The Nominalists And The Realists

Have you ever had a “light bulb” moment? A moment when a huge amount of information just falls into place like the pieces of a puzzle spontaneously rearranging themselves into a clearly recognizable image? Here’s a passage that did that for me a couple of days ago:   

The two extreme types of monetary systems are: the 'realist' under which each unit of money has, as a counter-part in the balance-sheet of the bank that has issued it, an asset that can be sold on the market for an equal value; and the ‘nominalist’ under which money is nothing but a token, void of substance. All the systems that have been, are, or will be in force range somewhere between these two models. (my emphasis)

(Chapter 6, Page 170 - "The Institutional Problem Of Money" from “Balance of Payments” by Jacques Rueff published by The Macmillan Company in 1967)

In 'Balance of Payments' Jacques Rueff explains that a 'realist' money retains its purchasing power. So while it is convertible into assets of equal value it also retains parity with all forms of wealth and consumption goods and services as well as claims that are sound e.g. the debts of creditworthy borrowers. (The words 'convertible' and 'exchangeable' have the same meaning here.) A 'nominalist' system treats money as mere tokens:

"('Nominalist' money) can be brought into circulation by a deficit and withdrawn by a surplus. It will therefore never be self-regulating, and can be regulated only by the utilization of an appropriate fiscal policy. With respect to it (a 'nominalist' system), the management rules of the Keynesian pharmacopaeia will have to be used."  (my emphasis)
This post started life as a response to a Tweet from Koos Jansen. Koos asked if anyone could recommend a book on international economics. My initial reaction was – one book, no way – but after sleeping on it I decided that two books by Jacques Rueff studied together might go close to delivering what Koos was seeking. I’m referring to Balance of Payments (‘BoP’) and The Monetary Sin Of The West. You can download ‘Monetary Sin’ here but I haven’t been able to access a digital copy of ‘BoP’. So I started this post because I believe that you need the content of both books in order to appreciate the elegance of Rueff’s economic theories.

[STOP PRESS: Slow Loris Larry announces a digital version of Balance of Payments is now available for download. Thank you SLL.]

Back to that “light bulb” moment. I have read a huge amount of material on economics, monetary systems and banking. I came to the conclusion some time ago that money should be the organizing principle of my studies and attempts to discuss what I was studying. That passage from ‘BoP’ supplied something else I have been striving for – an appropriate conceptual framework. It’s been obvious to me for years that there was a war being waged throughout economic history (and right up to the present) but I lacked a suitable framework with which to view the opposing forces.

I have been exposed to several concepts and theories about how these forces should be grouped – debtors and savers – labour versus capital – soft/easy money versus hard money - socialist versus capitalist and so on. Ultimately none of these categorizations provided me with a satisfactory conceptual framework. As Rueff points out:

"Contrary to the belief of the uninformed, there is no orthodoxy in monetary matters. A great number of systems can be conceived, each of which has its own distinctive merits. It is only from the standpoint of the functions that one assigns to Society that any one of these systems may seem preferable to the others.....('BoP' Page 170)

I found that when I tried to extrapolate from money as an organizing principle I soon ran into this "orthodoxy" problem. But this notion of realists versus nominalists works for me on several levels. I think I can reorganize a lot of the material I have collected within this framework and present it in a way that makes sense.

That Was Then This Is Now
I have copped some flack over the past couple of years for trying to apply lessons to the present gleaned from old books and texts on the basis that they are outdated. Some folks have argued that the world has moved on and old knowledge no longer applies to the modern world. I marvel at the lack of introspection this attitude implies. To me this is just another version of the "This Time It’s Different" mentality that takes hold during the boom phase of the boom and bust cycle. I think it's a kind of willful, collective amnesia. 

Here is Jacques Rueff's description of the aspirations that policy makers and the general public had for their monetary system back in the late 1960s:

"At present, the consensus demands, above all, of a monetary system that it should not hinder the development of production, and should thereby favor the 'full employment' of productive possibilities, but at the same time it wishes that the system chosen should give to the general price level the fullest stability consistent with the preceding aim."

Wow! Radical aspirations - full employment, price stability, an adequate money supply.... That passage could have been written today. Yet, despite the apparently well-meaning efforts of economists, governments and central banks since that time today we are even further away from this ideal monetary system than they were in the 1960s. In fact we now have an extreme 'nominalist' monetary system that has in turn lead to the creation of the biggest pile of debt the world has ever seen.

In 'BoP' Jacques Rueff describes the main benefit of a 'realist' system and how to structure it in a way that is partially self-regulating:

The essential feature of the 'realist' system is that, if suitably administered, it permits the creation of a situation that tends to avoid all threats of inflation or deflation.... Now, all practitioners know the difficulty met with in foreseeing inflationary or deflationary tendencies before they produce their effects. Therefore, more or less intentionally, monetary systems have been so devised that the regulating reactions have a tendency to develop spontaneously, thus acquiring a partially self-regulating character...."

Interestingly, Jacques Rueff an advocate for gold-based monetary systems, places a metallic currency at the extreme end of the monetary spectrum. [1] My reading of economic history leads me to believe that the pendulum has just about reached its limit in this swing toward the nominalist extreme. I doubt that it will be permitted to swing back to something equally extreme and unworkable as bi-metallism – been there done that. I imagine that a negotiated compromise somewhere in the middle is on the way.

Text Amended: August 8, 2015
[1] An old pal who styles his online persona as ‘Motley Fool’ (gleefully?) pointed out that Uncle costata had ignored the way pendulums actually function i.e. they don’t just stop half-way in mid-swing as I implied in the original text below. I mangled the analogy.

“My reading of economic history leads me to believe that the pendulum has just about reached its limit in this swing toward the nominalist extreme. I doubt that it will swing back to something equally extreme as bi-metallism – been there done that. I imagine that a compromise somewhere in the middle is on the way.”

So the Motley one prompted me to reflect more deeply on my choice of words. I think that humanity kind of sleep walked from the (extreme?) realist monetary system we had 150 years ago into the extreme nominalist system that we have today. But I anticipate that the new monetary system will be the result of a negotiated settlement rather than something that we just drift into. So I have tweaked the text to reflect this.


Gary said...

Hello Costata.

It's very interesting that you and Reuff think that the quality/standard of money has anything to do with 'assets' on a balance sheet.

I don't.

I think it is entirely driven by the credibility of the issuer.

Money is, always has been, and always will be, a token by the way, just a form of debt.

Good luck in your search.

Gary said...

The simplest example to demonstrate that Rueff's thinking is flawed:

The US had 20,000 tonnes of official monetary gold, a highly credible pile of assets. It was shipping this gold in volume, until one day, the issuer (US Govt) decided: no more.

Nothing at all to do with assets, everything to do with the credibility of the issuer.

There is a better way, it's here already, most struggle to see it though.

Otto ikn said...

Good post and you had me right up until the end. The discrepancy is that I see no evidence 1) your pendulum is at its nominalist limit and that even if it were 2) there's any reason to suppose it's about to swing back in your preferred timeframe (which reading between the lines is now-ish).

But I nitpick. It's interesting.

Alex in Montana said...


"There is a better way, it's here already, most struggle to see it though".

A little cryptic. Anything to do with FOFOA's writings?

I'm new here. Can you explain in a sentence or point me to something you have written here that might enlighten me?

Thnak you


Gary said...

Hello Alex.
I'm working on a post on that topic, nearly finished it.
Here's something I wrote elsewhere that might help:

Alex in Montana said...

I will read this - thanks

Warren James said...

@Costata, I'm comfortable with the description (insofar as I understand your summary) because it helps differentiate 'real' vs. 'fake' money.

I'm also interested in understanding the details of how the two intersect - the muggles of the financial world still view all money as 'realists' (i.e. tradeable for labour, assets) while the money masters are typically 'nominalists' (i.e. entire banking system including central banks) and use the discrepancy to enrich themselves - it appears to a casual observer like wizardry.

Just my two cents, I hope your ongoing study leads to even more stuff. Regards,

costata said...

Thank you all for commenting.

Otto ikn,

I do think we are getting closer to a crisis that can't be pushed off into the future. Once the systemic insolvency problems migrate from the balance sheet to profit-and-loss it's game over. IMO we are very close to that point. I'm expecting the next blow-up in this GFC by the end of 2015 or early 2016 at the latest but I have to admit that the powers-that-be have shown remarkable creativity in devising ways to postpone the day of reckoning. So perhaps I'll be proven wrong yet again.

Hi Warren,

I intend to do several posts exploring Jacques Rueff's monetary theories. They were well developed and articulated in detail. He explains how they work and why. Bear in mind that Rueff debated J. M. Keynes in print and face to face. He understood the Keynesian 'nominalist' management tools and Keynes theories. I'm confident Rueff can help people to understand both extremes of the monetary spectrum as well as the points in between. My next couple of posts will probably be an attempt to flesh out the features of the two extremes.

IMO you are spot on in saying this "the money masters are typically 'nominalists'". The beauty of this conceptual framework is that it doesn't prevent us from differentiating the actors by their behaviour. A "money master" can make their money by being a 'nominalist' banker while rejecting that system for their personal finances i.e. buying hard assets and acting from a monetary 'realist' ideology.

I can't make that kind of differentiation using, say, debtor and creditor as the conceptual framework to identify the opposing camps. By way of example even if you have two actors who are respectively debt-free and heavily indebted that doesn't stop a government from borrowing and taxing the debt-free actor's arse off to pay for it. What does his personal "debt-free" state tell us about an economic actor in that situation?

I think Rueff's conceptual framework allows us to strip out the ideological issues and focus on vested interests and human action. I intend to have some fun with this!


Bron Suchecki said...

"only from the standpoint of the functions that one assigns to Society that any one of these systems may seem preferable to the others"

I think this is key. So society gets the monetary system they deserve, which at this point in time is gimme gimme gimme and don't worry about saving.

costata said...

Hi Bron,

To a degree I think it's a case of getting the system we deserve. There's a brilliant observation from Robert A. Heinlein that I've referenced in the past:

That said I also think that Warren has touched on a key issue - perception. We experience money as a 'realist' construct on a daily basis despite the fact that the system is profoundly 'nominalist'. It's hard for people to grasp that the overall system functions quite differently to the way they as an individual actor experience it and operate within that system.

IMO the educational challenge is analogous to the debate about money creation in the banking system. Each bank borrows to lend. The "loanable funds" model of banking looks sound if you are looking at one bank in isolation. However, the moment you zoom out and look at the system this model fails and we have to acknowledge an "endogenous money" model wherein banks lend money into existence in the form of deposits.

You would think it would be obvious to everyone once they look at a model using two bank balance sheets instead of one. Yet Paul Krugman is still flogging "loanable funds" despite the Bank of England (among many other CBs) publishing papers that state that endogenous money is the correct model.

Gary said...

Hey Bron.

'So society gets the monetary system they deserve, which at this point in time is gimme gimme gimme and don't worry about saving.'

Have you visited the Euro zone of late?
The game has been changed already.
Still in transition to the other side.
'The ultimate safe asset, therefore, will be the currency itself.' Noyer.

Grumps LaBastard said...

Marty back on October 2nd, 2011. Start around the 18 minute mark.

Paraphrase:Key support around the 1400 area...test this area about July 2012 then trend back up to a high sometime between 2016-2020.

He said we were in the midst of a Sovereign debt crisis. Why trade in and out of this environment? When I first started building a position in 2008, that was my thesis. Ride out the cyclical bears until the systemic debt saturation is resolved. Sure I could have taken some profits during that 10 week move in 2011, but how do you know when to go back in? We traded at 1600-1800 for a good 18 months and I remember Marty saying just chopping around at that level would qualify as a necessary correction in the secular bull. Nothing about going below 1000.

He sounded much more together back then. I can see why we all followed him, but lately he's been too emotional.

Alex in Montana said...

I read him every day. A few points:

1) His editing is terrible. He pulls in millions for his conferences and products and he can't seem find someone to proofread his copy.
2) He makes lots of predictions and is right sometimes. Other times not so much.
3) His Q&A format serves up softballs. I don't think he is asked anything and he makes up the questions so he can knock them out of the park.
4) On Geopolitics he is many times utterly misinformed by either not knowing history or misrepresenting. He says he only looks at facts but he sure has a lot of conspiracy theories.
5) Like virtually all people who spend time in prison, he claims "he didn't do it".
I am agnostic on this as I don't have the facts to make an informed decision. On the other hand he is right about the judicial system. It's a mess.


Right now he says we break $1,000 for sure. If we do we can go to $680-681 if central banks begin selling gold. Those are his two targets.

So, I take him with a grain of salt and read as I do many others.

Grumps LaBastard said...

There's a 2014 movie on Netflix streaming, "13 Sins". It's never overtly revealed in the plot who the group is, but the opening credits give a clue. Checking the reviews online showed the muggles didn't make the connection. Most thought it to be a Saw knockoff.

You know how upcoming terrorist attacks are predicted in films. This movie is a prime candidate. There's a 911 reference towards the end. Watch this flick with an eye for stuff in the background.

Holly Wood.

costata said...

Re: Gary's comment

His words are in italics and my replies are in plain text. I replied to a Tweet from one of Gary's online pseudonyms pointing out that the reason I never respond to him is because I never want to have a conversation with him ever again.

I plan to do a series of posts on these theories of Jacques Rueff and I don't want 'Gary' playing the spoiler in the comment thread. So I am making one exception to my policy toward Gary and responding to two of his comments on this thread to try to avoid people being given a false impression of the theories I'm presenting. If anyone else wants to ask a question, even the same question Gary asks I will reply. But I'm not conversing with him and I don't want to go into the tiresome history of his trolling.

It's very interesting that you and Reuff think that the quality/standard of money has anything to do with 'assets' on a balance sheet. I don't.

In 'BoP' Jacques Rueff presented a book length explanation of his theories, the data supporting them and discussed his research over 50+ years in justifying his conclusions. I intend to present them to readers in a series of posts. Much of his material isn't easy to understand so I want to try to break it up and (hopefully) make it easier to digest. Rueff is the first person I have read who makes the asset-liability relationships crystal clear across a whole monetary system.

I think it is entirely driven by the credibility of the issuer.

In Rueff's analysis the credibility of the issuer rests on the credibility of the assets balancing the liability e.g. the bank loans (assets) balancing the bank deposits (liabilities).

Money is, always has been, and always will be, a token by the way, just a form of debt.

I used to hear similar things at FOFOA's blog e.g. money presented as a debt with no creditor, a credit with no debtor. I don't recall seeing any description of the accounting identities that support the depiction of money as a form of debt. I think one of Jacques Rueff's great contributions to monetary theory is that he clearly identifies where the assets and liabilities reside throughout a monetary system. Thus making money a debt-based system. And perhaps much more importantly he also explains the features and properties of the fictitious assets that reduce money to a token devoid of "substance".

The simplest example to demonstrate that Rueff's thinking is flawed: The US had 20,000 tonnes of official monetary gold, a highly credible pile of assets. It was shipping this gold in volume, until one day, the issuer (US Govt) decided: no more. Nothing at all to do with assets, everything to do with the credibility of the issuer.

They closed the gold window because their gold assets/reserves had been drained to less than 9,000 m/t. It was a default. They refused to honour their commitment to convertibility. So this issue of credibility and asset backing isn't an either-or proposition. The issuers credibility rests on their assets and their willingness to honour their commitments - to respect international agreements and uphold the rule of law.

There is a better way, it's here already, most struggle to see it though.

Click baiting? Use your own posts to advertise your material.

Gary said...

'Consider this simple fact: we engage in an exchange of goods and services everyday by using money as the means of exchange; and we offer our labour in exchange for money, which, in itself, has no value.'


'It is the first currency that has not only severed its link to gold, but also its link to the nation-state. It is not backed by the durability of the metal or by the authority of the state.'

I hope posting a couple of central banker quotes above to provide some clarity isn't considered bad form Costata, facts are facts, but I'll leave you in peace with your studies of history, whilst I look at the present and the future. Best wishes.

costata said...

Note to self:

Discuss why this quote from Wim Duisenberg has wrong-footed so many people:

"It is the first currency that has not only severed its link to gold, but also its link to the nation-state. It is not backed by the durability of the metal or by the authority of the state."

Note: Banks issued 95% of Euro pre-GFC and EU banks' risk-free asset = sovereign bonds therefore severance from "the authority of the state" = pipe dream!

If these people (e.g. Wim D) didn't lie they bull-shitted themselves. What they professed to envision didn't happen.

costata said...

Second note to self:

Recommend to the faculty that anyone who purports to quote a source (e.g. Wim Duisenberg) should be required to acknowledge the source and provide a link to the source in order to allow people to verify the quote.

Gary said...

My upcoming post will cover all of these points and more besides.

I must get it finished.
The time for procrastination is nearly over.

Gwyde said...

As the "Balance of Payments" was originally drafted in French, I've been checking for a french on-line copy. I found one at the Institut Coppet website:

AdvocatusDiaboli said...

Hi Costata,

"My reading of economic history leads me to believe that the pendulum has just about reached its limit in this swing toward the nominalist extreme."

Why? Because you "feel" like it? Because of whatever confirmation bias? Just wondering and asking.
Or let me put it the other way around: Under what circumstances the pendulum has has to reach its limit? IMHO no limit, why should it? You are talking about debt, well, that's just some numbers in some computer, doesnt hold anybody in power from doing anything, as long as the slavetards keep on slaving.
Greets, AD

costata said...

Thanks Gwyde!

If the French can upload a digital copy I'm wondering why an English language version can't be uploaded. Lew Rockwell's Mises Institute published 'The Monetary Sin Of The West". Perhaps 'Balance Of Payments' isn't Rothbard enough for his liking.


costata said...


I'm working on a post that will expand on that comment.

If you can use your own models and any valuations you choose then you can basically make a balance sheet look fine. You can cover up insolvency. I'm arguing that once insolvency starts to become evident in a P&L it's the end of the game.

costata said...


I forgot to respond on the "pendulum swing". As I complete this series of posts on Rueff's theories I want to use them to try to determine how far we are from the limits of this nominalist system. As I said I think we are close because the strategies that allowed this system to be kept alive appear to be failing. We can agree to disagree but I don't believe that debt can go to infinity.

AdvocatusDiaboli said...


why cant debt go to whereever? BTW what is debt? IMHO it is just some numbers in some computer. Some call those numbers unit of account (of credit?). Now tell me, why cant we type in any number we want to? Why cant we increase the numbers on one account and decrease the number on another account, calling that solidarity (at least that's how it is sold in Germany) or instead create new numbers calling that TARP? I just dont get it.
Greets, AD

Warren James said...

@AD, debt is a social contract. That's the beauty of the current financial beast - creation of social obligation and facilitating flow of value using mere keystrokes and without being limited to conventional boundaries or constraint.

Debt cannot go to infinity because you can't have infinite obligation. Take the australian slavetards as an example - we have flipped houses to each other for the last 15 years but reaching a point now where households cannot keep taking on more debt, because the banks already own every inch of our pathetic butts (present and future). The government has effectively mortgaged our children's livelihood as well. In some ways the convicts in the first fleet were actually better off - once they served their sentence they got given land. Viva la Progress!

Gary said...

'Now tell me, why cant we type in any number we want to?'

AD, it's a simple answer really. Debt has to be paid back, with interest. HAS TO BE, that's a fact. If it's not paid back, those owning that debt lose their asset. We are reaching the crunch, Greece but the first to arrive.

Banks, sovereigns, households, corporations, all of them are reaching the crunch. Debts have by far surpassed the capacity to be serviced (interest) and be repaid.

So, look out for defaults galore (in the EZ), and bailouts galore and printing everywhere else (yes, some central banks will 'type any number they want to'....but watch what happens to the value of their currency). Over the next 20 years.

AdvocatusDiaboli said...

Hi Warren,
"you can't have infinite obligation"
infinite obligation on what? In "repayment" of what? Remember FOFOA's little island of Ben&Chen, with the lines in the sand of representation? Do you really think it matters how many lines are in the sand?
See, it only matters that Chen continues to work. What was the idea to work for lines in the sand in the first place? From that point one could start to question if it matters, if there are 1 line or 1000 lines in the sand, IMHO it does not matter. And the idea that the fixed amount of gold coins voluntarily represents the infinite lines in the sand is just stupid. Why should I exchange the lines against gold in the first place?
The reason for this is, that humans have the strange idea of value. Value does not exist! The air you breath, the food you eat those things are real (compare that to the utility of the Mona Lisa painting). Only real utility exists. The idea of "value" in the broadest sense is just a representation of human desire, an expression of will, which is not real. And IMHO it is a social illusion not a contract.
Greets, AD

Warren James said...


Ok then I'll rephrase it, creation of social obligation and facilitating flow of real utility using mere keystrokes and you can't have infinite obligation of real utility

Me telling the bank their social contract is merely a social illusion may make me feel better philisophically, but it changes nothing of my individual circumstance.

The same when Ben decides his debt (denominated in lines in sand) is only 'just a concept' and stops working, and Chen brings out his whip (laced with bits of glass).

Just because value exists only as a mental construct, doesn't make it less real.

AdvocatusDiaboli said...

Hi Warren,
do I here some personal affection when complaining about "debt" and your bank? ;)

Maybe something to consider: In Germany we had until the 70's unlimited personal debt for lifetime (possibly combined with a criminal prosecution). That changed and we started to have a bankruptcy regulation. In the beginning it was 13years, than it changed to 7years, now it is 6years and they are discussing to maybe change it to 3years.

Strange hmmm? Doesnt sound to me like a glass laced whip, does it?
Just speculating, but doesnt that fit more into the picture of: "It does not matter, just dont stop playing the game and do go to work?"
Greets, AD

Gary said...

Well, someone is going to lose some money here, either bank creditors, or state creditors, tis the EZ way:

costata said...

Hi All,

This comment is off-topic. I needed somewhere to park it so that I could direct people to it if they want to comment.

Re: EU bank deposit protection

I put out a Tweet today musing about the possibility that the ECB might be using the Greece bank shutdown as a lever to push through some form of separation between the payment system in Europe and the banks other functions. This Tweet was in turn prompted by a Tweet by Victor the Cleaner where he said "Payments systems in Greece still not functioning after four weeks. ECB still in breach of their mandate." (On their website the ECB states that the feedback from stakeholders and clients at the time the ECB was being set up disclosed that their highest priority was a first rate payments system.)

I did a quick search to see if there were any papers by the ECB discussing the security of deposit accounts in the EU. The only recent documents I could find were "opinions" provided by the ECB opinions on whether proposed legislation for deposit guarantee schemes from member states complied with current EU legislation. If this is all the ECB is planning to support then add this initiative into the pile of evidence that the ECB is favouring the banks over every other stakeholder in the Eurosystem. That pile includes the bail-in rules.

I believe that the ECB could protect depositors very easily without government-backed bank deposit guaranty schemes. They could also insulate the payment system from the kind of shutdown we are seeing in Greece. Let me step you through the tools they have available to make this happen.

1. The ECB has the legal right to enact legislation. They can if they need to make laws. So no-one could stop the ECB doing what I suggest below IMO.

2. There was a recent development in the evolution of the EU payment and banking system called SEPA. Provided they give it the computing power required the ECB can offer real time settlement of inter-bank transactions in Euro reserve assets held by the ECB. Typically these transactions are netted off at the end of a set period e.g. daily. While the banks are in this period prior to settlement they carry counter-party risk of, say, default.

Before I continue to outline my proposed solution to protect depositors I need to know if custodial demand deposits are an option commonly offered by European banks? (They would involve holding vault cash 1:1 with the amount shown in the customers bank statement - like an old-style cheque account. These funds are not lent out by the bank and the bank generally generally collected fees on the operation of this type of account.)

When I get an answer to this question I can proceed.


costata said...

Re: EU bank deposit protection

Part 2

I'm going to assume that EU banks don't generally offer the kind of purely custodial account described above and all balances in deposit accounts can be utilized by banks in some form of lending or profit-seeking endeavour of European banks. This will allow me to complete the description of my solution to deposit protection as follows:

1. Banks throughout the EMU (and EU?) are required to differentiate* between custodial deposit accounts and funds 'deposited' in unsecured loan accounts with banks.

2. Unsecured loan 'deposit' accounts are subject to whatever bail-in plans are in place as part of the strategy to deal with the insolvency of a bank. These accounts receive a market rate of interest.

3. Banks charge fees for providing the custodial accounts and the ECB Eurosystem central banks exchange Euro reserves equal to the account balances of the custodial accounts in real time. So rather than a deposit being a liability of the bank (agent) accepting the deposit it becomes a liability of the central bank that can be discharged by transferring Euro reserves.

4. The ECB facilitates transactions through the payments system at any time involving custodial accounts regardless of the health of an individual bank.

This approach would not require any deposit guarantee fund. No taxpayer funding or support whatsoever. However, it would prevent banks from being able to access and use certain deposits unless they were given express authority to treat the deposit as a loan. If anyone can see any flaws in this proposal please let me know.

*Students of the Austrian school may recognize in this proposal elements of the treatment of deposits recommended in "Money, Bank Credit and Economic Cycles" by Jesus Huerta de Soto.

Slow Loris said...

It seems that, with the aid of a former colleague, I have managed to locate and request an Austrialin university Inter-Library Loan of a copy of Reuff's The Balance of Payments, 1967, in English.

When it arrives in a week or so, I will produce a digital copy as a .pdf file and, Warren willing, will make it available for download from Screwtape Files University.


Gary said...

Practical flaw, and it's a killer, would be the cost. The ECB won't take the risk (of a bank doing something naughty) and audit requirements, running costs, without a high charge. Similarly, the banks will levy a high charge for physical vaulting. Total cost, in my estimate, 2-3% per annum. One can see savers queuing up for that.

Philosophically, the ECB are merely a central bank, they're not interested in saving banks skins at all. They will never assume the liability. Never. The Fed might run with it, but not the ECB.

Finally, do you not know that banks are going to be pre-funding the deposit protection scheme?

It's nice to have dreams that some centralised authority will take all the risks away from the citizens, and banks become risk free, we all need to have dreams. However, some dreams don't reflect reality in the slightest. Some dreams a lack of understanding of business, money, life itself, as well as the philosophies that underpin the whole euro project. Risks cannot be eliminated, humans need to be careful.

Good luck with your search Costata.

costata said...

Bless you Slow Loris,

Please make sure you are on sound legal ground.


Grumps LaBastard said...

"Analysts believe that once the yuan join the SDR failure, will start another strategy, which is the gold strategy.

Media reported that China's central bank recently announced that only holdings of only 600 tons of gold reserves in the hope that the message is to be included in the SDR RMB background made. If the IMF rejected the application in China, then China will shift the focus of gold.

If Plan A fails, China will enable the B plan. Almost certainly, the Chinese have a lot of gold were not disclosed. China had to store gold dates back to 1983. Western analysts may not be clear from the 20th century, China began to accumulate gold, when the West sold a lot of gold. At the same time, with a huge trade surplus, massive capital inflows into China. Thus, as the author in October last year predicted, in 2002 China's gold reserves would be increased to 20,000 tons.

China has been the gold as the ultimate currency. The timing of the implementation of Plan B is ripe because of higher realized gold prices can be allowed to join SDR larger than gains. In the absence of currency intervention, which also helps reduce gold denominated Chinese debt levels. But also can enhance the level of wealth of the people. In short, the current economic development is threatened, the above measures will be highly welcome the general public.

This is bound to be attractive. Western capital market effect will be very interesting, because physical gold falling, left the debt has not been paid in gold. After all, as an old Chinese proverb: Ning peace dog, not troubled people."

Motley Fool said...

Hi costata

Nice terminology. Much less baggage than debt or credit base words. It should have some use.

Tongue in cheek : Have you ever seen a pendulum stop midway after falling from one extreme?


Ps. Kudos @ Slow Loris

costata said...

Hi Motley,

You got me on the pendulum. Mangled that attempt at analogy.

I think Rueff has a lot more to offer in addition to the terminology. I have more draft posts in the works. Just need a few hours to finish at least one.


Slow Loris said...

I am happy to announce that, courtesy of the Australian University Inter-Library Loan system and Murdoch University over in Perth, Western Australia, I have now been able to make a .pdf file of Jacques Rueff's “Balance Of Payments".

Warren has make it available for download at the following URL:


Slow Loris Larry

costata said...

Slow Loris,

Can't thank you enough.