Sunday, June 19, 2016

Robert Pringle - The Money Trap (Book and Blog)

Recently, I had the good fortune to discover another highly credible information source who writes about the issues we try to cover here (a reader here pointed me to it). Robert Pringle has a long and distinguished career in economics that you can read about here. Here is a selected excerpt:

"After obtaining a Masters degree in economics, sociology and history from King’s College, Cambridge University and post-graduate study at the London School of Economics, Robert joined The Banker, part of the FT group, later being appointed the Editor.
He also served as deputy director of the Committee on Invisible Exports, a body representing a wide range of UK service sectors, which was set up by the Bank of England to study and publicise the contribution made by financial, business, professional and allied services to world trade and the UK economy. He led a study that made the first published estimates of the invisible earnings of UK professions such as law, medicine and accountancy.
From 1979 to 1986  he was the first executive director of the Group of 30, an influential think tank based at the time in the World Trade Centre, New York (it has since moved to Washington, DC). For the G30, Robert co-authored pioneering studies of the foreign exchange and interbank markets, and on IMF borrowing from the private markets, and the emerging profession of official reserve management."

Mr. Pringle wrote a book titled "The Money Trap" in which he lays out his thesis that central bank policies since the financial crisis in 2008 have met with limited success. The book argues that governments have been using the wrong policy weapons. On his blog, Mr. Pringle recently wrote this article which summarizes the problems he lays out in his book. Here are a few quotes:

"What is the money trap? How can we get out of it?
Let me try to reformulate the thesis of my book in the light of recent developments.
Since the 1970s we have been in a period of transition to a new paradigm of monetary policy. Governments have tried various approaches to the challenges of managing money: in the 1970s, they put full employment top, and used monetary policies to expand demand, taking risks with inflation; the result was high inflation, high debts, the Third World debt crisis, and, eventually,  high unemployment. The 1980s saw a backlash as popular discontent with high inflation made policy makers give priority to price stability; this led the way to inflation targeting (IT) and central bank independence (CBI). After meeting with apparent success in The Great Moderation, the 2008 crash showed this policy model was also deficient. Since then reforms have focussed on strengthening bank capital but the basic framework of the system – IT + CBI with flexible exchange rates – continues.
This period has culminated in some of the biggest experiments ever – a massive expansion of central bank balance sheets, official interest rates held near zero for several years and in some cases deliberate currency depreciation in an effort to spur growth.
Results have been mixed.  Banks remain under great pressure, lending remains sluggish, real capital investment disappointing while households and businesses pile up cash balances.
To quote William White: (former BIS)"  . . . . . 
. . . . .
"To recap: Governments are evidently imprisoned in a cage from which they can see no way out. Indeed, there is no way out while they remain under the illusion that they can achieve their objectives by fiddling with monetary levers. Whatever form the central bank doctrine takes, whether reinforced by regulatory powers or whatnot, and whatever rules or objectives central banks follow, make no essential difference: they fail to achieve their ends; economies remain unstable, financial systems fragile. Public trust is lacking. Popular discontent and anger rumbles on dangerously."
My added comments: Here we have yet another very high credibility source expressing concern that the current monetary polices being employed are not solving the basic problems in the present global financial system. Mr. Pringle cites concerns from former BIS official William White who we covered in an article here on the blog earlier this year
The list of high credibility sources we are compiling here who are concerned over the stability and sustainability of the present global financial and monetary system keeps growing. We have been documenting warnings and concerns issued in recent years by current IMF and BIS officials all along (see list here). This year we have added new information from some former officials like Dr. Warren Coats, former BIS William White, former Dallas Fed President Richard Fisher and now from Robert Pringle
These are sources that should be listened to because they have years of experience on the front lines within the global financial system. When they express ideas and concerns, it is based on first hand knowledge in dealing directly with all kinds of issues and problems. I am happy to learn of the blog site (The Money Trap blog) that Mr. Pringle produces. I plan to monitor the blog as another high quality information source for readers here. I have told Mr. Pringle by email of my intentions to follow his blog and feature relevant articles there from time to time. He sent a kind and gracious reply.
Those of us who do not have a background in macro economics need all the expert sources we can find to help us learn and stay alert to any potential future change that might impact our lives. Mr. Pringle is another source that can help us with that objective.

Added notes: Readers may find this section on Gold of interest on The Money Trap blog. Here is quote from this section:

"History shows not only that there are alternatives to current ramshackle arrangements, but also that there are cycles in the way society defines and uses money itself.
Amidst spreading uncertainty, one thing is certain: that present arrangements will not endure. They are not compatible with globalised finncial markets. They are already in a state of advanced decay."

Also, I would like to thank Mr. Pringle for taking time from a very busy schedule to look over this article for accuracy (of my comments on his views). Whenever an expert takes time to do that, it helps improve the quality of the information presented here and we owe them our thanks for that. It's incredible how busy these kinds of experts are and yet they still make time to help us out here now and then. It's greatly appreciated.

A thank you to Willem Middelkoop (OMFIF Advisory Board) for a tweet on this article. And a thank you to Dan Popescu for his twitter mention as well. Another thank you to Robert Pringle for link back to this article on his blog in the last paragraph of this article.

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