Home > Uncategorized > Links. Luther, loans and capital. And: Italian central bank discovers old truth.

Links. Luther, loans and capital. And: Italian central bank discovers old truth.

  1. The explosive influence of mister Luther. The European 16th century reformation is resurfacing as a political and economic watershed. Jeremiah (of all names…) Ditmar and Skipper Seabold show how fast (we knew that already) and, especially how much (that’s new: epic) Luther’s  95 theses, hammered to the door of an obscure church in an obscure place, influenced the content of printing and how fast this led to new rules and laws.
  2. Ravi Kanbur and Joseph Stiglitz discover than, when we talk about wealth, balance sheets have two sides, one side (liabilities) which basically is about ownership rights and power and another which is the value of real and financial assets. Quote: what Piketty and others measure as wealth ‘W’ is a measure of control over resources, not a measure of capital K, in the sense that that is used in the context of a production function.“. To estimate this ‘production function capital’ the value of financial capital has of course to be subtracted from total wealth, while inflationary increases of house prices wreak havoc with the idea of ‘one kind of production function capital’. The good thing: the acknowledge the importance of (control over) ‘land’ and other unproduced capital. Aside – if I remember well, debts (liabilities) are used to pressure Greece to sell harbours and railways and the airports and the like (real, land related assets).
  3. The Bank of Italy discovers that: “the weakness of aggregate demand was contributing significantly to the decline in inflation“, while this weakness also influences inflation expectations’. The point: this means that, contrary to Lucas and Sargent inspired ideas in the Trichet era, the central bank is not the sole and only institution which governs inflation expectations while governing expectations is not enough to control inflation. Draghi is ++smarter than that, but it is good to see that the fight against the Lucas/Sargent paradigm is joined by the Italian central bank. Lucas/Sargent kind of ideas are by the way tempting to the ego of central bankers and therewith dangerous by nature.
  4. Eurozone small and medium sized enterprises as well as small and medium sized banks still have a hard time when it comes to financing. Small and medium sized enterprises in the Netherlands (which has no small banks left) do especially bad.
  5. About how bullying Iceland and Greece led to suboptimal negotiations.
  1. August 22, 2015 at 11:48 am

    Very interesting; worth following the initial Ditmar and Seabold link. Two points I can draw attention to.

    (1) “Mister Luther” pinned his theses on the church door just three yours after Machiavelli published “The Prince”, which advises would-be princes to tell people what they wanted to hear, not what they intended to do.

    (2) The very interesting difference between free and monopolistic city government already existed in the Catholic church. Interleaved with its “bottom up” heirarchy of local government by parish priests committed to and supervised by regional bishops represented globally by a college of reprentative bishops under the Pope, the Orders of monks etc like the Benedictines, Franciscans, Jesuits and many smaller orders are independent of the bishops, being authorised by the granting of something like professional or city charters.

    On reflection, this mixture of stability-conserving structure and radical freedom is much like the conservative and radical politics of today, suiting different types of mind, the difference being their cooperating rather than (like would-be princes) competing with each other.

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