Monday, February 16, 2015

David Graeber — The truth is out: money is just an IOU, and the banks are rolling in it

The Bank of England's dose of honesty throws the theoretical basis for austerity out the window.
David Graeber

13 comments:

Unknown said...

corrected link
The truth is out: money is just an IOU, and the banks are rolling in it

Tom Hickey said...

Link fixed. Thanks.

Ralph Musgrave said...

Graeber claims that the money banks lend to mortgagors “is not, really, the life savings of some thrifty pensioner, but something the bank just whisked into existence through its possession of a magic wand…” Bit misleading, that. Thought I suppose Graeber has to keep it simple seeing as he was writing a newspaper article.

Given constant GDP, if one person is going to borrow and spend an extra $X, somene else has to spend $X less, i.e. save $X. So private banks are very much into intermediating between borrowers and savers (i.e. lending money saved by “thrifty pensioners”).

In contrast, if the economy is operating at below capacity, i.e. if there’s scope for more GDP, then that can come about by private banks lending more, and the additional amounts loaned there are, as Graeber says, produced from thin air.

NeilW said...

"Given constant GDP,"

It's never constant. That's the point.

The banking system and the business cycle it supports is all about expansion and contraction.

Private lending is the source of growth in a neo-liberal system.

Matt Franko said...

This guy is supposed to be an anthropologist?

He doesn't even get it right here there is so much wrong here you dont even know where to start... BUT he still thinks the CB people somehow "knew all along" and have been conspiring to keep it secret? Please. ...

As an "anthropologist" he is blind to one of the largest systemic/institutional cognitive failures in human history. .. which one would think he should be interested in studying...

Matt Franko said...

This is BS:

"that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. "

Oh yeah the OWS people knew all about this! LOL!

Ignacio said...

Matt the fact that no one is really researching this is something worth researching itself.

There should be a big push from social psychologists, sociologists and neuroscientists to research this from a multi-disciplinary point of view but the problem is that the out-of-paradigm cognitions are so extended that the academe and scientists cannot even see how huge this is (because they are part of the same believe-system).

This will be something that will be studied by philosophers of science and sociologists in a couple centuries and humanity will facepalm all over it.

So far we only got 'systemic' approaches from economists and other academics, but no one is trying to do some remotely hard-science or even soft-science on this, the underlying mechanisms that create this sort of system-wide failure from the different individuals and collectives point of view.

Matt Franko said...

I, right I think that is the real issue here... your topic of "cognitive bias"....

Imo we know how to do the economics....

Rsp

Peter Pan said...

What factor(s) allowed you to overcome your cognitive bias?

The truth is out, but the messaging has yet to spread it around.

Tom Hickey said...

Cognitive bias is often not neutral (simple ignorance) but influenced at least subliminally by interests (blindsidedness). Of course, some know the truth but suppress it for advantage for a variety of reasons. One reason is, of course, to take advantage of the ignorance of others, but a good deal of it has been paternalistic. A large part of the rationale underlying the institutions of representative democracy is distrust of the "rabble," and a large part of the rationale underlying central banking is not only distrust of the rabble but also politicians.

So there are no facile answers here. The issues are complex and context-dependent.

Peter Pan said...

Economics is boring enough, and sufficiently mystifying, to allow for simple ignorance. So perhaps the largest demographic is neutral on this topic, and likely the easiest to reach.

I don't recall how I found this blog, but I think it had to do with leftist ideology instead of economics. Before that point, I believed whatever seemed like common sense, or was presented as being true by 'leading economists'.

Ralph Musgrave said...

Neil,

Thanks for pointing out that GDP is never constant. My assumption that it is is what's called a "hypothetical assumption".

If someone wanted to assume for the sake of argument that the Moon was made a cheeze, I wouldn't answer that by pointing to the obvious fact that the Moon is not made of cheeze.

Roger Erickson said...

So politics is largely the art of keeping an electorate from being productively provisioned with newly emerging aggregate capabilities?

The methods of partisanship are always under-funding and over-taxing perceived competitor families, clans & classes .... instead of building aggregate teamwork.

Why are we so stupid, when we KNOW that return on coordination is always the greatest return of all, by far?

The only time we allow ourselves to REAP the return on coordination is when some overwhelming signal triggers (or tricks) us into briefly overlooking our unending yet trivial self-generated frictions?

As Matt says, how pathetic, on an aggregate scale.

There are endless metaphors for our cultural stupidity.

Giant brains without connectivity (e.g., 200 lb whale breains)?

Stacks of computers without internet or Beowulf interconnects?

A human brain lacking a corpus callosum (or other key inter-connect features)?

Discussing this to death won't help. We need active experiments in education/training of a generation able to SOLVE the obvious problems, through practice.

Which nation DOES that practice won't be predicted from how "smart" they are. The next human culture will arise from aggregates that just do it.