NEP’s William Black in Davos

William Black’s Speech at the 2013 Public Eye Awards in Davos Switzerland.

5 responses to “NEP’s William Black in Davos

  1. Dear Prof Black,

    I enjoyed watching and listening to the above lecture you gave at Davos, which is most informative and entertaining at the same time. I bet that your lectures are the most popular on campus.

    Best regards,

  2. Professor Black,

    In the video, you mention good investment alternatives to Goldman Sachs. What are some good alternatives?

    Thanks for the good speech!

  3. AusteritySucks (@UmadBrazi1)

    Dr. Black,

    Not sure what I love more: your beard or your speech.

    Both are awesome.

    You the man.

  4. PLEASE,
    William K. Black
    Stephanie Kelton
    L. Randall Wray
    Marshall Auerback
    Scott Fullwiler
    Mitch Green
    Michael Hudson
    Dan Kervick
    Robert E. Prasch
    Felipe C. Rezende
    Pavlina R. Tcherneva
    Eric Tymoigne
    Joe Firestone
    Michael Hoexter,
    please, as being highly regarded professionals, your respected opinions could help guide mankind to a better path. And help a 76 year old fool sleep better at night. Justaluckyfool is just that, one single fool that has read very little about economics. Perhaps since having no formal education in that field, he cannot understand why the opinions formed may or may not be correct.
    Please help, not for one but for many.
    MMT-Modern Money Theory.
    TRUE OR FALSE: (Please improve terminology where needed)
    1.What Michael Hudson says about “compound interest.(If MMT found to be true than see question 2 )
    “…. The Mathematics of Compound Interest A syndicate of less than one hundred American capitalists, if allowed to collect interest on their capital at a low rate and re-invest for 150 years or less, would at the end of that time own the earth and all real and personal property thereon. This is a simple mathematical proposition, capable of exact demonstration, and any one who doubts the truth of this statement may set all doubts at rest by computing compound interest on one and one-half billions of dollars for one hundred and fifty years, at five per cent per annum. …Fl├╝rscheim elaborated that “All exertions, all improvements in the methods and tools of labor, the strictest economy, the severest self-denial, are powerless to compete with the rapidity of self-increase possessed by capital placed at compound interest, and they cannot keep up with its demands.” To illustrate the dynamic at work, he composed an allegory (pp. 327ff.). Many ages after man was driven from Paradise and told “to earn his bread by the sweat of his brow, mercy began to prevail. A loving angel was sent down by the Great Master, charged with the task of lightening the burden. The angel’s name was Spirit of Invention. He began his work by teaching man to make useful tools” and tame animals, and in time to mobilize water power, air and wind power, fire and steam power to drive machinery. “It seemed that at last the golden era had come of which men had dreamed for ages past,” but “that envious spirit, that fallen angel, Satan,” was jealous that his own empire would soon be over for ever. Among the follies of man, one little imp, called Interest, managed to attract his attention. “‘What is the matter with you, Interest?’ he asked the saucy imp. ‘You don’t seem to be so dejected as your comrades are?'” “‘Why should I be dejected, master?’ replied the spirit, ‘Am I not one of your favorite soldiers? Haven’t I always been victorious under your august guidance?'” But Satan answered sadly, “Alas, You are no match for the Spirit of Invention.” The Interest imp, however, volunteered to demonstrate his prowess in a dual, helped by his son, Compound Interest. At this point, Fl├╝rscheim introduced an image that Napier had suggested at the outset of his second book on logarithms in 1617, the Robdologia, likening the principle of geometric increase to that of a chess-board on which each square doubled the number assigned to the preceding one. An old Persian proverb told of a Shah who wished to reward the inventor of chess, a subject, and asked what he would like. To the Shah’s surprise, the man asked “as his only reward that the Shah would give him a single grain of corn, which was to be put on the first square of the chess-board, and to be doubled on each successive square; which, to the surprise of the king, produced an amount larger than the treasures of his whole kingdom could buy. It is this kind of chess-game which capital is continually playing with labor.” The remarkable growth of compound interest soon swallowed “products, capital, the earth and even the workers.” This was in essence the ploy that Fl├╝rscheim’s Compound Interest demon used. “Look at this chess-board,” he told the angel against whom Satan had pitted him. “It seems just like any other chess-board, with sixty-four squares,” but it “had the peculiar quality of extending the dimensions of the squares, so as always to be large enough” to hold whatever was placed on them. Instead of asking for grains of wheat to be placed on them, the Interest Imp asked for soldiers. “Now, listen well to what I propose,” he said to the angel, pointing to the latter’s huge army. I enter the first square with my son, and you match one of your warriors against us. We enter the second square doubled in number; you send two more warriors – and so on every succeeding square. . . . When we arrive at the last square, and you have a single soldier left after occupying the same, we shall declare ourselves vanquished, and Satan with all his troops will leave this world for ever. If I win, you and your army are to be at the commands of my master. Are you agreed? The angel agreed, expecting his horde of soldiers to easily exceed the number that the Interest Imp and his son, Compound Interest, seemed likely to accrue. In the beginning the angel laughed, for, though twenty squares were passed, no noticeable diminution of his forces was perceptible. Demon Interest said nothing, but attended to business, quietly doubling his army on every succeeding square. At the thirtieth square the angel ceased to laugh, and soon saw he was lost. ‘I despised you, little fellow,’ he signed despairingly, ‘and I am punished for my vanity. I see there is no use fighting against you. Demon Interest is more powerful than the Spirit of Invention. I am your slave. Command your servant!'” (THIS IS THE TIPPING POINT ! (Where we went wrong) ‘I am the only servant of my great master,’ dryly replied the demon. “Here I see him coming. He will give you his orders.’ And Satan gave his orders. He commanded that the angel was to continue in his work with all his troops, which were to be increased with all possible exertion, so that humanity – which did not know the nature of the antagonist it had to fight against – would always keep in fresh hope of final success when the new troops were forthcoming. But as fast as they appeared, Demon Interest was to send forth a larger army to capture the new forces, to enslave them, and – instead of their benefiting man – make them increase the slave-chains which weigh him down. WHAT IF DEMON INTEREST WERE TO ANSWER? (How we can fix it). I will now be the servant of a new master,one that will pursue happiness for all mankind.” READ More economics-of-compound-rates-of-interest-a-four-thousand-year-overview-part-ii/
    2. What justaluckyfool asks. True or false?
    ***(THIS IS THE TIPPING POINT ! (Where we went wrong) ‘I am the only servant of my great master,’ dryly replied the demon. “Here I see him coming. He will give you his orders.’ And Satan gave his orders.
    ***WERE TO ANSWER? (How we can fix it). I will now be the servant of a new master,one that will pursue happiness for all mankind.”
    And most important question
    3. Did Frederick Soddy (Noble Laureate) who did get a lot right in his book “The Role Of Money”, also get it right about ‘the role of banks’ and the evil of ‘fictitious lending’ ?
    Instead of printing and
    lending notes, an obvious creation of money, this
    much more insidious and dangerous form of issue
    grew up…
    It is important to realize that whichever way it
    works it is a case for the bank of ” Heads I win,
    tails you lose “. Moreover, the money in which
    they are repaid is, on the average, worth more in
    goods than that which they create to lend.

    There was essentially nothing new in this, or
    different in principle from lending ” promises-
    to-pay-gold ” instead of gold itself, save that the
    banks avoided the necessity of giving printed
    receipts for the goods and services their borrowers
    obtained for nothing, and there was a secret instead
    of open creation of money. Instead of lending
    notes, the banks, in effect, now lend cheque-
    books and the right to draw cheques up to limited
    sums beyond what the borrower possesses. For
    nearly a century, until the revelations of the War
    made it impossible to conceal the truth from the
    general public, the bankers stoutly denied that
    they were creating money at all, and claimed that
    they were merely lending the deposits their
    clients were not using. The President of the Bank
    of Montreal not a year ago continued to repeat
    this, but, nearer the centre of things, all this was
    known and admitted by the orthodox apologists
    for this monstrous system even before the War,
    usually by some such lying phrase as ” Every
    loan makes a deposit “.

    Genuine and Fictitious Loans.
    For a loan, if it is a genuine loan, does not make a deposit, because
    what the borrower gets the lender gives up, and
    there is no increase in the quantity of money, but
    only an alteration in the identity of the individual
    owners of it. But if the lender gives up nothing
    at all what the borrower receives is a new issue
    of money and the quantity is proportionately
    increased. So elaborately has the real nature of
    this ridiculous proceeding been surrounded with
    confusion by some of the cleverest and most
    skilful advocates the world has ever known, that
    it still is something of a mystery to ordinary
    people, who hold their heads and confess they
    are ” unable to understand finance “. It is not
    intended that they should. But if, instead of
    trying to puzzle it out along the lines of ” what
    you get for money “, these people will reverse
    the procedure, as in this book, and do so on the
    of ” what you give up for it “, the trick is clear

    Current Account Deposits. Cheque-account
    deposits at the bank represent, in monetary units
    of value, what the owners have given up in the
    way of goods and services in order to acquire
    these claims to equivalent goods and services on
    demand. In so far as one spends his money another
    receives it, or in so far as one receives the goods
    and services owing to him another gives them up
    and is credited for them. With true ” time
    deposits “, however, it is quite different, though
    banking practice has been directed to slurring
    over the distinction. In an honest money system
    this difference would be insisted upon as essential
    to accurate accountancy. However, this is too
    important a matter to deal with incidentally, and
    its consideration will be postponed. We will con-
    fine the argument here to cheque account deposits.
    The aggregate of the cheque-accounts, exclusive
    of genuine time-deposits, represents in units of
    money value, as stated, what the owners of money
    (not the borrowers of it) dealing with the banks
    are owed on demand in goods and services from
    the nation in which the money is legal tender.
    These vast sums of money are entirely of the
    bank’s creation in the first instance. When the
    bank pretends to lend their money they do not
    reduce the amount of the claims of the owners to
    goods and services on demand by a farthing. They
    do not inform them that they can no longer draw
    it out as it has been lent to others ! They
    create among the general body of vendors who
    supply goods and services, in exchange for the
    cheques the banks authorize their borrowers to
    draw, new claims on the community for goods
    and services. When these cheques are paid into
    the vendors’ accounts they create new deposits
    at the banks. When the borrowers repay their
    loans and balance their accounts, they with-
    draw money for the purpose from those to whom
    they sell goods and services, and by cancelling
    their overdrafts this money then disappears from
    existence, just as unaccountably as it made its
    appearance. If we can imagine the impossible,
    that they ever succeeded in freeing themselves
    from their indebtedness to the banks, every
    penny left would be worth half-a-crown and people
    earning 3 a week would get 2s. a week.

    Why Cheque-money is Preferred to Tokens.
    We have only to substitute physical counters
    or receipts to show the utter dishonesty of the
    accounting. For if a man surrenders a physical
    money token, whether to lend it to somebody else
    or to buy something with it from somebody else,
    there’s an end of it so far as he is concerned. He
    cannot ever lend or spend it again. He has to
    earn another or wait till his loan falls due before
    he can get another back to lend or spend again.
    But a man who deposits his money in a cheque
    account can lend or spend it exactly as though he
    had not deposited it at all, by using a cheque for
    the amount, and yet it is this same money the
    bank pretends it lends out.
    …The capacity of the banks to create money
    without giving up anything for it depended on
    their always having enough legal tender (conver-
    tible into gold) to meet the demands of their
    depositors ; that is, of those who have deposited
    money on ” current account “. In practice it
    was found that about fifteen per cent of their
    total deposits sufficed for their safety but, as
    the use of cheques continually increases, the
    percentage falls. The factor of safety is now
    considered to be about ten per cent, but may
    not be nearly as much. Nobody but the bankers
    themselves can see, in an age of potential plenty,
    any sense in their always trying to make it do
    the work of ^10 or more, when they have actually
    created claims to nine others which the owners
    have only to ask for to reduce them to panic, and
    send them howling to the Government for a
    And from the preface: “….. every monetary system must at
    long last conform, if it is to fulfil its proper role
    as the distributive mechanism of society. To allow
    it to become a source of revenue to private issuers
    is to create, first, a secret and illicit arm of the
    government and, last, a rival power strong enough
    ultimately to overthrow all other forms of
    government. ”
    With a note of thanks to NEP, I hopefully await your profound answers, as I believe that perhaps the “Invisible Hand” may be the reason for this site so as to continually “Guide” mankind.