Only with fixed fx, where ‘money creation’ is better described as ‘deficit spending’.

Shame shame shame.

ECB’s Weidmann Says Unlimited Money Creation Risks Inflation

By Jeff Black and Jana Randow

September 18 (Bloomberg) — Bundesbank President Jens Weidmann said central banks that promise to create unlimited amounts of money risk fueling inflation and losing their credibility.

In a ceremonial speech in Frankfurt today, Weidmann, who opposes the European Central Bank’s plan to spend unlimited amounts on government bonds, spoke of the responsibilities that central banks have to preserve the value of money.

“If a central bank can potentially create unlimited money from nothing, how can it ensure that money is sufficiently scarce to retain its value?” he asked. “Is there not a big temptation to misuse this instrument to create short-term room to maneuver even when long-term damage is very likely? Yes, this temptation is very real, and many in the history of money have succumbed to it.”

While Weidmann didn’t directly address ECB policy, he is the only central bank governor from the 17 euro nations to publicly oppose ECB President Mario Draghi’s plan to help curb the borrowing costs of member states engulfed by the region’s debt crisis. Weidmann, who has warned the bond-buying policy is tantamount to financing governments, said today that central banks were given independence to ensure the power to create money couldn’t be abused by politicians.

“If one looks back in history, central banks were often created precisely to give the monarch the freest possible access to seemingly unlimited financial means,” Weidmann said. “The connection between states’ great financial needs and a government controlling the central bank often led to an excessive expansion of the money supply, and the result was devaluation of money through inflation.”

‘Extraordinary Privilege’

The independence of central banks is an “extraordinary privilege” and not an end in itself, he said.

“The independence serves much more to establish with credibility that monetary policy can concentrate without hindrance on keeping the value of money stable,” Weidmann said. “The best protection against the temptations inherent in monetary policy is an enlightened and stability-oriented society.”

Weidmann’s speech forms part of a series of events in Frankfurt on the theme of money in the works of Johann Wolfgang von Goethe.

73 Responses

  1. Meanwhile in the UK, Bristol is launching its local currency today.

    Though it is pegged one for one to the British pound, in the “How it works for people” section, they say one can receive a 5% bonus when buying Bristol pounds.

    The good thing is that it seems to be accepted to pay for local taxes. I wonder how they will maintain the peg over time. I quickly read through their website but there aren’t much details. Anybody knows more about that?

    1. @Tristan Lanfrey,

      Sainsburys has had nectar points and Tesco clubcard points for years.

      Decades ago we had Green Shield stamps.

      Book tokens are ancient. iTunes top-up cards less so.

      Swapping one form of liability for a more restricted one is an old trick to try and boost trade. It alters nothing economically AFAICS.

    1. @Winslow R.,

      Guess this resolves the mystery.

      Saudi Action
      Futures slipped before the report on speculation Saudi Arabia is taking action to reduce the price of oil. The desert kingdom is pumping about 10 million barrels a day of crude and will produce more if customers demand it, a Persian Gulf official with knowledge of the matter said yesterday.

  2. I support print of Bce & Other Central Bank => this is less worse then recession and default.

    On Medium Term Recession&Output Gap take moderate world price.

    On Long Term (2015/2017 ?) on Global Scale (where Fix or Flexible Currency does’t matter because I am speaking of Entire World) mega liquidity Fed/Boj/Boe and in part Bce will become High Inflation.

    Weidmann is wrong because, even if Bce doesen’t print, Global Inflation will arrive also in Germany because the Rest World print.

      1. @WARREN MOSLER,

        I am thinking on long run Inflation by Bank Affairs, not Demand or macroeconomic. They are stockpiling commodities using Global QEasing.
        And Government secretly agree to reduce Reald Debt not payable with fiscal policies.

      2. Weidmann is making himself look like an idiot. Alain Parguez claims the head of the Belgian central bank was surprised when he explained to him that banks create money. Apparently no one had told him. I wouldn’t be surprised if that was true.

      3. @y,

        Equal parts funny and depressing 🙂

        People tend to think, due to their “hard currency” leanings, that there is a pot of money somewhere that we draw upon, similar to a pot of gold.

  3. Speaking of money creation, a little off topic, but if our Fed is allowed to purchase new issue MBS securities would they be creating new NFA in that case? Not sure how they’ll be buying in latest QE, new issue or secondary market.

    1. @DJ,

      Not sure it is correct, but not if they do not overpay for the assets. They create reserves, but they will be depleted when the securities mature. However, the private sector will lose interest income.

      Is that correct?

    1. @hamish,

      Limited thinking causes problems. Regardless of the paradigm.

      We have a failure to communicate, between theory & operations. That’s time to push the panic button, and relieve some theorists of command, for failure to perform their duty.

  4. This is slightly off-topic but the article describes a very interesting case: a high inflation, high involvement of the state in running the economy and despite that high unemployment. So the sanctions do actually work… despite facing no constraint on deficit spending the government cannot address all the issues and they are pushed deeper and deeper into a kind of “socialism”.

    Yet the leadership is dumb enough not to stop spinning the centrifuges.

    The conditions experienced by the Iranian economy under international sanctions can be compared to the fate of a country facing a dramatic drop in its exchange rate and yet unable to expand export due to production constraints.

    Deficient aggregate demand is not the only macroeconomic issue which can exist…

    1. @Adam (ak),

      You’re saying we used Greece as a War Game, to see if the same thing would work on Iran?

      With friendly fire like that, who needs anything but our own feet?

  5. I live for the day when heterodox economists scream to the world that there are no opportunity costs for the monopoly supplier of fiat currency.

    You know it all boils down to the fact that no monetarily sovereign nation ever needed a privately owned/controlled central bank to create the currency unit of account.

  6. Warren,

    could you comment on this one pls? If the public sector is indeed making a profit (in real terms), this would imply that the private sector is accordingly losing real wealth from (excessive) deficit spending/ZIRP policies..

    “[…] the US government is costing itself money by collecting taxes. That is, the more taxes the US government collects, the more money it loses.

    This is not because of some dubious super supply side effect. Its because the deficit earns a profit.”

      1. @WARREN MOSLER,

        just this:

        since author claims deficit spending, and the associated bond sales, creates real wealth for govt in this environmet of negative real yields. would this then mean that private sector is losing the exact same amount?

        as i understood it, the point of deficit spending was for govt to lose financial assets, in order for private sector to earn financial assets

  7. Warren,

    Could you please elaborate on your comment to the post?

    I interpret that you by money creation mean asset purchases by a CB paid by its own currency, but the assets are denominated in another currency. But feel I might be well off.

    1. first, I don’t use the term ‘money creation’ except very casually if at all.
      second, I sure don’t use it the way you say regarding fx denominated assets

  8. Dear Warren,

    A bit of a naive question if I may from someone new to MMT.

    Money creation does not create inflation if no excess spending happens, fine. But money creation creates specific assets bubbles, at least for a while, so who loses in the non-government sector and how ? For instance when stocks go up, what gives in ?

    Much obliged !


      1. @WARREN MOSLER,

        Only in a meaningless, and IMHO, very misleading, accounting sense.

        If common stock is really a liability of a corporation, then the title to a house is a liability of the house, and the title to a car is a liability of the car.

        In another sense, saying stock is a liability is equivalent to saying that you can have a liability to yourself, which is silly. Corporations are aggregations of people, after all, pro rated to each person by their individual common stock holdings.

      2. @WARREN MOSLER,

        “corporations have a dollar denominated liability to shareholders as they do to bond holders.”

        Shareholders own the corporation. Having an obligation to yourself is a nullity. This is not true for bonds in general. However, if you issued a bond and bought it back, it would indeed be a nullity.

        Are you seriously arguing that the stock market is a zero-sum game? Do you think the housing market is a zero-sum game?

      3. the equity is the bottom piece of the liability stack.
        yes, shareholders get to vote on corporate matters.

        i don’t think i ever said it was a ‘0 sum game?’

      4. ESM, both equity and debt holders have claims on the assets of the corporation. Both have variable market valuations depending on many factors (credit risk, profitability, real asset appreciation, etc). As far as I know, MMT doesn’t say much about the wealth effect, and it stays clear from discussing real assets. For example, if your house appreciated by 10% in the next year, both you and your mortgage company will re-value the claim on that asset upwards if you mark-to-market, and the wealth effect on a mass scale satisfies savings desires to some extent so that it motivates people to go out and spend and invest. I can see the interest rate channel reducing income to the non-government sector, but I can also see the effect of lower long-term rates on my balance sheet in the short-term. In the short-term, my savings desires are met. Whether it works in the long-run in this environment is still questionable because we need a more sustained and multi-year plan to meet the savings desires of the non-goverment sector because I don’t think that spending will pick up like they imagine it would.

      5. @WARREN MOSLER,

        sorry. for clarification let me repost myself:


        “corporations have a dollar denominated liability to shareholders as they do to bond holders.”

        my commment:

        agreed but at pennies on the dollar…so there is “unmatched” equity there…making the accounting equation “unbalanced.”

        Plus financial accounting of shareholder equity doesn’t balance out to any liability. The entry is debit cash; credit common stock for par and credit additional paid-in capital. Officially there is no liability on the books for stock issuance.

      6. @WARREN MOSLER,


        “i don’t think i ever said it was a ’0 sum game?’”

        Ok. You have a tendency towards writing pithy, cryptic responses which I’m sure I misinterpret from time to time.

        I think you would agree that fluctuations in the corporate bond market are zero-sum in the sense that they cannot change NFA. If a corporate bond becomes more valuable, then the obligor loses to the same extent that the owner of the bond gains. The accounting rules might not capture this, but the economic reality is that the game is zero-sum.

        However, if a stock goes up in value, nobody loses except shorts sellers (and for each dollar those guys lose, an extra dollar is made by people who are long). There is a net gain in assets/wealth. Since nothing endogenous to the private sector can change NFA, doesn’t this mean that stocks are not even financial assets in the MMT sense?

      7. stocks are dollar denominated corporate liabilities and financial assets of the holders.

        bonds and stocks represent a claim on corporate cash flows.
        bonds get paid first, stocks last and whatever is left over.
        If the fed cuts rates, all else equal, the market value of both stocks and bonds goes up.
        And new savers ‘lose out’ to new borrowers.

        i don’t see your problem with calling stocks corporate financial liabilities and financial assets for the holder.

      8. @WARREN MOSLER,


        “As far as I know, MMT doesn’t say much about the wealth effect, and it stays clear from discussing real assets.”

        I think that’s because the central government only has control over net financial assets (NFA). MMT actually doesn’t say much about the wealth effect of increases in NFA either. There is no formula I know of that tells us how big the debt or the deficit should be given a set of macroeconomic variables. MMT really just tells us that if there is no inflation and high unemployment, then the deficit is too small.

        I think it’s obvious that there is a positive wealth effect. How big it is I don’t know, but I don’t see why a liquid asset like shares in an S&P 500 index fund should have a substantially different effect on propensity to spend than a Treasury bond (which in turn I believe has roughly the same wealth effect as a bank deposit).

      9. @WARREN MOSLER,

        “There is a net gain in assets/wealth.”

        And a corresponding increase in the economy’s revaluation reserve which the overall liability on the equity.

        “I think it’s obvious that there is a positive wealth effect.”

        But that data was collected during a period of increasing private debt to GDP ratios – ie constantly increasing private debt.

        It’s doubtful whether there is a wealth effect when the economy is deleveraging.

      10. @WARREN MOSLER,


        “And a corresponding increase in the economy’s revaluation reserve which the overall liability on the equity.”

        Can you restate this in English please?

        “It’s doubtful whether there is a wealth effect when the economy is deleveraging.”

        Delevering hurts aggregate demand; a rising stock market increases it. The net can certainly be negative. The fact that it is difficult to measure the wealth effect doesn’t mean it doesn’t exist.

      11. A rising stockmarket does not increase aggregate demand by itself any more than increasing house prices does. There has to be additional spending going on – not simply a reallocation amongst a set of people.

        “The fact that it is difficult to measure the wealth effect doesn’t mean it doesn’t exist.”

        The fact that the ‘wealth effect’ was measured during a time of excessive borrowing calls into question its very existence during a time of subdued borrowing.

        The underlying conditions are no longer comparable.

      12. @WARREN MOSLER,


        “There has to be additional spending going on …”

        Demand precedes spending. I came, I saw, I wanted, I bought. Veni vidi volui emi.

        “…not simply a reallocation amongst a set of people.”

        A rising stock market does not reallocate wealth. It means increased wealth. It makes some people richer while not affecting the others. Sure, the wealth could be imaginary, and if it is, then presumably it will disappear.

        If I commission a work of art for $1,000, and it turns out to be a fantastic piece, and the art collecting community decides to value it at $1MM, was new wealth created or not?
        Did anybody lose? Would my propensity to consume be unchanged?

      13. Neil,

        There’s plenty of imperical evidence to suggest that the wealth effect is real. Your point about it being conditional (i.e. it doesn’t work in this environment) may have more to do with other forces (like deleveraging) that continue to affect demand. But if you were to isolate this variable, let’s say some unrealized capital gain that gives you an unexpected windfall, you cannot possibly rule out a change in behavior that would result in increased spending, no? We have to agree, however, that it’s not a zero-sum game. Re-valuation of financial assets happens despite creation of NFAs. An increasing house price gives the option to the owner of accessing that equity via a home equity loan or a second mortgage. It doesn’t mean that the owner will exercise that option, but surely that option is worth something?

      14. If you’re confused, try this exercise:

        Day 1, before announcement of Operation Twist,

        you own two types of NFAs 100K in cash (zero-maturity FRNs) and 100K 10yr government bond trading at par. Total NFAs owned by you is 200K.

        Day 2, after announcement of Operation Twist,

        you own two types of NFAs 100K in cash (Zero-maturity FRNs) and 100K 10yr government bond now trading at a premium. Total NFAs owned by you as defined by MMT is still 200K (plus 1-day accrued interest adjustment) despite your mark-to-market net worth going up in terms of FRNs. Remember, our unit of measure is the zero-maturity NFA, but MMT measures nominal NFAs in the accounting sense and does not mark-to-market.

      15. “An increasing house price gives the option to the owner of accessing that equity via a home equity loan or a second mortgage”

        ie via extra borrowing – which would show up, were it to happen, as a decreased level of net savings or change in net savings.

        “Day 2, after announcement of Operation Twist,”

        At that point the ‘market’ value of total assets may have gone up, but the amount of actual income in circulation has gone down – courtesy of the withdrawal of income on the bonds ‘twisted’.

        Asset rich, cash poor.

      16. Extra borrowing, were it to happen, would have zero effect on net savings as per MMT because the horizontal credit expansion is endogenous. The key word here is “net” as opposed to just gross savings. Savings are the accounting record of investment, as Mosler wrote, which of course means they change by the same amount. Point is that the facility for credit expansion, or horizontal money, becomes easier to access when your real assets backing the loans are revalued.

        “Asset rich, cash poor.”

        You are redefining cash as a flow not a bucket. NFAs are the same. NFAs measured in zero-maturity FRNs register a mark-to-market gain. Withdrawal of income is a flow problem that we all agree will eventually be a drag that can only be offset with more fiscal spending.

        Here’s another exercise to get us thinking about what happens during a horizontal credit expansion or contraction with NFAs unchaged:

        I issue shares to party A for 50% of my company and bonds to party B for the other 50%. To keep it simple, say the value of the company is $1,000 and the company’s business is buying and flipping ESM’s work of art valued at $1,000. So now we have:

        Assets: 1,000 = Liabilities: 500 + Equity: 500

        Scenario 1: Market revalues the work of art to $1MM, balance sheet will still look the same despite market-to-market value of equity going up. But we can IPO and sell the shares on the market to Party C who is not interested in increasing aggregate demand. Windfall to party A as a result of the IPO will likely motivate extra spending and increase aggregate demand. NFAs remain unchanged, but asset bubble influences aggregate demand.

        Scenario 2: Company sells the work of art for $1MM, balance sheet will now look like this:

        Assets: 1,000,000 = Liabilities: 500 + Equity: 999,500

        Nothing changed in the aggregate as a result of this transaction. NFAs simply changed hands for the title of ownership to the work of art.

        Scenario 3: An accident destroys the work of art, which was not insured, and the company declares bankruptcy:

        Assets: 0 = Liabilities: 0 + Equity: 0

        Salvage value is zero, so now even the debt holders don’t get paid. Credit in the economy contracts but not because the debt was repaid; the default caused an extinguising of the debt; No new NFAs created or destroyed; NFAs only changed hands from the debt and equity holders to ESM, the creator of the art.

      17. @WARREN MOSLER,

        “bonds and stocks represent a claim on corporate cash flows.”

        I disagree. A corporate bond does not represent a claim on corporate cash flows. It represents an obligation for the corporation to make specified interest and principal payments on certain dates. If the corporation fails to do that, then the bondholder can force the corporation into bankruptcy at which point the bondholder has a claim on corporate assets. It has nothing directly to do with corporate cash flow.

        “bonds get paid first, stocks last and whatever is left over.”

        That’s only in bankruptcy. Outside of bankruptcy bonds get paid according to a schedule. It has nothing to do with being first or last.

        “If the fed cuts rates, all else equal, the market value of both stocks and bonds goes up.”

        Lots of things change value when the Fed cuts rates. The value of a house goes up too. Does that mean a house is a financial asset?

        I think the important test is what happens if the dollar goes to zero value. A financial asset would go to zero value as well. A non-financial asset, like a stock or a house, would retain its value because it represents something tangible.

        “i don’t see your problem with calling stocks corporate financial liabilities and financial assets for the holder.”

        A share of stock represents partial ownership of a value creating enterprise. In this sense, it is similar to ownership of a house, a car, a factory, an NFL football team, or a coffee maker. It is a tangible asset. You only think of it as a financial asset because you have been trained since childhood to value stocks as the present value of an expected future dividend stream. That is a crabbed view of stocks, however, and completely misses the fact that stocks can have different utility for different holders. In takeovers or mergers, acquirers routinely pay much more than the market price because the corporation is worth more to them than the present value of dividends. Likewise, stockholders with majority control or at least superior voting rights value their shares more highly than minority shareholders.

      18. only in bankruptcy? misses the point.
        calculations of the distribution of corporate net cash flow/profits have priorities at all times.
        from senior to junior creditors. it’s called the credit stack. equity is at the ‘bottom’

        the test is whether the asset represents a dollar payment obligation of the counter party.

        bonds can ultimately be tied to the real assets as well. that’s not ‘the test’

      19. @WARREN MOSLER,

        In the sense that public corporations will always want to do whatever they can to attract more investors to them (raise capital) then yes I agree with you in that sense stock ‘is’ an economic liability but it is not an accounting liability. The stock forces the corporation to consider another point of view and thereby influences their decisions (or at least their perceived decisions if nothing more). So in that sense it curbs them from doing stupid things that would cause holders to sell and thereby give the stock a lower value. But still all of that is really more economic than accounting. At worst it just makes it harder for the officers and c-suites to exercise their stock-option rights and give themselves a nice pay-out on the up-swing. 😉

      20. for this analysis ‘liability’ doesn’t mean ‘something bad’ or a ‘negative’ in the sense that you imply.

        it means some entity’s obligation to make a payment.

        stocks represent a company’s obligation to make certain specified payments
        and their calculated value is the present value of those payments

      21. @WARREN MOSLER,

        “Extra borrowing, were it to happen, would have zero effect on net savings as per MMT because the horizontal credit expansion is endogenous. ”

        Yes I know. Sorry I’m not being clear.

        You would see balance sheet expansion with a wealth effect – an expansion in private lending. Difficult to pick that out amongst all the other noise.

        And you have to remember that there is a timing effect with private lending which pushes aggregate demand when it is accelerating and drags on aggregate demand when it is decelerating.

        So although it nets to zero at the end of the period, within the period its not quite zero at any point within that period.

        ISTM that the wealth effect can be explained by the aggregate debt increases rather than any magic per se. And that constant increase isn’t happening at the moment.

      22. @WARREN MOSLER,

        “the test is whether the asset represents a dollar payment obligation of the counter party.”

        That test is equivalent to my test. If there is a dollar payment obligation, and the dollar depreciates to zero value, then the financial asset is worthless.

        Common stocks do not satisfy this test. They are not dollar payment obligations. There is nothing in a corporation’s charter, nor any contract, which specifies a legal obligation to make dollar payments on common stocks (preferred stocks are different – although the tax code does not treat them as such, they are really debt obligations).

        Suppose a US corporation relocates to Europe? Does its stock remain a dollar financial obligation, or is it now a Euro obligation?

        Suppose a corporation writes into its charter that it will never ever distribute a cash dividend. Instead, at some point it will liquidate and distribute its assets to shareholders, and those assets predominately consist of, say, artwork, or gold, or oil, or shares of other stocks. I hope you agree its shares will not trade at zero. Does it pass your test?

        “bonds can ultimately be tied to the real assets as well. that’s not ‘the test’”

        Bonds can only be tied to the real assets when there is a default, and even in a default, bondholders are only entitled to take from real assets an amount that is capped by the total principal and interest that is owed. The value of the underlying assets affects only the creditworthiness of bonds (and loss severity in the event of a default).

        A corporate bond is very similar to a home mortgage loan where the corporation is the homeowner (i.e. the obligor), the bond indenture is the loan, the pledge of corporate assets is the mortgage, and the corporate assets in their entirety is the house. I don’t think it’s reasonable to say that the home loan represents a claim on the homeowner’s cash flow or an ownership interest in the home.
        But more importantly, I don’t think it’s reasonable to say that the title to the house is any entity’s liability.

      23. @WARREN MOSLER,


        I can honestly say that this may be the first time that I completely agree with ESM on something and at the same time am disagreeing with Warren. Who woulda thunk it!! Has the lion truly laid down with the lamb!! What a day!!! haha!!!

        Along the lines of what ESM is saying, for shareholders the risk of gaining or losing the value of their common stock investment is completely dependent on the market value of the stock. They are NOT expecting nor have they been promised, even on a contingency basis, a check written from the corporate itself directly for anything (except for a dividend).

        Dividends are a different story but only for the dividend paid. You can present value that amount and call it an accounting liability for sure. But the principal investment of a dividend bearing stock is subject to “shareholder risk” and the de-valuation of the stock. There is nothing for the corporation to present value unless it wanted to use some average rate of return as the discount rate maybe. But what principal are they valuing? Their own treasury stock perhaps, but not other shareholders’ principal investments…those are out on the market and the only way a shareholder can exit his position is by finding a buyer out on the market. The corporation themselves is out of that loop completely unless they want to step in and buy some of their own stock…but they don’t have to.

      24. stock holders are promised to get the net income left over after the bond holders are paid.

        it’s called earnings per share, etc.

        And the payments are called dividends.

        and the risk adjusted present value of that cash flow is the share price.

        and the market value of everything fluctuates.

        what do you think your tsy bonds are worth at 3am when they are all you have to settle losses in a card game and don’t want your thumbs broken, for example?

      25. @WARREN MOSLER,

        “what about a derivative that goes up in value if the dollar goes down?”

        You’re trying to create a paradox I guess, but I don’t think you can succeed in practice. A derivative whose payoff formula depends on the value of another asset must specify a method for observing the market price for that asset and a means of settlement.

        Is the settlement paid in dollars? Then I submit that the value of the derivative goes to zero in the limit as the dollar goes to zero, since an observation of the market price of the dollar (in ounces of gold, say, based on the last trade or the last bid) will be positive, and by my definition, settlement is made when the dollar is worthless. Of course, you can redefine the contract so that you essentially get a payoff of 0/0, which is undefined in general, but in specific cases depends on the relationship of x to y as we take the limit of x/y for x and y approaching zero. A judge would eventually have to decide I guess, just as one decided what the coupon on an Argentina FRAN of ’05 bond was when the formula broke after Argentina defaulted.

        Point being, if the derivative is settled in something other than dollars, then its value doesn’t go to zero, but it is no longer a dollar financial asset, even though the value may depend upon some attribute of the dollar.

      26. agreed
        US equities are payable in dollars and so as the dollar goes down in value equities go up in dollar value.
        If the dollar goes to 0 the stock is worth infinite dollars which is then also worth 0.

      27. @WARREN MOSLER,

        “stock holders are promised to get the net income left over after the bond holders are paid.”

        Ok. How much of the net income left over from Amazon or Google have their stockholders been paid? I don’t think those guys have promised their stockholders diddly squat.

        Berkshire Hathaway? I guess Apple is paying a dividend now, but it’s a tad smaller than their net income.

      28. @WARREN MOSLER,

        “If the dollar goes to 0 the stock is worth infinite dollars which is then also worth 0.

        You apparently didn’t understand what I wrote. There is no obligation to pay shareholders in dollars. Actually, there is no obligation to pay shareholders anything, unless the shareholders use their voting power to demand it, but that’s a separate point. If the dollar were to go to zero, presumably Google or Amazon would find another way to deliver value to their shareholders (e.g. Euros or gold or free services). They are value creating enterprises (similar to factories or machines), and so they are not dependent upon any particular currency to create value for their shareholders.

        Here’s a thought experiment. Suppose a corporation writes into its charter that it cannot pay dividends to its shareholders, ever. Do you think the stock would trade lower in terms of its P/E ratio than its peers? I don’t think so either.

  9. Dear Warren,

    Sorry but just to be a bit more specific : last 3 QEs saw stocks, bonds, gold, real estate recovered or significantly go up. What was it that netted the whole impact to zero ?

    Thank you.

  10. If a central bank economist is going to warn us about unlimited money creation, he has to tell us what the limit is, otherwise it is just hot air that anyone with an opinion could spout.

    And if he wants money to be sufficiently scarce, he should stage a burning of a significant amount of his income to make the point.

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