Money is just a token that we use to “keep score” of the debts we owe one another. It is just a unit of account that helps us keep track of who has given who what. Having a central quasi-governmental power in the form of a central bank simply helps us to do this and allows governments to extend deficit-financing in order to keep economic activity stable.
So, what accounts for the visceral reactions we see toward the system? Why do some bow down as if to a deity, while others recoil in horror as if confronted with a demon? The hint to this lies in the way we moderns relate to government and power. The fiat money system is an embodiment of arbitrary power and we in the modern world distrust this. Money is accepted largely by edict in that it is fiat money in which we can pay our taxes and it is also fiat money in which contracts can be legally settled.
Lying behind every dollar, euro and yen is a jailor and a judge who are ready to deprive us of our rights and our freedom should we choose not to play by the rules of the game. It is this aspect of the system that accounts for the strange reactions we see surrounding it. It is this aspect of the system that leads some to hide from themselves the reality of the system and imbue it with an auratic glow and leads others to hysterically attack it as a grave injustice and evil. To get to the heart of this matter we must understand better how we relate to political power today.Naked Capitalism
Philip Pilkington: Kill The King – Why Are We So Scared of Fiat Money?
19 comments:
Interesting. Explains why the poor and most oppressed by government also worry the most about deficits.
Excellent... this gets to the real nitty gritty of it...
I'd rather read Philip here or Dan or our Tom on this area these days more than anyone else... those 3 are the best currently out there imo...
I would tho perhaps somewhat challenge Phil here on whether the current power is "arbitrary" (although he may not be asserting that himself) as we have representative government where we get to vote... and our society's views towards public purpose get implemented thru laws... at least here in the US (Republic)
Tom wrote up something nice about this the other day in a response to Bob R.
Also from Philip: "And so we arrive at a central contradiction. Most of us want a state that does away with sovereign power once and for all and leaves us in charge of our own lives, and yet at the same time in order to have such a benign state we need to also imbue it with some degree of sovereign power."
for the record I for one DO NOT want a state that does away with it's sovereign power (which is what we have right now imo btw)... although I see Philip's point that many out there do.....
this goes back to at least the early to mid 1800s with the advent of formal Libertarianism which led to Karl Marx, Charles Darwin, John Wilkes Booth, Capitalism, Anarchism, etc... ie the typical chaos you see which is still running rampant today...
but it may be traced back to as far as when the west lost the view of "nomisma" which was a state currency system based "not on nature but on law" (per Aristotle) thru at least the beginning of the Pax Romana ... somehow the institution of "nomisma" ("of law") got replaced by actual mass measures of the "noble" metals (gold/silver/copper, all column 11 of the periodic table and full d-band electrons) and this actually could have been the start of all of this... (but you may not be able to see this point if you are a heavy libertarian)...
ie At some point monetary-wise we went from "not on nature but on law" over to "not on law but on nature" which is interesting...
Another thing is that taxes are too damn high and this is contributing to resentment of govt and the current chaos...
"12 Now tribute collectors also came to be baptized, and they said to him, "Teacher, what should we be doing?"
13 Now he said to them, "Impose nothing more than has been prescribed to you." Luke 3:12-13
Getting the tax rate correct is important...
our current overtaxation chaos is driven by morons in positions of authority in government currently who think they have to "get the money" from the non-govt, grandchildren (I guess via time machine) and the foreign sectors... (what a bunch of morons)..
they are proceeding just like Phil writes here: "a state that does away with sovereign power"... it looks like it is a collective form of suicide-like behaviour, ie they are attempting to "kill the government" that they themselves occupy... very dark.
rsp,
Another thing is that taxes are too damn high and this is contributing to resentment of govt and the current chaos...
"12 Now tribute collectors also came to be baptized, and they said to him, "Teacher, what should we be doing?"
13 Now he said to them, "Impose nothing more than has been prescribed to you." Luke 3:12-13
Getting the tax rate correct is important...
Matt Frank - I could not agree with you more. Moreover, most Libertarians and Supply Siders would take common cause with you on that score. As long as we're referencing scriptures, the Bible speaks of a 10% Tithe, which is a tax rate that go well with me.
I call it the 10% Solution -- 10% for earned income with a generous standard deduction such that a family of 4 earning $50K per year would not have to pay anything. Interest income, dividends, capital gains, estate tax, corporate tax would all be 10%. Social Security payroll tax would also go to 10% with 5% paid by employee & 5% paid by employer. Moreover, I would eliminate the $110K income ceiling on the SS tax. Almost all itemized deductions would be gone. If you do the math, the maximum effective tax rate anyone would pay would be 20%. It's so simple a child could figure it out.
Sorry Matt. I left the "o" out of your last name.
Right Ed the correct rate HAS to be way lower than what j6p is faced with right now...
Warren says "we are over-taxed for our current size of govt..."
Randall Wray talks about "taxes DRIVE the currency" this is good imo... we have to figure out this "drive rate" of taxation if you will, ie what minimum rate will "drive the currency" and tax no more than that perhaps... this should be looked into by non-morons...
rsp,
I don't know about the "sovereign state" part, Matt. Sovereignty has a long history in philosophy and law, and it is a slippery concept. In practice it has a very checkered past, mostly bad, stemming from the notion of the monarch as sovereign, i.e., having absolute dictatorial authority.
The modern idea stems from Hobbes's positing a social contract in which sovereignty originates in the people, and this was developed in the Enlightenment along the lines of social compact and "popular sovereignty." Sovereignty is delegated to government by the people, and the government only retains it as long as it serves public interest and purpose.
The notion of the sovereign state combines the historical notion of the sovereign as absolute ruler and transfers it to the modern state, even under the notion of popular sovereignty. Only in a popular democracy would the people actually retain absolute control. Under a republic, they ceded absolute control to those they elect to lead them. This, of course, involves absolute power in the state, and "absolute power corrupts."
The only way out ethically is through popular sovereignty exercised through popular democracy, and that requires a high level of collective consciousness, higher than has yet been manifested in any large society.
Humanity is still evolving its inherent potential. We ain't there yet, and the continued existence of the sovereign state in its present very imperfect form elucidates that.
But even with the level of collective consciousness at present, most societies could be doing a lot better at manifesting popular sovereignty through a social compact than they are by getting rid of privilege the corruption it spawns. That was really what the Enlightenment was about, but the philosophy was developed by the bourgeoisie rather rather than workers, so no we have the dictatorship of the haute bourgeoisie become the new oligarchy, in whose hands the sovereign power of the state resides.
The plutocratic oligarchy uses this power to to create the privilege of wealth that results in plutonomy. They use power and privilege advance their own interest rather than pursue the common good.
According to the theory of popular sovereignty, this forfeits their ethical claim on power. Then the people have the right. and hence the responsibility, to take it back.
The problem is not so much the tax rate as what is taxed. The US federal govt is taxing income, which is productive, higher than economic rent, which is non-productive.
Matt - Who or what is j6p?
Warren says "we are over-taxed for our current size of govt..."
Randall Wray talks about "taxes DRIVE the currency" this is good imo... we have to figure out this "drive rate" of taxation if you will, ie what minimum rate will "drive the currency" and tax no more than that perhaps... this should be looked into by non-morons...
Agreed. I think from the MMT perspective lower taxes translate into greater supply of currency in circulation which in the extreme could be inflationary. However in the Supply Side model, lower taxes can increase the demand for money which could offset the added supply and in some cases may even have a deflationary effect. Do you think it is just one or the other, or could both factors be at work?
MMT economists want low interest rate for investment and variable tax rate wi automatic stabilization to adjust size of endogenously determined deficit to changes in saving rate. MMT JG creates a buffer stock of employed and sets the rate govt pays for an hour of unskilled labor as a price anchor.
Very neat and tidy system that few bother to understand, but rather criticize bits and pieces of. They can't see the forest because they focus on individual trees.
Ed,
"Joe 6 Pack" ;)
Tom,
"Sovereignty" as a term of art in Philosophy? If so I'll have to try to sharpen the terminology...
I was perhaps referring to the word in the general sense of govt "power" or perhaps "authority" which maybe are not synonymous...
rsp,
"economic rent, which is non-productive.."
Tom lately what Ive seen is that the rent seekers, who I agree are non-productive, are not getting their free lunch as their properties degrade and then they dont save the money to rehab them or keep them up... so they are forced to liquidate them "as is" as prospective tennants can move into newly constructed sites for less money lately... or even buy a place outright...
rsp, matt
Matt, look at the Wikipedia post. This as been an ethical question from the get-go, which leads into social and political philosophy. Most of the Western debate started with the Greeks debating the issue rationally, based on what they argued were fundamental principles. Different philosophers posited different fundamental principles.
This got merged with religion after the rise of Christianity and the coming of Christendom as the dominant socio=economic and political driver in the West.
The Enlightenment was about a return to the debate on the basis of the Greeks, without the theological presumptions that had been grafted on. Then the scientific method was added to get social and political science.
Matt, there is no such thing as a free lunch. Eventually there are problems and they the freed market economists blame it on "socialism," the CRA myth is still alive and well, as they recommend handing out govt money to the bankers to "save the system." All BS.
BTW, John Kenneth Galbraith wrote a book entitled, The Anatomy of Power (1983), where he looks at a lot of these issues from the institutional perspective.
There is actually such a thing as a benign dictator. I lived for a long time under Lee Kwan Yew who from my personal experience ran a tidier ship than most democracies (with some caveats). Personally I don't so much care how the system is run as long as it works well.
A bit unrelated....I'm thinking the tension in society is driven by conflict in the definition and understanding of egalitarianism. Almost everyone I talk to agrees with equality or opportunity and economic reward based on genuine human endeavour and merit. There's also a general recognition there should be some equality in economic outcomes. At least the differences in outcome should not be too extreme.
What's not well understood are the mechanisms in the system that distort the linkages between real human endeavour, merit and economic outcomes. The structural unfairness and cheats.
Elitists constantly strive to capture the system and thwart egalitarians. Either private elites or Government elites. (Although some only want us to see the danger posed by Government elites). We just seem to bounce back and forward between the least evil of the elitists. It's seems one time egalitarians can morph into elitists when they gain power, so we need to watch out for that too.
Surely elitism is the real enemy and we should be focussed on fighting that. Not getting bogged down arguing opposite corners of the egalitarian camp.
@ Andrew
inegality in democratic republics results from power that translates into privilege and economic rent. Wealth leverages itself through political power gained by corrupting political office holders. This grants the wealth privilege, usually including a double standard of justice, and the ability to increase wealth through the extraction of economic rent.
This was the thrust of classical economics culminating in Marx. Neoclassical economics erased the consideration of economic rent of Smith, Ricardo,and Marx. Classical economists were also conscious of the role that power played in political economy. When political economy was dropped for neoclassical math modeling the consideration of power was erased also.
Now economists that attempt to reintroduce the consideration of power, privilege, and economic rent are marginalized as cranks, if they are not demonized as "Marxists."
Without a consideration of power, privilege, and economic rent in the tradition of classical economics, mainstream economics is just advocacy of neoliberalism as a socio-economic-political theory that result in a regime that calls inegality "meritocracy." It's all BS.
I'm dreaming but....
I'm sure there's a lot of common ground to be found with (USA style) libertarians and centre left progressives in the area of egalitarianism.
The common enemy is elite capture leading to abuse of power and the distortion of egalitarian principles.
It just seems to me hope lies with the proles finding common ground on egalitarianism. Only then can we start reversing the relentless march of the elitists.
"I'm sure there's a lot of common ground to be found with (USA style) libertarians and centre left progressives in the area of egalitarianism."
Andrew - You're kind of speaking my language. In your other post you said....
"Almost everyone I talk to agrees with equality or opportunity and economic reward based on genuine human endeavour and merit."
Problem is, don't mix up equality of outcome with equality of opportunity.
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