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The Free-Banking vs. Central-Banking Debate
April 14, 2011 9:41 AM   Subscribe

Out of thin air? "Have you ever said something like 'Let me buy you a beer next week'? I'm sure you have. We all issue promises of this sort. And we frequently use such promises as a form of currency... I have just described a simple credit exchange. Societies rely heavily on promising-making and promise-keeping. It is the foundation of all financial markets. I'd like to point out something about the promises you make. They are made 'out of thin air.' "

At the end of his post David Andolfatto ('a Vice President in the Research Division of the Federal Reserve Bank of St. Louis') asks what I think is a really great question:
Let's divert attention to more substantive issues. For example, the Fed has a legislated monopoly over the supply of small-denomination paper. Is this a good idea? What if we keep the Fed as is and allow free-entry into the business of money creation? If an unfettered private money system works well enough, it might drive Fed notes out of circulation. On the other hand, perhaps the demand for Fed paper will remain. Government paper (in the form of US Treasuries) drove out private money (AAA tranches of MBS) in the repo market in the past financial crisis. Now, isn't that interesting?
BONUS
  • How to Start Your Own Private Currency - "It's not as complicated as it sounds. You can 'back' it with gold, or mimic an I.O.U. for one hour's worth of work. All you need is a system other people can understand and, most importantly, trust."
  • On Private Money - "a survey of elderly in Japan found that they preferred workers who were paid in Fureai Kippu to those paid in Yen, because the care was better (or more 'authentic'). The absence of interest rates is what creates this effect — different currencies foster different relationships between people"
  • Currency Solutions for a Wiser World - "civilization needs a new operating system"
  • Online-Only Currency BitCoin Reaches Dollar Parity - "The BitCoin peer to peer currency briefly reached exchange parity with the US dollar today after a spike in demand for the coins pushed prices slightly above 1 USD:1 BTC. BitCoin was launched in early 2009, so in only two years this open source currency has gone from having no value at all to one with not only an open market of competing exchanges, but the ability to buy real goods and services like web hosting, gadgets, organic beauty products and even alpaca socks."
  • Why the Dollar's Reign Is Near an End - "For decades the dollar has served as the world's main reserve currency, but, argues Barry Eichengreen, it will soon have to share that role. Here's why—and what it will mean for international markets and companies." [1,2,3]
  • The free-banking vs. central-banking debate - "Long ago, a remarkable debate took place about the optimal way to organize an economy's money and banking system. The proponents of free-banking eventually lost out to those who favored some form of central bank regime..."
  • Inflation confusion - "The Fed, like every other central bank, is powerless to prevent fluctuations in the cost of living and increases of individual prices. We do not produce oil. Nor do we grow food. Or provide healthcare..." [1,2,3]
  • The revolution in central banking - "For a generation, the accepted orthodoxy has been to focus on taming inflation. Financial stability has taken something of a back seat. Now, whether mandated to do so or not, western central banks have bought up sovereign debt to sustain the financial system, printed money by the truckload to stimulate their economies, sacrificed some of their independence to coordinate monetary policy more closely with fiscal decisions, and contemplated new ways of preventing asset bubbles. Some -- such as Bank of England Governor Mervyn King -- have joined wider political protests at commercial banks that are still behaving as if they are 'too big to fail', and as if being bailed out is just a hazard of business."
  • King helps the case for banking reform - "The governor of the Bank of England did not mince his words when talking about the need for financial reform. Along with some digs at the industry's ethics, he suggested that bankers were still not living in the market economy. That was why they were still able to pay themselves such high bonuses... banks are still able to borrow at artificially low rates because creditors do not believe they will be allowed to fail. This in turn encourages risky behaviour and excessive remuneration." [1,2,3] (contrast w/labour...)
  • Modern Monetary Theory - "MMT offers the most promising toolkit for crafting a desperately needed replacement of status quo central banking."
  • Disrupting the banking system - "on whether and how Internet startups are disrupting the banking system" (cf. payment systems)
  • The Bank of Facebook: Currency, Identity, Reputation - "There has been much speculation recently about the role Facebook Credits could play in becoming a global virtual currency, and even the possibility of Facebook becoming a bank. In many ways, it already is becoming a bank – just not in the traditional sense. Facebook is harnessing the power of the social graph, and has certainly adopted an expanded definition of what 'currency' means. It's time for the rest of us to hop on board."
  • Facebook, Your Future Bank - "Forget sharing photos. Mark Zuckerberg may soon manage your finances..."
  • What happens when Facebook becomes a Bank? - "It starts with a Facebook piggy bank, payment system and credit card. Then it's a savings account and a loan perhaps for university. What about a mortgage, life insurance, health insurance, car insurance, house insurance and a pension? Afterall with a billion users these should be the best deals on the planet. Volume speaks price. Low price. This is before you offer your members peer to peer lending like Zopa giving them better interest and lower risk on their savings. Could it really happen? Are the existing banks holding your attention right now? Do you trust your existing bank? Do you trust Facebook to manage your money? Would you lend Facebook money? Would you invest in Facebook's public offering of shares? I guess trust is the killer app and it all depends if Facebook can pull that off."
Of course there's been talk of an Apple iBank, a Google Bank, a Walmart Bank and state banks for awhile now, and while they can all be rightly criticized, I'm not sure that the status quo -- w/r/t money, banking, payment, credit and value systems -- can be maintained either.
posted by kliuless (47 comments total) 53 users marked this as a favorite

 
My personal currency is measured, from low to high, in buybacks, leftovers, blowjobs and writing gigs.
posted by The Whelk at 9:46 AM on April 14, 2011 [3 favorites]


i propose we base our new economy on metafilter favorites
posted by pyramid termite at 9:48 AM on April 14, 2011 [9 favorites]


I will gladly pay you Tuesday for an emergency overnight loan from the Fed today. Wait, scratch that. How about we just call it even?
posted by RobotVoodooPower at 9:48 AM on April 14, 2011 [1 favorite]


Bonus indeed!
posted by dobie at 9:48 AM on April 14, 2011


I was about to complain that this was a terrible post, until I saw the "More Inside..."
posted by pharm at 9:50 AM on April 14, 2011


For those interested, see also the recent This American Life episode "The Invention of Money," which had contributions from the Planet Money team. Leave it to Ira Glass to make even a discussion about currency something that is insightful and engrossing! Episode description here, and the complete audio version of the episode (for free) on their website here.
posted by genekelly'srollerskates at 9:56 AM on April 14, 2011 [1 favorite]


2008:
"If all your friends aren't on Facebook yet, they will be: How one social network inevitably wins over even its detractors"

2011:
"Soon Facebook will be your bank"

2013:
"Can't find a job? Facebook will pay you. Here's what they want in exchange"

2020:
"We've got Facebook in our blood—literally: How modern medicine became a physical network"

2027:
"Unforeseen consequences of Facebook's upcoming purchase of Earth's oxygen supply? Not to worry, say lawmakers"
posted by AugieAugustus at 10:03 AM on April 14, 2011 [16 favorites]


posted by AugieAugustus at 1:03 PM on April 14 [+] [!]

penduluum was required by statute to like this [thumbs-up]
posted by penduluum at 10:05 AM on April 14, 2011 [1 favorite]


Interesting post, I'm not sure what prevents a return to company store style shenanigans when you allow the development competing currencies. Do I want to be locked into buying Facebook approved products (at a nominal markup) with my FaceBucks or would I rather deal with a form of currency that is more transportable. It's like the whole store credit deal with any number of stores. You want cash? You pay a big penalty but if you are content with store credit you get a bigger "return" because nothing is leaving the system.

And that doesn't even address the issues with taxation. If wealth is being generated even if it's in the form of arbitrary tokens what is the "real world" value of that transaction. Are taxes being collected?

I have no doubts that the current banking regime has significant structural problems but I'm wondering what sort of system we would be trading the current problem ridden system for. At a minimum it seems like it would be even less transparent.
posted by vuron at 10:07 AM on April 14, 2011 [3 favorites]


Between Making Money and The Baroque Cycle I think I almost understand the abstract nature of currency, but only if it's explained to me via fantasy world metaphors.

Although over at Mefightclub, the Minecraft people are having a discussion on how to create a stable, viable currency system for our complex online fantasy world. So far I think we're backing it on time spent, not materials.
posted by The Whelk at 10:08 AM on April 14, 2011


Private currencies create more opportunities for unconstrained monopolies and abusive labor practices. I'm with vuron on the point above about the bad old days of the company store. Feudal systems throughout history were also often characterized by the profusion of privately minted and backed currencies. For what should be obvious reasons (disproportionate command of material wealth and resources to back the currencies), such systems privilege the already wealthy even more than our current deeply flawed system. These ideas are a form of backsliding, not progress. There's a lot of that going around these days.
posted by saulgoodman at 10:14 AM on April 14, 2011 [3 favorites]


Currency is a consensual hallucination. BOO!
posted by Splunge at 10:16 AM on April 14, 2011 [3 favorites]


That said, I totally agree with this:
Anyway, back to my main point. Which is that condemnations of the Fed based on charges of creating money "out of thin air" are off the mark. The discussion should instead center on whether the Fed, as currently construed, is an institution that can be trusted to make good on its promises. This is the same question one would ask of any agency, public or private.
posted by saulgoodman at 10:16 AM on April 14, 2011


I'm with vuron on the point above about the bad old days of the company store.

I'll third that. If corporations can start paying people in scrip like they used to, it will be a very dark thing indeed.
posted by briank at 10:17 AM on April 14, 2011 [1 favorite]


Although over at Mefightclub, the Minecraft people are having a discussion on how to create a stable, viable currency system for our complex online fantasy world. So far I think we're backing it on time spent, not materials.

Congratulations - you've invented aristocracy. Online economies actually show up the weakness of time-based currencies, because they're so much bigger and 'game time' moves faster than that in the real world. the problem is that the people who get into the economy early end up so much richer than people who join later that no matter how hard the new arrivals work, they can never catch up (unless there's a market system, but supporters of time-based currency are usually hostile to such exchange mechanisms). And once a majority of people realize they can never catch up, they reject the existing system. In the real world, this means a revolution and either parliamentary government (occasionally) or dictatorship (usually). In the online world, they just...leave. Your virtual bank if it exists in-game, or the game if the currency is institutionalized. It's a tricky problem.
posted by anigbrowl at 10:18 AM on April 14, 2011 [8 favorites]


How about y'all just agree to take my IOUs, which will state "I Owe You [whatever it is you gave to me]," with my signature and a personalized doodle for you. In exchange, you will agree to hold onto said note until such a time that I become famous for something, and my individual doodles are worth the price of the item you gave me?

Deal? Fantastic!
posted by filthy light thief at 10:20 AM on April 14, 2011 [1 favorite]


Congratulations - you've invented aristocracy.


I've always wanted to be a Comte'.
posted by The Whelk at 10:22 AM on April 14, 2011


Every serf-based economy requires a company store.
posted by Blazecock Pileon at 10:26 AM on April 14, 2011


i propose we base our new economy on metafilter favorites
posted by pyramid termite at 12:48 PM on April 14 [+] [!]


Either people don't like your idea, or they like it so much they're hoarding their favorites.
posted by Kabanos at 10:29 AM on April 14, 2011 [3 favorites]


Yeah, "company store" was my first thought, and is the only possible outcome.

"They offered me either 7 US dollars an hour, or 12 Wal*bucks. The choice was obvious."
posted by Faint of Butt at 10:33 AM on April 14, 2011 [1 favorite]


i propose we base our new economy on metafilter favorites

There are worse things then having Astro Zombie as the linchpin of your economy.
posted by The Whelk at 10:33 AM on April 14, 2011 [2 favorites]


Be careful about starting your own currency, because you could end up like this guy.
posted by champthom at 10:33 AM on April 14, 2011


Also, Ace of Spades is not like Minecraft.
posted by anigbrowl at 10:35 AM on April 14, 2011


I was previously unaware of BitCoin. Having just read the how-it-works, which explains that the BitCoin currency's integrity relies on the aggregate CPU power available to honest traders being greater than that available to system attackers, it strikes me that gaming BitCoin would be an ideal application for a malware-powered bot army. So why should I assume that aggregate CPU power available to honest BitCoin traders hats will always outweigh that available to black hats?
posted by flabdablet at 10:57 AM on April 14, 2011 [1 favorite]


Too many hats. Beddie byes for me.
posted by flabdablet at 10:58 AM on April 14, 2011


your assumption is quite right. BitCoin is the potlatch of digital currencies.
posted by anigbrowl at 11:04 AM on April 14, 2011


I will fucking starve to death before I buy something with "facebook bucks".
posted by T.D. Strange at 11:14 AM on April 14, 2011 [6 favorites]


I wonder how well you can predict repayment odds if you have all of a person's personal info to analyze. If you can do it better than the banks can, given the inefficiencies of the credit reporting system, you can either offer lower interest rates, make more money, or both.

I also wonder how much of a motivator loosing access to Facebook will be if someone does get behind on a loan repayment. The bank can take your house or car, but Facebook can take your friends.

It also gives Facebook a vested financial interest in your well being and career status, which could either lead to having your interest rates adjusted in real time in response to what it knows about you, or slightly more distopian interventions in your life.

"Looks like you've been going out drinking a lot Dave is everything alright? I've got a lot riding on your success Dave, and hate to see you sabotage yourself like this. I've had a chat with your boss, and we both think you're a good guy with a bright future, but you'll need to buckle down if you want to get anywhere. Now Dave, rather than going down to the bar, why don't you get working on those reports and I'll talk to Mr Archer about getting you that raise?"
posted by Grimgrin at 11:23 AM on April 14, 2011


"Looks like you've been going out drinking a lot Dave is everything alright? I've got a lot riding on your success Dave, and hate to see you sabotage yourself like this. I've had a chat with your boss, and we both think you're a good guy with a bright future, but you'll need to buckle down if you want to get anywhere. Now Dave, rather than going down to the bar, why don't you get working on those reports and I'll talk to Mr Archer about getting you that raise?"
posted by Grimgrin at 1:23 PM on April 14 [+] [!]


"Your future is too important for me to allow you to jeopardize it."
posted by AugieAugustus at 11:27 AM on April 14, 2011 [1 favorite]


2005 WHAT IS FACEBOOK?

2008 JOINED FACEBOOK

2011 OH NOES FACEBOOK WILL ROOL THE EARTH

2015 WHAT WAS FACEBOOK AGAIN?
posted by unSane at 11:27 AM on April 14, 2011 [6 favorites]


pyramid termite: i propose we base our new economy on metafilter favorites
Eh, but then we'd have to calling them je$$amyn and cort€x...
posted by hincandenza at 12:16 PM on April 14, 2011


And we could use Pb as coinage.
posted by Splunge at 12:19 PM on April 14, 2011 [2 favorites]


Don't forget the Ripple project!

As I understand it, there isn't much concern about the "greater than 50%" attack. An attacker only gains double spending his own bitcoins, not printing more or spending other people's. I'd imagine anyone issuing real currency for bitcoins can reverse their wire transfers once they detect this.

There is a more insidious weakness in bitcoin's usage of IRC for bootstrapping, which permits an attacker to push clients onto his own network, again gaining him double spending attacks, presumably better ones.
posted by jeffburdges at 1:02 PM on April 14, 2011 [1 favorite]


Nice collection of links, kliuless - thanks for posting this!

I really enjoy Bernard Lietaer's work, as well as projects like BitCoin and Ripple and Metacurrency.

I am fascinated by currencies and the way they work, especially with respect to the social, political, cultural and environmental systems within which they operate, and the way that banks and money systems ultimately rely on relationships of trust. I spend a lot of time exploring assumptions and behavior regarding money, and trying to understand the systemic roots of various financial crises. Not an easy task!

One timely question I am investigating anew these days is: What happens when trust in centralized money systems breaks down on a wide scale, and how does this affect the viability of localized, alternative, complementary, or free currencies and gift economies?

Here are a few links from a collection I've amassed while exploring this question and learning about demurrage currency. I've been thinking about organizing some of these into an FPP of my own eventually - especially with respect to the work of Charles Eisenstein, who inspires me greatly - but I haven't yet figured out how I want to present it.

The Currency of Cooperation by Charles Eisenstein (a chapter from his brilliant book The Ascent of Humanity, available free in its entirety online)

Money and Life (documentary in progress, featuring interviews with Lietaer, Thomas Greco, David Korten, Hazel Henderson, Eisenstein and many others)

The Money Fix (documentary on alternative money systems)

Inside Job (Charles Ferguson's documentary on the 2008 financial crisis)

Comment on the Wörgl Experiment with Community Currency and Demurrage, by Thomas H. Greco Jr. (author of The End of Money and the Future of Civilization)

Complementary Currency: For Bootstrapping, But Not For Everything

Mary-Beth Raddon has also done some very interesting work on the micropolitics of alternative currency movements, including a gender and class analysis (see her book Community and Money for more.)
posted by velvet winter at 1:24 PM on April 14, 2011 [3 favorites]


I'm interested in an online currency that directly translates into advertising actions.

There would be three participant types : clients, servers, and advertisers.

First, a client application requests a service from a server who responds by fulfilling the request and giving the client a channel token, which it inserts into it's advertisement queue.

Second, our client the anonymizes this channel token before handing it off to advertisers, maybe recommended by the server, maybe random. Advertisers are given rough demographic information by the client, like language, gender, and age +/- 3 years, but nothing identifying.

Third, advertisers then pay the server in impression and click tokens using this channel token. Ideally, our client should verify these payments occasionally, especially the clicks, probably by simply processing them themselves when obtaining images or clicking.

Fourth, servers redeem the impression and click tokens with the issuing advertiser. All the tokens prevent anyone from cheating.
posted by jeffburdges at 1:29 PM on April 14, 2011


The discussion should instead center on whether the Fed, as currently construed, is an institution that can be trusted to make good on its promises. This is the same question one would ask of any agency, public or private.

yea, it's not whether it's public or private, or free vs. central, it's about building a system that encourages trust, cf. exit, voice, and loyalty... as dostoevksy sez in the dream of a ridiculous man: "If only everyone wants it, it can be arranged at once."

I really enjoy Bernard Lietaer's work...

me too :P btw, here's lietaer@TEDxBerlin... oh, and also, i've neglected to mention flabdab-lets!
posted by kliuless at 1:49 PM on April 14, 2011 [2 favorites]


The problem with bitcoin is that that at the core money is about abstracting away barter. You have one dollar that can purchase a bunch of stuff, and you can trade those dollars for other abstract things. But at a certain point you need to transfer those bitcoins for things like food and rent. When landlords and grocery stores start taking bitcoins, then they might have some application.
posted by delmoi at 5:14 PM on April 14, 2011


Banks, banks, banks...

U.S. investigators are examining whether some of the world's biggest banks colluded to manipulate a key interest rate before and during the financial crisis, affecting trillions of dollars in loans and derivatives, say people familiar with the situation.

For the past year, law-enforcement officials have been investigating whether the U.S. and European banks understated their own borrowing costs, which are used to calculate the London interbank offered rate, or Libor. The investigators are now looking into whether the banks effectively formed a global cartel and coordinated how to report borrowing costs between 2006 and 2008.
U.S. Asks if Banks Colluded on Libor

**

Senator Carl Levin, releasing the findings of a two-year inquiry yesterday, said he wants the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought the complex securities known as collateralized debt obligations without knowing the firm would benefit if they fell in value. The Michigan Democrat also said federal prosecutors should review whether to bring perjury charges against Goldman Sachs Chief Executive Officer Lloyd Blankfein and other current and former employees who testified in Congress last year. Levin said they denied under oath that Goldman Sachs took a financial position against the mortgage market solely for its own profit, statements the senator said were untrue.

"In my judgment, Goldman clearly misled their clients and they misled the Congress," Levin said at a press briefing yesterday where he and Senator Tom Coburn, an Oklahoma Republican, discussed the 640-page report from the Permanent Subcommittee on Investigations.
Goldman Sachs Misled Congress, Duped Clients

**

...the government has tried to change the ratings agencies. The Dodd-Frank financial reform law has some bold measures, like making the ratings firms liable for their judgments. Unfortunately, the rules are in danger of not being enforced because of budget constraints and resistance from the agencies.[...] Analysts are to lean over backward for the bankers. [...] “If some analysts drank the Kool-Aid, it was only because management mixed and stirred it up and threatened that analysts wouldn’t get to heaven on the spaceship unless he or she drank it,” Mr. Harrington ["an analyst in the structured finance group at Moody’s for more than a decade, much of it spent rating collateralized debt obligations."] said. Vows of Change at Moody’s, but Flaws Remain the Same
posted by The Emperor of Ice Cream at 5:40 PM on April 14, 2011


is this related to the beer economy? this article actually talks about it more:

House-moving is the prime market, but the idea is infinitely expandable, making for a delightful parlour game. What’s the penalty, in liquor, for bogarting the last slice of pizza, or usurping someone’s position at work, or shaving your buddy’s dog? What are the costs, in liquor, of innumerable favours?

as for Facebook... I love it to death, but I'm not sure if i'd trust it as a bank. my comments keep disappearing. then again, my actual bank is having trouble processing people's payroll today. so yeah....

i owe my mate two beers
posted by Lovecraft In Brooklyn at 6:06 PM on April 14, 2011


The problem with bitcoin [...] When landlords and grocery stores start taking bitcoins, then they might have some application.

That's the problem for any new currency, isn't it? If they aren't mandated by the King or whoever, you need some way to get them started. Bitcoin seems to have a better mechanism to encourage this than any other digital currency I've heard of, with an economic incentive to create and spend more 'coins' when they're in short supply as they apparently are right now. They exchange rate will have to reach something closer to equilibrium before that becomes really effective, but if that happens it could be more self-sustaining than other approaches have thus far proven.

Bitcoin FAQ: "At the moment, though, you can generate new coins quite profitably, if you expect them to have real value in the future. If you choose to, be aware that Bitcoin is still experimental software."

I'm going to give that a try. If it's still around next winter, I'll be generating coins at zero cost, as the electricity consumed will just go to heating the house. In the unlikely event that this ever really catches on, people who live in cold climates will rule the world. Global warming will reduce the money supply.
posted by sfenders at 4:44 AM on April 15, 2011


I think maybe it's gotten a lot less profitable to calculate Bitcoin money into existence since their FAQ was written. If I estimate correctly, my poor old desktop PC will take on average a couple of years to find about $50 worth. No doubt there are more efficient machines for doing it, but it doesn't look like it has far to go before there's no easy 'money' to be had there. I hadn't noticed that the Bitcoin money supply does not actually depend on CPU power. It seems to be set at a target amount controlled by a sort of central bank. They arbitrarily adjust the 'value' of CPU cycles to target the desired amount of money creation. Well, it's sort of interesting.

Unfortunately it seems like there is no attempt at providing transaction anonymity. Still, it would be better than credit cards I guess. The desirability of a new digital currency as I see it is not based on any nonsense about central banks creating stuff "out of thin air". It is motivated instead by the fact that existing paper money does not work so well over the Internet for ordinary transactions. It's not a matter of your landlord or grocer accepting it, you can simply hand them cash. Instead we just need amazon.com and metafilter accepting it.
posted by sfenders at 5:43 AM on April 15, 2011


featuring interviews with Lietaer, Thomas Greco, David Korten, Hazel Henderson, Eisenstein and many others

i chipped in :)

i was also thinking you should check out keith hart; i keep on returning to this paragraph:
The idea of money as a source of social memory was also crucial for John Locke who figures prominently in our story as the philosopher who inaugurated the modern age of democratic revolutions. Locke was obsessed with money's role both in establishing a progressive social order and in subverting it as its criminal antithesis. Indeed he believed that money launched humanity from the state of nature onto the road to civil government. As long as men’s possessions were limited to perishable products, the scope for property was restricted. Money, by offering a durable store of value convertible against all useful things, unleashed the potential for property accumulation and for the intergenerational transmission of inequality. For Locke then, money was indispensable to that development of cultural memory on which civilisation depends.
but if i may draw your attention to (SRW's take on) MMT for a moment:
A large stock of 'risk-free' financial assets allows people wishing to carry wealth forward to shirk their duty to steward resources carefully and bear the consequences of investment failure. Thus, the availability of government obligations simultaneously degrades the quality of real investment (by disincentivizing supervision) and magnifies the distributional injustice that attends failures of aggregate investment by shifting the burden of those shocks onto risk investors and workers. In theory, governments can mitigate this injustice by careful transfers and expenditures ex post, and that might be the right policy, but in practice those who disproportionately hold existing government obligations disproportionately hold political power, and resist the issue of new obligations which might dilute the value of existing claims... Absent an accommodative stock of government obligations, recessions would be crucibles that separate the deserving from the undeserving rich, and would thin the ranks of the rich generally. Recessions should be periods that decrease inequality, but the availability of default-risk free claims whose purchasing power is politically protected inverts the dynamic.
which, in essence, i think is:
...a government's 'solvency constraint' is not a function of any accounting relationship or theories about the present value of future surpluses. A government's solvency constraint ultimately lies in its political capacity to levy and enforce the payment of taxes... Note that a government's 'political capacity to levy and enforce payment of taxes' depends first and foremost on the quality of the real economy it superintends. The value that a government is capable of taxing if necessary to sustain the value of its obligations increases with the value produced overall. A government that wishes to be solvent should first and foremost interact with the polity in a manner that promotes productivity. Secondly, the political capacity to levy taxes depends upon either the legitimacy of or the coercive power of the state. A government that wishes to sustain the value of its obligations must either gain the consent of those it would tax or maintain an infrastructure of compulsion... I like to imagine excessively coercive regimes are inconsistent with overall productivity...
that is all :P

cheers!
posted by kliuless at 8:53 AM on April 15, 2011 [1 favorite]


oh and hey, maybe they'll accept 'projects like BitCoin and Ripple and Metacurrency'!
posted by kliuless at 9:09 AM on April 15, 2011


Also, Ace of Spades is not like Minecraft.

That looks amazing. How did I miss this?
posted by thsmchnekllsfascists at 9:49 AM on April 15, 2011


...what constitutes a brick today?

they're making it up as they go along, but is this ideal?
posted by kliuless at 9:54 AM on April 15, 2011


i chipped in :)

Excellent. I'm really looking forward to watching the Money & Life documentary in its entirety. I watched all seven parts of the interview from the film with Charles Eisenstein. Fascinating and compelling! Can't wait to see the rest.

And thanks for the additional references. I see that there are plenty of other great links to explore in your posting history here, too, kliuless...that'll keep me busy for awhile!
posted by velvet winter at 11:49 AM on April 15, 2011 [1 favorite]


Local Currencies To Replace Dollar For 5 Countries' Dealings [eichengreen (1,2,3,4,5,6,7,8,9) and pettis have been good on this i think btw]
posted by kliuless at 9:09 PM on April 17, 2011


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