And if necessary the countries of Europe and beyond will have to demand that banks deposit their cash in Treasury deposit receipts with central banks (as happened in the UK in the second world war) to ensure resources are taken out of the feral economy and made available for the public good at a time of national and international crisis.
Let\’s just confiscate the money from the banks!
It\’s worth having a look at what was actually done in WWII though. From Ritchie\’s own source:
A second group of direct quantitative credit controls involves keeping a portion of the cash resources of commercial banks immobilized at the discretion of the central bank. Two leading examples of this technique were the use of the Treasury Deposit Receipt (TDR) in the United Kingdom during and after World War II and the \”special account procedure\” adopted in Australia in 1941. Both were means of immobilizing the increased liquidity deriving from wartime government expenditure.
Allow me to unpick that last sentence for you. Governments were spending so much, borrowing so much to do so rather than taxing, that there was huge stimulus running through the economy. Not so much for Keynesian reasons, but because the government was fighting for its life. There were thus very large inflationary pressures. The credit controls were a way of reducing such inflationary pressures by immobilising some of the banks\’ liquidity.
The direct issue of Treasury Deposit Receipts at a nominal rate of interest to banks in the United Kingdom began in July 1940. They were not negotiable in the market nor transferrable between banks, but they could be tendered in payment for government bonds (and tax certificates); hence, during the war years they had a limited degree of liquidity. The Bank of England communicated to the banks collectively the amount of the weekly call, which was divided among them in proportion to their deposits. After the war, TDR\’s were replaced by treasury bills; in order to reduce the consequent high liquidity of the banks, there was a \”forced funding\” of 1,000,000,000 of treasury bills in November 1951, which were required to be invested in Serial Funding Stocks.
Quite, this was a way of reducing the inflationary pressure of the overly-massive stimulus being caused by the borrowing and spending to fight the war.
So, note, this immobilisation of funds was an anti-inflationary move.
Now, what is it that we\’re worried about today? Yes, you\’ve got it, deflation. In fact Ritchie worries about deflation. Yet what Ritchie is proposing is that we should use an anti-inflationary policy to deal with deflation.
Yes, this at the same time as we\’re doing quantitative easing, low interest rates, loose monetary policy, vast fiscal stimulus, all the things we\’re doing so as to try and avoid deflation and goose inflation up a little bit so as to escape from the debt trap.
The man is actually proposing the 100% wrong policy. The one 100% against absolutely everything else we\’re trying to do.
Me, I think he\’s going for the brass ring, the peerage. If Maurice Glassman can get one, why not Ritchie?