Tuesday, November 9, 2010
Tuesday, February 10, 2009
Reaction to Mr. Geithner's financial stability Plan
It is most appropriate that this blog is being started at the day that Timothy Geithner presented his financial plan to arrest the deepening economic recession. Having watched him and a couple of CCN reporters who were setting the stage I have come to the following conclusion.
Notwithstanding many questions that were unanswered his financial stability plan may work in the short term by building some confidence in the various sectors of society and the financial community. However, the plan does not imply a “fundamentally reshaping” or a financial transformation, let alone a monetary transformation.
A great opportunity is being lost of marrying the economic crisis to the climate crisis. The two crises have to dealt with simultaneously in order for both to be resolved successfully.
Secondly, though he mentioned the meeting of G20 finance ministers at the end of the week in Italy, the Obama Administration basically has gone it alone. Some mention was made of cooperation nationally and internationally.
Thirdly, it is almost pathetic how the Obama Administration and particularly the financial and business communities want to keep the credit creation function in the hands of the bankers who have such mess of it, with the assistance of members of Congress, particularly former Senator Phil Gramm and Senator Chuck Schumer, who have stood on the ramparts to deregulate. Human nature being what it is, Dr. Reddy of India’s Central Bank not only did not deregulate but tightened regulations in the face of deregulation around him. What is needed for long-term stability is having the banking system not engage in fractional banking, i.e. money creation. British government official of many decades of experience, James Robertson, is advising his government to scrap fractional banking, basing his proposal on the fact of two conflicting functions of the present banking system: creating money and competing with other institutions. No wonder, with regulation absent, banks out competed one another by inventing ever more complex and uncontrollable financial instruments!
Notwithstanding many questions that were unanswered his financial stability plan may work in the short term by building some confidence in the various sectors of society and the financial community. However, the plan does not imply a “fundamentally reshaping” or a financial transformation, let alone a monetary transformation.
A great opportunity is being lost of marrying the economic crisis to the climate crisis. The two crises have to dealt with simultaneously in order for both to be resolved successfully.
Secondly, though he mentioned the meeting of G20 finance ministers at the end of the week in Italy, the Obama Administration basically has gone it alone. Some mention was made of cooperation nationally and internationally.
Thirdly, it is almost pathetic how the Obama Administration and particularly the financial and business communities want to keep the credit creation function in the hands of the bankers who have such mess of it, with the assistance of members of Congress, particularly former Senator Phil Gramm and Senator Chuck Schumer, who have stood on the ramparts to deregulate. Human nature being what it is, Dr. Reddy of India’s Central Bank not only did not deregulate but tightened regulations in the face of deregulation around him. What is needed for long-term stability is having the banking system not engage in fractional banking, i.e. money creation. British government official of many decades of experience, James Robertson, is advising his government to scrap fractional banking, basing his proposal on the fact of two conflicting functions of the present banking system: creating money and competing with other institutions. No wonder, with regulation absent, banks out competed one another by inventing ever more complex and uncontrollable financial instruments!
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