- Jake

Friends come and go. Enemies accumulate.

And III, too?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

a diary in itself!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

1. A) I still don't understand why stagflation is scarier than a normal recession? After all, stagflation was resolved by "rebooting" the economy through an ordinary recession. So why is stagflation scarier than the recession that follows it, which is quite ordinary?

1. B) Or are you saying that the recession that follows it isn't an ordinary recession in some respects, or that the cause for the end of stagflation isn't the "reboot" but the re-opening of supplies of whatever strategic resource was lacking during the stagflation?

2. A) As an aside, Mig claims that there are simple technical measures that could be taken to combat inflation that are less likely to push the economy into a recession, but which are painful to bankers and therefore not taken. But the technical lingo involved escapes me at the moment.

2. B) Something about increasing the amount of "real money" banks must have when they create fiat money, or somesuch. Would this work?

Gaianne:

Can a sustainable economy have a form of money--abstract markers or tokens of real economic value, a medium of exchange?  We should not assume the answer is yes, but we might well consider what constraints a yes answer would have to meet.  It must be simple and transparent enough that corruption and cheating are not easy; so much is clear.  But more, the systemic purpose of money is to move goods and energy from where they are to where they are needed, and to meet this purpose money must flow readily through all levels and parts of the system without accumulating or clogging up.  

This gets to the nub of the problem that was the focus of a recent workshop I attended in Seattle.

Credit (aka "Time to Pay") - and not "Money" - is necessary for the circulation (ie exchange) of "Money's Worth" in goods, services, energy etc.

The problem is that we are used to seeing Money as an Object, and specifically as an IOU. Our Money consists of interest-bearing Debt aka Bank-created Credit.

Some - CH Douglas's Social Credit was such a proposal - saw the solution as the issue of Money as Credit by government directly with suitable mechanisms to address inflation. "Community Currencies" - such as LETS - are based upon a money as Credit created within a closed community.

But Credit is in fact only a small part of the financial system. It is the bloodstream, not the body. While Credit is implicit in a monetary system, it need not - indeed should not be used as money, interest bearing or otherwise, because credit alone is not enough.

IMHO Money exists only in the transient moment of exchange and is implicit in a monetary system. A monetary system exists wherever a barter network/ clearing union incorporates "trade credit" from seller to buyer.

I think Money is best described as "Dynamic Value". The analogy of money = Dynamic Value with kinetic energy is almost exact.

Credit is necessary for the deployment of "money's worth" to create productive assets. ie "Property" of different types, such as land, knowledge, buildings, machinery.

When created to acquire existing assets (eg through mortgage loans) the result is everywhere and always asset price inflation.

These productive assets constitute "Capital" - which I see as "Static Value" (analogous to potential energy) which produces "money's worth" in units of production which have a Value in exchange.

These productive assets are the subject of the financial claims (legal protocols) of "Equity" (shares in a Corporation) and secured Debt (eg mortgage loans) which together constitute what some call "Finance Capital".

Note here that one of the great mistaken assumptions of both conventional Economics and Marxism is that only "Labour" and not "Capital" is productive. This anthropocentric assumption is as accurate in understanding the real world as was the assumption in Ptolemaic cosmology that the Sun goes around the Earth.

This anthropocentric assumption - that only Labour has Value - justifies taxation policies based upon Income, rather than upon "Wealth" and particularly upon the privilege of private Property over Commons that encloses that Wealth.

But to return to the point, I believe that it is possible to replace the "deficit-based" but "asset-backed" value units which constitute our deficit-based Money with entire new classes of "Redeemable Units" denominated in energy, and land rental value, in particular.

We may do this simply by using a new legal "enterprise model" - already in increasing use, simply because "it works" - to invest in these assets and to enable new "Units" of production.

These Units will be fungible (ie acceptable in exchange) and capable of circulating as "asset-based" currencies which are redeemable in "money's worth" which is relevant to most people (eg Kilowatt Hours; Square Metre Years), and which is why they will accept them in settlement of credit obligations.

This circulation requires credit = time to pay, and that credit in turn requires trust. This trust currently comes from a Bank guarantee (which is the true value a Bank provides as a credit intermediary)but could equally be a mutual/ community guarantee backed by a pool of "Community Capital" - resources in community ownership - rather than the bank's pool of "Regulatory Capital" in private ownership.

I believe that we may avoid Stagflation only if we are able to replace (finite) non-renewables with (infinite) renewables).

This requires massive investment in a "Green New Deal" - achievable by monetising energy on the one hand, and using "energy partnerships" on the other - to create the productive Capital necessary.

The US is capable of leading this global Capital creation - but not of "owning" it.

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