Update Note to Readers

I have been on a family vacation over the past couple of weeks and am just now catching up on emails and news events, etc. As soon as I can I will post new articles. Obviously, the global panic related to the virus epidemic is causing some havoc in the markets, so clearly we should follow that closely. It's too early for me to tell how much impact it may have.

The political environment in the US remains as volatile and divided as ever so that will continue to be something to monitor all year since it could impact markets and financial stability. The rhetoric will only get more and more intense of course until the election is over with. Whether the results lead to any significant changes is impossible to project at this time. It is reasonably safe to assume that if President Trump is re elected, the odds of significant changes to our present monetary financial system are low.
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This is way off topic, but I do endeavor to try and provide helpful information here as best I can. We just finished a family vacation to Walt Disney World and were fortunate to be able to experience the new attraction their called The Rise of the Resistance which is part of their new Star Wars themed area.

If readers here have any interest in information about that attraction or tips we used that seemed to help us obtain a coveted boarding pass, I would be happy to do an off topic blog post to share the information. The boarding passes for this ride are hard to get due the the overwhelming demand every day that Disney is currently unable to meet).

Just email me to let me know if there is enough reader interest to warrant it. Meanwhile my daughter wrote this article which may be useful:

https://livelovelocalblog.com/how-to-get-a-rise-of-the-resistance-boarding-group/

This recent article linked below gives you an idea of how crazy the situation has become there at Disney World because of the surge of demand for this new attraction:

https://blogmickey.com/2020/02/dont-visit-disneys-hollywood-studios

We had never crowds like this before except around holidays and certainly not at the end of February. It appears that the attraction is drawing in thousands of extra visitors to the parks every day, even on days not historically known for large crowds.

Managing Global Liquidity as a Global Public Good

Although it has now been some time since the world has seen any kind of global banking or liquidity crisis, the potential for one still garners the attention of policy makers. 

A thank you to a reader here for pointing me to this report on the Robert Triffin International web site that urges policy makers to add more tools to monitor global liquidity and provide more early warnings of potential crisis. Below is the excerpted introduction to the report which includes a link to the full pdf version of the report.

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Managing Global Liquidity as a Global Public Good - A Report of an RTI Working Party

Robert Triffin International, Centro Studi sul Federalismo, December 2019

"The cumulative balance sheet effects of a decade of low interest rates, long as well as short, have become very large. This report examines the magnitudes of such effects through the many dimensions of global liquidity. This is not purely a monetary policy phenomenon as regulatory policies, restrictive fiscal policies in some advanced economies and structural factors have all had important impacts. 

Several indicators suggest increased financial vulnerabilities and higher risks of destabilising market dynamics. The dollar debt of non-banks outside the United States is at a new record: currency mismatches and leverage in the private sector have increased. The dollar funding of non-US banks looks fragile. Greater reliance on international bond markets has created new, opaque risks. There is widespread unease about the domination of the dollar, and about the inadequacy of the Global Financial Safety Net. The search for alternative multi-currency arrangements continues. But the need to address the risk of a new dollar liquidity crunch is urgent. 

International oversight of this issue is at present too fragmented. Policy responses at national level may require action by several bodies – central banks, regulators and Treasuries. The report therefore proposes that the Financial Stability Board, with inputs from the BIS, the IMF, the OECD and others, report regularly on global liquidity to G20 Ministers and Governors so they can act in time to avert a crisis."

Click here to find the pdf link to the full report

Blog Reader Provides Link to an Article on Jacques Rueff

One of the benefits of doing this blog is that from time to time I get reader input pointing me to a variety of information and articles that touch on the ideas of how a monetary system should work.

In this case, I want to thank a reader here for fowarding me this link to an article that explores the views of French economist Jacques Reuff. Below I have pasted in a few excerpts from the article. The reader also advises me that he is collaborating with the author of this article (Samuel Gregg) on another article that will propose some ideas on how a monetary system should be structured later on this year. 

We are always happy to feature serious ideas and proposals on this topic here and then add them to our marketplace of ideas for monetary system reform page. The intent is to build an archive all on one blog page linking to a number of ideas for monetary system reform to make it easier for readers to consider them and compare them. I could not do this without all the help I get from reader input and experts who help me out. I always want express my thanks for that here.

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Jacques Reuff's Monetary Order and US

"We live in strange monetary times. In Europe and Japan, central banks have implemented negative interest-rates to stimulate sluggish economies, despite overwhelming evidence that such policies aren’t working. The European Central Bank has even restarted its four-year old quantitative-easing program to try and overcome anemic growth throughout the Eurozone. Across the Atlantic, the Federal Reserve is trying to calibrate interest-rates to help America avoid a recession, even though there’s no consensus among forecasters of an imminent recession. Calls for the Fed to head towards negative-interest rates grow louder.

These trends suggest an international monetary system in which some of the world’s leading central banks seem driven by political reaction to immediate events and unfocussed upon what a primary goal of any sound monetary system: the provision of a stable unit of account that facilitates the free economic choices of consumers, households, and businesses over the long-term. From this standpoint, a type of monetary disorder is growing throughout the global economy.

Addressing the problem in a comprehensive way surely requires consideration of what truly constitutes order in a monetary system. Few people thought more about this question than the French economist and civil servant Jacques Rueff (1896-1978).

Searching for Order

"Perhaps the twentieth century’s foremost French economist, Jacques Rueff is primarily remembered for designing the economic reforms (Le plan Pinay-Rueff) imposed by Charles de Gaulle’s incoming government in December 1958 upon a France mired in economic crisis. These reforms—trade liberalization, spending-cuts, major tax and welfare changes, the termination of subsidies to many industries, and the franc’s devaluation—are widely acknowledged as having saved France from a perfect storm of currency instability, high inflation, uncompetitive industries, feeble capital markets, and low productivity. During the last fifteen years of his life Rueff moved from the French to the world stage, becoming a leading voice for restoring the classic gold standard as the Bretton-Woods system gradually collapsed."

. . . . 

Real Rights and False Rights

"But what type of framework should guide the state’s bolstering of monetary stability? This brings us to one of the most innovative aspects of Rueff’s thought about monetary order: his distinction between true or real rights (vrais droits) and false rights (faux droits).

By “real rights,” Rueff had in mind rights such as rights to property. These establish a minimum of economic order by clarifying who owns what, thus enabling people’s natural propensity and liberty to possess, use, and exchange things. Such rights nevertheless need to be given form, structure, and content by government policy and legal decisions. The establishment of contract laws, for instance, allows individuals to coordinate their use of their property in mutually beneficial ways.

The legal recognition of these rights is effective because it accords with economic truths about humanity. Such rights are thus “real.” Conversely, law and policies which contradict certain economic facts—supply and demand, the workings of incentives, humans’ tendency to pursue their self-interest, etc.—end up, Rueff says, creating “false rights.”

A government may declare, for instance, that people have a right to healthcare. But if markets in healthcare are not allowed to work, such a right merely exists on paper: hence, its “falseness.” Moreover, the fact that the state has affirmed this to be a right but proved unable to realize it, encourages disrespect for the law as well as increased demands by citizens that the government actualize what it cannot. In democratic societies, Rueff believed, it was hard for politicians to resist such pressures. This produces policies which magnify the proliferation of false rights through the economy."

. . . .

Conclusion

"The key to monetary order, Rueff teaches us, is to create institutions which help market relationships to function, rather than subverting them. Establishing and protecting such rules requires the inner conviction needed to resist temptations to short-termism, and a fortitude that seems beyond most legislators and many central bankers today. That, however, is all the more reason for us to listen to Jacques Rueff—someone notoriously unafraid to speak economic truth to politicians of all persuasions—and heed his insights in our own age of creeping monetary disorder."

Please click here and read the full article on Jacques Rueff

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Added note: We will keep an eye out for the new article mentioned by the reader expected to come out later this year and feature it here if and when it becomes available online.

OMFIF Report - Central Bank Currencies - A Question of Trust

I got an email from the OMFIF (Official Monetary and Financial Institutions Forum) based in London alerting me to new report they have issued. The report is a look at global public confidence in monetary, financial, and payment institutions as it relates to the potential issuance of central bank digital currencies. It is based on a global public opinion survey poll.

Below I have pasted in the Executive Summary for this new report. I believe readers can access the full report here by providing an email address. I was able to do so by providing one. This is an interesting new look at who the public might most trust in the future for the issuance of "digital currencies". I would encourage readers to download the full report.
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Executive Summary

Central Banks in Pole Position to Issue Digital Currency

"DIGITAL payments are proliferating worldwide and are proving increasingly popular. In China, the mobile payments market is worth $5.7tn and is dominated by two behemoths, Alipay and WeChat Pay. Facebook wants to launch Libra, a global digital currency, later this year, a move which has prompted wider discussion about central bank digital currencies. 

While the rise in digital payments is global, different regions have disparate needs. In advanced economies, services such as FedNow in the US and Faster Payments in the UK are evolving to meet the need for faster back-end payment solutions which can underpin retail payments. In emerging markets, the surge in mobile payments makes it much easier for workers to send remittances home to their families.

These changes in consumer behaviour and the surrounding policy debate make this the ideal time to present this OMFIF report, which centres on the findings of a global opinion poll on public trust in monetary institutions, payment characteristics and digital currency. The poll was conducted by Ipsos MORI across 13 advanced and emerging countries.

Our findings suggest that central banks are well-positioned to issue digital currency. In almost all countries, respondents indicated that they would feel most confident in digital money issued by the domestic monetary authority. Respondents globally expressed a lack of confidence in digital money issued by a tech or credit card company, particularly respondents from advanced economies.

The survey reveals significant differences in attitudes depending on levels of income and education, age and nationality. High-income and young respondents express the most confidence in current and future digital money, and consider speed to be part of the appeal.

The results indicate that openness to digital offerings rises with income and education levels, but declines with age. When respondents are asked about their preferred ideal characteristics for a payment method, they are unanimous in citing safety from fraud and theft as the most important feature, across all countries. Speed is the least important characteristic, suggesting that digital money will have to improve its safety features if it is to be to adopted widely.

The findings suggest that cash remains king: it has the highest average score across all different payment characteristics posed to respondents, across most different income, education and age groups. Cash is particularly popular in some advanced markets, such as the US and Britain. Respondents in emerging markets show the greatest level of willingness to embrace digital currency in the future and are open to the question of who should issue it.

These findings should prove informative and useful for monetary policymakers and private sector practitioners alike. They provide the first clear, quantitative indication of which groups and markets are most amenable to digital currency, and can serve as guidelines for regulators, central bankers and those working in the private sector who want to market their digital offerings to a broader audience.

Please click here to find access to the full report on the OMFIF web site

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Added comment: Once again I would call your attention to the next to last paragraph posted above from the Executive Summary. While we continue to see predictions of a future "cashless society" in various media articles, every study or report I see from any kind of official organization always includes a comment about how important cash remains as a payment system. They also usually note that there is no expectation that cash will be removed from the system any time soon and most studies even point out a number of hardships that would result from total elimination of cash used for payments. I think it is important to emphasize that for readers here.

BIS Update - Central Bank Digital Currencies

In the recent BIS (Bank for International Settlements) monthly update, they have several articles dealing with the status of central bank digital currencies. Below I have pasted in this recent update.

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February 2020 The green swan  How should central banks preserve financial stability in the age of climate change? Central bank digital currencies survey  Central banks are doing extensive work on digital currencies, and a small number indicate that they are likely to issue one soon. Policy responses to fintech FSI Insights paper provides a cross-country overview of policy responses to fintech developments. Monetary policy frameworks At an American Economic Association panel organised by the BIS, policymakers discuss whether monetary policy frameworks are still adequate to cope with the challenges central banks are currently facing. Creating a credible and trusted digital currency Benoît Cœuré takes part in a panel discussion on the likelihood of a trusted global digital currency and what trends could shape its future. More BIS publications  Statistics: Cross-border bank lending accelerates Global cross-border bank lending grew by 9% year on year at end-September 2019. Announcement: BIS expands membership The BIS invites the central banks of Kuwait, Morocco and Vietnam to become members and increases emerging market representation in key committees. Statistics: US dollar credit outside the US expands Dollar credit to non-bank borrowers outside the US grew by 5% year on year at end-September 2019.

Fed Chairman Discusses a US "Digital Currency" with Congress

We continue to monitor this space since central banks do continue to talk about the idea of possible issuing central bank digital currencies. We have several articles on the blog this month that cover various aspects of this issue.

Here we have Fed Chairman Powell responding to Congressional inquiries about it. There is nothing really new to report here but below I have posted a couple of excerpts from this news article on Yahoo about Powell's recent comments to Congress.

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"On Tuesday, Federal Reserve Chairman Jerome Powell gave his monetary policy report in front of the U.S. House Financial Services Committee, and then withstood hours of questions from members of Congress.

Rep. Bill Foster, a Democrat from Illinois, spent his entire five minutes asking Powell about cryptocurrency.

That line of questioning yielded some perspective from Powell that the Fed chair not previously given, and his responses could stoke optimism or disappointment from many in the cryptocurrency world, depending on how they want to parse his typically very deliberate word choice.

So, what did we learn about Powell and crypto?"

. . . .

“Frankly, Libra really lit a fire,” Powell said, “and was a bit of a wakeup call that this is coming fast and could come in a way that is quite widespread and systemically important—fairly quickly, if you use one of these big tech networks like Libra did. We fully appreciate the importance of making quick progress—we have not decided to do this, though. There are many questions that need to be answered around digital currency for the United States, including cyber issues, privacy issues; many many operational alternatives present themselves, so we’re going to be working through all that.”

Please click here to read the full article on Yahoo Finance

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My added comment: This article goes on to further state that Chairman Powell made it clear that the Fed has no current plans to implement a central bank digital currency in the US and another article I read said the US sees no need for it any time in the next five years.

Coming up later this month are some updates from the BIS on its views on central bank digital currencies and a new report from the OMFIF on CBDC's based on a recent global survey poll.

Added note: A thank you to reader Doug in the comments below for this link related to the Fed and a future digital currency:

https://www.coindesk.com/trumps-fed-nominee-judy-shelton-says-us-should-be-proactive-on-digital-dollar

Word Economic Forum - Central Bank Digital Currency Policy Toolkit

A thank you to a reader for passing along the link below to a report from the recent World Economic Forum that discusses policy tools for central banks considering using either a wholesale or retail version of a central bank digital currency.

We continue to see very little change in that arena so far and continue to expect any changes we do see to be slow and gradual in nature.

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WEF - Central Bank Digital Curreny Policy-Maker Tookkit

Executive summary

"In recent years, central bank digital currency (CBDC), a new form of digitized sovereign currency, has risen to prominence as a policy and operational consideration for many central banks, ministries of finance and other institutions. The intricacies of implementing CBDC are complex and the implications are wide‑reaching. As a result, policy‑makers may find themselves in uncharted waters when attempting to evaluate the potential benefits and trade‑offs associated with CBDC.

 The World Economic Forum’s CBDC Policy‑Maker Toolkit seeks to address the need for a concise CBDC decision guide that provides comprehensive and risk‑aware information to policy‑makers. This document serves as a possible framework to ensure that any CBDC deployment fully considers the costs as well as the potential benefits, appraising a multitude of risks and evaluating deployment and governance strategies, alternative solutions and other salient factors. Notably, it is not exhaustive, and instead intends to serve as a complement to additional research that any policy‑maker considering CBDC should conduct.

The CBDC Policy‑Maker Toolkit provides high‑level guidance and information for: 

– Retail, wholesale, cross-border CBDC and alternatives in private money such as “hybrid CBDC”
 – Large, small, emerging and developed countries."

. . . . 

"As policy‑makers navigate this process, they should consider how CBDC may introduce new capabilities that support regulatory goals while also introducing new risks or compliance vulnerabilities. CBDC could potentially be used as a tool to achieve policy objectives such as improved safety and resilience in payments systems; increased efficiency, access and competitiveness of payments systems; better data transmission and reporting to central banks; and financial inclusion. The achievement of these goals with CBDC must be evaluated in the full context of the associated trade‑offs and risks that CBDC may entail." 

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My added comment: I noticed this note from page 19 of the report linked above regarding the future of cash. I added the bold underline below for additional emphasis:


"Physical cash, particularly small banknotes, guarantees financial inclusion more than any other means of payment. Cash serves as a last‑resort means of payment and store of value in the event of payment‑system shocks and failures. For many, it is also their primary means of payment and savings. The central bank should not develop policies that remove small banknotes from retail use until a fully reliable alternative is available to all members of the population, which may not be possible." (see page 19)

Once again, for those expecting cash to disappear any time soon, I see nothing on the immediate horizon that suggests that to be the case for the reasons noted above and others that various central banks have cited including the US Federal Reserve.

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Added note: The Bank for International Settlements (BIS) produces this press release on CBDC news:

Central Bank Group to Assess Potential for CBDC's

"The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Sveriges Riksbank and the Swiss National Bank, together with the Bank for International Settlements (BIS), have created a group to share experiences as they assess the potential cases for central bank digital currency (CBDC) in their home jurisdictions. 

The group will assess CBDC use cases; economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies. It will closely coordinate with the relevant institutions and forums - in particular, the Financial Stability Board and the Committee on Payments and Market Infrastructures (CPMI). 

The group will be co-chaired by Benoît Cœuré, Head of the BIS Innovation Hub, and Jon Cunliffe, Deputy Governor of the Bank of England and Chair of the CPMI. It will include senior representatives of the participating institutions."

Facebook's Project Libra Continues to Face Headwinds

We covered Project Libra initiated by Facebook here some last year. While the project (which involves Facebook attempting to launch another payment system based on its own "Libra" cryptocurrency) attracted a lot of attention, we did note that we expected it to also encounter a lot of resistance as well.

That has proven to be the case as the two articles linked below point out. Below is a brief excerpt from each article.

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Coindesk.com - Vodafone is the Latest Big Company to Quit Project Libra

"Vodafone and Libra both confirmed Tuesday the company is no longer part of the consortium. Vodafone will dedicate resources previously intended for Libra to its well-established and successful digital payment service M-Pesa, which the company plans to expand beyond the six African nations currently served."

. . . . 

While Libra originally intended to launch in the first half of 2020, this timeline was thrown into doubt last year when Facebook CEO Mark Zuckerberg said regulatory concerns might push back the date.

Speaking on stage at the Blockchain Central panel held by the Global Blockchain Business Council at Davos, Disparte (Libra Association) further hinted at a possible delay in the launch schedule."

Please click here to read the full article on Coindesk.com

Bloomberg - Facebook's David Marcus Vows to Move Forward with Libra

"The Facebook Inc. executive responsible for the embattled Libra cryptocurrency said he doesn't fault companies that pulled out of the project, adding that he's optimistic more organizations will sign on despite intense opposition from politicians who seem to fear financial innovation."

. . . . .

"Visa, Stripe and Mastercard received letters earlier this month from Democratic U.S. Senators Sherrod Brown and Brian Schatz that urged the companies to "carefully consider" how they would manage potential risks associated with Libra before proceeding with the project. Asked if he thought the letter constituted a threat from the senators to the companies, Marcus responded, "I don't know, what it did it sound like to you?" He added that such correspondence can have a "chilling effect."

Please click here to read the full Bloomberg article

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My added comment: We continue to report here that major changes to the present monetary system are likely to be gradual in nature unless some kind of systemic crisis forces more rapid change. As these articles continue to illustrate, the status quo is quite powerful and hard to change without some kind of outside force impacting its stability.

Added note: Upcoming this month are several interesting articles on the future prospects for various kinds of digital currencies. These artciles will include some of the latest information from the World Economic Forum, the Bank for International Settlements, and the OMFIF based in London. If you review all these articles, you will be pretty well caught up with some of the latest information on this topic. 

Some News Notes as we Move into 2020

Right now there are just a few news items to follow as best I can tell. As we have stated repeatedly, it is obvious that the political battle in the US will pretty much suck all the oxygen out of the room this year at least until the elections are over in November. Who knows if even that will end the seemingly never ending intense political warfare of a nation that is clearly deeply divided on many issues including the economic ones we try to follow here. Below I am noting a few things to continue to follow since it is possible they could impact markets and even systemic stability.

1- Continued All Out Political Warfare 

It is now completely clear that a deeply politically divided nation will not find many issues to agree on and the old days of meeting somewhere in the middle seem to be gone. This environment creates a situation where no matter who wins elections, the other side wages never ending war to prevent anything from being done if possible. While this has led to gridlock for some time, if either side gains enough power to move an agenda, the system could be disrupted since the opposing policy proposals tend to be radically different from each other. It's just something to continue to monitor.

Added note 1-31-2020: Although it appears the US Senate will soon vote for acquittal in the current impeachment trial, we can expect that this will not change the political atmosphere in any significant way. Several Democrats have stated they will just continue to restart new impeachment proceedings so long as President Trump is in office. This suggests the all out political warfare likely will not decrease in intensity. Beyond that, we can now expect that in the future any elected President who faces a House of Representatives controlled by the opposing political party will probably be impeached at some point in their term. In our view here, all this is because the general public is completely divided and not likely to unite any time soon. So, no matter who wins any particular election, the opposition (or "the resistance" if you prefer that term) will now use any means available to them to try to block the agenda of their political opponents. We can't change the reality of how the world is and the enormous lust for power that obviously exists. So we need to correctly understand it in order to make the best personal financial decisions as these events can and do impact markets.

2- Dr. Judy Shelton nomination to the Federal Reserve

Dr. Shelton is widely viewed as someone who has "unconventional" views and who might challenge what some view as "groupthink" at the Fed. It is really unknown whether this would be a major factor impacting the system or not, but we should keep an eye on things at the Fed when she joins the Board of Governors.

3- Ongoing Repo Market Operations by the Fed

We have followed this since last year and it seems to still be a potentially significant issue to keep an eye on. The Fed says these unusual market operations are not an indication of any serious problems in the system. Skeptics and critics are raising many questions about that. All we can do is just monitor events and see what happens. But obviously, if there is some kind of major systemic problem inside the system that the Fed prefers not to disclose, the potential to disrupt the stability of the system would exist. Certainly it should be watched carefully.

4- What Happens with Project Libra - Facebook payment system

This project is meeting a lot of resistance from politicians and other interested parties as we expected here. We will do an update on this with some recent news on this Facebook project.

Followup from Q&A Interview with Robert Pringle

Recently, we published a Q&A style interview with Robert Pringle which you can view here. I wanted to select a couple of the questions and answers from the interview for additional emphasis for readers here. I have pasted them in below with a few additional comments I wanted to offer on these.

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Q: Central banks have played a huge role in guiding the present monetary system for many years now. Can you discuss some of the pros and cons you have seen over time of the role central banks have played?

A: "The central bankers I have known have been decent, honourable and conscientious. Events thrust their institutions into positions of high authority and status. Even the smallest central bank makes decisions of crucial importance for its country and people. Their elevated position exposes them to high risks and what they often call ‘headwinds’. This is an understatement. 

If central banking were classed as an Olympic event, it would join such sports as surfing, skateboarding, karate, and rock climbing, at the extreme end of the sporting spectrum. 

Central banks served as midwives of our current monetary and economic regime. They helped to shape its present form.

Now they service and maintain critical financial networks that span the globe. Far from being detached bystanders, they have facilitated revolutionary changes - changes that affect the life chances of men and women everywhere. We are all inter-connected through this intricate and ever-expanding monetary spider-web. 

They have managed multiple crises as agents of governments. The costs have been high, but not catastrophic - not yet.

What central bankers evidently do not know is how to prevent crises from happening in the first place. They claim to have learnt from experience, but the public is rightly skeptical. To what extent their policies are actually responsible for social ills such as rising inequality, stagnant real living standards in many countries, sluggish investment, growing monopoly power (notably of Big Tech) rising popular anger and disrespect for elites and ‘experts’ is arguable. I suspect they have been a significant factor. President Trump plays a “Punch and Judy” show with Fed chair Powell  but that’s what it is - a show. Sound money is as far away as ever."
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My added comments: A couple of points to make here for me. First, please note that these comments come from someone who has worked directly alongside many of the well known central bankers from around the world over the past several decades. So they have very high credibility for me.

The second point is to note that even those who work inside the system acknowledge that no one can control all the factors that can impact the stability of any monetary or financial system. This is why we have repeatedly stated here that readers should desire to stay informed and alert to events that can potentially impact systemic stability. Change comes eventually with the biggest question being what prompts the change and how quickly does it take place. In our view here, those are key unknowns to everyone including those who run the present system.
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Q: Central bank critics say that the "easy money" policies used in the last few years have not solved our ongoing systemic problems. What are your thoughts on that?

A: "I agree with such criticisms. It has been business as usual - in the sense that the overall design of the policy response to the crisis follows an established pattern: bail outs, large-scale monetary and fiscal stimulus, more detailed and extensive regulation, interference in market determination of interest rates, long as well as short, resulting in the suspension of market signals normally deemed essential to the functioning of capitalism. This leads to more political pressure on the state to move in and undertake investments. The ultra low interest rates have in effect replaced inflation as a tax on the public - a tax that governments have taken full advantage of. The inevitably sluggish response of the economy then is used to justify further state borrowing - because it is thought to be “free” money. This crowds out the private sector.

This is more than a debt trap; it is, as I argued in my book of 2012, a ‘money trap’. The nature of our money is at the root of the problem. 

At a time when everybody expects another crisis, it is absurd to suggest policies have solved your systemic problem."

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My added comments: Again, please note that Mr. Pringle agrees with critics who question whether central bank policies are really working to solve long term systemic problems. If he feels this way, we certainly need to take these issues seriously and realize that we need all the best information we can get to stay alert to any events that might impact the stability of our present system. 

Having just read his new book (The Power of Money), Robert Pringle goes far beyond the comment above. In the book, he calls on new thinking to emerge that could lead to a "reset" for our money so that in the future money becomes the servant of mankind rather than its master as it has so often been over time. 

He traces this history of money and its impact on society over the last 200 years. He talks about many hot topics of the day including the future of cash (he says it is not going away any time soon) and why gold has been and continues to be trusted the world over as a long term store of value (and why central banks own it but don't like the gold market as a commentary on their policy actions). He explains why credible and viable private sector alternatives to state sponsored money should be encouraged rather than suppressed. He says in the end, a society gets the money it deserves which is why we all need to learn as much as we can about these issues.

We all hope that future crisis will be avoided. But just assuming we won't get one and sticking our heads in the sand is a naive approach to say the least. In the book, perhaps the main theme was that money and monetary systems are never permanent and will eventually change over time and what we have now will also change at some point in the future. No one can really know what exactly will prompt the change or when it may happen, but history tells us it will happen as Robert Pringle shows clearly in the book.

This blog was created to encourage people to study these issues and take them seriously. Hopefully, as many people as possible will do that. This blog has archived many ideas related to these issues here on this page of the blog for anyone interested in learning more. There is a lot of information on that page you will not likely find on most media sources including some direct input from experts like Robert Pringle and others who want to see our money and our monetary system serve the people in the best way possible using what we can learn from history as a guide.

Summary of Some Key Messages from The Power of Money by Robert Pringle

As we mentioned in this earlier article, Robert Pringle has released a new book (The Power of Money) that takes an in depth look at the past, present, and potential future impact of money on our society. Mr. Pringle sent me an email with a list of some key points he wanted to emphasize that he gave permission to share here. These points listed below are taken directly from his email.

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. . . "here are some of the key messages (they may not all be expressed in these words in the book itself):"

1. The 20th century saw the rise of the Anglo-Saxon idea of money and the monetary economy to global ascendancy; for this to occur, rival outlooks and cultures had to be defeated and discredited  chief among them those of Germany and Japan.

2. Money is fertile ground for dangerous myth-making: among these is the belief that somewhere out there is an ideal money, one of universal applicability and good for all time and all circumstances; the search for this can be highly damaging. So is the belief that money is “just” a social technology - it is that, but is is much more than that.

3. A society's money must reflect and embody or project its shared values - as shown in the book these are subject to change - often rapid and unexpected change.

4. The true “backing” of a money consists in the values, beliefs and outlook of the society using it, its constitution and governance, not any specific metal and not the ‘fiat’ of the state or an agency such as a central bank. When people hold dollars, they share in American values and spirit.

5. Since the fall of neoliberalism our money lacks such backing, so people do not know what it is for - what social purposes it serves. That is why it needs to adapt to the growing consensus on an outlook giving priority to controlling climate change and the Green agenda.

6. It is in the nature of money to have damaging side-effects and temptations, as amply illustrated in the book; yet societies can learn to control these adequately for money to work its magic. How? That has been a concern of all religions and philosophers. Now we wonder why we are plagued by monetary diseases, like the 10 plagues of Egypt, we attribute them to forces, we try rationally to control them but they constantly escape our methods of control. We are much vexed.

7. The power of money and the monetary outlook has been at work behind many of the changes of our society, including some liberal causes such as feminism as well as adverse effects including the destruction or corruption of social bonds, family life, ancient civilisations and religious faiths. Not to deny that the benefts may well outweigh the costs.

8. The search for an ideal money that will be good for all times and places is vain. A good money is one that works well for its society.  On the whole, we get the money we deserve. It acts as a mirror for society’s faults as well as its virtues.

9. I do not at all dismiss the contribution of economists but society at large has to set the direction of travel.

10. I invite economists and central bankers to engage in a discourse about these wider aspects of the topics they study and the policies they advocate.

Please use and share the above as you see fit - and no offence taken if you think they stray too far from our brief!   (the Q&A interview topics)

All best wishes

Robert
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My added comments: I have now had a chance to read The Power of Money and I can say without reservation that this is a book that anyone interested in the issues covered on this blog will find interesting and worthwhile reading. The book was somewhat different than I expected in that it is not any kind of technical look at monetary polices or even just an historical recap of now our money has evolved over time. 

This book seeks to make the case that how society views money (and how money is used by powerful forces to influence society in various ways) goes far beyond just what people are using for money or what central bank policies may be in place at any given point in time. Those things change over time, but the Power of Money on society remains a constant.

Written from the perspective of a true "insider" of the monetary system, it reminds me of a book written years ago called "Tragedy and Hope" by Carroll Quigley. This book however, is a much easier read and focuses more narrowly on how money and power intertwine and how the "guardians of money" seen as the financial "elite" really operate the system.  It chronicles some of their successes and some of their failures as viewed by the author.  

Some of the fascinating topics explored in the book are:

- How did two world wars shape how the monetary system evolved from the Victorian era?

- The ongoing battle of views about money and its proper role in society swings back and forth over time impacting what kind of economic and monetary system we have

- The Euro Project - How it started - Did it work as Intended?

- What caused the financial crisis in 2007-2008? What did the Fed miss leading up to it?

- Why that crisis has renewed the debate over what money is and how we should use it

- The dangers of too much State control over money

- Where do things stand presently? Why it is hard to change the status quo

- Will we go "cashless"?  (he says not anytime soon)

- What about gold? How does he view it? How do central banks view it?

- Gold always bounces back no matter what is done to discourage its role as a store of value

- Where are we going in the future with our money? (does anyone really know?)

- We need ideas and imagination that challenge the status quo and the future is up to us (we the people can determine what happens with our money and if it is used for good or bad purposes)

This list only scratches the surface of the interesting topics explored in this book. It is filled with information, insights, and some personal anecdotes you will not see in mainstream media. It is written by someone who has observed how things work from the inside. If you have wanted that kind of perspective on how things really work, this is a book you would want to read. I think would find it very interesting and surprising in many regards.

Added news note: 1-16-2020: President Trump formally nominates  Judy Shelton and Christopher Waller to the Board of the Federal Reserve