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The Money Changers Serenade: A New Plot Hatches — Paul Craig Roberts

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To sell this new rip-off scheme, Summers has conjured up an explanation based on the crude and discredited Keynesianism of the 1940s that explained the Great Depression as a problem caused by too much savings. Instead of spending their money, people hoarded it, thus causing aggregate demand and employment to fall.

Summers says that today the problem of too much saving has reappeared. The centerpiece of his argument is “the natural interest rate,” defined as the interest rate at which full employment is established by the equality of saving with investment. If people save more than investors invest, the saved money will not find its way back into the economy, and output and employment will fall.

Summers notes that despite a zero real rate of interest, there is still substantial unemployment. In other words, not even a zero rate of interest can reduce saving to the level of investment, thus frustrating a full employment recovery. Summers concludes that the natural rate of interest has become negative and is stuck below zero.

How to fix this? The way to fix it, Summers says, is to charge people for saving money. To avoid the charges, people would spend the money, thus reducing savings to the level of investment and restoring full employment.

Summers acknowledges that the problem with his solution is that people would take their money out of banks and hoard it in cash holdings. In other words, the cash form of money provides consumers with a freedom to save that holds down consumption and prevents full employment.

Summers has a fix for this: eliminate the freedom by imposing a cashless society where the only money is electronic. As electronic money cannot be hoarded except in bank deposits, penalties can be imposed that force unproductive savings into consumption. 

1 Comments in Response to

Comment by Ed Price
Entered on:

"Banks too big to fail." Now let me see. If I were smart enough to create a banking system that paid me billions and trillions, would I be dumb enough to think that I could imprison the people in their bank accounts?

If this is for real, if these folks are truly thinking of penalizing people for having a little savings set aside for a rainy day - 'cause that's about all that the few people who have savings at all maintain - then the banking system is truly at the crashing point. It is literally falling off the cliff. It is over the edge. It is gone, and you should be pulling as much of your money out as you can and putting it into tangibles or Bitcoin.

On the other hand, these guys are pretty shrewd. It just might be that they want the banking system to fail entirely. Maybe Bitcoin is already positioned, in their control, to take over the world (even though the current Bitcoin bubble is bursting, violently, as I write). The Btc bubble will return, and along with it more stability and use for everyday affairs.

The other question always is, when these people talk like this, what are they doing behind the scenes?

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