英国金融学assignment

最后这一部分将包括一些建议。到目前为止,我们看到的有哪些?钱是一种非物质的东西,它可以被创建。金钱创造纯粹是政治的问题。在主要发达国家,各国承包着巨额债务。

 

无论何时,当私人银行认为创造金钱对他们有利时,他们就有能力随意的制造金钱。他们对经济稳定有一定的责任,但是却没有正式地承担这一责任。金融世界是建立在一个债务金字塔上的,使经济主体能相互依存的。这个金融体系,以无政府状态的方式进行开发,导致几个州已经无能为力的危机。

 

这就给我们带来了反思金融体系的必要性,以此来防止未来的危机。

 

Murray Rothbard,是Ludwig von Mises的一个学生,也是奥地利经济学学派的一名成员,在米尔顿•弗里德曼(Milton Friedman)于1971年解体时和米尔顿·弗里德曼一起批评部分准备金制度。他批评通过部分准备金银行制度来创造货币的过程,造成了通胀效应并将货币创造视作“魔法”。

 

反思金融体系来领唱未来的危机-Rethinking financial system to precent future crisis

 

This final part will include some recommendations. What have we seen so far? Money is something immaterial and can be created at will. The question of money creation is purely political. In major developed countries, the States have then contracting enormous debts.

 

Private banks have the power to create the money at will, whenever they judge it good for them. They are somehow responsible for economic stability, without officially bearing this responsibility. The financial world is built over a pyramid of debts, making economic agents inter-dependants. This financial system, which has developed in an anarchic manner, has lead to several crises against which States have been powerless.

 

This brings us to the necessity of rethinking the financial system in order to prevent future crises.

 

改变的需要-The need for a change

 

Murray Rothbard, a student of Ludwig von Mises and also a member of the Austrian school of economics has criticized the fractional reserve system, with a particular Milton Friedman, as Milton Friedman Unraveled in 1971. He criticized the process of money creation by the fractional reserve system for its inflationary effects and treats money creation and made "magic".

 

More recently, Maurice Allais saw in 1999, in The Global crisis today as "inappropriate" the current structure of money supply. He believes the current system is unstable and risky, liabilities and claims are not necessarily the same horizon and the risk of massive liquidity withdrawals by savers is always possible. Thus, according to Allais, "The entire global economy today is based on gigantic pyramids of debt, building upon each other in a delicate balance." He calls for a system where money creation is not the rule, in a framework of fixed exchange rate regime.

 

James Robertson and others want to bring the anti-globalization process of money creation under state control and feel that the current system is not aligned "on principles of economic justice and the realities of the era of information, so much so that confidence in democracy itself is seriously undermined He added: "The fact that these commercial banks always create these funds denominated official foreign exchange and money creation that generates profits Returning to the private sector is a glaring anachronism." It also recommends that central banks are only money-creating and the money created is allocated to public spending. The second-tier banks no longer have the ability to create money by borrowing, all in a system controlled by a world central bank, which "should be accountable to member governments.

 

在紧张情况下的世界-The world in a tight situation

 

In major developed countries, the States have gave up the control of the money to the private sphere. This had for effect to force them to borrow money from the private banks, paying them interest, which lead States contracting huge debts. The paying back of the public debts is still a question. This led the States to be deeply in debt, which make it hard for them to borrow money when it is necessary. For example to avoid banks going bankrupt.

 

Maintained by the United States since 1984, an average deficit annual of their balance of payments of more than 100 billion dollars is totally unacceptable. How do I recognize that the most powerful country in the world has such need for the rest of the world? How long can the USA keep on increasing its public debt? This has to change.

 

In the mean time, the financial world has been deregulated over the decades. Private banks and investors has been let free to create complex financial products, speculate on inflation, trade in hedge funds and so on. The anarchy in which the world has grown led it to happen fragile, unsure, and unstable. Economic agents are interdependent and the fall of one takes many down with it. And there’s few the State can do about it because, as said earlier

 

States are in deep debts and their borrowing capacity is weak

 

Private banks are the only one controlling the money creation

 

Private banks are therefore responsible of economic stability, without officially bearing the burden

 

Those three facts make today’s world instable. There is a need for a change. When the crisis struck, everyone admitted it. Banks, newspapers, States, public opinion, economists… Despite their weak action power, all over the world, States saved the banks when the system was in danger. If they hadn’t do so, the whole system may have collapsed, on a worldwide basis. No one wants it to happen. this would be a major disaster. Therefore, there is an urgent need for deeply reforming the financial system, to strengthen it. Otherwise, the next crisis may be the last.

 

主要因素-Major factors

 

Again, if we consider the history of recent decades, but also that the last two centuries, and probably that of those who preceded them, monetary and financial factors certainly appear as having a quite exceptional importance in the operation and stability of any economy. If appropriate monetary and financial conditions are not performed according to the actual economic growth, experience has shown that there could be dangers of the economy, or fairness of distribution of the income. Economic instability, underproduction, inequity, underemployment, distress and poverty as a result, are major evils.

 

However, deep disorders that are found can in no way be considered to be the result of the operation of a market economy; they were, and they are usually, the consequences of the financial policies and monetary implementations in a institutional framework that is simply inappropriate.

 

More than ever, very profound and radical, reforms are needed. The needed reforms:

 

-         reform of credit;

 

-         stabilisation of the real value of the unit of account;

 

-         reform of market;

 

-         reform of the international monetary system.

 

向着一个新的经济秩序-Toward a new economic order

 

We are now going to set up the bases of what should be the new system. We are going to look at the weaknesses of the current system, and try to make it safer, stronger, more reliable, and more ready to face crises. A system that would eliminate, or at least reduce, the amplitude of the expansion / crisis periods the economy has been growing around.

 

信贷系统-The credit system

 

“It is a palpable falsehood to say we can have specie for our paper whenever demanded. Instead, then, of yielding to the cries of scarcity of medium set up by speculators, projectors and commercial gamblers, no endeavors should be spared to begin the work of reducing it by such gradual means as may give time to private fortunes to preserve their poise, and settle down with the subsiding medium; and that, for this purpose, the States should be urged to concede to the General Government, with a saving of chartered rights, the exclusive power of establishing banks of discount for paper.”

 

Thomas Jefferson, 1743 – 1826, The Writings of Thomas Jefferson, Memorial Edition.

 

Thomas Jefferson is here saying that the state and the State alone should be responsible for creating the money. He approves the idea that private banks cannot be left responsible for economic stability since it is not their goal.

 

With an experience of at least two centuries, all kinds of disorders and the estate expansion and recession periods observed constantly, must be considered as two major factors that have amplified them significantly are creating money and purchasing by ex nihilo credit mechanism and financing of long-term funds borrowed short-term investments. However, it could easily be fixed to these two factors by overall reform which would otherwise terminate cyclical fluctuations, at least to considerably reduce the scale.#p#分页标题#e#

 

In fact, as we saw in the first part, the current system of credit, including historical origin was entirely contingent, and seems totally irrational, and this for five reasons:

 

creating irresponsible money and buying power by private banks;

 

financing long-term funds borrowed short-term investments;

 

high sensitivity of the cyclical credit mechanism;

 

financial instability it creates;

 

and finally the impossibility of any effective system by the public credit control and Parliament, due to its extraordinary complexity.

 

 This reform must be based on two very basic principles:

 

Monetary creation should be the State and the State only. Any other than the currency basis by the Central Bank monetary creation must be made impossible, so that disappear "false rights" currently resulting from the private banking currency creating.

 

Any financing of a given asset must be done according the borrower capacity to pay back the loan at the time of the loan, not speculating on long term predictions.

 

The mechanism of credit reform should thus make impossible both currency ex nihilo creation and borrowing short-term to fund long term loans , by not only allowing loans to haul more than borrowed funds deadlines. As we saw previously, enables banks to finance investments in the long term on the basis of loans of depositors in the short term, resulting in permanent and potential system instability

 

Creation of Scriptural currency depends on a dual commitment, willingness to banks to lend, and the willingness of economic agents to borrow. In times of prosperity, this dual desire exists and the Scriptural currency increases. In times of recession, this dual desire disappears, and the Scriptural currency decreases. Indeed, without the creation of money and you can purchase scratch allows the credit system, never extraordinary increases in stock market courses there before major crises are possible. Thomas Jefferson wrote:

 

 “Bank paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs. It is the only fund on which they can rely for loans; it is the only resource which can never fail them, and it is an abundant one for every necessary purpose. Treasury bills, bottomed on taxes, bearing or not bearing interest, as may be found necessary, thrown into circulation will take the place of so much gold and silver, which last, when crowded, will find an efflux into other countries, and thus keep the quantum of medium at its salutary level. Let banks continue if they please, but let them discount for cash alone or for treasury notes.”

 

Thomas Jefferson, 1743 – 1826, The Writings of Thomas Jefferson, Memorial Edition.

 

Thomas Jefferson, as I develop in this thesis, doesn’t want to suppress the banks. They are in fact a need for economic expansion, supplying financings, loans, and means of payments. They enhance the economic growth. But the monetary creation must be controlled by a central bank, and according to the actual economic growth.

 

This double condition implies a profound change of banking and financial structures based on total banking activities dissociation as they find today and their allocation to three categories of separate and independent institutions:

 

deposit banks ensuring only, for any operation of loan, cash receipts and payments, custody deposits of their customers, the costs invoiced to it, and cannot contain any discovered; customer accounts. The bank’s fees would be source of the income the Bank would get.

 

lending banks that would offer loans and mortgages at specific terms, and lending funds that they had to borrow on a longer terms, the total loan amount not exceeding the total borrowed funds;

 

business banks that would find their funding borrowing directly from the private sphere or the lending banks, and investing the funds borrowed in the economy.

 

In principle, such a reform would make impossible monetary creation and ex nihilo by banking and borrowing short-term purchasing power to finance more long term loans. It would only shorter than those corresponding to the borrowed funds maturity loans. Lending banks and merchant banks use intermediaries between savers and borrowers. They would be subject to a mandatory requirement: borrow long-term to lend in the shorter term, contrary to what happens today.

 

In the current system, the three banks are one in most of the cases. This drives them dependant from one another. The money you save is used by the business section of the bank to invest. It also covers (on a fractional basis) the loans the bank grants. If one of them encounters difficulties, it can drag the other down. If the stock market in which the savers’ money is invested goes down, the bank can go bankrupt and the person who just deposited his money loses it.

 

In the new order, those three activities would be separated. This strongly reduces the risk of systemic crisis. If the stock market goes down, it doesn’t mean that people’s savings are going to be in danger in case of the business bank goes bankrupt.

 

独立的中央银行-An independent Central Bank

 

As we began to see in the previous section, a Central Bank must be able to create the necessary financing public investment currency. This would allow it to be able to finance the State at zero interest rate. But here, we take a further step. This central Bank must furthermore be their only Institute authorized to create money. She would create the money necessary to finance economic rates limited to inflation, which commercial banks would be able to borrow, and then lend to individuals and businesses at a higher rate. Lending banks and merchant banks use therefore intermediaries between savers and borrowers. They would be subject to a mandatory requirement: borrow long-term to lend in the shorter term, contrary to what happens today.

 

A solution called universal social credit or dividend recommended by some liberals and Democrats historically due to Clifford Hugh Douglas is that any creation of free currency debt (increasing the money supply center) be distributed to all citizens in a perfectly fair and that the money created by loans (temporary currency) is mechanically limited to twice the mass of the central monetary (currency permanent).

 

Kydland and Prescott are Nobel Prize in economics. Their work was used as referent for several central banks and monetary policies reforms around the world. They established the concept of time inconsistency (1977), whereby economic, rational, agents do will trust to the central banks unless they are assured that they will respect their present commitments in the future. In their work, two ways have been clear to avoid "time inconsistency":

 

1.       Give the Central Bank independence compared with Governments

 

2       Impose them rules so that they comply with their commitments

 

Based on this theory, his bank would, and for the same reasons, independent from the political powers. Independent from the politics in order not to influence its action from the politics’ electoral agenda. This Central Bank would be given the power to accept or not the loans requested by the banks. This Central Bank would have for only mission, as it the case today for the Fed or the European Central Bank, the money stability. This control would be done by the ECB for the Euro zone, the Fed for the USA. This Central bank would also, as we were discussing in part 2, be able to lend money to the state at a zero interest rate.

 

Those financing would allow States to get back good budgets balances and on a long term to pay back the public debt. States would save a lot of money that people would get back paying less taxes. The only loosing parties would be private investors that would lose the good and risk free return on investment of public obligations.

 

It would give back the states the economic power they lost. It would give them back a capacity of action that used to be strong, but which has been reduced over the time. This power reduced, the state is weak when he needs to regulate the economy. And wherever the State has its control reduced, others forms of power appear, and, when this happens by accident, it rarely for the best.

 

Thus given the free hands, central banks can plan their action over the long term, since they do not undergo pressure from Governments anymore. Governors who are, let’s remind it, subject to electoral cycles. This is very important because this is the main raison that pushed the monetary creation power from the governments to the private sphere. Going back to the previous system would face this problem again, so this would be a very delicate point.

 

Also, as we were talking about the globalization, which we do not contest here, the Central Bank must be independent because there is a contradiction between the national dimension of State power and the global movement of currencies in an economy globalized. Indeed, more and more, there is a decline in the national or territorial reference: currency is used by non-residents and outside of its country of issuance. Thus, the central banks can be cooperating worldwide monetary governance in addition to national authorities, whose goal would be to ensure the proper functioning of the monetary systems of a globalized economy.#p#分页标题#e#

 

In addition to those criteria, such an organization of the banking and financial system would need the simultaneous implementation of very basic conditions:

 

the impossible creation of any money and buying means outside of that currency issuing area

 

the suppression of any potential imbalance arising from financing long-term investments with loans contracted on the short or medium term

 

expansion of global monetary supply, consisting of only the basic currency at the rate desired by monetary authorities

 

reducing at most, if not totally, the magnitude of cyclical fluctuations

 

assigning to the State the gains resulting from the monetary creation, allowing the State to lower taxes and reimburse the public debt

 

an easy control by public opinion and Parliament of the money creation and its implications.

 

Maurice Allais was supporting those ideas about the reform of the monetary and financial system. He said:

 

"These benefits are essential. The profound changes that involves would have to face naturally powerful interests. But in terms of major crises that the current credit system has continued to raise at least two for centuries and continues to raise today, and that the monetary authorities are still unable to master, this reform appears as a prerequisite for the survival of a decentralized economy and effectiveness.”

 

Mr. Allais, the world today's crisis .

 

可靠的价值指数-The realiable value index

 

In addition to the previous reforms and in order to prevent crisis, we need more economic stability, a larger and clearer view of the economic horizon. The market economy operation is based upon a very large number of commitments in the future. The economy efficiency, such as equity, implies that these commitments are respected, that the economic calculations are not biased, and that creditors or debtors will be respecting their engagements. It is therefore appropriate that the implementation of all contracts is not perverted by changes in the purchasing power of the unit of account. In fact, with such variations, only indexing the actual value of all commitments to the future, and especially of all loans and borrowings and all wage contracts of limited duration could provide a functioning both efficient and equitable economy.

 

It would mean a legal obligation to attach to all future loans to medium and long-term government, businesses and individuals a guaranteed purchasing power of principal and interest, this warranty being ensured by indexing in real value of repayments and interest, by reference to the general price index. Such indexing would be to introduce implicitly in the economy, for all transactions in the future, a unit of account stable value, unit whose use is essential for its proper operation, both to ensure its effectiveness and to avoid compromise the fairness of income distribution. It is important to understand the nature of such an indexing system. It does not grip the economy as a system of constraints incompatible and impossible to bear. It is simply to make it more effective to release, to a large extent, any constraints attached to uncertainty of the future and to fully establish the principle of honesty in the execution of contracts. The operation of such a system would tend to prevent any distortion of prices and incomes. It would preserve both the economic efficiency and equity of income distribution.

 

This is why we need the gradual establishment of a common unit of account on the international level, through an appropriate system of indexing. By itself, the indexing reduces uncertainty about the future, and it would thus generate efficiency. Like inflation is bad since it makes future more uncertain, indexation, on the opposite, would incite economic agent to have more trust in the future. In any case, refusing indexing of commitments on the future would higher uncertainty in any economic calculations and the spoliation of the debtors or creditors.

 

股票市场-The stock market

 

Often taken for responsible of the crises, stock markets have become a place with quite no rule but profit. Regulation exist and tend to keep the stock markets efficient, but still, scandals happens, stock prices go up and down very quickly and in insanely high amplitudes. Less and less it is correlated to the actual economy and companies performances.

 

Over the decades, stock markets have become real casinos, where traders play giant poker. It would be of little importance, after all. Some win others lose. But the fluctuations trigger the general courses, as they are, deep waves of optimism and pessimism, which significantly affect the real economy. Those appear unreasonable and damaging to the current institutional framework of markets. The current system is fundamentally uneconomical and detrimental to the economy stability. It can be advantageous for very small minorities.

 

To be actually useful to the economy and the majority, stock markets must be reformed. The main reform would include:

 

the financing of stock market operations by creating means of payment ex nihilo by the banking system must be made impossible. This would help reducing the fluctuation and adjust stock price to their real value, not on expected fluctuations.

 

the continuous quotations must be removed and replaced on each trading by a single listing per day for each value. A single listing day on each site for each value would be much better and it significantly reduces the costs, and would welcome all investors, large and small. More than a market is extended and more courses to stay were significant and fair. Stock prices would be less impacted by intraday traders that don’t actually play the company performance but on the stock’s fluctuation over the day, faking the actual value of the stock.

 

automatic programs purchase and sale must be removed. Such programs that detects markets gaps and bridge it make good money on very small fluctuations, only they play in on very large amount. Espacially investment banks do it. This is a way to make money for banks only. It is a good thing for small minorities. And it is useless to the real economy.

 

finally, the banks should not be allowed to speculate on their own account on the exchange, equities, and derivatives. When doing so, they invest massive quantity of money, which is not their, moreover. It enhances the high fluctuations of stocks and indexes and reduces small investor’s capacity to invest.

 

For those reasons, at least, the credit system, the Central Bank power, the worldwide index, and the stock market have to be reformed. More than ever, the finance world needs to get back under control in order to stop the unreasoned development it has grown around. This is a question of economic stability, but also a question of fairness. Today, private banks make millions of profit while some sectors of the economy lack of credit and markets collapse.

 

Of course, the reforms I advocate would be hard to implement. It would suppose to convince governments, politics and public. Such evolution would take a slow process, but at the end, would benefit the collectivity.

 

绑定参数的精确度-Precisions for binding arguments

 

Before closing this chapter and this thesis, I would like to answer proactively to some objections that would probably be advanced against the implementation of reforms and economic recommendations I advocate here. I tend to say they only find their fundament in the maintain of the status quo, which is not an argument.

 

It may only apply to the future only if we agree to identify the lessons from past. The monetary and financial crisis that has been repeatedly noted in the past have been greatly aggravated, if not caused, by lack of appropriate financial and monetary institutions, allowing operation at both efficient and equitable market economy. In fact, institutions that generate in themselves the seeds of their own destruction must be reformed. Like I said, it is certain that the interests of powerful lobbies and monetary and financial reigning doctrines are not favorable to these reforms. It would question too many sources of banks revenues over the world. And people sit on those revenues are influent.

 

The last fifty years have been dominated by a succession of dogmatic doctrines always backed with the same assurance, but quite contradictory with each other, equally unrealistic, and abandoned one after another under the pressure of events. In the study of history, we had too great a tendency to use unrealistic mathematical models, and analysis superficial circumstances of the moment while forget about what was the current situation. At the end, all measures implemented have always had a single object postponing the necessary adjustments, by granting new loans and the creation of new unreasoned means of payment, resulting in further increases in the overall volume of promises to pay.

 

In fact, almost all the present difficulties are due to a share of a total disregard for monetary and financial conditions of an efficient and fair operation market economy, and secondly an inadequate institutional structure banking and financial markets.#p#分页标题#e#

 

The different reforms that I advocate are independent of each other, and may be applied separately in some countries or in all countries. Each of them would be very beneficial for the overall economy. But if they were applied together, their beneficial effects would be considerably strengthened by each other.

 

These reforms are not reforms beyond any of thousands of others, each just trying to repair damage resulting from the previous ones, by creating new ones. These are fundamental reforms affecting the everyday life of millions of citizens. This makes them harder to implement but way more effective. We are talking of deep reforms that would be to considerate over decades, at least.

 

Moreover, they never have been tried or even thought, nor the Liberals rightly concerned with promoting economic efficiency, nor by the Democrats, just committed to the fairness of the income distribution. It is like if a company would never rethink its producing process since it works most of the time decently. Not even well, just decently, and just because it would take time and work to make needed changes. How long this company would survive in the market?

 

The reason is simple. Both the others have been blinded by the incessant repetition of pseudo truths and wrong forethoughts. In fact, the more dominant ideas have spread, the more they are somehow rooted in the psychology of men. The only result of this situation has been that great misery for millions and millions of people, the weakest being the hardest hit.