Jesus’ Thoughts on Economic Justice: Cancel the Debt

Source: True Economics

The Rich Get Richer when Central Banks Print Money

Friday, May 3, 2019 | by True Economics

The Netherlands Central Bank has just published a fascinating new paper, titled “Monetary policy and the top one percent: Evidence from a century of modern economic history”. Authored by Mehdi El Herradi and Aurélien Leroy, (Working Paper No. 632, De Nederlandsche Bank NV: https://www.dnb.nl/en/binaries/Working%20paper%20No.%20632_tcm47-383633.pdf), the paper “examines the distributional implications of monetary policy from a long-run perspective with data spanning a century of modern economic history in 12 advanced economies between 1920 and 2015, …estimating the dynamic responses of the top 1% income share to a monetary policy shock.” The authors “exploit the implications of the macroeconomic policy trilemma to identify exogenous variations in monetary conditions.” Note: the macroeconomic policy trilemma “states that a country cannot simultaneously achieve free capital mobility, a fixed exchange rate and independent monetary policy”.

Per authors: “The central idea that guided this paper’s argument is that the existing literature considers the distributional effects of monetary policy using data on inequality over a short period of time. However, inequalities tend to vary more in the medium-to-long run. We address this shortcoming by studying how changes in monetary policy stance over a century impacted the income distribution while controlling for the determinants of inequality.”

They find that “loose monetary conditions strongly increase the top one percent’s income and vice versa. In fact, following an expansionary monetary policy shock, the share of national income held by the richest 1 percent increases by approximately 1 to 6 percentage points, according to estimates from the Panel VAR and Local Projections (LP). This effect is statistically significant in the medium run and economically considerable. We also demonstrate that the increase in top 1 percent’s share is arguably the result of higher asset prices. The baseline results hold under a battery of robustness checks, which (i) consider an alternative inequality measure, (ii) exclude the U.S. economy from the sample, (iii) specifically focus on the post-WWII period, (iv) remove control variables and (v) test different lag numbers. Furthermore, the regime-switching version of our model indicates that our conclusions are robust, regardless of the state of the economy.”

In other words, accommodative monetary policies accommodate primarily those with significant starting wealth, and they do so via asset price inflation. Behold the summary of the last 10 years.

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Abstract

This paper examines the distributional implications of monetary pol-icy from a long-run perspective with data spanning a century of modern economic history in 12 advanced economies between 1920 and 2015. We employ two complementary empirical methodologies for estimating the dynamic responses of the top 1% income share to a monetary policy shock:vector auto-regressions and local projections. We notably exploit the implications of the macroeconomic policy trilemma to identify exogenous variations in monetary conditions. The obtained results indicate that expansionary monetary policy strongly increases the share of national income held by the top one percent. Our findings also suggest that this effect is arguably driven by higher asset prices, and holds irrespective of the state of the economy.

https://www.dnb.nl/en/binaries/Working%20paper%20No.%20632_tcm47-383633.pdf

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Description of YouTube content: For millennia we have been told that Jesus Christ died for our sins. So much focus on sin hasn’t left much room for theologians to talk about Jesus’ thoughts on economic justice. But what if, as a social reformer, Jesus was killed because he talked about reforming the economics of his day? Writing-off debt has been a cornerstone of economic reform for millennia, so could it have been debt that Jesus wanted to do away with? Host Ross Ashcroft travels to New York to meet economist Michael Hudson whose latest book explains why ancient debt principles have never been more relevant today.

Michael Hudson

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Source: Russia Insider

Debt Jubilee Now! Babylonian King Hammurabi Was More Humane Than America’s Current Rulers

Like many ancient leaders, the Mesopotamian monarch regularly forgave debt

by Paul Craig Roberts | May 7, 2019

As school children my friends and I were very interested in archeology and ancient civilizations. We read all the available books. My best friend intended to become an archeologist and to explore ancient ruins about which we imagined more than we actually knew.  

As far as I can discern these days no one in the general population has any thoughts of Sumer, Babylonia, Assyria, Ur.  For the American young the 1940s, not 2,500 BC, is the ancient past.

Hammurabi of Babylon

A time so long ago that it predates the Old Testament by 2,000 years is probably imagined as a brutal and politically incorrect time of inhumanity and human sacrifice.  In short, a script for a horror fantasy movie or a video game.

In actual fact, these civilizations were more advanced and more humanitarian than our own. They were more advanced because the rulers were focused on ensuring the society’s longevity by maintaining a livable balance between debtors and creditors. It has all been downhill ever since.

The rulers maintained social balance and, thereby, the life of the society by periodically cancelling debts. The rulers understood that compound interest resulted in debt growing faster than the economy.  The consequence would be foreclosures on agricultural land, which would shift riches and power into a small oligarchy of creditors. The ruler and the society would be deprived of a self-supporting population on the land which provided tax revenues, soldiers for the military, and corvee labor to maintain public infrastructure.  Disaster would follow.  A grasping oligarchy could overthrow the ruler or the dispossessed population could flee to a potential invader offering their military services in exchange for debt foregiveness.  

To protect their societies from dissolution by unpayable debts, rulers periodically  cancelled agrarian debts owed by the citizenry at large, but not mercantile debts among businessmen.

The reason for debt forgiveness was stability, not egalitarianism.

We know this fascinating story of the Bronze Age’s successful economic policy because Michael Hudson spent 30 years as a research fellow at Harvard University’s Peabody Museum working with scholars of the ancient word.  The study resulted in the organization of five colloquia over a decade and in the recent publication of Hudson’s book,  “. . . and forgive them their debts.”

Please go to Russia Insider to read the entire article.

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Ed.’s note: The 1 percent discussed in the first article posted above who clearly are in an extremely advantageous position to become even wealthier when the central banks print money, are represented in the discussion below with Abbey Martin.

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