Sunday, October 19, 2014

Ebola, NSA & Porn

While our "markets" based "health care system" has roundly flubbed it's first encounter with Ebola, it may have offered the serial liars and megalomaniacs at the NSA the best chance they're likely to get to redeem themselves. It's become clear in the last year the NSA pretty much stores and sorts data on all of us. If that information is in any way useful in our ostensible "War On Terror", it should be in the field of quickly tracking connections between people associated with some interest of the Agency.

Lets say, for the sake of argument, that Ebola is Terrifying. Further lets stipulate that a "health care system" designed to maximize revenue streams for its institutions and practitioners is likely to send people with symptoms of the common cold or flue out to propagate their various bugs to the benefit of sellers of treatments, whether lab tests, doctors visits or the spectrum of pharmaceutical products. That these symptoms happen to also include the early markers of our "Terrorist" threat has already confounded CDC, systematically enervated by de-funding low these last 40 years, and our above mentioned "health care system".

But! Since it's Terrifying, our serial liars and megalomaniacs are now well positioned to actually demonstrate the public service focus they claim as justification for their extra-constitutional intrusions into our communications. If their data sets have value, it should be in the sphere of tracking connections between people, a problem given new urgency in light of the CDC sending an Ebola infected nurse,

Thursday, October 16, 2014

Exorbitant Privilege Or Burden?

In order to be a reserve currency a currency must be broadly distributed and broadly circulated. To be broadly distributed and broadly circulated there must be enough currency in circulation to satisfy demand. In our world, as it stands, that demand includes the needs of global financial markets. Yesterday according to the New York Times something like $680 billion in US Treasuries were traded: currency adequate to support this volume must both exist and be sufficiently distributed.

In order for these conditions to be met, by definition the US must have spent abroad that volume of dollars, and US and other nations dollar denominated transactions must have provided adequate distribution. Once these conditions are met, other nations who hold our currency discover that when we sneeze they get a cold: when we have a financial ruction it tends to draw down their reserves. Should they run out of reserves, in the post New Deal world, they have discovered US sponsored institutions like the IMF and World Bank pauperize their populations and devastate their financial markets to preserve stability in the US economy.

This experience has encouraged all of our trading partners to accumulate vast dollar reserves: this, again by definition, requires the US to have first spent the desired sums. Ipso facto, the "trade deficit" and accumulated "National Debt", the first in order that our trading partners have our currency and the second in order that there is enough of it to satisfy the requirements of the two paragraphs above.

Once these conditions are met, our trading partners discover that by repressing the wage income of their populations they can force the US to continue to fund the accumulations they need both for hedges against the IMF and World Bank and whatever demand they may choose to import from the US. Once your population can't afford to purchase the stuff they make you can export that stuff to the US, who's currency is relatively strong because you keep purchasing Treasuries with that portion of your import earnings you have withheld from the workers who actually made the stuff. This decouples your economy from the US at the decisive point of savings accumulation. Savings in your country accumulates to owners of capital rather than workers and can be deployed to manage the local economy.

Thus our trading partners indirectly manage US demand through their purchases of Treasuries to sustain their domestic employment at the expense of US employment. This puts pressure on US workers who can't get jobs but must none the less meet their rent/mortgage etc obligations at the same time it puts downward pressure on interest rates. These combine to create a wonderfully usurious opportunity for creditors here in the US who have exploited it to the hilt, first with sub-prime mortgages and extortionate credit card practices and now with student debt and various new forms of sub-prime consumer finance. This is the Exorbitant Privilege: the US worker is pauperized by a convenient collusion between American financiers and repressive foreign regimes. Exorbitant Privilege indeed.

Sunday, October 5, 2014

The Exorbitant Privilege

"The Exorbitant Privilege" of reserve currency status, while a wonderful rhetorical trope, is more a hindrance than help to non-specialists understanding of the political role of a reserve currency. The layers of abstract function embedded in a cross border currency system compound confusion over counter intuitive complexity.

First obscurity comes from the dual nature of money as both asset and liability. Because we handle it as cash we intuitively understand certain analogue properties it appears to manifest relative to our exchange of other valuables. But this obscures the essential property that sets money apart from other valuable objects: it has no intrinsic value itself, really never has, and exists always and everywhere as both an asset and liability. What is the intrinsic value of gold, a form of cash frequently misunderstood as sin qua non money? It does not oxidize, holds its luster, is easily malleable, is fairly dense and conducts electricity. It's hard to say, but it appears aesthetic properties of weightiness, malleability  and shininess recommended it as a medium of exchange, but this function in no way encompasses what is interesting about money with regard to power, which is the essentially interesting thing about a reserve currency. While cash money has properties that can be aesthetically embodied in gold, it is the liability side of money at scale, money in quantities not easily handled in cash, that ultimately creates the "Exorbitant Privilege".

A dollar is a liability to the US Government and an asset to anyone who holds it. It entitles its bearer to a dollars worth of whatever goods and services she may choose to exchange it for within the dollar denominated economy. There is a lot in those two sentences that we need to be clear about before moving on. Every dollar that exists anywhere in the world, in whatever form it is held from cash to bonds to keystroke records in a banks IT system, exists as a result of having first been spent by the US Government (or having been recorded as a bank asset/depositor liability as a loan on a Govt. chartered bank's books). If it was not first spent by the US Government it is at very best counterfeit: being issued and spent by the US Government is the only legitimate way dollars can come into being. It is an IOU of the US Government with which that government purchases things it determines to purchase. Politically,

Links

Character: Ian Welsh
Buffalo Wind: John Michael Greer: Archdruid Report
Dollar Carnage: Raul Illargi: The Automatic Earth
Exorbitant Burden: Michael Pettis
Appeasement: Doug Muder: Weekly Sift