Sunday, January 24, 2016

Income inequality: Matthew Parris agrees with Jeremy Corbyn

Matthew Parris political journalist and ex-Tory MP, is agreeing with concerns expressed by Labour leader Jeremy Corbyn.

Parris' writes (Times 23 Jan 2016):  'We should take seriously Jeremy Corbyn's thoughts on wage differentials'The context is that Corbyn and almost everything he says, is overwhelmingly rubbished in the UK media. For example Spectator's Fraser Nelson: JC's 'leadership of the Labour Party as an unalloyed disaster' . So to have Tory-leaning Parris thoughtfully argue that he agrees with Corbyn's view that income differentials are bad and growing worse, and that this matters for Parris because it gives capitalism a bad name is somewhat significant.

He cites Oxfam's report on the matter: '62 billionaires own the same wealth as half the world' . He writes: 'When I see reports like this I have to stop myself looking away'. And at Davos last week (World Economic Forum) there was even concern from the world's elite about further inequality expected as robots take work, thus wages, from low-skilled people.

This week the idea of an unconditional Basic Income (aka Citizen's Income) for all, was introduced in the House of Commons as Green MP Caroline Lucas tabled an early day motion on it (Independent report). This measure would start to address the income inequality problem. The article links to a BBC Radio 4 item; support from the RSA; the Finland policy; French interest; and also that Jeremy Corbyn likes the idea.

This gathering of interest in Basic Income is good news indeed. The book The Free Lunch - Fairness with Freedom majors on the topic and provides a reasoned argument for this hopeful idea that is now coming into the mainstream of politics.

Tuesday, December 29, 2015

Political insights from Anatole Kaletsky

Anatole Kaletsky in Prospect Jan 2016More jobs by the day - but why? has provided a promising 'ladder view' from the Osborne maze (see this blog 26 Nov). He gives three views of the economic situation with the third highly convincing. He thinks 'the misconceived fiscal austerity that condemned Britain to four years near-zero growth'  may be over and even suggests George Osborne may be seeing things the Kaletsky way as evidenced by the autumn U-turns.

Kaletsky's main point is that current conventional economic theories deal inadequately with the computer and internet revolution because traditional ways of measuring gross domestic product (GDP) and productivity per worker are not recorded adequately, or at all.  The huge rise in jobs  is a beneficial effect of the ICT revolution and should be seen as a harbinger of better times, but instead, apparently weak productivity statistics are warping judgement. In Kaletsky's view George Osborne's long-term fixation with the deficit is far too pessimistic because of the failure to acknowledge the true strength of the economy.

Kaletsky explains the new way we should look at what is happening around us. Whilst the internet adds enormously to reading, communications, shopping and entertainment much of this is free to users and leave no financial record, with a corresponding reduction in GDP. And again, postal services have been transformed by the ICT revolution. Old industries - such as the struggling Post Office - are being decimated because communication is now done through other means such as e-mail, text and suchlike and being mostly free is unrecorded in GDP numbers. An old economics chestnut from the 1960s was that a Beethoven quartet still took four musicians as it did a century before, and this was taken as an example of the minimal productivity growth possible in service industries. Kaletsky points out that technology has now actually multiplied the productivity of the four players by millions of times and this shows up the inadequate economic theory. Unfortunately economists such as Robert Gordon who is a power behind US government economic advice deems the 'third industrial revolution' based on ICT to be productively poor compared with the earlier ones and he sees no gains since the 'ICT peak' in the mid-1990s; and that the ICT revolution is stalling due to diminishing returns as devices hit a size barrier due to 'the fixed size of the human finger' for entering information.

The problem is that governments are running economics with their eyes fixed on some old-fashioned outcomes and making policy judgements that affect us all. AK has a choice phrase to explain the difficulty: ' academic economics, lack of realism is rarely and obstacle to success.' He calls for a delay in deficit reduction and a delay in interest rate rises until wages and productivity are well up and inflation above 2%, using the official measures.

Kaletsky points out a wealth distribution effect of the ICT revolution, as do others such as Adair TurnerBetween Debt and The Devil ) .  As Lord Turner has it (p.69-70) Facebook needed a trivial amount of investment capital compared with the earlier revolutions. Its 2014 equity valuation was £150bn  and a significant part of this new wealth ends up in real estate and particularly in increasing land values. After those fortunate enough to share in the ICT revolution have their desires for consumer goods met they want 'locationally desirable land'. This in turn attracts those wanting capital gains to the real estate market and so the poor, and increasingly the less poor but young, lose out on the opportunity of owning their own home. George Osborne obviously aware of this trend which is cutting against the core Tory home ownership imperative is trying to manipulate the market with incentives and handouts to aspiring homeowners. In terms of this blog - he is handing out land-value-based Free Lunches for political ends rather than with fairness. Kaletsky in the Prospect  article points out the populist political movements around the world show that growing income imbalances are 'likely to be unpopular'.

In terms of The Free Lunch - Fairness with Freedom solutions to income imbalances lie in giving a regular citizen's income, as of right, to everyone, without means test. As to wealth imbalances and in order to dampen land price booms, all land values should be taxed (excluding the building value) which will capture for public benefit the huge flow of wealth into land which is now probably a lasting feature of the ICT revolution. Income taxes should be simultaneously cut to make the change politically possible.

UK politics is down a blind alley whilst a third industrial revolution is in spate but there is little vision for the problems of our time with few able to grasp the issues and offer solutions. Although The Church of England was good on analysis in March but timid on the way forward, TearFund in April was much bolder. Yesterday The Times (leader Dec28) has it: 'It is hard to avoid the feeling that the issues are big but the politics, at the moment, is rather small'.             

Thursday, November 26, 2015

Escape ladders for the Osborne labyrinth

George Osborne's Autumn Statement is another twist in his smoke-and-mirrors labyrinth. One month we were going one way and the next 180 degrees back. We are in a Wonderlandesque stupor and seem dulled to the fact that only in May he was scaring us that financial ruin for the UK was imminent unless we kept hold of Nurse Osborne with his essential austerity apparatus. His scare tactics were about Labour's supposed profligacy - this blog May 27 - so it was essential to cut spending budgets and this was enough to turn the election his way, just - with a little help from the Scottish Nationlist surge. Come yesterday's Statement and, Lo! The threatened tax credit cuts are not needed! And the police budget cuts are not needed! And tweaks in the economic modelling show the sun is rising!

Today, respected independent commentator Paul Johnson of the Institute of Fiscal Studies dares himself to say 'Some have even suggested that we have reached the end of austerity.' (FT 26 Nov). As before in this blog I think George Osborne is a master in his long-term power retention ploy through trashing the opposition by inducing fear, largely playing on a single case of jokey foolishness of Liam Byrne - see the May 27 blogpost - as long ago as 2010: 'I'm afraid there is no money'.

If you are lost in a labyrinth you need someone with a ladder who can set it up and from a clear vantage point above the obfuscating high hedges and obscuring smoke clearly point out the direction to more likely success. Frank Field MP may be one such. In a letter to the Times (26 Nov) he said the Chancellor gave him no assurance yesterday that in-work benefit reforms can work with the proposed and much delayed Universal Credit system. Mr Field suggests there should be a Plan B to UC, because it could turn out to be 'nothing more that an expensive fantasy'. An obvious Plan B is Citizen's Income -  payable to all and replacing most benefits; not related to work or absence of work. See Citizens Income Trust . Workable, affordable, effective, simple and quick to introduce.

Unfortunately a politician expected to have a ladder giving a view, has given George Osborne a perfect Liam Byrne moment Mark 2, in plain sight, in the House of Commons. John MacDonnell whilst answering Osborne's Statement gave him Mao's Little Red Book. His backing argument being utterly obliterated as he slid immediately on this self-made banana skin as the Red Book slid across the Commons Table. Too bad that his valid point was that China should not be allowed to buy up important national assets (National Air Traffic Control, Ordnance Survey, Land Registry). But possibly for George Osborne, even all this could be another labyrinthine dead end ploy for the future to divert attention from something else by causing a trumped-up hoo-hah. Then to graciously report:  'I've listened to the concerns. I hear and understand them' and then back off, as he did when he abandoned the tax credit abolition yesterday.  See John MacDonnell's explanation: YouTube

George Osborne did give a hopeful and positive policy in the Autumn Statement for would-be house buyers with the increase in Stamp Duty on the purchase of second homes and buy-to-let properties. This should force down house prices making them more affordable. Duncan Scott of PricedOut  is campaigning for zero house price rises and with an increasing number of people forced to rent through having no chance of buying, this will surely gain increasing voter support. Campaigning for land value tax to achieve this and with Citizen's Income for all, we'd be nearly into open country and leaving the maze.

Thursday, October 15, 2015

Fiscal Charter: Wisdom, Irrelevant Nonsense or a Cunning Plan?

John McDonnell gets a blasting from the FT ('Labour left floundering over economic policy') for Labour's chaotic policy turnabout but gives helpful hints of what might have been if  JM had been better informed.

George Osborne made an attempt this week to bind every future government to its Fiscal Charter (balanced budgets).  As the FT points out the Brits do not do such things.  'Declaratory laws' have no place and besides Mr Osborne himself rubbished a Labour attempt at the very same thing in Labour's 2010 Fiscal Responsibility Bill: 'vacuous and irrelevant' he said then. What's different with yours now, George?  The FT says that John McDonnell's description of the Fiscal Charter as a 'stunt' is accurate, being just another trap for Labour to encounter. All this works for the Osborne austerity view whilst the public are generally oblivious to the truth that the government's accounts are not the same as household's accounts as Lord Turner said recently :
'...the very essence of the insight of macroeconomics is that governments and states are not the sum of households. In the personal household economy, books have to be balanced, but the state economy is different.'

It is not that George Osborne himself does not understand an alternative to austerity such as the Quantatitive Easing for the People that Jeremy Corbyn now wants. Back is 2013 he quite understood that austerity is not the only way:
 ' It is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money. This would allow governments to increase spending or reduce taxation without raising corresponding finance from the private sector.'  
So we have a party following a Chancellor with an 'austerity' policy that seem merely set up to wrong-foot the opposition regardless of the damage it might cause to our economy or the possibilities it might exclude.

Mr Osborne is probably knowingly stretching his apparent belief in the austerity imperative as long as it discomforts Labour. Sooner or later he will decide, as the FT suggests, that a political judgement must be made rather than an economic necessity followed and his outlook will change - even with a cunning plan? Perhaps he will then begin to monetise the deficit as Lord Turner suggested in 2013. This might then 'achieve' his Fiscal Charter rules because creating government money that does not need to be paid back would be excluded from the deficit calculations!

Meanwhile we are being led on a false trail of needless hardship where the benefits of deficit financing are being ignored. Perhaps some Tories will be bold enough to develop insight? Or will Labour actually get their act together? The debate must be opened out and not delayed just for the benefit of the Conservative political purpose of annihilating Labour.   

Sunday, September 20, 2015

QE: easy for the rich. Kaletsky's QE: easier for the poor. Corbynomics? Bank of England independence.

Last week's blog had Natalie Bennett at Making Money Work, asking: Could monetary policy do anything about inequality? Steve Keen said that dealing with private debt would address inequality and it was his suggestion that one-off payments to everyone could tackle this, on the condition that debts be repaid first. Lord Turner didn't think there is a 'magic...costless way' of addressing inequality - the way to do this is progressive taxation.

Philip Aldrick (The Times 19 Sept) QE spared Britain a recession...  is particularly clear that monetary policy increased inequality by creating asset price bubbles such as in gilts, bonds and house prices. Inflation is rocketing in these assets, leading, for example, to fading hopes for first-time homeowners.  Low interest rate funding and high demand from UK and non-UK owners buying to let inflates this bubble. [ Private Eye has a searchable map of such overseas owned properties using Land Registry data. Check your area! Whole streets in London are foreign owned].

Clearly monetary policy as carried out since QE in 2009 has increased inequality in housing. But Anatole Kaletsky in Prospect Magazine: How Corbynomics could work  has a neat solution. Instead of QE's £375bn spent to prop up financial markets ('making the rich richer') he proposes that this could have been spent by being given via a weekly £20 payment, to every 'man, woman and child in the UK' until UK growth returned to pre-crisis levels. He proposed this back in 2012. The Free Lunch Blog mentions it here.

So monetary policy could reduce inequality - since equal payments to all inevitably raises living standards proportionally more for the less well off. As long as conditions are strictly adhered to as to the eventual termination of the payment no harm would be done.

That would be a temporary remedy for a sluggish economy. (NB: temporary QE has lasted 6 years so far). But politicians would be wary of the dangers of launching such a citizen-based policy because it would be difficult to stop politically when the monetary need was over. What would be needed to take over would be a similar payment to all but funded by reform of the welfare/tax balanced budget. Such a Citizen's Dividend / Basic Income would need to be established by the end of the monetary booster to avoid the pressure on politicians to extend the  monetary policy dangerously beyond its period of monetary need. Basic Income UK and Citizen's Income Trust have the details of an unconditional non-withdrawable payment to all, as of right.and it is broadly affordable within current budgets. That is the policy that would establish a new citizen's right, like voting, education and a health service.

Another use of monetary policy to promote sustainable growth is suggested by Prof Richard Werner: that credit creating institutions could provide monetary incentives for education purposes '$100,000 for each child born...such a policy would not be inflationary: among all inputs into the production function, human resources are by far the most important.' (New Paradigm in Macroeconomics p340).
To ensure good education for all must be among the most effective ways of poverty reduction and thereby inequality.

Inequality reduction by monetary means would not be magic - merely an effective policy against poverty and as a means of growing the economy.

But QE is magic - for wealthy people. From early 2009 when QE started the UK FTSE 100 share index to date has gained over 60% & UK house prices have risen 67%.

Strange how central bankers and governments fail to take easy steps to help the poor but so easily open doors for the rich to garner greater riches. The Monetary Policy Committee at the Bank of England has met dozens of times since QE started and resolved every time to keep interest rates at 0.5%. Their learned deliberations have now blown up another asset price bubble. Is the BoE really so partisan that it cannot think beyond top layer wealth creation as the sole answer to the crisis? Is it really there for the good of all - as might expected in a democracy? Presumably our government in meekly acquiescing to a measure that has achieved so little for so long, wholly agrees with it.

Bank of England independence is strongly defended. The question to be put is: How dependent on central bank policies ought the government to be?        

Saturday, September 12, 2015

Making Money Work: Lord Turner, Steve Keen, Chris Giles & Richard Spencer on Corbynonmics and money creation.

Lord Adair Turner has learnt a bit on the practicalities of speechmaking since we last reported (see ECOBATE 2014, 11 Nov 2014). In Winchester his PowerPoint slides were lost en route and but he did a brilliant job improvising. At the Positive Money event Making Money Work at Central Hall, Westminster on Monday 7th Sept he safely had 2 paper copies of his slides for each of the 200 or so attendees. His talk developed his ECOBATE 2014 theme and gave much detail as to how he thinks government economic and monetary policy technically could, and politically should, develop. 

He said that he did not agree with the extreme radical Positive Money view for the abolition of fractional reserve banking and its replacement with 100% reserve banking. But the 2008 crisis and slow recovery since cannot be understood without a clear understanding of the nature of debt, money and credit. Pre-crisis and for many decades we were far too relaxed about the private credit creation by banks. Post-crisis we are too terrified of the potential of what he termed 'overt money finance' (OMF) of government deficits -another name for this is 'helicopter money'. 

Lord T said there is no reason whatsoever against helicopter money, it was all a question of how much you do. A small amount will stimulate a little with no excessive inflation. He thought it would however be excessive to fund 10% of the fiscal deficit this way as it would bring hyperinflation and destroy the economy. 

In discussion  - Chair: Fran Boait (Positive Money) ; Prof Steve Keen (Univ of Kingston) & Chris Giles (Financial Times) - the matter of the doubtful effectiveness of Quantitative Easing (QE) so far was discussed in contrast to OMF. Chris Giles thought that whilst he would never rule any new idea out (e.g. Jeremy Corbyn's 'Peoples QE') he was sceptical that it is seen as a sort of magic solution which has no cost. He was cautious of using OMF as a monetary tool.  If it was used simply to put new money in everyone's bank account, good, but to use it to spend on infrastructure was fraught with problems - you might have to halt the construction of the HS2 railway unfinished, due to monetary rules.  Money is not the only driver of the economy, in addition there is housing and planning policy and new macroeconomic tools as to how banks should lend; however in the future QE might be seen to have been OMF.  Here Lord T agreed that QE, as started in 2009, might become post-facto OMF. He illustrated this with his view that with the Bank of Japan owning 60% of GDP in Japanese Government Bonds he thought it highly improbable that these would be repaid or sold off by the BoJ. He thinks it will become helicopter money and be shown to be a permanent monetisation of government debt. ''That is going to happen and I would place a bet on it'.

He thinks that we should consider a 2009 UK scenario where a 4% of GDP fiscal deficit was planned and £350bn 'reversible' QE issued. He put it that it might have been announced that 5% would be planned with the extra 1% being OMF money creation and non-reversible. He said that this would send an important signal and be much clearer than the current scenario of whether QE really is reversible.   

Currently the Bank of England is apparently doing two things: 1.Managing interest rates and QE for inflation targeting. 2. Managing bank lending through loan requirements and bank capital requirements, for economic safety and stability all without managing demand.  What he sees as actually happening is that the BoE is starting to manage the allocation capital as seen in the Funding for Lending Scheme to be directed to SME loans.  Five years ago such government allocation of capital was unthinkable! 

The cause of the crisis had been the mis-allocation of capital through private credit creation by banks.  Too much credit chased existing assets rather than to finance productive investment, which Richard Werner calls 'credit for GDP transactions'.   This caused a debt overhang with the danger of deflation.  Beyond the supply of consumer goods to most households,  housing becomes another way to compete between members of society to gain a more attractive home or stay at a hotel. As locations offer varying benefits this competition encourages more debt. Banks encourage this, being biased towards property lending due to the collateral available. Steve Keen pointed out the reverse case of lending to entrepreneurs where, maybe,  four out of five loans might fail with loss of principal. This shows the difficulties that banks can have in lending to productive ventures. 

Lord Turner questioned how widely we might be able to spread a new understanding of the monetary issues being discussed.  In confessional mode, in his new book 'Between Debt and the Devil' he has a chapter 'The crisis I did not see coming'. He had to embark on an intellectual journey to understand themes ignored in his earlier economics education - a frank admission in mid-career from a very high-flying player. He said the very essence of the insight of macroeconomics is that governments and states are not the sum of households. In the personal household economy, books have to be balanced, but the state economy is different. Steve Keen said whilst he was impressed by the new openness at the Bank of England but in contrast the political class think the government should be running a surplus. 'They vie with each other: 'My surplus is bigger than your surplus' ' which is the equivalent of banks believing they should be receiving more loan repayments than they put out in loans. Governments ought to be running a deficit with money creation financing a large part of that.  Clearly from the view of the panel, economics education should be transformed so that these things are understood in universities, but beyond that how easily can the ordinary voter understand it? As to conventional economics theory, the efficient market theory is clearly wrong as no financial trader would get up in the morning if it was, since they would not be able to make any money! But the public needs to know that economics will never give as clear answers in its field as for instance an engineer can give in designing a bridge.

In Q&A I said I was involved in helping to establish a local community bank - Hampshire Community Bank which would lend locally and give its profits to local good causes. Was this a good foil to the problems being discussed that had arisen through centralised, international banks?  By their strong applause the audience clearly appreciated the idea.
Steve Keen thought it was an excellent idea as local knowledge would inform bank decisions on loans. Centralised banking is essentially 'collateral banking' which is dangerous, but as Richard Werner emphasises local banks are the strength of German banking. 

Chris Giles said local banks are obviously good, but that a weakness might be that local firms gain loans merely by being local and not through normal due diligence and good banking practice. (Note: If I had been able to respond a comment could have been that this danger is just as likely with non-local banks! Just look at what happened leading up to the 2008 crisis. Where was careful banking practice by national /international banks then?)  

Richard Spencer, an economist whom Jeremy Corbyn uses to inform his People's QE, said that 5 weeks ago he hadn't heard of Corbynomics but since then he has been credited with writing it!  Jeremy Corbyn asks what does the economy need?  He thinks we need investment in public infrastructure and this needs money and if needed a deficit, and this if fine because people want to buy bonds. However he thinks the banking system is too powerful and People's QE would mean that the bond route would not always be wholly used and banks not needed for some fraction of the money. Corbyn has said that if the economy is booming People's QE would not be needed as the bond route might be wholly enough.  He (RS) largely agrees with Lord Turner's views apart from central bank independence. He said that for politicians to be told by the central bank the amount of OMF needed is not democracy, it would be rather like being told by bankers how much tax is needed. Politician should listen to able technocrats, such as at the Bank of England. But let's not have bankers in charge, let's have democracy in charge. Strong applause.

From the panel: When politicians had control of interest-rate-setting, public opinion (or party opinion) was often targeted very obviously and the high inflation of the 1970's might be seen as a warning that sole political control was dangerous.  'Commitment devices' (e.g. Committee on Climate Change/ Bank of England) agreed by politicians in order to keep a steady course over time ahead even when it hurts, are useful.  However the ECB has been given far too much control as it defines its own terms for price stability, for instance.      

Natalie Bennett the Green MP asked what the money system would look like if consideration for the environment and for addressing inequality (where everyone has enough) were both addressed. Chris Giles thought a monetary system could not create a better society. Lord Turner thinks that money systems are not an appropriate answer to carbon issues - there are enough devices around already.  Progressive taxation is the device to address inequality, not OMF. Steve Keen thinks that money creation is needed to redirect spending to carbon reduction, no-one will do this for a profit.    

Barb Jacobson for the Basic Income Trust asked about the idea of using money creation for cash payments to everyone?  

The panel agreed with the idea: There should be no problem with ensuring a single payment to each person through NI numbers and tax numbers / It should be directed to paying off personal debt first for those who have it / Alastair Darling tried to do it in 2009 but was told it would take 9 months, so he reduced VAT instead / Australia did the same thing in 2 weeks.

Chancellor George Osborne understands the subject of the Making Money Work event, as reported in  this blog   Nov 13 2013:
 ' It is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money. This would allow governments to increase spending or reduce taxation without raising corresponding finance from the private sector.'   See Treasury document quoted para 3.34:  Here 

See the Positive Money official post for the event Making Money Work: HERE

Posted by Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom      

Saturday, August 22, 2015

Corbyn's transformative idea: People's Quantatitive Easing

What do Nick Clegg and Jeremy Corbyn have in common? Back in April 2010 on the pre-hustings ITV debate 'the personality of Nick Clegg became visible.....for 90 minutes last week he was seen as a political leader and as normal. The shock rocketed him and his party up the polls leaving Tory, Lib-Dem and Labour within a few points of each other.'

Five years later the Lib-Dems are wiped out and now in the summer of 2015 it is all about Jeremy Corbyn as potential Labour leader. He hasn't generated a huge Labour swing in the polls but has enlivened the political debate in a quite extraordinary way that seems to have surprised even him. But among the other potential leader candidates Corbyn, the complete outsider, has become the star. It took Nick Clegg 90 minutes to effect a change in the 2010 election that brought the 5 year coalition; it took Nigel Farage about 3 years to 2015 to build a great poll rating that ended in UKIP's one seat; just where will Jeremy Corbyn take politics now?     

This poll shows that some of his core policies are favoured by the majority of voters by a wide margin: such as re-nationalisation of the utility and railway monopolies (3:1); minimum wage £10 /hr (3:1); 6o% tax for £150k earners (2:1); employee seats on FTSE100 boards (7:1).  What about people's quantitative easing that Corbyn has espoused as promoted by economist Richard Murphy?  Not an easy subject to poll about as even the Daily Telegraph and Bank of England governor Mark Carney are not altogether clear about what PQE might be as Murphy points out.  

In PQE Mr Corbyn is getting to a solution for the economic difficulties that are facing the country. The conventional stated view is that austerity is the only way.  JC has hit on a way to transform the economic outlook safely, sustainably and fairly.  It is key to most of his economics-related policies. For an early clear advocacy of PQE see Anatole Kaletsky from August 2012 . For nearly two decades Prof Richard Werner has been campaigning about the now so-called 'PQE' since he originally coined the QE phrase in the 1990's and this link has him explaining what he meant by it.

This Free Lunch blog from 2013 has more on PQE and shows that even George Osborne understands a little more of its possibilities than Mark Carney does, it seems - so austerity may not be the only way for Chancellor Osborne.  It wouldn't surprise me if he stole the PQE idea just as he did Labour's minimum wage idea at the last budget. But beware, a hopeful term may be twisted in use by politicians to leave us with current disfunctional economics. See these short videos by  Richard Werner explaining how the money system  and banking works and how it could be transformed.     

Gradually the concept of QE / PQE is taking hold. Lord Adair Turner, Michael Kumhof and Philip Coggan are speaking on it at 'Making Money Work' in London on Monday 7th September 4-6pm. Book on the link, free admission, there are limited places.
posted by Charles Bazlinton. Author The Free Lunch - Fairness with Freedom

Sunday, July 26, 2015

Centre ground politics: Citizen at the centre, Mr Corbyn?

An opportunity is available for a new politics in the UK that would advance the cause of the citizen, through a clear focus on citizen themselves, as viewed without the ideological spectacles of conventional party politics. Will Labour's Kendall, Burnham, Cooper or Corbyn manage to lift their heads from accepted wisdom? 

The Tories have set their jib and are teasing Labour to follow on and endorse their poverty-extending austerity policies, which are unhelpful to the promotion of a sustained economic recovery. As Matthew Parris in The Times (Sat 25 July 2015), has it, this is a manifestation of the 'supermarket view of politics' of our day - where voter footfall governs nuances of narrowly similar policies from all parties. Cleverly, through this shared view of what is important, Labour is in thrall to Tory policies which seem primarily designed to discomfort the opposition rather than benefit the nation itself. [See: How did the Tories do that?] Labour follows Chancellor Osborne like a dependent poodle as the Labour leadership crisis now demonstrates. The critter is not rebelling, biting off its lead and morphing into a mistress of its own destiny, but is keeping in close step. Except that Jeremy Corbyn is creating differentiation as he attracts attention with his refreshing straight talking which is panicking the three other leadership contenders - and bringing great ire from Tony Blair.

The return of the dark ages of Old Labour supposedly embodied in Corbyn belies that he has actually said some quite positive things, which any reasonable person might agree with. Such as establish a national investment bank for innovation and high tech investment  [see: Marianna Mazzucato] ; create QE for people instead of for banks; strengthen tax avoidance regulation; shift the tax burden to wealth and companies and off consumption and individuals; re-nationalise the natural monopoly of the railways.  What will be the outcome of Mr Corbyn backing into the limelight? Does he view politics through the old view: the 'dead hand' of the state - or will we get citizen-centred politics, which some of the above seem they might be?

The Universal Credit scheme is taking for ever to transform the benefits system - will it ever work starightforwardly? The Citizen's Income Trust  has proposals for a  better answer, a revenue-neutral Citizen's Income as a right for all. This would bring many benefits such as: reward unpaid carers, enhance the living wage of workers and foster job creation by small and struggling businesses; bring freedom through work/life choices that are pro-family; remove benefit traps and make work pay; enable charitable donations for community-inspired projects; and overall reduce poverty and raise living standards for countless individuals, families and groups.  Any Tory or libertarian should be able to see the individual-enhancing benefit of a Citizen's Income removed from bureaucratic means-testing, but would  Labour actually dare to introduce it and in one bound make real the doubtful 'living wage' of George Osborne? The citizen would be placed firmly at the centre of government policy making through a Citizen's Income as of right. But would Labour dare itself to trust the people this way?

Currently our socio-economic system is heavily biased towards those who own property. It is not every citizen that experiences the wealth-creating effect of property ownership. Renters are forever disadvantaged also-rans, whilst freeholders stack up a 'free lunch' of property wealth brought to them by the society-inspired wealth enabled by everyone, including the renters. No individual can ever create a rise in the value of their own land apart from being a minute part of the creative community that surrounds them.

Taxing land values on a annual basis would, along with a Citizen's Income, correct this lifetime imbalance in fairness.  A simple, revenue-neutral way to introduce it would be to levy a tax on the location value of the land alone (excluding the building value) and allow a reduction in £1 of income tax paid for every £1 land location value tax paid. Houses would become more affordable and wider ownership encouraged, more houses would be built to maximise the income from a given plot of land to pay the levy. The income tax / land value tax swap would avoid a disruptive change in finances for most households. Income-poor property owners could be allowed to defer some of the tax until the sale of the property.  The current favouritism towards property owners would be reversed bringing a new consensus - the promotion of the common good. Debt through mortgage would reduce as prices eased, releasing the income from normal jobs away from payments to bankers into useful goods and services. The evidence of a failed market shown, for example, by the pressures of international buyers on house prices shows that the land monopoly needs to be constrained to function more fairly than now. Land location tax is a major part of that answer.

Encouragement of new local community banks funded by local councils, social enterprises and a national investment bank should proceed apace.  With 7 years between now and the financial crisis it is high time that an alternative to the out-of-scale international banks is needed for local investment.  Small local banks are essential, scaled to fit the needs of small and medium sized firms which are beyond the marketing scope of the current high street banks. This too would be a policy that puts the citizen's needs at centre stage in terms of financial help for their enterprises, instead of as a supplicant at the door of the high rolling bankers only seeking mega-deals. The credit supply is artificially throttled through a lack of suitable local bank outlets. This failed market needs policy encouragement to make it function for the good of all.

Old Labour wanted the state in the centre ground of too many areas of life that are best handled by individuals, families and groups - as has been shown by deregulation. Conservatives see the free market as the answer to all, despite the existence in plain sight of obvious market failures. Recent government promotion of  housing purchase schemes, for example, are clearly counter-productive as they feed the heated house price frenzy thereby blocking off those still unfortunate to be excluded.

Conventional  politics fights over the centre ground. A new politics is needed that firmly puts the citizen at the centre ground.

Posted by Charles Bazlinton, Author: The Free Lunch - Fairness with Fredom which explores this theme of the citizen at the centre.    
The author is promoting the establishment a Local Community Bank which will pass profits to local good causes.

Thursday, July 09, 2015

Budget July 2015. Comfort for the comfortably off. Worries for the vulnerable.

After experiencing a very even-handed general election bringing a startling Tory win, our Chancellor George Osborne in his July budget has slammed Labour relentlessly against the ropes in his 'socialistory' budget. With eye-popping boldness he is interfering with the wage market and forcing firms to pay more than Labour's promised minimum wage and has trashed Gordon Brown's tax-credit machinations of many years - both at the same time and rather deceitfully naming the new minimum a 'living wage'. He is neatly using this second five year parliament to stretch (or excuse) his deficit reduction goal yet again, to 2019-20. Useful wriggle room there. 

He is to attempt to bind future governments to his idea of prudence in a new Fiscal Charter, which sounds good as a cross-party consensus builder but there are differences about what makes for wise economics. If it means that future Chancellors will not be able to use the economy as a political plaything like he has done for five years, so be it, but it would be disastrous if a dead orthodoxy inhibited creative policy. See: How did the Tories do that?    
Overall, George Osborne has dealt out comfort for the comfortably-off and worries for the financially vulnerable. To propose an exemption for homeowners with £1m value homes from inheritance tax, whilst reducing housing benefit for renters is as divisive as you can get, and bizarre supposing that fairness is inherent in the 'One Nation' soundbites in his speech . 
He said:
'The wish to pass something on to your children is about the most basic human and natural aspiration there is'
This is very, very true but even families who only rent a home and never own one still have such hopes, George! To use such a desire to justify an inheritance tax give-away benefiting only the better-off is an outrageous statement to hear spoken in the House of Commons in 2015. Callously insenstive to boot. Talk about 'grinding the faces of the poor' (Isaiah 3.15).

His tax credit / minimum wage  / benefit cap measures  /social housing renting at market prices, will, according to the media summaries, probably mean the loss of 60,000 jobs, and the reduction in income of over £1000 p.a. - maybe as much as £5000 - for the poorest. Poor students will no longer be given grants but loans and will lose housing benefit.

On a positive note for lower house prices, buy-to-let landlords are to have their profits trimmed by taxation and reduced allowances. This might mean a more plentiful supply on the market bringing more affordable house prices, but landlords may raise rents to recoup the losses.

Maybe Mr Osborne has a cunning tax reform plan, and inheritance tax elimination is one step to that goal? Next step being the taxation of land values  each year to steal what might have been a trump card from Labour? The transaction cost of stamp duty land tax at 10% on a £1m house sale must make the market sticky and keep buyers off.   Why not charge 1% every year on the land value portion of every house, allowing a deduction of £1 off income tax for each £1 of land value tax paid? Free up the housing market, lower house prices and cut income tax for all whilst retaining overall tax revenue,  all in another Osborneian sweep we are going to expect from now on. Hey!
[Note: See Financial Times Magazine 7 Mar 2015. In 2012 Osborne wanted to have a mansion tax and cut income tax. Cameron overruled.]  
What a policy for a reforming Chancellor of the Exchequer, go on George, pinch another Labour policy - you're bold enough!  All would then be forgiven - or at least some of it.           

Thursday, June 11, 2015

Helena Kennedy, Oliver Kamm and what banks actually do

Helena Kennedy in the New Statesman 5 June on Magna Carta says banks rely on complexity which foxes law prosecutors and befuddles politicians. Surely complexity does not automatically imply illegality? So where does the power come from that Baroness Kennedy says is wielded by financial institutions, which in her opinion shows that Magna Carta lacks bite?  It is derived from a very simple, non-complex but fully legal right to create the money supply by banks. See this short video which explains the process:  Banking and the Economy  

From this process - the ability to create money - the banks, et al, engineer the complex financial products that rattle HK, which are the source of the profits. If this power was not available and banks had to make do with their own funds, there wouldn't  be any point in making complex products - it would be too much bother given the small margins. The profits arise for banks from the huge leverage gained by multiplying small margins on a huge base of their specially created money. See also on the ignorance of politicians from Positive Money.  The answer for politicians such as Baroness Kennedy  is not 'going head to head against large banks', but to take away their right to create money - or at least encourage the formation of independent  local community banks, owned by local trusts which don't make complex products and which channel profits back to the community.    

Oliver Kamm in The Times 11 June writes:
' the role of banks and capital markets in matching owners of capital with businesses that need it' 

This new paper by Jakab and Kumhof will enlighten:  Bank of England paper No 529 
Mervyn King (2012), former Governor of the Bank of England: “When banks extend loans to their customers, they create money by crediting their customers’ accounts.” Lord Adair Turner (2013), former head of the UK Financial Services Authority: “Banks do not, as many textbooks still suggest, take deposits of existing money from savers and lend it out to borrowers: they create credit and money ex nihilo — extending a loan to the borrower and simultaneously crediting the borrower’s money account.”

Or see this blogpost 'Bank of England concurs with Prof Richard Werner's view on creation of money by banks'
posted by Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom

Wednesday, May 27, 2015

How did the Tories do that? Election May 2015

It was probably the choice of rabbits and one particular rabbit pulled from the electioneering hat that won the May 2015 election for the Tories. 

Lesson for future elections for all parties? Promise carefully attractive goodies for various sectors of the electorate and also spread scare stories about your opponents. The Tories quickly produced rabbit after rabbit: massive discounts for housing association tenants to buy their homes; a special deal for family homes freed from  inheritance tax up to £1m;  an extra £8bn for the NHS; free 30 hours of childcare - all these from the austerity party! Most of these trumped the equivalent Labour rabbits who failed to impact the voters with any unique selling points that could stick with enough people all the way to the polling booth. The Labour refusal to add in a EU referendum given the popularity of UKIP was extraordinary.   

Election rabbits are also the scare stories each party spreads about the others. A Tory one about Labour was the pressure Labour would be under from the more extreme anti-austerity SNP as quasi-coalition partners. Probably the most important anti-Labour rabbits coming from the Tories were:  Things That Show Labour Is Economically Incompetent. The show stopping prize rabbit was the letter written in 2010 by Liam Byrne that he left on a desk in Whitehall in 2010 for his Treasury successor:  'I'm afraid there is no money'. 

Labour never had a good answer for that letter which backed up the Tory message that they were not to be trusted to run the economy again. Instead of seriously rebutting it, Ed Balls claimed it was a joke and was trounced for being flip. But  The Times on 13 April  had Prof Richard Layard making what looks like a sound defence of the earlier Labour handling of finances after the world was overtaken by the 2007/8 financial crisis.  Why was Labour unable to get such reasoning across?  The Prof shows that the Coalition, in insisting on the austerity programme of rapid deficit reduction forced economic growth down:

 ' The IMF has studied 173 cases of budget cuts around the world and found that the consistent outcome is economic contraction. Far from improving things the Conservative plan almost certainly made them worse'.  

But such a message never gained traction from Labour over the 5 years to rebut the need for harsh austerity. The problem is that Labour did have some issues they failed to address. One was Gordon Brown's classic:  'no more boom and bust' repetition made during his Chancellorship giving a display of hubris and lack of common sense that was never resoundingly apologised for by the now-defunct Labour old guard.     

Maybe the Tory strategy is illuminated by a passage in the book The Free Lunch - Fairness with Freedom  (p. 114-5, written in the time before fixed-term parliaments): 

'But UK governments do have a possibility of 'riding the [economic] cycle' as they allow it to work more naturally, with some possibility of timing elections, rather than attempting to manipulate it around fixed electoral dates.'  

I think that Prof Layard's remarks about the Conservatives setting the wrong economic policy in their early coalition years,  shows that they were manipulating the economic cycle for electoral purposes, around the new fixed-term parliament timetable introduced by the Coalition. They chose a short term deficit reduction period (ideological reasons given of course), and its austerity outcome more importantly chimed with their political aims of downgrading Labour's competence. 

Continuously through the Coalition parliament they built up an excessive slur on Labour's reputation for economic management. Cleverly the Conservatives insisted on Labour failings by conflating the reasons for the 2007/8 world financial crisis with whatever errors could be found from Labour's record over the previous decade. Over the Coalition parliament the 'Labour mis-management' narrative took hold with even the austerity outcomes giving them ammunition to shoot at Labour.  As the election approached, by now having managed to bring on the delayed growth to give voters a 'feel-good factor', the refrain:  'You can't trust Labour with the economy'  was accepted truth and the Liam Bryne letter was ready to be produced a few weeks before voting - as a wonderful, scary, Tory rabbit.

Prof Layard says that by 2010, GDP was rising along with Labour's policy of 'a sensible long term plan to reduce the deficit without aborting the recovery'.  David Cameron claimed when speaking on the Byrne letter, that the UK in 2010 was as risky as Greece - implying that austerity was essential. Layard says there was no comparison of the UK with Greece: 'There was no crisis'... 'In 2010 our net debt relative to GDP was lower than the G7 average'. He also explains that the Osborne austerity measures slowed the economy from 1.8% (2010) to 0.8 % (2011) to 0.2% (2012). 

The argument here is that George Osborne's austerity was mainly an anti-Labour policy and not an ideological one. In economic terms it didn't work very well anyway as the deficit reduction deadlines have been stretched and stretched into the future, to 2018 and possibly beyond. Back in 2010 under the less austere Labour programme the economy had started to heal itself and a continuation of that might have aided deficit reduction faster.  But the Tories shot the UK economy in the foot, slowing growth and used this self-induced outcome to dupe electors away from Labour. The UK public suffered three years of unnecessary delayed growth, and the Tories won in 2015. What a triumph!  

Alternatively in 2010 for the Tories to have allowed Labour's plan to run and bring more growth would imply that Labour were competent and the Tories were carrying on their good work. If this had been done, by 2015 the core election issues would have been very different. The new Tory 'One Nation' theme looks hollow against the refusal to recognise reasonable economic management whichever party it comes from.  With George Osborne's continuing failure to meet his own deadlines the time is overripe for some humility from him as well as from Labour maestros.  The UK public deserves more than tiresome election fisticuffs over economic management - why can't we have consensus? 
posted by Charles Bazlinton. Author The Free Lunch - Fairness with Freedom         

Tuesday, May 05, 2015

Election emergency. Why? Russell Brand's view.

Russell Brand [Twitter @the trews] has decided to vote in the general election after all. He wants the Conservatives out of office and thinks that Labour's Ed Miliband will listen to the voters after gaining power, even though he isn't wholly smitten with EM.  His conversion to voting can be seen here.  Caption: Emergency: Vote to start revolution.  

Talking emergencies - a few days ago two pre-teen children were stuck in a lift.  They didn't use the alarm button or emergency phone because: 'We didn't think it was an emergency'. Instead, a bit like Russell Brand pre-conversion, they tired to raise the alarm by calling and shouting for help - for about an hour and a half. Eventually someone heard and the local Fire and Rescue services released them safely.  

Owen Jones of The Big Issue (Apr 27-May 3) - full article buy a Big Election edition - asks Russel B 'Are you basically a big megaphone for people and causes that are otherwise ignored?' Brand says his gifts are to make complicated information accessible and showing off. He wants his understanding of compassion and connection to communities see: Focus E15 (preventing housing evictions) to be leading and not his egotistical nature. It sounds promising - at least.

Better a late conversion to voting than no voting at all. A pity he didn't change his view a few weeks ago when there was time for unregistered voters to take notice. Consequences follow for failing to act - the children trapped in the lift suffered longer by not taking action in the manner expected. 

So for those who are registered to vote and will only vote if they can be convinced we are in an emergency - an emergency for fairness - consider these:

1. Is it an emergency for fairness that 8 years after the banking crisis and a taxpayer bailout of the banks, huge salaries and bonuses are still paid to bankers? Find a party that wants to reform the banking and money supply system, that promises regional or local banks. And Vote. 

2. Is it an emergency for fairness that in many parts of the country, young people will become old people before they can save enough for a deposit to start to buy a house? Find a party that aims to introduce land value tax in place of income tax and other taxes so that fairness for new home owners and renters is considered. Mansion tax is a start.  And Vote.   

3. Is it an emergency for fairness that whilst low income housing tenants are penalised  for having a spare bedroom and thereby suffer a housing benefit cut, that the Conservatives are considering raising the nil inheritance tax threshold to houses worth £1m ?  Find a party that is not so blatantly partisan in favour of wealthy property owners. And Vote.    

Russell B, says vote Miliband to evict the Conservatives but vote Green in Brighton. Few say it like Brand says it, but many of us do it - vote to achieve the least worst option. Maybe there is a need to look at a proportional voting system again?

By the way, if you are in a lift that won't move, your are in an emergency. Press the red button and/or  use the phone - they are usually down near the floor. Instruct your children. And never, never, try to climb out of a stuck lift if the doors are open between floors. 

And when you get out: Vote. 
Posted by Charles Bazlinton.  Author The Free Lunch - Fairness with Freedom 

Saturday, April 18, 2015

Tearfund: land value tax, money reform and basic income

This week the Bishop of London Richard Chartres called for a 'passionate concern for the common good and a fuller life for everyone' (The Times, letter 16 April 2015).  He was launching a discussion paper by the charity Tearfund  The Restorative Economy .

This is a highly significant paper in its scope and insights; with its suggestions for transformational policies; and from where it comes - a prominent Christian-based charity. As seen in the earlier blog the  'Bishop's letter: Postscript coming?'  issued by Church of England bishops, disappointed by the somewhat bland recommendations. But this Tearfund paper is seminal. It suggests using the restorative principles of the biblical jubilee as an 'instruction manual' and theologically argues that the mission of Jesus was a re-uniting and restorative one. Tearfund sees its work as an 'integral mission' covering lifestyles including such things as economics. This is highly unusual! As seen in the 'Bishop's letter', the official church does not usually challenge the status quo and vested interests with awkward recommendations.

Tearfund (not a church-based charity) has clearly moved beyond its original brief of famine relief.  It acknowledges success in recent years in reducing disease, poverty, and increasing life expectancy, but although it sees promise in our future, there are obvious threats ahead, with inequality rising and economic insecurity for millions.

Thus it wants measures:
' to share the proceeds of that natural wealth fairly, just as jubilees reset land ownership on an equal per capita basis.'

' through stronger and fairer taxation of property (via a land value tax) ...
a strong moral case for using some of the income from land for the benefit of society as a whole, and for preventing wealth from becoming increasingly concentrated over employing taxes on land/property and on wealth transfers to fund services such as education and healthcare.'

it explains land value tax:
'A land value tax. At present, business rates in the UK apply to the rental value of commercial property – in effect, taxing buildings rather than the land underneath them. The problem with this approach is that it creates perverse incentives, which can (for example) skew our economy away from industries that use expensive buildings – such as manufacturing....'
'...The Mirrlees Review therefore calls instead for a land value tax, arguing that ‘this is such a powerful idea, and one that has been so comprehensively ignored by governments.'

and even extends to the reform of money and banking:
'a hard look at the implications of the framework within which money is created in our economy. Would it be worth considering, for example, requiring banks to keep a high level of reserves against deposits (setting a level of, for example, 50 per cent – half what has been suggested by the Financial Times’ Martin Wolf and IMF researchers)?'

and wants the provision of a basic income:
'Allow poor people everywhere to meet their basic needs by introducing a global social protection floor, including healthcare, education, nutrition and basic income security.' 

It calls for political action across disciplines 'joining the dots' :
'Looking back at key moments in history, it’s clear that the tides often turn because of the emergence of a movement for change. Right now, we need such a movement, one that follows in the footsteps of the anti-slavery campaigners, the US civil rights movement and all the other examples of ordinary heroes – Christians, people of all faiths, people of none – who together achieved the impossible. These movements faced almost insurmountable odds, but they overcame.'

posted by Charles Bazlinon, author of The Free Lunch - Fairness with Freedom which prefigures much in the Tearfund paper.  

Monday, March 23, 2015

George 'Two Nations Toryism' Osborne

What is the Conservative Party for? Benjamin Disraeli is credited with forging a One Nation vision for it and a decade ago David Cameron was spoken about as having taken on Disraeli's mantle see: Daily Telegraph from 2006 . Remember the Big Society of the last election?

So what, at the bedrock, does Conservative policy look like as seen through the March 2015 Budget? Is Toryism about One Nation any more?

The most telling measure is the new Help to Buy ISA for aspiring first time home owners. For every £200 you save the government will add £50 up to a limit of £3k for £12k saved.
Says Jonathan Eley in the Financial Times 21 March: 

'Housebuilders, existing homeowners and estate agents... feared a tax raid in the form of capital gains tax on the sale of high-value primary residences. Instead they got a shiny new subsidy from taxpayers... they can scarcely believe their luck. This is irresponsible policy making.'  

So the Chancellor is keen to boost the housing market at the bottom end but this will add to house price inflation and make homes less affordable for those who cannot meet the criteria for the new HTB ISA. The 2013 Budget introduced an earlier Help to Buy shared equity scheme. That was handled through housing associations, which tempers the price effect of the subsidy on the general housing market; but this HTB ISA is a direct action into the housing market and is likely to boost prices. By this measure this Tory Chancellor is further forcing apart a divided nation, separated by the way they have to provide for their housing needs: The Renters and the Owners.

Paul Johnson of the Institute for Fiscal Studies, commenting on the Budget in The Times March 21, 2015  'Both parties need to come clean on cuts'  - has it that there will be a £10bn gap in government financing which will involve more cuts than specified now. He reports that the Chancellor says he will cut 'welfare' to achieve this. Johnson says that this is likely to mean a reduction in support for housing benefit as housing rents have soared due to demand and the housing benefit bill is stretched. He thinks that the support link to actual rents may be broken so affecting social housing tenants as well as private renters. So with welfare cuts proposed the nation is to be further spilt, and probably again through housing costs.

So the Conservatives are a long way from a modern version of Disraeli's One Nation in these policies. Look at this report in the New Statesman 24 September 2014  about Mansion Tax:

'When Miliband first adopted the idea in 2013, the Tories responded by writing to their wealthy donors soliciting funds to campaign against a 'homes tax' '  .

There is nothing obvious in the Budget to bring house prices down to more affordable levels, such as a annual levy on land values, which would also automatically promote house building. George Osborne has finally killed off any hope of David Cameron's Big Society bringing an equitable housing policy and Disraeli must be turning in his grave.

Posted by Charles Bazlinton: More ideas for a fairer society in The Free Lunch - Fairness with Freedom  

Monday, March 16, 2015

Richard Werner on broadband investment

Promises, promises. Electioneering by George Osborne (The Times, March 16, 2015) has him saying that 'Remote homes will be first on ultrafast broadband'. A new invention, 'G.Fast' will be x4 the speed of the ordinary variety and enable easier access for more consumers.  And the government will be able to concentrate subsidies on the remote areas because of new technological developments by BT.  New subsidies are going to be available for suburban areas too. 

The background assumption of all this is that the government has had to hold back on subsidies (until election time) because of the austerity regime following the financial crisis.    

Prof Richard Werner (Chair of International Banking at the University of Southampton) has it that infrastructure investment which promotes the sustainable economy, can readily be funded with money created by the government. That is: debt-free and interest-free money.
Yes read that slowly:  D E B T - F R E E  AND  I N T E R E S T- F R E E.

In an article about this written in 2010:

It is therefore possible to finance the Broadband Initiative with the creation of government money, without anyone incurring any costs or debts, and without any interest burden.

One day a government, hopefully, will wake up and grasp powers for the common good that are currently controlled by banks. Why don't political parties champion this as they head for the election? Are they so in thrall to banks who would be by-passed for credit creation?
Posted by Charles Bazlinton.