Local currencies' time to shine
July 7, 2020 12:34 AM Subscribe
Complementary currencies for municipal finance - "It is an act of criminal malfeasance that the United States' federal government has not eased the tremendous fiscal pressure on states and municipalities, enabling them to prioritize public health and long-term economic wealth over immediate maintenance of tax revenue. Misgovernance of the United States presently rises to the level of war crime (and that is not just Donald Trump). A recent article by Rohan Grey, aptly titled Monetary Resilience, highlights one way this national misgovernance might be circumvented. Municipalities could issue complementary currencies..." (via)
If the Federal Government Won't Fund the States' Emergency Needs, There is Another Solution - "California's own history provides a potential path forward. Back in 2009, when faced with a similar fiscal crisis, California's state controller, John Chiang, began printing IOUs in lieu of cash to pay taxpayers, vendors, and local governments. In the context of a $26 billion fiscal deficit, the amount of IOUs created was actually quite small: 28,750 IOUs worth $53.3 million issued initially. But these IOUs came with a potentially radical provision, namely allowing them to be used for personal income tax refunds—an action that effectively would have meant that California was de facto entering the currency issuing business."
What a Solidarity Economy Looks Like - "Despite President Bolsonaro's COVID-19 denialism, a small Brazilian city has one of the most ambitious responses in the world."
Suppose a municipality issued basically a gift card with which certain taxes and fees could be paid at a discount. In particular, suppose that only business taxes and fees are granted this discount, but gift card balances are sold just to individuals and in limited amounts. Suppose that local businesses can apply for “merchant accounts” with respect to these gift cards, accepting payment from customers in gift card dollars just as they might from a debit card. Businesses would be eager to receive this local scrip, at least until this revenue is enough to cover all of their tax obligations eligible for the discount. They would encourage customers to pay in the scrip, whether by sharing the tax discount directly, or by offering other inducements. The overall demand inspired by the tax discount would be more than consumer facing business’ tax obligations. These businesses’ local suppliers will also prefer to be paid in scrip, and will share inducements with business customers, creating demand beyond each firm’s own tax bill. Municipalities themselves can creatively design inducement for residents to maintain balances in scrip. Perhaps residents get 10% off museums, public transit, etc if they can demonstrate a threshold balance, with a scan of a QR code on an app. There could be some (modest) VIP amenities for high balances. Perhaps balances pay interest on themselves, at a rate lower than what municipalities have to pay to float bonds but higher than what ordinary consumers earn in bank savings accounts. To put a floor under its value and limit consumer risk, municipalities could stand ready to buy back the scrip, at a discount or with a moderate transaction fee to discourage redemption. However, the city’s tax and amenity schedule would be the fundamental driver of scrip demand.Nathan Tankus: Stanch the Bleeding From Local and State Finances With Local Currencies - "All sorts of local monetary experiments were extremely widespread during the Great Depression, as this 1948 dissertation's map shows [DISTRIBUTION OF SCRIP ISSUES IN THE UNITED STATES] The tax receivable IOUs (referred to legally as 'Tax Anticipation Notes') were the most successful of these experiments and especially common in New Jersey and Michigan. Hence, why I own Atlantic City and Detroit notes: Yes, these issuances were acts of desperation. They were also effective and by far the most effective monetary tool state and local governments had to 'support themselves.'" (via)
Importantly, municipalities would retain control (by their management of merchant accounts) over to whom this scrip might be paid. Complementary currencies are historically deployed in the service of localism, of encouraging circular flow within a local economy rather than “leakage” into a more global economy... But besides the localism, the existence of these scrips would create a new option for municipalities, increasing fiscal resilience. During periods of great need, municipal governments could encourage an increase in the float of the currency, by adjusting the tax and amenity schedule, and also by appealing to community and local pride. These currencies could serve as small scale echoes of the “war bonds” that helped finance World War II.
If the Federal Government Won't Fund the States' Emergency Needs, There is Another Solution - "California's own history provides a potential path forward. Back in 2009, when faced with a similar fiscal crisis, California's state controller, John Chiang, began printing IOUs in lieu of cash to pay taxpayers, vendors, and local governments. In the context of a $26 billion fiscal deficit, the amount of IOUs created was actually quite small: 28,750 IOUs worth $53.3 million issued initially. But these IOUs came with a potentially radical provision, namely allowing them to be used for personal income tax refunds—an action that effectively would have meant that California was de facto entering the currency issuing business."
What a Solidarity Economy Looks Like - "Despite President Bolsonaro's COVID-19 denialism, a small Brazilian city has one of the most ambitious responses in the world."
In Maricá, a city of 160,000, about 42,000 of the city’s lowest-income residents—who already receive 130 reals (R$), about $25, per month as part of the city’s expanded basic income—will now be paid R$300 per month ($60), 169 percent of the Brazilian poverty line, at least through June. End-of-year bonuses will be advanced to make April’s payment an even larger R$430 per person. Food baskets are also being distributed to families with children in the public school system, and additional support is being offered to small businesses and self-employed workers. The sums involved are not luxurious, but they represent the difference between catastrophe and the possibility to overcome the crisis for tens of thousands of Marica’s residents...also btw...
The sole municipality in the state of Rio Janeiro governed by the left-leaning Workers’ Party (Partido dos Trabalhadores, or PT), for the last decade Maricá has benefitted remarkably from a stroke of geological fortune: its location next to the Campo de Lula, the most productive oil drilling site in Brazil.
Yet unlike the protagonists of countless prior commodity booms, the city has used its windfall to distinguish itself as Brazil’s premier municipal innovator, investing its oil proceeds in a remarkable suite of progressive social policies. In addition to the basic income program, which has more than 42,000 monthly recipients, initiatives include savings accounts for high school students, free public transportation, massive infrastructure investments, and a sovereign wealth fund to lower costs of capital and guarantee social programs in perpetuity.
At the center of these policies is a local digital currency called the mumbuca. All social benefits in Maricá are paid in mumbucas, as are city salaries. The currency is backed one-to-one by reais held in reserve by the Banco Mumbuca, the largest community bank in Brazil, which is funded through the Maricá city budget. The currency is accepted exclusively and almost universally in Maricá. The 2 percent fees that businesses pay to accept the mumbuca, and thus to access its massive base of beneficiaries, go straight to the bank, where they are used to fund no-interest loans for local entrepreneurs and homeowners. The mumbuca, in other words, is not only a vehicle for financial inclusion, but also a means to turn Maricá from a sleepy bedroom community into a thriving market for goods, jobs, and leisure.
- Announcing JFI's Social Wealth Seminar - "An ongoing virtual, semi-monthly forum exploring strategies to manage public assets and resources in service of a more just society, in the United States and across the world. (First session Tu July 7 @ 6pm ET when @nzewde will present on baby bonds.)"
- A Cheap, Race-Neutral Way to Close the Racial Wealth Gap - "It's time to try baby bonds."
- @interfluidity: "in 2008 we learned that bank deposits trade at par not because banks are excellent at regulating the value of their liabilities, but because they have a political backstop. then why shouldn't other entities' liabilities have this backstop, and trade at par? it obviously should not be the case that every entity's liabilities should be backstopped by the Treasury / Fed at par... but i do endorse the exercise of developing more general criteria+principles of regulation for the monetary backstop private sector banks now uniquely enjoy by virtue of historical accident, but arguably now merit (in the public interest) much less than other entities might." (Responding to the University Budget Crisis with University Currencies)
- @rohangrey: "Regarding the question of legality - I agree with your point that states already issue many kinds of circulating debt instruments so the question may be moot (ie just call it a 'retail tax credit' and dare a court to disagree). And as @NathanTankus has argued, the case law around this question usually bends in favor of accommodating new state-money instruments and has since the pretty early days of the republic." (see @jbouie: "The goal isn't to make the courts a vehicle for progressive policy, but to make sure elected majorities can govern — to keep the United States a democratic republic and not a judge-ocracy")
- @dandolfa: "b/c people instinctively believe what holds true for themselves or their businesses translates 1:1 into what holds true for money-issuing government. It does not. But it needs explaining. And if you're explaining ..."
- The Deficit Myth, by Stephanie Kelton - "A leading light of modern monetary theory illuminates the debate"[1,2,3] (The Federal Government Always Money-Finances Its Spending: A Restatement)
Having not read the links yet, my appetite is whet. BUT, remember, it's not just about innovative financial tools for small players. It's also about avoiding the future backlash from status quo financial capital. I don't know how relevant Jacksonian era policy is in an era where the fictitious economy is multiples of the real one and Goldman Sachs is a bitcoin hegemon.
posted by Reasonably Everything Happens at 5:26 AM on July 7, 2020
posted by Reasonably Everything Happens at 5:26 AM on July 7, 2020
This is a most impressive post!
But the concept feels very alien to me (as a European), this must surely be a sign of a failing state? Yet there are good examples from the past and the US is still there. I am confused.
posted by mumimor at 5:36 AM on July 7, 2020
But the concept feels very alien to me (as a European), this must surely be a sign of a failing state? Yet there are good examples from the past and the US is still there. I am confused.
posted by mumimor at 5:36 AM on July 7, 2020
Yet there are good examples from the past and the US is still there.
I think "It's also about avoiding the future backlash from status quo financial capital" is a pretty important point: it's not obvious to me what the difference is between creating a currency, issuing non-voting shares of stock, doling out IOUs or institutional scrip or issuing a cryptocoin is, beyond the part where the apparatus of state decides who to shelter and who to crush.
posted by mhoye at 6:19 AM on July 7, 2020
I think "It's also about avoiding the future backlash from status quo financial capital" is a pretty important point: it's not obvious to me what the difference is between creating a currency, issuing non-voting shares of stock, doling out IOUs or institutional scrip or issuing a cryptocoin is, beyond the part where the apparatus of state decides who to shelter and who to crush.
posted by mhoye at 6:19 AM on July 7, 2020
this must surely be a sign of a failing state?
I've talked with a friend about setting up a parallel economy at the state or local level, to enforce the social contract you want to see but can't get to because you're at a sub-optimal local maximum and the feds are siphoning off all the cream (and then sending you back some half-and-half, maybe, if you kowtow.) So yes, a sign of a failing state.
But suppose you have your local currency. You could issue a UBI if you wanted. You could condition professional licenses (like medical licenses) on acceptance of the currency. You could, as OP notes, pay your local taxes with it.
But here's the angle I was interested in: you can make it opt-in, by saying (for example) that if you want to hire somebody who has paid for their education with this currency, then you have to take the currency, or pay the locality in US money for the privilege of using a home-grown asset. If you want to do health-insurance business, you have to accept local currency. Employees can choose whether to be paid in local, US, or some combination. (A non-participating employer would have to buy local currency on the secondary market.) And so on.
There's a lot to design (a whole economic system!) but you have a lot of options, and a lot of ways to make your social policy explicit. You're not stuck just trying to subdivide pennies (e.g. raising an extra quarter-cent on tax X to pay for dubious program Y operated inefficiently by Z, a crony of the person or party in power.)
posted by spacewrench at 6:52 AM on July 7, 2020
I've talked with a friend about setting up a parallel economy at the state or local level, to enforce the social contract you want to see but can't get to because you're at a sub-optimal local maximum and the feds are siphoning off all the cream (and then sending you back some half-and-half, maybe, if you kowtow.) So yes, a sign of a failing state.
But suppose you have your local currency. You could issue a UBI if you wanted. You could condition professional licenses (like medical licenses) on acceptance of the currency. You could, as OP notes, pay your local taxes with it.
But here's the angle I was interested in: you can make it opt-in, by saying (for example) that if you want to hire somebody who has paid for their education with this currency, then you have to take the currency, or pay the locality in US money for the privilege of using a home-grown asset. If you want to do health-insurance business, you have to accept local currency. Employees can choose whether to be paid in local, US, or some combination. (A non-participating employer would have to buy local currency on the secondary market.) And so on.
There's a lot to design (a whole economic system!) but you have a lot of options, and a lot of ways to make your social policy explicit. You're not stuck just trying to subdivide pennies (e.g. raising an extra quarter-cent on tax X to pay for dubious program Y operated inefficiently by Z, a crony of the person or party in power.)
posted by spacewrench at 6:52 AM on July 7, 2020
But the concept feels very alien to me (as a European), this must surely be a sign of a failing state? Yet there are good examples from the past and the US is still there.
1) There's a good argument that the US has become a failed state and recovered at least 3 times: run-up to the Civil War, 1870s-1890s, Great Depression. US is still here ≠ the US has never seen a collapse in state capacity.
2) it is absolutely a sign of a failing state, but I don't really see any of the FPP links saying otherwise, more "a failure of state capacity can be survived here's a technique"
posted by PMdixon at 7:06 AM on July 7, 2020 [4 favorites]
1) There's a good argument that the US has become a failed state and recovered at least 3 times: run-up to the Civil War, 1870s-1890s, Great Depression. US is still here ≠ the US has never seen a collapse in state capacity.
2) it is absolutely a sign of a failing state, but I don't really see any of the FPP links saying otherwise, more "a failure of state capacity can be survived here's a technique"
posted by PMdixon at 7:06 AM on July 7, 2020 [4 favorites]
But suppose you have your local currency. You could issue a UBI if you wanted. You could condition professional licenses (like medical licenses) on acceptance of the currency. You could, as OP notes, pay your local taxes with it.
The biggest problem with a UBI in a local currency is that it's going to be inflationary by its very nature. At some point you either have to find someone who's going to accept the currency for food and goods or you're going to have to turn it back into hard currency at which point, the person getting hard currency is going to be amassing your money supply and then what? You're back in the same situation of the money not flowing through the community.
Plus you can't make people pay taxes or licenses in it . The reason the US dollar can survive as fiat is because it's the exclusive method of paying taxes in. You can't do that as a local currency. It's right there in 31 U.S.C. § 5103. So why is someone going to search out this local currency when they can just pay it in USD? What's the exchange rate? Is there an official one? Is it backed by USD? What's the reserve ratio? There's no liquidity so exchange will either be ad hoc or expensive.
There are so many interconnected working parts here. It's not just a matter of "let's just print a UBI and give our supermarkets all these useless notes they can't buy stock with".
posted by Your Childhood Pet Rock at 8:53 AM on July 7, 2020 [2 favorites]
The biggest problem with a UBI in a local currency is that it's going to be inflationary by its very nature. At some point you either have to find someone who's going to accept the currency for food and goods or you're going to have to turn it back into hard currency at which point, the person getting hard currency is going to be amassing your money supply and then what? You're back in the same situation of the money not flowing through the community.
Plus you can't make people pay taxes or licenses in it . The reason the US dollar can survive as fiat is because it's the exclusive method of paying taxes in. You can't do that as a local currency. It's right there in 31 U.S.C. § 5103. So why is someone going to search out this local currency when they can just pay it in USD? What's the exchange rate? Is there an official one? Is it backed by USD? What's the reserve ratio? There's no liquidity so exchange will either be ad hoc or expensive.
There are so many interconnected working parts here. It's not just a matter of "let's just print a UBI and give our supermarkets all these useless notes they can't buy stock with".
posted by Your Childhood Pet Rock at 8:53 AM on July 7, 2020 [2 favorites]
P.S. You think you've seen grifting on payday loans? They're nothing compared to a bureau de change. Poor people are going to get downright reamed trying to get town dollars back to hard currency to buy anything else.
posted by Your Childhood Pet Rock at 8:56 AM on July 7, 2020 [1 favorite]
posted by Your Childhood Pet Rock at 8:56 AM on July 7, 2020 [1 favorite]
It seems easier to just strip the wealth of the top 1000 or so individuals and give it out.
posted by rockindata at 8:57 AM on July 7, 2020 [7 favorites]
posted by rockindata at 8:57 AM on July 7, 2020 [7 favorites]
It seems easier to just strip the wealth of the top 1000 or so individuals and give it out.
This. I'm all for the when you reach $100,000,000 you get an "I won capitalism" trophy and you forfeit the rest of your wealth thing.
posted by Your Childhood Pet Rock at 8:58 AM on July 7, 2020 [4 favorites]
This. I'm all for the when you reach $100,000,000 you get an "I won capitalism" trophy and you forfeit the rest of your wealth thing.
posted by Your Childhood Pet Rock at 8:58 AM on July 7, 2020 [4 favorites]
[all links are in French] France has had a pretty strong and legalized local currency movement going since 2010. I'm only just learning about it, but my understanding is that there is MLCC (Monnaie Locale Complémentaire et Citoyenne), which is about solidarity and ethics, plus another called SOL which is a collection of projects with a mutual aid kind of flavor.
There are local MLCCs and SOLs all over the country [map view]. Details below come from the site for La Roue, a particular MLCC for the Alpes-du-Sud region:
There is some variation in how they work, but in general an MLCC is pegged 1 : 1 to the Euro and is obtained by buying them at that price with Euros from particular distribution points (and you can buy your Euros back at the same price). The reserve of Euros is held by particular banks (or one bank? I've only found La Nef) that have made certain ethical commitments not to speculate and to invest the reserve funds in the local economy. A given MLCC is only accepted by members of its particular network, membership is limited geographically, and membership requires a commitment to the MLCC's charter. Even with all that, there seems to be a lot of places to spend your Roue, Bulle, Chouette, Florain, etc.
posted by Grimp0teuthis at 9:01 AM on July 7, 2020 [1 favorite]
There are local MLCCs and SOLs all over the country [map view]. Details below come from the site for La Roue, a particular MLCC for the Alpes-du-Sud region:
There is some variation in how they work, but in general an MLCC is pegged 1 : 1 to the Euro and is obtained by buying them at that price with Euros from particular distribution points (and you can buy your Euros back at the same price). The reserve of Euros is held by particular banks (or one bank? I've only found La Nef) that have made certain ethical commitments not to speculate and to invest the reserve funds in the local economy. A given MLCC is only accepted by members of its particular network, membership is limited geographically, and membership requires a commitment to the MLCC's charter. Even with all that, there seems to be a lot of places to spend your Roue, Bulle, Chouette, Florain, etc.
posted by Grimp0teuthis at 9:01 AM on July 7, 2020 [1 favorite]
Wörgl in Austria had a municipal currency as long as it was allowed to in the Great Depression, which is reported to have worked well.
posted by clew at 9:05 AM on July 7, 2020 [1 favorite]
posted by clew at 9:05 AM on July 7, 2020 [1 favorite]
My college town Lawrence, Kansas tried this in the 2000 and it didn't work very well in the end. People were enthused at the beginning, but eventually people want real money because they want to either spend it out of town or buy things from out of town to which that currency was worthless. And since you cannot legally prevent someone from taking US dollars in the US, the whole thing eventually just withered away.
There is a case to be made that the US isn't an optimal monetary area and really should have 3 or 4 regional currencies, but local currencies as a solution are naive unless there is no one you want to trade with, and in a modern, specialized economy where it's all about trade with your neighbors.
posted by jmauro at 10:06 AM on July 7, 2020 [1 favorite]
There is a case to be made that the US isn't an optimal monetary area and really should have 3 or 4 regional currencies, but local currencies as a solution are naive unless there is no one you want to trade with, and in a modern, specialized economy where it's all about trade with your neighbors.
posted by jmauro at 10:06 AM on July 7, 2020 [1 favorite]
There is a case to be made that the US isn't an optimal monetary area and really should have 3 or 4 regional currencies,
Whether there's 3 or 4 regional currencies or one, the problem of areas having a lower standard of living will still occur. People's real wages will still be in the toilet whether the currency has devalued precipitously or if the local economy can't support high paying jobs. The difference is that we're now paying currency conversion fees shipping from California to the Midwest. It's all papering around the reality that monetary transfers to poorer regions are the best way to increase a standard of living of an area.
posted by Your Childhood Pet Rock at 10:13 AM on July 7, 2020
Whether there's 3 or 4 regional currencies or one, the problem of areas having a lower standard of living will still occur. People's real wages will still be in the toilet whether the currency has devalued precipitously or if the local economy can't support high paying jobs. The difference is that we're now paying currency conversion fees shipping from California to the Midwest. It's all papering around the reality that monetary transfers to poorer regions are the best way to increase a standard of living of an area.
posted by Your Childhood Pet Rock at 10:13 AM on July 7, 2020
Ithaca has had something similar for a while:
https://en.wikipedia.org/wiki/Ithaca_Hours
It seems to have spread to a few other college towns.
It seems to me that such a system might have worked better when economies were more regional (e.g. before automobiles). In our current economy where people routinely buy goods online from retailers thousands of miles away, I'm not sure how feasible it is. In any case, I can't imagine paying teachers and other municipal employees in "Philly Eagles Bucks" unless maybe you could guarantee banks and other debt holders would accept them as legal currency, and at a favorable exchange rate.
Public banking as a means to reduce interest payments on municipal debt might be a more feasible alternative:
Public Banking
Or we could let state governments run deficits in times surrounding recessions .......
Of course, all these are just workarounds to the real problem, which is that the US government as designed simply isn't capable of governing a modern, technologically advanced, globalized state. It turns out dividing powers between three branches might have been a good idea if you were worried about a modern Caesar trying to free your slaves and redistribute your landholdings to the lower classes, but its a bad idea when you want to try to regulate an economy, build modern infrastructure, provide healthcare, respond to crises, or do any of that other "promote the general welfare stuff" that modern governments need to do to prevent nuclear power plants from exploding or pandemic diseases from spreading along those globalized trade routes that are making them rich.
posted by eagles123 at 10:45 AM on July 7, 2020 [1 favorite]
https://en.wikipedia.org/wiki/Ithaca_Hours
It seems to have spread to a few other college towns.
It seems to me that such a system might have worked better when economies were more regional (e.g. before automobiles). In our current economy where people routinely buy goods online from retailers thousands of miles away, I'm not sure how feasible it is. In any case, I can't imagine paying teachers and other municipal employees in "Philly Eagles Bucks" unless maybe you could guarantee banks and other debt holders would accept them as legal currency, and at a favorable exchange rate.
Public banking as a means to reduce interest payments on municipal debt might be a more feasible alternative:
Public Banking
Or we could let state governments run deficits in times surrounding recessions .......
Of course, all these are just workarounds to the real problem, which is that the US government as designed simply isn't capable of governing a modern, technologically advanced, globalized state. It turns out dividing powers between three branches might have been a good idea if you were worried about a modern Caesar trying to free your slaves and redistribute your landholdings to the lower classes, but its a bad idea when you want to try to regulate an economy, build modern infrastructure, provide healthcare, respond to crises, or do any of that other "promote the general welfare stuff" that modern governments need to do to prevent nuclear power plants from exploding or pandemic diseases from spreading along those globalized trade routes that are making them rich.
posted by eagles123 at 10:45 AM on July 7, 2020 [1 favorite]
The biggest problem with a UBI in a local currency is that it's going to be inflationary by its very nature
If the decisions on how much local currency to issue are being made on an MMT-informed basis, where somebody is making a reasonably well-informed guess about the extent to which the local economy's productive capacity is being artificially constrained by a lack of liquidity and issuing local currency to make up the shortfall, then it ought to work pretty well.
If it's some kind of Camacho attempt to make everybody a local currency millionaire, not so much.
posted by flabdablet at 10:48 AM on July 7, 2020
If the decisions on how much local currency to issue are being made on an MMT-informed basis, where somebody is making a reasonably well-informed guess about the extent to which the local economy's productive capacity is being artificially constrained by a lack of liquidity and issuing local currency to make up the shortfall, then it ought to work pretty well.
If it's some kind of Camacho attempt to make everybody a local currency millionaire, not so much.
posted by flabdablet at 10:48 AM on July 7, 2020
Plus you can't make people pay taxes or licenses in it
You can make people pay local taxes and local licenses in a local currency (at least as far as the text of §5103 goes. I haven't researched the caselaw.) Obviously a UBI in a currency that has no real productive-value support would be inflationary, but as part of a broader system, I think you could work something out. As a simple example, you could charge for parking & public-park use in local currency (that's a revenue-generating case) and give out the local currency thus earned as a UBI. Essentially, a local currency would allow you to price public goods / the commons in a better-considered way.
In addition, I suspect that if you can boot up an economy in this way, you can reduce the flow of dollars, which may (again, pending caselaw research) reduce the US taxable transactions. This is how you move value from a larger, unfair system into your local, fairer system.
It's all papering around the reality that monetary transfers to poorer regions are the best way to increase a standard of living of an area.
This is true, if you take a micro view. (If you take money from somewhere, or print it, and give it to poor people, then their standard of living will increase.) But if you expand your view to include the people you're taking it from, you may find unexpected opposition. (Even if you print the money, you have exactly the same problem of printing a local currency, instead of just using the local currency to support a system of value-for-value transactions.)
posted by spacewrench at 10:53 AM on July 7, 2020
You can make people pay local taxes and local licenses in a local currency (at least as far as the text of §5103 goes. I haven't researched the caselaw.) Obviously a UBI in a currency that has no real productive-value support would be inflationary, but as part of a broader system, I think you could work something out. As a simple example, you could charge for parking & public-park use in local currency (that's a revenue-generating case) and give out the local currency thus earned as a UBI. Essentially, a local currency would allow you to price public goods / the commons in a better-considered way.
In addition, I suspect that if you can boot up an economy in this way, you can reduce the flow of dollars, which may (again, pending caselaw research) reduce the US taxable transactions. This is how you move value from a larger, unfair system into your local, fairer system.
It's all papering around the reality that monetary transfers to poorer regions are the best way to increase a standard of living of an area.
This is true, if you take a micro view. (If you take money from somewhere, or print it, and give it to poor people, then their standard of living will increase.) But if you expand your view to include the people you're taking it from, you may find unexpected opposition. (Even if you print the money, you have exactly the same problem of printing a local currency, instead of just using the local currency to support a system of value-for-value transactions.)
posted by spacewrench at 10:53 AM on July 7, 2020
You can make people pay local taxes and local licenses in a local currency (at least as far as the text of §5103 goes. I haven't researched the caselaw.)
The local government can allow payment in local currency, but you cannot require it. Federal law says a government agency must except dollars and coins denominated is USD else the debt\fee is cancelled regardless if they're federal, state, county or city. Private entities can reject dollars and do local currency only, but a government entity must accept USD.
Also paying people in anything other than dollars is illegal under Fair Labor Standards Act of 1938.
posted by jmauro at 11:54 AM on July 7, 2020 [1 favorite]
The local government can allow payment in local currency, but you cannot require it. Federal law says a government agency must except dollars and coins denominated is USD else the debt\fee is cancelled regardless if they're federal, state, county or city. Private entities can reject dollars and do local currency only, but a government entity must accept USD.
Also paying people in anything other than dollars is illegal under Fair Labor Standards Act of 1938.
posted by jmauro at 11:54 AM on July 7, 2020 [1 favorite]
GUYS GUYS GUYS JUST LOCAL MMT OUR WAY OUT OF IT!!!
posted by symbioid at 12:07 PM on July 7, 2020 [1 favorite]
posted by symbioid at 12:07 PM on July 7, 2020 [1 favorite]
Or we could let state governments run deficits in times surrounding recessions .......
Keynes had it right the first time. Governments need to be counter-cycling spenders and they need to have the guts to raise taxes during booms.
posted by Your Childhood Pet Rock at 12:15 PM on July 7, 2020 [4 favorites]
Keynes had it right the first time. Governments need to be counter-cycling spenders and they need to have the guts to raise taxes during booms.
posted by Your Childhood Pet Rock at 12:15 PM on July 7, 2020 [4 favorites]
The local government can allow payment in local currency, but you cannot require it.
Fair enough. The local government can incentivize the payment in local currency to any degree it cares, by (effectively) setting the exchange rate. Further, it has control of a few things that it can use productively, such as licensing and zoning. For example, it could condition business licenses on paying a living wage, where "living" is not defined as "$X" but rather in terms of the goods and services it has organized in local currency. (Yes, I'm aware that this has the smell of a command economy. The idea is not to mandate X potatoes or Y hospital visits, but rather to expose certain basic, required things and prevent capitalism's relentless optimization from eating away at the bottom.)
Also paying people in anything other than dollars is illegal under Fair Labor Standards Act of 1938.
I am not a FLSA (or any kind of) employment attorney, but I would bet dollars (or Beenz) to donuts that this is permissive: you cannot force someone to take Beenz, but someone can contract to accept Beenz if he wants.
The problem is, setting things up so that it makes sense for people to take the local currency. If it's just "free money," then it's a pointless exercise. But if it's a comprehensive system that circulates value in a fairer way, then it's a way to get to that fairer system without having to shut down and convert the current system (which may be unfair, but the people holding the long end of that stick are not about to go quietly into that good night. All well and good to talk about the rich somehow forefeiting their wealth, but...well, let me know when that happens.)
As PMDixon said upthread, this may be a technique for dealing with some of the problems of a failed state. If the state hadn't failed, it wouldn't be necessary.
posted by spacewrench at 12:19 PM on July 7, 2020
Fair enough. The local government can incentivize the payment in local currency to any degree it cares, by (effectively) setting the exchange rate. Further, it has control of a few things that it can use productively, such as licensing and zoning. For example, it could condition business licenses on paying a living wage, where "living" is not defined as "$X" but rather in terms of the goods and services it has organized in local currency. (Yes, I'm aware that this has the smell of a command economy. The idea is not to mandate X potatoes or Y hospital visits, but rather to expose certain basic, required things and prevent capitalism's relentless optimization from eating away at the bottom.)
Also paying people in anything other than dollars is illegal under Fair Labor Standards Act of 1938.
I am not a FLSA (or any kind of) employment attorney, but I would bet dollars (or Beenz) to donuts that this is permissive: you cannot force someone to take Beenz, but someone can contract to accept Beenz if he wants.
The problem is, setting things up so that it makes sense for people to take the local currency. If it's just "free money," then it's a pointless exercise. But if it's a comprehensive system that circulates value in a fairer way, then it's a way to get to that fairer system without having to shut down and convert the current system (which may be unfair, but the people holding the long end of that stick are not about to go quietly into that good night. All well and good to talk about the rich somehow forefeiting their wealth, but...well, let me know when that happens.)
As PMDixon said upthread, this may be a technique for dealing with some of the problems of a failed state. If the state hadn't failed, it wouldn't be necessary.
posted by spacewrench at 12:19 PM on July 7, 2020
and they need to have the guts to raise taxes during booms.
GUYS GUYS GUYS! JUST TAX YOUR WAY OUT OF IT DURING THE NEXT BOOM!
posted by spacewrench at 12:24 PM on July 7, 2020
GUYS GUYS GUYS! JUST TAX YOUR WAY OUT OF IT DURING THE NEXT BOOM!
posted by spacewrench at 12:24 PM on July 7, 2020
I am not a FLSA (or any kind of) employment attorney, but I would bet dollars (or Beenz) to donuts that this is permissive: you cannot force someone to take Beenz, but someone can contract to accept Beenz if he wants.
You cannot pay someone with any sort of scrip.
posted by Your Childhood Pet Rock at 1:14 PM on July 7, 2020 [1 favorite]
You cannot pay someone with any sort of scrip.
Scrip, tokens, credit cards, “dope checks,” coupons, and similar devices are not proper mediums of payment under the Act. They are neither cash nor “other facilities” within the meaning of section 3(m).Other facilities being things like reasonably priced room and board and that sort of thing, not town currency. You need to pay legal tender for wages.
posted by Your Childhood Pet Rock at 1:14 PM on July 7, 2020 [1 favorite]
GUYS GUYS GUYS! JUST TAX YOUR WAY OUT OF IT DURING THE NEXT BOOM!
Well governments can tax more and keep inflation under control while reducing the debt burden on the state or they can just inflate it away causing real wages to decline and the people to lose purchasing power over time.
Guess which way we normally do it?
posted by Your Childhood Pet Rock at 1:16 PM on July 7, 2020
Well governments can tax more and keep inflation under control while reducing the debt burden on the state or they can just inflate it away causing real wages to decline and the people to lose purchasing power over time.
Guess which way we normally do it?
posted by Your Childhood Pet Rock at 1:16 PM on July 7, 2020
You cannot pay someone with any sort of scrip.
You mean I cannot agree to work for scrip? I don't think that's true. If I agree to take something in payment, you can pay me with that thing.
For example, I would agree to work for $12k less per year, if I received coupons good for medical care equivalent to my health insurance. If I could trade those coupons to somebody else and they could go to the doctor, that would be even better (the coupons would be more valuable to me, and whatever the other person had that I wanted to trade for, might also be more valuable to him.)
Guess which way we normally do it?
A "solution" that doesn't work is not a solution, any more than the abstract idea of a local currency which is not implemented because "it'll never work."
posted by spacewrench at 1:36 PM on July 7, 2020
You mean I cannot agree to work for scrip? I don't think that's true. If I agree to take something in payment, you can pay me with that thing.
For example, I would agree to work for $12k less per year, if I received coupons good for medical care equivalent to my health insurance. If I could trade those coupons to somebody else and they could go to the doctor, that would be even better (the coupons would be more valuable to me, and whatever the other person had that I wanted to trade for, might also be more valuable to him.)
Guess which way we normally do it?
A "solution" that doesn't work is not a solution, any more than the abstract idea of a local currency which is not implemented because "it'll never work."
posted by spacewrench at 1:36 PM on July 7, 2020
A minimum wage is worthless if the company can get you to "voluntarily" agree to work for company script.
Also the IRS wants their cut which is tough to enforce with script.
Has there ever been a time in which getting paid in script has been to the advantage of the worker?
posted by Mitheral at 1:43 PM on July 7, 2020 [2 favorites]
Also the IRS wants their cut which is tough to enforce with script.
Has there ever been a time in which getting paid in script has been to the advantage of the worker?
posted by Mitheral at 1:43 PM on July 7, 2020 [2 favorites]
You mean I cannot agree to work for scrip? I don't think that's true. If I agree to take something in payment, you can pay me with that thing.
Any hourly wages paid and overtime need to be in cash or a limited set of other facilities, room and board and stocks are the two usual ones. If waiving your right to receive cash was a thing it would just be a giant loophole to pay scrip. The employee "waived" that right.
For example, I would agree to work for $12k less per year, if I received coupons good for medical care equivalent to my health insurance. If I could trade those coupons to somebody else and they could go to the doctor, that would be even better (the coupons would be more valuable to me, and whatever the other person had that I wanted to trade for, might also be more valuable to him.)
That would be income in kind and you would be liable for income taxes on it as well as anything above what the coupons were actually worth. So you'd basically be taking 25% off the top. The whole point of healthcare as a fringe benefit is that no taxes are paid on it.
I feel like I'm arguing with a libertarian at this point because the avoidance of the law is getting increasingly contrived.
posted by Your Childhood Pet Rock at 1:45 PM on July 7, 2020 [4 favorites]
Any hourly wages paid and overtime need to be in cash or a limited set of other facilities, room and board and stocks are the two usual ones. If waiving your right to receive cash was a thing it would just be a giant loophole to pay scrip. The employee "waived" that right.
For example, I would agree to work for $12k less per year, if I received coupons good for medical care equivalent to my health insurance. If I could trade those coupons to somebody else and they could go to the doctor, that would be even better (the coupons would be more valuable to me, and whatever the other person had that I wanted to trade for, might also be more valuable to him.)
That would be income in kind and you would be liable for income taxes on it as well as anything above what the coupons were actually worth. So you'd basically be taking 25% off the top. The whole point of healthcare as a fringe benefit is that no taxes are paid on it.
I feel like I'm arguing with a libertarian at this point because the avoidance of the law is getting increasingly contrived.
posted by Your Childhood Pet Rock at 1:45 PM on July 7, 2020 [4 favorites]
The meaning of “local” also matters a lot in terms of taxes. Sales tax in Memphis is 9.75%, of which 7% goes to the state and the other 2.75% is split up between the county and the city.
If “local” is any unit smaller than the whole state of Tennessee, paying taxes in anything other than dollars gets super-complicated.
posted by Huffy Puffy at 2:29 PM on July 7, 2020
If “local” is any unit smaller than the whole state of Tennessee, paying taxes in anything other than dollars gets super-complicated.
posted by Huffy Puffy at 2:29 PM on July 7, 2020
Other facilities being things like reasonably priced room and board and that sort of thing, not town currency
Room and board is heavily regulated as well to the point it's easier to just pay people than try to figure it out since it's so easy to run afoul of the regulations and the set rate is lower than the market rate in most places that you'll lose money if you try to do it. The only group of companies that even try are colleges and universities that have a large legal department and lots of spare rooms that they can rent out for basically nothing.
posted by jmauro at 3:04 PM on July 7, 2020
Room and board is heavily regulated as well to the point it's easier to just pay people than try to figure it out since it's so easy to run afoul of the regulations and the set rate is lower than the market rate in most places that you'll lose money if you try to do it. The only group of companies that even try are colleges and universities that have a large legal department and lots of spare rooms that they can rent out for basically nothing.
posted by jmauro at 3:04 PM on July 7, 2020
paying people in anything other than dollars is illegal under Fair Labor Standards Act of 1938
Paying for their labour, sure. But a UBI is explicitly not a payment in exchange for labour, so paying a UBI in local scrip, and making local taxes payable in that same scrip at an issuer-defined equivalence scale to dollars, does not involve any breach of an act regulating labour standards; and there's nothing stopping anybody from trading things other than labour for whatever they damn well please.
posted by flabdablet at 3:30 PM on July 7, 2020 [2 favorites]
Paying for their labour, sure. But a UBI is explicitly not a payment in exchange for labour, so paying a UBI in local scrip, and making local taxes payable in that same scrip at an issuer-defined equivalence scale to dollars, does not involve any breach of an act regulating labour standards; and there's nothing stopping anybody from trading things other than labour for whatever they damn well please.
posted by flabdablet at 3:30 PM on July 7, 2020 [2 favorites]
But a UBI is explicitly not a payment in exchange for labour, so paying a UBI in local scrip, and making local taxes payable in that same scrip at an issuer-defined equivalence scale to dollars, does not involve any breach of an act regulating labour standards;
What about when the IRS taxes you on the UBI and you're forced to come up with hard currency to pay your fed taxes because they won't accept town dollarydoos to pay it? Oh and the value of said dollarydoos has been declining all year due to inflation so now you're double fucked.
posted by Your Childhood Pet Rock at 3:38 PM on July 7, 2020 [1 favorite]
What about when the IRS taxes you on the UBI and you're forced to come up with hard currency to pay your fed taxes because they won't accept town dollarydoos to pay it? Oh and the value of said dollarydoos has been declining all year due to inflation so now you're double fucked.
posted by Your Childhood Pet Rock at 3:38 PM on July 7, 2020 [1 favorite]
What about when the IRS taxes you on the UBI
Is that actually something they're likely to do? Current practice would seem to suggest not.
posted by flabdablet at 10:46 AM on July 8, 2020
Is that actually something they're likely to do? Current practice would seem to suggest not.
posted by flabdablet at 10:46 AM on July 8, 2020
i mean i admire attempts to set up a local currency, but also any local currency that becomes widespread enough to work in lieu of nation-state currencies would face the problems correctly identified in this thread. most notably, unless it was in some way backed by hard currency (or some equivalent commodity*) it would face hyperinflation.
something i would like to add, though, is that the state is a jealous motherfucker about currency, and even if a successful local currency got around the legal constraints that hem in local currency attempts, it could very easily face state suppression.
without an army behind it — and a damned good army — ultimately any local currency isn't worth a continental.
*: i'm too lazy to google around, but if i recall correctly the "social credit" schemes of the early 20th century were based around something like this, with labor time standing as the "equivalent commodity." but also i'm lazy so if anyone else actually knows stuff about what the canadian socreds were up to before they turned into a standard conservative party please let us know
posted by Reclusive Novelist Thomas Pynchon at 12:08 PM on July 8, 2020 [1 favorite]
something i would like to add, though, is that the state is a jealous motherfucker about currency, and even if a successful local currency got around the legal constraints that hem in local currency attempts, it could very easily face state suppression.
without an army behind it — and a damned good army — ultimately any local currency isn't worth a continental.
*: i'm too lazy to google around, but if i recall correctly the "social credit" schemes of the early 20th century were based around something like this, with labor time standing as the "equivalent commodity." but also i'm lazy so if anyone else actually knows stuff about what the canadian socreds were up to before they turned into a standard conservative party please let us know
posted by Reclusive Novelist Thomas Pynchon at 12:08 PM on July 8, 2020 [1 favorite]
probably the better way to this same end is to institute local, democratically controlled banking, since a local currency backed by some amount of hard currency is effectively equivalent to the fractional reserve banking system.
peoples' banks are, like other banks, susceptible to bank runs... but since they don't appear as quite a direct attack on the legitimacy of the state, they have less of an immediate problem with the men with guns showing up to shut down the scheme.
posted by Reclusive Novelist Thomas Pynchon at 12:14 PM on July 8, 2020
peoples' banks are, like other banks, susceptible to bank runs... but since they don't appear as quite a direct attack on the legitimacy of the state, they have less of an immediate problem with the men with guns showing up to shut down the scheme.
posted by Reclusive Novelist Thomas Pynchon at 12:14 PM on July 8, 2020
any local currency that becomes widespread enough to work in lieu of nation-state currencies would
have become non-local, and therefore Doing It Wrong.
Expansion of a local currency beyond the bounds of the local economy should be seen as an unfortunate leakage from that economy, not an aim of the issuer. And local currency should be seen as a supplement, not an alternative, to the national currency already in circulation in that local region.
Inflation - hyper or otherwise - of a local currency is also by no means a given. In a local economy that is artificially constrained by a lack of liquidity, injecting a local currency to fill the liquidity gap would increase economic activity, prompting the creation of the very businesses that the status quo ante was making unfeasible; this would increase competitive pressure within the local area and act as a counterbalance to the inflation that might otherwise be caused by everybody having more money.
Only if local currency continued to be injected faster than the productive capacity of the local economy called for it would the value start to decline (which is why the Camacho "everybody is a millionaire, let's party" strategy won't work).
The beauty of a local currency in this regard is that the issuer is also local, will have a good handle on the local currency's inflation rate relative to the national currency, and can adjust the issue rate to match the needs of the local economy without having to pay much attention to conditions anywhere else; any local council has a much less complex monetary policy job to do than the Fed.
Also, if the local currency is actually doing the job it's presumably being introduced to do, the increased local business it enables is not going to be reflected solely in the local currency itself; it's going to cause more money generally to change hands within the locality, which will inevitably yield an increase in dollar-denominated taxes flowing to the central government. There's no reason why a central government should want to shut this down unless it's being horribly mismanaged and doing more harm than good.
posted by flabdablet at 12:33 PM on July 8, 2020
have become non-local, and therefore Doing It Wrong.
Expansion of a local currency beyond the bounds of the local economy should be seen as an unfortunate leakage from that economy, not an aim of the issuer. And local currency should be seen as a supplement, not an alternative, to the national currency already in circulation in that local region.
Inflation - hyper or otherwise - of a local currency is also by no means a given. In a local economy that is artificially constrained by a lack of liquidity, injecting a local currency to fill the liquidity gap would increase economic activity, prompting the creation of the very businesses that the status quo ante was making unfeasible; this would increase competitive pressure within the local area and act as a counterbalance to the inflation that might otherwise be caused by everybody having more money.
Only if local currency continued to be injected faster than the productive capacity of the local economy called for it would the value start to decline (which is why the Camacho "everybody is a millionaire, let's party" strategy won't work).
The beauty of a local currency in this regard is that the issuer is also local, will have a good handle on the local currency's inflation rate relative to the national currency, and can adjust the issue rate to match the needs of the local economy without having to pay much attention to conditions anywhere else; any local council has a much less complex monetary policy job to do than the Fed.
Also, if the local currency is actually doing the job it's presumably being introduced to do, the increased local business it enables is not going to be reflected solely in the local currency itself; it's going to cause more money generally to change hands within the locality, which will inevitably yield an increase in dollar-denominated taxes flowing to the central government. There's no reason why a central government should want to shut this down unless it's being horribly mismanaged and doing more harm than good.
posted by flabdablet at 12:33 PM on July 8, 2020
serious question: what problems does a robust local currency solve that aren't better solved by a peoples' bank?
posted by Reclusive Novelist Thomas Pynchon at 12:35 PM on July 8, 2020
posted by Reclusive Novelist Thomas Pynchon at 12:35 PM on July 8, 2020
Mainly the problem of not enough people having funds left over at the end of a week to put in the people's bank.
There are many places where the main reason people are poor really is because they simply don't have enough money.
posted by flabdablet at 12:38 PM on July 8, 2020
There are many places where the main reason people are poor really is because they simply don't have enough money.
posted by flabdablet at 12:38 PM on July 8, 2020
Inflation - hyper or otherwise - of a local currency is also by no means a given. In a local economy that is artificially constrained by a lack of liquidity, injecting a local currency to fill the liquidity gap would increase economic activity, prompting the creation of the very businesses that the status quo ante was making unfeasible; this would increase competitive pressure within the local area and act as a counterbalance to the inflation that might otherwise be caused by everybody having more money.
Almost all the communities in the US are service orientated and have trade deficits on goods. Any community currency is going to be continually devaluing using that money to bring in "foreign" goods not by insufficient economic activity. Putting in more free money isn't going to take that constraint away. The end result is just the Zimbabwe dollar.
posted by Your Childhood Pet Rock at 1:59 PM on July 8, 2020 [1 favorite]
Almost all the communities in the US are service orientated and have trade deficits on goods. Any community currency is going to be continually devaluing using that money to bring in "foreign" goods not by insufficient economic activity. Putting in more free money isn't going to take that constraint away. The end result is just the Zimbabwe dollar.
posted by Your Childhood Pet Rock at 1:59 PM on July 8, 2020 [1 favorite]
there's a bit of a difference between using tax/revenue anticipation notes as currency for states/municipalities in a jam (à la the depression/pandemic shutdown) and starting up community currencies proper (à la mumbucas).
there's legal precedent for both. auerback documents the former in the link, but they weren't without institutional backing -- as SRW notes, what if the fed backed them at par? as the for the latter, time-banking ones like ithaca HOURs are a thing (if not super successful).
of course RANs as currency isn't ideal, as noted in thread. or like auerback says:
meanwhile and elswhere on the UBI/MMT front...
Economists call for more direct cash payments tied to the health of the economy
oh and perhaps relatedly...
The "Noble Lie" Critique Of MMT - "...critics seems to assume that MMT requires extremely active changes of tax rates to control inflation. If that were in fact necessary, it would be politically awkward. However, MMTers put much more faith in automatic stabilisers, and there is limited need to change tax rates as often as the policy interest rate."
also btw...
Support Grows for Guaranteed Income Among America's Mayors - "More city leaders are committing to explore universal basic income experiments that are grounded in civil rights ideals."
@interfluidity: "this (very MMT-inflected) piece by @doctorow is the best thing you'll read today."
Almost all the communities in the US are service orientated and have trade deficits on goods... The end result is just the Zimbabwe dollar.
trade deficits (for goods or services) don't necessarily lead to hyperinflation; failed states do... like venezuela has a trade surplus. a community currency would be as good as the what the community produces for exchange in the marketplace (sometimes intertemporally). if in the course of such exchange, dollarydoo claims built up 'funding' said deficits, it just means greater 'foreign' investment in the community -- a trade deficit-offsetting capital account surplus. the only thing dollarydoos are good for is buying goods -- or services -- within the community OR investments based there.
---
*which italy has proposed before! (and sardinia has their own local currency btw ;)
posted by kliuless at 1:49 AM on July 9, 2020 [1 favorite]
there's legal precedent for both. auerback documents the former in the link, but they weren't without institutional backing -- as SRW notes, what if the fed backed them at par? as the for the latter, time-banking ones like ithaca HOURs are a thing (if not super successful).
of course RANs as currency isn't ideal, as noted in thread. or like auerback says:
To be clear, this is not an ideal way to proceed. Far better would be immediate per capita distributions to all states to allow them to sustain relief efforts and public health policies designed to mitigate the spread of the coronavirus, similar in model to the range of block grants that the federal government has in the past allocated nationally.or @rohangrey:
...my preferred alternative approach is simpler: have the federal govt pass legislation explicitly authorizing states/municipalities to issue complementary currencies as a delegation of federal power, in exchange for macro-regulatory oversight, similar to the delegations of money-creation power inherent in bank charters.i.e. the fed's par backing. but absent that, these are stop-gap measures states/municipalities might consider. whether they could eventually evolve into something more robust -- e.g., "a potential middle ground between no currency union and Eurozone-style single-currency straightjacketing (ie the parallel Greek/Italian Euro)"* -- remains to be seen! i'd argue it's a matter of politics -- if enough people want it/see the benefit, then the legal niceties and tax ramifications could be worked out :P
I'd also point out that one of the benefits of this approach is that it generalizes the swap-line framework as the base case for inter-jurisdictional liquidity provisioning, both vertically as well as horizontally. So instead of (or in addition to) the Fed's MLF, it could create a local currency swap line network within the US, and manage federal-local dynamics through that arrangement.
meanwhile and elswhere on the UBI/MMT front...
Economists call for more direct cash payments tied to the health of the economy
Direct cash payments can improve financial security, boost consumer spending and may speed up the recovery, according to a letter from a group of economists calling on U.S. policymakers to keep providing direct cash payments to Americans until the economy is stronger.claudia sahm (macromom), a former fed economist (with her own rule), is a big proponent of this.
The stimulus payments should be issued automatically, based on certain economic indicators such as the unemployment rate, until there is enough evidence that the economy is recovering, the group of mostly left-leaning economists said in an open letter organized by the Economic Security Project and The Justice Collaborative.
oh and perhaps relatedly...
The "Noble Lie" Critique Of MMT - "...critics seems to assume that MMT requires extremely active changes of tax rates to control inflation. If that were in fact necessary, it would be politically awkward. However, MMTers put much more faith in automatic stabilisers, and there is limited need to change tax rates as often as the policy interest rate."
also btw...
Support Grows for Guaranteed Income Among America's Mayors - "More city leaders are committing to explore universal basic income experiments that are grounded in civil rights ideals."
@interfluidity: "this (very MMT-inflected) piece by @doctorow is the best thing you'll read today."
The pandemic crisis has taught us two critical things:Pandemic Aid Helps Make the Case for Basic Income - "If government provided a basic income, would people want to avoid work? @Noahpinion says it doesn't look that way"
1. Blind adherence to government austerity destroys capacity – it doesn’t build it.
California spent $200M in 2006 on a stockpile of mobile hospitals, tens of thousands of emergency beds, millions of N95 masks and thousands of ventilators.
In 2008, the state dismantled the stockpile to save the $5M/year maintenance budget (warehousing and keeping the ventilators’ batteries charged) so it could balance its budget during the financial crisis.
2. Sovereign currency issuers do not experience cash shortfalls during crises – they experience capacity shortfalls.
Central bankers are getting carpal tunnel syndrome from typing extra zeros into their Treasury spreadsheets. The money supply is fine. That helicopter money is going to procure things that the private sector doesn’t want (the labor of people who are quarantined at home).
Almost all the communities in the US are service orientated and have trade deficits on goods... The end result is just the Zimbabwe dollar.
trade deficits (for goods or services) don't necessarily lead to hyperinflation; failed states do... like venezuela has a trade surplus. a community currency would be as good as the what the community produces for exchange in the marketplace (sometimes intertemporally). if in the course of such exchange, dollarydoo claims built up 'funding' said deficits, it just means greater 'foreign' investment in the community -- a trade deficit-offsetting capital account surplus. the only thing dollarydoos are good for is buying goods -- or services -- within the community OR investments based there.
---
*which italy has proposed before! (and sardinia has their own local currency btw ;)
posted by kliuless at 1:49 AM on July 9, 2020 [1 favorite]
U.S. town prints own currency to boost coronavirus relief
posted by the man of twists and turns at 3:45 PM on July 9, 2020 [2 favorites]
posted by the man of twists and turns at 3:45 PM on July 9, 2020 [2 favorites]
more on MMT, fwiw...
The Deficit Myth: A Review
The Deficit Myth: A Review
Capitalists, [Kalecki (1942)] wrote, disliked what we now call MMT because it weakened their power. If governments can use fiscal policy to maintain full employment, they don't need to maintain business confidence and so "this powerful controlling device loses its effectiveness":posted by kliuless at 11:00 AM on July 12, 2020The social function of the doctrine of "sound finance" is to make the level of employment dependent on the "state of confidence...[Capitalists'] class instinct tells them that lasting full employment is unsound from their point of view and that unemployment is an integral part of the "normal" capitalist system.It is surely no accident that the backlash against functional finance came at a time when capitalists re-asserted their power over governments. Nor is it an accident that it's happened when capitalism has shifted away from mass-market Fordism to extractive finance capital: the former requires full employment and a mass market, the latter requires cheap money instead.
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