Is An Anti Austerity Alliance Possible, Part 2: Michael Hoexter: Naked Capitalism
Private Equity: A Government Sponsored Enterprise: Yves Smith & Nanea: Naked Capitalism
Wednesday, October 31, 2012
And One More Time, What Is Money?
(part 1) (part 2)
In the terms of double entry book keeping money is always and everywhere a contract binding a debtor to a creditor. When I possess a dollar it is my asset and a government liability: the US Treasury is the sole issuer of the dollar and every dollar represents a Treasury liability. Every dollar held by a non-government entity is an asset for its holder backed by the full faith and credit of the US Government, for whom it is a liability. When I purchase something with that dollar my asset is converted into whatever it is I have purchased and the governments liability is passed along to whoever sold me my purchase as an asset for them. The reason dollars are used to denominate trade within the dollar denominated portion of the world economy is that everyone who produces and exchanges within that system must pay taxes with dollars and expects the US Government to enforce its tax regime.
Double entry book keeping is a tool to keep track of the assets and liabilities of individuals and institutions that participate in money denominated exchange, but it also makes clear some underlying properties of monetary systems that are not intuitively apparent. A paper dollar or a gold coin are both fairly useless objects. What gives each its value, to the extent it has one, is that others expect it to port their exchanged wealth from one transfer to the next. When viewed this way, that gold has some intrinsic value seems a much less supportable proposition than that the coercive force of the US Government makes paper dollars valuable. That it will only accept the cancellation of its own liabilities as payment of tax both defines what a dollar is and convinces me to use it. So long as there is a US Government, it will be bigger than me and expect its taxes paid. Beyond that, in extremis paper is more edible than shiny yellow metal.
In the terms of double entry book keeping money is always and everywhere a contract binding a debtor to a creditor. When I possess a dollar it is my asset and a government liability: the US Treasury is the sole issuer of the dollar and every dollar represents a Treasury liability. Every dollar held by a non-government entity is an asset for its holder backed by the full faith and credit of the US Government, for whom it is a liability. When I purchase something with that dollar my asset is converted into whatever it is I have purchased and the governments liability is passed along to whoever sold me my purchase as an asset for them. The reason dollars are used to denominate trade within the dollar denominated portion of the world economy is that everyone who produces and exchanges within that system must pay taxes with dollars and expects the US Government to enforce its tax regime.
Double entry book keeping is a tool to keep track of the assets and liabilities of individuals and institutions that participate in money denominated exchange, but it also makes clear some underlying properties of monetary systems that are not intuitively apparent. A paper dollar or a gold coin are both fairly useless objects. What gives each its value, to the extent it has one, is that others expect it to port their exchanged wealth from one transfer to the next. When viewed this way, that gold has some intrinsic value seems a much less supportable proposition than that the coercive force of the US Government makes paper dollars valuable. That it will only accept the cancellation of its own liabilities as payment of tax both defines what a dollar is and convinces me to use it. So long as there is a US Government, it will be bigger than me and expect its taxes paid. Beyond that, in extremis paper is more edible than shiny yellow metal.
Monday, October 29, 2012
Links
It's Not Imbalances, It's Incompetent Banking: Randall Wray: EconoMonitor
Buying America: Greg Palast: RNN
Policy Debate Has Lost Its Way: Richard Koo: Nomura Securities
Sectoral Balances Part 3: Bill Mitchell: Billyblog
John Harte: John Carlos Baez: Azimuth
Case Inlet Retreat: MW Works: Contemporist
Buying America: Greg Palast: RNN
Policy Debate Has Lost Its Way: Richard Koo: Nomura Securities
Sectoral Balances Part 3: Bill Mitchell: Billyblog
John Harte: John Carlos Baez: Azimuth
Case Inlet Retreat: MW Works: Contemporist
Sunday, October 28, 2012
Links
When Growth Models Change: Michael Pettis
The Sanctity Of Creditors: Felix Salmon: Reuters
Argentina And Inflation: Randall Wray: EconoMonitor
Not necessarily what I'm going to do, but clear thinking about it:
Why I Refuse To Vote For Barak Obama: Connor Friedersdorf: The Atlantic
The Progressive Case Against Barak Obama: Matt Stoller: Salon
And on other subjects:
Sunny Gymnasium: Tekhne Architects: archdaily
The Sanctity Of Creditors: Felix Salmon: Reuters
Argentina And Inflation: Randall Wray: EconoMonitor
Not necessarily what I'm going to do, but clear thinking about it:
Why I Refuse To Vote For Barak Obama: Connor Friedersdorf: The Atlantic
The Progressive Case Against Barak Obama: Matt Stoller: Salon
And on other subjects:
Sunny Gymnasium: Tekhne Architects: archdaily
Saturday, October 27, 2012
What Is Money? Again.
(part 1) (part 3)
Money in a modern industrialized economy is what society, that thing Margaret Thatcher asserted did not exist, owes its constituent individuals. Some years later she followed up with this, “they never quoted the rest. I went on to say: There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It’s our duty to look after ourselves and then to look after our neighbour. My meaning, clear at the time but subsequently distorted beyond recognition, was that society was not an abstraction, separate from the men and women who composed it, but a living structure of individuals, families, neighbours and voluntary associations.“ Ms. Thatcher's Neo-Liberal mythology not withstanding, we do not survive in the world through looking after ourselves first and then looking after our neighbors, we survive by participating in a world of man made institutions that organize our activities in ways that yield material living standards vastly beyond the reach, much less imagining, of families and neighbors not fortunate enough to have been born into vast industrialized societies of multivalent and complex institutions. To the extent that we survive with the aid of money it is this institutional environment from which we are drawing our sustenance.
Money in a modern industrialized economy is what society, that thing Margaret Thatcher asserted did not exist, owes its constituent individuals. Some years later she followed up with this, “they never quoted the rest. I went on to say: There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It’s our duty to look after ourselves and then to look after our neighbour. My meaning, clear at the time but subsequently distorted beyond recognition, was that society was not an abstraction, separate from the men and women who composed it, but a living structure of individuals, families, neighbours and voluntary associations.“ Ms. Thatcher's Neo-Liberal mythology not withstanding, we do not survive in the world through looking after ourselves first and then looking after our neighbors, we survive by participating in a world of man made institutions that organize our activities in ways that yield material living standards vastly beyond the reach, much less imagining, of families and neighbors not fortunate enough to have been born into vast industrialized societies of multivalent and complex institutions. To the extent that we survive with the aid of money it is this institutional environment from which we are drawing our sustenance.
Monday, October 22, 2012
What Is Money?
(part 2) (part 3)
This seemingly simple question has been at the center of most of what I've posted in the last three years. Like the fractal properties of the waterline on a river bank, the closer you look at money the more infinitely complex it becomes. Like language or math, money is a projected system we've built around our inclination to abstract symbolic meaning from things. Like language and math it is a tool we created to solve practical problems in the world that once extant began its recursive feedback with that world restructuring our actions in it around the new definitions created by our own invention, money. Instinctively we value life, the things required to sustain life and the things within it that afford pleasure. Money is an alternate value system we invented to solve distributional problems with those prior values. But, like math or language, its universality as a system lends money a tendency to usurp those subjective, less measurable and older values and to substitute its own terms for those that preceded it.
The invention of money had the same kind of affect on our production and exchange of things as the invention of writing had on our production of myths. That is to say it decisively ended an earlier phase and set us on new and for the first time fixed foundations over which we continue to build. David Greaber's magisterial "Debt: The First 5000 Years" comes as close as the general reader probably wants to get to an historical understanding of the creations and evolutions of monies around the world. For our purposes here I'll focus on what money is here and now in early 21 century America, I'll focus on the fiat dollar. Since the final demise of the Bretton-Woods exchange rate system in 1971 the US dollar has been a floating fiat currency. This is to say it is a money backed only by the value created within that system of trade and commerce denominated with the dollar. This is very different from how fiat currency is popularly described as being backed by nothing. The productivity of the dollar denominated global trading system is at present the greatest economic achievement mankind has produced. It is something more than nothing, but what exactly is it?
This seemingly simple question has been at the center of most of what I've posted in the last three years. Like the fractal properties of the waterline on a river bank, the closer you look at money the more infinitely complex it becomes. Like language or math, money is a projected system we've built around our inclination to abstract symbolic meaning from things. Like language and math it is a tool we created to solve practical problems in the world that once extant began its recursive feedback with that world restructuring our actions in it around the new definitions created by our own invention, money. Instinctively we value life, the things required to sustain life and the things within it that afford pleasure. Money is an alternate value system we invented to solve distributional problems with those prior values. But, like math or language, its universality as a system lends money a tendency to usurp those subjective, less measurable and older values and to substitute its own terms for those that preceded it.
The invention of money had the same kind of affect on our production and exchange of things as the invention of writing had on our production of myths. That is to say it decisively ended an earlier phase and set us on new and for the first time fixed foundations over which we continue to build. David Greaber's magisterial "Debt: The First 5000 Years" comes as close as the general reader probably wants to get to an historical understanding of the creations and evolutions of monies around the world. For our purposes here I'll focus on what money is here and now in early 21 century America, I'll focus on the fiat dollar. Since the final demise of the Bretton-Woods exchange rate system in 1971 the US dollar has been a floating fiat currency. This is to say it is a money backed only by the value created within that system of trade and commerce denominated with the dollar. This is very different from how fiat currency is popularly described as being backed by nothing. The productivity of the dollar denominated global trading system is at present the greatest economic achievement mankind has produced. It is something more than nothing, but what exactly is it?
Saturday, October 20, 2012
links
Medical Insurance Is Business: Robert Prasch: NEP
Sectoral Balances Part 1: Bill Mitchell
Sectoral Balances Part 2: Bill Mitchell
Forcing Frequent Failures: Steven Randy Waldman: Interfluidity
Political Failure Of The Euro: Yanis Varoufakis
Why Are We Bailing Out The Banks Part 3: Golem XVI
Ballymorris House: Donal Colfer Architects: ArchDaily
Sectoral Balances Part 1: Bill Mitchell
Sectoral Balances Part 2: Bill Mitchell
Forcing Frequent Failures: Steven Randy Waldman: Interfluidity
Political Failure Of The Euro: Yanis Varoufakis
Why Are We Bailing Out The Banks Part 3: Golem XVI
Ballymorris House: Donal Colfer Architects: ArchDaily
Sunday, October 14, 2012
Links
Why Americans Are So Easy To Control: AlterNet: Bruce Levine
Self Destruction Of The 1%: Chrystia Freeland: NYT
Why We Are Bailing Out The Banks, Part 1: Golem XIV
Why We Are Bailing Out The Banks, Part 2: Golem XIV
A Vignette Of The American Political Scene: Jesse
Shearers Quarters: John Wardle Architects: Contemporist
Self Destruction Of The 1%: Chrystia Freeland: NYT
Why We Are Bailing Out The Banks, Part 1: Golem XIV
Why We Are Bailing Out The Banks, Part 2: Golem XIV
A Vignette Of The American Political Scene: Jesse
Shearers Quarters: John Wardle Architects: Contemporist
Saturday, September 29, 2012
Links
The Waning Of The Modern Ages: Morris Berman
Complexity And Resilience: HBR: Andrew Zolli
Tail Risk Payoff: John Dizard: FT
Can China Increase Competitiveness: Michael Pettis
Borges And The Virtual Age: Rick Bookstaber
Bookstaber's essay should be read with this:
Power, Pollution And The Internet: James Glanz: NYT
for an understanding of the instinctive and cultural forces that drive unsustainable behaviors.
Apollo Bay House: Rob Kennon Architects: Contemporist
Complexity And Resilience: HBR: Andrew Zolli
Tail Risk Payoff: John Dizard: FT
Can China Increase Competitiveness: Michael Pettis
Borges And The Virtual Age: Rick Bookstaber
Bookstaber's essay should be read with this:
Power, Pollution And The Internet: James Glanz: NYT
for an understanding of the instinctive and cultural forces that drive unsustainable behaviors.
Apollo Bay House: Rob Kennon Architects: Contemporist
Thursday, September 20, 2012
Thursday, September 13, 2012
Wednesday, September 12, 2012
Links
What Chinese Really Fear: Gerard Lemos
Six Policy Mistakes: Niels Jensen: CreditWritedowns Unfortunately the author of this piece, in his mistake #4, sees no obligation by states for the survival of their populations. In his view social spending is nothing but bribery to voters whereas the reality is most recipients of public benefits don't vote, but as described in "Enclosing The Commons" are without recourse for survival in the absence of benefits. Similarly his #5 sees defrauding pensioners out of their retirement income, a real theft of property, as a solution to finance having raided the pension kitty.
The Great Labor Reset: Rick.Bookstaber.Com Another look at the world with people as simple abstractions. Interesting anyway.
Complex Regulations Do The Opposite Of What They Were Designed For: Yves Smith: NC
Kid University: Paredes Pedrosa Architects
Six Policy Mistakes: Niels Jensen: CreditWritedowns Unfortunately the author of this piece, in his mistake #4, sees no obligation by states for the survival of their populations. In his view social spending is nothing but bribery to voters whereas the reality is most recipients of public benefits don't vote, but as described in "Enclosing The Commons" are without recourse for survival in the absence of benefits. Similarly his #5 sees defrauding pensioners out of their retirement income, a real theft of property, as a solution to finance having raided the pension kitty.
The Great Labor Reset: Rick.Bookstaber.Com Another look at the world with people as simple abstractions. Interesting anyway.
Complex Regulations Do The Opposite Of What They Were Designed For: Yves Smith: NC
Kid University: Paredes Pedrosa Architects
Tuesday, September 11, 2012
Enclosing The Commons
Gerard Lemos had this interesting bit in the Times on Sunday. In his efforts to find out what ordinary Chinese were worried about he appealed to an embedded religious custom, "wish trees", not stamped out by the Communist Party. "People tie notes about their private desires to the branches, hoping that the wind will blow their prayers to heaven." From such notes, blown to him rather than heaven, he found that "people had lost their optimism and were yearning for security and freedom from anxiety". And that "income is a primary worry for those who have lost their jobs or land". He describes this from a modern western sociological point of view that completely misses the essential thing that is happening here: this is the Chinese version of what late Medieval England called "enclosure".
These people were born into a world, however impoverished, of community bonds and responsibilities that mutually reinforced individuals sense of security by embedding them, to use our sociological terms, in "support groups" with access to "resources": families and villages with access to land and water. These were communities that could pull together in times of famine, drought or political pestilence to survive. And did, and as recently as within the living memory of "The Great Leap Forward". While I am all for industrialization, the division of labor and economic efficiencies at the macro level, when a society embarks on re-organization from something like English Feudalism, France's Ancien Regime or PRC "Communism" into something like modern industrial capitalism, it is imposing on its population an existential dependency on money that will be entirely new to them and will always produce anxiety about money because suddenly life is impossible without it.
This political undertaking in post Medieval England was the subject of a great deal of attention by Marx and the brutality exhibited as part of the process in that particular place and time inspired most of his more radical political ideas. It's ironic now that it is nominally communist China callously inflicting this same regime on its population. Were the CCP really a Marxist entity it would certainly recognize what it is doing as familiar and provide its people with what means of production they needed to ensure their survival. That instead when "I told the officials who gave me permission to put up the wish trees about these anxieties... in their authoritarian, bureaucratic mind-set the reports were taken as early warnings of social tension rather than grievances to be redressed" indicates whatever its ideological pretenses the regime is a typical authoritarian one first and foremost, and consequently much more concerned with control than any interests of its minions.
“My daughter is far away in Guangdong. I am sick. I’ve had this lump for a long time. I think it’s cancer. I can’t afford to go to a doctor, and I haven’t told my daughter. I don’t want to ruin her life.” Deprived of both community and sustenance, even bonds of family are degraded as parents like this one calculate their costs to their children for their children's good and select death rather than resistance. People in such straights reach out for "spiritual" solutions because that is what they can afford when in a newly monetized economy they find themselves without money. A similar soulfulness has flourished in the post Reagan "neo liberal" United States as real incomes for the majority of citizens have gone into permanent decline. Spiritual communities cannot redress the absence of money, but by pooling resources into new organization can leverage their poverty into better communal conditions, but only to a point.
At the point of real scarcity, in the real absence of necessary resources in a money economy hard decisions about life and death are all that is left to both individuals and groups. “I’m a citizen at the bottom of society,” as one person wrote to heaven in the person of Lemos, “we would like to punish those who have taken away our land”. But they have neither the authority or resources so instead they pine and starve to free their children, they hope, to prosper in this perverse new world. Like the capitalist prototypes of the West, the Chinese version has at its dawn been overrun by corrupt opportunists who propagandize against their victims with wealth expropriated from those same suffering masses. It took a hundred years for the socialism that has made western economies viable these last sixty years to take its final shape in the aftermath of World War II. With its demographic heft and rapidly degrading environment, China has much less time to figure out that if people are dependent on the cash economy they must have adequate opportunities to acquire cash to survive. And even as China struggles to learn this lesson, we in the West are doing our best to forget it.
These people were born into a world, however impoverished, of community bonds and responsibilities that mutually reinforced individuals sense of security by embedding them, to use our sociological terms, in "support groups" with access to "resources": families and villages with access to land and water. These were communities that could pull together in times of famine, drought or political pestilence to survive. And did, and as recently as within the living memory of "The Great Leap Forward". While I am all for industrialization, the division of labor and economic efficiencies at the macro level, when a society embarks on re-organization from something like English Feudalism, France's Ancien Regime or PRC "Communism" into something like modern industrial capitalism, it is imposing on its population an existential dependency on money that will be entirely new to them and will always produce anxiety about money because suddenly life is impossible without it.
This political undertaking in post Medieval England was the subject of a great deal of attention by Marx and the brutality exhibited as part of the process in that particular place and time inspired most of his more radical political ideas. It's ironic now that it is nominally communist China callously inflicting this same regime on its population. Were the CCP really a Marxist entity it would certainly recognize what it is doing as familiar and provide its people with what means of production they needed to ensure their survival. That instead when "I told the officials who gave me permission to put up the wish trees about these anxieties... in their authoritarian, bureaucratic mind-set the reports were taken as early warnings of social tension rather than grievances to be redressed" indicates whatever its ideological pretenses the regime is a typical authoritarian one first and foremost, and consequently much more concerned with control than any interests of its minions.
“My daughter is far away in Guangdong. I am sick. I’ve had this lump for a long time. I think it’s cancer. I can’t afford to go to a doctor, and I haven’t told my daughter. I don’t want to ruin her life.” Deprived of both community and sustenance, even bonds of family are degraded as parents like this one calculate their costs to their children for their children's good and select death rather than resistance. People in such straights reach out for "spiritual" solutions because that is what they can afford when in a newly monetized economy they find themselves without money. A similar soulfulness has flourished in the post Reagan "neo liberal" United States as real incomes for the majority of citizens have gone into permanent decline. Spiritual communities cannot redress the absence of money, but by pooling resources into new organization can leverage their poverty into better communal conditions, but only to a point.
At the point of real scarcity, in the real absence of necessary resources in a money economy hard decisions about life and death are all that is left to both individuals and groups. “I’m a citizen at the bottom of society,” as one person wrote to heaven in the person of Lemos, “we would like to punish those who have taken away our land”. But they have neither the authority or resources so instead they pine and starve to free their children, they hope, to prosper in this perverse new world. Like the capitalist prototypes of the West, the Chinese version has at its dawn been overrun by corrupt opportunists who propagandize against their victims with wealth expropriated from those same suffering masses. It took a hundred years for the socialism that has made western economies viable these last sixty years to take its final shape in the aftermath of World War II. With its demographic heft and rapidly degrading environment, China has much less time to figure out that if people are dependent on the cash economy they must have adequate opportunities to acquire cash to survive. And even as China struggles to learn this lesson, we in the West are doing our best to forget it.
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