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Excerpt from Monetary Policy Takes Center Stage: MMT, QE or Public Banks? Now I think this is interesting, Prof. Mary Mellor says that banks issue loans but not the interest the bank requires back, so new money needs to be always lent into existence so that previous borrowers can earn it to pay back the interest they owe.That sounds alarming to me, but Prof. Steve Keen says the velocity of money will pay the interest as it cycles many times through the banks and then back out again into society as they pay for their services, rates, and wage bills. Phew, I feel happier now, but who is right? UK professor Richard Murphy adds another role for the central bank – as the issuer of new money in the form of “Green Infrastructure Quantitative Easing.” Murphy, who was a member of the original
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Excerpt from Monetary Policy Takes Center Stage: MMT, QE or Public Banks? Now I think this is interesting, Prof. Mary Mellor says that banks issue loans but not the interest the bank requires back, so new money needs to be always lent into existence so that previous borrowers can earn it to pay back the interest they owe.That sounds alarming to me, but Prof. Steve Keen says the velocity of money will pay the interest as it cycles many times through the banks and then back out again into society as they pay for their services, rates, and wage bills. Phew, I feel happier now, but who is right? UK professor Richard Murphy adds another role for the central bank – as the issuer of new money in the form of “Green Infrastructure Quantitative Easing.” Murphy, who was a member of the original
Topics:
Mike Norman considers the following as important:
This could be interesting, too:
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Excerpt from Monetary Policy Takes Center Stage: MMT, QE or Public Banks?
Now I think this is interesting, Prof. Mary Mellor says that banks issue loans but not the interest the bank requires back, so new money needs to be always lent into existence so that previous borrowers can earn it to pay back the interest they owe.
That sounds alarming to me, but Prof. Steve Keen says the velocity of money will pay the interest as it cycles many times through the banks and then back out again into society as they pay for their services, rates, and wage bills. Phew, I feel happier now, but who is right?
UK professor Richard Murphy adds another role for the central bank – as the issuer of new money in the form of “Green Infrastructure Quantitative Easing.” Murphy, who was a member of the original 2008 UK Green New Deal Group, explains:
All QE works by the [central bank] buying debt issued by the government or other bodies using money that it, quite literally, creates out of thin air. … [T]his money creation process is … what happens every time a bank makes a loan. All that is unusual is that we are suggesting that the funds created by the [central bank] using this process be used to buy back debt that is due by the government in one of its many forms, meaning that it is effectively canceled.
The invariable objection to that solution is that it would act as an inflationary force driving up prices, but as argued in my earlier article here, this need not be the case. There is a chronic gap between debt and the money available to repay it that actually needs to be filled with new money every year to avoid a “balance sheet recession.” As UK Prof. Mary Mellor formulates the problem in Debt or Democracy (2016), page 42:
A major contradiction of tying money supply to debt is that the creators of the money always want more money back than they have issued. Debt-based money must be continually repaid with interest. As money is continually being repaid, new debt must be being generated if the money supply is to be maintained.… This builds a growth dynamic into the money supply that would frustrate the aims of those who seek to achieve a more socially and ecologically sustainable economy.