I am honoured!
Tim Worstall is a man of the highest opinion, of himself.
How kind of you to say so Richard.
As far as I can tell he thinks almost everyone I know who has ever written anything is wrong.
It’s a position he might sustain if he was forever correct.
Unfortunately Tim fails in that objective. There are two good reasons for that. First he never appears to propose anything; he only criticises others. And when he does criticise he either deliberately misses the point, shooting down straw men of his own construction or he is just wrong.
His latest go at me concerns seigniorage: not a subject in common discussion I admit. It is the profit made by a person who creates currency (to put it in a nutshell). I argue that this profit largely arises to our banks. That’s because 97% of all money in use is electronic, and the banks make that. It’s that currency that they created that they have also lost: it’s how there was sufficient money to generate the enormous losses they have suffered.
Then there’s cash: that’s 3% of all money in use. Worstall argues I’m wrong because the profit on the creation of cash always goes to the Bank of England – even when issued by private banks in Scotland and Northern Ireland.
I don’t dispute this point, but when sneering what’s more important – the 97% electronic money to which I referred or the 3% cash with which he tries to defeat my argument?
I don\’t doubt that the banks, utilising this wonderful fractional reserve banking system that we have (and Adam Smith spent a number of pages explaining why it was indeed a good idea) create much of the credit in the system.
However, I do doubt that by creating such credit they earn seigniorage. That\’s the point here. If they do not earn seigniorage through that creation then there\’s no seigniorage to be captured by nationalising the banking system, is there?
That\’s the point that has to be proved. Do the banks in fact make seigniorage? Anyone care to try and prove that they do?