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Richard Andreas Werner (born 5 January 1967) is a German banking and development economist who is a university professor at University of Winchester.
He has proposed the "Quantity Theory of Credit", or "Quantity Theory of Disaggregated Credit", which disaggregates credit creation that are used for the real economy (GDP transactions), on the one hand, and financial transactions, on the other hand. [1] In 1995, he proposed a new monetary policy to swiftly deal with banking crises, which he called 'Quantitative Easing', and it was published in the Nikkei. [2] He also first used the expression "QE2" in public to refer to the need to implement 'true quantitative easing' as an expansion in credit creation. [3] His 2001 book Princes of the Yen was a number one general bestseller in Japan. In 2014, he published the first empirical evidence that each bank creates credit when it issues a new loan. [4]
In 1989, Werner earned a BSc in economics at the London School of Economics (LSE). During his postgraduate studies at Oxford University he spent over a year in Japan, studying at the University of Tokyo and working at the Nomura Research Institute. [5] His DPhil in economics was conferred by Oxford. In 1991, he became European Commission-sponsored Marie Curie Fellow at the Institute for Economics and Statistics at Oxford. [5] His 1991 discussion paper at the institute warned about the imminent 'collapse' of the Japanese banking system and the threat of the "greatest recession since the Great Depression". In Tokyo, he also became the first Shimomura Fellow at the Research Institute for Capital Formation at the Development Bank of Japan. He was a visiting researcher at the Institute for Monetary and Economic Studies at the Bank of Japan; and he was a visiting scholar at the Institute for Monetary and Fiscal Studies at the Ministry of Finance. [5]
Werner was chief economist of Jardine Fleming from 1994 to 1998 and published several articles on the Japanese credit cycle and monetary policy, many of which are in Japanese. He joined the faculty of Sophia University in Tokyo (1997-2004) as a tenured assistant professor. [5] Werner was senior managing director and senior portfolio manager at Bear Stearns Asset Management. He worked at the University of Southampton (2004-2018), mainly as Chair and Professor in International Banking. [5] Werner becomes Professor of Banking and Finance at De Montfort University in 2018. [6] He is the founding director of the university's Centre for Banking, Finance and Sustainable Development and organiser of the European Conference on Banking and the Economy (ECOBATE), first held on 29 September 2011 in Winchester Guildhall, with Lord Adair Turner, FSA Chairman, as keynote speaker. From 2011 to 2019, he was a member of the ECB Shadow Council.[ citation needed ]
Werner has developed a theory of money creation called the Quantity Theory of Credit, which is in line with Schumpeter's credit theory of money. [7] He has argued, since 1992, that the banking sector needs to be reflected appropriately in macroeconomic models since it is the main creator and allocator of the money supply, through the process of credit creation by individual banks. [8]
Werner's book Princes of the Yen , about the modern economic development of Japan, including the bubble of the 1990s and subsequent bust, was a number one general bestseller in Japan in 2001. [9] The book covers the monetary policy of the Bank of Japan specifically and central bank informal guidance of bank credit in general. [10]
Werner proposed a policy he called "quantitative easing" in Japan in 1994 and 1995. At the time working as chief economist of Jardine Fleming Securities (Asia) Ltd. in Tokyo, he used this expression during presentations to institutional investors in Tokyo. It is also, among others, in the title of an article he published on September 2, 1995, in the Nihon Keizai Shinbun (Nikkei). [11] According to Werner, he used this phrase in order to propose a new form of monetary stimulation policy by the central bank that relied neither on interest rate reductions (which Werner claimed in his Nikkei article would be ineffective) nor on the conventional monetarist policy prescription of expanding the money supply (e.g. through "printing money", expanding high-powered money, expanding bank reserves or boosting deposit aggregates such as M2 –all of which Werner also claimed would be ineffective). [12] Instead, Werner argued, it was necessary and sufficient for an economic recovery to boost "credit creation", through a number of measures. [11] He also suggested direct purchases of non-performing assets from the banks by the central bank; direct lending to companies and the government by the central bank; purchases of commercial paper, other debt, and equity instruments from companies by the central bank; and stopping the issuance of government bonds to fund the public sector borrowing requirement, instead having the government borrow directly from banks through a standard loan contract. [13] [14]
Werner is founding director and chairman of Local First Community Interest Company, which promotes the establishment of not-for-profit local community banks, modelled on the successful German local co-operative, Raiffeisen and Sparkasse savings banks that have enabled German small firms to become top exporters and job creators in Germany. [15]
In 2019, Werner took out a discrimination case against his employer, Southampton University, claiming he was discriminated against and ‘victimised’ in a ‘harassment and bullying’ campaign for being German and Christian, during his 14 years career at the university. The £2.5m payout was one of the largest awards ever made by a British tribunal and was so high because the university failed to defend itself. [16] In July 2019, after a successful appeal by the University, the judgement was set aside and the case was set to proceed in the usual fashion. Werner was then, in August 2020, granted permission to appeal the decision in the Employment Appeal Tribunal. [17] In the meantime Werner brought a discrimination claim against the University of Cambridge after they withdrew a conditional offer of employment in 2018. [18]
Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies. Macroeconomists study topics such as output/GDP and national income, unemployment, price indices and inflation, consumption, saving, investment, energy, international trade, and international finance.
Monetarism is a school of thought in monetary economics that emphasizes the role of policy-makers in controlling the amount of money in circulation. It gained prominence in the 1970s, but was mostly abandoned as a practical guidance to monetary policy during the following decade because the strategy was found to not work very well in practice. Instead, inflation targeting through movements of the official interest rate became the dominant monetary policy strategy.
Post-Keynesian economics is a school of economic thought with its origins in The General Theory of John Maynard Keynes, with subsequent development influenced to a large degree by Michał Kalecki, Joan Robinson, Nicholas Kaldor, Sidney Weintraub, Paul Davidson, Piero Sraffa and Jan Kregel. Historian Robert Skidelsky argues that the post-Keynesian school has remained closest to the spirit of Keynes' original work. It is a heterodox approach to economics.
In macroeconomics, the money supply refers to the total volume of money held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circulation and demand deposits. Money supply data is recorded and published, usually by the national statistical agency or the central bank of the country. Empirical money supply measures are usually named M1, M2, M3, etc., according to how wide a definition of money they embrace. The precise definitions vary from country to country, in part depending on national financial institutional traditions.
Monetary reform is any movement or theory that proposes a system of supplying money and financing the economy that is different from the current system.
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The quantity theory of money is a theory from monetary economics which states that the general price level of goods and services is directly proportional to the amount of money in circulation, and that the causality runs from money to prices. This implies that the theory potentially explains inflation. It originated in the 16th century and has been proclaimed the oldest surviving theory in economics.
Money creation, or money issuance, is the process by which the money supply of a country, or of an economic or monetary region, is increased. In most modern economies, money is created by both central banks and commercial banks. Money issued by central banks is termed reserve deposits and is only available for use by central bank accounts holders, which is generally large commercial banks and foreign central banks. Central banks can increase the quantity of reserve deposits directly, by engaging in open market operations or quantitative easing. However, the majority of the money supply used by the public for conducting transactions is created by the commercial banking system in the form of bank deposits. Bank loans issued by commercial banks expands the quantity of bank deposits.
The Japanese asset price bubble was an economic bubble in Japan from 1986 to 1991 in which real estate and stock market prices were greatly inflated. In early 1992, this price bubble burst and Japan's economy stagnated. The bubble was characterized by rapid acceleration of asset prices and overheated economic activity, as well as an uncontrolled money supply and credit expansion. More specifically, over-confidence and speculation regarding asset and stock prices were closely associated with excessive monetary easing policy at the time. Through the creation of economic policies that cultivated the marketability of assets, eased the access to credit, and encouraged speculation, the Japanese government started a prolonged and exacerbated Japanese asset price bubble.
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David Ernest William Laidler is an English/Canadian economist who has been one of the foremost scholars of monetarism. He published major economics journal articles on the topic in the late 1960s and early 1970s. His book, The Demand for Money, was published in four editions from 1969 through 1993, initially setting forth the stability of the relationship between income and the demand for money and later taking into consideration the effects of legal, technological, and institutional changes on the demand for money. The book has been translated into French, Spanish, Italian, Japanese, and Chinese.
Phillip David Cagan was an American scholar and author. He was Professor of Economics Emeritus at Columbia University.
The Lost Decades is a lengthy period of economic stagnation in Japan precipitated by the asset price bubble's collapse beginning in 1990. The singular term Lost Decade originally referred to the 1990s, but the 2000s and the 2010s have been included by commentators as the phenomenon continued.
Neil Wallace is an American economist and professor of economics at Penn State University. He is considered one of the main proponents of new classical macroeconomics in the field of economics.
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