Ceasefire Sort-Of Holding?

The world economy remains hostage to the war in the Middle East. Although the news flow remains extremely erratic, direct combat between Iran and the United States has been muted (although fighting was happening in Lebanon with Iranian proxies).

As I believe I noted before, one of my “hobbies” in university was reading up on international relations theory and diplomatic history. The current situation appears somewhat bizarre from the perspective of that theory. The usual story from the Realist perspective was that diplomacy since the Peace of Westphalia was determined by national interests. Since nations’ interests are determined by material facts, we do not need to enquire too deeply into the inner workings of countries to understand their international behaviour. We have reverted to an earlier mode of affairs, as many key governments are acting as neo-Royalist entities, where the interests of the ruling clique determine national policy. (Neo-Royalism has been the term recently floated by a few academics to explain the dynamics of the Trump administration.)

Public Bank Lending

In my previous article, I discussed (traditional) postal banking, in which the central government manages a deposit-taking bank (which historically used post offices as “bank branches”). Postal banks offered basic payments and savings services for poorer people who were ill-served by private banks.

In my view, the usefulness of such banks depends upon conditions in the country. It may be just as easy to mandate private banks to offer minimal standards of service without the challenges of attempting to replicate the information technology investments required. In countries where private banking has spotty coverage, such banks may be useful.

Postal Savings Banks

Postal savings banks are a venerable form of public banks. They were traditionally aimed at providing payment and savings options for the broad public — they were not banks providing a full range of lending services. Instead, they recycled deposits into the bond and money markets, mainly investing in central government bonds. The “neoliberal” trends since the early 1980s resulted in these institutions being weakened or even privatised. In addition to the political shifts, the rise of digital computing raised the level of expected services in most countries.

This is an unedited draft section of my banking primer. My inflation manuscript is looking at Brent Crude price charts and sobbing.

Inflation Debate Post On My Substack

Due to time constraints, I am not copying over my recent article to this blog. I apologise for this, but I might bring it here later.

Bond And Loan Financing

In an earlier article, I did an over-simplified discussion of how a local public bank would interact with municipal bond issuance. There was some ambiguities that I skipped over in order to keep things brief. This drew a variety of questions, and so it is clear that I need to expand on what I wrote.

Since these articles are expected to be bound into a banking primer manuscript, I was going to need to cover some of these basics long before I got to a section on public banks. But I will cover the basics herein, and not worry about the manuscript logic. There are also some assertions about technical issues which I would have to reconsider and dig into if they stay in the manuscript.

No War Plan Still

The main reason to be pessimistic about the war between Iran versus the United States and Israel is the lack of path towards peace. The United States does not have a plan that is remotely viable, since there is little sign that the Iranian regime will collapse. On the Iranian side, the plan appears straightforward: strangle traffic through the Strait of Hormuz until the damage forces third countries to move in directions favourable to Iran (e.g., expel American bases).

Public Banks And Municipal Bonds

Tyler Suksawat and Scott Ferguson recently published “Reclaiming the Public Interest: Cities Should Sell Municipal Bonds to Their Own Public Banks.” The lengthy title sums up the argument well. In this article, I want to offer my comments on this topic. My feeling is that the scope for such purchases are necessarily limited, and so one cannot expect an immediate revolutionary change. To the extent that sub-nationals can boost their finances, I think the model of la Caisse de dépôt et placement du Québec (“la Caisse,” disclaimer: my old employer) is more viable (at the state level in American terms).