Time for the Magic Money Tree

One of the great things my children tought me was that, when you are playing a game with defined rules, if the rules are not working well you change them. The meta-game of manipulating the rules is itself of value, and extends the life of the game. This has application in real life!

It seems not long since UK politicians were proclaiming that the magic money tree does not exist, and there was no alternative to austerity. Yet it turns out that it does indeed exist, and is being deployed by central banks to help governments to handle the financial crisis erupting in the wake of covid-19. Money is created, by the central bank, at the stroke of a key on a keyboard, is used to solve the problem, and may get paid back eventually. There is now no alternative to the magic money tree.Read More »

The Next Crash

Why should I lie awake in the middle of the night thinking about the next financial crash, when we’ll again see failing banks and governments frantically trying to stabilise ‘confidence ‘?

Of course there will be another financial crash. There always is. It’s built into the system.

Maybe next time we should apply some common sense, says my feverish nighttime reverie.

  • Put failing banks into special administration, keeping current contracts going where possible.
  • Remove and investigate bank directors, recovering mis-spent money where possible.
  • Break up big banks rapidly into saleable and social banks eg regional banks.
  • Crucially, the money it costs should be created by central banks as ‘sovereign money’, not taken from the people and public services by increasing public debt and resulting ‘austerity ‘.
  • Of course this will slightly devalue the currency,┬ábut then that is simply a recognition of its true value in this situation.

If only…

Featured image of bank run 1933, via Wikimedia Commons