By J. D. Alt. The post is a continuation of ideas first developed in Alt’s novel, The Architect Who Couldn’t Sing, available at Amazon.com or iBooks. Originally posted at New Economic Perspectives.
Why does it seem like there isn’t enough money to pay for the things we really need? The headlines are filled with stories about our nation’s “debt problem” and dire warnings about our impending “bankruptcy.” As an architect who fills his waking hours thinking up all kinds of wonderful things we could be building, I’m alarmed by the idea there isn’t enough money to pay for any of them. Before wasting more time dreaming, I had to find out: Is it really true? Are we really too poor to put America back to work making and building the things we need to maintain a prosperous nation?
Searching for an answer, I discovered a small (but growing) group of economists (see here, here, here, here, here, here) who represent an emerging school of thought known as “modern monetary theory” (MMT). These men and women are valiantly trying to make us all understand a paradigm shift that occurred some forty years ago, when the world abandoned the gold standard. Their key insight shocked me: A sovereign government is never revenue constrained when it is the Monopoly issuer of its own pure fiat currency; it has all the money that’s needed to put its citizens to work building anything—and providing any service—that is desired by the public (provided the real resources are available). Even more remarkable, sovereign “deficits” in the fiat currency are just the accounting record of the surpluses that have been injected into the private economy. Eliminating the sovereign currency deficit by imposing austerity will not make the economy healthier; it will, in effect, bankrupt the citizens!
If this seems to defy logic, stay with me for just a few minutes. I’m going to propose a simple exercise that will help you “see” this reality for yourself. The exercise is simply that everyone join me in a familiar game of Monopoly. By the end of the game, I hope to convince you that MMT is correct and that we could be doing better, much better – for ourselves and future generations—if we just understood and took ad vantage of our modern monetary system.
Let’s begin.
Playing Monopolis Monopoly
We’ll play by the normal rules (I’ll suggest some added features as we go along) except this time we’ll pay special attention to certain things that are happening. For example, you’ll recall that before the game can begin, one player has to agree to be the “banker” (a tedious task, but someonehas to do it.) But now choosing this person has a special importance: it must be done democratically, with the players voting to determine who will manage the game’s money. We’ll do this little exercise because we want to pay special attention to the fact that the Monopoly “bank” is an entity created by the players themselves for their mutual benefit. In fact, we won’t refer to it as the “bank” anymore, but instead will call it our “currency issuing government” (CIG). In a real sense, we all “own” CIG together, and taking a minute to democratically choose who will manage it heightens our awareness of this key fact.
To reinforce this awareness, the next thing we’ll think about, as we set up the Monopoly board, organize the Deed Cards, shuffle the Chance Cards and choose our tokens, is that what we are really doing is setting up, and getting ready to operate, a miniature nation-state. Let’s even give it a name: Monopolis. We, the players, are the new citizens of Monopolis. We have just established, through democratic consensus, our currency issuing government, and we are now getting ready to operate our economy. That’s what the game is about.
Issuing the Currency
As we get ready to play, we immediately discover an odd dilemma: CIG has all the money! We, the players, are ready to go but we can’t start the game until we have some of CIG’s money. This is an awkward moment, which is dispensed with so quickly in regular Monopoly we hardly notice it. (The “banker” is instructed to make initial cash distributions in the amount of $1500 to each player). If we pay attention, we can see that this moment raises some interesting and crucial questions.
The first question is: are we not playing the game backwards? Isn’t it us, after all, who have to give our money to government before it has any money to spend on anything? Politicians are telling us this all the time: “Your tax dollars are going to pay for this or that.” And, as will become clear, at the state and local level, this is certainly true. But at the federal level—at the level of the sovereign state—the game of Monopoly provides us with our first clue that something is fundamentally different now from what we habitually imagine it to be.
The CIG we’ve created for our nation of Monopolis, in fact, has exactly the same purpose, and exactly the same unique and special power as any government that issues its own sovereign currency: Its purpose is to issue and manage the money we are going to play our game with, and the special power we’ve granted it is the ability to create as much money as necessary for our game to go on as long as we want it to.
Indeed, the rules of Monopoly specifically state that while players can run out of money (in which case they are bankrupt and out of the game) the Monopoly “bank” itself can NEVER run out. In the event the game unfolds in such a way that all the pink and green and blue and gold bills that come in the box are absorbed by the players, the Monopoly rule book instructs the banker to get out a pencil, paper and scissors and create new money as needed. (This is the definition of “fiat money”—money that gains its acceptance simply by decree.)
So it appears we aren’t playing the game backwards after all. The currency does flow from CIG to the players, and when we give some of that money back—in the form of taxes, or fees, or fines— by logic it cannot be because CIG needs that money. In fact, the CIG could take all the money it receives (in taxes, fees or fines) and simply shred it and throw it away: it has no need for it, because when it needs money it simply “issues” the currency. The first time I tried to wrap my thinking around this set of ideas my primordial brain-stem resonated with knee-jerk objections. (I’m not alone. See here)
Indignant as I might get, however, Monopoly forces me to realize that if I want to play the game, I have to accept the fact that the CIG gets to create the money, and I have to use the money it creates. I could insist otherwise, demanding that each player bring to the table his own private stash of gold and silver. In fact, it was just forty years ago that the real world played the game in exactly this way, and the long history associated with that experience is what implanted our brain-stems with Neanderthal beliefs about what money is and how it works. But as will become evident (if we can ever get started) the game proceeds with much greater efficiency and potential for economic growth (prosperity for more and more people) if we use our CIG’s fiat currency, which has an unlimited supply, as opposed to the player’s “gold and silver” which has a limited quantity.
Monopolis Players have Jobs
As I mentioned, “plain-game” Monopoly glosses over all these issues by directing the “banker” to simply make initial cash disbursements of $1500 to each player. In our game of Monopolis Monopoly, however, we want to emphasize that people work for a living. So we begin our game by having our government buy something it needs from each of the players.
For example, I’m a writer-architect, and the government pays me $1500 to write the Monopolis rules. You are a builder, and the government pays you $2500 to build a network of roads that will allow lumber and materials to be transported to the Monopoly board properties. Sister Sue is an administrator, and the government pays her $2000 to create the Balance Sheet we’ll use to keep track of the game’s transactions. So now we’ve each done a bit of work, have modest cash positions, and we’re ready to begin the game. Before we do, however, let’s look at the Balance Sheet sister Sue has created. Keeping this Balance Sheet up to date, and paying attention to it from time to time, is going to be important.
Finally! We’re ready to roll the dice to see who goes first. As we play, we should begin to notice the fact that there are two different kinds of transactions occurring. One set of transactions takes place among the players themselves: I land on your property and have to pay you rent. Let’s say I land on Vermont Avenue and I have to pay you $50; then you land on Baltic Avenue and have to pay Sister Sue $75; then Sister Sue lands on Charles Street and has to pay me $150. Let’s think of these transactions as happening within something we can call the “private sector”, and update our Balance Sheet to look like this:
Horizontal and Vertical Transactions
MMT economists refer to the transactions within the private sector as “horizontal” transactions. These include all transactions between households, businesses, corporations and state and local governments. What they call “vertical” transactions are those between the private sector and CIG.
Our government’s initial procurements of services from Me, You and sister Sue were vertical transactions. We can observe another vertical transaction the first time a player passes Go. When this happens, Monopoly stipulates that the “banker” will pay that player $200; it will then continue with the same payment to each player each time they pass Go throughout the game.
We can think of these “Go payments” as being analogous to many different things in the real economy—the federal government paying someone to mow the front lawn of the White House, for example, or sending out a social security check to our grandmother. At this point, it doesn’t really matter. What we do want to notice, however, is what these “vertical” transactions do to the Balance Sheet. Let’s say each player has now passed Go:
What we can clearly observe is that while the Private Sector continues to be a zero-sum game, the “vertical” transactions generated by the “Go payments” have increased the size of that sum. And, once again, the new total of currency assets in the private sector is exactly equal to the “deficit” debit account of our CIG. (Indeed, how could it be any different?)
Expanding the Economy
Now let’s add some “fiscal events” to make our game more interesting. The first “Fiscal Event” I propose is the building of an aircraft carrier. It’s a well-known fact that governments like to purchase aircraft carriers, so it is entirely reasonable to suppose that our little nation-state would like to have one as well.
We can get an aircraft carrier into our game in exactly the same way the U.S. government gets one into its fleet: It goes to the Newport News shipyard and buys one. In Monopolis Monopoly, we’ll simulate this event by pretending that one of the players is the shipyard—You, for example, since you’re the builder amongst us. You give Monopolis its aircraft carrier and CIG pays you for this good by injecting $10,000 into your currency account.
What’s worth noticing here is that this vertical transaction has injected a considerable amount of currency into our game, but that money has been used to build something that does NOT add to the inventory of things that players can buy. Since none of the players in the private sector have any need for an aircraft carrier, our choices of things to spend our money on are still limited to the properties on the Monopoly board and the houses we can build on them—only now we’ve got a lot more money to throw at those things. In one sense, then, the government’s decision to build an aircraft carrier, while it may benefit our common defense, doesn’t really expand the economy of our game. That’s something to think about.
Building Codes and Government Regulation
Politicians argue a lot about whether government regulations are good or bad for the economy. From at least one perspective, however, if we insert government regulation into our Monopolis Monopoly game, the result is a big surprise.
To see this, let’s create a regulation. Since our game involves the building of houses and hotels, let’s have our regulation be a Building Code. Not just any Building Code, but a big, thick, extremely complex and detailed one like the International Building Code adopted by virtually every city in the United States. Once in place, the rule stipulates that players cannot build a house or hotel without meeting the requirements of the Code.
How does the government create such a Code? In exactly the same way it acquires an aircraft carrier: it pays someone to figure out what should be in the Code, pays them to write it, to illustrate it, to publish it. I would venture to guess that the International Building Code likely cost almost as much as an aircraft carrier, so I volunteer myself to be the player the government pays to write it. After I deliver the hefty volume, CIG transfers $7,500 into my currency account.
What we should notice here is that, like the aircraft carrier, the writing of the Building Code has injected a major sum of currency into the game. But something else has happened as well: The Building Code gives rise to a multitude of “services” which the game players now need, and which they can buy with their money. These are the services of professional experts who are trained to understand the Building Code (which is completely incomprehensible to those of ordinary intelligence). In our game, I have volunteered sister Sue to be the provider of Code Services to the other players. As can be seen on the Balance Sheet, both Me and You have paid Sister Sue for some of these services, and will continue to do so each time we add a house to one of our properties.
Unlike the aircraft carrier, then, the Building Code injects currency into the game and creates new things for the players to spend their money on. This particular government regulation, then, actually expands the economy of our game. This also is worth thinking about.
Enabling Structures
The sun’s been down an hour now, and the room we’re playing Monopolis Monopoly in has gotten pretty dark. Sister Sue turns on a light and—to our great surprise—we find we’re not alone! While we’ve been busy rolling the dice, clomping our tokens around the Monopoly board, and counting our stashes of currency, the neighbors have come over. They’re standing around, leaning against the walls, watching us with keen interest. They’re noticing all our pretty houses and hotels and colorful money, and I can tell from the expression on their faces that they want to join in the fun.
Fine with me, except there’s a problem: You and Me and sister Sue already own all the property on the Monopoly board. If the neighbors join the game there won’t be any property for them to buy, and without property, they couldn’t work with You to build a house, or hire Me to design one, or sister Sue to interpret the Building Code. So there’s really no way they can participate in the game.
But a couple of these folks are leaning forward now in a determined way, hands pushed in their pockets in a manner that suggests they might be coming out of their pockets at any moment, and I’m starting to get worried. There are a couple of kids, hanging onto their mother’s dress, who look like they haven’t eaten in two or three days. Sister Sue is looking at them and getting tearful.
Suddenly, I’m struck by a lightning bolt idea, and I immediately share it with the other players: The government of Monopolis should build a series of structures on the Monopoly board that creates new properties that players can build more houses and hotels on. I suggest calling them “Enabling Structures” because they will enable the neighbors to participate in the game. I quickly design a prototype:
The path of play around the board will now zig-up through the Enabling Structure and zag-down to the lower board, with the players either claiming possession of or paying rent to the owners of the Enabling Structure Lots.
How will the government build the Enabling Structures? Just like it buys an aircraft carrier or a building code, and I nominate myself (it was my idea, after all) to be the Enabling Structure developer. I build them all around the monopoly board, effectively doubling the number of properties and houses and hotels players can now buy in the game. To compensate my efforts, CIG injects the tidy sum of $8,000 into my currency account.
Now the neighbors can join the game, except they still don’t have any money to begin playing with—the same dilemma, recall, we started out with ourselves. Sister Sue proposes that our currency issuing government is perfectly capable of paying each of the neighbors to build a house on the first “Enabling Lot” they land on, and this procurement by our Monopolis government will become their “start-up” cash for playing the game. The new player will then pay “rent” back to CIG each time they pass go, until those payments equal the original procurement, at which point they will own the houses outright.
Whew! Now the neighbors are in the game, and after a few rounds, they’ve acquired property and built some houses, and the game proceeds just as before, except now there are more of us playing. And while the building of the Enabling Structures—and the government’s procurement of the first Enabling Structure houses—has injected a big chunk of currency into the private sector, it’s also created a LOT more things for the players to buy and sell to each other: more properties, more houses, more building services, more design services, and more services to interpret the Building Code. That’s really something to think about.
Here’s where we need to pay close attention
As the neighbors get more deeply involved in the game, building houses, collecting rents, passing Go, our currency issuing government is going to quickly run out of the money that came in the Monopoly box. So, for our game to continue, we have to follow the Monopoly rules (already stated) which instruct the “banker” to get out pencil, paper, and scissors and begin creating more currency to keep up with the expanding needs of the game.
Now there may be some folks at the table who are genuinely alarmed by this idea. They may tell us that the government cannot just “print money” because that will inevitably lead to hyper-inflation; that the government, just like all the rest of us, must “live within its means.” Their heated arguments might persuade other players too, because, well…it’s just obvious that “printing money” and running up the sovereign “deficit” is the road to serfdom.
The question is, should we listen to them? Let’s update our Balance Sheet and see what we think. (To keep the Balance Sheet fitted on the page, I’ve combined the neighbors transactions into a single column; I’ve assumed there are three of them, that they’ve each claimed an Enabling Structure lot, that CIG has paid each of them $1500 to build a house on that property, and they’ve each made one rent payment of $100 back to CIG.)
It’s clear, looking at the Balance Sheet that our CIG continues to run a “deficit”. It is also clear (especially since the neighbors joined the game) that this deficit has been growing at an increasing rate. But in what sense does that deficit become a “debt” that we, the players, should worry about paying back? The balance sheet shows that the CIG’s deficit is not our debt at all, but simply a record of the currency that’s been issued into our game. And where did all that “deficit spending” end up? Look again at the balance sheet: it’s in the accounts and assets of the players themselves.
Maybe we should think of something else to call it
When my personal bank account is in “deficit”, that is something I worry about. When a city or state government has a “deficit”, that’s also something to worry about because we have not given our “local” governments the power to issue the currency (they are users of the currency, just like the rest of the players.) When their coffers are empty, they have to make tough choices and cutback on their spending. But when we say our sovereign government has a growing “deficit”, we are badly misleading ourselves if we use the word the way we do when we think of our own bank accounts. What Monopolis Monopoly is showing us is that our sovereign “deficit” is in fact a balance sheet accounting of our own financial wealth. And why we would want to reduce that is a mysterious thing indeed!
MMT versus Neanderthal Economics
Actually, there’s only one reason we’d want to make ourselves miserable by imposing some arbitrary budget rule or fiscal austerity on our game: because we still believe we’re operating under the rules of what might now be called “Neanderthal Economics,” which go something like this:
“We must adhere to the principles of ‘sound money’ for if we do not, our citizens will lose faith in the currency and begin converting it into gold. To prevent this from happening, the sovereign must spend only what it takes in. If it tries to spend too much, its gold reserves will be depleted and it will be forced into bankruptcy just like anyone else.”
And what if, believing this, we actually eliminated the deficit and began running surpluses? Well, in that case it’s obvious our game of Monopolis Monopoly would quickly come to an end: Our CIG would have all its money again, but the players would have nothing with which to play the game. At that point, we might just as well pack everything neatly into the Monopoly box and put it back on the pantry shelf.
The astute player will object that we’ve left out too many things for our game to really mean anything: Private banking, for example, or managing inflation, or bonds and interest rates (if the Fed doesn’t “need” money, then why does it seem to borrow so much of it?) Next time we play Monopolis we could add those in, but they won’t change the basic MMT truths that our simple version of the game has revealed:
A society with a sovereign fiat currency can build any thing or obtain any service it deems necessary or desirable, so long as the citizens of that society are willing and able to build the thing, or provide the service, in exchange for the fiat money. The sovereign deficit, no matter how large it may grow, is not like a shortfall in your own bank account: it is the balance sheet record of the
money that was transferred to our side of the ledger.
The implications of this, I believe, are simply astounding.
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“A society with a sovereign fiat currency can build any thing or obtain any service it deems necessary or desirable, so long as the citizens of that society are willing and able to build the thing, or provide the service, in exchange for the fiat money. The sovereign deficit, no matter how large it may grow, is not like a shortfall in your own bank account: it is the balance sheet record of the”
The above statement is Not 100% true. We still have to respect the constraints of the physical universe:
The achievable rate of raw material extraction from the earth and the rate at which we can convert raw materials to the desired finished product.
more at:
http://aquinums-razor.blogspot.com/2011/11/here-is-how-bankers-game-works.html
mansoor h. khan
Mr. Khan, thank you for bringing this up. The fact that it needs to be brought up at all is a sign of how delusional our global societies are.
An argument can be made that this is the fatal flaw inherent in what we call “civilization”. For a few million years, homo sapiens lived in balance with nature; it’s only in the last few thousand that homo sapiens has sought to control and exploit nature, with increasingly disastrous results. Animism gave way to sky gods. Abstraction became the norm, which leads us to our current and utter incomprehension of what is happening to us. Fidelity to our abstractions has led us off the cliff of the material world which is dying at our hand.
Lidia,
True. But I am not so negative about it. we are also the most creative beings ever created.
Remember:
Effective Utility of our Work (Production) = (1) Raw Materials on Earth (for now) X (2) Engineering Creativity X (3) Management Creativity
Number 2 and number 3 are in our control.
mansoor h. khan
And there is some very interesting work taking place in biotech, and synthetic biology.
http://edge.org/conversationsin/tags/Synthetic%20Biology
These people are zoning in on very specific sequences for traits – successfully. They are beginning to envision plant cells replicating as fast as bacteria to grow crops in days, and organisms that consume CO2, and excrete gasoline – killing two birds with one stone there, and I’m only scratching the surface of what they are showing.
Biotech is going to dwarf all other technology as far as impact. These people are essentially writing software in ACGT.
All praise belongs to God!
Yes, biotechnology may well dwarf all other technology in terms of impact—negative impact: just take a look at the GMO/seed monopoly issues and the extinction of biodiversity. [A contender for “biggest impact” could end up being our nuclear technologies, of course.]
We don’t even understand what makes ecosystems work (see the moose extinction article), yet we have the hubris to tinker with its underpinnings wholesale, and in a reckless fashion.
Can they re-create the 800-year-old giant red cedar that was cut down in Vancouver for roof shakes? Please hurry.
http://www.huffingtonpost.ca/2012/05/17/vancouver-island-red-cedar_n_1525958.html#s=991376
“When we know what God is, we shall be gods ourselves.” – J.B.S. Haldane
I mean, like, what could possibly go wrong with designing a food crop that exudes pesticides, and contains toxic substances even when harvested for food or when the residual is mulched. What could POSSIBLY be wrong with that?
Personally I’m far more interested in this:
http://www.jetpress.org/volume13/Nanofactory.htm
If the promise of personal nanofactories ever comes true, practically all non-resource extraction industries become obsolete overnight, and even those will suffer greatly.
Imagine a world where every human being can build just about everything they want or need that can be realised with physical matter with a mere keypress and a modest input of energy and matter. Most material distribution networks instantly obsolete. Why move stuff around when everything that a normal human being might need can be produced right at home? All polluting and ugly factories, obsolete. All retail, obsolete. Basically it’s the complete death of top-down violence enforced capitalism. And it may be less than 10 years away.
All hail local autonomy?
Lately there is a new ad on CNBC which is terrifying. Someone says that the global economy is a marvel to behold because in the last 10 years we humans have produced 90% of everything that has ever been produced on the planet. And then viewers are encouraged to believe in the world as we know it. I, for one, will not believe in the world as I know it. Not until Deep Water Horizon has been cleaned up. The Oregon coast; Fukushima; all the estuaries and rivers of the Earth; all the garbage in the oceans; all the toxic chemicals; all the poison in our food, air and water. Not until the Forests of Borneo have been restored and the rainforest in Brazil is protected; not until the mass extinctions abate. I will not believe in this world until we come to our senses. It is the coming to our senses that should take priority. Then, I agree, the future looks much better.
I read the 1972 book “The Limits to Growth” many years
ago. Overall, I thought it a reasonable study and
a “warning sign”, in a sense. The American economist
Henry C. Wallich wrote an article in 1982 heavily
critizing the “alarmist” tone of “The Limits to Growth”.
Just reading the first page of Wallich’s 1982 article,
with its dismissive and patronizing style, is enough to
make me cringe.
Susan, I am glad I haven’t seen that ad, because it would make me more furious than I already am. Thanks for being sane and contributing here against the “cornucopians”.
We cannot “engineer” a single thing that is life-giving on this planet, not a single thing.
We can engineer antibiotics and pesticides and cement and skyscrapers, etc. but we Cannot Recreate what these things take away.
One a fishery is gone, it doesn’t come back, eg.
http://www.themudflats.net/2012/05/19/epa-warns-pebble-mine-could-affect-sustainability-of-bristol-bay-fishery/
And yet people will seriously DEBATE the “value” of a gold mine versus a wild salmon run in terms of today’s nominal dollars, like that’s some way to decide the issue.
And you have those who stand to gain from the mine, on the other side of the world, running ads showing a Native woman hiking the area to show how “far away” the mine is from the Bay. [Far away for humans, not animals or fish or birds, whose idea of “far” is quite different from our own.]
Look at the brilliant human “engineering” of the Aswan dam, which has ruined ecosystems both upstream and in the Mediterranean.
http://ocean.tamu.edu/Quarterdeck/QD3.1/Elsayed/elsayed.html
Moreover, it caused most of the population to become infected with grotesque parasites which had been kept under control by the water’s past natural ebbs and flows:
http://www.ncbi.nlm.nih.gov/pubmed/1216315
I could go on and on, of course…
People aren’t smart enough to know how dumb they are, and cannot predict the outcomes of their supposed “genius”. Oppenheimer didn’t know whether, when he pushed the button during the Manhattan Project, whether the reaction would be contained, or whether THE ENTIRE WORLD WOULD BE DESTROYED. He pushed the button anyway! This is with complete annihilation being a 50/50 chance staring him in the face! Not some cumulative effect to be seen somewhere else at a later date…
The money system we’ve devised, of course, is a brick that we’ve put on the accelerator to extinction.
• When all the trees have been cut down, when all the animals have been hunted, when all the waters are polluted, when all the air is unsafe to breathe, only then will you discover you cannot eat money.
~ Cree Prophecy
• Humankind has not woven the web of life. We are but one thread within it. Whatever we do to the web, we do to ourselves. All things are bound together. All things connect.
~ Chief Seattle
P.S. I wish a Native American would run for President. ~ just me
• You have to plant. You can’t just eat.
~ Neil Young
http://neilyoungnews.thrasherswheat.org/2009/10/tweet-of-moment-you-have-to-plant.html
• When all the trees have been cut down, when all the animals have been hunted, when all the waters are polluted, when all the air is unsafe to breathe, only then will you discover you cannot eat money.
~ Cree Prophecy”
@just me — thank you for this. I had it on a T-shirt 20 years ago; the T-shirt has disintegrated.
But could we imprint this on Obama’s and our FOREHEADS????
I think your argument fall under the “able” part of “willing and able to build it”.
Still, unless there is nuclear fission or fusion involved the basic building blocks are still there (for the most part, i understand that helium is leaking out of the planet thanks is lack of density vs gravity and air pressure). It just takes more energy than it is worth right now to recycle most of it.
Energy may well be the real issue, as our demand may hit galactic proportions within a generation or two if it keeps growing. But that again comes under able.
What the HELL are you talking about, “energy MAY BE the issue”!?!?
Energy is THE ONLY issue.
Our demand will never hit “galactic” proportions because will we have destroyed the infrastructure of life far earlier than having exploited all possible energy sources.
The largest source of energy available to humans is the sun’s activity of photosynthesis in plants.
Since we are hell-bent on reducing that activity to its minimum, we will reap the rewards of that.
Oh, P.S., it would not be possible to consume “galactic” quantities of energy, because all of this energy consumption has discarded HEAT. Let’s say we want 3% growth. At an increase of 3% per year in waste heat, we would just cook ourselves in short order, far quicker than even the current, disastrous, global warming.
Excellent point! The 2nd law of thermodynamics is the hard limit for the current growth model. Considering an annual rise in energy consumption about 3% for the last century, within 4 centuries the surface temperature of the Earth will have reached that of the Sun, and a lot sooner inhospitable to human life.
And there are also hard limits to how efficient we can make motors, etc. For instance, in electrical motors we’ve already reached 91-92% efficiency.
So, it’s not about energy sources, but about thermal energy (heat) dissipation.
“so long as the citizens of that society are willing and able to build the thing, or provide the service,”
Emphasis mine. Mr. Strether understands real resource limitations quite clearly.
It’s good to point that out of course.
I wasnt sure what the article was trying to get at. Is this man saying that the US does not have a problem and can print its way out of the crisis ? If that was indeed the point being made with long “mental” experiment with monopoly then a couple of points, firstly the parallel is totally incorrect since the game in the above article is being played within a closed set of ppl who are all in the US including the banker which is the FED that “can” print all the fiat currency where as in the real world this fiat currency is something other countries are being paid for their goods and services eg. all the oil, production effort from china, high-tech from india etc.
And agree with the astounding bit in the end of the article since it is an astounding con that the US has been pulling off since 1972. To use the same example its like one of the players in monopoly having the ability to print money of its own that parallels the global standard and then forcing other players including the bank to accept it and buying things around the board with it.
But really its not astounding considering that in the 70’s there was no one to challenge the US military might including europe which was already weakened at the end of 2nd world war and also scared of the Russia. The US started with the now-OPEC countries, played king makers and forced the dollar on the rest of the world, the rest is history – beginning of a golden age for US.
But all good things must come to an end. Russia is no longer an evil from mainland europe’s perspective. More countries have joined the nuclear club including China and India. With overall imperialisim on the decline after the 1940’s and gone by 1980 (south africa being the last one) no one is going to accept the fiat currency anymore and hence the economic crisis. The 2008 crisis was caused by the rest of the world dumping internal US debt (cloaked as securities and other fancy finacial instruments) which was not a surprise because by then the rest of the world was already trying to dump the dollar itself.
So if the solution is to print more of the fiat currency then rethink it as its not going to work or definately be the cause of WW3.
http://www.exterminatingangel.com/index.php?option=com_content&task=view&id=826&Itemid=662
” There have been discussions and proposals as to how to structure a better monetary system and one popular proposal is to combine the Treasury and the Federal Reserve system and have the government spend money into the economy directly, by paying for public works with new money, rather than this roundabout way of having the Fed buy government debt as the basis of the currency. The fact is that as an obligation, money is inherently a debt, a promise of value to be returned. Even a gold based currency is just debt denominated in gold, as in; IOU one ounce of gold. So unless those commitments are made as viable investments with potential long term return to society, the result will be another form of bad debt and it will also collapse. Governments have an inherent tendency to make more promises than can be kept, so giving politicians the ability to create money by spending it into existence is an idea that should only be considered with the strongest of reservations. The current system seems designed to create excess debt anyway, since it budgets by putting together enormous spending bills, adding enough extras to get sufficient votes and then the president can only pass, or veto it in whole. Budgeting is to list priorities and spend according to ability. If the government actually wanted to budget, these bills could be broken into their various line items and have every legislator assign a percentage value to each one. Then reassemble them in order of preference and have the president draw the line at what is to be funded. This would create a system of actual budgeting, as well as distributing more power over the entire legislature, rather than having most of it accumulate at the top. This makes prioritizing a legislative function, with the president as the one responsible for the level of spending. As Truman might have put it, “The buck stops here.”
This system would result in a smaller money supply and less federal money going to local projects, but if there is a community public banking system, which funneled profits back into the public projects within the community being served, rather than having it siphoned off by big banks, to be lent back to the various levels of government and then spent on those same projects, the result would be a more stable and sustainable civic foundation.”
There cannot be any argument that the present system does NOT create excessive debts.
Excessive debts describe the status-quo, which has grown from the present system which creates all money as a debt burden that is greater than the amount of money created.
Debt-Money-R-Us.
The government money would be created without debt to anyone – being issued to promote aggregate demand and entering the economy as a payment for something of a public good, or it would not be in the budget.
It will NOT result in less money being available for the real economy, only less for the “leveraged” speculators.
The amount of credit-and-debt in the economy will be a matter of commerce.
The Kucinich Bill provides MORE money for public investment than could any public banking proposal.
http://kucinich.house.gov/UploadedFiles/NEED_Act_FINAL_112th.pdf
It does so because the state’s gave up their right to create money to the federal government, and the GUV gave it to the private bankers.
We NEED to change that and give the states more of the purchasing power created annually in the national economy.
For the Money System Common.
Joe,
Money is a promise of value. It is inherently a debt.
There is a fundamental conflict between the short term needs of politicians in charge of government and the long term needs of government that mitigates against giving the politicians in charge of government the unlimited power to spend money into existence.
That’s why I offered an actual budgeting process built into the relationship between the executive and the legislative.
Money is Money.
Debt is Debt.
Better the twain,
Had never met.
There is no reason to have debt in order to have money.
What would be the consequence of having the government issue $359 Billion in NEW MONEY in its budgeting process next year in order to provide for the normal growth of the economy.
And doing so without issuing any debt?
It would also be part of the budgeting process, identifying the goods and services it was purchasing.
Of course, this could only happen in full withdrawal of the private privilege of creating debt-based money, or there would be excess monies and cause inflation.
Why does money need to be a debt?
Thanks.
Money is simply an idea. The idea is codified into law. Money is whatever we decide it is. Nothing more, nothing less.
It is VERY important to a few hundred extremely wealthy families that they control the money supply, and therefore, the entire world economy.
Does this suit the rest of us, numbering in the billions? Well, if not, it’s time to stand up.
Nice post! Thanks.
For those who fear the CIG (Currency Issuing Government) might overspend, the solution is to allow other currency issuers but whose money is only acceptable for private debts. The CIG would retain its monopoly of creating legal tender for taxes but now note that if the CIG overspent with regard to taxation and economic growth that taxes would be EASIER to pay in real terms for the other currency users since government money would be cheaper. To avoid an inflationary spiral the CIG would then have to raise taxes (unpopular and an admission of error) or reign in its spending till economic growth caught up with its money supply. Btw, the solution of coexisting government and private money supplies is implied in Matthew 22:16-22 (“Render to Caesar …”).
I read most of the above article yesterday because of a link Rodger Malcolm Mitchell gave.
your mmt makes money simply a means of exchange and rapidly destroys money as a store of value. try again.
Money is a contract. The value is the implied exchange. Treating money as a store of value creates the illusion that it has some inherent value beyond the trust imbued in it and if we treat it as such, the assumption becomes that the more money there is, the more wealth we have. Which leads to the situation that we have now; Enormous amounts of liquidity, not only chasing limited investment potential, but rapidly destroying real value and wealth in order to create more money.
“Enormous amounts of liquidity, not only chasing limited investment potential, but rapidly destroying real value and wealth in order to create more money.”
RAPIDLY DESTROYING REAL VALUE
Exactly. You get it.
P.S. generally: in all cases, substitute the term DEBT for “liquidity” and it will be easier to see what’s right in front of our eyes.
Public money administration is a matter of public policy.
It SHOULD provide the means of exchange for the national economy.
If people want to have a ‘store of value” and they don’t like Savings Bonds, they can invest their money in whatever store of value they choose.
Buy some gold.
As long as the value of the money ITSELF is sound – that is maintains ITS OWN purchasing power through proper management, it is meeting its store of value requirement as the national circulating media.
A national monetary system’s primary function IS to have a media for exchanging all the goods and services produced in the national economy.
No problem there.
For the Money System Common.
Issuing money “destroys its value” …? (i.e. is inflationary) ….Really….?
According to its first-ever audit, the Fed (that’s the U.S. central bank) issued $16 -$29 trillion to fix the financial markets after Lehman Bros. went belly-up. That was roughly five years ago. Where’s the inflation?
And, more importantly, why do the same fraudsters whose crimes led to the financial meltdown get bailed out, but social safety net programs and revenue sharing for the states get the shaft?
Part of the problem is that the CIG is in the control of the financial sector. After money becomes a tool for people, not bankster, power, then comes the true “golden age.”
“where’s the inflation?” This is a provocative question.
I have seen food prices pretty much double both in Italy and the US over the past decade.
That’s, in one sense, “inflation”. But it has not come about because of an increase in the money supply; it has come about because of REAL SCARCITY. There is no “supply/demand” equation. There is demand. And there is supply. SUPPLY MAY VERY WELL NOT INCREASE DESPITE DEMAND.
Apart from food “inflation” (real resource scarcity beginning to show itself) there is DEflation: a nominal reduction in debt money. When debts are written off or become impossible to repay, money goes to money heaven, creating deflation. The fact that we have both inflation and deflation at the same time just proves how doubly-fucked we are.
What happens to all forms of money when there really is no future value to store?
That is what we are facing: future value WILL BE less than current value.
Future value will be less than current value.
That’s fine. Much of the problem with the current design of money is trying to kill those two birds with one stone. The assets created by availability of money as a medium of exchange (rather than the money itself) is a far more appropriate store of value IMHO.
“The assets created by availability of money as a medium of exchange (rather than the money itself) is a far more appropriate store of value “
WHAT THE FUCK ARE YOU TALKING ABOUT!!? This is the most incoherent sentence I have ever read.
“the ASSETS CREATED by [the] availablity of money”!?!?!?
What assets are those?
How can they be a “store of value”?
Lidia, I think you’re now immunized and free to think !
A pleasure to meet you too Lidia. You don’t think the use of money as a medium of exchange enhances human society?
Or, as craazyman identifies later on, wealth is co-operation and money as a medium of exchange certainly lubricates the process of co-operation. The assets I’m referring to are the result of co-operative [economic] activity: schools & hospitals, relationships, trust. I’m not talking about gold or stocks. Make more sense now?
No. I don’t think so. I don’t see schools and hospitals as founts of trust. I see them as perversities: the schools not educating and the hospitals by and large not making well.
I will pry your gold with it’s ‘stored value’ from your cold dead fingers and throw it into the ditch as useless. Continuing down the path of money as god over all things is the most asinine thing I have ever heard. Your ‘stored value’ is nothing but a number. You can’t eat it, it teaches you nothing, it provides no energy to light your way and it can’t keep you warm. Yes, I know your argument will be, “but I can trade it for what I need.” Ah, but what if others find it worthless because they have discovered that value is created in other ways. Money is simply a tool and should be treated so.
Maude,
Fascinating article, and it’s easy to get fired up after reading it and all the very good critical comments here, but…
I know you mean well from a purely idealistic perspective, but what should be used as “stored value”? Some of us need to over-produce in the summer in order to eat in the winter. Do we use our good looks, charm, and quite-possibly-completely-unearned-trust as stored value?
Or do we all become truck farmers with silos and cold cellars, giving up our building trade jobs in the cold cold north? Do I spend all my time in the summer digging root cellars and building silos instead of growing food? Or do I hire someone using something, gold for example, that I have stored up through excess production in the fields and then traded for some sort of item like the above mentioned gold that can be used as “stored value”.
Whether it’s grain or gold, or good looks and charm, some think it’s important to be ants instead of grasshoppers. You never know when Mother Nature will determine that a drought or flood or a bout of Malaria is this season’s Blue Plate Special.
Hopefully you are not suggesting that savings accounts of any type are a bad thing? If so, then what do I put up to buy the land to build my silo, build my root cellar and grow my food? Stored value, whether gold, $$$, or is necessary for those of us who choose to be ants instead of grasshoppers… I think.
By the way, you are more than welcome to pry any and all gold/$$$/ from any and all cold dead fingers, but be very cautious if they are warm live ones :)
Animal Farm
What about banking and loans and deposits. There’s another character that needs to jump into this story. Piggy Banker.
Piggy Banker sniffs around Monopolis looking for people who want and need things but can’t afford them. Some need them, like a loan to pay for job training. But others only want them, like a loan to pay for a vacation trip to Vegas that you’ll pay for through your gambling profits.
Then he “lends” them money so they can buy these things. But he doesn’t have to have the money first in order to lend it, the way you lend your neighbor your lawnmower when his breaks down, or the way you lend your hardback edition of “A Critique of Pure Reason” to your plumber who needs something to use to hold the door open while he hauls in the new toilet he’s gonna install in your bathroom.
No. Piggy Banker creates the money as he lends it simply by saying “here’s your money” and using his computer to make a bunch of positive numbers appear on your bank statement. Then he has to make sure he has reserves to cover that loan, but he can arrange those later with the Monopolis Central Bank who basically gives him any amount of reserves he wants. Just because he’s Piggy Banker.
So you don’t need the govermint to spend money to create money. Piggy Banker creates money just by walking around and singing “I’ll finance your mortgage, I’ll rummage and pillage, singing I’m a piggy banker piggy banker am I” (sorry Woddie Guthrie). Piggy Banker rummages around sticking his snout everywhere trying to smell opportunity. He’s not all bad, but sometimes his addiction to eating garbage gets him in trouble, and if he eats enough garbage, then all the people in Monopolis say “Oh Man, Piggy just ate himself almost to death again. I guess we have to bail him out one more time.”
So the money comes from Piggy Banker snorting around eating whatever he can and handing out loans. And everything works unless the Pig stuff himself with so much shit you have to put him in the animal hospital before he dies and takes the entire banking system down with him. You don’t need the govermint to spend money into existence.
Then he has to make sure he has reserves to cover that loan, but he can arrange those later with the Monopolis Central Bank who basically gives him any amount of reserves he wants. craazyman
The banks have another way of getting away with their counterfeiting – they can borrow back (via interbank lending) the reserves they would normally have to hand over to other banks as their newly created bank money circulates in the economy. Basically, the banks agree to share the interest from their money-from-thin-air loans. The banks (and I assume credit unions) thus act as one huge bank.
F. Beard,
I am glad you brought up this idea of thinking of the banking system as “one bank”. What makes this “one bank” work work?
1) deposit insurance
2) lender of last resort
3) legal tender laws
The above are government privileges we (the people) give the banks for getting “screwed” with recessions and depressions. This nonsense has to end.
mansoor h. khan
Surely, Piggy Banker is part of the system. By the
tone/content of your comment, I’m thinking that
Piggy Banker might be one of the so-called “too big to fail”
players (though TBTF is ultimately a policy, I believe).
For added realism, I’d add a few geopolitical entities
outside Monopolis. Some ideas would be China, Europe,
Saudi Arabia, Iran, London&UK, Russia, Africa and Japan.
Any mechanism is open to abuse and when abused and broken one needs to avoid the diagnosis that the mechanism itself was faulty. The Federal Reserve worked fine for a long time until it got taken over by the private banks. Economics was a decent subject of study until Milton Friedman and the Chicago School and other money bag sponsored schools started water carrying for the 0.1%. Any system that well meaning honest and intelligent human beings setup is taken apart and shredded by other dishonest greedy neanderthals. This process is overseen and either prevented by good leadership at the top or aided and abetted by corrupt leadership. Good leaders inspire other good leaders, bad leaders inspire other bad leaders. Clinton spawned Blair, Nick Clegg, Obama etc. Clinton it seems was the original bad seed in chopping off government and auctioning it off to the private sector, one wonders if he was inspired by Thatcher. In conclusion, reverting back to our original framework of Glass-Stegall for banking and Keynes but with the change of throwing all private bankers out of the Fed and passing a rule saying that anyone who served any time in Private banking can NEVER be appointed to the Fed in any capacity should take care of things and restore sanity.
The banks created the Fed in the first place, in order to make the government responsible for maintaining the value of the currency, while they retained the profits of lending it out. Prior to that, money was often issued by the banks themselves, which meant they were responsible for maintaining trust in their own currencies. It was only after the crash of the Great Depression and the rules which grew out of that which placed the banks under some obligatory restraints, which they took a long time to overcome. The recession of the seventies created a situation where excess money was getting into the economy and the resulting deregulation of the eighties and nineties allowed the banks to turn finance into a casino, which kept all the excess money floating in a cloud, but it is now grown too large to sustain.
“”The Federal Reserve worked fine for a long time until it got taken over by the private banks.””
That would have been like on Christmas Day of 191, a day or so after the private bankers created the Fed.
The proposal of Congressman Kucinich puts the Fed as a Bureau under Treasury responsible for implementing monetary policy and supervising banks.
http://kucinich.house.gov/UploadedFiles/NEED_Act_FINAL_112th.pdf
Once the private bankers are prevented from “creating” the nation’s money as a debt, the Fed will truly ” work fine for a long time”.
For the Money System Common.
Sorry.
s/b 1913.
I think the MMT has some merit, but it has to be practiced with caution. Creation of new money should be the prerogative of the government, I fully agree with that. However, the power to create new money needs to be constrained by a periodic vote of the legislative branch. Since money is supposed to play two roles, as means of exchange and the store of value, creation of new money without corresponding rise in productive output has a dilutive effect. If money is created in a well known quantity, by a vote which occurs out in the open, and can not occur more often than every X number of months of years, markets will decide whether the effect of new issuance is economically productive or dilutive. All holders of fiat currency can be seen as stockholders in the corporation called the United States. If the government issues new currency irresponsibly, the value of their stock will drop, and they can vote out politicians who increase money supply irresponsibly. The problem we are having now is that the power to coin money has been ceded by the government to private interests, and these private interests have proven conclusively that they can not be entrusted with such power. Private banks are far more profligate issuers of fiat money than the government would ever be, because private issuance occurs through sleight of hand and is potentially unlimited.
The power to create money by the government, and the necessary checks thereon, should happen on an ongoing, annual basis – it is called the budget.
Whereas at present the government must BORROW its non-taxed revenues, under reforms the amount of new money created must be identified within the budgeting process as the balance between taxes and spending.
It must provide for GDP growth potential.
It’s very simple.
It’s ALL in the Kucinich H.R. 2990 proposal for reform.
http://kucinich.house.gov/UploadedFiles/NEED_Act_FINAL_112th.pdf
Just waiting to be discovered by the MMT philosophers.
For the Money System Common.
joe,
With Kucinich gone, who will carry the bill, or even the idea, forward?
I am assured that it WILL be introduced.
Could be Conyers.
It would help if all have their Reps consider signing on.
The fact is that the most revolutionary legislative proposal in a hundred years or more, one that restores true economic democracy, has been written and exists for all to see.
Our inability to use that tool for positive change is at our own peril.
This is probably the best comment I read here.
As you describe this function of increasing the money supply would have to be a part of a electoral process so that the party who promises do expand the money supply must be legally bound to follow on the promise.
The interesting part would be what segment of the population would vote for dilution and what segment for keeping its value but it certainly would involve the population in the affair while presently simply the Fed is serving the banks.
One aspect is not mentioned in the game, namely what happens to those going bankrupt due to investments in items that are simply not liable (malinvestments) or in a wider sense how it deals with wealth and income disparity.
I stopped reading at the very beginning.
Organized work creates money.
If you’re organized and you’re working and you don’t have any money, the people you’re working for have stolen it from you.
We don’t need fancy theories.
We just need to be paid for our work.
“The end of the gold standard changed things.” You believe that? I want to tear my hair out. Thieves are thieves. They like blood most of all. Stop giving them yours.
America is a sucker for this kind of bogus solution.
Dave,
you are missing an important point. Once you get off the land and become labor, you must be able to sell your labor every day to survive. What if you can not find the market for your labor? What do you do if you are born into a situation, when there is nothing you can do to earn money?
If you are born in the countryside and find yourself starving, you move to the city. If you find work but there is no money, the economic system is bogus and you have a political problem.
Don’t you see, isn’t it clear? No matter how you change the system – gold, silver, MMT, who cares!, Jamie Dimon is going to steal all the money. All MMT does is give him lots more money to steal. All your money, all my money. He’s a thief, he’s a cheater, and there has never been a system, and never will be a system, that can’t be cheated. No matter where it comes from, no matter what you call it, no matter how much of it there is, Jamie Dimon going to steal it. A thief is who and what he is. That’s why we have cops. Arrest Jamie Dimon and take back your money.
The system really is just that simple.
‘Our oppressors own the military and the media, and their FEMA camps are waiting for us.’
Dave, You’re 100% accurate with your assessment. Our problems aren’t with how money is created at all. MMT is just another bunch of bullshit and would be gamed exactly as this system is being gamed. Until there’s resolve to put criminals behind bars it’ll never change. Till there is political resolve to limit income disparity, things cant get better. And if there would be that resolve, the system we have now would work just fine. All the MMT’ers, bless their asses, remind me of kids in a playground. Kids that believe little Susie and Johnny will play nice with them, just because. Little do they know those little bastards have been taught to kick them to the curb and take their lunch away. Its been that way since Adam and Eve, so you’d best concentrate the thoughts and efforts into re-becoming a nation of law, not a nation of fraud as it has become. MMT is just a glittery sidetrack to the real show.
Jack, Dave, there’s a big difference between “money” and “things of value”.
Dave, you’re absolutely right that workers create value. Jack, you’re absolutely right that our problem has little to do with money directly — it is political, it relates to sociopaths deciding to rule over other people and getting away with it.
However, money (“medium of exchange”) is a tool the elite use to abuse people. It’s important to understand how it actually works in order to understand how they’re using to abuse people; their scheme depends on people *not* understanding how money really works, and instead believing elaborate lines of bullshit that the elite are peddling.
You may be right, and MMT may be crazy, but one thing it accomplishes is removing the TINA (“there is no alternative”) excuse from the austerians who are fine bailing out the banksters, but can’t be bothered with social safety net programs or revenue sharing with the states.
If the excuse that “we’re running out of money” were not believed, then the thieves have just one less place to hide.
The problem, Adam, is that there is diminishing money because there is diminishing energy and diminishing resources.
That money is a stand-in for energy and resources, few people will argue. But when money goes away because energy and resources are going away… somehow that is incomprehensible!?!?
We are blowing smoke up our own asses (to use a Jim Kunstler phrase).
Sure, we always can decide to “not run out of money”, but we can’t decide not to run out of resources.
Lidia, we are not running out of money “because we are running out of resources”.
The supply of money has been artificially constrained.
Yes, we are running out of certain resources — but we have more and more of another, namely labor (population keeps going up) — and we have plenty of sunlight, too.
We know that the supply of money is artificially constrained because of the number of unemployed people.
If we were only resource-constrained, everyone would be working and we’d just see prices skyrocketing for oil and food. Instead we *also* see mass unemployment, which shows that the supply of money is also constrained.
“supply of money is also constrained.’… Nathanael
Yeah its tied up in the LHC of derivatives and looking for a multiverce to flow into.
Skippy… BTW how much of that binary cash is just delusional imagery, cough…. I mean fraud. You know, accounting lies, BS contracts, expansion of debt never to be repayed, et al.
Well, you just see how much labor you get out of diminishing per capita sunlight, water and soil nutrients.
De-regulation, De-taxation and off shoring jobs have diminished our ability to earn. Wealth has flowed from all economic classes to the top 1%. The cost of living has continued to rise substantially while our ability to earn has declined. Hence, we substituted debt for income and leveraged our most basic asset… our homes.
All of which was by design. It has more to do with government policy then the gold standard. Blaming the gold standard is just one more way to avoid a hard look at the failure of trickle down Reaganomics and supply side economics.
A country that can no longer produce that which it consumes is in deep trouble. Look no further than the fall of ancient Rome. The financialization of our economy is an additional destructive factor that will cause our demise as it has done in the past to other economies like Portugal, and Great Britain.
We need to reverse course and return to a balance between production and consumption. Globalization is adversely effecting us.
“A country that can no longer produce that which it consumes is in deep trouble.”
Yup – what if we decided that a good policy would be to consume only that which we could, sustainably, produce. That would change things considerably, methinks – and render a lot of other discussions on theory rather moot …
John Merryman. Didn’t you get the memo Neo-Liberalism fell like the Berlin Wall in the Debt Crisis of 2008. It is insufficient to merely state that government can’t be trusted to create new money neither can the private banks.
The only work-around to resolve this issue is to add some democratic accountability into the situation and that accountability to be to the ones who matter in the real economy those who produce and consume the goods and services we need and that means a government input also because some of those goods and services are public ones.
This has to mean that the various sectors that you can split the economy into, agriculture, manufacturing, mining, consumers, retirees, etc. would have to be represented on a reconstituted Federal Reserve not just predominantly the financial sector as currently. It’s no good, however, merely calling for representatives from these sectors because there’ll be attempts from the political parties to “capture” the new Federal Reserve board so you have to confront reality and the representatives also be those from the party winning the majority share of the vote at the Presidential elections. At least you’ll be improving matters in that the interests of a broad spectrum of sectorial interests will get to be represented and in more in a more technical and real-world fashion not just a talking shop for ideologues.
Scholfield,
I really don’t see it as a matter of reforming the system as it is, because it is quite obvious the only ones with the power to reform it are the ones most diligently destroying it from the inside. So it is more a matter of understanding the fundamental nature of the process, figuring out what parts of the current social model will still be left standing, when the excrement hits the air circulator, then devise a basic, fairly understandable description of where society needs to go. Such that when the various power centers get back on their feet and try to start controlling the direction of society towards serving vested interests, they will have to contend with a slightly more enlightened and skeptical populace.
The essay I linked to above(http://www.exterminatingangel.com/index.php?option=com_content&task=view&id=826&Itemid=662) is my effort to construct such a manifesto. While I realize there are aspects many people will find controversial, I’m trying to fashion an argument that will have its most appeal when the various political, religious, economic and security power centers are in the greatest turmoil, rather than something which applies to the situation at this moment.
I realize I left a bit unsaid in that comment. Mostly that when the current monetary system blows up and much of the notational value which most people have in the banking system vanishes, either because it amounts to unpayable debts, or falls into the deepest pockets, the single most important criteria for people’s survival will not so much be what sector of the economy they work in, but their geographic location. The global economy is going to break down. As Tip O’Neil so apply put it, “All politics is local.”
I think the first signs of this are the various movements toward forming state banking systems. That is the point about what will be the primary social structure left standing and how it needs to formulate a working economic model. Yes, the Federal government isn’t going to disappear, but it is going to be seriously chastened.
What is interesting in this election is the extent to which the conversation is being dragged to the left, even if for most of those in charge, it is simply an election strategy. While the occupy movement seems about as futile as the anti-globalization movement and Obama’s populist rhetoric is exceedingly hollow, I think we will look back, those of us alive, in twenty years and see it really was the beginning of a tidal shift.
Very nice, BUT.
You did mention resources, but should have given them more emphasis. Certainly Keynes did.
This is not 1940 any more. There no open frontiers. Because of past government policies aimed at maximizing population growth, there are 100 million new mouths to feed each and every year. At the same time crop yields per acre have not increased for over a decade now, and things like fresh water, energy, topsoil etc. are things that we simply cannot manufacture at the needed scale with anything resembling our current technology.
“Green technology”? Replace that phrase with “magic pixie dust” and you will say the same thing. There is the same lack of demonstrated track record for both phrases.
“Conservation”? Why yes, we can become poorer and poorer until chronic malnutrition physically prevents women from having large families – this is happening in India right now – and we can all live lives that are the most miserable that they can be without us actually dying. Not much of a solution.
We are past the phase where we could just dump more fertilizer on the crops and drill more oil wells and as long as the money supply was OK things would be great. We need to spend less time worrying about the rich messing with fiat money, and more time worrying about the rich encouraging too-rapid population growth.
I did advanced mathematics at the universities.
I’m rather awe-struck at the little amount of thought
and debate about the implications of exponential
growth of population. At a 2% annual rate of growth for
a population, the doubling-time is obtained by dividing
seventy years by the percentage points of annual
rate of growth. For a 2% annual rate of growth,
the doubling-time is close to 70/2 = 35 years.
Have you read this http://climateandcapitalism.com/2012/03/29/a-modest-proposal/ ? (or other articles making the same point?)
Just curious for your perspective on it.
It might be worthwhile considering the possibility there’s an alternative (I mean besides certain doom).
See Amory Lovins TED talk for a more hopeful alternative:
http://www.ted.com/talks/amory_lovins_on_winning_the_oil_endgame.html
We know the solution to the population problem; educate women, emancipate women, and supply women with access to birth control.
A few other things help a bit.
Of course, now we have to stop global warming too.
Fertility rates have been plummeting worldwide for many years now.
Large parts of the world, such as most of Europe, Russia, China, Korea, and Japan, have sub-replacement fertility rates. The average woman in those regions has fewer than two children. The next generation will be smaller than the current one.
Even countries with above-replacement rates, such as Egypt or Kenya, have seen massive drops in total fertility. The rate in Egypt has fallen by more than half in just 20 years.
The only reason that world population is still increasing is because of the huge number of the women who were born in the 1970’s and 80’s, who are still in their reproductive years.
But world population is going to peak at less than 9 billion, before 2050. We’re actually going to have fewer people around than experts considered the lowest likely population model.
World population, environmentally speaking, is a good-news story, although it won’t feel that way at mid-century when the world’s working-age people are going to be carrying the biggest ever load of dependent seniors.
I will be blunt, I can’t believe individuals with a brain can actually come up with such a thing as MMT. The thing is really like playing monopoly and should be kept as such.
To be honest, who would not like to live in a world of endless money (with value of course), tell me one person that would not like that guys and girls? One..
Why is it so hard to understand that currency is not the same as wealth/capital. I hope you agree that the purpose of money is for transferring of wealth and storing of wealth and capital.
MMT is the best option if you want to transfer wealth, nothing more. I’m 100% confident that if the geniuses in Washington decide to implement MMT, it wont be too long before our economy collapses. I mean, we already have too much “manual interventions” yet MMTers are asking for more.
In addition to someone deciding how much currency is needed and at what price (which the fed already does and is terrible at best), the government will now decide how much people are paid (easy task ehhh). How do you decide how much currency is needed? How do you decide how much people and companies get paid? Do you take another “democratic” vote (seriously)?
For god’s sake, why are we afraid of a recession? Isn’t GOD telling us to slow down – too much capacity/supply?
Solution:
Let the market manage money supply and the cost/interest (prevent banking corruption), and back currency by the shiny metal that Beard hates, gold (prevent government corruption).
Free markets removes the control/greed/corruption element away from a few men. It avoids “mistakes” from happening, too much money, too little money, too cheap money, too expensive money.
It prevents governments from using the monopoly to enrich themselves, or buying votes, or spending money in useless projects without taxing (which hurts). It allows for the failure of irresponsble corporations or individuals. In other words, it punishes failure and rewards success. It rewards hard workers and punishes lazy ones, thereby creating a more productive society. As society becomes more productive, the prices should drop, benefiting society as a whole and sharing the wealth.
Mole (and an appropriate name too!), you have presented some ideas here that are hard to understand. Right now it seems to me there is endless money floating around the system in derivatives, for example, that we hope will never have to be realized. Why would MMT mean more endless money than the system we already have?
You have a magical concept called “free markets” and it will not solve anything. Markets are run by people (who make mistakes all the time) and there are all kinds of other constraints on markets. You will have to define “free.”
Governments do not “buy votes” but politicians sure do. That is where the corruption is coming from. Money itself is not a corruption, but how it is used can be.
You have forgotten that the politicians are voted into office by the people. That process has been corrupted so that politicians are now doing the will of the corporations and banks that buy them. When politicians are not millionaires; when politicians truly represent the people who vote for them; when money is not used to modify policy then you will see government doing what it is meant to do.
In some ways, we get the government we deserve. The citizens have to be more vigilant. The system that is now in place is not working for the majority of the people. Dear Mole, just try to understand that there is more than one way to view the economy. Be brave and try to understand the benefits put forth by MMT. You will feel better if you do.
Jehr,
The essense of free markets is to accept mistakes.. I would go so far as to say that it is by making mistakes that humanity has achieved so much. But if you make a mistake (just as you should if you make a profit) you should bear the fruit of your mistake, PERIOD. That is what free markets are.
A person making a mistake and going under is ok and won’t kill the economy. A corporation making a mistake and going under is ok and won’t kill the economy. A TBTF bank making a mistake may be a bit painful, but it will be ok and will not kill the entire economy. Free markets allow for these things to clear without harm.
A government (group of politicians or whatever you want to call it) making a mistake will destroy not only the economy, it will destroy our society as a whole. Do you see the difference? Look at the market for oranges for example. If there are too many oranges, prices drop, some competitors are driven out and prices stabilize. If the supply is too tight, competitors are driven in, increasing supply and prices again find an equilibrium. If oranges are in excess in one area of the country, while tight in another, oranges will be demanded from the area with tighter supply and will keep demand high on the area with too many oranges. If you see it this way, and I hope you do, you can see how free trade actually promotes employment – the opposite of what you hear coming from Washington.
I will add that the FREE market is the one giving the pain, and the pain will continue until we revert to the equilibrium whether we like it or not. Whether we have MMT, Austrian or keynesian economics. It is god/nature telling us and it will force it on us whether we believe in unicorns and fairies or not. Unfortunately, currency is just a convinient way of exhange a limited amount of wealth. Wealth does increase with time, but it cannot be created out of thin air like paper can. Now, if you know simple mathematics, what happens when you increase the denominator?
An individual (and we do as we wish for the most part), corporations, governments should be allowed to do as they please so long as they do not break the laws set for by people, the constitution. As you say, the government is elected to enfore the laws and the law should be the same whether you are a company, poor, rich, politician or non politician.
Our government has clearly sold us down the river when you hear stories of a poor person being thrown in jail for helping himself to a damn piece of freaking bread to feed himself, while corporate thieves, politicians, unions, government class steal billions. This should send shills down our spine…
I agree with you 100%, the change begins when we look at ourselves in the mirror and decide this crap ends. When, instead of being controlled by politicians and roaming like idiots in Wall Street, to showing up in DC, state capitals, and Local City governments accross the country.
MMT is not the answer, free markets have proven itself to be a self clearing mechanism if we only take our little dirty hands off it.
Mole,
In nature a free market is called an ecosystem. In it all the corporeal/corporate entities rise and fall. Within each individual organism, there is a subservient ecosystem of all sorts of beneficial to parasitical relationships. So what is the difference between the external ecosystem and the internal ecosystem?
The internal system is controlled and maintained by a single nervous and circulatory system. Within society, the nervous system function is filled by government, while the circulatory system is finance. A market needs a medium of exchange and when that economic circulatory system operates at the behest of a single entity, then that market is subservient to that entity. Now we can either have a largely public or a largely private financial system. Each have their advantages and disadvantages.
For reference, for much of history, we had private government, variously called monarchies, fiefdoms, etc. They worked reasonably well, up to a point and generally solved succession issues that constantly roil public forms of government. Up until they do break down, then the many stored resentments cause great havoc. Monarchists assumed “mob rule” could never work and thus assumed they could do whatever they liked, as there was no alternative, but they went overboard and lost their monopoly on power. Currently the private financial system is making that same mistake.
Thanks John Merryman for this concise, deep, and extermely clear comment. And much appreciation for your other comments today as well. You’ve said pretty much what I wanted to say, except you laid it all out so well that I have nothing to add.
Today’s postings by Strether (and the one on the 19th) have been a powerful combination that have left me pretty much depressed (cuz I’ve had to discard the last remnants of hope in reforming the system). The revolution is aborning, but as John Merryman said:
[The system] “… worked reasonably well, up to a point and generally solved succession issues that constantly roil public forms of government. Up until they do break down, then the many stored resentments cause great havoc. Monarchists assumed “mob rule” could never work and thus assumed they could do whatever they liked, as there was no alternative, but they went overboard and lost their monopoly on power. Currently the private financial system is making that same mistake.”
I fear we are slowly sliding to the finale — and the birthing of the struggle to rebuild. I do hope that “Mole” is the only one who will look forward cheerfully to all the “creative destruction”.
JurisV,
Thanks for the feedback. I would like to offer some thoughts on the reality of “creative destruction.”
It’s part of nature. The way the system pushes the reset button when there is too much bad code. As individuals we go from birth to death, but the species is constantly going onto the next generation, leaving the old in the past. It is going from death to birth. We are cells in some larger form and so are our bodies constantly forming new cells and shedding old ones.
The conceptual problem with monotheism is the absolute is basis, not apex, so a spiritual absolute would be the essence from which we rise, not an ideal from which we fell. If we wanted a symbol of this spiritual foundation, it would be the newborn babe, not a creaky old man. It just so happens that civil orders prefer to assign theological legitimacy to the top of the order, not the bottom. The only part of our soul that is truly our own are the memories and we forget most of the details of our lives shortly after they happen. Yet our genes seem to record what is really important.
So think of what is coming as one of the more monumental periods in history, not just the fact that many of us will likely not see the other side of it.
Without motion, nothing exists. With motion, nothing exists forever.
John,
I agree with your points, but I would not call what’s happening a “mistake”, and I would not isolate the issue to the “private” financial system as you profess. The public side of the equation, government, allows this arrangement because it benefits its needs. Let me put it this way, banks don’t make money if they dont lend, and politicians cant buy votes if they dont spend.
So spend they do. They spend in medicine to benefit pharma, in education to benefit teachers, in housing to benefit bankers, war for the benefit of military complex, etc, etc, etc… All with the same purpose, make a group of people happy which will in turn vote them into office.
Now, can you advise as to what benefit moving the financial system function from hand A to hand B will do for us?
Wow… I like your comment — again. And I agree with what you just wrote; and I especially appreciated the last two paragraphs”
“So think of what is coming as one of the more monumental periods in history, not just the fact that many of us will likely not see the other side of it.
Without motion, nothing exists. With motion, nothing exists forever.”
Yes, our dynamic Universe is all about change — constant change! That’s the process that gives life to us and all our relatives in the biosphere. My spiritual evolution has gone from Jesus to Christianity to Zen, Native American thought, back to Jesus’ teachings, and now primarily a Zen-Deist based hodge-podge of all the rest. However, all I really know is that “I don’t Know” much about “life, the universe, and everything” with any degree of certainty. It is what it is, in all of its incredible grandeur — our Universe.
I will continue to do what I can for family, friends and neighbors and try not to add more pain into our Universe. There is already too much of that.
Lately I have been starting to wonder about the duality aspects of our world — specifically wondering if maybe if the yin/yang thing of bad/good isn’t, in fact a feature and not a bug. And as you said — our DNA learns, adapts, and goes on …….. and repeats as needed.
“In nature a free market is called an ecosystem. In it all the corporeal/corporate entities rise and fall. Within each individual organism, there is a subservient ecosystem of all sorts of beneficial to parasitical relationships. So what is the difference between the external ecosystem and the internal ecosystem?”
JMM, this is an interesting comment that shows how little most people understand about ecosystems. I would never say that an ecosystem is like “a free market” because it is not. There is far more coôperation than competition. In the “free market” of all against all as conceived by modern man coôperation is virtually anathema. In a real ecosystem, the values of coôperation and conviviality outweigh competition.
In the past, resources were never SCARCE, because ecologies conspired to make the most of arriving solar energy. Doltish humans have worked hard to break the ecological bonds between the sun, the earth, the plants and the animals… I mean we have really worked HARD to bust these up. And now we don’t know what the fuck to do. Humpty Dumpty cannot be put back together again.
Fat Beard will appreciate that the God character pointed to the birds and the lilies of the field, who toiled not, nor spun. Something happened in-between to change the world of abundance into one of (initially) false and ultimately real scarcity.
@Lidia,
Amazonian, African and Pacific islander hunter gathers, in the tropic zone, spend about 3hrs a day to feed themselves.
Then some developed mob comes in and builds a road for access to whatever resources.
Then everything goes too shite.
Skippy… empiric observation, as you know. Store of value hahahahahaha!
Mole,
There are advantages and disadvantages to everything. When any one method build up too much blowback, then something has to change. The reason democracy has worked is because it decentralized political authority and tries to assign responsibility where is is most effective; federal, state, local, communal. So the question would be how to apply that model to the financial system?
Say local communities each have their own public community bank. One in which local residents made deposits into and borrowed from. Profits from this bank would be public funds for that community. Then there would be state and regional banks that larger businesses and and wealthier individuals used, with the profits being spent on larger regional projects, then the same at the federal level.
The question is as to why they wouldn’t compete and cannibalize each other, until only one large bank is left? This goes to the heart of why money has to be understood as a contract, the basis of the social compact, not a commodity that can be mined or manufactured. Then the value of the currency is fundamentally tied to the health and sustainability of the community, not as reductionistic units of value to be distilled out of any and all sources.
So it’s not moving the system from private hands to the institutional forms of government we know, but rather using the system to recreate the communal bonds. Some months ago, NC ran an article about economists studying aboriginal societies and trying to find how they use money, but couldn’t find anything we would recognize as a common medium of exchange. The logical reason for this is because these organic societies are based on mutual trust and reciprocity, as essentially singular organisms. So there is no need for a medium of exchange. When that organic trust does break down, it becomes a matter of schism and conflict, not bankers and lawyers. We use money as a replacement for that organic trust because our societies are far too large to be able to understand all the people we meet. Yet, if people understood money existed as a institutional replacement for that communal bond and not simply some commodity manufactured by governments and banks, then they would react differently. For one thing people would understand this institutional bond comes with a definite cost, so it would make sense to strengthen one’s ties to the other members of one’s local community, rather than have relationships denominated in cash. Also value stored in the quality of one’s possessions, rather than this throw away economy. Also maintaining ecological resources and not have them constantly stripmined in order to grow some plutocrat’s bankroll.
If we understand money is a social contract and not private property, there would be no theory to justify enormous excesses of wealth. Think in terms of blood in the body. Necessarily the brain has priority over the feet when it comes to accessing the blood supply, but it still doesn’t get more than it needs in order to function, otherwise the result would be a stroke. Part of the function of the brain is diagnosing feedback from the feet and other senses, not exploiting them. The same applies to a functioning community. There will be leaders who require more resources in order to function most effectively, but it is still to serve the larger community, not exploit it.
JurisV,
“bad/good isn’t, in fact a feature and not a bug.”
From that essay I wrote, “The problem here is that we tend to think of good and bad as an issue of black and white moral clarity, even if the details are usually messy and unclear. While we instinctively think of good and bad as ideals, they are really the primal biological binary code. Life is attracted to the beneficial and repelled by the detrimental. What is bad for the chicken is good for the fox and there is no clear line where the chicken ends and the fox begins. Between black and white are not just shades of grey, but all the colors of the spectrum. While it’s bad for good things to come to an end, it is necessary to having good things in the first place. The price we pay for being able to feel in the first place, is that a lot of it is pain.”
Lidia,
“There is far more coôperation than competition. In the “free market” of all against all as conceived by modern man coôperation is virtually anathema. In a real ecosystem, the values of coôperation and conviviality outweigh competition.’
There is quite a lot of cooperation in the economy when it is growing, but when things start to break down, cooperation can turn to competition, just as in nature. Man really isn’t outside nature, we just don’t always recognize the patterns. Energy expands, mass contracts. This cycle defines many of these processes, such as growth occurring throughout an economy as energy is absorbed, but breaking into discrete units when it starts to wane.
I think in the long run, this is the end of the beginning for humanity, not the beginning of the end. Ecologically, it would seem the planet is trying to grow a central nervous system in the form of human civilization, but we are going through an adolescent phase, where it’s all about us. Growing up can be very resource depleting and we have wasted a good deal, but we have also learned alot. As it is now, we are top predator in a collapsing ecosystem, while the function of a central nervous system is to guide and protect the larger organism, not exploit it, so we have a long way to go from here to there. Time will tell, but doubtfully any of us will be around to see if it works. Good night.
John Merryman, that’s a very charitable, very Charles-Eisenstein approach. I think it gives far too much importance to humans as value-bringing protagonists and not enough recognition of modern civilization’s concerted and programmed destructiveness, which is baked into our current cake.
I don’t see any concrete proposals on the horizon that really pull back from human destructiveness. We can certainly “fall in love with the Earth” again, as Charles says, but that doesn’t mean that we haven’t abused our lover to the point where reconciliation is no longer an option. I have come to loathe things like the National Geographic channel, Animal Planet, and even Yves’ “antidotes” because I see them as wallpapering over a disastrous turn of events. If we can easily see animals on TV and in pictures, it’s like they’re still really there and things maybe aren’t so bad…
Lidia,
I agree it is a mess and that it is going to get much worse. Human civilization has grown to be a tidal wave and will likely come crashing down with even more destruction. The fact remains that for life on this planet, it will be just one more cycle in a very long line. What I’m going on, though, is the tendency of that cycle of expansion and contraction to incorporate increasing levels of complexity and intention. Much as those fungi banding together to scatter spore, we might just be a function of further seeding the universe with bacterial and viral forms of life. I think though that when civilization gets itself back together, there will be much more recognition of feedback loops and reciprocal actions, not just this single minded linear drive. Got to get to work. Racehorses actually.
The essense of free markets is to accept mistakes.. Mole
There is NOTHING free market about government recognition of gold as money. Instead it is government privilege for a shiny metal.
You’re not advocating free markets; you’re advocating fascism.
Free market is so misused, it’s tough to say precisely what it means or whether we’ve ever really had one. I do wish the Government would just hire everyone who needs to be hired, that might help.
Beard,
Me and you don’t have to argue over this really. As I’ve told you before, I don’t own an ounce of the metal, but the FREE market, NOT the government will decide what the currency should be.
If governments had the ability to chose a currency, the US dollar wouldn’t be used outside of the US. Am i wrong?
but the FREE market, NOT the government will decide what the currency should be. Mole
In order to have a true free market in private money creation, government money MUST be inexpensive fiat.
People should be free to use gold and ANYTHING else for private debts but government money MUST remain inexpensive fiat.
A gold standard replaces government control of private money with private control of government money. That is no solution.
Y’all need to read more of this blog before you adopt the idolatry of “Free Markets uber alles”… Seriously, try this one for one of the many “efficiencies” of Free Markets:
http://www.nakedcapitalism.com/2012/05/mark-ames-failing-up-with-citigroups-dick-parsons.html
It’s the laughable story of promoting incompetence at the highest levels. On the other hand, actually it’d be laughable if it weren’t true.
Everything you just said Mole describes the present “Free Market.” MMT would take back control and operate a sane economy with rules, regulations, and budgets, and, most importantly, jobs.
Susan,
Negative. The Fed decides (human intervention) how much liquidity there is. The Fed decides (human intervention) how much currency is worth via overnight rates.
The government (human intervention) decides who fails and who wins, renters vs owners, solindra vs blah, JPM vs Local Bank, Unions vs non-unions, Pharma vs non-pharma, and I can probably can keep going until the end of times.
However, MMT would take what we have and introduce more of the above (human intervention and misallocation of capital). If MMT sounds insane, it’s because it is.
Not only has manual intervention proven to be a total disaster, we are now asking for 100 times more. For god’s sake…
No. MMT makes the real operations of the money system clear.
Money is already created for public purpose. The issue is, by and for whom? In other words, who’s defining “the public” and who is defining the nature of that public?
If your views are that the public purpose should be defined democratically, or at the very least in a form that permits some degree of accountability and transparency, then probably MMT provides a useful starting point for analysis.
If your views are otherwise, then perhaps not.
No, it is the same system we have today essentially taken over by the government and juiced with all sorts of drugs. In MMT the government decides:
How much money is created.
How much interest banks should charge.
How much people get paid.
How much banks lend.
When banks have to lend.
What purposes banks have to lend for.
How much money is created for purposes some jackass in Washington deems as required.
One thing is certain, it is never too much. The system essentially destroys the capacity of a currency to store wealth. A fiat system, and especially MMT, by nature are fraudulent.
Either we ask for the government to enforce the rule (I thought fraud was illegal????) of law or we dont folks. It is that freaking simple. You either support fraud or you dont. There are no 2 ways about this.
After a system like MMT is implemented, I would not be surprised if the government decides who you sleep with. Who your children belong to. What you eat. What you see in TV. What car you drive. How much you eat. How much you spend. When you can go to the bathroom. etc, etc…
What a freaking disaster this thing is people.
Hey Lambert,
Must we put up with fascist, hypocritical gold-bugs here? I mean how stupid can anyone be to think a gold standard is the answer?
mr. beard, love your posts.. however, censorship would be unwise… i enjoy and personally benefit from austrian/austerian posts… steel is sharpened on stone
One has to draw the line somewhere – deflation loving, gold loving, usury loving, fascist hypocrites posing as libertarians seems as good a place as anywhere.
perhaps you are right, and my inner stalin agrees..(i know that might appear strawmanish, but some old friends and i spent many hours debating the merits of stalin… (the rort(y)ian(sp?) irony is strong in this one)) postpostscripts aside… you have to argue with these folks or you just create an ‘echo chamber’… you’ve been posting your ideology/monetary ideas for a long time here and i respect that and give it serious consideration as far as i’m able to understand it… but a lot of the fellows who goldflake are probably educated by your considered polemic as well- to the extent that i believe they are not sh(r)ills… regards
@mole,
The State always decides, implicit or not, what the people within its auspices do…
Skippy… The definition of citizenship and privileges within a state are better questions……. methinks. The greek deinition of citizenship cira 450BC. the locking of women up behind doors as a result, the fear of Bacchae… Lmao…
http://www.youtube.com/watch?v=L74AKeEsaw8&feature=related
If the state is not sorted[?], what differance does the rest of the shite make… eh.
The three players in Metropolis could be like Barons
in Normandy, before the Norman Conquest of England
in 1066. My point is that MMT/Monopolis is a
good analytical framework, I think.
What’s absent or implicit in Monopolis is “the threat of
the hands coming out of the pockets” (development of the
“plot”), devolution of authority, creation and annihilation
of players, maybe representations of natural resources,
the judiciary, military technology as an enabler of conquest
& subjugation of people and “weaker” nations, the
press: good/bad/Pravda/Fox.
But as you write, it clarifies and makes almost
crystal-clear how fiat central-bank currency really
works. I’d just add that, as far as I’m concerned,
pressures by “leaning over” by the neighbours are
the same kind of thing as threat of “troubles”,
“general strike”, political party schisms,
mafia [“black” economy] thuggery, and so on.
Bravo to the Architect!
Beard @3:54,
Not to worry, after a statement like:
“After a system like MMT is implemented, I would not be surprised if the government decides who you sleep with. Who your children belong to. What you eat. What you see in TV. What car you drive. How much you eat. How much you spend. When you can go to the bathroom. etc, etc…”,
methinks mole may have imploded. Or perhaps mole is angling for a place in the SC where insurance mandates inevitably slide into a requirement to buy broccoli ….
@Aquifer,
Yep, “He blowed up real good!”
Mole = Defiant?
In the aftermath of the Bolshevik Revolution in Russia
in 1917, Russian Imperial (Tsarist) bonds became
almost worthless. After the fall of Communist USSR
and Russia, and a turn to capitalism, I don’t know
how much Russian Imperial bonds are worth today.
Cash is better seen as a medium of exchange;
it stores value just as long as and to the extent
that there’s widespread acceptance of it to buy
goods and services.
“I’m 100% confident that if the geniuses in Washington decide to implement MMT, it wont be too long before our economy collapses.”
I’m also 100% confident that if they don’t, the same thing will happen.
However, this is utter bullshit: “Solution:
Let the market manage money supply … Free markets removes the control/greed/corruption element away from a few men.”
The fact that we HAVE a “market” at all implies that we have a surplus. If a surplus is not forthcoming, we are wont to impose/extract/create one even if that means starvation or expropriation for some unlucky cohort.
Whatever the scale of past depredations and inequities, we now have a far larger common problem: the End of Growth [the diminishing of profitable extraction] which means the end of effective surpluses which means the end of capitalism and the end of interest-based money as we know it.
Discuss.
I started thinking about economics (or more correctly finance?) in late 2008 after discovering peak oil and transition. Your summary of the facts is identical to the understanding I reached within 6 months to a year.
skint, 2008 is more or less when I started questioning the status quo, as well. What amazed me the most is that so much ground work had already been laid by the likes of Frederick Soddy, Georgescu-Roegen, Ivan Illich—from the 1920s to the 1970s—and then been completely ignored.
When one is INSIDE the phantasmagorical creation it is hard to see the reality outside of it. Most people on the planet will live and die not having seen the outside of it. They’ll remain enslaved to the fictions of “growth”, “meritocracy”, “democracy” and so forth.
(1) money’s just as useful without a surplus — “medium of exchange”, remember?
(2) who needs interest?
(3) understanding the way money works is important regardless of interest — “medium of exchange”, remember?
(4) true power flows from the loyalty of armed gangs; this has been known since Caesar at least, and is probably going to become far more important in future years. But even they use money.
Mole, you’re wrong about the purpose of money. The purpose of money is not “to accumulate wealth”.
The purpose of money is to make mutually beneficial transactions happen. There are a lot of transactions which wouldn’t happen if all we had was barter, gifts and promises.
The “medium of exchange” function of money is the critical one, though arguably the “unit of account” function is even more important.
The “store of wealth” function is relatively unimportant and that’s why your entire argument is off-base. It’s just find to erode the “store of wealth” if you have to do so in order to make money work as the “meidum of exchange”.
I hate to break this to you bro, but it seems your ideology and religious faith in “free markets can pretty much be summed up in this:
http://i.imgur.com/19kfm.gif
I’d suggest adding a player with the nickname
Chronos (god of time). Chronos dispenses tickets of time.
For example, 365 tickets each valued at one hour of work/leisure every hour on the hour to each and every player.
Then, a Secret Service Agent to investigate any and all
counterfeiting, under the supervision of the government of Monopolis. Chronos and other deities could dispense
matter, energy, time and space, according to the Laws
of Physics. Probably, these deities (such as the Chronos
player/umpire) should be incorrutible.
It’s a great set-up with Monopolis. An idea worth
building upon!
Sorry, I meant one ticket to represent one day.
Then 365 tickets amount to 365 days, a year of time.
Monopoly has that jail thing, which I suppose we could call “housing” while playing the game.
I hope JD Alt will continue with his analogy by including what is happening now with all the QEs and bailouts and borrowings at the Fed window. I can see the money supply increasing exponentially and the banks getting most if not all of the benefit. The banks do not lend the money obtained to others in the private sector but keep it or speculate on the market. You can then see the vast imbalances that happen and are happening now in the country.
Next, I would like to see some ideas on how the imbalances can be rectified. Here I see the political corruption playing a key role. Perhaps the Federal Reserve Chairman and the Treasury Secretary should be positions that are voted by the populace. But before that, everyone would have to understand the information in MMT.
Solutions are so difficult.
You have described the current situation exactly.
And indeed, the problem is that the people in general do not understand how money really works; if they did they’d realize that the government can print it as long as people use it for trading — and that the government *is* printing it, but choosing to give it to rich bankers instead of to them.
If people in general understood *all* of this, we might get reform. Most people don’t undersand *any* of it yet.
Hmmm … treatise on bookkeeping from an architect. Excellent!
The article should have stopped with, “(provided the real resources are available)”.
The real resources are not economically available which is our current ‘crisis’ in its entirety. MMT can buy time adjust to the edicts of ‘Emperor Less’ by affording stringent conservation … and nothing else.
We have lived beyond our means as ‘industrial man’ for 400 years, we cannot do so any longer. Used improperly, our implements — including MMT — will hasten the unraveling of our enterprises rather than rescue them.
Don’t believe? Just watch; the denouement is underway currently.
Cleaning up the environment would not put as much money into private circulation under our present system as it would under MMT. Because just like the military expenditures for the last 40 years (mentioned above as an expenditure that does not give back to the citizens, but rather serves to inflate and imbalance the entire system), any expenditures under the present system will not be bought and sold in the private market. Those military expenditures made some privateers and banksters very wealthy, at the suffering of the rest of us. But if we had direct government expenditures for an organized, multi-decade clean-up, we could bypass the middlemen. Private consortia (sp?) could even purchase and use military surplus equipment thereby paying us back for some of that profligate cold war spending. And etc.
We are truly around the bend into madness that this mutant MMT theory is raising it’s head from the grave once again.
Even the true MMTers understand that taxes must be levied to control inflation and interest rates. This is the revenue constraint that the present author claims doesn’t exist. This constraint ties back into and arises from the physical constraint present in all physical goods and services available at any one time. There are no free lunches, for people or governments.
Agreed – if every American would drive their cars over a cliff (jumping out at the right time) we’d be well on our way to cuttin’ the spending and savin’ the planet. Do it people, incinerate your car!
Common sense.
People have difficulty understanding that currency is worthless if not backed by wealth. You can create as many papers as you want, but the damn wealth grows slowly.
You want MMT to work? Than find a way to increase catle, corn, beans, land, drinking water, food, etc, etc…
You can create as many papers as you want, but the damn wealth grows slowly. Mole
What we want is the optimum sustainable real economic growth rate and that requires the optimum growth rate in the money supply.
But you want to limit the growth rate in the money supply to the mining rate of gold?!
So how likely is it that the mining rate of gold is at all times equal to optimum growth rate in the money supply?
Approximatively zero?
So how many people will a gold standard kill?
Beard,
Did gold prevent the expansion of credit in the 1920s? If gold was the issue in the depression, than why are we debating today’s headaches when we have a non-gold fiat currency? HINT: It’s not the currency that’s the issue, it’s the manipulation of it that’s the issue and the cause for bubbles. The bubbles are the issue, not the lack of bubbles…
Gold simply has a better enforcement mechanism than fiat. We will be arguing this until our economy blows sky high. Another option would be sound lending, one dollar of capital for one dollar of unsecured lending, in other words don’t allow banks to lend more than the firms capital. But, based on the social mood I see around these circles, I doubt that the government will have a faint of heart and start working responsibly.
Until then, let’s keep praying so that the destruction won’t cause total chaos when Keynesians and Marxists are done with us.
Another option would be sound lending, one dollar of capital for one dollar of unsecured lending, Mole
Oh yeah, that’s Denninger’s fascist idea to limit credit to those with property.
The truth is that since credit is essentially counterfeit money, that NO ONE IS CREDIT WORTHY.
Lies lies lies…
One dollar of capital means sound lending. You want to lend, be my guess, just make sure you will get repaid.
Do you want counterfeit and fraud or not?
You cannot have it both ways my friend.
One dollar of capital means sound lending. Mole
It’s not lending of existing money; it is money creation by lending – it is thus counterfeiting. Denninger wants the rich to continue to have access to counterfeit money.
The only “sound money” is ethical money – not a shiny metal or credit for the rich.
Fat Beard, will more people die under a fiat money regime? Yes. Will MANY people die under any money regime, or any regime without money altogether, which OUTSTRIPS its resource base? Also yes.
Get used to it. Tribal peoples practiced contraception, abortion, exposure along with abstinence to mitigate human population pressures. Take away 3 of the 4 tools in the toolkit, and…
Deflation is much more of a killer than inflation. And that’s what the gold bugs are after, major deflation to “purge the malinvestments”. The last major deflation was a (the?) major cause of WWII which wasted enormous resources and lives.
More like the investment provided by American (and others) investors, preceded the events and not deflation.
Skippy… In the end, it was just a global resource grab. KYour capital at work… eh.
Deflation is much more of a killer than inflation. And that’s what the gold bugs are after, major deflation to “purge the malinvestments”. The last major deflation was a (the?) major cause of WWII which wasted enormous resources and lives.
Beard, the last depression and its militaristic response did indeed waste lives and resources. The gamble was that it would waste more resources than lives… err… more lives than resources.. “she’s my sister, my daughter, my sister, my daughter…” “Forget it. Jake. It’s Chinatown.”
What does that have to do with the current endgame, which no monetary finagling can forestall?
It DOES NOT MATTER whether there is gold, no gold, or some gold, if THE PHYSICAL SOILS WHICH SUSTAIN US are paved over or poisoned.
Why doesn’t anyone get this?
If the natural cycles of life are interrupted, WE are interrupted. This is not a difficult concept.
We’ve been over this: It is usury that requires exponential growth just to pay the compound interest and it is credit creation that steals from the many for the sake of a few. Our money system is based on both but you gloss that?!
Would you have been whining during the 1930s that a shortage of resources was the problem then too? Or maybe that there were too many workers?
The money system MUST be fixed. It is wasteful, unjust and dangerously unstable. It will KILL millions again if not fixed, not to mention destroy immense resources.
Yes, usury requires an exponential growth in resources.
AND SO DOES UNLIMITED population growth, eg. the Jesus-freak Duggars and their 19, 20 kids or whatever they intend on having barring the death from exhaustion of the matriarch.
If they were all left to their insane devices, there would be at minimum 1600 grandchildren from just the emission of the loins of these two narcissistic megalomaniacs.
It’s not one or the other which is a problem. It’s both. And population explosion is a WORSE problem because it is REAL, where as monetary explosion is problematic but in the end solely abstract.
@beard,
NO… it is not a monies problem, it is, an ideological problem. Forms of promise, are just, one aspect of this ideology. Usery is just a byproduct of old metaphysical ideals, yet, the removal of this one item will not change the over all ideological landscape.
Skippy… Market or Humanity + including all life and the potential this world still has ( currantly being reduced faster than ever before ).
A totally ethical way to reduce population growth is prosperity. If the money system is fixed then the chances for sustainable prosperity are greatly increased.
@beardo,
Prosperity? Another vaporous metaphysical word. The world can not exist under developed country[s consumption… full stop.
Skippy… “sustainable prosperity”…. beardo. What priest like mumbo jumbo, like such a thing ever existed or could. The historical record is quite clear, expansion is the only way to support such levels of human activity. Asteroids [ROFLOL!!!!!!] Its a long way… away beardo, till then its beggar thy neighbor or as I like to call it “the gawd rule” (cough I’m better than you… gawd said so).
With a helmet like that, I trust you’re an authority.
Could you please provide some outline of
the deflationary period that came before WWII ?
I’ve heard and read much more about inflation,
as compared to deflationary periods. I think
I once worked-out how deflation plays out.
What I’m missing is a good historical case-study
on deflation.
Deflation is a nightmare with our money system (credit lent into existence for usury) because once it starts debts become more difficult to pay which increases loan defaults which causes banks to cut lending which causes even more deflation in a vicious positive feedback loop.
Mole said “… but the damn wealth grows slowly.”
You’ve got that part right Mr Mole, but you left out the most important part — “wealth” grows by people (human beings) exerting effort to create and expand “wealth.” The money you keep talking about is an abstraction — it’s a symbol (Sumerians used to put marks on clay tablets and then trade those) for accounting the “value” of the wealth that actual PEOPLE create. None of that happens without real people and sufficient resources.
Have you ever asked yourself how our ancestors — the Hunter Gatherers — survived and thrived WITHOUT money? Or how do honeybees work their butts off without money?
The answer is somewhere in the land of trust, fairness, and everyone working together for the common good.
John Merryman’s comments have been a very good description of what happens in the progressive stages of our human history after “hunter gatherers”, larger tribes, villages, and more complex societies where powerful people can (and usually do) abuse their power.
MMT would be part of a sane government where rules/regulations would keep the thieves, crooks, charlatans and nitwits from abusing those that are actually working to accumulate wealth.
You do remember, Mole –don’t you — that Adam Smith (the originator of the “free market” philosophy) in the 18th Century that the powerful had to be restrained with rules (laws) lest they take advantage of the less powerful.
We all need rules in a society. How about games Mr Mole. Would you prefer baseball, football, soccer, etc. without rules? A “free market” of sports? Why do we gladly aceept and respect rules in our sports? And why do we bitch and moan when the rules are not fairly applied?
Our society works best with proper rules and the “rule of law” — not “the rule of men”. That’s what our founding fathers gave us — a tremendous gift. Unfortunately it has been largely squandered by the powerful groups that now rule the USA.
Mr JurisV,
Read my post again. Laws are not manipulations – are they?
“wealth” grows by people (human beings) exerting effort to create and expand “wealth.”
This is bullshit. If five billion people “exert effort” does that mean the earth will yield twice as much abundance to ten billion people seeking to extract resources from it?
Yours is an absurd argument on its face.
MMT works just fine. As long as there’s high unemployment, printing money and giving it to the unemployed people *just works*.
Once everyone is employed, you have to stop, obviously.
The country has a lot of poor children. Our ruling classes don’t want to invest in educating young people, preferring instead to track into lifetimes of insecure, low-wage labor and/or prison. Our elites don’t need a populace educated in critical thinking.
In a related development, Peter Geoghegan recently noted in the London Review of Books that local currencies were springing up in the UK and Europe as a response to austerity, and he reminds us of “the Miracle of Worgl” back in the early 30s, when a town used its own currency to rebuild itself and achieve full employment during the Depression–until the policy was declared illegal by the Austrian Central Bank and the courts.
Whereupon they went right back to 30 percent unemployment.
The contemporary account of the “Miracle” makes a fascinating real-life commentary on the Monopolis example–that’s the second link, highly recommended, and I think it gives powerful support to the MMT idea, subject to resource constraints. But hell, we haven’t even tried proper Keynesian stimulus yet!
The “Miracle”:
http://www.lrb.co.uk/blog/2012/05/01/peter-geoghegan/the-miracle-of-worgl/
A Contemporary Report:
http://onlinelibrary.wiley.com/store/10.1111/j.1467-8292.1934.tb00435.x/asset/j.1467-8292.1934.tb00435.x.pdf?v=1&t=h2gba2mf&s=0b69fcc85020fe1e70b077cadc9283dfc989405b
The funny thing is that unemployment is what the rich personally perceive and cultivate:
http://www.hulu.com/watch/174635/born-rich
_Theory of the Leisure Class_ goes into much more detail about what the rich actually cultivate. True unemployment is only the goal of the nicest of the rich. Power and abuse of others is the goal of the rest.
‘We can get an aircraft carrier into our game in exactly the same way the U.S. government gets one into its fleet: It goes to the Newport News shipyard and buys one’
Just like that voila! Then when the Gubbmint want’s to take housing from people they just go to legal powerhouse in every state and pay them a bunch of money, and take housing away from people so other people can make more money. I know what you’re thinking but it doesn’t stop there, why, if the Gubbmint needs to house people in a jiffy they just go to Halliburton and buy some facilities. It’s only a game, don’t hate da’ playas.
Aircraft carriers are used for imperalism (killing people stealing land, getting the oil, stuff like that). They are a horrendous waste anyway you crack it.
Precisely, the Bankster marinoettes are already dangling the “debt deficit” mongering throughout the propoganda pipes. This Wall Street centered austerity pathology infects when drummed out hypnotically. Even the smartest rube compartimentilizes debate as if a check book ledger is the absolute answer to the universe.
Incidentally, aircraft carries, bombs, guns, weapons and war are conducted without pause or consideration or debate. Fascism doesn’t hold elections,
The usual justification for spending on “national defense”
is that we can’t predict with full certainty the policies
of “adversary” sovereign powers.
Reading-up on what led to WWI (1914-1918), it was said
that the so-called “intellegentsia” in Germany viewed
a future war with France (and also Britain, as I recall)
as a certainty; therefore, even war on a “pretext”
(assassination of a Prince of the Austrian Habsgurgs in
Sarajevo by a Serb nationalist) together with Alliances,
and the view in Germany that France/Britain/Russia
were “relatively weak” compared to Germany (lots
of industrialization and military buid-up there),
was in some sense a “rational choice” by Germany …
Going to war because the Reich is strong and a future
war with Britain/France is inevitable anyway …
I’m not convinced we know the whole truth re: WWI
(cabinet-level papers, etc.) to this day.
Geez, kinda like Iraq/Afghanistan, the Bush Doctrine, and Preventative War… which, due to modern warfare tools has been far more efficient, though not nearly as thorough in reducing population growth as “The War To End All Wars” was.
Sooooo, life is not a Monopoly Game.
Why do the MMT proponents continually provide reforms to political economics using allegories and hyperbole when trying to explain just exactly what NEEDs to be done to the present system of Guvmint and money in order to restore the stability and soundness they claim will allow everyone to either have a job or a wage that feeds, clothes and houses everyone?
Where are ALL the reforms NEEDed?
I have offered the Kucinich Bill that reform the money system and puts it back into the hands of the people, that eliminates the debt-money connection, and pays off the national debt.
http://kucinich.house.gov/UploadedFiles/NEED_Act_FINAL_112th.pdf
That may not be the MMT agenda, exactly.
But for those in the know of the MMT agenda, WHAT is not able to be done if we were to pass the Kucinich Bill?
Because if it does everything the MMTeers want, then where is the econ-intelli-prog support for these reforms?
For the Money System Common.
The Kuninich Bill does pretty much exactly what MMTers would recommend. Close enough, anyway.
…the problem, however, is the number of people who don’t even comprehend why the Kucinich bill is a good idea.
One reason I think that the NEED Act of Kucinich is capable of taking off is that it avoids some of the inconceivale tenets of MMT – like the government neither has nor doesn’t have any money, and that taxes do not, and are not needed to, fund the government.
And that the only purpose of taxes is to remove buying power from the private sector.
The Kucinich Bill is more straight-forward:
The government has the power to create the nation’s money and we are taking that power BACK from the private bankers.
Also the government does not NEED to borrow from the private sector and it ends public borrowing and repays the national debt.
It ends debt-based money – finalmente.
Maybe it’s too simple for the financialists.
I have no problem believing that the descriptive side of MMT is accurate.
Where they lose me is their lack of explanation for the obvious other aspect of monetary reality: the fact that our money system was hijacked by people who are only interested in enriching themselves and their cronies.
Any fiat money system is made by men. Men are corrupt. Always. This seems to be the essence of the “Austrian” position, which doesn’t get much credit in these parts.
The Austrians are hypocrites. They claim to be for liberty but then insist we all be forced to use gold as money.
Any fiat money system is made by men. Men are corrupt. Always. This seems to be the essence of the “Austrian” position, which doesn’t get much credit in these parts.
Any money system is made by men. Any money system is a fiat money system. Gold standard just means that the government has decided to back a worthless commodity, gold, with its intrinsically valuable fiat money. It has decided to run a government “We buy & sell gold!” store. MMTers have absorbed all the good ideas that the Austrians have had – MMT-guided money would likely be the hardest, least inflationary money the world has ever seen.
It can be a good idea to run a gold standard.
When?: When your country (ConMania) has a lot of gold, a lot of gold mines, and is surrounded by a lot of other countries who you have convinced to run a gold standard – The Marks & Suckers Confederacy. You use your worthless gold or your gold-backed currency to get their valuable fiat money, and spend it on imports from Marks & Suckers. You can import all the high-tech machinery that the poor Marks & Suckers have designed & built & all their high-tech scientists & technologists and use ’em to develop your economy & its useful, non-gold resources. Gold is only valuable because you can get fiat money for it, not vice versa.
The object of Monopoly is to bankrupt all the other players and own all the property. In the traditional board game, wealth inequality is the point. One person, let’s call him Mr. 1%, ends up owning everything and the other players, let’s call them the rubes or the 99% end up with nothing. And it is not like Mr. 1% ends up owning everything because he’s a better, smarter player. Let’s be real clear about this. He cheats. He’s got the rulebook and whenever a challenge comes up he always settles it in his favor. If pressed, he simply adds a new rule which says, “I can do what I just did.” If other players try to do the same thing, he tells them, “The rules don’t allow that.”
What is left out in the description given in this post is actually most of the world we live in: kleptocracy, wealth inequality, and class war. It makes the false, essentially neoclassical, assumption that all players are more or less equal, and that they will behave reasonably, that is honestly. Events of the last 35 years contradict all of these assumptions. While it is true that MMT is the only current theory that deals with money in a post-gold standard world, it is equally true that MMT works very well in a kleptocracy. Indeed something I have said before, we have had MMT practised by our elites and the kleptocrats. For them, there is always the money for their tax cuts, wars, and bailouts. But MMT has not been applied to the rest of us. We are treated as if we still live under the gold standard. We are told the money isn’t there for Social Security, Medicare, jobs, healthcare, education, and infrastructure. The money isn’t there to pay off your debts or fix your mortgage. And of course, the people who are telling us this are the Mr. 1%s of this world and those who work for them.
Hear, hear, Hugh.
I just came across once again the “plutocrat” memos from Citigroup: http://politicalgates.blogspot.it/2011/12/citigroup-plutonomy-memos-two-bombshell.html
1) the world is dividing into two blocs – the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest. …
2) We project that the plutonomies (the U.S., UK, and Canada) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization…
4) In a plutonomy there is no such animal as “the U.S. consumer” or “the UK consumer”, or indeed the “Russian consumer”. There are rich consumers, few in
number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie. …
The Managerial Aristocracy, like in the Gilded Age, the Roaring Twenties, and the thriving nineties, needs to commandeer a vast chunk of that rising profit share, either through capital income, or simply paying itself a lot. We think that despite the post-bubble angst against celebrity CEOs, the trend of cost-cutting balance sheet-improving CEOs might just give way to risk-seeking CEOs, re-leveraging, going for growth and expecting disproportionate compensation for it. It sounds quite unlikely, but that’s why we think it is quite possible. Meanwhile Private Equity and LBO funds are filling the risk-seeking and re-leveraging void, expecting and realizing disproportionate remuneration for their skills.
Then Citigroup goes on to describe the possible backlash.
You or others may enjoy the “Born Rich” and “One Percent videos linked here:
http://www.hulu.com/watch/174635/born-rich
The One Percent as seen from within:
http://www.documentarywire.com/the-one-percent
Here is a link that works, excellent piece of film, nice short interview with one of the devils, Milton Friedman :)
http://www.youtube.com/watch?v=HmlX3fLQrEc
The point of teaching people about MMT is *precisely* so that people understand that currently the elites practice “MMT for the 0.1%, pain for the 99%”.
Once people understand that that’s a choice of the elites — that the elites could perfectly well practice MMT for everyone, but choose not to — the elites start to risk the wrath of the mob, and we start to have a chance.
And here we have these intellectual minnows at the G8 conference and the eyes and ears of the press clinging to their every feeble stale shallow utterance and a media simply regurgitating purile filth to a braindead proletariat.
Oh, God, it could have been so different.
Thanks JD for providing a tool to illustrate what is possible (and how the money-myth is a fallacy) but, as the comments make clear, how to use all the unlimited funds wisely will require another siesmic mind-shift for an ignorant citizenry.
how to use all the unlimited funds wisely
NOOOOOOO. There are not “unlimited funds”. There never have been, and there never will be. That some people based a monetary system on “unlimited funds” is exactly the pernicious mental stranglehold that we are trying to free ourselves from, even if it is only to free ourselves to see our own imminent demise.
Really there are (money is an abstraction). The point is that CIG is making decisions about the goods & services it pays for and wisdom dictates paying workers to clean up the environment or care for the elderly rather than waste natural resources on building aircraft carriers for example. Non?
It’s tough to suss out. Yes, if there are “funds” to support aircraft carriers, there should be “funds” to support social programs. But few posit the third likelihood, the likelihood that there are (at base) no funds at all to finance either enterprise, sustainably.
There are more than one set of axes upon which the political games are being played, BUT the only axes which count are those which value real current and future resources in light of an ever-degrading environment which can give us increasingly less, out of our own volition.
It’s no longer the rich vs. the poor ONLY, as it was in the 1920s, a time of expanding resource exploitation. We are currently facing a world where per-capita resources are declining and will forever decline, barring a severe population correction.
The US isn’t even close to broke. Check out their Comprehensive Annual Financial Report (not the summary)
They are just making sure the richest stay that way.
Let’s do a little thought experiment here rather than running around in a field full of daisies blowing bubbles in the spring sunshine. We’ll play the game the way the economists do, starting from a list of completely unrealistic assumptions:
1- All existing banksters will voluntarily turn themselves in, are issued orange jump suits and shipped to Guantanamo. Wait a minute that prison wouldn’t be nearly big enough– but you get the picture.
2- Any politician who has ever taken a contribution from any part of the financial system will be immediately removed and barred from holding public office for life.
3- The Fed will be nationalized, and bankster-created federal reserve notes now used as money replaced by greenbacks issued by the Congress as the constitution stipulates.
4- Tim Geither will be hung as a common criminal, and replaced at Treasury by the foremost MMT theoretician in the land.
Now the People will select new Representatives uncorrupted by Bankster Capitalism, and the monetary system will be designed to give them all the money they need to get what they want. And what do they want? MORE. Like most humans throughout history, people want more of what they now have. That may be two meals a day rather than one, a house rather than an apartment, a Ford Expedition rather than a VW Beetle, a mansion rather than a house. While Capitalism enables the few to get much, much MORE, the seeds of desire were planted in the human psyche long before we could even write the word.
No problem. Our new MMT Treasury will simply print more money and give the people what they want. Or we will find a new one—.
But wait a minute, why are there such long lines at the gas pump when you try to refuel your Ford Expedition? You just received your monthly allocation of Greenbacks delivered on a two ton truck, so you have plenty of money, but you still can’t buy everything you want or need.
Money is merely a consensual delusion that facilitates exchange. Pieces of paper with dead presidents printed on them, shiny bits of metal too soft to make into decent arrow points, large round stones with holes cut in the center— all of them only have value to the extent that people are gullible enough to accept them in place of something that they can actually use. The consensual delusion is so powerful that people have extreme difficult distinguishing between money and Wealth.
The wet dream held by MMT advocates rests on the idea that a change in the color of the squares on the chess board will change the relationships of power that determine the outcome of the money game.
In industrial civilization the real measure of value is Energy, not gold or fake notes (money). Wealth is created by the application of human ingenuity to the finite physical world. The entire physical structure that supports a population grown three-fold in a few centuries exists only because humans learned to extract concentrated fossil fuel energy from coal and oil. That energy originated from the sun, was captured by photosynthesis, and transformed by millions of years of heat and pressure. In a few short decades we have used half the total endowment of fossil fuel energy, and invented no other forms of energy extraction that can begin to match its low cost, high concentration, and transportability.
Whether fiat currency is printed by banksters seeking to increase their number and size of yachts or congress critters seeking to put a SUV in every garage has only marginal impact upon the world our offspring will inherit. If you really want to anticipate the future, measure the methane plumes above melting arctic permafrost and bubbling up from the methane hydrates released from seas that have not seen open water since the end of the age of the dinosaurs. Species that overshoot the carrying capacity of their environment, foul their nest, and eat all their food supply always find a worthy competitor, be it microbe or fanged tiger, that puts them in their rightful place as compost for future life on the planet.
The MMT crowd is not seeking a “free lunch” but to prevent the destruction of many lunches that have ALREADY been paid for and to allow the creation of many lunches that would other wise not be made because of a mere lack of money in the right hands.
Of course price inflation is a danger. Any powerful tool is potentially dangerous yet we use them safely all the time.
Beard, you are confusing money with wealth and monetary policy with the real world. If you grant that fossil fuel energy is finite, all of industrial civilization is based upon it being inexpensive and available, and no alternative that comes close in availability and energy density exists, then it is silly to say that ‘price inflation is something that we can simply use safely’.
We have at least several hundred years of fissile energy and once fusion is practical then our energy problems are over.
Right, and we don’t need to recycle our glass and metal and plastic because Jesus will come and clean up the earth.
Actually, abundant energy should greatly help with recycling.
And remember how Jesus had his disciples pick up the uneaten loaves and fishes?
And who are you calling fat? I might just be big boned!
And don’t forget, it is you who are stuck on this planet (according to your belief system), not me. I could just buy some popcorn and Coke, watch the spectacle and wait for the Rapture.
“We have at least several hundred years of fissile energy and once fusion is practical then our energy problems are over.”
FB, we may have the potential for several hundred years of fissile energy, but WE DO NOT HAVE SEVERAL HUNDRED YEARS’ WORTH OF CONVENTIONAL, FOSSIL FUEL, ENERGY to maintain these already aging systems.
We cannot guarantee continuous electrical energy to maintain circulation in cooling tanks which are supposed to hold nuclear waste for the next several tens of thousands of years.
We cannot.
We cannot guarantee it through next Tuesday.
WHY we cannot is hubris. It is the same ancient story, from the wax on the wings of Icarus to… some biblical story I’m sure you can scrounge up. The message is: do not fuck with God/nature. That may seem rudimentary and simplistic, but it’s not all that crazy, wouldn’t you admit?
Why the hell do you even bother to comment here, seeing as you are convinced of having a celestial “Get Out of Jail Free” card?
Beard, you are confusing money with wealth and monetary policy with the real world. No, that is what such specious arguments starting from “physical reality” always do. MMT & F Beard do not. These arguments always have the commodity theory of money, the worst scientific theory of all time, hidden in them. Sane economics simply suggests – no random, purposeless destruction – no attack on yourself. It doesn’t really matter what the physical, environmental facts are, what the correct accounting for such externalities are. You aren’t going to be better off if you chop off your own limbs for no reason. You aren’t going to run your business or your economy more efficiently or more sustainably if you forget how to add & subtract.
Look at the USA – increasing levels of what is usually called technology. But essentially no progress for the ordinary person in the last three decades, even before the crisis – the worst in the history of the USA & even the 13 colonies, including any 30 year period that included the Great Depression. Great Moderation = Great Stagnation. How could this happen? Well, what happened is that the social technology of economics & finance degenerated, moved backwards. The USA has a tradition of more than half-way decent economics in action. The last 30 odd years of pseudomathematical astrological mainstream “economics” has been the worst, stupidest & most ignorant economics ever used in the USA. Enormous sectors of the economy have become much less efficient, ever more theft from the poor to give to the rich, ever more torture of innocent people, ever more potlatches of wealth destruction in order to counter increasing productivity. It has been a real achievement of steady decay to accomplish such pathetic growth, such unemployment, such poverty amidst plenty and not have a bloody revolution. You can be damn sure that if the returning soldiers of 1945 came back to, or came back to life today to such a decayed polity & economy, there would have been.
Pretty much the best USA economics-in-action was around 1941-42-43; slow degeneration and spread of ignorance, not all that serious til the 70s. Then led by innumerate pseudomathematical moronic barbarians effectively burning libraries, a dark age fell. And Europe, which tended to have a somewhat higher level during the postwar era, reverted even worse than the USA. All MMT suggests is going back to a somewhat improved version of the econ-tech of the early 40s. Even the mid 60s would be an enormous improvement. By remaining with 1940s econ-tech, we could have had MUCH more wealth than now & perhaps more resource usage & environmental damage, depending on how green we were – or more wealth & the same resource usage & damage – or we could have had the same amount of wealth, better distributed, and much less resource usage & damage. And it would therefore be a lot easier to deal with environmental, population, etc problems. Because we would have treated economics as a goal to accomplish a purpose other than – find out which of your arms is stronger by arm-wrestling yourself – and then use the stronger one to chop off the weaker one.
“The USA has a tradition of more than half-way decent economics in action…. Calgacus.
Tell that the people of south – central america, pacific rim and now the middle east.
Skippy… BTW anything that happened in WWII, should NOT be, used as a indication of how to run a economy. It was the most destructive activity humanity has ever engaged in. Hell were still cleaning up the mess.
“The USA has a tradition of more than half-way decent economics in action.” Calgacus.
Tell that the people of south – central america, pacific rim and now the middle east. My meaning was the pragmatism, rationality, effectiveness, efficiency, technological advancement of the economic means not the moral decency of the political ends.
BTW anything that happened in WWII, should NOT be, used as a indication of how to run a economy. It was the most destructive activity humanity has ever engaged in. Hell were still cleaning up the mess. Again, see above, though few would put the primary blame for the destruction of that war on FDR’s USA.
There’s basically a law of conservation of sanity in economics & war. Sane economics is used during the insanity of war, while during the sanity of peace, insane, destructive, unintelligible, everything-backwards “economics” is used.
The murder and subjugation of populations, out side continental US boarders, is an act of war… methinks.
Caveat, this was at the behest of a few wealthily and not the general population, it must be said. The rest of your meaning is just what they thought IMO, until circumstances changed (see today).
FDR’s USA? Yep, he had zero problem bending Churchill over a barrel during the North Atlantic Treaty. How far do you think he would have gone, how much of Engalnd destroyed, just to hammer the deal home? Anyway the activitys so loudly projected about this economic time were an outiler within human history.
Skippy… as economics is just metaphysical thoughts applied to human activity for short term goals, prosperity, wealth, concentration of power, et al, for the global wealthy… I can not find any sanity… in it… ever.
Only in Soddy’s Cartesian Economics Lecture on “The Bearing of Physical Science Upon State Stewardship” are we in fact provided the systemic guidance needed to have a money system based on natural resource entropy, thermodynamics and geo-physical limitations.
His book on The Role of Money explained how the proper money system should be functioning to deliver wealth to the wealth-creators in this real political-economic arena that surrounds us.
His monetary-economic philosophy provided the foundation for the modern studies of ecological economics.
But he was far from an MMTist.
For the Money System Common.
“A zoologist who observed gorillas in their native habitat was amazed by the uniformity of their life and their vast idleness. Hours and hours without doing anything. Was boredom unknown to them? This is indeed a question raised by a human, a busy ape. Far from fleeing monotony, animals crave it, and what they most dread is to see it end. For it ends, only to be replaced by fear, the cause of all activity. Inaction is divine; yet it is against inaction that man has rebelled. Man alone, in nature, is incapable of enduring monotony, man alone wants something to happen at all costs — something, anything… Thereby he shows himself unworthy of his ancestor: the need for novelty is the characteristic of an alienated gorilla.” ― Emil Cioran
That’s a really interesting citation. Inaction may be divine, but I would argue strenuously against its being “boring”. I have never in my life for one minute been bored. I cannot conceive of it. But that doesn’t mean that I am “doing things” constantly—in fact it’s the contrary.
BOREDOM, in this case, is the limited comprehension of the observer. And yes, modern man’s pathological necessity to “do something” is our downfall.
re Humans always want MORE
You don’t agree? Take a poll that includes all the economists in the nation, all the elected officials, all the officers of corporations, and all the soccer moms. Ask them if the economy needs to start growing again. Then ask them what the ideal rate of growth in the economy should be. The universal consensus will be in favor of growth, and the desired rate will likely be at least 3%.
Let us assume that wealth amounts to possessions, and each American citizen owns a package of goods that could be packed into a small van. If the economy were to deliver 3% growth in the wealth of its citizens for little more than 300 years, the volume of their possessions would cover the entire surface area of the earth.
If humans, including MIT trained mathematical economists, can’t grasp elementary exponential mathematics, how can you expect them to not drive their species over the cliff?
You conflate growth in value with growth in tonnage. Technology is learning to do more and more with less and less. Ever hear of nano-technology and meta-materials? How much raw material does an I-Pad require?
FatBEard, WHAT THE FUCK DOES AN I-PAD DO?
Does it put food in your belly? If not, it does not count as wealth. Punto e basta.
How many square feet does a human being require? Do your math. If we assume that all humans have morphed into I-phones, and run the numbers for exponential growth of I-phones until they completely cover the surface of the earth the difference is only a single doubling period compared to starting with moving vans. Still to big a scale for you? Start with carbon nano tubes and assume 3% exponential growth. It’ll only take a few more doubling times to again cover the earth.
Sustained exponential growth in a finite system is impossible, and any economic system based upon that goal will inevitably fail.
You continue to conflate value with mass but even assuming we are talking about mass why on Earth would people continue to increase the MASS of their possessions once they were comfortable? Once the entire world’s population is comfortably prosperous, why wouldn’t they be content?
Actually, in your latest you conflate surface area with value. But the growth rate of prosperous populations tends to level out. If not for immigration, the US would have a shrinking population, I’ve read.
Yeah, FB, I’m going to value my possessions all the more once they are squashed into a dense cube. In fact, once I accumulate them to the point that they reach the density of a black hole, drawing all humanity and humanity’s works into it, I’ll know I’ve WON!! YAAAYYYY!
Bravoooo! Thanks for sketching out our situation in vanloads.
I always figured such mental exercises would be a given, but apparently they are not, even among the most educated, as you correctly point out!
you’ve made many solid points in this thread, if there was upvoting here, you’d have all of mine.
do you see a path ‘forward’ from here?
in my small circle of friends and family, definitions of ‘forward’ range from replacing incandescent lightbulbs with cfl’s to drill baby drill. mostly liberal, yet, all channeling cheney (‘the american way of life is non-negotiable’).
if we could go back 40 years and make bartlett’s ‘arithmetic, population and energy’ standard fare for the 6th grade, then we might today be able to arrive at some agreement as to the path forward.
as it stands, if people choose to remain uninformed, even after deepwater, fukushima and elgin (all those things are still leaking, right?), there can be no hope for a re-design of ‘civilization’.
quinn’s concept in ishmael, that re-designing your aircraft while it is in flight is probably not possible, is never far from mind. nor is prince’s ‘party like it’s 1999’.
kimyo, personally I’m trying to work through the realization that it will not be possible to change humanity’s trajectory. Even if all the willpower in the world manifested itself tomorrow, it would be like trying to turn around the proverbial supertankers/Titanic/aircraft carriers.
The recent population boom in the so-called third world is poised to set off an even greater generational boom quite soon, seeing as the bulk of the population in many ‘developing’ countries is quite young, just reaching procreation age.
This is as we argue, in the US, over whether birth control is appropriate!
It’s already too subtle to convince even one person out of ten, or out of 100, that their maximum procreation and/or consumption of resources right this minute is unwise.
I have a sort of neighbor who spent this past afternoon burning large quantities of toxic, plastic, trash. Who am I supposed to complain to? There were explosions which sounded like rocks hitting my windows, because he was apparently burning some kind of aerosol/spray=paint canisters. He wore ski goggles as he did this. And then we wonder why there is bee colony collapse, etc.
People are just stone stupid. They are beyond redemption. They have been intensively cultivated to repudiate and despise the natural world. The worst of them will kill us, and the best of us can only wring our hands, as we type on computers requiring shit-loads of plastic, electricity, and exotic materials.
I plan to retreat to a rural state, but even there the populace sustains itself on monster-truck driving and other nonsensically destructive/consumptive rituals.
>People are just stone stupid
i wonder if it’s not that they are stupid, but that they are mentally ill, and that it is ‘civilization’ which had made them so (gliadin in wheat causing a ‘leaky gut’, which allows all manner of toxins to pass directly into the bloodstream)
i also wonder if this pass at ‘civilization’ is not our first.
ps: global warming has all the earmarks of a religion dressed in lab coats. ‘most scientists agree’ is not science. the co2 dogma is a distraction from the real issues at hand (ie: no, we can’t deal with the mercury pollution because we have to install these spiffy new carbon scrubbers).
it’s an oncoming mini-ice-age which i’m worried about, in terms of selecting the right area for my doomstead.
Holy Cow this thread is really getting looney. I wonder if it’s a full moon or what? Maybe all you kiddies just need to take a nap. ahhahah.
I figured out what wealth is during the Institute for Metrobus Analytics — wherein I stare out the window of the bus on the way to work and figure stuff out. usually best when it’s raining and the window is dirty or scratched.
Wealth is cooperation. No more and no less. Because no physical thing is valuable unless it calls forth cooperation. And what does a wealthy person have except the ability to call forth cooperation on demand. If he wants a big house, he calls forth carpenters and plumbers. If he want a ferrari, he call forth rubber suppliers and paint manufacturers. If he want a yacht, he call forth the makers of propellers and the makers of radar units and sails.
So if wealth is cooperation, infinite wealth is not possible, only wealth up to the society’s potential cooperation limit. This limit can be expressed in a number of different and mutually exclusive ways. If one person own everthing and everbody els is slave, then there’s a cooperation limit = 1 person taking from all. So everbody els haz no cooperation. Very litle overall cooperation, per person.
But if everybody cooperates in a harmonious ensemble, then total cooperation overall = summation of individual cooperation factors = is greater overall. So more wealth overall.
Of course a clever person would intuit that there is an implied point of perspective in this defanishun. Yes there is. And that is the anthropomorphic principle at work.
It took me a while to make the jump that wealth is cooperation and nothing more. Several bus rides, as the words swam around in my head like little fishes. The way they flash suddenly and then dissapear, the way fish do. You don’t even know they’re really fish unless you knew in advance they are. If you don’t know and you watch them in a creek you don’t know what they are, what’s flashing at you. but you can get a trained eye. This will come from spending time next to a creek fishing. You’ll see and understand, even on a bus.
craazyman: you too crazy!
Seriously, this is analogous to the ecosystem story: the more symbiosis, the more rich the ecosystem.
As Charles Eisenstein pointed out, though, money is a poor substitute for real connections. Everything we used to get for free, we now have to pay for, to our detriment and to the detriment of the planet and those around us.
We are also reaching an abstract monetary crisis in the Limit of Things We Can Commodify.
I agree crazyman that it is really loony to spend your time discussing a world inhabited only by other humans who live and prosper by cooperating with each other in their world that only exists in the mind of humans and lacks things like bees to pollinate the imaginary plants that they cooperate to harvest from imaginary soil.
The purpose of Monopoly is not to enable the players to all gain property, but to find a winner, identified as the player who has bankrupted all the other players.
Of course, then the game ends. Games are meant to end; we hope that livlihoods resulting from property ownership are not meant to end.
As children we used to play Monopoly with only one change: anytime a player was about to be bankrupted, he was just given more money by the Bank. What happened was that eventually almost all the plots had hotels on them and everyone was paying everyone else continually. Once no further building could occur, a stable exchange economy developed (assume that each “hotel” was a “productive” unit). However, no one became “rich”, if being rich implies that others must be poor.
Monopoly with unlimited funds is no longer monopoly. As I believe Steve Keen noted, without capitalists, there isn’t a capitalist economy.
Well, you just have to take one step back to see the monopoly: it’s a monopoly of hotel-building, exactly as we have seen in the real world, taking away from investment in more mundane or necessary endeavors, like, say, decommissioning old nuclear plants.
I believe the assumption in the Monopoly game is that there ARE enough hotels (which can be looked at as productive units, not as “useless” hotels) to fill up the board. ie, potential supply of goods is unlimited. But of course, you are right: that is a VERY questionable assumption, to say the least.
in other words, all that is needed is for the citizens to have CON-fidence in the fiat money printers.
aka, trust me.
famous
last
words
Let me guess?
You’re a gold-bug?
Sad. Yves goes on vacation and so does the comments. This post about MMT and its comments almost totally ignore the credit form of money. So most of the heat misses the mark. Fiat money is not the driver of a capitalistic system, the driver is the expansion or contraction of credit. Growth is driven by credit, not by fiat money. Supply does not drive growth, demand drives growth.
Nice try guys, but you need to do better.
Nominal growth is driven by nominal credit. You get a little sticky star for that at least.
NOW tell us again how demand for Dodo meat creates Dodos. Or passenger pigeons… I really have a hankering for passenger-pigeon pie.
John Merryman. Neo-Liberalism is a flawed economic model but it is man-made. I don’t see your viewpoint as being much different than the one David Abel put forward in his book “The First Gene” that algorithms govern life processes and that some form of intelligence is built into life to organise the creation of those algorithms since no verifiable evidence has been put forward they can evolve from inorganic sources. So as I see it Neo-Liberalism’s flawed economic model can be regarded as man-made algorithms that we need to change as a society and the creation of new money, the quantity of its flow and its targetting is something society can choose to do via a make-over of its central and private banking system.
The company “Planetary Resources” or another company inspired by its vision will eventually bring tons of precious metals and even more valuable “Rare Earths” from the Asteroid Belt (and the Periodic Table) to our economy. Perhaps this flood on the market will finally break the fetishism surrounding gold.
Everyone wants more resources… Look up, or look at those people who are looking up.