Abstract
The current state of global banking is partly the result of lawmaking.
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Notes
James Robertson estimates that the commercial banking system creates about 90 per cent of the total money supply, far exceeding the portion of the money supply created by central banks — see James Robertson and John Bunzi Monetary Reform — Making it Happen (London, International Simultaneous Policy Organisation, 2003), p. 19.
James Rickards estimates the portion of money created by the commercial banks in the US at 80 per cent, see James Rickards, Currency Wars — The Making of the Next Global Crisis (New York, Portfolio/Penguin, 2011), p. 179.
Ronnie J. Phillips, The Chicago Plan & New Deal Banking Reform (New York, M.E. Sharpe Inc., 1995), foreword by Hyman Minsky, pp. 45–70.
Michael Hudson, Super Imperialism: The Origin and Fundamentals of US World Dominance, 2nd edn (London and New York, Pluto Press, 2002), preface and ch. 11.
Elgin Groseclose, America’s Money Machine: The Story of the Federal Reserve (Connecticut, Arlington House, 1980), p. 112.
John Butler, The Golden Revolution: How to Prepare for the Coming Global Gold Standard (Hoboken, NJ, Wiley, 2012), pp. 174–5.
John Kenneth Galbraith, The Great Crash 1929 (Boston and New York, Mariner Books, 2009), pp. 3–7.
Numbers from Hyman Minsky, Stabilizing an Unstable Economy (New York, McGraw-Hill, 2008), p. 331.
Liaquat Ahamed, The Lords of Finance: 1929, The Great Depression, and the Bankers Who Broke the World (London, Windmill Books, 2010), p. 322.
Gregory Mankiw, ‘The Macroeconomist as Scientist and Engineer’, Journal of Economic Perspectives, 20 (4): 29–46; (Fall 2006)
Richard Duncan, The Corruption of Capitalism (CLSA Books, 2009), pp. 8–9.
Richard Duncan, The New Depression: The Breakdown of the Paper Money Economy (Singapore, John Wiley, 2012), p. 56.
For a more detailed description, see Dirk Benzemer, ‘No One Saw This Coming: Understanding Financial Crisis through Accounting Models’ — MPRA (Munich Personal RePRc Archive — MPRA Paper No.: 15892 posted 16 June 2009).
Michael Hudson and Dirk Benzemer, ‘Incorporating the Rentier Sectors into a Financial Model’, World Economic Review, vol. 1 (2012), p. 2.
W.S. Jevons, The Theory of Political Economy (1871).
Quoted in Donald Gillies, ‘Can Mathematics Be Used Successfully in Economics’, in What’s Wrong With Economics, edited by Edward Fullbrook, London 2004 — Chapter 18, p. 188.
Edward Fullbrook, ‘Are You Rational?’, in A Guide To What’s Wrong With Economics, ed. Edward Fullbrook (London, Anthem Press, 2004), p. 71.
Paul A. Samuelson (‘Nobel Prize’ laureate), Economics, An Introductory Analysis, 4th Edition of a total of 19 editions. Quoted from George Cooper, The Origin of the Financial Crisis (New York, Vintage Books, 2008), p. 6.
Steve Keen, Debunking Economics: The Naked Emperor of the Social Sciences (London and New York, Zed Books, 2004), p. 167.
Marc Blaug (1927–2011), Economic Theory in Retrospect (Cambridge, Cambridge University Press, 1997), pp. 569–70.
Unlike speculative bubbles, informational cascades do not reflect the behaviour of rational speculators betting on the continuance of overpricing. But neither are the investors in a cascade necessarily behaving irrationally, as are those investing on the basis of a fad. Rather, they are attempting to make rational decisions based on all the information available to them, but their aggregation of that information results in mispricing relative to fundamentals. Imperfect information aggregation may occur when individuals follow the behavior of preceding individuals rather than acting on their own information. Or later investors, unaware of the information that motivated earlier ones, will be tempted to base their decisions on the action of those investors. See Bruce J. Jacobs, Capital Lies and Market Realities: Option Replication, Investor Behavior and Stock Market Crashes (Oxford, Blackwell, 1999 and reprint 2000), p. 98.
J. Bentham, The Principles of Morals and Legislation (New York, Hafner Press, 1948 [1780]), quoted from Keen, Debunking Economics, p. 26.
See: Daniel Kahneman, Thinking Fast And Slow (New York, Farrar, Straus and Giroux, 2011).
Benoit B. Mandelbrot and Richard L. Hudson, The (Mis) Behavior of Markets: A Fractal View of Financial Turbulence (New York, Basic Books, 2006), p. 55.
See also, Charles Ferguson, ‘Larry Summers and the Subversion of Economics’, in The Chronicle of Higher Education, 3 October 2010. Also: Washington Post, 4 April 2009, ‘White House Economics Aide Summers Discloses Income.’ According to this article Summers collected in 2008 USD 5.2 million from the hedge fund D.E. Shaw and USD 2.7 million in speaking fees from several troubled Wall Street firms.
E.g., Glenn Hubbard was a Board Member of Matropolitan Life and Capmark, a major commercial mortgage lender, which went bankrupt. The declared income from Metropolitan Life was USD 250 K p.a. Laura Tyson was on the Board of Directors of Morgan Stanley (USD 350 K p.a.); from: Charles Ferguson, ‘Larry Summers and the Subversion of Economics’, in The Chronicle of Higher Education, 3 October 2010.
The so-called S&L crisis was quite severe. 1,043 out of 3,234 savings banks had been closed. The total cost had been USD 153 billion, USD 124 billion were shifted to the taxpayer and USD 29 billion via industry support for the deposit insurance institutions — Admati and Hellwig, The Bankers’ New Clothes, p. 55. See also William K. Black, The Best Way to Rob a Bank Is to Own One: How Corporate Executives And Politicians Looted The S&L Industry (Austin, University of Texas Press, 2005). There Black shows that the crisis was caused by bad deregulation and endemic fraud. Over 1,000 ‘rational agents’ were convicted of felonies.
Brooksley Born, ‘Deregulation: A Major Cause of the Financial Crisis’, Harvard Law & Policy Review, Vol. 5, 2011, p. 235.
Federal Reserve Bank of New York, Quarterly Report on Household Debt And Credit, May 2012.
Vera C. Smith, The Rationale Of Central Banking and the Free Banking Alternative (Indianapolis, Liberty Press, 1990), p. 30.
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© 2014 Tillmann C. Lauk
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Lauk, T.C. (2014). Banking. In: The Triple Crisis of Western Capitalism. Palgrave Macmillan, London. https://doi.org/10.1057/9781137432964_2
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