<html><body><div style="color:#000; background-color:#fff; font-family:times new roman, new york, times, serif;font-size:12pt"><div><span></span></div><div><br></div> <div style="font-family: 'times new roman', 'new york', times, serif; font-size: 12pt; "> <div style="font-family: 'times new roman', 'new york', times, serif; font-size: 12pt; "> <div dir="ltr"> <font size="2" face="Arial"> ----- Forwarded Message -----<br> <b><span style="font-weight:bold;">From:</span></b> Geoffrey Gardiner <geoffrey.gardiner@btinternet.com><br> <b><span style="font-weight: bold;">To:</span></b> gang8@yahoogroups.com <br> <b><span style="font-weight: bold;">Sent:</span></b> Sunday, 12 August 2012, 9:37<br> <b><span style="font-weight: bold;">Subject:</span></b> Re: [gang8] Interesting things<br> </font> </div> <br><div id="yiv134616579">
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<div id="yiv134616579yui_3_2_0_18_134475904945545"><span id="yiv134616579yui_3_2_0_18_1344759049455118"><font face="Times New Roman">Dear
Michael,</font></span></div>
<div><span><font face="Times New Roman"></font></span> </div>
<div><span id="yiv134616579yui_3_2_0_18_1344759049455124"></span></div>
<div><span id="yiv134616579yui_3_2_0_18_1344759049455127"><font face="Times New Roman">Yes.</font></span></div>
<div><span></span> </div>
<div><span id="yiv134616579yui_3_2_0_18_1344759049455132"></span></div>
<div id="yiv134616579yui_3_2_0_18_1344759049455142"><span id="yiv134616579yui_3_2_0_18_1344759049455135"><font face="Times New Roman">I even thought of
offering a paper for the Dijon conference in December but there are only three
days left to send a draft. Below is what I have written so far. Not quite the
same as your points, but they are all part of the same model. I suppose one
could say that lowering interest rates makes those who already have assets
richer on paper, but only if they liquidate and spend do they benefit from it.
Those without assets find it harder to acquire any. And the people who have the
assets now are those (like me!) who were made rich by having their loans
inflated away as a result of the application of monetarist 'remedies' for
inflation which had exactly the opposite result to what was expected.
</font></span></div>
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<div><span id="yiv134616579yui_3_2_0_18_1344759049455150"><font face="Times New Roman">**************************</font></span></div>
<div><span><font face="Times New Roman"></font></span> </div>
<div id="yiv134616579yui_3_2_0_18_1344759049455166"><span id="yiv134616579yui_3_2_0_18_1344759049455144"></span></div><span id="yiv134616579yui_3_2_0_18_1344759049455147">
<div id="yiv134616579yui_3_2_0_18_1344759049455155"><font face="Times New Roman">Has Quantitative Easing instigated the death of popular
Capitalism?</font></div>
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<div id="yiv134616579yui_3_2_0_18_1344759049455172"></div>
<div id="yiv134616579yui_3_2_0_18_1344759049455159"><font face="Times New Roman">Quantitative Easing, the practice of central banks buying
up debt, mostly government bonds, has revealed that the market rate of interest
is negative in real terms, a fact concealed until now by administered discount
rates set at higher levels than the market required. The reason for this is that
saving, mostly contractual for pensions and life insurance, vastly exceeds the
amount of saving needed to fund Real Capital Formation and all other private
uses of saving. (Support this with figures from UK National Income Blue Book for
2010). With a negative real interest the logic behind pension funds and
endowment assurance policies vanishes. Savings will diminish in value if they
are invested in bonds, even indexed linked bonds. For the moment there are still
positive yields on equity investment, but the pool of equities is too small to
provide a solution of the problem. Equities are often already overpriced
relative to their net tangible asset values. (Example Kraft.) Therefore funds
invested in equities are increasingly likely to look like Ponzi
schemes.</font></div>
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<div id="yiv134616579yui_3_2_0_18_1344759049455169"><font face="Times New Roman">Quantitative Easing was based on a misunderstanding of
the banking system. (Explain). Can it be reversed, and if so will real interest
rates become positive again. Probably not.</font></div>
<div id="yiv134616579yui_3_2_0_18_1344759049455190"></div>
<div id="yiv134616579yui_3_2_0_18_1344759049455192"><font face="Times New Roman">Savings does not equal real investment but equals
financial liabilities, which encompass both debt and equity provision.
</font></div>
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<div id="yiv134616579yui_3_2_0_18_1344759049455176"></div>
<div id="yiv134616579yui_3_2_0_18_1344759049455178"><font face="Times New Roman">*****</font></div>
<div><font face="Times New Roman"></font> </div>
<div id="yiv134616579yui_3_2_0_18_1344759049455184"></div>
<div id="yiv134616579yui_3_2_0_18_1344759049455186"><font face="Times New Roman">You no doubt have seen that the yield on 2 year Danish
government bonds is negative. </font></div>
<div><font face="Times New Roman"></font> </div>
<div id="yiv134616579yui_3_2_0_18_1344759049455204"></div>
<div id="yiv134616579yui_3_2_0_18_1344759049455206"><font face="Times New Roman">As I am getting ready to go away to Edinburgh I cannot
finish it off, but as you will doubtless be saying the same things, I do not
have to worry.</font></div>
<div><font face="Times New Roman"></font> </div>
<div id="yiv134616579yui_3_2_0_18_1344759049455208"></div>
<div id="yiv134616579yui_3_2_0_18_1344759049455210"><font face="Times New Roman">Geoff</font></div>
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<div dir="ltr"><font size="2" face="Arial">
<b><span>From:</span></b>
Michael Hudson <michael.hudson@earthlink.net><br><b><span>To:</span></b>
gang8@yahoogroups.com <br><b><span>Sent:</span></b> Saturday, 11 August 2012,
17:07<br><b><span>Subject:</span></b> Re: [gang8] Interesting
things<br></font></div>
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<div id="yiv134616579">
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<div><font size="4"><font face="Times New Roman"><span><font style="FONT-SIZE:14pt;">Dear Geoffrey,<br>You
use a good term, <b>Monetary capital gains.
</b>that in fact was what I was referring to, not rising “real” asset
prices.<br>I was simply applying the financial principle of “total returns”:
income + monetary capital gains. As central banks have driven down the interest
rate, they have created capital gains by raising the capitalization rate of a
given income (at the lower interest rate), while national treasuries and local
authorities have cut property taxes. This has created <b>Monetary capital gains </b>without any real growth
in productive capacity at all.<br>The effect of monetary capital gains on the
“real” economy is to oblige homeowners to go further into debt to buy housing,
and also — as you have pointed out -- to oblige pension funds (and pensioners)
to save much more in order to secure a given retirement
income.<br>Michael<br><br><br>On 8/11/12 7:22 AM, "Geoffrey Gardiner"
<geoffrey.gardiner@btinternet.com>
wrote:</font><br><br></span></font></font>
</div><blockquote><font size="4"><font face="Times New Roman"><span><br></span></font></font></blockquote></div></div></div></div></div></div></div>
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