BOOM as at 20th September 2020

A MONEY REVOLUTION — ELECTRONIC CASH

We use a money system inherited from 16th century Venice and it needs to be changed urgently because it is simply not fit for purpose in our modern world. The advanced economies are all now struggling since 2008 because they are increasingly under the influence of many deflationary forces that inhibit CPI inflation. And without CPI inflation, the Venetian money system based on banking and credit creation simply cannot function as it must. Those deflationary forces include aging demographics (too many old people who don’t borrow), cheap energy inputs, massive technological change, low wages growth, cheap Chinese imports and a relative shortage of borrowers. 

So do we drive 16th century cars? Do we still ride horses to get from A to B?

No but we use a money system that has not changed since those ancient days in medieval Venice. Back then, the bankers walked to the Rialto Bridge and St Mark’s Square every day with their benches on their shoulders to set up and conduct business on the side walks. The benches were called il banco or i banchi. In the Italian language, banco means a bench. So therin lies the origin of the word bank.

Banks are at the very core of our Venetian money system and they are granted a special banking license to create bank credit money (bank loans — 90 – 97 % of our fresh new money supply). We also have Cash — notes and coins — commonly called sovereign money (because the sovereign or the State issues it). And we have banking reserves money which can only be used by banks inside the banking system to settle inter-bank transactions so that money does not circulate in the goods and services economy.

Cash has slowly but surely been reduced in use over the last 50 – 60 years. Before large mainframe computers arrived, it was the dominant form of money. However, these days, almost all money is now in electronic, digital form issued by banks when they create a loan. So nearly all our money now has an interest component payable. Cash is very different because we do not pay interest on it when we use it.

There are some people who even want to get rid of cash altogether “because it is inconvenient” and “is used in the black economy”. However, cash is a great buffer to the credit money in our economy. And that buffering aspect has been slowly lost over those 50  – 60 years, leading to a distorted balance in our supply of fresh new money. This is causing major problems in our money system and needs to change. It’s obvious that we now need Electronic Cash. 

BOOM’s Quantitative Boosting policy is essentially a comprehensive policy designed to create it. The policy is described in the link below in terms that anyone can understand.

Electronic Cash — as described and created in BOOM’s Quantitative Boosting policy — will reside on the Ledgers of both banking sector (commercial banks and central banks) and the Treasury Department under a Tripartite Agreement. That is the best solution for a new, revolutionary cash money system to complement bank credit money.

Fresh new money created by QB will not flow into the asset price economy directly — therefore minimizing any Asset price Inflation effect. And it will not flow into citizens’ pockets directly — therefore minimizing any Consumer price Inflation effect. It will be non-interest bearing, mediated via a mix of perpetual and/or fixed term Promissory Notes. Its economic effect will be immediate upon expenditure via the normal Treasury channels so no new technology is needed. If the Treasury can prioritize its new spending into employment creation (jobs for all) and the development of productive infrastructure, it will have an immediate beneficial effect on social goals and economic stability.

Such electronic cash will co-exist with credit money (originated as per usual in the form of bank loans). It can be increased in volume and decreased in volume over time, allowing better inflation control but it should never exceed 50% maximum of the total money supply in existence. The volume control mechanism will give central banks a new lever to pull in generating both economic activity and in limiting inflation. However, the central bank will still retain conventional monetary policy for use in those goals (interest rate settings).

The Government presence in the Tripartite Agreement will allow the people to have a seat at the table through their political representatives. The Commercial Banks’ involvement is a critical part of the Tripartism. Without them, a Bipartite agreement would happen between just the central bank and the government. This would result in power devolving towards the Government because the central bankers are, after all, appointed by the Government.

QB’s electronic cash is a new mechanism of fresh new money supply for the economy. It can be instigated within minutes via the exchange of just two Promissory Notes. The first will pass from the central bank to the commercial banks and the second will pass from the Treasury to the central bank. The ledger entries would be immediate and the funds would flow to the Treasury immediately. All of this can be achieved before morning coffee with the three parties sitting at a table to effect the ledger entries and with the Tripartite Agreement decided beforehand.

The Establishment Loans and the Promissory Notes would be classified as Reserve Assets and Reserve Liabilities (respectively) on the central bank and commercial banks’ ledgers. On the Treasury ledger, the government’s Promissory Note to the central bank would be a liability and the funds received (the electronic cash) would be a liquid asset.

WHAT ARE THE ALTERNATIVE SOLUTIONS?

Central bankers know this problem exists and they are keen to invent electronic cash. There are two other alternative electronic cash solutions to Quantitative Boosting currently under consideration. They are CBDC’s (so called “Central Bank Digital Currencies”) and the Coronado Potter Solution (designed by two economists who previously worked for the US central bank).

Any central bank electronic cash solution issued solely by the central bank directly to citizens would grant too much money creation power to the central bankers (e.g. a “CBDC – a Central Bank Digital Currency”). Their new money creation power would be essentially unchecked. The risk of uncontrollable CPI inflation outbreak would be enhanced by such a methodology over time. Also, once the cash is created under such a system, how can it be recalled?

The Coronado Potter solution whereby the Treasury would issue contingent “Recession Insurance Bonds” directly to citizens would grant too much money creation power to the political class. After all, the politicians would soon learn to issue such bonds in a heart beat if they thought it necessary. The risk of uncontrollable CPI inflation outbreak would be enhanced by such a methodology. Also, again, once the cash is created under such a system, how can it be recalled?

Central banks are currently using a policy called Quantitative Easing — whereby they create fresh new money and buy assets (principally freshly issued government bonds). However, this is all mediated through the asset markets and obviously has a strong distorting effect on asset prices. The rich (who hold lots of assets) get richer under this policy and the poor get poorer  — relatively and without even knowing. They suspect that something is “not quite right” and that the system is working against them. The result is loss of egalitarianism, social unrest, protests, violence and, ultimately, violent revolution may erupt.

Can’t we just have a peaceful revolution instead?  The Money Revolution of BOOM’s Quantitative Boosting can be put to work immediately. Let’s get started.

Quantitative Boosting Explained — Link:  https://boomfinanceandeconomics.wordpress.com/2020/01/18/boom-as-at-19th-january-2020/

HUGE NUMBERS OF DOCTORS ASK FOR REASSESSMENT OF CORONA MEASURES

Globally, we are seeing a massive campaign of disinformation concerning Covid 19 in the main stream media. While a great number of doctors are presenting different views, unprecedented censorship by the media prevents them from making the news bulletins and headlines. Their opinions are effectively banned.

Information from different thinking experts and professionals can currently be found almost exclusively through targeted searches on the internet or alternative news sources, but not in the mainstream media. Start with THE OPEN LETTER from Doctors in Belgium  —

THE OPEN LETTER

SIGNATORIES

Germany

An international group of doctors has launched an extra-parliamentary inquiry into the “exaggerated and oppressive corona measures”, with a view to questioning politicians and scientists around the world.

International

The initiative by Luc Montagnier, Nobel Prize winner in medicine, and Robert F. Kennedy, lawyer, among others, addresses the many inconsistencies surrounding corona policy and is addressed to the presidents of the WHO, the European Commission and the European Parliament.

United States

In the US, a group of clinician doctors, who see patients on a daily basis, united under the banner “America’s Frontline Doctors” and gave a press conference which has now been watched millions of times.

The Netherlands

In the Netherlands, doctors have come together and drafted an open letter addressed to colleagues and the government pleading for proportional measures. This letter aims to stimulate an open and frank debate on how to tackle the Covid-19 outbreak and was signed by more than 800 doctors.

An open, sharp-worded letter, was written by doctors and mental health care providers, that has been signed by more than 2500 healthcare professionals.

Spain

A public press conference of “Doctors for Truth” in Madrid, was attended by 400 doctors and scientists under the slogan “A world dictatorship with a sanitary excuse”.

https://niburu.co/gezondheid/15385-artsen-komen-massaal-met-coronawaarheid-naar-buiten

Belgium

A Belgian initiative, which has already been signed by more than 900 doctors and health professionals (3 September 2020)

http://omgekeerdelockdown.simplesite.com/?fbclid=IwAR2bJAAShAlIidjnRQPyVSoZbk1Uj-FTHAthL77hKX_Oo8aMLN3V6DdwAac

An open letter on the initiative of a group of doctors from the Cliniques Universitaires St-Luc, UCLouvain. 12,000 have signed already.

In economics, things work until they don’t. Until next week …………  Make your own conclusions, do your own research.  BOOM does not offer investment advice.

CLICK HERE FOR PODCASTS:
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EMAIL: gerry {at} boomfinanceandeconomics.com

Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/

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HOW MOST MONEY IS CREATED

BANKS CREATE FRESH NEW MONEY OUT OF THIN AIR (but they always need a Borrower to do so)

THERE IS NO SUCH THING AS A DEPOSIT
BANKS PURCHASE SECURITIES, THEY DON’T MAKE LOANS
BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY
Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how the banking system and financial sector really work.
https://www.youtube.com/watch?v=EC0G7pY4wREhttp://

How is Most New Money Created ?

LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans).

From the Bank of England Quarterly Bulletin Q1 2014    —
“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves”.

Youtube Video —  https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-in-the-modern-economy-an-introduction

and

https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy

Paper:  Money in the Modern Economy  PDF —  CLICK HERE

Quarterly Bulletins Indexhttp://www.bankofengland.co.uk/publications/Pages/quarterlybulletin/2014/qb14q1.aspx

Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.

On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter —

“In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).

”Reference: https://www.bundesbank.de/Redaktion/EN/Topics/2017/2017_04_25_how_money_is_created.html

The Reserve Bank of Australia (Australia’s central bank) has also contributed to the issue in a speech by Christopher Kent, the Assistant Governor on September 19th 2018.“…… the vast bulk of broad money consists of bank deposits”“Money can be created …….. when financial intermediaries make loans

“In the first instance, the process of money creation requires a willing borrower.” “It’s also worth emphasizing that the process of money creation is not the result of the actions of any single bank – rather, the banking system as a whole acts to create money.”
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MOLS Denmark

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