A Letter To A Friend

The division of labor is indeed a wonderful thing. For it to work however a sizable suite of liberal infrastructures must first be in place. One of the most important and least understood is the money system itself. It is an infrastructure, no mere thing, and it has important counterintuitive properties that cause its human inventors to consistently and systematically abuse themselves with its operation. I’ll address the nature and cause of this self abuse below, for now suffice to note that money is an artifact of man created to solve a particular set of problems, which it does. But aspects of the system are profoundly different from anything found in nature and can confuse us with an artificial logic that, while of our own creation, wreaks havoc on our evolved heuristics. Keynes would have been, and any real Keynesian will be the first to suggest the function money was invented to fill was efficient exchange for the purpose of strengthening the community, the state and its people. And his work centered on the all too human reasons why it periodically fails. 


I think we can agree the world, no less the subset of human institutions, is far too complex for anyone to fully understand. A result of this recognition was the invention of science, a vast set of institutions built around the need to codify what can be measured in a testable and document-able way so that functional generalizations to be universally depended upon can be drawn. The study of economics from Petty forward has been driven by a scientism seeking to document the underlying principles of economic activity in such a form. Like money, however, this scientism reduces understanding to mathematics which by nature excludes most of what is valuable in lived human experience. The scientism imposes a form that makes it easy to forget economics is the study of a subset of human behavior, it is a sociology of that human behavior engaged with the system of money. From its founding until Keynes economics assumed an identity between the math and the behavior it represented, he rejected this. 

Where We Can Go (3 of 3)

Read Part 1 and Part 2 first


What would an alternative look like? There is a great deal to be optimistic about once we discard our ideological blinders and use the tools at our disposal. This is not to suggest we don't face major challenges, we do.  Two out of every five calories mankind consumes are the product of nitrogen produced from fossil oil: this will have to change as the finite resource on which we are in fact feeding will eventually be depleted. While it isn't yet clear what the consequences of anthropogenic global climate change will be, it is clear the climate is changing with unending consequences: processes set in motion by our technologies are unpredictable and irreversible. Sustained adaptation, continuous change, will be the only viable response to continuous environmental evolution.

While the scale of these problems is enormous, their speed leaves them well within our ability to cope. These forces we have set in motion will affect everything we do henceforth. However they will not determine what we ultimately do. We simply know too much as a species to be materially constrained: as we organize ourselves to benefit from the oceanic reserve of knowledge embedded in the minds of seven billion reproducing souls it is pure fatalism to imagine we can't create opportunities from the challenges into which the future will inevitably crystallize.  And the history of civilization is the history of ever growing organizational systems that aggregate ever larger groups of people into effective, prosperous, healthier and longer living communities driven there by changing conditions.

Where We Are (2 of 3)

Read Part 1 first 

The cash piles and mountains of Treasuries sitting idly or nearly so on Western investors' balance sheets are the mirror image of a demand collapse: they are two ways of seeing the same thing.  If I recall correctly it was A. C. Pigou who said "economics is the art of making simple things complicated".  With regard to Macro-Economics, the efforts of the last two generations of PHDs has proven his point by their almost universal failure to predict the implosion of the illusory Great Moderation in a monumental financial collapse.  The so called Moderation has been revealed as the Class-Cold War it actually was. In this war, pure propaganda against all the available evidence of real outcomes, well funded by corporate managements and corporate media, has cloud and debased popular understanding in a miasma of obfuscatory complexity. While Americans have an accurate sense that the US Government no longer works for them, they have been deliberately deceived as to who it does in fact work for while for forty years it lined corporate bottom lines with productivity gains diverted from working Americans.

During the Carter Administration, while Milton Friedman and Alan Greenspan were whispering in the Presidents ear, the Supreme Court determined in Buckley vs Valeo that paying politicians bribes was a Constitutionally protected form of political speech.  This metonymy began the process of converting what had been a corrupt political forum into a spotlessly efficient political marketplace. While successive court cases have codified the structure of regulation in this market in detail, this efficiency has come at the cost of divorcing politically viable ideas from popular needs. As the upward wealth redistribution of Neo-Liberalism advanced, the political marketplace, like all market places, lost touch with poverty and real human need to focus ever more efficiently on ideas that could be exchanged for cash: it went where the money is.

How We Got Here (1 of 3)

The architects of our post war civilization suffered greatly for their knowledge.  Having watched Europe stumble blind into disaster in 1914, blundering on to genocide thirty years latter these policy makers earned in blood and toil a terrible respect for the Vulcan power inherent in the industrial systems they managed, power for both good and evil that all too easily grinds individuals to dust.  Even before the outcome was clear, in the thick of World War II these humanists began to lay the groundwork for what would become the most successful framework of political economy in human history, a framework that would take the world from 2.5 to 7 billion souls who live both longer and better.

The burden of such success is pressure each of us now bears to exceed the standards set by our predecessors. Occasionally epochs consume their paradigm and having done so raise this pressure logarithmically. When success outstrips the basic conditions that spawn it and progress stalls before what is old has finally collapsed, with the new defenseless in utero, the resulting hiatus is a limbo where both grand vision and epic execution are required just to maintain the achievements of the expiring era. To even imagine a future, something fundamentally new must be conjured into being.  This is what we are living through.  As the Homogenocene extinguishes species at a pace to rival the Cretaceous asteroid impact, our voiceless dominions in other genomes are expressing their disapproval by simply vanishing.  The narcissistic cacophony of our politics drowns their growing silence as we shout down even the distressed humanity who bear in  hardship the shortcomings of our aging and overtaxed systems at who's margins it is increasingly difficult even for people to survive.

Communism vs Capitalism

Today's Izvestia includes a story by Jeff Sommer detailing the incipient schism within The Party between the Capitalist business class Bosses and their Communist financial overlords in the Politburo.  While beginning with an account of the contents of the Party's official "Beige Book ", Mr. Sommer has apparently got his hands on a copy of the Party Executive Committee secret "Beige Book" made only available to full members of the Executive Committee.


While Sommer is careful to present the differences between the public position of the Party in the official report and those of the secret version as primarily one of tone, Samizdat readers will recognize key phrases as indicating the possibility of a more significant political breach within the Politburo.  The article begins with summaries from the official report derived from statistics provided by local Party Bosses in required "Three Month Plan" filings.  However the executive report includes an interpretation of these statistics by local Bosses diametrically at odds with the official Four Year Plan interpretation.

Aurora of Empire Part 2

Part 1

For fifteen hundred years from the decline of Rome until London in 1800 no civilization in the western world supported a city of a million souls.  While across this era global population continued its steady upward crawl, it did so by populating increasingly marginal parts of the planet, adapting and improving them to support forms of living mostly familiar from antiquity.  When the improved technology of early industrialization began to transform the possibilities of urbanism, drawing ever-greater portions of society into cites as it did, the pressures of density began the systematic transformation of every aspect of the human habitat. 

Cities and the increasingly remote agricultural systems on which they depend became ever more man made artifacts. In the last 200 years we have remade our habitat to conscious tastes without regard to, in fact in near total ignorance of ancient genetic adaptations we physically embody for an organic habitat we have left behind and are now actively extinguishing.  The demographic pressure driving this destruction has both aesthetic and ethical implications and before returning to aesthetics is Part 3, a digression into ethics is warranted because very real ethical constraints explain much of why the complexity of the modern world is so confounding .

The National Asset Base

Is this really the best Washington can do? It is pathetic.  So hopelessly lost in the mythology of neo-classical economics is our cult of Mammon in DC that they can not see past their own greed, what they see as their greatest virtue.  The US is the fiscally sovereign issuer of a floating fiat currency.  This means it can afford whatever it wants that can be purchased in the dollar economy any time it wants.  This includes Social Security, unemployment benefits, infrastructure, education, banker bailouts, multiple wars, etc, anything that is available to purchase that can be purchased with dollars. 

This also means that the very conceptualization of “the national debt” is an archaic relic of the expired gold standard era.  In that bygone world, for the government to spend beyond tax receipts it was in fact required to borrow in the international market from other hoarders of gold, and as it did so interest rates went up because those external creditors got to set the rate at which they would lend.  

The Platonic Hell of our Commercial Guardians

It is a global clusterfuck of looting at the moment.  Power and money are confused to the point that ideas like corruption and ethics are simply no longer relevant. A self serving global elite has captured the levers of all of the worlds major currency systems and is looting on every continent on an epic scale.  The problems begin with the United States, the monopoly issuer of a floating fiat currency that is pretending it is on the gold standard to justify as necessary a massive upward redistribution of wealth.  

This policy, and a similar one at the ECB leaves open the door of currency manipulation on a global scale by entities with the economic power to execute.  The Chinese have to buy bonds from both the EU and the US in order to force an export market by depressing the value of the Yuan which in turn prevents the Chinese from consuming and thus exports demand to debt selling countries.  China is able to do this because both western systems pretend they are constrained in some unexplained manner from simply creating the money their economies need rather than selling debt to, among others, the Chinese.

The Great Leap Forward

The capitalist "Great Leap Forward", of which we are on the brink, like its communist predecessor is an attempt to impose on reality an ideological system's claims to universal truth, regardless of the underlying reality. The Maoist conceptions of "collectivization" and "industrialization", with perfect knowledge of how humans will behave in the communist utopia to come, were uninterested in the realities of how millions and millions of Chinese actually got their daily rations. Somewhere between 20 and 50 million people had to die to kill this vision.

The capitalist conception of "efficient markets" and "rational expectations", with perfect knowledge of how humans will behave in the "free market" utopia upon who's brink we teeter, are uninterested in the realities of how millions and millions of Americans and Europeans get their daily rations. So committed to their utopia are mainstream economists that  they take it upon themselves to scold the reality based community for it's sinful insistence on reality.

Shut down the government, cut off social security, medicare, medicaid, food stamps and other income supports. These all offend the free market utopia. How many will need to suffer how much to prove the insanity?

The Marginal Propensity to Hoard

Dick Cheney said "deficits don't matter", and for his purposes that was true.   Speaking as he was of the budget deficits of the United States, monopoly issuer of a floating fiat currency, he was correct if he meant these deficits could never threaten the solvency of the US government. For Cheney this meant it was OK to spend prodigious sums that would go mostly to management bonuses and salaries at companies contracting to fight America's wars for it, companies with which he was deeply affiliated.  Cheney meant that since the deficit could not make the US insolvent, there was no problem with it making him and his friends rich.  

On a floating fiat currency, so long as the issuer of the currency, in our case the US government, denominates its debts solely in that currency, as ours does, it can never be made insolvent by those debts.  This is a simple fact of fiat currencies, money is created whenever the government spends and extinguished whenever it collects taxes.  While this does not mean that deficits are unimportant, it certainly means they do not threaten the solvency of the government.  Deficits are an outcome of an hysteresis in economics that results from the inextricability of human nature from the object of the discipline.  

Aurora of Empire

Part 1

The first great drama of New York City skyline was the rise of the piers for the Brooklyn Bridge. Born in the ashes of America's great internecine conflagration, alignments forged in war between commerce and politics, between laborers and visionaries and between capital and human creativity were set loose in the sprawling and expanding city. Grand projects of a scale and ambition never before conceived in the New World were dreamed of and then made real. Imagined half way between the dawn of industrialization and the present, the Brooklyn Bridge, and particularly it's piers, can be read as both ancient and contemporary. They stand at the dawn of American Empire and are the harbinger of full scale American industrialization towering over a vanishing pastoral to heights even steeples never dreamed of.

The gilded age, parallel to which the piers arose, was at its' end an era still deeply rooted in the ancient traditions of European civilization. Although the sinews of industrialization were insinuating themselves into every aspect of the new, between the Civil War and the First World War most of the advances in industrial technology were sublimated into infrastructure which unlike the Brooklyn Bridge remained invisible. While H. H. Richardson's buildings had been bearing wall masonry, Charles McKim's were mostly steel frames, parged with terracotta and only veneered with stone. Privy gave way to sewer, stairs to elevators and gas light gave way to electric.

The System Investigates Itself

Boardman Robinson, 1921.

Published in The Liberator

March 19, 1921

Suckers & Kochs

By personalizing the issue, the focus on the Koch brothers involvement in right wing politics confuses the causality of the endemic corruption in our system. The Koch's, among others, are an inevitable result of the Supreme Court's metonymy confusing a signifier, money, for speech, one of the infinite number of things money can represent that also happens to be a constitutionally protected right of U. S. citizens.

Money is a universal signifier of abstract value, a yardstick by which all relative economic values can be compared. It is created through a printing monopoly by an issuing government, in our case the Federal Treasury. Speech on the other hand, most narrowly, is vocalizations by individual humans. More generally and as constitutionally conceived, it is the lined up sequences of words with their meanings individual citizens speak or write with political purpose.

What Everyone Should Know About Money

The frantic concerns we hear today about government budget deficits and accumulated stocks of debt exhibit a deep, willful and politically motivated misunderstanding of what money is. To suggest that the government that creates a non-convertible, floating fiat money such as the dollar, the pound or the yen, could conceivably run out of it is either a political protest of that government’s ability to unilaterally control interest rates or a statement of complete ignorance. Money is not just the thing we all carry around in our wallets, it is a system, and it does not exist in nature, it is a creation of governments. Gold was the preferred money in a world in which one could not depend on governments. With six billion people in the world, we all depend on governments in ways as entirely unimaginable to our ancestors as the internet or space travel. Living in modern societies we can no more do without fiat money than we can do without government itself. Imagine what you would do if tomorrow you were totally cut off from money.

When a credit cycle busts, as a big one recently did, that is the condition that most people find themselves in with the absence of a fiat money system. No one as yet has had the hubris to claim they can tame the credit cycle, and the infinite liquidity of a fiat system in duress makes it unnecessary to succeed in such an effort. The problem with fiat money is not its performance in crisis, conditions that called it into existence in the first place. The problem is what the powerful do with it day to day. Money is a man made system invented as a tool to facilitate distribution as societies concentrated beyond the utility of reciprocal obligations and barter for commerce. Because it relies on a universal empty signifier, however, money has properties more akin to mathematics than the analogue world we inhabit and who's values it represents. The manipulation of these mathematical properties allows those who understand them to concentrate flows of money into forms that become indistinguishable from power. Once money is deployed this way, it is within the purview of those manipulating it to rob the prudent of reward for their efforts.

The Bubble Bursts Verse

Back in the first round foreclosures,

T’was the bankers that made themselves hosers:

With mooches for debtors the MBS bettors

Were buggered by shorts from their brokers.

Well-hung bankers in trading floor branches,

Of banks built of dud bb tranches,

Were shocked to discover their positions uncovered

When Hypo Real shunned their advances.

With mountains of dreck on their books,

The best and the brightest and crooks,

And Freddy and Fanny all ran to their nanny:

It’s free money whenever she cooks!

Now bankers, they really can’t stand her,

That nanny, she could make them pander,

But loves them so much that whenever they touch

If they don’t pick her pocket they rob her.

While her power makes them so jealous,

Only bankers are worthy, they tell us,

To indulge in her pleasures, all national treasures

They'd corrupt lesser mortals among us.

And her children she tends to neglect.

She lets them all get by on debt.

But for bankers suffices to look past their vices

And backstop their every bet.

When the economy finally tanked,

From her brood employment was yanked,

But instead of their succor she embarked like a fucker

On a high horse of moral complaint!

It wasn’t bank’s loose lending standards,

But the low lives, those big spending bastards,

That created this mess and she had to confess

They deserved all their little disasters.

Having given all that they had asked,

She was shocked when her bankers then tasked

P R flaks with attacking all her efforts at backing

Rationales for the big bucks they’d sacked.

Now it’s nanny who’s going to get hosed

By those big spending bankers who posed

As the hope for the future she really felt suits her,

But now they’ve run off with here clothes!

Bankers speak now with the voice of the state

They tell the rest of us "fish or cut bait"

Give your money to us or you're under the bus!

Extortion they insist is our fate!

So it seems that Americans are left

To select between robbery and theft

As preferred means to fund financial industry fun

While forsaking our own lives bereft.