So he explains it all

Richard Murphy says:
January 14 2016 at 7:07 am
What I am saying is that time limited notes always mean that a transfer of funds between banks is possible in a crisis, but that the impact is limited

So, runs become irrelevant: the BoE will issue funds to make payment in the case of any bank and so the 2007 Northern Rock scenario need not arise. The animal spirits can be contained

But this is achieved without guarantees

And it is achieved in a way that has to reverse: the redepositing of funds has to take place, so the cash extended is almost as quickly cancelled and order re-established

There may be flaws in the idea: I am far from being able to see all consequences of a suggestion. But it would seem to me a way that avoids the need to formally guarantee deposits and which at the same time aids their orderly transfer if there was a crisis

The very fact that it does that probably mean that they may not be needed, whcih is the best outcome for all contingency plans

Nope, he still doesn’t get it.

If the bank is solvent but illiquid then the central bank will provide unlimited liquidity. And cashiers cheques etc will also work. So, we don’t need time limited money. If the bank is insolvent then the time limited money doesn’t work either.

15 thoughts on “So he explains it all”

  1. “There may be flaws in the idea: I am far from being able to see all consequences of a suggestion.”

    Lol.

    A rare admission of fallibility from the Great Oracle.

  2. I want to see this man on national TV. I want to see him telling people that banks should give them thousand pound notes which become worthless in thirty days.

  3. “There may be flaws in the idea: I am far from being able to see all consequences of a suggestion.”

    Then why making it in the first place?

    As a private and, all things considered, insignificant person, I can afford to shoot myself in the foot by having an opinion based on inadequate understanding of the facts available to me on Issue [x]. Life can force your hand , and all.

    However, if Issue [x] touches subject(s) I have been educated in, or worse, claim a certain amount of (professional) expertise in, using this line becomes a cop-out for incompetence.

    When this caveat is used in a professional capacity in a (semi)public position it becomes downright criminal.

    excuse me.. my mood went from grumpy to murderous on this one.

  4. Maybe we can make this educational. Next time there’s a bank run, those queueing for their savings can choose between taking Richard’s funny money, or they can vent their frustration at waiting by sawing Richard’s shed in half.

    As long as there are no neoliberal sophists in the queue, it should be a foregone conclusion.

  5. Wellll…. it’s good practice to explain the assumptions your report is based on. These figures assumes the Census is more accurate than the Elecoratal Register. This code assumes that ‘month’ is always 1-12. This map ignores CEDs with fewer than 20 people. etc.

  6. Not sure how just limiting withdrawals wouldn’t be easier, at the point he’s talking about there’s no confidence in the bank anyway so taking out time limited money that you can’t rollover by depositing in another bank isn’t an improvement on you can have x amount of real cash per day and we will still be processing bill payments, mortgages electronically.
    Maybe this is another one of those make it so complicated it needs a load of extra civil servant proposals he likes doing for the unions.
    For someone who talks so much about transparency and tax loopholes he is very quiet on simplification of the tax code.

  7. I like the idea that £1,000 notes, even “time-delimited” are less use to criminals than £10 notes. That’s why they don’t do 500 euro notes any more, coz the criminals complained.

    As if any government is going to issue £1,000 notes but which expire at the end of the month. That’ll inspire confidence. Take a bank with a rumour of insolvency. About fifty people go to said bsnk to remove their money. Respond by making said bank issue unless huge denomination notes which expire in a month. Everyone chillaxes and watches TV.

    No, wait: riots ensue as everyone thinks the whole currency is fucked and tries to withdraw their money.

    Even Corbyn thinks he’s a liability. Reflect on that.

  8. Actually, I don’t understand the criminal reference. What does he mean? What special relevance does criminality have during a banking crisis? Why is it an issue then more than now?

  9. The 500-euro note is very popular with criminals. Murphy doesn’t want to create a sterling equivalent.

    Why he thinks high-denomination notes are the key to solving a banking crisis I haven’t understood.

  10. Rob: Actually, I don’t understand the criminal reference

    It’s just Murphy having vestigial awareness that criminals supposedly like big denomination notes and he thinks that he can magic up a comprehensive compendium of tricks to develop a wizard solution to a problem that nobody has had the gumption to identify, let alone resolve until he came along.

  11. “The 500-euro note is very popular with criminals.”

    Yes, I know. They didn’t really complain. I thought it had been withdrawn, but only apparently in the UK.

  12. It’s almost as if he hasn’t noticed how customs have changed over the last 25 years. I honestly cannot recall the last time I visited a bank to cash a cheque or withdraw funds. Perhaps Murph wants these high denomination notes to be available from ATMs. This would radically change the risk reward ratio of knocking off an ATM. It would be good for those companies who rent out JCBs, however. Maybe this is part of the cunning plan, although I must admit that encouraging bank-runs by the method of stealing ATMs seems an odd policy to me and it is unclear what problem it solves.

  13. “The 500-euro note is very popular with criminals. Murphy doesn’t want to create a sterling equivalent.”

    Well yeah.. who wouldn’t like large denomination notes when it comes to the business of shifting large amounts of [economic exchange token] across Legalities undetected.
    Bank notes are still less monitored than , say, serious amounts of gold.

    Less items makes for easier counting as well, always a plus in a rather harsh environment where “mistakes” can be pretty terminal.

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