I think it was one of Steve’s lectures or speeches that I recall watching recently, where he (?) argued the point that, rather than Govt’s dumping squillions into the banks in the GFC, if they (a) understood economics properly, and (b) really wanted to stimulate the economy, then they should have given the money directly to households.

Makes perfect commonsense to me. As you say, all the FHVB and similar foolishness does is provide a temptation to even greater debt levels, hence, unsustainable.

However, I still maintain my fundamental point. That banking must be turned into a non-profitmaking Community Service. Anything less is ‘hacking at the branches’, not the root.

The reality is, banks effectively ARE the govt. So, whether the response to a crisis is multi-squillion $ direct bank bailouts, or, “stimulus” that props up asset bubbles, who profits most, irrespective of the chosen policies?

The banks.

actually BIR,

one thing i forgot to mention in my discussions with you , is that government deficit spending can exacebate private sector ponzi behavior. so depositing $900 in a bank account , thats fine, but extending the first home owners grant, well thats just pouring fuel onto the fire and ratcheting up our debt problem a notch or two

Thanks, hope you enjoy your holiday, and really look forward to more enlightenment on fundamentals during the walk

– ‘The point here is not that banks don’t tend toward usurious and Ponzi behaviour–obviously they do. But it is a “sufficient” condition, not a “necessary” one.’ –

That remains the evil root I’ve been trying to get at. If mankind allows even a ‘sufficient’ condition for banks / money lenders to engage in such tendencies, millennia of history demonstrates that they will always take it. To society-as-a-whole’s detriment. We must remove the condition (whether necessary or sufficient is irrelevant), or, face the same problems – only in slightly differing forms – over and over again, ad infinitum.

Case in point, from latest Bloomberg news –

JPMorgan Chase & Co., Lehman Brothers Holdings Inc. and UBS AG were among more than a dozen Wall Street firms involved in a conspiracy to pay below-market interest rates to U.S. state and local governments on investments, according to documents filed in a U.S. Justice Department criminal antitrust case.

A government list of previously unidentified “co- conspirators” contains more than two dozen bankers at firms also including Bank of America Corp., Bear Stearns Cos., Societe Generale, two of General Electric Co.’s financial businesses and Salomon Smith Barney, the former unit of Citigroup Inc., according to documents filed in U.S. District Court in Manhattan on March 24.

http://www.bloomberg.com/apps/news?pid=20601010&sid=anl9vTKXKYyk

hi barnabyisright,

bank assetts(loans) earn interest income, bank deposits incurre interest expences. income and expences ultimately effect equity, but it doesnt alter the fact that in balance sheet terms the creation of a bank loan creates an assett and a liability in equal measure.

nett interest margin has an effect on profit and loss, but whats been discussed here is the balance sheet effect.

http://money.ninemsn.com.au/article.aspx?id=1032272

Re MMt – there are examples of economies using MMT , such as Nth Korea. Not sure that it is a good example though.

The first is house prices divided by the CPI–that’s the real house price index. The other one is the house price divided by household disposable income: that’s the “affordability” index if you like. Since incomes have increased in real terms since 1980, the second is lower than the first.

I am confused by some of your figures. Your first figure seems to show a more than doubling in real home prices in AU since 1986 while your third to last figure at http://www.keenwalk.com.au/wp-content/uploads/images/T-Shirt/KeenT-Shirt03RealHousePricesAndFHOG.jpg seems to show less than doubling in real home prices in AU since 1986?

I must be misinterpreting things somehow. Could you (or another reader) help me understand why the implied real home price rises in the figures are different?

Thanks.

more hawaiin shirts entering the country

or will it be a grass skirt.

im expecting to see footage of steve keen taming the banzai pipeline

The point here is not that banks don’t tend toward usurious and Ponzi behaviour–obviously they do. But it is a “sufficient” condition, not a “necessary” one.

We’ll discuss–and demonstrate–this on the walk together anyway.

BTW, bye all, I’m off for 2 weeks vacation in Hawaii, out of Internet range. I may post one more blog entry before departing tomorrow.

Cheers, Steve

PPS. Georgia – Mikhail Sakashvili – US Uni educated Lawyer.