Essay About Purpose Of This Paper And Truth Of Finite Income

War on Savings: Modern Monetary Management in Crisis
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War on savings: modern
monetary management in crisis
Sarel Johannes Oberholster
CCPT (PTY) Ltd, Johannesburg, South Africa
Abstract
Purpose – The purpose of this paper is to examine modern monetary policy as practiced and
promoted by the officials of Central Banks, with the Federal Reserve Bank of the USA and the Bank of
Japan in leading roles.
Design/methodology/approach – Modern monetary policy is assessed for its rhetoric and its
philosophies steeped in Keynesian traditions. The fallacies of relying on patently incorrect economic
theory with specific critique on the assumption that saving is equal to investment (S ¼ I) is exposed in
the policy failures of themes such as quantitative easing, approaching the zero bound, wealth effects,
the liquidity trap, forbearance lending and an unwavering belief in the power to inflate. An alternative
credit theory is presented and discussed to explain the accumulation of monetary interventions in the
modern banking environment. The credit theory is further expanded to evaluate an economy in
distress as a result of an accumulation of monetary stimulations against a background of the
philosophies of the Austrian school of economics.
Findings – Three decisive monetary policy outcomes are identified and substantiated in the Austrian
philosophy of laissez faire; the probable outcome of modern monetary policies in deflationary stasis; and
the destructive outcome of extreme monetary and fiscal interventions resulting in a hyperinflationary
depression and destruction of the money unit.
Originality/value – The conceptual framework and content of the paper are mostly original and will
contribute to the study of political and monetary economics.
Keywords Monetary policy, Central banks, Keynesian economics, Fiscal policy, Fiscal measures
Paper type Conceptual paper
The great inflations of our age are not acts of God. They are man-made or, to say it bluntly,
government-made. They are the offshoots of doctrines that ascribe to governments the magic
power of creating wealth out of nothing and of making people happy by raising the “national
income (foreword by Murray N. Rothbard to The Theory of Money and Credit – Mises,
Ludwig von (1881-1973)).
1. Introduction
The war upon savings is an ancient one. Even the alchemic desire of turning lead to
gold was part of this war. Saving is a sacrifice. Savings can be stolen, plundered, but
most of all, used to protect against an uncertain future. Savings and the vassals of
savings have been lusted after since the production of the very first economic surplus.
The inventions of deceit to dispossess savings have no match in any other human
endeavour. Wars have been fought with it and over it. Everybody wanted some but not
all were prepared to gather it the hard way.
Japan was the focus of my research when I set out on this journey of discovery.
The Japanese economic miracle turning into a long-term disaster of systemic failure
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
Monetary
management
in crisis
Journal of Financial Regulation and
Compliance
Vol. 18 No. 3, 2010
pp. 201-223
q Emerald Group Publishing Limited
1358-1988
DOI 10.1108/13581981011060790
needed to be understood. The reason for the research became more compelling with the
advent of the global financial crisis in 2007.
The Austrian School of economic thought was going to be important for my
research but a rigorous drive into economic theorising took me to the heart of Austrian
economics. My research shows that economic management in the invisible hands of the
market is in much better hands than the hands of monetary interventionists. The
destructive nature of monetary interventionism will be placed on display.
1.1 The truth of finite income
The economy exists to satisfy the needs of the individual. Yet individuals have a finite
life span and as such a finite income over that life span. This will hold true even when
individuals are assessed as a collective. Individuals consuming in excess of their finite
income from production are deficit producing while individuals who consumes less
than their finite income from production are surplus producing.
Debt as the discounting of future income for consumption in the present is a servant
to the finity of an individuals income. In plain language, debt discounted should not be
greater than the finite income from production of the individual.
Modern monetary policies