THE HARMFUL EFFECTS OF OLIGOPOLIES OF BANKS ON SOCIETY

Fernand Braudel said that capitalism is constituted by a structure of three levels: a lower layer, the wider of an extremely elementary economy and essentially self-contained, which he called living material, the layer of non-economics, soil into the capitalism plant its roots, but which can never penetrate. Above this layer, comes the field of market economy, with its many horizontal communications between the different markets in which there is an automatic coordination linking the supply, demand and prices. After this layer and above it, is the anti-market zone where operate large predators and there is the law of the jungle. This - today as in the past, before and after the industrial revolution - is the real home of capitalism (Braudel, Fernand Civilisation matérielle, économie et capitalism- Vol 1, 2, 3. Paris: Librairie Armand Colin, 1979).

 

The anti-market zone cited by Braudel is the true home of monopolies and oligopolies where the law of the jungle prevails. Monopoly (from the Greek "monos," one, and "polein" sell, means "one to sell") means the absence of competitors in a given sector of the economy, resulting in the existence of only one supplier. This single vendor has in his hands the advantage to impose the price of their goods in the market. In addition to force a rise in prices of its products to increase their profits, the monopolist can also lower the price of their products to prevent the entry of a competitor in the same market segment that dominates. Anyway, the monopolist has, except specific cases, a domain so of the industry in which it operates that become the "owner" of the market.

 

In the oligopoly (from the Greek "oligoi" few, and "polein" sell, it means "few to sell") are few suppliers, each holding a large share of the market, and being sensitive to price changes in the market, representing an imperfectly competitive market structure. In oligopoly, there is a tendency to form cartels or market division between the oligopolists. It is through monopolistic and oligopolistic practices that companies maximize their profits to the extreme. One of the sectors where there is a flagrant oligopolistic practice is banking in Brazil and worldwide.

 

Economist François Morin, emeritus professor at the University of Toulouse and member of the board of French Central Bank, says in his book L'Hydre Mondiale- L'oligopole bancaire (The Worldwide Hydra - The banking oligopoly) that 28 world-sized banks are a oligopoly totally distanced of the public interest. To bring humanity safe from future financial disasters, François Morin considers that it´s necessary to destroy these banks, which he compares to a hydra, and redeem the currency for the domain of the public sphere (MORIN, François. L'Hydre Mondiale- L'oligopole bancaire. Montréal: Lux Editeur, 2015).

 

It is important to note that the hydra is a beast of Greek mythology with several snake heads, one of them immortal, and dragon body. It was created by Juno and was one of the twelve labors of Hercules. It was known as "Lernaean Hydra". The blood of the Lernaean Hydra as his breath was poisonous. If their heads were cut off, they returned to be born. While the hydra is not dominated, the heads continue to grow increasingly.

 

As a handful of banks took the form of global hydra? François Morin says that after the liberalization of the financial sphere that began in the 1970s (when the exchange rates and interest rates are set by the market and not by national states and capital movements are liberalized) the monetary and financial markets become global themselves in mid 1990. The largest banks then had to adapt its size to this new exchange space, through mergers and restructuring. The conditions were met for the emergence of an oligopoly on a global scale, which quickly becomes gigantic: the balance sheet total of 28 banks oligopolistic (50.341 billion dollars) was higher than the total public debt (48.957 billion dollars) in 2012.

 

According to François Morin, these very large banks made agreements among themselves fraudulently from the mid-2000s constituting a cartel. Since then the banking oligopoly became a hydra devastating for the world economy. These 28 banks were declared "systemic" at the G20 meeting in Cannes in 2011. The analysis of the causes of the financial crisis that began in 2007-2008 did not leave any doubt about the responsibility of these banks in triggering the process. It´s being put into question the "financial derivatives", which have become common at this time and continue to be circulated worldwide. Let us remember that derivatives are products that are designed to provide guarantees to their owners and some of them are highly speculative. The activation (cash conversion) may become catastrophic in the event of a crisis. It should be noted that only 14 systemic banks 'manufacture' these products whose value is more than 10 times the world GDP.

 

Multiple analyzes showed that these banks hold dominant positions in several major markets (foreign exchange, debt securities and derivatives). It is characteristic of an oligopoly. But since 2012 the judicial US, the UK authorities and the European Commission increased investigations and levied fines that demonstrate that many of these banks - especially 11 between them (Bank of America, BNP-Paribas, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan Chase, Royal Bank of Scotland, UBS) - set up systematically "scams in organized gang". There have been applied fines of many millions of dollars, by manipulation of the exchange market or LIBOR (interbank interest rate of reference established in London).

 

François Morin says in his book that the world is sitting on a mountain of financial time bombs mounted solely by this handful of banks. It is quite clear that there are many financial bubbles that can burst at any time. The bubbles in the stock market can only be explained by the massive liquidity injections by central banks. But above all, there is a bubble in public debt that hit all major economies. Toxic private debt of the banking oligopoly was massively transferred to the national states in the last financial crisis. The excessive public debt due exclusively to the crisis and these banks explains the austerity policies adopted in more and more countries. This excessive public debt is the main threat, as seen in Greece and potentially in Brazil.

 

According to François Morin, from the 1970 national states lost all monetary sovereignty because the currency is now created by banks at the proportion of about 90%, and the central banks (which became independent from national governments) for the remaining 10%. In addition, the management of currency through its two core prices (exchange rates and interest rates) is entirely in the hands of the banking oligopoly, which has all the conditions to manipulate them. So, the big banks get their hands on the monetary conditions for financing of investments, but also, and above all, the financing of public deficits domain. National states are not only regulated by the markets but above all hostages of the world hydra, according to François Morin.

 

The relationship between banks and national states is indeed devastating. Representative democracy empties gradually because the banking oligopoly exploits the powers of the states for their own benefit. Everything indicates that conditions are ripe for a new financial earthquake in the world, now that the nation states are on the verge of bankruptcy and unable to intervene in their economic systems. The next financial earthquake will be even more severe than occurred in 2008 whose economic and financial effects will be disastrous and its political and social consequences could be dramatic.

 

The centralization of capital lays the foundation of the dominance of monopolies and oligopolies in the political field. In all countries, capitalist monopolies and oligopolies control the activity of the rulers. At the present time are the large financial corporations that control governments. In any capitalist power can be formed a government against the will of the great financial wolves. This is the real control of the government, the control of banks, and not the alleged control by the parliaments. The presidents of the United States, for example, are, as a rule, the instruments of a small group of monopolists. It is impossible to govern United States without the consent of monopolies and oligopolies. Even if the national states to strengthen the state banks of their property will not have enough capacity to face the powerful national and international banking oligopolies. Given this fact there is only to the peoples of the world to act politically to destroy the banking oligopolies or wait that financial bubbles explode to erect a new world order after the debacle of the financial dictatorship of global banking oligopolies.

 

* Fernando Alcoforado, member of the Bahia Academy of Education, engineer and doctor of Territorial Planning and Regional Development from the University of Barcelona, ​​a university professor and consultant in strategic planning, business planning, regional planning and planning of energy systems.

Comments

Jeffry Gilbert Added Apr 2, 2017 - 9:00am
One word solution. Blockchain. 
Dino Manalis Added Apr 2, 2017 - 9:44am
We have to reinstate Glass Steagall and seperate commercial from investment banks and implement antitrust laws on banking, like other sectors.  Major financial institutions remain too big to fail, that has to change to prevent another banking crisis!  Banks should take risks, but not at the expense of taxpayers or depositers!
George N Romey Added Apr 2, 2017 - 9:54am
As usual Fernando excellent analysis and at a higher level.  If there is one central theme that has encouraged and caused predatory capitalism and the destruction of the middle class (in the US, Europe and Japan) and social mobility it has been the concentration of business and power.  Companies have merged and acquired endlessly and in many industries we are stuck with a few major players.  Its no wonder these gigantic MNCs have sucked the life out of the economy.
Doug Plumb Added Apr 2, 2017 - 12:57pm
It is absurd that governments go into debt to private banks. Only governments should have the authority of a central bank.
  We have somehow learned to live with absurdities.
  Fractional reserve is not the problem, as many people severely misunderstand it.
  The problem is in Right, not Fact. These banks now control the money supply independent of government and therefore control government (and the media, education, publishing...).
  The roots of this conspiracy is biblical and these banks are merely a means to an end and not the end in themselves.
  We must start looking at the end game so we can see the seriousness of it all and stop talking band aid solutions.
Mike Haluska Added Apr 3, 2017 - 11:10am
When you start taking economic advice from socialist central planners about the "evils of capitalism" and monopoly, you're in serious trouble.  The socialists say that capitalism creates monopolies and oligarchies, so their solution is to nationalize everything under one giant government monopoly?
 
 
Jeffry Gilbert Added Apr 3, 2017 - 11:17am
Again, one word solution: Blockchain. 
 
Decentralized. 
Fernando Alcoforado Added Apr 3, 2017 - 2:23pm
 Jeffry Gilbert, Blockchain can only be executed if there is an effective global articulation of the main countries of the world with the support of their productive sectors and their respective civil societies aiming at the regulation of the global financial system.
Fernando Alcoforado Added Apr 3, 2017 - 2:23pm
This is part of the solution, Dino Manalis. I think it would require global regulation of the financial system to correct its current distortions that could lead the world economy to bankruptcy. All countries in the world, especially the most powerful, should articulate themselves to discipline the action of the financial system on a planetary scale.
Fernando Alcoforado Added Apr 3, 2017 - 2:26pm
I entirely agree with your point of view, George Romey.
Fernando Alcoforado Added Apr 3, 2017 - 2:30pm
You're right Doug Plumb. I think it would require global regulation of the financial system to correct its current distortions that could lead the world economy to bankruptcy. All countries in the world, especially the most powerful, should articulate themselves to discipline the action of the financial system on a planetary scale.
Fernando Alcoforado Added Apr 3, 2017 - 2:37pm
Dear Mike Haluska, we are facing one of the ills of capitalism, which are the financial oligopolies that operate globally and tend to lead the world into bankruptcy. The solution is not to nationalize the banks, but to discipline them to operate with rules that are established by all the countries of the world and to avoid the chaos that dominates the world scene.    
Mike Haluska Added Apr 3, 2017 - 2:42pm
Fernando - do you really think it is possible for ANYONE to comprehend the enormous complexity of the world's markets, much less "discipline he actions of the financial system on a planetary scale"?  The current attempts to control currency exchange rates, trade, prices, production are what CAUSE the financial disruptions of the economy!!!
 
Besides - where do you find these "Angels" who are going to run society for us"?  How do you hold these "Angels" accountable?  I strongly suggest that you pick up a copy of "Atlas Shrugged" and toss out that copy of "Rules For Radicals".
Jeffry Gilbert Added Apr 3, 2017 - 2:50pm
Blockchain can only be executed if there is an effective global articulation of the main countries of the world with the support of their productive sectors and their respective civil societies aiming at the regulation of the global financial system.
 
I'm not sure you understand blockchain. Its decentralized. All the data is stored on hundreds of nodes that all agree with each other. No central bank is required or desired. Its such a threat to the status quo that China is looking to data mine so that it can collect tax at the moment of sale. Banks are working hard to incorporate blockchain in an effort to remain relevant. Its faster, more secure, cheaper and out of the control of the central banksters. What's not to like? 
 
 
Fernando Alcoforado Added Apr 3, 2017 - 4:40pm
Mike Halusta, one fact is clear: we live in a chaotic economic and financial environment because there are no global rules and global institutions that can order the world economic system. I am not looking for angels but flesh and bone people to accomplish this important task.
Fernando Alcoforado Added Apr 3, 2017 - 4:53pm
Jeffry Gilbert, to demonstrate what I know about blockchain I have to tell you the following:
 
 Within the Bitcoin virtual currency, a blockchain is the data structure that represents a financial accounting entry or a record of a transaction. Each transaction is digitally signed with the purpose of guaranteeing its authenticity and ensuring that no one adulterates it, so that the record itself and the transactions within it are considered of high integrity.
 
When a new transaction or an existing transaction fix is ​​received, generally most of the nodes within a blockchain implementation must perform some algorithms and essentially evaluate and check the history of the individual blockchain block that is proposed and thus arrive to the consensus that the history and signature are valid, then allow the new transaction to be accepted in the registry and a new block is added to the transaction chain.
 
This distributed consensus model is what allows the blockchain to function as a distributed record without the need for a central authority to tell which transactions are valid and (perhaps more importantly) which are not. Blockchain can be configured to work in a variety of ways, using different mechanisms to achieve consensus on transactions and in particular to define known participants in the chain and to exclude all others.
 
The lack of requirement of a central authority makes it an ideal record and an ideal determination solution for affiliate relationships that are usually made in an equal condition without the provision of a referee or manager. Indeed, getting computers to verify and settle transactions eliminates the need for clearing chambers and other clearing agents, providing the exclusion of the middle in the business organization and generally reducing costs by improving the speed at which transactions can be made, verified , defined and recorded.
 
I don´t see none conflict between adopting Blockchain in the context of an effective global articulation of the major countries of the world with the support of their productive sectors and their respective civil societies in order to regulate the global financial system. Blockchain would work to make the global articulation happen.  
 
It is important to note that Blockchain has never been widely tested in the marketplace. Although strong on a theoretical basis, there remain questions about how well protections will work in the reality of the digital economy we are living today. The biggest problem with Blockchain technology today is that it is complex to apply, mainly because, as is typical for open source projects, there are several projects, each with its own teams and ideals. Marrying all the functionality into a practical application is difficult.
Mike Haluska Added Apr 3, 2017 - 5:05pm
Thank God there are no "central planners" that think they know better than the billions of individual transactions of the free market!
Mike Haluska Added Apr 3, 2017 - 6:36pm
Fernando - the vast majority of current & past financial crises had little to with the banks and more to do corrupt politicians spending the treasury into ridiculous debt and then trying to "borrow their way out of debt"!!!  The housing collapse had little to do with banks and more to do with socialist politicians like Barney Frank who forced banks to make hundreds of thousands of loans to people with no means to pay them back.  
 
The problem is that politicians never learn from the mistakes of the past.  The Egyptians, Romans, Byzantines to NAZI Germany all thought they could borrow and conquer their way to prosperity - same as the USA since FDRoosevelt and his "New Deal".
George N Romey Added Apr 3, 2017 - 6:40pm
Mike the politicians never asked or forced banks to begin all the side betting on the garbage loans that the banks knew would fail.  That is what really caused the meltdown. Also, by 2006 most investors realized just how bad these securities were and stopped buying but the banks continued to make the loans and warehouse them thinking the market would come back.  The short term profit from these securities was just too good for them to pass up.
John G Added Apr 3, 2017 - 8:20pm
Doug Plumb   It is absurd that governments go into debt to private banks.
 
Sovereign currency issuing governments like the USA. UK, Japan, Canada, Australia etc don't.
Issuing bonds is not 'going into debt'.
John G Added Apr 3, 2017 - 8:21pm
95% of what banks do these days should be illegal. They should be in the business of making loans for worthwhile purposes and retaining those loans until they are retired.
Jeffry Gilbert Added Apr 4, 2017 - 3:31am
Fernando, It good to see you have as much understanding of blockchain as you do. I'm confused however, are you advocating government control of blockchain nodes? If so why? The inherent trustworthiness of a decentralized system that has duplication on par with that of DNA precludes any reason for any government to impose itself into the system. 
Mike Haluska Added Apr 4, 2017 - 9:33am
George old buddy, your statement:
 
"Mike the politicians never asked or forced banks to begin all the side betting on the garbage loans that the banks knew would fail."
 
is simply factually wrong.  See the Dodd Frank legislation, which while it didn't literally put a "gun" to their heads, made it "risk free" to lend to anyone with a pulse.  There were also regulatory threats to make sure "economically disadvantaged" weren't denied loans and there were quotas for minority loans. 
 
Mike Haluska Added Apr 4, 2017 - 9:41am
John G - your statement:
 
"They should be in the business of making loans for worthwhile purposes"
 
while sounding idealistic and morally superior, it is in fact irresponsible to the depositors who put THEIR money at risk by lending THEIR money to someone whose only qualification is their need is "worthwhile". 
 
You can lend YOUR money to whatever "worthwhile purpose" you choose.  Banks are lending the money of depositors and taxpayers and have a fiduciary responsibility to make certain the depositors funds are secure.   
Jeffry Gilbert Added Apr 4, 2017 - 9:42am
Both of you are ignoring the fact that the banksters own Congress lock stock and barrel. 
Mike Haluska Added Apr 4, 2017 - 12:16pm
Jeffry - let's say they both have a "mutual interest" in the financial sector!
 
This is why I proposed my Constitutional Amendment that eliminates the power of politicians and bureaucrats from granting "favors and exemptions". 
 
Essentially, the amendment would read:
 
"No politician, government employee or official shall make an exemption to any law, treaty, executive order, tariff, subsidy, regulation, etc." 
 
The reason people give lots of money to politicians is because they want a special favor (tax break, tariff, subsidy) that nobody else (e.g. competitors) can get.  By taking away the power of granting "goodies", the politicians and bureaucrats are no longer of any great value since a single person can't influence or grant their special wishes.  Why give a politician millions of dollars if he can't return the favor?
John G Added Apr 4, 2017 - 4:48pm
Haluska, banks don't lend out depositors' funds.
Every new loan is new money.
There is nothing in my comment to imply lax underwriting standards.
Get over yourself.
Doug Plumb Added Apr 4, 2017 - 5:23pm
re "Sovereign currency issuing governments like the USA. UK, Japan, Canada, Australia etc don't.
Issuing bonds is not 'going into debt'.  "
 
It is because that money gets taken from people to pay the interest on the money made for a promise that both sides know cannot be kept. This invalidates the promise, they have no claim de-jure or de-facto on this funny money we have been passing around. There is no responsibility on the banks to manage the economy in the interest of the peoples who's name is on the bonds. No consideration ever took place.
Doug Plumb Added Apr 4, 2017 - 5:26pm
@ Jeff re "It good to see you have as much understanding of blockchain as you do. I'm confused however, are you advocating government control of blockchain nodes? If so why? The inherent trustworthiness of a decentralized system that has duplication on par with that of DNA precludes any reason for any government to impose itself into the system. "
 
I would advocate some kind of government control in terms of responsibility for protection. Our current money problems stem from the conflict of interest on the part of governments banks vs public. They must please the banks or the banks unplug the economy.
Doug Plumb Added Apr 4, 2017 - 5:32pm
Pizzagate is turning into a really big deal according to Alex Jones. I believe him. All kinds of people are getting caught red handed, or "cage handed" and the courts aren't prosecuting. Hmmm. I wonder how these good folks fit into the scheme of things.
  The judiciary is obviously going to back up phoney claims on the part of the banks.
John G Added Apr 4, 2017 - 5:37pm
It is because that money gets taken from people to pay the interest
 
No it doesn't. That interest is private sector income and it makes retirement funds and insurance possible.
Fernando Alcoforado Added Apr 4, 2017 - 7:46pm
Mike Haluska, I disagree about your rejection of what you call "central planners" to regulate the global financial system and about your defense of having no control at all. The crisis of 2008 happened precisely because of the lack of regulation of the financial system that can be repeated if there are no initiatives in this direction. I agree with you that past financial crises had little to do with banks, but the situation changed from the 1980s and 1990s when global banking oligopolies began to dictate their will in the world and triggered the global crisis of 2008.
.
Fernando Alcoforado Added Apr 4, 2017 - 7:57pm
I agree with you, John G, that it is absurd for governments to get into debt with private banks. I disagree with your assertion, however, that issuing government bonds does not mean taking on debt. It is exactly the purchase of government bonds by banks that accentuates the subordination of national states to the interests of the financial system.
Fernando Alcoforado Added Apr 4, 2017 - 8:09pm
Dear Jeffry Gilbert, I admit the use of the blockchain under the supervision of a global central bank that would need to be created to oversee system performance and intervene when necessary. What I do not admit is the blockchain operate without any supervision. The financial system would be somewhat similar to an aircraft that when it reaches cruising speed the autopilot is turned on, but if there is any problem during the flight, the pilot intervenes to avoid the worst. The global financial system is too big to fail and drive the world economy into bankruptcy.
John G Added Apr 4, 2017 - 8:14pm
Selling bonds is merely exchanging the excess reserves in the payments system (that net government spending creates) for Treasury certificates.
They give the holders no power whatsoever. And the market has no power over the issuer. 
It is a purely monetary operation and has no bearing on funding, spending or taxation rates.
Fernando Alcoforado Added Apr 4, 2017 - 8:34pm
I disagree, John G, that buying and selling Treasury certificates is purely monetary. Deficient and indebted governments are forced to raise funds in the financial market as a way to avoid issuing currency that would fuel inflation. The dependence of governments around the world on the financial system to cover their deficits and public debt means the power of the financial markets over governments. This is happening all over the world.
John G Added Apr 4, 2017 - 8:39pm
Deficient and indebted governments are forced to raise funds in the financial market as a way to avoid issuing currency that would fuel inflation.
 
Nope. That's old gold standard era thinking. They issue currency when they spend. They extinguish currency through taxation and they issue bonds for excess reserves in the payments system to maintain control over interest rates.
 
That is the reality of the modern system. 
 
Mike Haluska Added Apr 5, 2017 - 4:14pm
John G - your claim:
 
"Haluska, banks don't lend out depositors' funds.
Every new loan is new money."
 
defies both common knowledge and common sense.  Are you going to tell me that when I get a mortgage they call up the Treasury and print the money to cover the mortgage?  What happens to the deposits made by customers?  They're not all stacked neatly in the bank's safe!
 
Mike Haluska Added Apr 5, 2017 - 4:20pm
Fernando - "intellectuals" like you that advise nations on monetary policy and the belief that "you know best how to control the economy" is the primary reason that the nations that listen to people like you are in financial ruin.  NOBODY can "control" the results of billions of individuals trading in the market.  The efforts made to "control" it only screw things up and what economists predict will happen always have unintended disastrous consequences.  Just look where your ideas have gotten South America!
John G Added Apr 5, 2017 - 6:26pm
Haluska, your bank credit doesn't come from deposits or the Treasury.
It is a number typed into an account by your bank.
Your common sense is wrong and your knowledge of the system is zero.
Fernando Alcoforado Added Apr 5, 2017 - 7:55pm
John G, when governments are faced with budget deficits they have to choose between two alternatives to cover deficits: 1) issue currency that contributes to fuel inflation; And, 2) raise funds in the financial market through the issuance of government bonds that contributes to fuel public debt. To avoid inflation, governments opt around the world for alternative 2. This is the reality of the modern financial system.
Fernando Alcoforado Added Apr 5, 2017 - 8:09pm
Mike Halusta, the nations that find themselves financially ruined are those who follow advice like yours, that is, they are in favor of the absence of any control over the financial system. It is this policy that has ruined not only the countries of South America but also major economic powers such as the United States. I disagree that we can not control the results of billions of individuals trading in the market because we have today the information technology that makes it possible to exercise this control. What we need is to set up institutions such as a world central bank to order a chaotic financial system that tends to lead the world into a new crisis of greater proportions than in 2008.
John G Added Apr 5, 2017 - 8:14pm
If issuing currency automatically causes inflation, why is Japan fighting deflation?
So called government debt is merely interest bearing paper for the government spending that otherwise would be excess reserves in the payments system.
There is no real world need to issue those bonds. It doesn't change anything but the asset portfolios of the private sector.
Your gold standard thinking is no longer reality.
Fernando Alcoforado Added Apr 5, 2017 - 10:55pm
John G, to combat deflation in Japan, there should be cash injection directly into the economy as suggested by Ben Bernanke in 2002 before taking over the Federal Reserve. An idea came up: the one of the “helicopter money” that is the possibility of the BC to make an injection of money directly in the economy. Bernanke invented the term “helicopter money” inspired by an article published in the 1960s by economist Milton Friedman, Nobel Prize for Economics in 1976. Friedman described the image of banknotes and coins being dumped on a village to demonstrate how the issue of money would have an inflationary impact. But for Bernanke and several other economists, this would be an alternative for Japan to emerge from deflation and low growth. Money would be injected into the economy in a number of ways: through a tax rebate; By a direct transfer of values ​​to each citizen - with a card or a bank transfer; By an infrastructure investment program; Or by eliminating part of the public debt. In all these cases, the BC would print the money. This means that the issue of currency generates inflation confirming my thesis. Japan has not adopted this measure to combat deflation. John G, you did not convince me. I keep my point of view.
John G Added Apr 6, 2017 - 2:34am
You didn't answer the question, because you can't.
 
Now you're trying to conflate growth with inflation.
 
That is dishonest. Dishonesty comes naturally to the neoclassicals. Just watch 'Inside Job' for your school's ethical standard.
 
The reality is that the Japanese government has issued so much currency that its liabilities are 230% of GDP but it isn't facing inflation.
 
According to your theory it would be.
 
So are you going to man up and admit your theory is just plain wrong?
 
My sense is that you won't.
Mike Haluska Added Apr 6, 2017 - 9:20am
Fernando - your claim:
 
" I disagree that we can not control the results of billions of individuals trading in the market because we have today the information technology that makes it possible to exercise this control."
 
begs the questions/challenges -
 
"Why do you need to CONTROL the results of individuals trading in a free market?" 
 
"Show me the "technology" that "controls the results of billions of individuals trading in the market!  We can record transactions AFTER THE FACT - that's all!!!
 
I never said we don't need control of the nation's monetary system!  Our problem is simply the government spending more than it raises in taxes and the using unsound methods (borrowing, printing currency) to hide their irresponsible behavior. 
John G Added Apr 6, 2017 - 2:34pm
Haluska. If the government did not spend more than it raised in taxes, what would we use for base money?
You really have no clue of what you are talking about.
Fernando Alcoforado Added Apr 6, 2017 - 8:54pm
John G, my view on the problem of deflation in Japan is as follows:
1) In 1992, Japan had a budget surplus of its public debt below 70% of GDP. But 22 consecutive years of deficit (1993-2014) have taken their debt to an unprecedented level in the annals of the Organization for Economic Co-operation and Development (OECD). The huge Japanese debt originated in the late 1980s, after a decade of strength, when the financial bubble burst in 1987. Japan has the largest public debt in the industrialized world, and its economy was seriously affected in 2011 by Tsunami and the subsequent nuclear crisis. Japan's public deficit has skyrocketed after 2011 because the economy has stopped growing. The government of Japan preferred to sell government bonds to issue currency to cover the deficit.
2) By selling government bonds, there was a monetary slowdown in the market that drove the economy into recession. If it issued currency, the government would encourage consumption and, consequently, fuel inflation. This recessive policy contributed to the fall in prices of goods and services.
3) In Japan, prices are down, or in deflation, because consumers of goods and services usually wait for some time to buy, to meet some need and entrepreneurs stop investing for at least two reasons: 1) assume that they will cost lower capital to invest further; And, 2) prefer greater definition of the consumer market to establish the scale of their offers.
This is my view on the problem of deflation in Japan.
Fernando Alcoforado Added Apr 6, 2017 - 9:09pm
Mike Haluska, we need to control the financial system to avoid crises such as that of 2008 that affected the entire world economy. It is clear that with the use of information technology we are able to monitor the performance of the financial system and identify anomalies intervening before it produces its consequences. It is unreasonable to only become aware of system anomalies after the facts. We have to monitor the performance of the system in real time working to avoid its evil effects. I agree with you that the problem lies not only in the financial system but also in the government that raises tax and misuses resources in an irresponsible way. I consider that it´s  important to regulate the financial system and also governments.
John G Added Apr 7, 2017 - 4:41am
You're just dodging the issue like a typical neoclassical.
 
Answer the question you old fool.
Fernando Alcoforado Added Apr 7, 2017 - 2:29pm
Old idiot is you, John G.
John G Added Apr 7, 2017 - 3:30pm
You're a typical neoclassical. When the facts don't match your theories you avoid and waffle.
 
If your theory that inflation is caused by government increasing the money supply was correct, Japan would be suffering high inflation.
 
It isn't, so clearly there is a flaw in your theory.
Mike Haluska Added Apr 7, 2017 - 4:59pm
Fernando - your desire to:
 
"I consider that it´s  important to regulate the financial system and also governments."
 
sounds noble and altruistic, which are the WORST considerations for managing anything!  As Dr. Friedman so eloquently asks:
 
"Just where do you find these Angels who are going to run society for us?" 
John G Added Apr 7, 2017 - 7:45pm
Friedman was a stunning hypocrite. He was a central planner himself. He just wanted the planning to benefit his rich benefactors (mostly David Rockefeller) at labour's expense.
He had no problems with the use of force by the state providing it was against the poor and the powerless.
 
Fernando Alcoforado Added Apr 7, 2017 - 10:13pm
John G, my final answer: In Japan, the economic policy adopted was not to increase the money supply in the economy, but to withdraw money from circulation through the sale of government bonds. It was this policy that drove Japan into recession and also deflation. My reasoning is absolutely correct. I agree with your comment about Friedman.
Fernando Alcoforado Added Apr 7, 2017 - 10:19pm
Mike Haluska, I agree that it is difficult to find "Angels" that will direct society to us. But we have to struggle to find them because without the feedback and control of the financial system we will be at the mercy of chaos.
Mike Haluska Added Apr 10, 2017 - 2:27pm
Fernando - you may as well be looking for Santa Claus as well.  NOBODY should have that much control over something so powerful - it will corrupt anyone.  Your fear of "chaos" is irrational.  When economic systems are left to follow their own "rules" the shear number of individual separate and small transactions keep the system from swinging to far one way or the other.  It is only when interfered with that the free market gets screwed up (see Great Depression).
Mike Haluska Added Apr 10, 2017 - 2:29pm
John G - do you ever actually THINK before you write?  Friedman's whole life was dedicated to PERSONAL FREEDOM in economics, government and life. 
John G Added Apr 10, 2017 - 2:57pm
Nonsense. He was an agent of David Rockefeller and his rich Wall St cronies.
Mike Haluska Added Apr 10, 2017 - 3:14pm
And you're an agent of Inspector Clouseau.
Fernando Alcoforado Added Apr 10, 2017 - 7:16pm
Mike Haluska, I want to make it very clear that I do not advocate the central planning of the economy of each country or the world because this experience was unsuccessful in the Soviet Union and Eastern European countries. What I stand for is the control of the global financial system that operates as a worldwide hydra and threatens to lead the world into bankruptcy. This is the thesis that I defended in writing our article.