BQE: Bilateral Currency Swaps
Ethical Markets thanks the Planck Foundation for permission to post this useful new approach – Hazel Henderson, Editor
BQE: Bilateral Currency Swaps
Traditional QE only leads to carry trade (a money flow to high yield / high risk foreign financial markets) and thereby does nothing for the real productive economy. On top of that Traditional QE also increases systemic risk of the financial system also (more capital towards high yielded risks). Traditional QE is covering the mismanagement of the past by watering down the future. Traditional QE has no benefits for the public interest, it serves only the financial industry at (again) the cost of the rest.
Traditional QE has a lot to do with the dilemma capitalism faces. Within capitalism two main directions are emerging: Financial Capitalism (making money with money: parasitic on the real economy: wealth concentration by the market: outsourcing production: declining jobs at fast pace) and Productive Capitalism (delivering real goods and services: wealth distribution by the market: insourcing production: rising job numbers at fast pace). The Global West has chosen for Financial Capitalism. The Global East and Global South (aka the Global Rest) have chosen for Productive Capitalism.
For more on this huge ‘which direction to go’ dilemma that is emerging within capitalism see http://www.planck.org/publications/Financial-Capitalism-vs-Productive-Capitalism, see http://www.planck.org/publications/Addressing-Economic-Decline-of-the-Global-West, see http://www.planck.org/publications/Labour-Taxation, see http://www.planck.org/publications/Money-Creation.
Are there other (non-toxic) ways to use monetary tools to boost economies? Models that saves the financial industry (delivers them the needed turnover/margin), but not specific favors the financial industry (models that not favors WallStreet, but favours the real economy of MainStreet). Yes, there are. Multiple. At Planck Foundation we’re specialized is these non-toxic QE models. It’s non-toxic (xQE) that’s the core of almost all monetary/economy models we have developed.
BQE is one of such non-toxic xQE models. BQE (Bilateral QE) is about an agreement between two Central Banks to do a currency swap under limiting conditions. The most important limiting condition of BQE is that the facility only must / can be used to for trade between those two nations. BQE is based on the theories of Alexander Hamilton (one of the founding fathers, the economic one, of the USA after their independence war from Great Brittan’s empire at the end of the 18th century), of Friedrich Raiffeisen (19th century) and of Friedrich List (the economic theorist behind the economic rise of Germany, Russia and Japan at the end of the 19th and start if the 20th century).
BQE works good for a currency (and therefore is in the interest of the Central Bank) as it expands the reach of its currency in global trade and reduces the dependence on a floating foreign global reserve currency (the US dollar: which delivers the USA a creditcard on the rest of the world at the expense of the rest of the world). A more important role for the own currency in global trade is an objective all Governors of all Central Banks aim for. BQE can deliver that to them.
BQE stimulates the economies of both nations i.e. currency areas. Does BQE limit the independence of the Central Bank within a nation? No, it doesn’t. BQE is choice the Central Bank can make and negotiate themselves. No political involvement. The restriction conditions are simple (preventing fraud and facilitating only real exports) but too detailed to describe here at large in this welcome speech. In short: these limitations prevent a) that the financial industry will use this BQE for other purposes (and try to make money with just gambling again), b) that looters can not abuse/loot this system by fake transactions. So these limitations are important and we’ll deliver you all facet of it during the day and c) protects the bilateral partners against unbalanced inflation by their counter party.
Let’s all gain loads of knowledge today.
(copyright free transcript of the welcome speech on Planck Foundation’s monthly ‘Non Toxic QE’ Seminar of May 2014)
Gijs Graafland / Planck Foundation / Amsterdam / 2014