Recently, Jason Kuznicki read and critiqued Kevin Carson’s Studies in Mutualist Political Economy. Discussion continued in the comments section, and this exchange came about:
Miko: […] Easy credit to those with connections leads to easy money and credit crises. Hard credit to those who don’t deal directly with the central bank makes it difficult for laborers to raise capital. Last time I checked, the average credit card interest rate was quite a bit above prime.
Jason: State-run credit can either be systematically too tight or systematically too loose. It can’t be both. We’re talking about the overall money supply here, not about any one person or class’s access to it.
Well…yes and no.
Sure, by definition when talking about central banking the actual monetary flow is determined by a single player. That’s the point of a central bank. However, the point of entry into the economy once the flow leaves matters. By design, what happens is basically monetary trickle-down: the central bank determines the money supply, which goes to the largest ostensibly “private” financial institutions, then filters out through the rest of the market. The problem with this is the same as the problem with the original trickle-down economics, that for all of the inputs not much actually comes out at the other end.
As a result of this, loose monetary policy doesn’t really mean access to capital is loose. The proper metaphor would be to imagine a garden hose turned up to full blast…with a huge knot in it. The mess when the line finally bursts is going to suck, meanwhile you still lack for water.
Kevin left his own response to the original topic here, btw.