Leo Panitch on how the US still decides the future of global capitalism

Leo Panitch offers an antidote to the growing consensus that the new development bank launched by the BRICS manifests a significant challenge to US hegemony.

From The Guardian:

International attention has been diverted away from this year’s G20 meetings in Australia by the declaration from the leaders of Brazil, Russia, India, China and South Africa, at their meeting in Fortaleza Brazil this July, that they would launch a new “Brics bank”. Created by the US Treasury in the wake of the Asian financial crisis at the end of the 1990s, the G20 was designed to get the major “emerging market” states to take responsibility alongside the G7 for the “new international financial architecture”. This was seen as providing legitimacy for the continuing central role of the US in superintending a greatly expanded but increasingly volatile global capitalism

Read rest here.

Jamie Galbraith: Government Doesn’t Have to Borrow to Spend

When the Treasury writes a check, a bank credits an account. That's money creation. Treasury bonds absorb money, but aren't needed.

Jamie Galbraith on endogenous money and US Debt in NYTimes:

The debt ceiling was enacted in 1917 for one purpose: to fool the rubes back home. Just as Congress started running up debts to pay for the war, they voted in the ceiling to pretend otherwise. And that is why whenever reached, it must be raised.

The debt ceiling is also an anachronism. It is based on the idea that the government must raise money from elsewhere, before it spends. That was true in the days of gold. It hasn't been true, for this country, since at least the creation of the Federal Reserve back in 1913.

In the modern world, when the Treasury writes you a check, your bank credits your account. That's how money creation works. The Treasury then issues bonds to absorb that money. Banks like this because bonds pay more interest than reserves. But there is nothing economically necessary about the bonds. This is obvious since the Federal Reserve buys back many of them, leaving the public with the cash it would have had in the first place.

Read rest here.