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Money re-defined: Thinking outside the econ box

by psyched Wed Dec 29th, 2010 at 01:55:32 AM EST

Man invented money. It is not a process of nature like gravity or sunlight. Man conceived of this thing called money to make it easier for folks to trade stuff.

Money is not a physical thing; it is a mental concept, a social contract. It is nothing more than information, often disguised as a coin or a paper bill. And what is the information that it carries? It is that the bearer is entitled to exchange this money for various items or services.

Money has become so embedded in nearly all of human behavior that it has far surpassed its original primitive function as a substitute for physical things in trading.

And yet we think of money in much the same way its primitive inventors did.
Please follow me below the fold to consider the unfortunate implications of this disconnect.


Economists and financial leaders will not deny that money is intangible, that it is purely conceptual. And yet they treat it, probably unconsciously, as a physical thing that is in limited supply.

The presumed limits of the money supply have resulted in concepts and situations damaging to human society and to our world, such as national debt limits, spending caps, spending cuts, austerity, deficits, taxation, borrowing, hoarding, bankruptcy and more.

If one views money as possessing characteristics of physical things, the obvious conclusion is that the amount of money in the world is limited, as all physical things are. And since it is limited, all the money in the world is already owned by people and by other entities such as governments and corporations. And if all the money were spread around equally among the world's population, individuals would each own only a small amount. Therefore, for an individual to become wealthier, others must become poorer. And thus there is no cure for poverty because there will always be competition for the limited amount of existing money, and the smartest and most aggressive will gain the lion's share of wealth.

These seemingly logical ideas are pervasive in the world's population, but they are probably rarely adopted through rational analysis; rather, they are mostly unconscious beliefs derived from many centuries of following our primitive ancestors' views of money--beliefs practically embedded in our DNA.

But if economists agree that money is a concept rather than a physical thing, why do we have the world's leaders acting as if money were physical and limited? Concepts do not possess the same limitations as physical stuff like gold or oil. Concepts can be limited or unlimited depending upon our will to make them so. We cannot change the limits of physical stuff (unless we physically destroy it).

When our leaders refer to deficits, spending caps and austerity, they are assuming that there is a physical limit to a nation's or the world's money, and they know what the limit is. When corrupt leaders declare that citizens must survive with less government assistance, they are doing so not only because lobbyists for wealthy groups have paid them to do so, but also because both they and the lobbyists are afflicted with concretistic thinking about money, a holdover from "Stone Age" trading notions.

The world's economy needs to be humanized. If world leaders agreed that money should be based upon human needs rather than solely upon its relationship to commodities, goods and services, these beneficial results could follow:

1.    Taxation would be unnecessary, since a government can produce as much money as its needs require.
2.    A Basic Income Guarantee could be applied to all its citizens.
3.    Needed government programs such as infrastructure building and health care could be funded at levels based upon need rather than upon arbitrary federal budget limits.
4.    Poverty would be eliminated.
5.    Recessions and depressions would be eliminated.
6.    General prosperity would ensue.
7.    Capitalism could continue as usual.
8.    Governments might no longer be viewed as enemies of the people.


It should be obvious that the main function of money is to facilitate or make possible a vast array of human behaviors. Even life itself usually depends on the possession of money, as when parents decide whether or not they can afford to have children, or when people die because they cannot afford proper medical treatment. Over the ages, money has become involved in, even critical to, virtually every aspect of human existence. It has evolved a long way from its pre-historic role as a shiny metal to trade for food.

From my book

Governments can declare that all men are created equal and endowed with inalienable rights, but it can do little more to advance and preserve these rights, because they usually require money. A Basic Income Guarantee (BIG) would be beneficial in this respect.

After my recent book was published I discovered that there is an informal organization promoting BIG. Although discussions have been held for many years, no agreement as to the funding mechanism for a BIG has been reached. I believe that recognizing money as informational, carrying the information that the government certifies that the bearer can use it for any of the usual uses of money, would provide a funding means for BIG.

What I'm advocating is that governments print much more fiat money, provided that money is redefined as no longer exclusively based upon commodities, goods and services, but upon the needs of citizens.

Governments should exist to promote the welfare of their citizens. By redefining money in the way I propose, governments could eliminate taxation, provide basic income guarantees for all citizens, meet the infrastructure-building and social program needs of its citizens that could not be handled by private efforts, and contribute more to international problems such as climate-change mitigation.

I have provided much more detail in my book, which is described further at www.TableOfGold.com

I am not an economist; my field is psychology. Therefore you will find evidence of naivete about economic concepts, but hopefully not about the needs of people in my book.

A different version of this diary was posted earlier at DailyKos. Update [2011-1-5 13:55:49 by psyched]: I'm gratified to see all the comments on this diary. I'm pleased to see so much general agreement that money is not a thing. It's fun and illuminating to follow the discussions that verge into physics, metaphysics, philosophy, etc., and perhaps they are useful, but they seem tangential to the main thrust of my arguments, which I would summarize as follows: 1. Money is not a physical thing, but a social contract. 2. Money was created by man and thus can be changed or eliminated by man. 3. Money and its rules of usage need changing to improve our dysfunctional economy. 4. The world must agree that government issuance of fiat money should be limited only by the limits of the people’s needs (including infrastructural and environmental requirements) to achieve and maintain life, liberty and the pursuit of happiness. One of the main impediments to achieving these ends is the disparity of beliefs among the world’s people about what money really is. Most people regard money as a physical entity, and even world leaders who understand the non-physicality of money behave as if it is a scarce or limited physical thing. And perhaps, as stated or hinted at in some of the comments, financial leaders consciously or unconsciously control the masses by perpetuating the notion that money is limited. The concept of greed enters often into economic discussions. In my book I said that to combat greed it is easier to change the rules of using money than it is to reform the psyches of greedy individuals. The latter approach would provide many jobs for psychotherapists, but its effectiveness would be questionable, especially when one is dealing with sociopaths, who are notoriously immune to therapy or even diagnosis. On Sunday I saw the film “Inside Job”, a documentary of the 2008 international financial breakdown. Most interesting was seeing close up the interviews with various greedy and/or sociopathic types who appear to lack understanding of or concern with the gargantuan effects of their actions upon millions of suffering people. It’s unfortunate that we can’t weed sociopaths out of political or other positions where their behavior becomes so disruptive to society, the way we look at medical exams of candidates for office to gauge whether they are physically suitable for a leadership position. This ties in with comments here that good government is essential to carrying out the beneficial societal aims we promote. (I don’t mean to promote a discussion of psychotherapy for politicians; that was merely a side remark.) Thank you again for your serious attention to this diary, and happy new year!

Display:
Most of what you contend in the diary is correct, but there's a couple of points where you're making unwarranted assumptions:

Taxation would be unnecessary, since a government can produce as much money as its needs require.

Well, yes and no. The government can fund all its activities out of seigniorage and not tax anybody. However, this is not necessarily desirable.

Government net expenditures in excess of the private sector's desire to accumulate government liabilities results in either expansion of production or higher prices. Expansion of production is what the private sector prefers to do if it has the choice. But if there is no slack in productive capacity, it has to raise prices in order to increase the nominal savings desire.

And there is no guarantee that the government can do all the things it wants to do with just the slack that arises organically in the private sector. When the government wants to do things above and beyond what it can do with the free lunch from private sector inefficiencies, it may prefer to enforce slack in the private sector that it can then repurpose, rather than accept price increases. The choice between the two is a matter of economic policy and strategy, and it would be silly to deprive yourself of the option to create slack by taxing purely because taxes are ideologically uncomfortable.

Besides, taxes serve important regulatory functions. Taxes can serve to internalise externalities. Taxes can serve to cut wannabe aristocrats down to size. Taxes, like subsidies, can serve to direct economic development along the lines that serve the needs of industrial planning. And, most importantly, steeply progressive taxation dissuades looting of productive enterprises by centrally placed insiders, because steeply progressive taxes penalise lump-sum payments (which are typical of looting) relative to stable salaries (which are typical of bureaucrats).

Poverty would be eliminated. [...] General prosperity would ensue.

Yes and no. Poverty could be eliminated, provided that the physical means to provision society exist. Creating money does not automatically create goods as well.

Now, in modern industrial societies, the means to physically provision society exist. But due attention must be paid to ensuring that they continue to exist in the face of changing (and likely intensifying) resource constraints.

Capitalism could continue as usual.

That rather depends on your definition of "capitalism."

If by "capitalism" you mean that those who own capital direct the production of goods, then a substantial part of the industrial economy hasn't been capitalist since the first Ford T rolled off the assembly line. And if by "capitalism" you mean that those who own financial assets direct production, then activist government currency policy like you propose would certainly be an abolition of capitalism.

Of course, if by "capitalism" you mean the sort of planned economy where the organisations that produce stuff are in the private sector and mostly manage their own internal affairs, then "capitalism" would be re-instated with the collapse of Wall Street as a political force that necessarily results from undercutting their role as the only gatekeepers of money.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 29th, 2010 at 07:55:33 AM EST
Government net expenditures in excess of the private sector's desire to accumulate government liabilities results in either expansion of production or higher prices. Expansion of production is what the private sector prefers to do if it has the choice. But if there is no slack in productive capacity, it has to raise prices in order to increase the nominal savings desire.

Let's see if I get this right. I will regurgitate what I understood : Inflation is what happens if government provides extra net money in the absence of economic growth.

Corollary : as long as there are external constraints to economic growth, extra government money can still be redistributive in its effect, e.g. by providing a guaranteed minimum income, but comes with a cost in inflation.

The approach is frowned upon by teh Serious Peoplez, because 1) capital doesn't like inflation, and 2) guaranteed incomes distort the lower end of the labour market.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Wed Dec 29th, 2010 at 09:27:33 AM EST
[ Parent ]
Inflation is what happens if government provides extra net money in the absence of economic growth.

That's one driver of inflation, yes. Of course, there are other sources of inflationary pressure as well, so it's not simply the case that if the government pursues balanced budgets then there won't be inflation. There will still be inflation and the government can deficit spend without adding to that inflation, until the deficit spending matches the increased savings desire caused by the nominal economic growth (it seems reasonable that, all else being equal, people want to hoard the same amount of purchasing power in the form of government-issued money tokens - when inflation happens for unrelated reasons, this means that people want more tokens).

Corollary : as long as there are external constraints to economic growth, extra government money can still be redistributive in its effect, e.g. by providing a guaranteed minimum income, but comes with a cost in inflation.

Yes, but "the inflation tax" is a rather crude way to redistribute wealth. Inflation isn't as scary as the Conventional Wisdom holds, but it's not precisely desirable either.

The approach is frowned upon by teh Serious Peoplez, because 1) capital doesn't like inflation,

Capital doesn't care about inflation. It's the holders of financial instruments who don't like inflation, because it makes their instruments less valuable. Capital cares about real exchange rates, but those are only related to inflation if you're pursuing a fixed-rate ForEx policy.

and 2) guaranteed incomes distort the lower end of the labour market.

If by "distort" you mean "restore some bargaining power to unskilled labour," then yes.

Of course there are other ways to restore bargaining power to unskilled labour, and they are probably less involved than a basic living stipend.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 29th, 2010 at 10:08:30 AM EST
[ Parent ]
More fundamentally, since the people that hold wealth denominated in money want to see the real value of their wealth holdings defended. Reifying "people who hold wealth denominated in money" as "capital" invites the confusion between those specific wealth assets that involve command over productive equipment and the productive equipment itself that the term "capital" seems designed to foster.

However, the fact that the main purpose of taxation is to defend the value of wealth holdings points toward a progressive tax system, since it is not fair to tax those without the income to let them save to defend the wealth concentrated in the hands of those with ample income with which to save.

Note also that the "primitive beginnings of money as a substitute for a physical thing to trade" is a neoclassical fiction. The primitive beginnings of money were as receipts for the payment of taxes in kind: the weight referred to in early clay tokens was the weight in wheat or some such grain paid into the state granary.

Once these were made fungible ~ one person can overpay taxes and then use the spare receipts to trade with someone who is a good pot maker or plow maker so they do not have to trade goods for grain to pay their taxes ~ then precious metals are both more durable and less easy to counterfeit, and we are up and running.

The flip to money being the thing that taxes are paid in is a natural progression as society becomes more complex, and with that, the need to have fiat currency to pay taxes in is one of the foundations of the socially-constructed value of money. The other one is that commercial banks need fiat currency to clear payments with other commercial banks.

Roughly, if half of our productivity gains were directed into the production cycle and half into the parasitic wealth cycle, then it seems reasonable that about half of our taxes would come from broadly based taxes on consumption or wage and salary income, and half come from taxes on wealth income. That, of course, would be something close to the situation back when the US macroeconomy functioned best, over half a century ago ~ not quite, when the regressive nature of most state and local taxes are taken into account, but approaching that.

By the same token, since all productivity gains are now directed into the parasitic wealth cycle, all of our tax revenue at present ought to be coming from taxes on parasitic wealth income.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Dec 29th, 2010 at 01:14:06 PM EST
[ Parent ]
Even more interesting regarding history and money, was the Spanish gold boom in the 16th century. It was a huge expansion of monetary mass with almost no growth attached.

But we could buy stuff and interchange services for a long time...it was the North who created some factories, but all the Spaniards were having a good time during the Empire times since all the production was at full capacity here (and we exported actual growth to the north). But even in those times, most of the wealth accumulated in a very short number of hands.. so you had a huge monetary mass which did not create inflation because it went to the super-rich, but large enough so that everybody was working in Spain, but without significant growth in Spain which was compensated with growth outside Spain to create the stuff that the kingdom demanded.

I guess there is some kind of teaching lesson there... though I am not sure which one.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Wed Dec 29th, 2010 at 01:33:14 PM EST
[ Parent ]
By North I meant North Europe. And by not generating inflation.. well I think that is not completely correct. But still.... better to have old whcih was mostly useless for any other thing than not having it. Basically in the 16th century, printing money smartly was a way to have a more decent society.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Wed Dec 29th, 2010 at 01:35:41 PM EST
[ Parent ]
... but while the chattering classes discuss steady inflation below the level of income growth, it doesn't cause the same pain as a hyperinflationary episode does.

Indeed, with gold and silver based monetary unit, there is no way to avoid inflation when plundering a continents worth of accumulated gold and digging the silver out of two huge mountains of silver.

The teaching lesson is that the widespread adoption of a mercantalist economic policy requires (and could indeed be an adaptation to) a major importing nation to generate the trade deficits corresponding to the trade surpluses.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Dec 29th, 2010 at 02:32:59 PM EST
[ Parent ]
Note also - in this era of sovereign debt fears - that if there is no government deficit there is no increasing private savings (unless other private entities has increasing debt).

If I understand it correctly.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Wed Dec 29th, 2010 at 05:36:30 PM EST
[ Parent ]
Well, there can be no net private savings of financial instruments (absent a current accounts surplus). But there can be a private saving of physical goods.

It's just that in a mature credit economy, (very nearly) all production and transaction of physical goods is accompanied by movement of financial assets (but the reverse is not necessarily true - naked credit default swaps are financial instruments that do not correspond to any physical production or trade). So neglecting physical savings is usually close enough to the truth as makes no matter in a mature industrial economy.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 29th, 2010 at 06:20:31 PM EST
[ Parent ]
...if there is no government deficit there is no increasing private savings (unless other private entities has increasing debt).

On a national accounting level the government can have a balanced account and there can be private savings IF there is a trade surplus. Also, in the case of direct foreign investment, either governmental or private, private individuals or companies can generate savings as a result of the financed activity. If a foreign government, such as China, chooses to accumulate large reserves of currency denominated in a particular trading partner's currency, such as US$ instead of spending the currency, that, in effect, is a demand loan from China to the USA. The effects of a loan can be present spending, present savings or a mix.  

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Dec 29th, 2010 at 08:34:01 PM EST
[ Parent ]
I suspect the book is written for the US market where statements like:

1.    Taxation would be unnecessary, since a government can produce as much money as its needs require.
7.    Capitalism could continue as usual.
8.    Governments might no longer be viewed as enemies of the people.

Would make the book more publishable, saleable, and marketable as not the work of a socialist/utopian nutjob.  The author makes no claim to economic expertise - which somewhat undermines his credibility - as the topic is essentially an economic one - even if it is necessary to re-theorise the concept of money.

It's a pity the author didn't work with an economist like yourself to produce a more coherent, credible, and evidenced theory as the concept of money as a finite zero-sum resource needs to be challenged.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Dec 29th, 2010 at 11:31:34 AM EST
[ Parent ]
I don't particularly object to #7&8 - "capitalism" covers such a wide variety of economic systems that the word serves as little more than an ingroup/outgroup identifier. And, well, Americans do have a quite inordinate mistrust of their government. Given their experience from recent times, I can't say I blame them.

It's #1&2 I have an issue with, and partially #4, because they encourage wrong-headed or impractical policies.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 29th, 2010 at 11:49:58 AM EST
[ Parent ]
... over that past two hundred years has involved the wholesale supplanting of entrepreneurial capitalism with producer corporate capitalism and then the replacement of that by finance corporate capitalism. So another wholesale replacement by communal corporate capitalism or syndicalist corporate capitalism would just be par for the course.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed Dec 29th, 2010 at 01:16:56 PM EST
[ Parent ]
Except that the teabaggers imagine that capitalism is still in its entrepreneurial phase and the Right basis its political ideology on that wilful ignorance of history

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Dec 29th, 2010 at 04:16:44 PM EST
[ Parent ]
Well, yes, but that only means that its necessary to get the next phase up and running and once its the system with the money, why, it will suddenly have been the way it was done all along.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed Dec 29th, 2010 at 05:31:55 PM EST
[ Parent ]
yea, but they've just robbed all our money and started the new system without us


Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Dec 29th, 2010 at 07:37:02 PM EST
[ Parent ]
... which is to say, money in motion, rather than money at rest in accounts which is what we normally signify when we say "money", by, to paraphrase Veblen, grabbing insider positions at the strategic intersections of the old economy.

So we've got to treat their occupancy of the strategic intersections of the old economy as an error condition and route around it, which is where so much of what ChrisCook writes about comes in.

However "they've just" seems to get the wrong past tense ~ the replacement of producer corporate capitalism by finance corporate capitalism got underway in the Great U-Turn in the mid-70's and increasing income shares have been diverted all through the past thirty odd years since.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Dec 29th, 2010 at 11:08:12 PM EST
[ Parent ]
I would say that money exists only in the instant of exchange. ie it exists only in motion as what I think of as 'Dynamic Value'. (Value being 'money's worth').

When value is at rest, then it is Static Value or Finance Capital, consisting of:

(a) conflicting permanent (ownership) claims over productive assets, and temporary (debt etc) claims over use of both productive assets, and

(b) Use value of the capacity of productive individuals, where I see Labour as having two distinct components: Energy (manpower or unqualified labour) and Knowledge (everything between our ears).

ie Capital is potential Money.

I am optimistic about routing around the rentiers because I believe that an 'open' form of capital is possible with indefinite duration within a 'co-ownership' partnership framework agreement.

Moreover, I believe that collaborative/partnership frameworks are emerging in use (even the Economist has been writing about this) because they 'work', and that those enterprises which do not use such models are at a competitive disadvantage to those who do.

We will IMHO see in the financing world a 'Napsterisation' transition from intermediation to service provision simply because the capital requirements of the latter are limited to operating costs.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Dec 30th, 2010 at 05:29:24 AM EST
[ Parent ]
... not to Value ... an institution that functions as medium of exchange, unit of account, means of deferred payment and store of value.

It functions as a store of value through the first three functions combined with a relatively stable price level, so in the face of a hyperinflationary episode, a unit of currency can start to lose its ability to function as money.

Also, if it cannot be held in accounts, it cannot be used as a means of deferred payment.

A store of value is no more equivalent to value than an olive oil bottle is equivalent to olive oil.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Dec 30th, 2010 at 08:23:02 PM EST
[ Parent ]
Well IMHO that definition of Money is demonstrably complete bollocks.

Wherever a barter system incorporates credit, then the result is a monetary system. By way of example on the Swiss WIR exchanges of goods and services have taken place on credit terms since 1934. They do so not in exchange for 'fiat' Swiss Francs as currency but by reference to Swiss Francs as a Unit of account or numeraire. Moreover, the framework of trust - which probably accounts for the longevity - is provided by security given by WIR members over their property.

Proprietary barter systems like Bartercard operate as complementary currency systems in much the same way by incorporating credit.

In my view Money is a (monetary) relationship which includes the following elements:

(a) Credit - ie time to pay;

(b) Value Standard - a unit of measure or 'numeraire';

(c) Accounting System;

(d) Framework of Trust - an agreement between system participants, backed by collateral or otherwise.

(e) Currency - a generally acceptable Unit redeemable in value (aka 'money's worth').

Currency is an object: Money is the relationship of which it is a part.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Dec 30th, 2010 at 10:54:00 PM EST
[ Parent ]
Is not that a restating of the same properties?

In effect:

(a) Credit - ie time to pay = means of deferred payment

(b) Value Standard - a unit of measure or 'numeraire'; +
(c) Accounting System = unit of account

(d) Framework of Trust - an agreement between system participants, backed by collateral or otherwise = store of value

(e) Currency - a generally acceptable Unit redeemable in value (aka 'money's worth') = medium of exchange

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Sat Jan 1st, 2011 at 07:25:23 AM EST
[ Parent ]
I think there's more to credit than that. Credit includes elements of:

  1. Time to pay.

  2. Social and political obligation (from the borrower's side)

  3. Sponsorship and/or investment (from the lender's side)

  4. Social and political leverage (from the lender's side)

  5. Risk of loss of political and social leverage (from the lender's side)

  6. Inflationary multiplication (because once you create credit, you have money that is in two places at once AND is collecting interest.)

Once you have lending at interest, it's inevitable that the individuals and institutions who maintain that lending will suck the life out of the rest of the economy. Compound interest guarantees that leverage among the lender class increases, while ability to repay among the debtor class decreases.

Eventually you get a depression. Inevitably. This is true even if the lending generates productive activity.

Any system that replaces current models has to allow social sponsorship for projects that can multiply collective wealth with intelligently managed risk, but which doesn't assume that profiting from interest is an essential part of this.

Or at the very least, if profiting at interest is allowed, accumulations of social and political leverage must be strictly limited to keep them from distorting rational planning and democracy.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jan 1st, 2011 at 08:25:31 AM EST
[ Parent ]
ThatBritGuy:
I think there's more to credit than that.

I am deconstructing credit down to the basic component of 'time to pay' inherent in what I have seen described as 'split barter' pairs of monetary events, as follows:

Event One: exchange value for Buyer IOU by reference to numeraire.

...Time elapses...

Event Two: cancel/clear IOU - in return for value received from seller - by reference to numeraire.

But I agree with you that there is a framework of trust within which credit occurs.

This is implicit in the very word 'credit'.... 'he believes'.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 1st, 2011 at 09:38:25 AM EST
[ Parent ]
It's a pity the author didn't work with an economist like yourself to produce a more coherent, credible, and evidenced theory as the concept of money as a finite zero-sum resource needs to be challenged.

You are right that collaborating with a real economist could yield a polished finished product. However, I don't know any economists, and psychologists I have known typically steer clear of economists.

And my book was not meant to be the last word. I self-published it--not waiting for months of rejection slips--to toss out an idea I'd been harboring for years and begin a conversation about economic fixes needed yesterday.

It's very gratifying that a conversation has begun here. I've learned a lot already and hopefully some effective theories and publications and maybe even movements will arise from this.

by psyched (railtravel [at] gmail dot com) on Fri Dec 31st, 2010 at 05:24:31 PM EST
[ Parent ]
Many thanks for your thoughtful comments. I am sorry to take so long to reply, but there is an 8-9 hour time difference from California.

First, taxation: By this I meant the income tax. In my book I said that some taxation could continue, for corporate regulatory purposes, for example, provided that it was understood that it represented punishment or regulation and not a necessary replenishment of  "spent" government coffers.

I don't mean to set these ideas in stone--they are proposals that would require much tweaking by experts before being adopted. So perhaps only very-high income people could be taxed. But I thought that the elimination of taxes would make this general plan more palatable to corporatists. And eliminating the income tax for the man-in-the-street would be an economic stimulus for him, but more importantly it would discourage conservative opposition to government, which now makes it more difficult for government to operate efficiently on behalf of citizen welfare.

Elimination of poverty: This is of course very complicated, and would be especially difficult with respect to under-developed countries that lack the resources that citizens need. But in developed countries poor people who haven't starved to death are getting some food, though they have not bought all of it with their own money. Someone else has bought it for them, so that giving poor people their own money relieves others of the burden of supporting them, but the demand for food wouldn't rise enough to create shortages or hyperinflation. The poor buy more, the supporters buy less. The demand doesn't change that much, and the amount of food now going to waste could cover much of the increased demand. N'est-ce pas?

Capitalism: Yes, I was being vague about the meaning of capitalism.

Again, I really appreciate your analytic comments.

by psyched (railtravel [at] gmail dot com) on Wed Dec 29th, 2010 at 04:32:49 PM EST
[ Parent ]
Oops! My comment above was meant as a reply to JakeS' first comment.
by psyched (railtravel [at] gmail dot com) on Wed Dec 29th, 2010 at 04:36:58 PM EST
[ Parent ]
psyched:
Oops! My comment above was meant as a reply to JakeS' first comment.

It is, so you clicked right.

How comments are showed depends on your setting which you find below the comments. I think 'Nested' is default.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Wed Dec 29th, 2010 at 05:39:39 PM EST
[ Parent ]
Many thanks for your thoughtful comments. I am sorry to take so long to reply, but there is an 8-9 hour time difference from California.

That's fine. ET has a much slower turnover than Kos anyway.

First, taxation: By this I meant the income tax. In my book I said that some taxation could continue, for corporate regulatory purposes, for example,

And what I'm pointing out is that the higher ends of the income tax scale for individuals do serve important regulatory purposes. Because they disincentivise looting of going concerns by their top executives, and curb-stomp wannabe aristocrats.

But I thought that the elimination of taxes would make this general plan more palatable to corporatists. And eliminating the income tax for the man-in-the-street would be an economic stimulus for him, but more importantly it would discourage conservative opposition to government, which now makes it more difficult for government to operate efficiently on behalf of citizen welfare.

I understand the propaganda value of being able to say that your program would involve abolishing taxes. But there are ways to split the Raygun coalition that do not involve depriving yourself of almost half your tools for macroeconomic planning.

You don't need to convince everybody. You need to convince a governing coalition. The rest can go take a hike.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 29th, 2010 at 06:37:13 PM EST
[ Parent ]
And, most importantly, steeply progressive taxation dissuades looting of productive enterprises by centrally placed insiders, because steeply progressive taxes penalise lump-sum payments (which are typical of looting) relative to stable salaries (which are typical of bureaucrats).

Man, that's deep (well, it's a new idea for me)

So let's posit that there are roughly a constant number of people who wish to parasitise the economy no matter what the political system.  In that case we choose between bureaucrats and used car salesmen by our tax rules.  But what we don't do is change the total parasitic load on society.  If that is true then all the claims of welfare bums and cutting taxes to reduce reduce government waste become irrelevant as they are just improving one group's welfare at the cost of another's loss.

by njh on Thu Dec 30th, 2010 at 05:09:17 PM EST
[ Parent ]
Well, bureaucrats are not parasites. Large organisations run on paper - reams and reams of it. So by making CEOs glorified bureaucrats rather than glorified snake oil peddlers, you do actually decrease the total parasitic load on society.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Dec 30th, 2010 at 05:17:20 PM EST
[ Parent ]
At the risk of repeating Jake's points from a different perspective, here goes:

European Tribune - Comments - Money re-defined: Thinking outside the econ box

But if economists agree that money is a concept rather than a physical thing, why do we have the world's leaders acting as if money were physical and limited? Concepts do not possess the same limitations as physical stuff like gold or oil. Concepts can be limited or unlimited depending upon our will to make them so. We cannot change the limits of physical stuff (unless we physically destroy it).

Well, historically speaking it's been less than 40 years since the last vestiges of the gold standard were cast off; most of the political leadership in the western world grew up with "primitive" money that was linked to a tangible good.

Also, while I will grant that money is a social contract, it is not purely a mental concept, but a claim on physical resources - which in our economy means a claim on energy resources. So increasing the nominal incomes of the bottom fifth of the income scale will not, by itself - increase the amount of BOEs these people will be able to afford, i.e. their real share of GDP.

And I do have to ask:

European Tribune - Comments - Money re-defined: Thinking outside the econ box

What I'm advocating is that governments print much more fiat money, provided that money is redefined as no longer exclusively based upon commodities, goods and services, but upon the needs of citizens.

What, in economic terms, do citizens need if not goods and services?

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Wed Dec 29th, 2010 at 12:15:10 PM EST
What, in economic terms, do citizens need if not goods and services?

You mean apart from access to those goods and services?

The money model is fundamentally wrong because it asks the wrong questions. The aim is to create "growth" and "profit" in the abstract, as accounting fictions which have their roots in an aristocratic view of the world in which sovereigns sponsored colonial expeditions, slave trading, and war, and accumulated gold and other goods for their personal use.

It's essentially Pharaonic.

The alternative is some form of economic democracy, in which participants are economically and politically equal, and sponsorship choices, including long term planning and investment, are modelled rationally.

The essential question isn't who's rich and poor, but how people are spending their time, what activities are valued, and what is being created with physical resources.

This sounds obvious, but it's centuries away from how economics is framed today.

The point of economics today is eugenic - the aim is to create winners and losers, and to make sure that the differences are clear and as extreme as possible.

It's purely about the creation of status and hierarchy, and not about effective politics or planning.

You can't have rational planning when you have an economic system which is designed to create an aristocracy.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Dec 29th, 2010 at 12:37:36 PM EST
[ Parent ]
I grant all that. My comment above is an attempt to get a grip on what I feel is a gap in the argument, i.e. that money is being discussed in the diary reference to the material world - even though we live in a world of material resource constraints.

I quite agree that monetary reengineering is a necessary prerequisite for a more equitable society. But in a world of increasingly tighter resource constraints, it is certainly not the only, nor even the most important prerequisite.

A further point that I have trouble with is an implicit assumption that greater equity would go hand in hand with greater prosperity. I am not at all sure that assumption would stand up on a global basis, especially when we factor in the radical curtailment of fossil fuel consumption necessary to keep global warming sub-catastrophic (to name just one out-of-control material variable).

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Wed Dec 29th, 2010 at 04:24:21 PM EST
[ Parent ]
Consider that financialisation has created the constraints.

With rational planning the world economy would have started to move to renewables as soon as it became obvious that fossil fuels were running and that CO2 production was going to have negative effects on farming, insurance, and so on. That would have been some time in the 70s, give or take. (It's possible that if rational planning was SOP and not a freak occurrence, the move could have happened earlier.)

The result is - no equivalent constraint. You don't have infinite energy, but you have far more abundant and reliable energy.

What effect would that have on prosperity?

Coincidentally, you also don't have a bonkers in-bred Saudi aristocracy sponsoring terrorism or pulling the strings of the US government.

If agriculture were run rationally, you'd get managed sustainability. You might - or might not - get smaller output, but you certainly wouldn't get the coming Orlovian post-binge crash and head-banging hangover.

Consider a third world that was allowed to develop fair trade and democracy without first world privateering. Africa would be far more stable and prosperous, and might well have industrialised on a small scale, creating entirely new markets and entirely new sources of innovation and talent.

Consider that with wider prosperity, military spending could decrease. That's an extra half a trillion or so that could be spent on innovation and investment, on and off world, every year.

And so on.

The problem with these debates is that the default assumption is that the current system is the most prosperous, most productive, most intelligent and most enlightened. In reality it's none of these things - it's unstable, psychotic, and self-destructively stupid. It doesn't create prosperity, it obliterates it.

Good rational planning does the opposite - it creates synergies of benefit that are cumulative.

The limits of those synergies have never been explored.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Dec 29th, 2010 at 06:10:54 PM EST
[ Parent ]
i really love this comment.

there's yer big pitcher right there, nutshelled into a few terse, pithy phrases, with a musical sense of pace and rhythm, masterly blogging indeed. yay ET

ThatBritGuy:

The problem with these debates is that the default assumption is that the current system is the most prosperous, most productive, most intelligent and most enlightened. In reality it's none of these things - it's unstable, psychotic, and self-destructively stupid. It doesn't create prosperity, it obliterates it.

ok let's break this down into easily understood metaphor~

if you take a car, to get from a. present state to b. a better (or in our case less-worse) one, you can take a car made planned-obscolently, liable to break down easily, with a 25% efficient motor design, fuelled on highly polluting, extremely wasteful carburant, then drive it like a maniac, revs jammed in the redzone, out of oil, shot brakes, through crowds of innocent bystanders at night with no lights.

terrible, tragic!

easy to see why people want to live without the darn thing, better to walk! even burn them in effigy, or throw them off a cliff like the kalahari bushman did with the coke bottle in 'the gods must be crazy'.

but supposing....

the machine was made from easily renewable materials, with a more efficient motor, running on cheap, ubiquitous non-polluting sources, etc etc.

a digitised model-T, basically, hemp plastic, biodiesel, if we can't make the wind/solar battery thingy work out post-peak-lithium, on pyrolytic gas, or methane locally produced.

rubber bumpers, top speed nice and low, or gridded to magnetic distancing, the car as idea is geniality incarnate, if you get what seems like details right, but later are recognised as fundamentals, more so than even the chassis and wheels.

(and they took millennia to invent, lol.)

a lot of folks are understandably blaming the sins of the drivers/designers on the car itself.

nature is a conservationist capitalist, she makes things multiply and grow, mature and yield more again, with no waste that isn't food for someone/thing else.

if we modelled our profit-seeking systems on those principles, s-l-o-w and sound, but relentlessly productive, we would have a chance of creating a mod of what went before, (once we drag the wreck out of the ditch) that would reveal the genius in nature, by reflecting her in our institutions.

thereby harmonising them, by allowing nature to support them through respectful co-operation, treating her like a partner friend, instead of like a robber cannibal, eyeing her -us!- up and down as nothing but grist for some madcap mill.

current corporatism is a flight to mediocrity, homogeneity, monopoly and a kind of fascism of the imagination, the very opposite of biodiversity, nature's sustainable way.

again, compliments for such a wide-ranging, commonsensical comment, there is so much truth in it, not a wasted word. writerly without a touch of mannered.... rare gift.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Wed Dec 29th, 2010 at 08:54:31 PM EST
[ Parent ]
ThatBritGuy:
Consider that financialisation has created the constraints.

Given how often we have said here that financialization creates nothing, I would say that financialization allocates the burden of those constraints. The constraints themselves are inherent in the physical world.

ThatBritGuy:

The result is - no equivalent constraint. You don't have infinite energy, but you have far more abundant and reliable energy.

The assumption that renewable energy would be "far more abundant" (presumably this means a much more favorable EROI) is, AFAIK, still an open issue; ARG's last touches on this.

Also, non-renewable energy is merely the constraint that is biting harder now; there are other constraints (copper, rare earths,...) that could conceivably hamper the expanded harvesting of renewables.

ThatBritGuy:

The problem with these debates is that the default assumption is that the current system is the most prosperous, most productive, most intelligent and most enlightened.

Heh. I don't recall going there at all.


The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Thu Dec 30th, 2010 at 10:34:25 AM EST
[ Parent ]
More favourable EROI, no, not necessarily. But a larger investment harvesting the same EROI gives a larger output - and you'll run out of demand for electricity long before you run out of good wind and solar sites.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Dec 30th, 2010 at 11:35:51 AM EST
[ Parent ]
JakeS:
you'll run out of demand for electricity

Or supply of copper? ;)

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Thu Dec 30th, 2010 at 12:23:47 PM EST
[ Parent ]
You wouldn't need as much copper. With rational planning you'd get significant efficiencies on the demand side which aren't allowed to exist in a eugenic economy.

And if you're not desperately worried about efficiency because you have ample power, aluminium is a workable substitute for some applications.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Dec 30th, 2010 at 01:06:08 PM EST
[ Parent ]
Given how often we have said here that financialization creates nothing, I would say that financialization allocates the burden of those constraints. The constraints themselves are inherent in the physical world.

Not necessarily.

You missed the point about "off world."

The assumption that renewable energy would be "far more abundant" (presumably this means a much more favorable EROI) is, AFAIK, still an open issue; ARG's last touches on this.

Even if renewables produced equivalent energy rather than more abundant energy, the point is that the energy supply would be stable, predictable and democratically neutral. That would have an obvious and immediate prosperity effect.

Limited non-renewables have an obvious and immediate destructive effect on prosperity. Value is squandered on ostentation, military spending and political game playing.

A synergistic economy isn't just that it's more stable and less likely to explode, but that it has a completely different political profile, and a completely different investment and development profile.

You're extrapolating from today's disasters and saying 'This is inevitable.'

I'm saying that it's only inevitable if you accept the massive inefficiencies that are built into a system which is designed to enclose and squander capital and resources for the benefit of a tiny percentage of the population, instead of developing them intelligently and creatively for a majority.

Heh. I don't recall going there at all.

Perhaps not. But you have bought into assumptions about inevitable scarcity which derive from same.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Dec 30th, 2010 at 12:58:03 PM EST
[ Parent ]
The assumption that renewable energy would be "far more abundant" (presumably this means a much more favorable EROI) is, AFAIK, still an open issue; ARG's last touches on this.

I am not sure what the present total EROI for fossil fuel is. But the EROI for new oil is probably less than the factor of 20 that we can currently get for wind energy. If true this would imply that the "rational" approach, ignoring vested interests, would be to shift our efforts to wind and other renewables and intensify our efforts on conservation. But that is assuming that the good of the population as a whole is more important than the immediate self interests of the elites -- which does not seem to be the case. So we live by what is rational for them.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jan 2nd, 2011 at 01:29:48 AM EST
[ Parent ]
70ies seems about right.

CO2 having a heating effect was known since about 1900, but was generally assumed to have an even warming effect giving a warmer, greener planet.

Then came computers and some clues on how climate behaves through how weather behaves:

Chaos theory - Wikipedia, the free encyclopedia

An early pioneer of the theory was Edward Lorenz whose interest in chaos came about accidentally through his work on weather prediction in 1961.[43] Lorenz was using a simple digital computer, a Royal McBee LGP-30, to run his weather simulation. He wanted to see a sequence of data again and to save time he started the simulation in the middle of its course. He was able to do this by entering a printout of the data corresponding to conditions in the middle of his simulation which he had calculated last time.

To his surprise the weather that the machine began to predict was completely different from the weather calculated before. Lorenz tracked this down to the computer printout. The computer worked with 6-digit precision, but the printout rounded variables off to a 3-digit number, so a value like 0.506127 was printed as 0.506. This difference is tiny and the consensus at the time would have been that it should have had practically no effect. However Lorenz had discovered that small changes in initial conditions produced large changes in the long-term outcome.[44] Lorenz's discovery, which gave its name to Lorenz attractors, showed that even detailed atmospheric modelling cannot in general make long-term weather predictions. Weather is usually predictable only about a week ahead.[26]



A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
by A swedish kind of death on Thu Dec 30th, 2010 at 10:40:12 AM EST
[ Parent ]
dvx:
What, in economic terms, do citizens need if not goods and services?

(a) Location/Land - ie somewhere to live and work, among other things;

(b) Energy - to keep them warm/cool; connected; lit; and moving, among other things.

(c) Knowledge - to keep them informed, educated, and entertained, among other things.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Dec 29th, 2010 at 01:05:29 PM EST
[ Parent ]
Location/Land is valuable by dint of a series of services associated with recognized property rights, energy is normally consumed as either a good (petrol, batteries) or a service (electric, natural gas, etc. grid connection), and provision of information in a useful form is quite definitely a service.

So you are saying that in addition to goods and services, they also need goods and services?

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Dec 29th, 2010 at 01:20:48 PM EST
[ Parent ]
BruceMcF:
So you are saying that in addition to goods and services, they also need goods and services?

LOL.

Definitions are wonderful things......

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Dec 29th, 2010 at 05:29:51 PM EST
[ Parent ]
I'll grant you (a), but it seems to me that both (b) and the provision of (c) (which encompasses medical care as well) come down to BOEs.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Wed Dec 29th, 2010 at 01:27:58 PM EST
[ Parent ]
i'd add a 4th, health care, from prenatal, through birth and all the way to the grande finale.

of course you could make that a subset of no 3.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Wed Dec 29th, 2010 at 08:58:42 PM EST
[ Parent ]
What, in economic terms, do citizens need if not goods and services?

To answer this question, I would look at how people actually use money. In my book I put it this way:

In our post-stone-age world money is used for much more than the purchase of physical goods such as food. Money is used for retirement savings, for investments, for gambling, for hoarding, for collecting, for illegal purposes such as bribery, for building social status, for buttressing up personal egos, for charitable contributions, for providing inheritances...the list is long. And yet we think of money as being limited by the amount of physical goods a nation can produce. And even if services are added to goods the conceptual basis of money is still inadequate.

People's uses of money reflect what their needs are. If one considers feelings of security, for example  (surely one of the prime human needs), the acquisition and saving of money fills this need, but I don't think a service is involved. When a worker cashes his paycheck and hides some of his money under a mattress, the squirreled-away money is filling a need, though no goods or services were involved.

by psyched (railtravel [at] gmail dot com) on Fri Dec 31st, 2010 at 02:20:06 AM EST
[ Parent ]
Money as a thing is the basic conceptual metaphor most people use to function economically. We have an intuitive understanding of the consequences that follow from using that metaphor since we live in them (and I'm not referring to the current recession)

What would be alternative conceptual metaphors for money, and most importantly how would people's behaviour change under a different conceptual framework? Are there other concepts that would have to be reinterpreted in order to have a consistent conceptual framework for an economy built around money-as-not-a-thing?

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010

by Migeru (migeru at eurotrib dot com) on Fri Dec 31st, 2010 at 06:09:56 AM EST
[ Parent ]
What would be alternative conceptual metaphors for money,

Money is a vehicle for exercising power.

Are there other concepts that would have to be reinterpreted in order to have a consistent conceptual framework for an economy built around money-as-not-a-thing?

If money is a vehicle for exercising power, then the concept of "voluntary transaction" becomes suspect (this is the basis for the left-wing critique of prostitution, for instance - as soon as the interchange involves money, you have established an unequal power relationship).

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Dec 31st, 2010 at 06:43:24 AM EST
[ Parent ]
The problem is the bastard hybrid definition of the word Money, to which Bruce referred, and the task would be to deconstruct it in a way that will resonate with everyday use. We have to look at peoples' everyday experience, and  'money-as-a-thing' might in my view be better thought of as 'currency', which is a word people do in fact use and understand.

A currency is in fact a credit object (a Unit redeemable in payment for value), and it fulfils the  monetary functions of 'store of value' and 'medium of exchange'. It is not interest-bearing, however (which people understand) and holders of currency therefore have an 'opportunity cost'. Currency is, I think, easily understood as 'money's worth'.

A 'Value Standard'  - ie an abstract 'unit of account'; 'unit of measure' or 'numeraire' - on the other hand, is distinct from a currency, and this distinction is not generally understood because neither with historic commodity money-as-an-object (eg gold) nor deficit-based 'fiat' money-as-a-credit-object created by credit institutions, does the distinction of money-as-a-standard exist.

But I would say that people do understand the concept of standard units of measure eg metres for length, and kilogrammes for weight, so a standard Unit of measure for denominating value will not be difficult provided it relates to everyday experience. This is where an 'energy standard' Unit fits in, I believe, since the use value of energy over time is relevant, in one way or another, to all forms of economic activity.

Private banks do not in fact issue credit objects, but rather debt objects, which are not Units redeemable in payment for value, but the diametric opposite. Private bank credits are Units redeemable in payment for a Unit redeemable in payment for Value. So they are not a claim over value, but rather a claim over a claim over value and as the chartalist Henry Liu puts it, that makes them 'debt instruments' rather than 'credit instruments.

This reversal of polarity - the assumption that money is debt (with a fairly arbitrary interest 'cost') - in the underlying relationship between credit, value and money is what completely fucks virtually all schools of Economics except MMT and the Chartalists, because their basic axiom is complete bollocks.

But I digress, once again....

Throughout the history and development of money and credit such a distinction between currency and 'standard' has not been made in practice, although it does in fact exist - as I have many times said - wherever a barter network begins to incorporate credit or time to pay.

Understanding this distinction involves a paradigm shift in conceptualisation, and I do not think that in order to get 'there' to a new system from 'here' we actually do need to make that shift.

We may actually change the system by consensually changing the institutional or legal and financial framework  - the 'framework of trust' - within which credit creation and exchange takes place and the IT and data flow architecture of the system.

New forms of what we think of as 'currency' will be an outcome of what is in effect a combination of a messaging system (money messages - where generic mobile payments are well under the way), and an accounting system of rights and obligations.

These credit objects are in fact accounting objects, and will probably never exist in tangible form.

I outlined a holistic 'systems thinking' view of what I like to call the Money 3.0 architecture at the University of Strathclyde earlier this year.

I believe that the conditions are now ripe for its viral introduction, because now that the conventional system is terminally fucked by systemic insolvency (both of the general population and the banks) it is in everyone's interests - especially banks - for the necessary migration from credit intermediation to credit service provision to take place.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Dec 31st, 2010 at 07:39:32 AM EST
[ Parent ]
The key oint to understand how worthy n eocnommist is of your ears, it is how much he likes to talk about different approach to money.

Those economists that always have in mind that money and its quantity is something very difficult to define, that changes with  time, and it is basically magic are the ones, normally, that understood something slightly complicated (and not simple macro-religion) in their young years.

So, money is indeed fiat. But taxation is an excellent way to make all your citizens use the same money (why would they use the state money if you do not force them to pay taxes in "your"money) and also a great way to eliminate monetary mass from the ones you prefer when the service-industrial capacity is working full gear and it is growing at the maximum non-asset inflation rate.

The important point to carry home is that direct money transfer which imply small levels of inflation (or hardly measurable levels of inflation) should be carried out. For example, a minimum food and services rent for everybody would probably not affect inflation. A full-free car rent will create inflation.

In any case, if this world was be rational, economists who do not think that printing money generates inflation "by definition" will be the norm. Unfortunately we have crazy cultist (or evil bastards) at the top. They will cry hyperinflation whenever you print money...and as any cult, you just do not know if the people int he cult mostly believe the nonsense, mostly do not believe it but want to pursue it for power structure desires or sometimes both.

I wrote something similar regarding the crazy cultist and hyperinflation in Spanish

http://avionesdecercanias.blogspot.com/2010/12/ese-gran-2010.html

Are Germans master-of-the-universe stupid-crazy, or evil?

A pleasure


I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Wed Dec 29th, 2010 at 01:25:11 PM EST
There's a good reason that conceiving of an abstraction like money as a finite, physical commodity has been so compelling: it's close enough to the truth for government work.

If you don't think of money as a finite physical commodity, then you have to specify an alternative, non-physical conception of it. You've given an alternative conception of money that says that money is more like an organizing tool for getting people to do things for each other, and if so, I think that's on the right track.  But it doesn't get you out of the finite quantity problem.

If you think in terms of money as something to "facilitate a vast array of human behaviors, you can't escape the concept of commitment -- the relationship by which people commit to one another to do something.  Conceived this way, money is a useful social innovation for getting people to collaborate with each other on collective projects, grounded on the commitment and expectation that a given unit of currency will provide a desired amount of what people really want.

But it is possible to become over-committed, as we all likely know. This means there are limits to how much fiat money a government could create and spend before people begin to realize that society has over-committed itself with respect to the actual resources that exist.  

For this reason, even if it is not really true that money is a physical commodity, it has been a very useful fiction for trying to keep society's activities within bounds of at least some known resource constraints. There may be better fictions for doing so, but keeping people from over-committing themselves has to be part of it if we want to avoid or reduce the incidences of crises like the recent one.

by santiago on Wed Dec 29th, 2010 at 04:04:48 PM EST
... financial crises, we must perpetuate the misconceptions that are at the heart of the recent financial crises?

And of course, in order to have a repeat a the recent financial crises, we need the same thing ...

... so after all, There Is Not Alternative to the neo-liberal fantasies regarding the economy.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Dec 29th, 2010 at 05:34:58 PM EST
[ Parent ]
You don't have take the neo-liberal line to see over-commitment as the general cause of the financial crisis. Banks over-committed (or, if you like, lied) to their much-too-willing-to-be-gullible investors (because those investors were swimming in paper claims to wealth) in their mortgage backed securities about what they could actually do for those investors, causing home prices to be too high, causing further over-commitments on the part of homeowners to be able to perform enough work to make good on their commitments.

By using the more general conception of commitment, you can begin to show that the problem is not government trying too hard to provide for equity as the neo-liberal claim goes, but rather the opposite -- that a concentration of claims to wealth being accumulated by the richest people in society, for which there just weren't the actual resources available to make good on those claims, was the basic cause of the crisis.

by santiago on Wed Dec 29th, 2010 at 05:59:31 PM EST
[ Parent ]
... by government ... overcommitment to the safety net that we ripped to shreds, overcommitment to investment in infrastructure that we allowed to fall to ruin, overcommitment to labor rights that we allowed to become dead letters.

Yup, government overcommitment across the board.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Dec 29th, 2010 at 07:23:51 PM EST
[ Parent ]
Exactly. Government couldn't keep up with its commitments to a safety net, or infrastructure, or other things because it over-extended itself by committing, first and foremost, to making life for the wealthiest better. In an infinite world, it wouldn't matter one way or the other if you gave tax cuts to the rich because you would still have the clout to organize society to provide a safety net and infrastructure, etc.  But in the real, finite world, by giving tax cuts to the rich first and foremost, you lose the clout to organize people to also attend to social welfare, infrastructure, etc. Because resources, even non-physical ones such as time, are finite, committing to the rich first means not being able to deliver on commitments to others. Printing more money won't solve the problem by itself (which is the combined effect of QE2 and Obama's failure to let the Bush tax cuts expire) unless it is able to be used as a way of organizing people to get back to work, such as through an actual government program that employs people.
by santiago on Wed Dec 29th, 2010 at 08:01:00 PM EST
[ Parent ]
The policy decision to under-commit to essential public services was not a consequence of a policy to make life for the wealthiest better, it was part and parcel of the policy to increase the economic power of the wealthiest. The "inability to afford" these commitments was and is a fiction engineered be pretending that money is equivalent to a scarce resource.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed Dec 29th, 2010 at 11:13:10 PM EST
[ Parent ]
But my point is that money really is a scarce resource, even as an abstract social construction. That is why, by accident or by nefarious, class-biased purpose, thinking of money as a physical commodity like gold has a compelling feeling of truth in it for people.  

Even if we offer an alternative, more abstract notion of money that I think works better -- that money is an organizing tool that allows people to coordinate their activities with each other (that is, it is a social tool for collective action) it doesn't take away from the fact that people's lives are limited at the very least by mortality and thus by time. Whether you do it with money or any other means of organizing people to act together in concert toward some kind of common purpose, there is a distinctly finite amount of things that people can possibly do with their lives.  Couple that with a distinctly finite amount of physical resources with which to work at any point in time, and you just can't escape the fact of scarcity in life. Doing one thing usually means not doing something else.

by santiago on Thu Dec 30th, 2010 at 11:02:35 AM EST
[ Parent ]
Of course money isn't scarce.

There may be shortages of generally acceptable money's worth, ie currency, but there can never be a shortage of money any more than there can be a shortage of kilogrammes or metres.

Although we are used to our fiat credit objects being used both as a currency and as a Numéraire, or value standard, by reference to which transaction prices are expressed, there is no reason at all why they should be.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Dec 30th, 2010 at 12:20:54 PM EST
[ Parent ]
I don't quite agree.  There seems to be a perfectly good reason why they should be, and it is as money is used as a negotiable instrument for obtaining the voluntary cooperation of others in one's own projects, it proves to be extraordinarily useful to be able to both judge value in reference to other things as well provide an expectation of how much of those other things one will be able to get in the future. While not strictly necessary, it is likely that an instrument which can be both a value standard and an object of trade in itself, such as credit, will drive other contrivances out of everyday use.
by santiago on Thu Dec 30th, 2010 at 12:31:40 PM EST
[ Parent ]
santiago:
it is likely that an instrument which can be both a value standard and an object of trade in itself, such as credit, will drive other contrivances out of everyday use.

That is what has happened and, with the greed/profit motive, accounts for the shit we are in:  bad money drove out good.

But such deficit-based money is unsustainable in the long run because it necessitates the issuer getting into debt - in relation to a global reserve currency that is of course the Triffin Dilemma.

In my view the best candidate for a value standard is an absolute Unit of energy.

Whereas the appropriate bases for credit and of currency Units (undated credits redeemable in payment for value) to be exchanged by reference to that value standard are units redeemable in payment for the use value of factors of production, however these are defined.

A Unit of energy currency is not the same thing as an energy standard of course, and it is possible to imagine one or two more or less fungible types of energy currency.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Dec 30th, 2010 at 01:23:13 PM EST
[ Parent ]
Yes, there might be advantages that.  But what would prevent "bad money" from driving the imminently umore seful energy unit currency out of circulation.  Imagine a scenario where energy becomes suddenly more valuable due to some kind of problem in energy production somewhere. Why would people want to trade away something of inherent use and suddenly of more value instead of an otherwise unusable fiat piece of paper that some fiscal authority somewhere can just invent to pay its other bills while keeping its energy costs at least temporarily low?
by santiago on Thu Dec 30th, 2010 at 01:54:10 PM EST
[ Parent ]
The extent to which Units redeemable in payment for a particular form of energy - eg a Unit redeemable in payment for a litre of n-Octane; a Unit redeemable in payment for a Man Hour of unqualified Labour; a Unit redeemable in payment for 10 Kilo Watt Hours of electricity; or a Unit redeemable in payment for 1 MMBtu of heat - are acceptable in exchange will affect their price in relation not only to each other but also to (say) Units redeemable in payment for real property rental value; Units redeemable in payment for gold; or abstract $ Units redeemable in payment for US taxes.

There is no difficulty in imagining certain forms of energy becoming more valuable in energy (EROEI) terms. That is the reality of finite supplies of non-renewable energy which is finally beginning to dawn.

But changes in supply and demand of different types of energy - and hence of Units redeemable in payment for each type - have no effect whatever on the validity of using a Unit of energy as a universally understood standard of measure - analogous to kilogrammes for weight and metres for length - for all value exchanges, energy and otherwise.

In the absence of such energy accounting I see no prospect of the transition to non-renewables being financed and funded, because the economic decisions based upon fiat currency, combined with intermediated markets operating 'for profit', demonstrably lead to perverse and unsustainable outcomes.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Dec 30th, 2010 at 02:38:06 PM EST
[ Parent ]
That is why, by accident or by nefarious, class-biased purpose, thinking of money as a physical commodity like gold has a compelling feeling of truth in it for people.  

And the earth is flat, and what goes up must come down, and god punishes people for sins with plagues of boils.

All of these were compelling truths at some point.

That doesn't stop them being completely wrongheaded.

Sure, you can continue to think about money in obvious, simple-minded terms. But it should be obvious that after half a millennium of regular financial disasters the simple-minded terms are really, really stupid and unhelpful.

Metaphorical obviousness isn't a guide to truth. Predictive power is. And practical theories about money (supply, etc) have proven negative predictive power - they not only fail to predict disasters, they cause them.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Dec 30th, 2010 at 02:12:10 PM EST
[ Parent ]
That's not my point.  My point is that, like flat earth concepts were replaced by a spherical earth concept that was both more true and more useful, a new concept of money has to be both more useful as well as more true. One of the useful parts of thinking of money as a physical thing is an inherent, if flawed, mental picture of keeping one's commitments in bounds of what is realistically possible. A new conception of money should be at least as good as that or ideas like just printing more money to get people back to work will encounter the same failures as that approach has already encountered many times.
by santiago on Thu Dec 30th, 2010 at 02:35:06 PM EST
[ Parent ]
santiago:
A new conception of money should be at least as good as that or ideas like just printing more money to get people back to work will encounter the same failures as that approach has already encountered many times.

Ideally we will be able to let the academics debate what is inside the new sausage: most people, as Bismarck pointed out, are not interested in how the sausage is made.

It must simply be recognisably a (non toxic) sausage.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Dec 30th, 2010 at 02:42:33 PM EST
[ Parent ]
Yes, but making it non-toxic is a non-trivial problem. If your goal is to create a substitute for fiat money, it has to actually work better than fiat money for what people use fiat money for right now -- organizing other people to do things for them.  If it doesn't do that job better, then people will just use something else that does.
by santiago on Thu Dec 30th, 2010 at 02:51:47 PM EST
[ Parent ]
santiago:
Yes, but making it non-toxic is a non-trivial problem.

I think it's quite straightforward, actually.

The bulk of money in existence (if not in circulation) is based directly on an individual's promise to pay, but is backed by (capitalised) property rental values. In fact, in the US, it's often not backed by individuals at all, since non-recourse 'jingle mail' loans are entirely deficit-based and land backed.

If properties are held by a custodian (as is the entire institutional market in securities), then within a suitable consensual framework agreement - not dissimilar to a condominium, a REIT, or an 'evergreen' lease - the indefinite rental occupation of the property, and the direct issue of Units redeemable in payment for the resulting rentals gives rise to a form of currency based on a rental pool from real properties.

I argue that such an undated credit instrument, which offers a return depending on the depth of the discount at issue, is in fact non-toxic in effect since there is no compounding of interest. There are also other major benefits in terms of risk and liquidity.

In simple terms it's undated investment directly in the land, rather than a loan to the land owner.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Dec 30th, 2010 at 04:58:18 PM EST
[ Parent ]
While very interesting in its possibilities, particularly regarding being undated and zero interest, I'm not convinced that what you've described really removes very much of the toxicity of money that we currently have, not prevent people for going on and creating and using fiat money as we do today.  

While a good deal of money today is backed by capitalized rental values, those values themselves are backed by social institutions of governance (which is not necessarily the same thing as the state). So the ultimate backing of money is governance institutions, not land at all.  Property is an outcome of policy, not of land, which is merely a geographical characteristic of a kind of property.

Cash is an undated credit instrument already, and it already offers a return based on discounted values with respect to consumption, property, or other currencies. The benefit of your proposal therefore seems to be derived from the institutional contrivance of property custodians that you have described in detail elsewhere.  And you might be right, but if so it will be only because the custodian framework reduces the problems of information asymmetry (returns to lying or withholding the truth) among stakeholders in voluntary relationships that plague the current monetary framework, and I'm not yet convinced that it does. It seems in your framework that there is still as ample an opportunity for profit for unethical custodians and risk analysts that there is in the current way of doing things.  But I'm open to being convinced otherwise.

by santiago on Fri Dec 31st, 2010 at 04:27:17 PM EST
[ Parent ]
santiago:
So the ultimate backing of money is governance institutions, not land at all.  Property is an outcome of policy, not of land, which is merely a geographical characteristic of a kind of property.

You assume that property is an object, when in fact both property and money are relationships defined by protocols which incorporate governance.

These relationships connect subjects (individuals) with objects (location; energy; knowledge) all of which have a value in use, and are therefore well-placed to be a basis of credit alongside the use value of the energy and knowledge of individuals.

But it is indeed true that whatever the basis of credit, the money and property relationships require a framework of trust.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Dec 31st, 2010 at 05:10:08 PM EST
[ Parent ]
You're misreading me (Or I'm mis-writing, which is more likely the case). Property is not an object at all. It an outcome of the human activity of governing, i.e., of power -- of getting people to act together in concert toward a common purpose, a form of relationship.  That is, property is, like money, praxis, not object.  You're really arguing the same thing but you're not not meeting my mind on the praxis concept.
by santiago on Fri Dec 31st, 2010 at 05:55:10 PM EST
[ Parent ]
What failures would those be? Printing money in order to put the unemployed to useful work has not, as far as I am aware, ever been met with failure. It has historically caused labour to obtain enough bargaining power to match employers, causing price-wage inflation. But that inflation was never crippling, and the cure - reinstating structural unemployment - is decidedly worse than the disease.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Dec 30th, 2010 at 04:12:47 PM EST
[ Parent ]
What about the many hyperinflation episodes the neolib set likes to beat our heads with?  Those can, in almost all cases, be categorized as abject failures. Basically, high inflation is a failure because it means that you couldn't actually get anywhere neat the number of people to work that you were supposed to.  Some inflation is not a failure.  High inflation is, however, because people have just substituted higher prices for quantity of work, solving nothing regarding employment.  Put into my overcommitment framework, it means that if people perceive society to be too over-committed, they no longer trust the power of organizing tools like money to actually deliver on their promise of getting things done for them, so they require more of such contrivances to compensate for the higher chance of not getting what they want out of reciprocal relationships with others.
by santiago on Thu Dec 30th, 2010 at 04:40:22 PM EST
[ Parent ]
What about the many hyperinflation episodes the neolib set likes to beat our heads with?

Normally caused by exchange rate collapse in the face of structural import dependency, not sovereign deficit spending.

Basically, high inflation is a failure because it means that you couldn't actually get anywhere neat the number of people to work that you were supposed to.

"High inflation" and "hyperinflation" are not the same thing. You can have high inflation (10-15 %) without having hyperinflation. A problem, yes, but not more of a problem than (semi-)deflation (< 5 %).

Some inflation is not a failure.  High inflation is, however, because people have just substituted higher prices for quantity of work, solving nothing regarding employment.

Naturally, once you have full employment, additional spending is trading higher inflation for no gain in employment (because employment is already full), and you shouldn't be doing that. But government spending only becomes inflationary after it has exhausted the pool of unemployed resources. So persistent unemployment and persistent inflation can only result if there are real raw material scarcities (capital is abundant in modern society), or because there is some other mechanism that causes inflation (such as an unresolved contest between labour and employers resulting in a price-wage spiral).

"Curing" this by artificially limiting the money supply (in order to cause money scarcity to be more constraining than resource scarcity, or make the most money-sensitive contestant in the political conflict drop out) is akin to hitting the patient over the head in order to give him a headache bad enough that it will distract him from his stomach pain. That's Mickey Mouse medicine.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Dec 30th, 2010 at 04:59:44 PM EST
[ Parent ]
Normally caused by exchange rate collapse in the face of structural import dependency, not sovereign deficit spending.

Actually printing money to cover government spending isn't really deficit spending at all and doesn't have to add to other balance of payments items that people like to look at like debt, unless institutions require it to be done like it is in the US. In most countries, the central bank just prints money and the treasury spends it without the drama of bond sales and other market-based manipulations.

It is not at all clear, however, that exchange rate collapses are independent of expansionary monetary policies. Quite the opposite. If not directly causing exchange rate collapses, expansionary monetary policy in the face of questionable economic growth prospects at the very least has been observed to exacerbate them greatly.

The key point is that there certainly are conditions where an expansionary monetary and fiscal policy can be expected to have positive social outcomes, particularly for the non-rich.  However, not all cases are applicable to such a policy.  If they were, Americans should all be applauding Obama's sell-out to the Republicans right now, because the combination of the Fed's QE2 and the continuation of keeping taxes too low to pay for government services to the rich are precisely based on a belief that in all cases, not just some, just printing money will keep more people employed than not regardless of other conditions.

by santiago on Thu Dec 30th, 2010 at 05:41:12 PM EST
[ Parent ]
You can only have a currency collapse if you're either a) pursuing an unsustainably overvalued peg, b) running a trade deficit in excess of your luxury imports, c) running a current accounts deficit in excess of your luxury imports and lacking the will to tell your foreign creditors to fuck off and die or d) running a current accounts deficit and unwilling to tell your population to cease luxury imports that are in excess of your exports.

Tightening monetary policy is in all these cases a suboptimal response, and in several of them a disastrous one.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Dec 30th, 2010 at 05:49:49 PM EST
[ Parent ]
Like inflation, there is a difference between a currency collapse, and a revalution to something lower.  A policy of continuing government spending while printing money do so will, and often has, had the effect of lowering the value of country's currency, a positive and desired outcome in many cases, though not for everybody, particularly consumers of imported goods.

In the case of today's Greece, such an outcome would be desirable if it were still possible.  However, in the case of Venezuela, where people still aren't working but are instead living off the better distributed profits of oil exports to the US, printing money to pay governments' bills while at the same time increasing the price of imports which are required because so little of what people need to consume is actually produced in Venezuela due to oil dominance, has the effect of eroding the well-being of people significantly. (Although, if you live in a slum, you're still probably better off, but that's just a function of your miserable starting position, not a function of a sustainable policy that allows for further development out of slumdom.)

by santiago on Thu Dec 30th, 2010 at 06:01:24 PM EST
[ Parent ]
Yeah, printing money is not a substitute for intelligent economic planning. Neither is not printing money, or any other fast and easy rule of thumb. That's because there is no substitute for intelligent economic planning.

However, depriving yourself of monetary flexibility simply because you are worried that the government might rely on it instead of intelligent economic policy is akin to advocating the abolition of refrigerators because people might rely on them instead of proper kitchen hygiene. It doesn't solve the problem, and it does deprive you of a useful tool.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Dec 30th, 2010 at 06:23:58 PM EST
[ Parent ]
Which episodes are we talking about? Weimar Germany, Zimbabwe and which other?

I think if we look closely at these the printing of money has not been in relationship to employing people, but without knowing which episodes to look at there is no starting point.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Thu Dec 30th, 2010 at 05:00:40 PM EST
[ Parent ]
Venezuela today. Argentina to some extent as well.  Ecuador in a very dramatic way in the late 1990's.  (Led to a contraction of the real economy by more than a third in 2000, causing an out-migration of about 10% of its population, mostly to Spain, at the time.)  Etc.  The cases of failure or problems are many, so such a policy is not without risk of catastrophe worse than doing nothing, making it pretty important to identify the conditions under which printing money to allow government to spend might work well.
by santiago on Thu Dec 30th, 2010 at 05:27:25 PM EST
[ Parent ]
santiago:
One of the useful parts of thinking of money as a physical thing is an inherent, if flawed, mental picture of keeping one's commitments in bounds of what is realistically possible. A new conception of money should be at least as good as that or ideas like just printing more money to get people back to work will encounter the same failures as that approach has already encountered many times.

Had to think about his.

That aspect is only useful if the goal is to prevent printing money beyond what the economy can deliver on. If the economy is shrunk by loosing access to markets, by having to deliver goods or capital to foreign powers or by the resources it depends upon being depleted, inflation happens without a single new coin is minted. And thinking that money is a physical thing can then greatly confuse and hinder a political response.

Furthermore in the case of depleted resources, thinking that money is a thing appears to increase the likelihood of depleting resources, since it "makes money". And if the resource is cheap you can always buy another later, which ignores that it is cheap because it is plentiful and all the money made of it comes from it being a useful resource. So once it is depleted it will be expansive and costly to restore, as you have just killed the goose that laid the golden eggs.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Sat Jan 1st, 2011 at 07:47:41 AM EST
[ Parent ]
A swedish kind of death:
santiago:
One of the useful parts of thinking of money as a physical thing is an inherent, if flawed, mental picture of keeping one's commitments in bounds of what is realistically possible. A new conception of money should be at least as good as that or ideas like just printing more money to get people back to work will encounter the same failures as that approach has already encountered many times.

Had to think about his.

me too!
tying it in with tbg's comments about rational planning, it seems that the scarcity=profit syndrome taken to its linearly logical conclusions will by default lead to a succession of ponzi schemes betting on cantilevered outcomes, a crooked casino.

with compound interest as the ratchet, or one-way valve that keeps the capital concentration moving inexorably upward.

that's why chris cook's ideas fire me up, because we have been pegging value to finite resources instead of near-infinite ones, and money/debt has come to reflect peoples' slavery to their relationship with money, instead of money being handmaiden to the best of human enterprise.

profit-with instead of profit-over.

a system that is only dependent on renewables could give healthy growth at every step of the huge transformation process.
instead of our tax money being used to wholeheartedly, unequivocally _support
the rollout, it has been decided on high that that's not ok anymore, by a so-called left wing government!
and to rub it in more, the recent supergrowth in the italian solar PV industry is thanks to berlusconi government...

through the looking glass we go again...

the only hope against the suicidal venality of our corrupted political classes, hocked to/hooked on dinosaur tech is for public enlightenment about how gvts and corrupt lobbying are subsidising the very worst of solutions, and starting the very overdue, long overdue, realisations about how energy is used in societies, and how safer sources are poohpoohed in favour of ecocidal methods.

once people grok that energy is being bottlenecked as a scarcity, and we can rationally plan longterm optimal sociopolitical solutions around it, then the amount of 'money/credits' can grow infinitely, if slowly.

the economy is description of energy moving, and chris' way more faithfully reflects reality, in how energy moves in nature, decentralised through diversity.

under a system like that 'scarcity' would be technical, we want more energy credits running around as barter units, harvest more sun/wind etc, bet on things like land which we need for our continued survival. all the squillions people bet on the share market in this or that blue chip corporate behemoth, (all built on the scarcity=profit rentier capital sequestration model) could be channelled into future earners that may not yield interstellar bankster bonuses, but would return the flow of capital and dividends to circulate by encouraging energy self-sufficiency, and freeing up so much work now sacrificed to pay exorbitant fuel bills to monopolistic, testicle squeezing ecocriminals.

what else will we be able to count on after this paradigm implodes, if not land, water, sunshine and wind, and the steady slower profits that their intelligent deployment could probably guarantee?

these conniving knaves are two a penny, unless we restructure our fundamental social concepts about what money means, and could better morph into, present conmen will fall away and be instantly replaced by slicker ones...

it will have to come from the people, as more of us realise the disgrace we should feel from abusing our environment so.

and the concomitant joy in being able to do anything about it, no matter how small.

many hands...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sat Jan 1st, 2011 at 08:59:44 AM EST
[ Parent ]
melo:
profit-with instead of profit-over.

I prefer to think that within a consensual/mutual/reciprocal partnership framework agreement, there is no 'profit' and no 'loss' accounting.

Instead, there is the mutual creation and exchange of surplus value in all its forms (which include the spiritual and emotional).

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 1st, 2011 at 09:21:37 AM EST
[ Parent ]
Money is not a resource. A resource is something that can be consumed or that is actually required to produce something that can be consumed.

Money is only required for production because we have set up rules of the game that require it.

And money can be created by an accounting manipulation at a bank, which implies that it is not scarce, either.

Money is inelastic in supply to the individual, but not to the economy as a whole.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Dec 30th, 2010 at 06:47:22 PM EST
[ Parent ]
To the extent that money organizes people to perform activities for one another, it certainly is a resource because, at the very least, time is finite for any given person as well as for the sum of all people in an economy. Even if money isn't physical, it is representational and relational -- it represents people's time, at a minimum, that can be committed to other people in some kind of relationship.  That is why creating more money cannot have any effect other than inflationary unless there are unemployed resources available which can be committed to action by the new money.  

 

by santiago on Fri Dec 31st, 2010 at 12:54:10 PM EST
[ Parent ]
To the extent that money organizes people to perform activities for one another, it certainly is a resource because, at the very least, time is finite for any given person as well as for the sum of all people in an economy.

In that case it's time that's finite, and money is just the paperwork.

Paperwork is - of course - infinite. :)

Even if money isn't physical, it is representational and relational -- it represents people's time, at a minimum, that can be committed to other people in some kind of relationship.

No it doesn't. There is absolutely no direct relationship between personal time and money.

There are a lot of political relationships linking time, resources, and money.

But money is an effect of those. Not a cause.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Dec 31st, 2010 at 01:14:56 PM EST
[ Parent ]
There is certainly a direct relationship between time, and all other constraints of mortality -- that is all resources -- and money. Money cannot exist outside of what you call the political relationships that link it to time and other resources.  Money is neither an effect nor a cause -- it is the thing itself, the praxis.
by santiago on Fri Dec 31st, 2010 at 01:32:08 PM EST
[ Parent ]
santiago:
-- it represents people's time, at a minimum, that can be committed to other people in some kind of relationship.  

The basis for that misconception is the mistaken anthropocentric Marxist assumption of Labour value, which capitalists find convenient because it justifies levying taxes only on 'earned' individual income and corporate profits, based respectively entirely, and partly, upon Labour.

In fact the vast bulk of money in existence represents the use value over time of location; the use value over time of energy, whether static/material and embedded in a location, or dynamic; and increasingly, the use value over time of 'objective' Knowledge insofar as this may be encapsulated within the relationship of Intellectual Property.

It is self evident that these capital assets are 'productive' - whatever conventional Economics may assume for ideological reasons - in that they have a use value over time which may be - and is - monetised independently of Labour value.

The capitalist owners of productive assets, on the other hand, are 'unproductive', and typically share little if any of the income and gains ('rents') they receive from their privileged property rights with the society whose members confer these privileges.

Since there is no way in which the privileged turkeys who own, manage and govern afflicted countries will ever enact Christmas, then the necessary structural changes must come from another direction, which I believe is an ongoing rapid, revolutionary and viral change in the property relationship, and the very nature of capital itself.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Dec 31st, 2010 at 01:18:50 PM EST
[ Parent ]
No, this conception is independent of the classical economists' notion of labor as the source of all wealth or Marx's capitalism concept. If you can attribute to intellectual thinking, it comes more directly from Hannah Arendt's concept of praxis and Talcott Parson's discussion of power.

That money is a limited resource, even as an abstract concept, can be proven due to two givens: Money cannot exist outside of a human relationship constrained by action of some kind (praxis), and we are mortal beings and thus subject in every way to finite limits regarding our actions.

by santiago on Fri Dec 31st, 2010 at 01:39:40 PM EST
[ Parent ]
Sorry, but I think these Subject/Object metaphysical assumptions - your givens - are misconceived.

Value the way I see it, through a quasi-Pirsig lens of a Metaphysics of Value - is indeterminate, or put another way, definable only in relative terms. It is a pre-intellectual reality and subjective Praxis does not come into it.

In my view, monetary and property relationships between subjects (individuals) and productive assets (objects) are not constrained by human action.

How can anyone say that the use value of patterns of Knowledge - which are infinite, and independent of the individual who may discover or create them - is limited?

Or that the use value of the energy which flows - all of it - from the Sun, and the Universe of which it is  a part - is finite?

I think that it is a form of arrogance or vanity, actually, to think that Value (because money IMHO is Dynamic Value or value in motion) can in any sense be constrained by human action.

Sure, the heap of chemicals which is a mortal man has a finite life, but his actions, ideas and even image live forever.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Dec 31st, 2010 at 03:46:55 PM EST
[ Parent ]
Taking a quote your engaging paper:

Riegel speculated that Money exists only in the transitory instant of Exchange of
Value: in other words that Money exists only in motion.

This is what is meant by praxis.  Money cannot be conceived of separate from the action of exchange.  Money is a relationship and not a thing. This is one of the two "metaphysical" givens I provided above from which it can be shown that money is, indeed, a finite resource.

The other is merely the given that we are mortal, i.e. the universe, even the sun, is finite, and thus time is of the essence to all of us, among other things. Even our brains necessarily limit knowledge, which is a nonsensical concept apart from a thinking being, and thinking beings once didn't exist and someday won't again.

(As a believer myself, I realize that I am taking an atheistic position regarding knowledge here -- a presumption that immortality is a fiction because of a lack of evidence in our imminently mortal world that such a thing can be true, but that doesn't in any way injure my argument here since money and policy is a concern only of our present, mortal existence, even if morality can be argued to be derived from a belief in immortality.  The implication is that only if you try to introduce the concept of immortality to the discussion of Value -- which opens up a whole different book of problems altogether -- can you argue that concepts such as value and quality exist apart from the very mortal human activities to which such words belong.)

Essentially, your paper actually argues my point:  Money is not an object at all, but because money is inseparable from mortal human relationships of exchange, it is still as limited as if it were conceived of as an object.

by santiago on Fri Dec 31st, 2010 at 05:47:09 PM EST
[ Parent ]
Well, while I see where you are coming from, and I agree that exchange is one integral component of the monetary relationship, I do not think that dualistic infinite and finite absolutes result in an adequate basis for the value relationships of Economics any more than they do for the energy relationships of Physics.

I believe that a third - indeterminate/indefinite and non-dual - state transcends your 'givens'.

santiago:

Even our brains necessarily limit knowledge, which is a nonsensical concept apart from a thinking being, and thinking beings once didn't exist and someday won't again.

I don't see it quite this way. I think that patterns of Knowledge are timeless, and it is our brains' capacity to recognise, discover and store Knowledge which is limited.

When we are all gone, the Knowledge will still be there, and it may be recorded as data objects and have a value in use long after the discoverer/creator has shuffled off this mortal coil.

Likewise, patterns of energy are always there: they simply change state, and possibly location, over time.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Dec 31st, 2010 at 06:15:04 PM EST
[ Parent ]
I see that you're trying to make an analogy with quantum mechanics here, but I fear that's not going to be a fruitful path of inquiry for your project regarding money. Not wanting to get any more metaphysical than this discussion already has become, you're going to run into the problem of knowledge that was pointed out by philosopher Ludwig Wittgenstein and that has influenced thinking in many fields of both natural and social science since. Put simply, you're going to eventually only find that you've been playing language games and not finding anything fundamentally true because words, and thus concepts, such as "Knowledge" are nonsensical apart from our actual use of the terms in relation to the world.

This means that while "light" can have the independent meaning we give, a priori, to the concept while mathematically going about arguing the truth or not of quantum mechanics, "knowledge" cannot. In order to go about proving the proposition that "patterns of Knowledge are timeless" we would have to pre-assume the very meaning of knowledge that we are trying to prove. That's just a language game in the end, and the best you could hope to get out of that exercise is to ultimately come to that realization.

Any time that abstract concepts engendered with meaning by human experience, such as "knowledge," "timeless," "death," "God," or "infinite resources" come up, the language-game alert should sound in our heads, and we should be skeptical of any claims regarding general propositions of those concepts outside of the narrow parameters of the discussion at hand.

by santiago on Mon Jan 3rd, 2011 at 12:29:36 PM EST
[ Parent ]
santiago:
I see that you're trying to make an analogy with quantum mechanics here, but I fear that's not going to be a fruitful path of inquiry for your project regarding money.

Ah....analogies!

Robert M. Pirsig Quotes | Star Quotes

Fantastic, Phædrus thinks, that he should have remembered that. It just demolishes the whole dialectical position. That may just be the whole show right there. Of course it's an analogy. Everything is an analogy. But the dialecticians don't know that.

santiago:

That's just a language game in the end, and the best you could hope to get out of that exercise is to ultimately come to that realization.

I agree with Pirsig's view  that it is from Rhetoric - and language games - that everything springs. This applies to your reference to Arendt and Praxis just as well as to any language I, you or anyone else might use.

Lightning hits! Quality! Virtue! Dharma! That is what the... | Star Quotes

Lightning hits!
Quality! Virtue! Dharma! That is what the Sophists were teaching! Not ethical relativism. Not pristine "virtue." But areté. Excellence. Dharma! Before the Church of Reason. Before substance. Before form. Before mind and matter. Before dialectic itself. Quality had been absolute. Those first teachers of the Western world were teaching Quality, and the medium they had chosen was that of rhetoric. Sourced, Zen and the Art of Motorcycle Maintenance
(1974)

As J A Wheeler - a physicist - said....

Reality is defined by the questions you put to it

I believe that 'Value' is indeterminate, and may only be defined in relative terms, and that in order to create a valid basis for addressing the relationships of Property and Money then it is necessary to use what Pirsig referred to as a 'Metaphysics of Quality'.

I refer to a 'Metaphysics of Value' but Quality; Value; Beauty, and other such concepts are aspects of Reality which differ only in the questions asked of it.

This leads us down a path way beyond my pay-grade to Soros's belief in Economic Reflexivity, and to the Copenhagen Interpretation.

In this 'Quantum Economics' context, I have long thought - and this is purely intuitive - that market transactions/events are analogous to particles and that while Market momentum may be (and is) measured and forecast, and Market direction may be measured and forecast, it is impossible to do both.

At this point I feel heavy breathing down my neck from migeru and JakeS, so I'll leave the analogies at that.....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Jan 3rd, 2011 at 02:48:12 PM EST
[ Parent ]
Yes, please.

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010
by Migeru (migeru at eurotrib dot com) on Mon Jan 3rd, 2011 at 03:59:11 PM EST
[ Parent ]
Where did you spring from?

No one expects the Spanish Inquisition.....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Jan 3rd, 2011 at 04:07:59 PM EST
[ Parent ]
Unexpected springs and leaps remind me of particles, but I'll leave the analogies to those more prepared to make them.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jan 3rd, 2011 at 04:17:41 PM EST
[ Parent ]
There's nothing wrong with analogies.  That's not my point.  The issue is whether the analogy of your conception of money to quantum physics is appropriate or not, and I'm arguing that it isn't for the reason's given by citing Wittgenstein. Since, unlike the word "light," "knowledge" can mean whatever you define it to mean within the context of a given discussion, talking about patterns of knowledge that exist whether or not minds are around to know anything requires you to assume what you are trying to prove.  And that's a language game -- finding out that the problem you've thought of is just a matter of assigning definitions to words and not something more fundamentally true.

Your second point that everything else we're saying here is just a language game too is valid enough.  But that's okay because playing a language game for the purpose of clarifying the mis-manipulation of language is one of the primary purposes of philosophy, and by extension all social science. (According to Wittgenstein, it was the only purpose remaining to philosophy, and a necessary one.)

None of this takes away from your worthwhile project regarding Money 2.0, however. Nothing about your project depends in any way upon a conception of money analogous to something like quantum mechanics.  What I'm suggesting is that you should avoid getting bogged down in the metaphysics of money, because such an exercise is ultimately an intellectual dead end that wouldn't support the rest of your work even if it wasn't.  Money is a relationship and not an object. That's a sufficient definition of a concept to go from, so no need to try to develop the definition further than that.

by santiago on Tue Jan 4th, 2011 at 09:37:19 AM EST
[ Parent ]
That is why creating more money cannot have any effect other than inflationary unless there are unemployed resources available which can be committed to action by the new money.

Well, yeah, if your economy is already employed at capacity, creating new money does not magically make new capacity happen. But no WesternTM economy has been operating at capacity for the last forty-five-odd years. So you will, I trust, permit me to argue that governments using seigniorage to push the edge of the capacity envelope is not, perhaps, the most pressing economic problem facing WesternTM civilisation at present.

Happy new year, by the way.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Dec 31st, 2010 at 09:01:30 PM EST
[ Parent ]
Happy New Year to you too!

No, it's not the most pressing problem right now, for the simple reason that we are in a crisis that is being prolonged by exaggerated, although completely rational under the circumstances, aversion to risk taking.  In such a condition, printing money and spending it is exactly the right prescription.

But, in the US at least, government was also printing and spending money in a very big way from 2000 to the present when tax cuts favoring the rich were enacted while spending on the wars increased at the same time.  Unlike today, in 2000 and in subsequent years it could very well be that the economy was operating beyond capacity, especially given its oil based technology constraints and the increasing use of those same resources by China and other 3rd world countries. And that overcommitment of resources to the rich without the possibility of economic growth being capable of delivering on those commitments is the true underlying cause of the financial crisis of 2007.

by santiago on Mon Jan 3rd, 2011 at 11:01:01 AM EST
[ Parent ]
But here's the thing: The US had many opportunities to print and spend money on projects that would enhance the future capacity of the US to produce stuff. Yes, that might create inflation in the present, because it would restore the bargaining power of labour without diminishing the bargaining power of employers or banks. But that could be resolved simply by diminishing the power of the banks. Or it could be left to run its course - even at the height of the bubble, inflation (even including asset price inflation) was nowhere near 10 percent per year, except in the areas worst hit by the property bubble.

My contention, to reiterate, is not that simply printing money solves all problems. It obviously does not. My contention is that the ability to simply print money is an important tool for the government. At the very least, it can serve as a nuclear option with which to threaten a financial sector that has run amok: All their assets can be inflated into oblivion. Like more literal nuclear options it is usually unwise to actually employ it, but that does not mean that having it is not useful in and of itself.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jan 3rd, 2011 at 12:34:51 PM EST
[ Parent ]
I agree. It is potentially an important tool.  But we should be realistic about what it really is.  It isn't a technology in the sense of a more efficient, new source of energy.  It is merely a discursive contrivance to resolve, given the particular institutional constraints within a given polity, a fundamental disagreement about how, and to whom, to allocate resources -- that is, a contest for power.  

Printing money, or not printing enough due to the money-is-a-commodity narrative, is therefore just a political tactic for getting enough people to get on board with a given plan for distributing resources in some way, but there is no general truth about money beyond that. There also may be other, equally effective political tactics our side (the progressive, "green" side) can use to overpower the "drill baby drill" side.

by santiago on Mon Jan 3rd, 2011 at 12:47:11 PM EST
[ Parent ]
I know you know this ...

The Central Bank doesn't "print" anything.  Money is created by the right person typing in numbers on the right computer.  Other "right thinking and approved" people access (borrow) this money by typing in numbers on their computer.  

Accepting this allows a fundamental change in our heuristic (basis for thinking about thinking about) the financial system.  The above "flow" - a Verb, note! - can, as Chris Cook has tirelessly written, be re-conceptualized as "energy" where a currency can be viewed as a concrete, physical, container of money-energy in the same way a D cell battery is a container of electricity.

Take a one ounce gold coin.  As a "battery" of money-energy it can sometimes have $250-worth of money-energy; sometimes it can hold $1,400-worth of money-energy.  It doesn't matter.  The "worth" of the gold coin is how much money-energy (however derived) the holder is willing to take to transfer possession of the coin coin to a buyer and how much money-energy the buyer is willing to store in the coin to take possession.

Major Money Market Banks, under this analysis, are great big huge batteries getting their money-energy from the power-station known as "A Central Bank."  They then flow the money-energy to various sub-stations (non-MMBs and other financial institutions) who use it themselves or flow it along in big chunks to their consumers who, in return for the chunks (loans,) return money-energy in smaller chunks, over time.  The MMBs take this stream of money-energy and return it to the Central Bank as payment for letting them have the money-energy in the first place.  The vast majority of this money-energy never comes close to a "battery."  (And nor would anybody really want it to!)  It flows to and fro along the wires and connections of a massively complex "money-energy power grid."  Entities tap into this power grid, as needed, and place money-energy onto the power grid as needed, wanted, desired.

I submit, as brain-damaged as the above Model is, it fits Reality better than the Money-as-a-Noun heuristic.


Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Mon Jan 3rd, 2011 at 01:24:12 PM EST
[ Parent ]
I'm not sure what the energy metaphor accomplishes here, aside from irritating physicists...

Money is a vehicle for expressing power (no, not power as in MW, power as in machine guns). There is nothing particularly mysterious about that. Barring the government from printing money at will is a contrivance to artificially limit government power. It should therefore be justified on its merits as a countervailing pressure against undue concentrations of power, not as a matter of objectively sound economic planning - and certainly not as a fact of life.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jan 3rd, 2011 at 02:09:00 PM EST
[ Parent ]
I don't want to get into another nominalist/phenomenologist discussion.  (But I will if I have to.  :-)  The English word "energy" has more meanings, uses, and association patterns than it's technical definition in physics.

Sure money is a vehicle for expressing domination.  So are clothes, cars, homes, art objects, jewelry, dialect, facial expressions, music, food, having possessions, giving away possessions, burning possessions, how many wives/husbands one has, & etc.  Hominidae have an innate tendenz to build hierarchies to establish a social, thus political, rank.  We play Dominance Games, part of which is grabbing whatever we can to signal (and manipulate) our position in the hierarchy.  "Don't mess with me!  I've got a Breguet pocket watch!" is the same sort of social signaling as a male chimpanzee showing his canines in a Threat Display.  

To some (unknown) extent this is hard-wired into the human brain.  To the extent is is hard-wired it is unchangeable.  Thus, we can't change it so we have to recognize it and attempt to build poltical-economic structures to minimize it.  

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Tue Jan 4th, 2011 at 01:39:32 PM EST
[ Parent ]
I'd quibble with 'hard-wired', though I use myself it to describe neurons growing new connections in response to endorphin reception. But, of course, if neuronal connections were really hard-wired, chemical behaviour modulation couldn't happen ;-)

"Auto Brain Surgery for Dummies (Enjoy the ultimate feedback experience)" says that the status behaviour you describe, along with many other similarly 'deep' behaviours, is the result of genetic capability in the production of metaprogramming biochemicals, such as hormones and neurotransmitters. All the little factories we have (endorphins made in the pituitary gland and the hypothalamus, or serotonin made in the gut, or testosterone in the testes, or dopamine made in all sorts of odd places) can differ between individuals in their rate and amount of production - in response to similar stimulii.

But, as you have correctly pointed out in the past, it's how the factories react to demand that is important - and that it is a feedback process. And sometimes, I would add, recursive: if you are genetically efficient at producing epinephrine it is possibly going to change your 'attitude' to risk and stress as you grow up - unless other 'antagonist behaviours' develop. Likewise, since food makes all of us 'feel good' - because the gut releases serotonin - it doesn't take much for a recursive feedback to develop and lead to 350 lb people. Again, mitigating behaviours have to be established early on in life, to prevent the recursion.

You can't be me, I'm taken

by Sven Triloqvist on Tue Jan 4th, 2011 at 02:40:32 PM EST
[ Parent ]
Sven Triloqvist:
I'd quibble with 'hard-wired'

Me too. I suspect the hard-wired is simply the matter, contrasted with the spirit. Cartesian dualism in new form.

The brain is all matter and that matter is us.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Tue Jan 4th, 2011 at 03:32:56 PM EST
[ Parent ]
The Hominidae species (humans, chimps/bonobos, gorillas) all live in structured social groups that express dominance.  That strongly suggests the Dominance Game has a neurological basis.  This is not to say that all humans plays the Game to the same extent.  Other factors in the Brain/Mind Unity also affect behavior.  Otherwise we would all be sociopaths.

Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Wed Jan 5th, 2011 at 10:53:09 AM EST
[ Parent ]
santiago:
Even if money isn't physical, it is representational and relational

sounds like the particle/wave physics debate...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sat Jan 1st, 2011 at 09:03:36 AM EST
[ Parent ]
Exactly.

But my experience of ET is that down that road of analogy lies a pie-fight on a Cosmic scale........

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 1st, 2011 at 09:25:48 AM EST
[ Parent ]
Bruce:
The "inability to afford" these commitments was and is a fiction engineered b[y] pretending that money is equivalent to a scarce resource.

I'm pleased that you and so many others here agree that money is not finite and scarce (at least not so finite as we have been led to believe).

It seems to me--the psychologist, non-economist--that "money" in people's thinking has to be based upon something they can understand. If not upon silver or gold or the presumed productivity of a nation, then what?

This was perhaps the hardest question to deal with in my theorizing. My solution is to consider the end results of money: how does it serve mankind, how does it poorly serve mankind, what does mankind lack that money ought to be assisting?

As a psychologist I look at individuals and their behavior and makeup. Societies are indeed more than the sum of their parts, but also each part is an individual person with his/her needs and aspirations, each person a kind of microcosm of society.

So I decided that the basis of money could be the "sum total" of the needs and aspirations of a society/nation. Others will argue that even these are finite, but undoubtedly they are much larger than the goods-and-services productivity of a nation. My hope is that the possibility of much higher government support for beneficial and creative projects for individuals and groups would stimulate science and the arts, in addition to supporting business startups, etc. And of course the needs of people include help for the Earth, the people's environment.

Thanks to comments here, I see that the direction and quality of government commitment is of great importance. I addressed that factor only tangentially in my book.

BTW, Bruce, I am a great fan of your diaries on public transport and rail travel. They are unexcelled.

by psyched (railtravel [at] gmail dot com) on Thu Dec 30th, 2010 at 02:57:21 PM EST
[ Parent ]
You may get more mileage out of thinking of an economy as map of the collective unconscious rather than as the sum total of conscious aspirations and desires.

Being Freudian about it, money is id stuff. It could be - and should be - made more conscious. But currently it's distilled desire, and the fact that accumulating money facilitates irrational behaviour that disregards practical consequences is seen as a feature, not a bug.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Dec 30th, 2010 at 03:09:46 PM EST
[ Parent ]
Rather are some here who might argue (as non-psychologists, as well as non-economists) that the ego (the part of the mind that 'we' think 'we' can interrogate) is overwhelmingly limited in the options provided upstream and cross-stream by the parts of the mind/brain that we cannot interrogate.

There are probably no Dr Spocks in society as a whole, and certainly none in the industries of finance.

Money is a number within a limited range (for each individual) that people can hang transactional ideas of fairness upon, and make comparisons. A million euros, for instance, is way beyond my range: I have no real grasp of what that number means. A billion is silly putty for most of us, I'd guess. A single euro cent is also outside my range.

You can't be me, I'm taken

by Sven Triloqvist on Thu Dec 30th, 2010 at 03:35:30 PM EST
[ Parent ]
Brit Guy and Sven,

Yes, the collective unconscious would be a good fit. However, I am afraid that there are so many people who cannot even in post-Freudian times accept the idea of unconscious activity in individuals, let alone in society, that there would be a lot of resistance to that idea.

And yes, there would continue to be limited budgets for individuals and groups, but hopefully not for government.

I wrote in my book,

Since the concept of money was created to help human society function better, the focus of money should be upon human attributes, needs and potential rather than upon physical things connected only tangentially with humans. It should focus upon all the things that make people human--all human mental, physical and spiritual attributes, all human potential for creating, maintaining and advancing life, all human capacity for loving and aiding fellow humans and other living creatures, all human capacity for providing for the physical and psychological needs of humanity, all human capacity for imagining and planning for the future.
by psyched (railtravel [at] gmail dot com) on Thu Dec 30th, 2010 at 04:49:41 PM EST
[ Parent ]
In real terms, the government's budget is limited by the total economic activity within its jurisdiction. In extremis the government can confiscate all surplus value, but it cannot magically make surplus value happen (it can increase economic activity with direct sovereign investment, but that's another sort of story).

But it's certainly true that you'll hit political constraints long before you hit the physical limit to the government's budget.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Dec 30th, 2010 at 05:03:38 PM EST
[ Parent ]
Well - that's a bit like saying that you know the answer is in one place, but you're not going to look there because no one wants the answer.

There's nothing wrong with your quote, except for the fact that it's not difficult to see that money in its current form - and economics, of which money is a part - is a literal disaster machine.

Money should serve a majority of the population, but instead the majority of the population serves money.

Nothing much can change until the majority of the population understands that this is something of a problem. (And certainly not in their interests.)

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Dec 31st, 2010 at 01:18:45 PM EST
[ Parent ]
Whether or not one thinks - as I do NOT - the current system "works" it must be recognized it does "work," on some level, for the majority of people ... otherwise the majority wouldn't acquiesce.

Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Tue Jan 4th, 2011 at 01:53:40 PM EST
[ Parent ]
Well, that's badly phrased.

I do not think the current system works very well for the majority.


Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Tue Jan 4th, 2011 at 01:55:21 PM EST
[ Parent ]
... have in this amusement park we label the economic aspects of society.

It has extrinsic value under the rules of the game that we place, and people coming to feel as if money is intrinsically valuable is just the normal process of institutionalization of social rules of behavior.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Dec 30th, 2010 at 06:51:08 PM EST
[ Parent ]
As a tangent: how was money perceived in the communist east?

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
by A swedish kind of death on Wed Dec 29th, 2010 at 05:44:03 PM EST
[ Parent ]
As a necessary evil.
by santiago on Wed Dec 29th, 2010 at 06:00:01 PM EST
[ Parent ]
... was "we pretend to work and they pretend to pay us".

Also, "They say in the decadent US, don't buy a car made on Monday, because the workers are hung over. / Well, no worry that we'll get a car made on a Monday, but I'd worry about buying a car made on Tuesday."

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Dec 30th, 2010 at 06:54:11 PM EST
[ Parent ]
Avoiding overcommitment is not the only angle of attack when it comes to avoiding crises like the present one. There are more or less painful ways to unwind overcommitments, and choosing the less painful way goes a long way towards preventing crises (or at least towards preventing crises from becoming a problem for any important social institution).

The money-as-a-thing narrative promotes the most painful possible way to unwind overcommitments, because unwinding overcommitment through default-driven deflation is infinitely much more painful than unwinding overcommitment through inflation. While prevention is important, it is equally important that the preventative measures do not cripple our ability to cure the ailment when they fail to contain it (as they occasionally must, because economics is complicated business).

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 29th, 2010 at 06:15:23 PM EST
[ Parent ]
I don't disagree, which is why I say there are likely better ways to conceive of money than as a physical thing, but whatever replaces it needs to maintain a way of keeping track of social commitments in some way.  

Another way to think about this is to ask whether, if we believe that the US and the world was really on an unsustainable, peak oil run in the months and years leading up to the crisis, is it even possible for a generous, Keynesian economic kick of printed money and general government spending to return the economy to the employment levels pre-2008?  Or, alternatively, would government fiscal intervention have to be strategically directed toward re-tooling society's workforce toward more sustainable activities than before.

If overcommitment isn't the right way to think about this, then the answer to the first question would be yes, undirected Keynesian government spending such as the continuing tax cuts that Obama just opted for should be enough to get the economy back to where it was in 2006.  But if overcommitment is the right way to think about it, the second question is where we want to focus.

by santiago on Wed Dec 29th, 2010 at 08:09:59 PM EST
[ Parent ]
santiago:
Another way to think about this is to ask whether, if we believe that the US and the world was really on an unsustainable, peak oil run in the months and years leading up to the crisis, is it even possible for a generous, Keynesian economic kick of printed money and general government spending to return the economy to the employment levels pre-2008?  Or, alternatively, would government fiscal intervention have to be strategically directed toward re-tooling society's workforce toward more sustainable activities than before.

yes and yes.

certain PTB would prefer this only after every other dead end avenue has been explored.

but those two will be the only ones left standing once all the other golems have rotted, if we live that long, and probably even if we don't.

because 2 and 2 will eventually be understood to sum to 4, and we'll look back and go 'how hard was that to figure out, really?'

right now most peoples' lives in the west are still about propping up and polishing policies about as useful as easter island statues.

lately they don't look so buff...

timmmmmbbbber

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Wed Dec 29th, 2010 at 09:11:28 PM EST
[ Parent ]
Another way to think about this is to ask whether, if we believe that the US and the world was really on an unsustainable, peak oil run in the months and years leading up to the crisis, is it even possible for a generous, Keynesian economic kick of printed money and general government spending to return the economy to the employment levels pre-2008?  Or, alternatively, would government fiscal intervention have to be strategically directed toward re-tooling society's workforce toward more sustainable activities than before.

Of course it would have to be strategically directed.

But the Austrian conception of money as a finite thing precludes both crass Keynesianism and intelligent Keynesianism. So the money-as-a-thing narrative has to go, irrespective of what kind of economic planning is required to get us through the next couple of decades of resource squeezes.

Because the problem with money-as-a-thing w.r.t. overcommitment is that it does nothing to prevent private-sector overcommitment. And private sector overcommitment is always much more painful than government overcommitment. Government overcommitment can, at worst, result in an inflationary episode, whereas private overcommitment results in major industrial depressions.

If overcommitment isn't the right way to think about this, then the answer to the first question would be yes, undirected Keynesian government spending such as the continuing tax cuts that Obama just opted for should be enough to get the economy back to where it was in 2006.

No, the tax cuts Obama signed into law would be stupid even in the empty world, because Gilded-age levels of wealth and income inequality do Bad Things for the productive part of the economy.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Dec 30th, 2010 at 05:32:10 AM EST
[ Parent ]
i thought Keynes was for gvt stimulus, not for cutting taxes! was he?
where else to get the money to stimulate, if not bankers, investor bonds, or sovereign funds, other countries' betting money?

cutting taxes is thought by neolibs to stimulate the economy, but lately haven't people been trying to salt money away, or at least unwind themselves from the credit they caught themselves up in, and no matter how much cash people have, if they don't feel reasonably sure that the economic climate is trustworthy, what's going to make them buying loads more stuff, and keep Main St growth a gogo?

they'd like to make teh impossible happen, if they can't sustain the illusion (consumer confidence) in the above ground economy, what hope has the huge shadow economy of sustaining its fiction, since all its towering, cantilevered bets are on rapid, slash'n'burn dividends in meatspace.

so people starve from lack of rice while gilded tycoons swan round manhattan getting the edge on each other, and paying the puppets so they can pay out of court without admitting guilt, (on those rare occasions they do get caught), while the average person has to be accountable, and balance his own books without cheating, or a nice country club prison to do token time in.

people are mostly good natured, don't want fuss, just keep their noses patiently to the grindstone, toeing the line, mustn't grumble, like good dobbins from animal farm.

so these careening careerists hellbent on meltdown just keep right on going till they smash into something like reality, then expect to throw more promises and money like it's going to undo the oops there went the gulf fisheries, millions of livelihoods.

oops, chernobyl, oops climate change. sorry about that arctic ice shelf, sorry about millions in asia going without drinkable water,(just buy evian) where does it end?

any brake pads on this juggernaut, any soft meadow to land in? how many have to suffer in front of our faces before we freaking get a clue?

printing a bunch of paper and hoping peeps don't realise it's worthless... wouldn't keynes have suggested borrowing money if absolutely necessary, but invest in your work force, not china's. your infrastructure, so if/when the party ends at least you have something real to show for it! a bridge, a replanted forest, a sustainable industry that can wipe its own future face!

/rant off, scuse the ignorance, as Mig would say, i'm probably not even wrong, lol.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Thu Dec 30th, 2010 at 06:17:56 AM EST
[ Parent ]
Yes, gross levels of income inequality do bad things to the productive part of the economy, but the question is, why?  The answer, I think, lies along the lines of providing too many resources, and hence power, to people whose primary activity is in capturing wealth rather than making it.  This means that resources -- physical, temporal, social, and even psychological -- are not infinite within a given polity and that society and providing resources to some necessary takes away at the very least opportunities for others. Thinking in terms of over-commitment in general allows for that.
by santiago on Thu Dec 30th, 2010 at 10:51:13 AM EST
[ Parent ]
Even in a world of infinite resources, tearing down is easier than building. So if you give comparable power and wealth to those whose business it is to tear down as you do to those whose business it is to create... well, you do the math. Scarcity exacerbates this problem, but removing scarcity will not remove the problem that people who make nothing but money tend to be in the way of people who make real stuff.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Dec 30th, 2010 at 12:24:54 PM EST
[ Parent ]
That seems like a good point, but is it really true?  In a world of truly infinite resources, why would it be an easier to tear down than to build? It seems instead that the reason that it seems to be usually much easier to destroy or to steal than to make something new might be entirely a function of finiteness.
by santiago on Mon Jan 3rd, 2011 at 11:07:04 AM EST
[ Parent ]
The problem with saying that the government has over-committed itself is that this is a talking point for the RW ideologues and manipulators. Unfortunately, it is true. The government has IMPROPERLY over-committed itself to the maintenance of the wealth of the very wealthy, even when efforts in that direction are almost certainly futile, as with much recent spending and credit backstopping. This follows directly from the fact of governmental capture by corporations, chiefly financial corporations. In effect, the US Fed and Treasury are continually giving transfusions to corpses. No serious person will note that about as much fluid as is being introduced is draining out beneath the corpses, much of it directly into the pockets of the executives and owners of those corporations.

Public debts so incurred must be classified as "odious debt" and be repudiated. But that is not yet politically possible. Meanwhile, the demands of these corpses has created the greatest funerary industry since the Pharaohs. It has become "All Money To The Banks" -- the capitalist equivalent of "All Power To The Soviets".

All that is required is the ability to repudiate the odious debt -- a definitely non-trivial "all". Once that is done a new focus on efforts actually required for the survival of our societies can be undertaken and the economy can be run along the lines of Modern Monetary Theory quite successfully. I am afraid that current attempts to apply MMT while ignoring the consequences of the funerary cult may be doomed. Too much of the real economy, from industry to residential real estate, has been sucked into the maw of the official cult of dead money. </rant>

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Dec 29th, 2010 at 09:10:49 PM EST
[ Parent ]
Psyched, this is how the world has worked since the Bretton Woods system collapsed in 1971. Unfortunately I have bad news for you: the unlimited supply abstract currency system is now over. If you continue printing money in excess of 13%/a (as it was made earlier this decade) while the physical size of the economy isn't growing, at one time you flare Velocity and it's all over.

Btw, if a Government doesn't collect taxes then its money is worthless.

Vencit omnia veritas.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Thu Dec 30th, 2010 at 07:09:45 AM EST
Perhaps a useful way of looking at money is that there are multiple stages.

First, you exchange goods and services: I'll fix your house if you give me a goat.

Second, you invent money fixed to a good or service: A penny loaf of bread.

Third, you associate the value to something that is not particularly useful as a good or service: The gold standard.

Fourth, you invent fiat money where there is no fixed purchasing price equivalency.

Fifth, your bankers invent fractional reserve banking, allowing money to be created out of thin air.

Sixth, you lose control of the value of your currency as your bankers manipulate the system so the value goes into their pockets.

by asdf on Fri Dec 31st, 2010 at 06:05:37 PM EST
That would be the historical-empirical description of money.  :-)

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jan 2nd, 2011 at 01:41:29 AM EST
[ Parent ]
The New Speed of Money, Reshaping Markets

A SUBSTANTIAL part of all stock trading in the United States takes place in a warehouse in a nondescript business park just off the New Jersey Turnpike.

Few humans are present in this vast technological sanctum, known as New York Four. Instead, the building, nearly the size of three football fields, is filled with long avenues of computer servers illuminated by energy-efficient blue phosphorescent light.

Countless metal cages contain racks of computers that perform all kinds of trades for Wall Street banks, hedge funds, brokerage firms and other institutions. And within just one of these cages -- a tight space measuring 40 feet by 45 feet and festooned with blue and white wires -- is an array of servers that together form the mechanized heart of one of the top four stock exchanges in the United States.

The exchange is called Direct Edge, hardly a household name. But as the lights pulse on its servers, you can almost see the holdings in your 401(k) zip by.



You can't be me, I'm taken
by Sven Triloqvist on Sun Jan 2nd, 2011 at 03:46:12 AM EST
as the lights pulse on its servers, you can almost see the holdings in your 401(k) zip by

If this doesn't make people take their retirement savings off the stock market, they deserve whatever happens to them at the next market meltdown.

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010

by Migeru (migeru at eurotrib dot com) on Sun Jan 2nd, 2011 at 04:38:00 AM EST
[ Parent ]
Single points of failure.

Electronic Trading Creates a New Financial Landscape - NYTimes.com

"It is a technological arms race in financial markets and the regulators are a bit caught unaware of how quickly the technology has evolved," says Andrew Lo, director of the Laboratory for Financial Engineering at M.I.T. "Sometimes, too much technology without the ability to manage it effectively can yield some unintended consequences. We need to ask the hard questions about how much of this do we really need. It is the Wild, Wild West in trading."

Mr. Lo suggests a need for a civilizing influence. "Finally," he says, "it gets to the point where we have a massive traffic jam and we need to install traffic lights."

Yup. The markets need to be made discontinuous, with periodic auctions - Gold Fix style - and data broadcast simultaneously, so all players have the same latency.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Jan 2nd, 2011 at 06:44:49 AM EST
[ Parent ]
The markets need to be made discontinuous, with periodic auctions - Gold Fix style - and data broadcast simultaneously, so all players have the same latency.

This is the smartest thing I've read so far in 2011.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 2nd, 2011 at 10:54:34 AM EST
[ Parent ]
"It is a technological arms race in financial markets and the regulators are a bit caught unaware of how quickly the technology has evolved ...

Regulators were warned, decades ago, this was coming - program trading started in the late 1960s.  They chose to apply band-aids and then sit on their asses while sticking their fingers in their ears while singing "La, la, la.  I can't HEAR you!"

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Mon Jan 3rd, 2011 at 12:38:51 PM EST
[ Parent ]
Please see the update I posted Wednesday morning.
Unfortunately, I could not make the update format correctly, so it is difficult to read. My apologies.
by psyched (railtravel [at] gmail dot com) on Wed Jan 5th, 2011 at 02:00:30 PM EST


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