From a comment at Warren Mosler's blog, by MRW. Worth reposting in it's entirety (fixed a few typos for easier reading, and added the Beardsley Ruml link).
This is an awesome example of what our grandparents knew, our parents forgot, and we have to learn again. What will it take to ensure our grandkids don't have to relearn it the hard way? Carve it into the marble at every Fed building?
MRW Reply: August 4th, 2012 at 3:45 pm
I laughed when Rickards brought up the spectre of German hyperinflation. Keep this post to show your worried friends. Better yet download the whole book.
The quote below was written in 1939 by Richard L Owen, Former Chairman, Committee on Banking and Currency, United States Senate. It was presented to Congress in late January 1939, then sent out for printing at the Government Printing Office.
‘Natch, since this showed up a few months before WWII, who's read it?
Get a load of the title:
National Economy and the Banking System of the United States — An Exposition of the Principles of Modern Monetary Science in Their Relation to the National Economy and the Banking System of the United States
76th Congress, 1st Session, Senate Document 23
http://archive.org/details/NationalEconomyAndTheBankingSystemOfTheUnitedStates
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Chapter XVI, The Inflation Bogey, pg.65
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The old system is vigorously defended. Its advocates and defenders fill the American press with articles dealing with the question of our economic life in which they attribute the evils arising under the existing system to many other causes than the real fundamental cause. Modern monetary science exposes the real cause beyond the possibility of doubt or successful contradiction. But the advocates of the old order, minimize or denounce monetary causes as being responsible for our national distress. The purport of these various articles seems to be to warn the Members of the Senate and House of Representatives and the people against “tinkering with the currency,” against “fiat” money, against “printing press money,” and against the dangers of “inflation.” The experience of Germany following the World War is pointed out as a terrifying example, in which inflation resulted in the destruction of the value of bank deposits, bonds, insurance policies, mortgages, and other evidences of debt, by reducing the German mark to zero value through the inflation of the German mark billions of times.
The term “inflation” has thus been built up as a bogey warning the people against any necessary expansion by using the term as equivalent to a defensible and necessary expansion of the money supply.
These advocates of the old system (which has continuously reproduced one depression after another) seem to rely upon the lack of an informed public opinion. They frighten the people by the bogey of “inflation” as if the advocates of modern monetary science proposed “inflation.” Modern monetary science vigorously opposes “inflation.” It vigorously opposes the “inflation” which has been employed by the sagacious few to profit and to acquire the wealth of the ignorant many.
Modern monetary science proposes an adequate plan by which to prevent inflation for all time.
MRW: "Add this to Ruml’s 1946 “Taxes as Revenues are Obsolete” and I think you can blame WWII and people’s concerns with it as the reason why no one paid attention to what theses gents were trying to explain to Congress."
37 comments:
Good post Roger,
More evidence that certain humans have been able to understand state currency systems throughout history....
Where does this leave Simpson-Bowles, Peterson/Walker, Rep. Ryan, Pres. Obama & his advisers, the Ron Pauls, etc...???
Dishonest or morons?
I say morons... but opinions vary.
Rsp,
Matt, I think that Upton Sinclair summed it up:
I used to say to our audiences: "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
▪ I, Candidate for Governor: And How I Got Licked (1935), ISBN 0-520-08198-6; repr. University of California Press, 1994, p. 109. wikiquote
These people understand in an interested way, and so they cannot view the issues and operations involved objectively.
"Where does this leave Simpson-Bowles, Peterson/Walker, Rep. Ryan, Pres. Obama & his advisers, the Ron Pauls, etc...???"
Maybe they should learn to read?
The comparison with the events that lead to WWII is apt. Now some people want to return to that failed paradigm, which, incidentally, the world had been following previously in ages that led to mercantilists competition and eventual war. It's a form of idolatry as fixation on the material.
To look at money as anything but what it actually is, a useful idea become institution expressed chiefly as accounting entries, leads to irrational behavior that ends in tears. Treating money as a "thing" of absolute value turns it into a god to be worshipped. This is the message of the midrash of the golden calf in Exodus, for example. Go and reread it from that perspective. To enter the Promised Land, the people had first to divest themselves of their idolatry. Whether these events took place as described, or even at all, is immaterial now. The message is still timely. See The Four Idols of Francis Bacon
Roger but then they have to be able to understand what they are reading.
This topic is what I consider very abstract.
Something happens to them, Leverage has documented that brain research has shown that their neocortex does a shut-down (they lose higher order brain functions) and they cannot abstract as needed to be able to understand what they are reading here....
This has to be one of, if not THE MOST, interesting human behavioral responses ever witnessed throughout the history of the human.
AND probably the one cognitive response that has THE MOST destructive effects on the human.
Cognitive research should be ALL OVER THIS.... but here's the catch: COULD YOU EVEN GET THE COGNITIVE RESEARCHERS TO UNDERSTAND WHAT WE ARE TALKING ABOUT?????
I have my doubts...
Rsp,
I would say people like Simpson, Bowles, or Paul honestly don't get it.
Obama's "salary" depends on not getting it.
" Whether these events took place as described, or even at all, is immaterial now. "
Right Tom, imo even if you are given to think all of that is a "fairy tale", can't it still be edifying to the non-believer? Like the ancient Greek writings?
Rsp,
Matt: This has to be one of, if not THE MOST, interesting human behavioral responses ever witnessed throughout the history of the human. AND probably the one cognitive response that has THE MOST destructive effects on the human.
Food, sex, and territory affect all organisms including humans in pre-cognitive ways. And money, especially in its material form, to the list in the case of humans. It blows out the cognitive circuits because with money one become god-like. Money gives a sense of safety and comfort — ersatz immortality. It also bestows freedom and power, attributes of the gods. Human depict heaven as a place of pleasure and plenty.
There are deep biological reasons that most human have difficulty getting that money is a useful idea become institution/convention that is reducible to accounting entries recording assets and liabilities. Instead, most humans see money as the key to the control room. Difficult to overcome that love for control.
All of the ancient myths are "true" if one knows how to read them. The problem arose when a priesthood arose to interpret them as a means of social control. This has nothing to do with the sages that originally told the stories. The Greek term mythos means story, and the Hebrew term midrash means teaching story. These stories are about life, not facts although facts do figure into the legends. The greats of the past are archetypes and the legends are stories that illustrate these archetypes.
We have forgotten this, and "modern" educational system are hopelessly screwed up because of it. The modern dumbbells threw all this out as "useless" in learning a trade or profession. It is the basis of spiritual teaching and liberal education. Even Aristotle, known today as the ancient man of reason par excellence, is said to have spent his final days revisiting the myths.
@MattFranko
"Something happens to them, Leverage has documented that brain research has shown that their neocortex does a shut-down (they lose higher order brain functions) and they cannot abstract as needed to be able to understand what they are reading here...."
Sure, that happens in a fraction of the spectrum of individual humans. Doesn't matter. WE'RE the ones who selectively elect such people to policy positions. There's a very easy if indirect way to rectify this.
Quit sending inappropriate people to try to manage increasingly dynamic systems.
That bypasses all the irrelevant biochemistry unique to various subgroups.
ps: If they consider homosexuals & left-handed people (what else?) to be national threats, we can certainly claim that people disproportionately incapable of abstract & dynamic thought should not be policy staff.
Hell, if the military can devise an operational strategy for Officer Development, we could at least TRY to set rational standards for policy development positions? Ya think?
Very good find. :)
I think these pradigm changes take time. Milton Friedman's monetarism didn't change the world overnight. It's time now to undo the damage done by monetarism. Everything is pointing the way that first they ignore you, then they laugh at you....
Events in Europe might not be so bad for the world in long run, but then again: In the long run we are all...
Quit sending inappropriate people to try to manage increasingly dynamic systems.
The crux of the problem and no obvious political solution. It is true that we are selecting the wrong people for high position in government and business, it goes beyond that. It is a cultural and institutional problem, and such problems are tenacious difficult to resolve without a reset, and entrenched system resist resetting. Historically, is usually takes a shock. but the problem now is that the entrenched system has become resilient in the face of shock due to the development of disaster capitalism.
Tom,
What's "disaster capitalism"?
Thanks.
What's "disaster capitalism"?
Using crises, real or manufactured, to advance the neoliberal agenda, e.g, on the the ground that there is no alternative (TINA), or that it is the most efficient and therefore the most effective way forward.
The concept was surfaced by Naomi Klein in her book The Shock Doctrine.
See also War, Terror, Catastrophe: Profiting From 'Disaster Capitalism' by Paul B. Farrell, Dow Jones Business News, October 16, 2007, for a synopsis.
"Disaster Capitalism"
see also "Invasion of the Straw Men"
http://mikenormaneconomics.blogspot.com/2012/08/invasion-of-straw-men.html
just to carry on the allegory :)
Makes you afraid to go to sleep, with these kinds of policies lurking in closets.
"To look at money as anything but what it actually is, a useful idea become institution expressed chiefly as accounting entries"
I'd say money is more a hierarchical system of debts, or liabilities, rather than just a "useful idea".
The question is, who is at the top of that hierarchy?
The history of humanity is about fighting for possession of that top spot.
I'd say money is more a hierarchical system of debts, or liabilities, rather than just a "useful idea".
Subsequent development of the idea rather than a given. There are a lot of possible institutional arrangements. Why just settle for what we've inherited by happenstance or the design of "interested men" (Thomas Paine).
The general idea of money is really rather simple. Time for some out of the box thinking about money as an institution that focuses chiefly on money are a unit of account instead of primarily as a medium of exchange or worse, a store of value.
Money is about tracking transactions, which is what a monetary economy is about. And the design of the monetary system operationally influences those transactions.
Money is not a veil. It's use can be employed to enhance (or detract from) the effectiveness and efficiency of an economic system. Let's design a system that is beneficial to the entire society, not just the privileged that run and control the institutional arrangements of money creation and use.
agreed, however what you're advocating is control of the monetary system by the faction you endorse (which I do to).
*too
It's interesting that the author of this paper, Robert L. Owen, was part Cherokee and his family fotune was destroyed following the banking Panic of 1873.
"interested men"
Tom sounds like the only thing that these "men" were interested in was silver and gold. (eg Read Hamilton's Federalist 12)
They all seem to have possessed some sort of perverted fetish for these metals as "money" and accordingly placed severe limits on human authority... and not able to see any alternative arrangements...
But then you have Lincoln who did the greenbacks (subsequently killed), FDR who confiscated the gold domestically (died early of seemingly natural causes), then Nixon who removed gold internationally (then got run out of town on a rail).
So there have been men who have stood up for our own human authority (over metals) and paid a price looks like.
But to use the term "men" associated with "metal lovers" I think takes liberty with the word.
At some level I question the basic "manhood" of any of these "metal lovers".
Think Ron Paul running around worried about whether the gold is still in Fort Knox... who cares!
It's unmanly behavior imo...
rsp,
eg Roger mentions the US homophobes above... imo it's like these "metal lovers" are gay for these metals.
Rsp,
Matt,
how do you think the banking sector came to be dominated by so few banks? The 19th century was largely about wiping out the opposition, whilst keeping the proles down. Gold can be quite useful for that. The monetary system has always had the potential to be used as a weapon...
Y,
I see what your saying but look at Hamilton here in Federalist 12:
"By multipying the means of gratification, by promoting the introduction and circulation of the precious metals, those darling objects of human avarice and enterprise, it serves to vivify and invigorate the channels of industry, and to make them flow with greater activity and copiousness. "
Sounds a bit sexual imo... he is definitely getting carried away here... this is weirdo writing at some level...
Rsp,
I'm getting a copious flowing sensation just thinking about it...
mmmm, lovely gold.
I think people probably just tend to covet whatever society deems to be highly 'valuable'.
As a child I would have thought that gold was pretty, but that's about it. After years of being told how 'valuable' and important it is, if I'd by chance found some lying on the sidewalk I would have gone wild.
Right! It's weird!
What was he thinking????
I guess it was intended to be persuasive writing but did Hamilton know about subliminal messaging already in the late 1700's? I dont think Freud came around with that stuff for another half a century...
I think he was evidently caught up in what Marx went on to call a "commodity fetish" which had some sort of sexual overtones... really weird!
rsp,
Certainly the attachment to commodity money is really weird from a 'rational' point of view.
I've read all sort of crapp from gold bugs, things that could be considered 'madness'.
But there are different levels of perception around the concept of money. To me the most fascinating thing is that most people does get how basically money is a creature of society, institutions and (ultimately) the "state". But ultimately they detach this feature and in convoluted ways they manage to apply 'exogenous' thinking about money.
The 'household' analogy is very strong, and there is a projection of each individual and household unit towards currency management. My current theory is that 'socialization' process of wage labour induces a cognitive block about this, think about it: you end your whole life 'working for money', you are basically being deceived into devoting your most precious thing (life) to acquire an abstract thing which can be created by institution ex-nihilo.
You must 'rationalize' and rise a mental block about how this is possible. Otherwise it would be very 'unfair' that someone/something has the power to control your living time in such powerful way. The natural tendency to 'exogenize' currency creation and management then is very strong.
This off course ends up in the very unscientific discipline of economics and its textbooks. (Even if it's by just ignoring money -neutrality-, because is very convenient to ignore molesting things.)
"Disaster Capitalism", How they are rumored to operate:
https://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man
agreed, however what you're advocating is control of the monetary system by the faction you endorse (which I do to).
Yes, I would revise the currency institutional arrangements quite a bit, with government taking over retail banking and the banks commercial and investment banking. I would also shorten the leash considerably on bank activities, as well as move to decentralize banking.
Matt, I think he was evidently caught up in what Marx went on to call a "commodity fetish" which had some sort of sexual overtones... really weird!
Definitely a fetish, and your connection of it with what Freud would later say is spon on.
There are even ancient myths that make gold and silver the semen of the gods that fell on earth. See Jos. Needham, Science and Civilisation in China: Volume 5, p. 118 — Google Books.
Seen in this light Hamilton's words are really uncanny.
jeg3, what Perkins alleges is shocking but actually very mild in comparison with US black operations, e.g., in Latin America, the Iran-Contra scandal being only the tip of the iceberg.
Matt,
the Romans were well aware of the Eastern superstitions about gold and exploited them to the hilt. Alexander del Mar (who else) wrote a book on that.
David,
That DelMar book you linked to seems to focus on the Roman calendar...
My take is that at least the Medes then Greeks then the Romans used state currency which was purposefully in contrast to the use of weights of metals for their monetary system, this based on their belief that MAN was the measure of all things...
Futher, it looks like the Romans allowed nations in the empire to establish local policies to use their own local monetary systems for small denomination items or local public purpose (probably assume as long as it was not at cross purposes with Roman policy).
Still have much left to read from Delmars writings thanks again for the reference to his works... rsp
Matt,
you're right. As I looked through the book it wasn't much about money, although there are some interesting snippets here and there. I don't doubt that the Romans understood the fiat aspect of money very well and developed practical policies around it. They also did, as you know control gold coinage, which was inextricably linked with the Sun God mythos of the Eastern (and Greek) empires. What del Mar found and wanted to show is that the Roman emperors were as thorough and serious about imposing the emperor as Sun God as the Egyptian, Persians or Chaldeans had been. They changed the calendar, rewrote historical records, deleted inconvenient parts, etc. All this seems ancillary to the main point, but ultimately, the gold coin with the visage of the emperor with "sun" rays streaming from his head was a religious "fetish" object. Defacing a coin was punishable by death, not because it was money but because it was considered blasphemy against the emperor sun god.
Matt, David,
Amazing the trivia humans invent, in order to shape any situation to expedient purpose.
All when, long term, it's far more productive to re-purpose, fully align and fully leverage all people to a "more perfect union." Aka, return-on-coordination trumps all other returns.
But that requires investment in a deferred payoff that not everyone is adequately prepared to grasp.
MRW: "Add this to Ruml’s 1946 “Taxes as Revenues are Obsolete” and I think you can blame WWII and people’s concerns with it as the reason why no one paid attention to what these gents were trying to explain to Congress."
That is not really right. Everybody paid attention, not in spite of, but because of WWII. And by 1939, there had already been an intentionally Keynesian deficit & the subsequently systematically denied success of the New Deal. Keynesian economics, "The New Economics" won, decisively. Everybody knew & understood MMT back then, to the extent that "everybody knows" stuff. But the victory was not complete enough, it was not usually expressed clearly, precisely, correctly & simply enough, as Ruml did, partly because actual economic institutions were not entirely freed & still clutched the golden (killer) teddy bear.
So the Keynesian era had serpents in the garden that grew ever stronger, and the tipping point where the nonsense won out in academia was somewhere around 1970. That's when the forgetting occurred, became universal, comically exactly when the system became in actuality entirely free & teddy-bear-less.
Y: I'd say money is more a hierarchical system of debts, or liabilities, rather than just a "useful idea". Right. Preferable to what Tom said, not really a subsequent development of it. It's the only thing that money has ever been & is common to all superficially different institutional arrangements.
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