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I think that Keynes' Gesellian approach at Bretton Woods to his Bancor/International Clearing Union was spot-on and is a key insight which I have referred to here many times.

But the central issuance of a fiat Bancor by the ICU quasi-IMF/World Bank institution he had in mind required global government and global taxation to back it. This is just a New World Order wet dream.

I like to distinguish between:

(a) Financing - which is short/medium term, high risk credit based upon productive people, and which enables the creation of productive assets;and

(b) Funding - which is medium/long term; low risk, and based upon the use value of productive assets.

Financing does not require deposits: merely credit clearing based upon the capacity of individuals and corporates to provide value.

VISA is a good example, where there are no deposits, and both the sell side (through charges) and the buy side (who pay interest in respect of unpaid balances) cover system and default costs and provide a handsome profit to the owners.

The Swiss WIR is another credit clearing system which has been around since 1934, and the ongoing Ecuadorean FactoRepo is yet another. In neither case does fiat currency change hands: obligations are settled not in exchange for, but by reference to fiat currency as a numeraire.

It is the deployment of the credit necessary for Funding of productive assets which is the interesting question.

This is where the need for deposits comes in and how a currency issue may actually be based upon productive assets.

Here, John Law's analysis and proposal in 1705 for land-backed currencies remains valid, I think, but requires updating, through the creation of units redeemable in payment for rentals in respect of real property held by a custodian. Of course, such land-based currencies would be by definition domestic, but their creation would enable existing unsustainable property debt to be converted to undated credits ina  debt/equity swap on a cosmic scale.

But in relation to the EU and the need for a common (not a single) currency there is IMHO a genuine opportunity to base a European currency upon the value of energy. Moreover, the skills and experience to architect and lead such a project are available on this site.

How that might work is one of the things we'll probably touch upon next week when we focus on my pet subject of Resilient Financial Markets.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon May 30th, 2011 at 07:32:13 PM EST
[ Parent ]
But the central issuance of a fiat Bancor by the ICU quasi-IMF/World Bank institution he had in mind required global government and global taxation to back it.

Yes.

Shared fiscal policy is a necessary condition for a stable fixed-currency regime.

That is not an indictment of Keynes' analysis, it is an indictment of the Gold Standard.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 07:36:50 PM EST
[ Parent ]
In addition, the EU (unlike the World as a whole) could have federal level fiscal policy...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:31:32 AM EST
[ Parent ]
Which presumably was the plan by the Euro founders - who had a strategic vision unlike their successors today who couldn't think their way backwards out of a paper bag.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 02:54:37 AM EST
[ Parent ]
Hmm, they already knew Germany wouldn't go for it 20 years ago...

Or Germany was hoping to impose German macroeconomics on the rest of Europe, as has happened with Merkel's "Euro Plus Pact" (formerly the Pact for the Euro formerly the Competitiveness Pact formerly the Deauville pact).

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 03:43:09 AM EST
[ Parent ]
Migeru:
they already knew Germany wouldn't go for it 20 years ago

You've said that Germany has been pursuing the same mercantilist goal for twenty years, and now that the other EEC leaders at the time knew that Germany would never accept compromise on the currency (so, presumably, moves towards a more federal type of economic governance), but went ahead all the same.

Can you write a diary explaining this?

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 07:40:43 AM EST
[ Parent ]
there still was momentum for "ever closer union." This died somewhere in the late-90s/early 00s and was killed off by France's NON to the EU Constitution, which basically set in stone the message that there would be no increase to the political legitimacy of the Brussels institutions, ceding the ground to national governments.

And at times of crisis, national populism is the easy route to deflect blame and rally people, with predictable results.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:09:44 AM EST
[ Parent ]
Stop blaming the political left for the sins of Third-Way social democrats.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:19:24 AM EST
[ Parent ]
where did you see me blame the political left in my comment above?

Wind power
by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 09:33:27 AM EST
[ Parent ]
France's NON to the EU Constitution

which you blame (not in that comment, but you did all thrrough the Constitution debates on this site years ago) on the French "lyrical left" and rebels within the PS.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:40:09 AM EST
[ Parent ]
I did indeed, but in this case I was making a more general point about the overall loss of desire for "ever closer union." Maybe it was generational change, maybe it was the focus on enlargement (which as we know the Brits did see, rightly or wrongly, as a distraction from deepening tendencies), maybe it was having a fundamentally eurosceptical French president (Chirac), maybe it was the cost and change in perspective(s) from  Germany' reunification it was the scandinavians and the more utilitarian view of the EU, or (more likely) a combination of all that.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 10:23:21 AM EST
[ Parent ]

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