sources of obligation, sources of value
March 17, 2016 1:56 AM Subscribe
an introduction to fiat money (pdf) by Steve Randy Waldman:* - "Self-reinforcing bootstrap dynamics hold as strongly for a king's token as it would for any other thing, but much more stably so, since the king can reinforce and assure the stability of his token so long as he retains the political capacity to coerce or persuade payment of tax." (via)
"The problem was that if the subsistence base was capable of supporting the population entirely, colonial subjects would not be compelled to offer their labor-power for sale. Colonial governments thus required alternative means for compelling the population to work for wages. The historical record is clear that one very important method for accomplishing this was to impose a tax and require that the tax obligation be settled in colonial currency. This method had the benefit of not only forcing people to work for wages, but also of creating a value for the colonial currency and monetizing the colony. In addition, this method could be used to force the population to produce cash crops for sale. What the population had to do to obtain the currency was entirely at the discretion of the colonial government, since it was the sole source of the colonial currency." —Matthew Forstater on monetizing colonial Africa from Taxation and Political Accumulation (pdf)some excerpts...
- the role of the banking system: "Banks' incentives are to subsume all spheres of human activity into income-generating enterprises to which funds can be profitably advanced. It's an overstatement and a bit conspiratorial to say that banks are 'responsible' for the increasing colonization of all aspects of life by market management and control. But their incentives are certainly consistent with these developments."
- fiat money is an activity, not a thing: "For the most part, real economic value cannot be stored, it must be produced and reproduced every day. Money as a store of value is a convenience, an easy, durable claim on future value. But it is only a claim. That future value will still need to be produced."
- how fiat fails: Fiat fails when the sovereign that manages it fails... Fiat failure is never due to 'printing' alone. It represents an imbalance between printing and capacity."
- in conclusion: "The serious problems with fiat currency are ethical. Fiat currency management is an incredible lever for social control, and people at the center, in government or in the banking system, have many opportunities for corrupt self-dealing... Improving on fiat currencies, via cryptocurrencies or any other means, is a worthy project. But I hope you'll understand how fiat currencies work — and they do work — and focus on remedying their serious ethical deficiencies."
- How does inequality 'freeze' an economy? - "Some European physicists have used a [random exchange network] model to examine how a significant change in inequality affects the overall level of exchange... What they find is troubling, although not all that surprising -- rising inequality tends to undermine exchange."
- Social credit is the answer - "The solution is obvious: Social Credit. Adopt the policies of the Social Credit Party of Alberta in the 1930s. Adopt the policies of Upton Sinclair's campaign for Governor of California in the 1930s. Adopt the policies that are taken as a matter of course and are in the background of Robert A. Heinlein's 1947 novel Beyond This Horizon."
- Incorporate–for free–everybody with a Social Security number as a bank holding company.
- Let everybody then have their personal bank holding company join–again for free–the Federal Reserve system as a member bank.
- Offer every such personal bank holding company a permanent long-term open-ended infinite-duration zero-interest line-of-credit to draw on, up to some set maximum nominal amount.
- Raise the amount of the line-of-credit maximum every quarter by that quarter's desired helicopter drop.
- Central banks beat Bitcoin at own game with rival supercurrency - "A central bank crypto-currency is coming soon, leap-frogging Bitcoin, and that spells big trouble for the finance industry."
- The Financial System of the Future - "In this context, two relatively new interrelated ideas hold considerable appeal: that central banks should issue their own digital currency; and that financial transactions more broadly could be recorded on a decentralized ledger."
- New Zealand plans to give everyone a 'citizen's wage' and scrap benefits - "We are keen to have that debate about whether the time has arrived for us to have a system that is seamless, easy to pass through, [with a] guaranteed basic income and [where] you can move in and out of work on a regular basis."
The researchers found another interesting effect -- a "trickle up" flow of wealth quite different from the usual "trickle down" picture of supply-side economics. In an economy with appreciable inequality, capital tends to flow from those with less to those with more, generating a cascade of transactions along the way. Hence, policy interventions aiming to spur economic activity should work better if they inject money into the system at the lower end, rather than from the top... Central bankers might have a more powerful and beneficial effect if they instead injected money directly into the accounts of citizens, who could then use it to pay down debts or spend as they like. The idea of such "people's quantitative easing" is gaining popularity, and for good reason. It would more directly attack the budget constraints holding back the vast number of individuals on whom economic growth depends.
Central banks should, instead of taking all the revenue from seigniorage they create and transferring it all back to the Treasury, calculate each quarter how much of the seigniorage they hold should be distributed to citizens in the form of that quarter's helicopter drop. I am not certain about how the legal-institutional constraints bind the BoJ, and ECB, and the BoE. I believe that the Federal Reserve could start such a policy régime today:
The same institutional forces that have, since the selection Paul Volcker, kept the Federal Reserve focused on avoiding an inflationary spiral would still bind. There would be no way to gimmick such a Social Credit system to turn it into a giveaway to the bankers. It would give the Federal Reserve the power to engage in the one policy that nearly all economists are confident will always have traction on nominal demand. Once the Federal Reserve was off and rolling, other central banks would, I think, quickly find mechanisms within their current institutional-legal competence to accomplish the same ends.
- Perspectives on a Universal Basic Income (pdf) - "A sociotechnological dividend: There is no evidence that today's 'winners' work harder or need to work harder than the extraordinary innovators or businessmen of the past. The vast increase in wealth that comes from a relatively few getting an ever greater share of an ever larger pie is not 'economically efficient' (i.e. necessary to inspire production and growth), but simply a matter of happenstance. If this is right, then the economic case for changing our institutions to alter this happenstance, not-so-great outcome is strong. Giving everybody a 'property right' on an equal share of some portion of aggregate output is a facially fair way to change our institutions in a way that resonates and is consistent with our practice of modern capitalism. The dividend stream generated by such a universal shareholding would look identical to a universal basic income."
- MMT stabilization policy - "A government's solvency constraint ultimately lies in its political capacity to levy and enforce the payment of taxes [which] 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."
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