Randall Wray is probably the best known representative of a branch of economic thinking called Modern Monetary Theory (MMT). On Naked Captilism I read his polemic called “Debt-free money and banana republics“. I am more than a bit disappointed. From somebody like Randall Wray, who specializes on debt, I would have expected a more careful treatment of the relation of money and debt, especially if he wants to be vitriolic and call those cranks, who argue for “debt-free money”. Randall does not seem to know, what debt is.
Dear Mr. Haering, I came across your blog post, “The microcredit mafia lowers its socially responsible mask,” and am compelled to respond to your assertions. I believe we share the same concern for client interests. FINCA also values an open discussion on how best to deliver critical financial services to people across the world, wherever they may live.
Muhammad Yunus and his Grameen Bank have received the Nobel Peace Prize on the promise of conquering poverty by giving poor people in poor countries access to debt. A whole industry of lending to the poor has developed from this. It is making its leading figures quite rich and is pushing many customers into misery and debt slavery. A recent tax-filing of the large microcredit-“charity” FINCA and an internal report tell us a lot about this business.
Let’s assume that there is a financial oligarchy which exerts strong political influence due to the vast amounts of money it controls. Let’s further assume that this financial oligarchy has succeeded in having financial markets deregulated and that this has enabled the financial industry to expand their business massively. Then, in some near or far future, their artfully constructed financial edifice breaks down, because it cannot be hidden any more that the accumulated claims cannot be serviced by the real economy.
Outstanding credit to the private sector in the euro area has been shrinking for a long time. It is shrinking fast in several peripheral countries and the European Central Bank (ECB) seems unable or unwilling to do anything about it. Given that the economy of the euro area is barely crawling out of recession and that inflation is predicted to be significantly below the central bank’s target rate for the next two years at least, this seems troublesome. Two economists of the Bank for International Settlements (BIS) help out
Fabian Lindner of the German macro-economic research institute IMK has submitted a very timely and well-argued piece to the World Economic Reviw: “Does Saving Increase the Supply of Credit? A Critique of Loanable Funds Theory”. He takes on influential theses of luminaries from Larry Summers, over Ben Bernanke to Hans-Werner Sinn by tracing them back to the loanable-funds-fallacy – a fallacy which still rules standard textbooks. His main proposition is simple and not refutable: firms and economies do not operate at full capacity. All research and surveys show that