003 (6.218 billion francs) ...
(10) including the famous asbestos removal Clemenceau just wander through the Mediterranean without finding a port ...
(11) At last report (March 2, 2004), public debt of France would be around € 1,000 billion, and "service" would be more than 40 billion euros, the second after the civil budget of Education.
(12) but in February of that year he already reached $ 540 billion.
II)
developments
The fascination with gold, with empirical measures taken in an emergency so that the public does not lose confidence in the banking system until the recent installation of the dictatorship of the markets throughout the economy, history of money, under each of its three forms appears as the ongoing struggle between the greed of those who want to be the instrument of their power and concern for those in charge of damage control.
The system of the gold standard
For centuries, the currency of France was defined as a certain weight of gold, that is to say, it was part of the system known as the gold standard. This reference does not yet guarantee stability, the weight of gold in the monetary unit declined gradually over time. Thus, John the Good franc weighed 3.87 grams of fine gold, while in 1785, that of Louis XVI in weighed more than 0.29 grams (13). The Convention, which gave the book the name of franc (14) and defines the size and weight of the pieces (15), fixed by the law of 7 Germinal (March 28, 1803), the value of the franc germinal to 0.290 grams fine gold. But the continued devaluation (16 since.
The mid-nineteenth century, the system of the gold standard was seen as a way to "unify performance and economic policies of nations" (17). He effectively ruled for fifty years, gold being then the only reference currency of 59 countries, which facilitated trade between them. These convertible currencies remained until World War II. In the United States the 1929 crisis led to so many bank failures (18 that, upon taking power in 1933, Roosevelt was forced first to close all banks to stop the rush of the audience from the counter claim his due gold, and subsequently abandon the convertibility of the dollar, but retained its reference to gold ($ 35 an ounce, or 31 grams) for trade against other currencies.
Bretton Woods, signed in 1944 between 44 nations, together constituted an international system which fixed the exchange rate. Gold continued to play a monetary role at the international level, through the dollar, who thus a leading role in other currencies. But the deficit of the balance of payments of the United States, related to their war against Viet Nam, altered the trust of other countries and external convertibility of the dollar could not resist, Nixon officially abolished August 15, 1971. since then, the creditors of the United States can no longer, as did De Gaulle, demand payment in gold amounts that are owed. The demonetization of gold at the international level has been effective since 1976 (agreements Kingston), where any reference to gold was removed from the statute of the International Monetary Fund (IMF). Gold is no longer anywhere in the world, a legal tender, but central banks still retain in their coffers, because this metal is still considered a safe bet ...
(13 In 1541, the Gold Coin (2 pounds) of Francis I in weighed more than 1.46 grams.
In 1602, the golden crown of Henry IV (under 3 pounds 5) weighed 0.99 grams.
In 1640, the Louis Louis XIII (10 pounds) weighed 0.62 grams.
In 1700, that of Louis XIV, 0.44 grams.
In 1726, that of Louis XV (24 pounds), 0.31 grams.
(14) Law of 18 Germinal (April 7, 1795)
(15) Law of 28 Thermidor (August 15)
(16) The 25 / franc reduced to 0.059 grams of fine gold 6/1928, or 20.3% of the franc germinal
1/10/1936 0.044 g 15.2%
21/7/1937 13.5% 0.039 g
11/12/1938 0.025 g 8.6%
8/11/1942 0.021 g 7.2%
26/12/1945 0.0075 g 2.6%
20/9/1949 0.0025 g 0.86%
24/7/1958 0.0021 g 0.72%
12/27/1958 0.0018 g 0.06%
1/1/1960 g 0.001 0.000018%
11/8/1969 g 0.000016 0.000
(17) John Kenneth Galbraith Money, whence it cam, Where It Went.
(18) (659 bankruptcies in 1929, 1,352 in 1930 and to 2,294 in 1931)
The choice of gold as a standard was not the panacea for many reasons. The reference to a metal, whatever its physical qualities, is completely arbitrary and that this choice does not ensure the stability of the currency is not its biggest flaw. It indeed gives undue power to producers of the metal, simply because the money available depends on them. Thus the European economy in the sixteenth century was dominated by importing silver from the mines of South America newly conquered, while the metal was, in fact, far from being a matter first vital to the economy of Europe. Similarly we know the bitterness of the gold rush in the Klondike and power exercised by the owners of the gold mines of South Africa. Not only the economic role of the metal chosen does not match reality, but there is also no objective reason that makes the change in the mass of metal mined is one that suits the financial needs of the economy.
In fact, it is the abandonment of any reference to the currency in the reality that is far-reaching. If it is not secured on a measurable physical quantity, and if the state does not guarantee them, it is so easy to arbitrarily increase the weight that you can not know what one receives when we accept this money in payment.
The vagaries of legal tender
About the origin of banknotes, we saw that their use was first poured freely, then a group of bankers acquired the privilege of only the issue pretext thus limit their uncontrolled proliferation.
Several confidence crises occurring, sometimes turned into panic, he had to find "instruments" to avoid a catastrophe that will cost the public's faith in the banking system. Which? "The precursor of all the instruments of reform was the Bank of England. No economic institution has never enjoyed as long as a prestige ... and it's a well-deserved reputation as the art of managing money, as well as almost all of the mystery in which he exudes, was born there . "writes JKGalbraith (19), explaining how the Bank of England, from 1720 to 1780, was affirmed in the role of guardian of the money supply and manager of the financial problems of the government. She began by removing her London tickets competitors. Its own notes were then easily converted into metallic money, so ... no one asked the conversion! Tickets from its competitors is far smaller inspire the same confidence, the Bank of England became virtually the only source of paper money, the others being only commercial banks, which were willing to loan these deposits. Then later when Britain had to conduct two wars, against its American colonies and against Napoleon, and he took it for the money, the Bank of England suspended the convertibility of its notes in coinage : the tickets were then forced currency.
In 1844, after several adventures, the Prime Minister, Sir Robert Peel (1788-1850,) fixed by the Bank Charter Act the total amount of emissions allowed tickets (14 million pounds at the time), this amount being guaranteed by state good. In addition, the Notes will be guaranteed only in proportion metal crate. The Bank of England was no longer able to fulfill one of the functions that would have averted a catastrophe provide funds if all account holders came to collect their due from banks. The application of the law was nevertheless suspended whenever she would be too embarrassed the Central Bank ...
Similarly, in France, the government had to intervene whenever a crisis of confidence threatened. Until 1848, the notes were not legal tender, that is to say that no one was forced to accept them as payment, but they were convertible. At the time of the 1848 revolution, and the legal tender fiat were reported and then alternately removed and restored, and finally recovered since 1939.
This is the example of the Bank of England which was followed by other countries to define the roles of central banks such as the Bank of France or group of banks constituting the Federal Reserve (abbreviated to the "Fed" ), established in the United States by the Federal Reserve Act of December 13, 1913.
The Bank of France has never been required to maintain a ratio of the amount of its gold reserves and the amount of its notes in circulation. It expected commercial paper and consented lombard. The amount of notes issued depended, in principle, the needs of trade, but this program was limited in 1870 to a maximum set by law. But when the ceiling threatened to be punctured ... a new law would raise him!
Everything changed in France with the outbreak of the First World War. From August 5, 1914 the "carriers" of tickets rushed the counters of their banks for the issuance of their due. And there were obviously too many tickets for the commitment to repay, there was yet registered, to be honored! So the government decided that the Bank of France was released from his promise: he decreed the moratorium and forced air, which, since they had no intrinsic value, represented now nothing.
A very partial convertibility was restored from 1928 to 1936, but since then the notes of the Bank of France had legal tender fiat, until they give way to the tickets of the European Central Bank.
(19) Money, whence it cam, Where It Went be found throughout the epic of the creation of central banks and the definition of their duties.
Yves Herbo 02-10--2014 (more)
Foray into an area reserved too: money - Part 1
On 29/09/2014
Foray into an area reserved too: money - Part 1
I come back on a very good study by ATTAC independent group that not only returns to the basic historical that led us to the current economic situation of the entire planet, but was widely anticipated and explained the risks that have occurred since the book which dates from 2004 ... the group continues its observations and interventions, and I am personally quite agree with their conclusions, and history:
Foray into an area reserved too: money
Foreword
The main themes of ATTAC, whether the tax on transactions between currencies, tax havens and financial crime, the abolition of Third World debt and the role of international financial institutions (IMF, WTO, World Bank) , retirement and pension funds, privatization of the public and the patenting of life services, all revolve around money. Yet this central theme is not directly addressed.
Why the citizen who refuses to undergo the dictatorship of the markets it not call into question the tool of the dictatorship? Leave this area and experts, that is, to a reserved area beyond any citizen control.
Although the complexity of monetary issues is daunting and discouraging, we wanted to address them in an attempt to bridge the gap between those who know and can take advantage of those who do not know, and suffer the consequences.
*
We left with a very familiar idea of money: it is what allows to trade with those around us, so this is a social link. And we were ready to believe that the currency is only the intermediary between people, ie it is politically neutral.
We knew that his form had changed the course of history, but we were convinced that this development had followed naturally that technical, so she had no other effect on the relationships between people that facilitate their exchanges ... Some of us were even convinced without really having asked the question, that the currency of a country was naturally created by his government's decision !!!
We understand first that "money", we always talk about, is no longer valid. We discovered, but with astonishment, that the creation of legal tender notes, essentially private interest. Then we learned, among other things, it is not guaranteed by any real wealth, which has opened the market, lucrative, risk. And that parallel currencies, such as LETS, were no more than illegal tickets and restaurant vouchers and other loyalty cards that retail chains offer their customers for advertising.
*
Brought to reconsider conventional views, we asked a lot of questions. The discussion leads us to some conclusions and proposals:
First, that in a democracy, it is the political debate that should return the key decisions on the currency of the country, namely: its creation, its total mass and the roles assigned to it.
Then, as a country's money supply should represent the wealth it produces for the offer for sale.
And finally, we cease to confuse being and having mixing in a single accounting, materials with human resources. These, by their nature, are not measurable.
*
Which brings us to defend a transformation of money, that we sketch to finish. With this new transformation, the economy would be the management of physical assets.
And income received by an individual would not be the price at which he manages to sell itself, it would be based on his personal and intended to give him the means to develop according to their tastes, aspirations and skills needs.
But to achieve this, we must first a majority of people are aware of these issues the currency.
Thank you to Jean-Pierre, Gerty, Gilbert, Guy, John and Annie for spent together since June 2000 in an attempt to clear brush this area long evenings.
summary
Unlike any standard textbook economics that addresses the chapter on money by claiming that it has three functions (unit of account or standard of value, medium of exchange and a store of value), we preferred to understand the meaning and especially the scope of these claims, first to know, in the first part, with the three possible forms of money: commodity money, banknotes and bank money.
In the first chapter, so we look for each of these three forms, what is its nature, what is its mode of creation and what guarantee it presents; and in the second chapter, we recall how has changed the course of history the use of these three forms of money to the most recent transformations of liberalization and deregulation.
The third chapter asks us to consider the basis on which all economic exchange and is based on the concept of value, before presenting the three classic functions attributed to the currency for comparison with current reality.
In the fourth chapter are briefly recalled big monetary theories, those schools of classical and neoclassical thought, Keynes and Marx.
This package allows to consider the relationship between money and society are addressed in Part II.
In the fifth chapter are discussed the consequences, both nationally and internationally, since money is a debt that involves a national community:
- Operational risk associated with this form of currency, effect-ball snow-interest loan and Third World debt. The bank interest related to money creation is legitimate? Who wins and who loses in the fight against monetary inflation, which was given as the sole objective of the Central Bank European?
The sixth chapter examines the parallel currencies, whether the form, most widely spread, vouchers or cards issued by large retail chains to retain their customers, or the local currency intended to offset disadvantages of the official currency for the population.
Finally, the third section attempts to answer the question: what other transformation of the currency could eliminate the adverse effects on society transformations that led to the current currency? What could be the modalities and what openings it would offer?
part one
"The alchemists of the Middle Ages tried to make gold with some base metal, modern alchemists, we aptise bankers have discovered a way to make money avecun little ink." Jacques Duboin (eyes open).
I
Grain or sorrel, like a promise
There is no definition of money on which economists have agreed. While economic textbooks usually start by saying that money has three functions as if it were a definition. We prefer to begin by recalling the origin and method of creation of the three forms of money which the first, commodity money was casting for millennia, and the third bank money is, by far, the largest since less than a century.
The three forms of currency in circulation.
The parts, which are the first form of our currency, are the memory of commodity money primitive. The latter, appeared some 5,000 years BC, was a commodity, such as grain or cattle (1), to be used or exchanged later against another commodity.
The choice of this intermediate goods evolved then to the metal (copper, silver and gold) preferred over others for its qualities: unalterable, stainless and handy. The first metal parts would be the electrum staters (natural alloy of gold and silver) appeared in Lydia around 680 BC: a stranger had had the idea to melt the ingots into small plates of the same weight and the same way to avoid having to weigh every transfer since now enough to count.
But in the species is said "ringing and cents" divisional of our present currency, there is more noble metal.
(1) herd hoi said in Latin from which comes the word pecuniary.
*
Although we can trace its origin to the Sumerian civilization, the greenback, the second form of our currency, has unsafe roads in the Middle Ages, leading to fears of being robbed merchants and ruined if they carried their gold coins. In the seventeenth century English travelers became accustomed to entrust to the goldsmiths of the City of London, against a receipt assuring can get them when they pleased, upon payment of a custody justified. Then these receipts, the goldsmith notes or bank-notes were used as a method of payment and the public became accustomed to accept as money because they were easier to manipulate than the parts and that the one who had received guaranteed to be able at any time re-exchanged against gold deposited.
The goldsmiths were quick to realize that we never called them all the money they had on deposit, but only a very small part. They concluded that they could without much danger, to risk much sign receipts they had gold in their vaults and they used such receipts "short" for their own shop ... Former bankers from Italy and Amsterdam, which were issuing, too, the deposit receipts when they are deposited cash, proceeded as goldsmiths of the City of London. Hence the spontaneous generation of banknotes, received multiple copies of a single deposit. The value of the transaction is significant for the person who utters: indeed, when the currency ceases to be good, is just a piece of paper, make change provides against the value of the banknotes flowing in the market. This was all included counterfeiters long time!
But if anyone could open a bank, the risk was great, especially in times of trouble, the audience would claim the gold in exchange for all the notes and noticing too many and their alleged convertibility was a decoy ... to eliminate this risk, a group of bankers undertook to obtain the exclusive right to engage in this. But to exclude others, it was the intervention of the state. Seizing the opportunity of a need for money of their sovereign, a group of English bankers in exchange for an advance, obtained from William III that gives them the sovereign right to print money (the other being the sovereign rights right to raise an army, to administer justice, to make war or sign a peace treaty). It was an amazing privilege as it is the creation of the national currency! But so was born the Bank of England in 1694 (2). And a similar scenario, which had already been practiced in Sweden occurred in most other countries around the same time. The Bank of France, for example, was born thanks to two coups:
In 1799, the Revolution is nearing its end, two Parisian bankers, one answering the remarkable name of John Bartholomew The Coulteux Canteleu and the other to that of Jean-Baptiste Perregaux, sent to Bonaparte, then in Egypt a messenger for the offer him money, according to historian Dauphin-Meunier (3) plotting a coup. A few days later the Directory was overthrown "to save the Republic" and two weeks later, the two bankers put 12 million francs available to the new government. Bonaparte will thank: not only did he appoint senators, but shortly after his coup of 18 Brumaire, February 13, 1800, he accepted the articles they gave him a new bank, although qu'appelée Private Bank France with a capital of 30 million, of which they became directors with Bonaparte and his brothers and two other "conspirators" Cambacérès and Lebrun. The purpose of the bank was to discount commercial paper, but it had competitors, the main one being the Caisse discount and trade, that Bonaparte first tried to discredit. Unsuccessful, he even sent troops to seize the accounts and hunt staff. And as the bank still refused to surrender, the Consul Bonaparte, by the law of 14 April 1803 (4) gave the bank an organic constitution and he conceded the monopoly of issuing notes for fifteen years in Paris and major cities where it would branch. Then, as, in his view, its bankers were trying to take too much independence, Napoleon rewrote the constitution gave him "basic statutes," which remained in force until "in 1936, in which it was headed by a government kind of constitutional monarchy: shareholders always elected the regents and the censors, but management was under the tutelage of a governor and two deputy governors appointed by the emperor also his privilege was extended for 25 years and its capital. increased to 90 million. This privilege it was then renewed, and after the revolution of 1848, became the exclusive nationwide.
It is then for providing Napoleon III 12 million he needed to ratify his coup of December 2, 1851 that the bank still called "France", gained independence.
*
The third form, bank money, was born with the first banks: the time of the Greeks and Romans, transfers between current accounts of merchants were already made by bankers.
In the fourteenth century invented the bill of exchange, or processes for remote payments: the banker remuneration, stands between the merchants to centralize bills, evaluate and perform clearing and exchange between different currencies.
In the eighteenth century became the discount: banking, buying a bill to his client because of credit.
It was not until the twentieth century that bank money is released to the general public, who do not often aware however, that John Kenneth Galbraith commented: "The process by which banks create the money is so simple that the mind is still confused. "(5)
This currency is indeed a set of writing in the accounts of institutions that create it, and it is transferred from one account to another by means of an order, which can be written (a check) or computer (a credit card). Specifically the process of creating bank money is the simultaneous increase in assets and liabilities held by a financial institution account.
(2) two years after its foundation, it has issued 1,750,000 pounds in tickets when she was in reserve than 36,000 pounds of gold.
(3) Read "The bankers Bonaparte" by JM Vaslin in The World Economy November 5, 2002.
(4) Law of 24 Germinal Year XI.
(5) John Kenneth Galbraith "Money, whence it cam, Where It Went," in French "Money" translation.
It's so easy you might think that the issue of this form of currency is restricted to government, which would use it to adapt national money supply needs of the entire population ... Well, and also amazing as it seems, not only this facility is not reserved them, but it's not even a matter for governments!
It is the privilege of some banks and other credit organizations defined as follows:
" Every credit institution that received monetary authorities a" license "to be made available to customers or managing means of payment and conducting financial transactions with non-financial agents (ie the businesses, individuals or administrations) can create bank money. "
In France, the privilege of "managed transferable deposits" was in 1999 to 70.9% reserved for commercial banks to 9.4% in the Giro, 6.2% for savings banks (since 1978), 11.6% to the Treasury and 1.9% other (including the Bank of France). But on December 31, 2001, this privilege has been removed to the exchequer!
Our currency in its entry form is created by financial institutions that are predominantly private interest groups.
Dual enrollment, or "provision" of a bank account can occur:
by depositing cash (notes and coins) or by transfer from another account, or finally through a loan from the bank.
In the latter case, the credit results in a dual enrollment, just as if there had been real deposit, sometimes writes as follows: ". Loans make deposits"
This third method of funding generated by a virtual repository such as a draft, it is a promise, so generates ex nihilo bank money: it is subject to the same payment instruments (check books or credit cards (6)) that in both processes related to a non-fiction submission, so it causes the increase in the money supply in circulation when the flow of these new loans are higher than the flow of repayments of earlier loans.
The so appropriated by a commercial bank account several times the amounts that have been filed ... and thanks to the miracle of a process that we call back after thinking about the security relating to each of the three forms of currency.
Warranty? - Fewer insured
When they were gold or silver coins had intrinsic value, than the metal they contained. This value was guaranteed: manufactured under the control of a sovereign, his image therein, which showed that he was the guarantor of its weight and its "good quality". The problem with this form of currency has long been the variety of parts, that after dismemberment of the empire of Charlemagne, every lord wanted its currency valid in its stronghold. For centuries, kings failed to regain the right to establish the unit of currency in the kingdom, despite the name of Frank John II, called the Good, in 1360 gave this money which was used to pay the ransom that freed of the English, who had taken prisoner. It was not until the Convention (April 1795) for the monetary unit to be established, along with the weights and measures.
But today's metal parts, without precious metal, no longer have any intrinsic value and bank notes are not convertible against gold they are supposed to certify the filing.
And yet, and as incredible as it may seem when you discover that fact, these are the only two forms of currency that is legal tender! They are also designated by fiat money, from the Latin fiducia, trust. Why? Because only in the form of currency notes and coins has "unlimited legal tender", which means that its validity as a means of payment is guaranteed, and it is because it is created under control Central bank: it circulates metal parts that are made on the order of the Administration of Money and Medals, and it kept the monopoly acquired as was recalled, manufacturing tickets. This control appears as a kind of survival of the sovereign right to coin money and this is what remains of a sovereign right which gives the Central Bank the name of issuing institution.
This is probably the term that has become widely used the idea (or feeling) that all money is created by order of a state institution. But this is an illusion. Actually legal tender or "fiduciary" is only pocket money! It does not constitute an insignificant portion, less than 15% of the money in circulation. Because the amount of coins is so low that they are used only for small purchases. And for slightly higher amounts of payments and honest, even for everyday purchases, it checks and credit cards for tickets ... therefore mainly used for laundering dirty money because their preferred anonymity increasingly allows them to carry discreetly. Without this perverse use, the total amount of notes would be much less.
(6) which are often called "credit card" as they are cards for payment from an account.
*
Most of the money is bank money (note: the accounting and computer lines). But it has, by nature, no intrinsic value and, in addition, unlike paper money, it has generally no legal guarantee. Confidence that each attaches him is only that the customer against the commercial bank that holds the account. As this money is only a game of writing in registers or memory of the computer of the bank, it goes into effect if the bank fails. When a bank customer, you deposit cash or a check to replace the window, the corresponding amount is recorded as an asset of the bank: she is now the owner. The same amount is also included in its liability as it is understood that you must. It is now in your debt, you are his creditor. And if it is a day declared bankrupt, that is to say, if it's put into unable to pay what it owes, you're just one of his many creditors, some of which are often declared "priority" ...
The risk of the currency entry form comes from its mode of creation. Only that it is possible to register how much does anyone on an account, there is no natural limit to the money supply in this form. We will see later that this facility has obviously led to abuse, rules and controls were successively introduced, changed, deleted, etc. Previously, trying to understand the mechanisms by which commercial banks, as opposed to a false but often ingrained in the minds idea, are far from being content to live to lend to some of their customers what others have submitted them. They have indeed acquired the power, especially large deposits in their care are higher, to create money from nothing, "ex nihilo." And not only do they have the power to give what is not theirs, but in addition, they have one to lend it several times, because they take advantage of what is euphemistically called "the multiplier effect of credit."
Let's get a little into detail to explain this mechanism, as it seems critical to the entire economy (Part 2). Previously, three quotes show that we are not alone in this opinion.
First that of Thomas Jefferson, third President of the United States: "I believe that banking institutions are more dangerous to our liberties than standing army. Whoever controls the money of the nation controls the nation. "Then the thought of the famous American industrialist Henry Ford:" If the people of this nation understood our banking and monetary system, I believe there would be a revolution before tomorrow morning. "Finally Maurice Allais, "Nobel" in economics, described the process as follows: "In essence, the creation of present money ex nihilo by the banking system is the same [...] to the creation of money by counterfeiters [...]. Specifically it leads to the same results. The only difference is that those who benefit are different "(7)!
(7) "The global crisis today," ed. Cl JOUGLAR.
Sources: http://www.france.attac.org/
To pause after this first important part but already complicated for less accustomed to the economy (mixed with history), here's a video of Mini-Show that attempts to explain the process of money creation in 2010 .. . Will we get out of the downward spiral ...?:
Little Reminder: in autumn 2008, three scenarios were given for "out of the crisis" ...:
Scenario A: The central bank refinances commercial banks massively ...
We have seen, the current problem is a liquidity problem (missing commercial banks money "central bank"). Some may say, easy! Since it is not gold, central banks can simply start printing money, refinance commercial banks and everything will be fine (if the customers of these banks are looking for tickets mass, they can provide, do not panic).
Moreover, from a political perspective, it is interesting to note that such a decision could only be taken by an unelected person (Mr. Trichet, governor of the ECB in Europe and Ben Bernanke, chairman of the Fed in the USA (note: at the time!)). Note that they made gestures, including lowering interest rates! This is all well and good, but would have the disadvantage of losing confidence in the currency itself! (whereas today it is in the banks that trust is lost). Indeed, how could anyone believe that money is "store of value" (one of the properties required of money) if we issue all you want, unrelated to the economic wealth of the country? In fact, this scenario A is highly inflationary, and if practiced on a large scale, there would be risks that we were in the same situation as Zimbabwe (inflation of 100,000% per year). The currency would then no longer say anything, and would probably be replaced by other forms of exchange!
Scenario B: States buying up banks ...
If banks are not refinanced by the central bank, one solution could be that used previously: states themselves buying up banks (nationalizing) and ensure their credit ratings Thus, banks may give away tickets to depositors who pick up their deposits because their new owner (the state) gave them cash. From a political standpoint, it's a problem "ethics": it is the taxpayers who will pay off the bankruptcy of the banks! But mostly this scenario B is not credible because the states are already hyper themselves in debt. For example, the French debt reached 1.25 trillion euros in the first quarter of 2008, or 63% of GDP! In the United States, the situation is no better: the federal debt reached 10,000 billion!
In other words, you ask a blind cataract reached driving blind! The risk that states themselves may one day not repay their debts and be themselves insolvent with all the consequences that implies: civil servants, pensioners, unpaid, treasury bills dishonored etc!
Scenario C: Nothing is done: Situation credit crunch
Another scenario could be that when governments do nothing. We find ourselves in this case in the same situation as that of 1929, known as the credit crunch and described by Irving Fisher: leaving do, bank failures are increasing, and the number of depositors cheated! The consequence is that a good portion of them are insolvent, no money, and there is a domino effect. In fact, in this situation everyone is looking for liquidity and it is willing to sell his property: there is thus on all markets numerous sellers and very few buyers: prices in all areas collapse (it is otherwise than in scenario A), nobody wants to buy, companies are unable to sell their produce ... - October 10, 2008 by €ric
April 2012: it will be noticed immediately that no real solution has been found for the scenarios of 2008, if not always a rather bewildering choice and contrary to the interests of citizens, ie Scenario B without even really guarantee the possibility of a refund any future: protecting the privacy and to saddle the past, present and future citizens with all possible assistance devices States intiaux diverted from their goals, and not renationalising the most obvious debts ... but largely avoiding any control or take a share of the writing system ...
Yves Herbo 29-09-2014 - ditto to date: all is confirmed ... to be continued ...
New website for your organization MPSA
On 25/09/2014
This new movement in full organization has a new website: MPSA. This site allows you to follow or discover the movement and stay in touch with us. It will also allow members to be informed of upcoming events, general meetings and news of the movement!
This site is currently under construction, but we are actively working for your organization acquires a complete and useful for the future political party web site, because it is indeed that!
We hope you enjoy your visit to our website!
Yves Herbo, founder, theorist