A brief reference to the functioning of the economic system through a representation of the model of the circular flow of income " (1) greatly simplified for the purpose, may 'help to understand the financial crisis sub-prime mortgage .
So very briefly, the circular flow model 'consists of two areas:
- families;
- companies.
families have the resources of production: labor and monetary resources . Businesses use these resources to produce goods and services.
families receiving income in exchange for work and / or monetary resources provided to enterprises. This income is partially spent to purchase goods and services produced by enterprises, in part shall be retained for future expenditure savings form (Wicksell, 1934).
between family businesses and so create 'two streams:
- the flow of goods and services ;
- cash flow.
generates income spent on consumption, income retained generate savings. The savings creates a cash flow which is there to store of value, and that 'brokered mainly by the banking system. It is used to finance business investment so that 'create new jobs and income for families so that they can' on the one hand consume goods and services produced by other companies and save funds for further investment, creating precisely a stream Circular, a virtuous cycle for the economy and social welfare.
This in a nutshell, and 'the facsimile of the current economic model, which Reserve bank to a central role in intermediation of monetary resources among those who have excess (families) and those who require it for investment (businesses).
Intent to understand the current financial and economic crisis, would like to analyze the flow of money as a store of value (savings) that comes from families to businesses through the intermediation of the banking system. Press analyze how saving and 'used by the banking system as many have found it right in the epicenter of the crisis.
A basic concept inherent in the currency and 'the "value of money over time (time value of money )" (2) The interest rate makes the equivalent value of two cash flows do not coincide in time (eg € 100 delivered today are equivalent to € 110 return in 1 year at an interest rate of 10% per annum, or € 110 to be collected between one year is equivalent to € 100 received today and "discounted" or better discounted at 10% annual rate). Nobody would accept in exchange for € 100 € 110 at the same time. Two factors of uncertainty affecting the interest rate: inflation (3) and risk. Note that the interest rate and 'regarded as an independent variable to the Convention on the capital of financial mathematics. In reality 'the interest rate and' a viariabile that depends on the capital. D always a point of view of money, it seems to be more 'appropriate to replace the concept of "expectation on the future" with the concept of "trade-off risk-return" (4) . For example, given that the investor in the face of lower real interest rates to keep cash rather than convert banknotes means less liquid, you can 'be argued that what' happens not depending on expectations about the future difficult to represent, but because '"the trade-off risk-return" does not make it sufficiently attractive conversion of the currency means less liquid. In this sense, inadequate " trade-off risk and return" are the cause of speculative bubbles, that 'the result of a conversion "wicked" of money in means less liquid. Since the currency and 'the liquid medium par excellence, assuming the interest rate, the rate of profit and risk premium all zero, deflation would occur in the presence of a certain gain in real terms by converting means having the money in less liquid function of store of value (cost or willingness to divest), while in the presence of inflation would be a sure loss in real terms, not turning them into money means less liquid (convenience or willingness to invest). The absence of deflation and inflation would allow a balance of flows in which it is economically indifferent holding money function as a store of value or other means with the same function as less liquid. The change in the purchasing power of money and 'the exogenous variable determined by monetary policy through the medium of the rate of change in the money.
back to saving, and it 'is mediated through a "direct transfer" and an "indirect transfer" of funds. In the European continent and 'developed a configuration more' oriented banking system: cd bancocentrica, where the firms to raise funds mainly through bank credit. In Anglo-Saxon countries there is a configuration of the financial system more 'market-oriented, with "direct transfer" of funds from households to businesses and the intervention of financial intermediaries and as a broker (in placement) and as trasformer assets (in indirect employment), where funds are found by precisely locating businesses on the market in financial instruments ( bonds, shares) in families (called savings aware ). In either case, if we exclude the pension funds are highly developed in Anglo-Saxon countries (for example, in Italy from a macroeconomic point of view, pension funds are virtually non-existent), the main financial intermediary between families and the business remains the banking system. (4)
The price of the intermediation of savings and direct 'as the "interest differential" as applied by the bank between providers (households) and borrowers of money (business).
The fact that the direct intermediation of savings to be made by the banking system is not 'the result of a free market choice, but' a privilege for state intervention (law) in favor of the bank .
In Italy and 'in fact, the current standard against which " to raise funds from the public and' prohibited non-banks . (6) Relying on the current economic model can be 'quietly say with little doubt of contradiction, that each country grants the reserve of the credit function in favor of the banking system.
state reserving to the banking system the direct intermediation of savings from households and businesses, by prohibiting the collection of savings from the public to other actors, performs an act of trust in the bank. This confidence and essentially 'justified by the fact that there is an independent public body (7) : the central bank. It addition to having the task of coining money for the state (8) and - acting on the extent of the interest rate and open market operations - to control the stability 'of prices (inflation) (9) also has the task of regulating and supervising (10) on the sound and prudent management of the institution bank (11) .
sound and prudent management essentially means
- truthfulness 'of the accounts and solidity' of bank balance sheets ;
- limits to risk-taking that might generate losses.
Consequently the central bank responsible for supervision having regard to the established 'overall efficiency and competitiveness' of the financial system as well as compliance with the provisions credit.
The state reserves to banks to raise funds from the public and therefore an exercise of the credit, 'cause there is an asymmetry of information (11) between households and businesses that the bank as' an intermediary has designed to reduce.
According to this approach, due to asymmetric information between investors and companies, the cash flow to finance investment would not take place without the intervention of the bank, 'cause the families did not have the information and confidence necessary to ensure within an acceptable level of risk that the loans made to businesses will be honored at the end.
banks, according to this approach, would have instead of appropriate organizations to find and process all the necessary information and assess whether an undertaking and therefore 'deserving of credit within a level of acceptable risk (credit risk cd ) according to the principle of sound and prudent management.
So on one hand, investors do not fund companies directly 'cause they consider a high credit risk. They prefer to deposit their savings accounts by lending to banks (savings unaware cd) which are placing greater trust in faith that will not be lost. Second, banks taking the risk of credit loan savings collected from families to businesses and making money on the interest rate differential with the approval of the state.
It works for now, mainly thanks to the trust that families have in the banks. Q HIS trust and 'substantially justified by two factors:
- the guarantee on deposits ; (13)
- the lending of last resort. (14)
history - but also the recent news - teach that the ultimate guarantor of solvency ' of the state banking system remains solvent to make the system draws on the debt (15) . From here, the unresolved issues of moral hazard, that the profits remain private while losses are socialized.
In conclusion, the banks have the privilege granted by the state to exercise the credit function, and so 'to create money through the banking monetary function (16) and as having a substantial income on the interest rate differential applied Mediation of savings. It seems obvious that this income amplified by monetary function remains to be suitably justified if commensurate reduction function of asymmetric information, namely ' through the recruitment by the banking system for credit risk on companies.
other hand, if the credit risk and 'downloaded outside of the banking system, possibly located in the financial markets using financial instruments lack transparency, the annuity becomes a legitimate extra income entirely unjustified. But this' and that 'worse, you have to admit,' the bank so that the institution 'and organized' totally useless, just end in itself! (17)
---
(1) ML Katz, HSRosen, Ed McGraw-Hill (1998)
(2) RADE Fusco, DWMcLeavey, JEPinto, DE.Runkle, Ed AIMR (2000) - The time value of money Reflects relashinship Between the time, cash flow, and an interest rate .
(3) PD Groenewegen, G. Vaggi, Carocci Ed (2002) - According to the monetarist theories of M. Friedman, H. Simons, J. Angell, K. Bruner and A. Meltzer stability 'of price is reached in the best possible way by setting a target rate of growth of money supply. In this respect, and 'quite worrying that the beginning of 2007, the Fed publishes data on monetary aggregate M3. [ http://it.wikipedia.org/wiki/Aggregati_monetari ] should also be noted that the consolidated balance sheet of the Fed, in its essence inviariato entries since 1951, in the last 18 months' exploded. [ http://www.imf.org/external/pubs/ft/wp/2009/wp09120.pdf ] [ http://blogs.wsj.com/economics/2009/06/11/a-look -inside-feds-balance-sheet-61109-update / ]
(4) for this can 'be useful to the brilliant idea of \u200b\u200bFischer Black ( Exploring General Equilibrium , 1995). Fischer Black and 'co-authors of a Black-Sholes equation ( Black-Sholes-Merton Model ) used to price options. [ http://it.wikipedia.org/wiki/Modello_di_Black-Scholes-Merton ]. See Perry Mehrling [ http://books.google.it/books?id=OKDbnWuspo4C&printsec=frontcover&dq=perry+mehrling ]. The Black-Sholes formula is not 'nothing but the heat equation with clothes covered financial [ http://it.wikipedia.org/wiki/Equazione_del_calore ]. Curiosity ': the Black-Sholes equation has established a baseline analysis of Grisha Perelman [ http://arxiv.org/abs/math.DG/0211159 ] [ http://arxiv.org/abs / math.DG/0303109] that have failed to settle the Thurston geometrization conjecture [ http://mathworld.wolfram.com/ThurstonsGeometrizationConjecture.html ] and the Poincare Conjecture.
(5) A. Saunders, MMCornett, M. Anolli, Ed McGraw-Hill (2004)
(6) See Article 11 Banking Act (TUB), Leg. 385/1993, now in force. The reserve collection of savings from the public in favor of banks and 'was introduced into Italian Banking Act of 1936 (see Article 1, Royal Decree 375/1936). According to this law to raise funds from the public and the provision of credit had qualified public functions, but now - according to the Banking today - these activities 'are activities classified as' business as "confidential". The Banking Act of 1936 was developed during the fascism and prepared by the Corporation of Insurance and Credit. The leader approved 'first draft decree Act March 3, 1935. Before 1926, the exercise of the 'bank, and in general the pursuit of activities' economic, was free and the legislature was concerned only to regulate the issuance of paper money, and this' following the scandal of the Bank Roman, the constitution of the Bank of Italy (see August 10, 1893 Law n.449) through the merger of National Bank of the Kingdom of Italy, the Banca Nazionale Toscana and Banca Toscana credit in serious condition after the decoction crisis of 1893, with complaint of serious scandals in the conduct of the National Bank and internal relations with the government. From 1926 until 1936, at the dawn of autarchy, the principles of economic liberalism began to find the first exception to which were dictated specific disciplines in the field of mortgage credit and agricultural credit. The corporate stock of the activity 'collection of savings from the public in favor of banks, and is' committed even in the current legislation even though it is not the most' qualified by the legislature as the public interest and in spite of the art. 47 of the Constitution to propose a vision of cooperative (and not corporate or fascist) for the year of the credit. Last but not least we must also highlight that the system (economic) bank and corporate-style self still in force - with universal banks held up by anti-historical privileges and inquitanti conflicts of interest and with central banks that make economic policy, and not only monetary, without democratic control - not only is devoid of utility 'social (in part because of the management of credit risk arising cd to ditribute model), but also can' be seriously detrimental to the safety, freedom 'and dignity' office, as the recent crisis in the sub-prime mortgages showed! The abolition of the reserve to raise funds for banks and 'indispensable to restore the principles of cooperation, utility' social, security and dignity 'as enshrined human art. 41 of the Constitution also apply to the banking sector after the reform of the Banking Act has definitively ruled that the bank 'business and no longer' feature of public interest. The state has a duty to encourage and protect the savings and regulate, coordinate and monitor the operation of credit in a more 'respectful of the freedom' to economic initiative and utilities' social than it has done so far, freeing themselves from patterns Corporate, anachronistic and self-legislation for the banking sector. Recent examples of bad corporate lawmaking and illiberal measures are the latest on the FCA and the Tub for financial advisers, brokers and agents in a credit institution activities 'financial, tending more' to create barriers to entry for oligopolies in the banking sector and savings, rather than actual benefits to consumers. These methodologies the lawmaking were born in historical periods in which autarkic principles existed, illiberal and undemocratic conduct of the economy, clearly in conflict with the principles of equality, freedom 'and co-operation of modern democracies.
(7) DPR 12/12/2006, Statute of the Bank of Italy, Art.1
(8) In view of this task was assigned by the central bank, the latter gets an income and 'called "seigniorage" [ http://www.bancaditalia.it/bancomonete/signoraggio ]
(9) For example, the ECB aims to keep rates below, but close to 2% the price increase. Treaty establishing the European Union, Article 105 [ http://www.bancaditalia.it/banca_mercati/polmon/obiettivi ]
(10) The supervisory controls are based on the collection and examination of documents and statistical and accounting data that the supervised entities send to the Bank of Italy, and on missions consist of inspections conducted by employees of the Bank of Italy at banks and other financial intermediaries. [ http://www.bancaditalia.it/vigilanza ]
(11) Banking Act (TUB), Leg. 383/1993, Art 5.
(12) The theory of asymmetric information is in one of the founding fathers George Akerlof. To explain the theory he does' reference to the used car market. [ http://emlab.berkeley.edu/users/akerlof/ ]
(13) In Italy, Leg. 659/1996, Deposit Protection Fund Interbancartio [ http:// www.fitd.it/ ] - In the U.S., the Federal Deposit Insurance Corporation [ http://www.fdic.gov/ ]
(14) CACiampi, credit Ultimately, Milan 21/02/1992 [ http://www.carloazegliociampi.it/71?resource_1681=12202 ]
(15) chap. 1, footnote 8
(16) v. money multiplier, Wikipedia [ http://it.wikipedia.org/wiki/Moltiplicatore_monetario ]. In the Middle Ages (1128 - 1312), the Order of Templi Salomonis Milites was undoubtedly the first global organization to benefit from the money multiplier (the cross and delight of these early " unpopular bankers ) [cf. http://it.wikipedia.org/wiki/Cavalieri_templari or http://fr.wikipedia.org/wiki/Ordre_du_Temple ]. History attests to the ability 'of the Templars in financial management. With bequests, donations and other liberal 'Knights of the Temple soon became wealthy landowners and property. The constant trips to the Holy Land, the allowances enjoyed by the direct dependence on the pope, had meant that their fleet to become the most 'fast and safe in the Mediterranean. The Templars fee organize the transport of pilgrims to the Holy Land and their assets. Most powerful of view of reliability 'acquired by the Order, the management is entrusted to the custody of their strongholds in the remarkable treasures. To relieve the pilgrims during the journey to the Holy Land from the weight of gold coins, or to help the merchants during the trip feared assaults by bandits and other risks and invented the "letters of credit or bills of exchange" (modern bank money: checks). The pilgrim leaving - instead of 'travel to Europe with heavy burdens and dangerous - place coins in the order behind a receipt showing off to his arrival in the Holy Land to collect the corresponding amount of gold or d 'silver at another fortress of the Order. In essence, the light and despised paper (had recently replaced the parchment) circulated in place of the dangerous heavy metal. [See http://www.templaricavalieri.it/storia.htm ]. In time the Templars realized that only some of the assets deposited with them was materially collected. This was because 'creditors - for comfort' and reliability 'acquired by the Order in honoring the return of deposits - accepted as payment receipts for deposit instead of gold coins. Thus was born 'proto-type of paper money. Not only that, the Templars began to pay a fee (interest), in addition to the heritage of the Order, including that portion of gold deposited by third lying unproductive in their strongholds. Cosi 'for example, in the Reign of Philip IV of France said the beautiful, circulated as means of payment in addition to gold and silver coins minted by the Mint of the Kingdom, including the "letters of credit issued by the Order, the whose total pero 'non corrrispondeva entirely to coins deposited in their strongholds, but only a fraction of them. [See http://www.ricerchetemplari.it/l 'economia.htm ]. Not for nothing when the Templars were burned at the stake, were charged (and of heresy, sodomy and illegal practice of indulgences) in order to enrich the unlawful and necromancy, that is to practice spiritualism, 'cause they would be able to transmute base metals into gold. With today's eyes it seems clear that this ability 'to create the gold was not the result of alchemy, but the "magic" of the money multiplier! It was perhaps no heresy inflation and to declare the end of the Knights of the Temple! " In 1306, during of a devaluation, rise Parisian artisans, and Philip the Handsome temporarily suppresses all corporations "(see J. Goeff, 1967, Feltrinelli, Milan).
(17) The activity of banking business, so 'as structured in the universal banks - with business models discharging outside the credit risk, with economic re-washed as to prevent them from being allowed to fail, so' to force governments to intervene with substantial public resources to cover their losses and preserve the private savings - it is difficult to 'place, in Italy, nell'alveo art. 41 of the Constitution, which states that the initiative Private economic ... can not 'conducted in conflict with the utilities' capital. So ', given the serious implications of the failure of a universal bank, its activities' private economic runs counter with the Constitution and the law should prohibit (limit negative) that were formed bank conglomerates that constitute a real danger to public finances and savings of citizens. The law should instead direct and coordinate the activities' private banking in order to pursue social objectives, without risking depletion of the nation. In this context, the reserve (including any amount to a minimum) the collection of savings from the public in favor of banks, as provided by art. 11, D. Lgs. 385/1993 (the Banking Act - TUB), where it was once intended to be an oligopoly banking firm in the banking sector to strengthen it, today is anachronistic and - given the enormous technical and technological the control of money - quite unjustifiable as well as dangerous to freedom 'and democracy.
0 comments:
Post a Comment