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Announcing the Instituto de Finanças Funcionais para o Desenvolvimento

Today is Wednesday and I have to travel most of the day and present to a large financial markets gathering in Sydney tonight. My theme tonight will be ‘What the Hell is Going On’, as a challenge to the mainstream who haven’t a clue about what is happening and summarise their lack of awareness and the dissonance that is creating for them by screaming about inflation. The mainstream macroeconomists are so far off the mark these days that they must be like the flat earth theorists who watched ships successfully sail off the edge of the globe only to come back around the other side. They are lost and can only interpret the current events in terms of ‘duh, central banks buying bonds, too much money in the system, duh, must be inflationary’. Anyway, today some jazz and a video to watch.

Creation of a new Institute in Brazil

Last week, Randy Wray and I joined some scholars from Brazil, who have established the – Instituto de Finanças Funcionais para o Desenvolvimento – or Institute of Functional Finance for Development or IFFD for short.

This was their inaugural event and both Randy and I were really pleased to be invited as speakers at their launch.

This is a great initiative and I hope they can create change in the economics debate in Brazil, which is obsessed with issues pertaining to currency instability and debt.

That obsession has constrained public policy and prevented millions from escaping the interminable poverty that the application of mainstream economics creates.

Here is their – Manifesto (in Portuguese).

This video documents their launch. Most of it is in Portuguese but from 10:53 to 27:00 you can see some of the contribution Randy and I provided to the discussion in English.

Anyway, to Simone and Daniel and Co, good luck with your venture.

Music – One can never have enough Jazz – Part 2

This is what I have been listening to while working this morning.

On Monday, I presented the jazz interpretation of Erik Satie’s Gnossienne pieces by French pianist Jacques Loussier with his Trio.

Please read my blog post – Progressive political leadership is absent but required (October 24, 2018) – for more detail on Erik Satie.

Today, to complete the picture, here is the – Jacques Loussier Trio – playing Erik Satie’s Gymnopédie No. 1, which is the first of his suite of three exercises or – Trois Gymnopédies – for piano, which were written between 1888 and 1895.

They are in 3/4 time and the first one was indicated by Erik Satie to be played in a ‘Lent et douloureux’ fashion. Very slow and very gravely.

Here is the jazz version of the first of the three pieces.

It is off an album – Jacques Loussier Trio Satie, which was released in 1998 (Telarc Jazz).

As an additional link – here is the version by – Blood, Sweat and Tears – from their – Variations on a Theme by Erik Satie (1st and 2nd Movements) – which appeared on their second album from 1968.

Quite a contrast to the rest of that album.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

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    This Post Has 9 Comments
    1. Bill,

      I am sure that you will have seen an article entitled “The UK economy could be transformed by a central bank digital currency” that appeared in the Guardian. However, I wonder if readers of your blog will have seen it.
      https://www.theguardian.com/commentisfree/2021/jun/14/central-bank-digital-currency-uk-economy

      There is a consultation document from the BoE at
      https://www.bankofengland.co.uk/paper/2021/new-forms-of-digital-money

      I wonder if it would be possible for you comment on this proposal, as it doesn’t seem to me to be at all sensible based on the article alone. I’m just starting on the BoE documentation (71 pages).

      It would be great if you could

      Many thanks.

    2. We keep hearing about digital currencies as if people are finding gold mines.
      Well, aren’t all currencies digital, nowadays?
      Aren’t paper bills and coins something of the past, that we can’t discard alltogether, just yet?
      Or are we talking about cripto-currencies?
      The cripto fans even call the blockchain computing as mining.
      It’s so easy dreaming oneself hitting a motherload of GOLD!!!!!
      Many people believe cripto is a hype thing, the great fashion of the XXI century, just after tesla.
      Some people believe that is just another ponzi scheme.
      Ponzi schemes may be forbidden in some countries, but not in Kosovo, where the electricity is free and everyone is “mining” (Kosovo is an ancient mining region, so the verb mining).
      The electricity drain in Kosovo is so great, that europe’s clock time even got behind it’s due schedule, in 2018 or 2019.
      So why do this people say it’s the future?
      Because it’s scarse. The number of tokens is limited, as if it was GOLD!
      But, when they mine the last cripto, what will happen?
      They’ll close the mine.
      The tokens will be around, OK.
      But, what’s the use of those tokens?
      They don’t buy you anything, but you got to give away dollars/euros/whatever to buy them.
      So, they are a pure speculative asset.
      Let’s go back to the old currencies – the fiat currencies.
      What are those old currencies worth?
      Well, they’re worth a lot if they are issued by a central bank on country with a strong economy; they’ll worth little if the economy is weak.
      You can speculate with an old currency (like Soros did with the british pound on the black wednesday), but only if the government is weak.
      You wouldn’t play wednesdays in China.
      So, some governments – like the Chinese – are getting around cripto, because people are eager to have cripto. They want it – let’s give it to them.
      Having the old chinese currency, or the new one, doesn’t make a lot o difference, except if you loose your hard drive.

    3. @ Paulo Rodrigues re: ‘Well, aren’t all currencies digital, nowadays? …Or are we talking about cripto-currencies? I agree the language is confusing because of course few transactions actually involve cash these days. But no, the Bank of England is not addressing the current crypto-currencies but a) what it calls ‘stablecoins’ – stable because ‘new forms of digital money are assumed to be denominated in sterling. Unlike cryptoassets such as Bitcoin, which do not have an anchor, they are also assumed to be backed by assets that make them stable in value. Thus they have the potential to be widely used in the UK economy as an alternative to existing forms of money. But, unlike commercial bank money, it is further assumed they would not be created by lending (private bank loans).’ Quote from BofE report, link provided by Richard1. Quite how backed and anchored I’m not clear. b) a Central Bank Digital Currency – which I gather would be money that people could hold in deposits directly at the BofE. Both would seem to challenge the existing cosy private bank lending backed by the state model.

    4. For me, I think money issued by the state is debt instrument, crypto currency is not.

      Crypto is a form of asset like gold dug out from the ground, tulip you grow in the garden, diamond from a mine, or anything of that nature (tangible or intangible).

      I have not read the articles mentioned by Richard1, but I have reviewed around 200 articles on crypto currencies (sometimes ago) for a research purpose, my perception is that as long as fiat currency is used by central banks, they should not get confused with this “asset money for transaction” concept.

      While at the same time, they should try to improve this state money (fiat system) to keep up with modern world (more convenient digital banking, digital transactions, better interesting settings, if they have to, and so on).

      Coming back to the crypto, so, I think the question should be more like how state or one deals with speculation or possible speculation in an economy, like property bubbles, currency speculation, crypto bubbles etc. to avoid the next financial crisis if it is left unchecked.

      And for us, how one benefits from it, or just avoids it all together.

    5. @ vorapot re: ‘money issued by the state is debt instrument’ It’s a very flexible debt instrument, depending on the citizen’s situation. If I am being paid for work in the economy (or even receiving out of work or retirement benefit), I may have to make a part repayment immediately, if I am on PAYE (pay as you earn tax), but otherwise get time to exchange the money issued for goods/services, before making repayment in tax. I or others might even carry that money forward in savings or assets such as a house, to future generations without the state demanding all of it back, and at no interest. That’s not a bad deal, but then I had to (usually) work upfront for it.

      ‘as long as fiat currency is used by central banks, they should not get confused with this “asset money for transaction” concept.’ This I don’t understand. We don’t have a barter system. Of course, unless I am paid or transact for cash, I don’t ever have a direct relationship with the currency issuer (although this may change if there is a Central Bank Digital Currency) – I just rely on the private banks marking accounts up and down. You may be right that cryptocurrencies are like tulips but without bringing much cheer to anyone except the few successful speculators.

    6. The term crypto-currency is misleading just as is “life” insurance when you are buying death insurance. As long as these assets are quoted or valued in dollars or other currencies, they are crypto-assets, not currencies. In the traditional definition of a currency–a medium of exchange or store of value, these “currencies” fail on both counts. For a country to adopt a crypto-currency such as bitcoin as legal tender tells me that transactions in that country will be reduced dramatically due to the misunderstanding of the way in which bitcoin is valued.

    7. Patrick B: “You may be right that cryptocurrencies are like tulips but without bringing much cheer to anyone except the few successful speculators”.

      That’s all there is to it I am afraid.

      No state, in the right mind, would allow anyone to issue currency to be used in her own jurisdiction.

      It is like Donald Trump allowing Maduro to issue peso or bolivar to be used in the US, or vice versa (that would be fun).

      But asset money for transactions system (like gold nugget for cheeses), which sometimes can be more convenient or flexible, but not practical in modern or even ancient macroeconomic management.

      Further, equality and justice for mankind, transferring of currency-issuing capacity into the public hand for better use for society, etc. are fine, but how this is done has to be within a framework.

      As far as history and human experiences are concerned, the widely adopted one is called double-entry book keeping, and usually maintained by an accepted body like a government or her agent.

      (By the way, what I want to say in the earlier post was “interest rate settings”. Sorry for the typos).

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