ECB should give money directly to citizens

The European Conservatives and Reformists (ECR) group in the European Parliament recently launched “Leer Geld”, an initiative led by MEP Sander Loones, to raise awareness about the effects of the monetary policy conducted by the European Central Bank (ECB).

The initiative is to be welcomed: monetary policy is too often overlooked by civil society, yet its impact on our lives has never been greater. Under its “quantitative easing” programme (QE), the ECB has been buying large quantities of government bonds since 2015. Surely injecting the equivalent of 20 percent of GDP into the eurozone finance sector cannot be without consequences. (continue)

You can read the full article written by me and Eric Lonergan at EUobserver.

So little time (reading list)

I have wanted to write a series on power in democracies ever since my How to win votes post from June 2016. Being elected is not enough (or necessary) to have real power. Policy need to be implemented. There can be opposition from civil servants and judges appointed by previous regimes1. The press can selectively report on what politicians are (not) doing.

Unfortunately, I haven’t found the time yet to write down my general ideas on power, as I have been too busy with my book on banking. But right now, the Trump administration is exposing the hidden assumptions many commentators have about democracy. This makes the Trump regime a great case study for anyone interested in real world politics, rather than the fantasy version2 many people desperately want to believe in.

If you’re bored with the (very annoying and unoriginal) “Waaah, Trump is a meanie” fluff you can read everywhere, here are some interesting articles:

On leadership and politics:

This is why authoritarian leaders use the Big Lie (by Xavier Marquez)

Why do rulers follow the rule of law? Thoughts on Trump, Erdogan, and history (by Jared Rubin)

On institutions and the “deep state”:

Egypt’s failed revolution (by Peter Hessler)

Former Obama Officials, Loyalists Waged Secret Campaign to Oust Flynn (by Adam Kredo)

Hail to the Pencil Pusher (by Mike Konczal)

On life in non-democratic countries:

Everyday authoritarianism is boring and tolerable (by Tom Pepinsky)

On censorship and ideas:

Raining Frogs (by Isaac Simpson)3

On trade:

What exactly does Mexico export to the US? (by J. W. Mason)

On culture:

Origins of political correctness, Lugenpresse found in panics (by Brett Stevens)

On Political Correctness (by William Deresiewicz)

James Burnham’s Managerial Elite (by Julius Krein)4

What is global history now? (by Jeremy Adelman)

A Hard Future for a Soft Science (by Bradford Tuckfield)

Liturgy of liberalism (by Adrian Vermeule)

Biological Leninism (by spandrell)

Clarifying the First Law (by Lawrence Auster)

The Warlock Hunt (by Claire Berlinksi)

On big data and statistics:

Do You Trust Big Data? Try Googling the Holocaust (by Cathy O’Neil)

On psychology/convictions:

Why Facts Don’t Change Our Minds (by Elizabeth Kolbert)

Dopamine Puppets (by Scott Adams)

On sociology:

A Miscellany of Foundations and First Principles for the Study of Sociology (by “Dissenting Sociologist”)

On ethnic conflict:

The Lost World of West Philadelphia (by Devin Helton)

On monetary policy and central bank independence:

Why conservatives should fear a Trump Federal Reserve (by Peter Conti-Brown)

I’ll expand the list if I come across other good articles. Hat tip to pseudoerasmus and HappyAcres, who always share quality stuff.

Last update: December 9, 2017

Blog highlights of 2016

When I started my blog, I worried that there wouldn’t be enough interesting topics to write about on a regular basis. I was wrong…

Politically, 2016 was the year of Brexit and Donald “Mr. Brexit” Trump.

If you read one single article by me, let it be How to win votes.

Written shortly after the Brexit referendum, it anticipated what the mainstream media ‘discovered’ following the election of Trump. Including fake news, the role of hackers, online bubbles, demographic voting blocks, elite rejection of election results…

Rereading my piece What voters like about Trump, I can say that I covered all relevant aspects months before Trump’s victory forced the Belgian press to take him seriously. And I pointed out the backlash against social justice warriors which is also happening in Europe, e.g. due to their crusade against Zwarte Piet (note that my post was written in June!).

By clicking on the Trump tag, you can find more posts on Trump’s presidential campaign and the reaction of the press.

On finance and economics, I have written long posts on central banking, such as

How central banks influence interest rates by quantitative easing

Helicopter money part I, part II and part III

Central bank liabilities and profits

Furthermore, some economic posts exposed the errors of tenured professors. They should read my upcoming book!

The book I’m writing is a kind of Finance for dummies1. I need about one more month of editing before I can send it to a publisher. Check my blog in 2017 for updates on when it will be released. You can also follow me on Twitter.

There is nothing about Trump in my book, so his haters will also like it!

Annual reviews and other Soviet business practices

As the end of 2016 is quickly approaching, it is time to reflect on the past year. For people working in large bureaucratic organizations like banks and government, this means filling out performance evaluations. Organizations collect these records of their employees’ professional histories. Managers can use old reviews to motivate (non) promotions of their subordinates.

One intriguing aspect is the fact that employees are expected to write negative things about themselves. In management speak this is called “opportunities for growth” or some other bullshit term. But basically the writers have to incriminate themselves. The self-evaluation provides the proverbial rope for somebody to hang them with.

This reminded me about something I read in a book1 by historian Orlando Figes on the Soviet Union. Members of the Communist Party had to write an autobiography which was regularly updated. The higher-ups in the hierarchy could use these documents to control their underlings and their rivals.

The more you think about it, the more parallels there are between modern business life and Soviet society.

It is well known that corporations are not democracies nor markets. But this post focusses on the cultural similarities that caught my attention. Continue reading “Annual reviews and other Soviet business practices”

Social media warriors for Trump

WARNING: This post is NOT SUITABLE FOR WORK!

Decades from now, historians will be discussing how the political outsider Donald J. Trump could win the American presidency from a career politician like Hillary Clinton.

While the memory is still fresh, I – as a foreign observer – want to highlight a part of the presidential race that has not been covered well by the press. Especially as censorship is rapidly destroying evidence of what has really happened.

This article documents an aspect of the online battle for the hearts and minds of the public that was not organized by the official Trump campaing team.

This is my report on the Meme War of 2015-2016. Continue reading “Social media warriors for Trump”

Trump predictions. Let me get some popcorn.

There is a Dutch proverb that says “een ezel stoot zich geen twee keer aan dezelfde steen”. Its literal translation is “a donkey doesn’t bump against the same stone twice”, but is usually translated as “once bitten, twice shy” or “a fox is not caught twice in the same snare”.

The proverb means that people don’t (or shouldn’t) make the same mistake twice. Even a dumb animal like the donkey is smarter than that.

Apparently, the political pundits are dumber than donkeys when it comes to Trump. For over a year, they have underestimated his chances. Here is a list of Trump predictions, in which the ‘You are now here’ marker has continuously moved down:

greentexttrumppredictions

Not having learned from their embarrassing experience, the pundits cannot help but continue their failed predictions. Continue reading “Trump predictions. Let me get some popcorn.”

Don’t be an idiot like Paul Krugman

The electoral victory of Donald Trump has dumbfounded the pundits. Nobel Prize winner and political commentator Paul Krugman was very confident prior to the election that Hillary Clinton would win.

When the election results came in, he was shocked. Krugman admitted that he didn’t know the United States as well as he thought he did.

This was not surprising. Krugman is the prototype of a sheltered elite living in a bubble. How many Trump voters do you think he personally knows? Probably none. Rather, he inhabits an echo chamber full of likeminded people. Just to give some examples, I’m talking about people like Noah Smith, Brad DeLong, Paul De Grauwe and Simon Wren-Lewis.

All have academic backgrounds, cushy jobs, and liberal technocratic preferences. They all read papers like the New York Times. They all are given a forum in the quality press. The all “know” Trump is an incompetent idiot. They all “know” that “facts have a well-known liberal bias”.

In spite of their titles and influence, they were dead wrong about Trump. Continue reading “Don’t be an idiot like Paul Krugman”

From Moses to Trump: elites against the establishment

Elites cannot act against their own interests, right?

Donald Trump has been running a populist campaign against the establishment. To many of his critics, this is absurd.

Why should a billionaire care for the working class? How can a man whose shirts and ties are made in China be against trade deals? Is Trump credible when he calls for a wall at the US-Mexican border, knowing he hired Mexican workers himself?

Trump is so much part of the elite that his Democratic rival Hillary Clinton even attended his wedding to Melania.

It appears that Trump belongs to the establishment which benefits from the status quo. Why would anybody who is a ‘winner’ in the system want to change it?

These critics, however, miss two important points.

First of all, the critics assume that members of the elite are only motivated by their personal financial interests. This, however, denies human nature. People have strong feelings on what is just and right. Elites have the means to become champions for others they sympathize with. Continue reading “From Moses to Trump: elites against the establishment”

Robot shark lifeguard

One of my business ideas has recently been implemented. My former colleagues at KBC launched a platform where small business owners can find entrepreneurs who want to take over an existing company.

I had this idea when a well-run shop for fishing gear and pet products in my hometown closed down. The owners retired and none of their children was interested in continuing their work.

This was a shame, because a lot of know-how and service to customers was lost. The owners missed out on the sale of a profitable business. A sale of the going concern could have yielded much more than selling separate assets. For the bank, a sale would have brought the opportunity to manage extra retirement funds. In addition, it could offer a loan to the new owner, sell insurance1, payment solutions etc.

As I regularly have ideas for startups or other business opportunities that I cannot pursue myself, let me share an idea that I had today. Feel free to implement it! You can thank me later when you’re a millionaire.

Engineers at the US Navy are developing a robot shark. They intend to use this robot to patrol around ships and in harbors. It is normal that the Navy explores military applications first.

A clever startup could market such robots as lifeguards.

But such devices could find widespread civilian use. A clever startup could market such robots as lifeguards. Imagine a robotic lifeguard loaded with sensors that can detect when a swimmer is in trouble. And that can grab them and bring them to the surface or to shore. This would give extra support to human lifeguards. And because it is seaborne already, a robot shark would cut down valuable intervention time.

The market for such a device would be huge. Think of all the swimming pools and beaches that would want to improve the safety of their bathers. Or robot sharks could assist in saving drowning migrants in the Mediterranean.

Central bank liabilities and profits

Central banks (CentBs) have drastically expanded their balance sheets in the wake of the global financial crisis. The Federal Reserve (Fed) and the European Central Bank (ECB) followed the example of the Bank of Japan (BOJ) by buying trillions of dollars and euros worth of long-term bonds, a policy known as quantitative easing (QE).

The CentBs make these purchases by “base money”, i.e. cash and reserves1. Neglecting legal restrictions, CentBs can create base money at will.

There is a lot of controversy among economists about QE and its consequences for the balance sheets of central banks.

This post discusses the question of whether or not base money should be considered a liability of the central bank. After that issue is understood, we can clarify when the CentB can book a profit and how this affects government finances.

One of the stated goals of QE is to raise inflation. Some worry that once this happens, rising interest rates will cause massive losses to the central bank, resulting in unspecified “bad things”. I argue that these fears are unjustified. Continue reading “Central bank liabilities and profits”