Transcript from Limbaugh last week on the emerging federal legislation to maintain lower interest rates on student loan debt at this link. (Please ignore all the ads for "investing" in Precious Metals that may appear on his site... if you go there.)
He's (Pres. Obama) gonna veto this so that student loan rates will go up so that he can blame Republicans for it. He is counting on the fact that the media will not significantly report the Republicans tried to stop it. Pelosi is attacking the Republican bill. This is what they're saying. Because this is paygo. "Okay, how we gonna pay for this? The student loan interest rate." The government runs it now. The higher interest rate goes the more the government gets. So if you're not gonna have the student loan rate doubled, then the government says, "Uh-oh, we're losing money here." So Boehner and the boys, to make up the loss, take $5.8 billion from Obamacare, and Pelosi is attacking Boehner's bill because it uses that $5.8 billion from Obamacare's preventative health program. She's calling it an attack on the health of American women. Apparently only American women benefit from preventative health care. Now, never mind that Democrats voted earlier this year to take money from the preventative health fund to help pay to keep doctors' Medicare reimbursements from dropping. And never mind that Obama's own budget proposed cutting $4 billion from the same fund to pay for some of the other stuff they wanted. The GOP has always been against the interest rate on student loans going up. They just want to pay for it. Again, folks, just so everybody's clear, the student loan interest rate is scheduled to double because of legislation the Democrats wrote in 2007. And since the government runs the student loan program, all the interest payments go to the government now, not private sector banks. So, if the student loan interest rate's scheduled to double, then the government's telling itself it's gonna have that much more money coming in as people pay off their loans and pay the new interest rate. So the Republicans come along and say, "We're gonna make sure the interest rate doesn't go up." Well, that means the government's gonna lose all that money.You can see here how the absolute ignorance of our morons in government, who have signed on to some sort of "pay-go" idiocy due to their mistaken beliefs in what the fiscal authorities of the Federal government represent, handcuffs them from being able to pass any legislation that would create needed net financial assets in the non-govt sector at this point.
Here they feel that they must trade off preventative health care services for less revenues from student loan interest, when in fact the government doesn't need to charge ANY interest on student loan debt in the first place and non-govt sector direct healthcare providers continue to be revenue constrained.
Limbaugh is good at pointing out this idiocy, but he too has NO CLUE what it is REALLY all about: Both sides are mired in absolute economic and fiscal ignorance which has them surrendering the only true authority that they have all worked so hard to obtain positions within.
limbaugh really brings out the worst of people, including myself, he spews nothing but lies and hatred, same as ted nugent, look what the right did to the dixie chicks when they came out against the iraq war. these people make me sick. this has nothing to do with economics, but rush is vile. he is the one dividing america, scum
ReplyDeleteDave,
ReplyDeleteSuggest try to get "above the fray" to the extent you can wrt this bringing out the worst in you...
If you watch the Graeber video that Tom posted below, he and Keister talk a lot about the student loan debt.
If what Rush says is true here and the govt is actually holding all of the student loan debt then I dont know if Graeber has this right as far as students being forced into some sort of debt servitude by the bankers, if that is what Graeber is implying ie occupy "wall street".
Banks may be originators and take an origination fee and service fees, but after they lay off the risk to the govt, the continuing servitude might be better thought to be to the govt morons not "the bankers".
I think the govt morons may be more dangerous than "the bankers".
resp,
It is baseless and beyond preposterous for you MMTers to claim that because a government might be able to create its fiat funny-money out of thin air and pass it on to its supporters without a dim-witted electorate figuring out the scam that you have abolished the laws of economics, especially the law of scarcity. We get the part where the government, if it has the ability to get away with it, can create money via keystrokes. We get it.
ReplyDeleteWhat we dispute is that such an eventuality abolishes all economic law which seems to be the ultimate center-piece of your belief system. “Pay as you go” forces the populace to acknowledge and approve of the use of their limited resources for the government’s nefarious schemes in present time which has the tendency to put a quick stop to them. Your funny money system is designed to allow for the surreptitious transfer of purchasing power to the elite for wars and to pay favors without the victims knowing the source or nature of their loss. For “accounting” fanatics, your system is rigged to hide accountability.
Don’t act surprised when an unconstrained government behaves in an unconstrained manner regarding civil liberties and war or when an elite captures such a government in order to loot the populace.
As I understand it ( I have a son just graduating with some student debt) the pay back of the loan is based on income (never more than 10% of income for 120 payments) If the debt is settled before or at that point ...great, if not the rest is forgiven.
ReplyDeleteBob, give it a rest.
Laws of economics? Funny money? Law of scarcity???
We dont live in a zero sum world you imagine. We dont have too many people and we dont have too few resources. Everyone on the PLANET could live on their own 900 sq ft plot and fit within the state of Texas.
You're becoming a cartoon.
Obviously Bob doesn't get it. I can tell by the way he talks that he thinks any new asset creation is inflation that transfers purchasing power from the poor to rich. MMT doesn't claim to have abolished scarcity or that the government has unlimited spending power. It is only saying that what should be focused on is the resources. What is inflationary is spending beyond the available resources. I don't think were quite there yet.
ReplyDeleteDid you see Paul Krugman mention on Sunday morning TV that there are no such thing as bond vigilantes in nations that issue their own currency? He is coming around!
ReplyDeleteLaw of scarcity???
ReplyDeleteLike the fact that the same apple cannot be swallowed by two different people at the same time. This cartoon states your preposterous and infantile world view:
http://www.flickr.com/photos/bob_roddis/4163003939/in/set-72157600951970959
Because of the scarcity of body and time, even in the Garden of Eden property regulations would have to be established. Without them, and assuming now that more than one person exists, that their range of action overlaps, and that there is no preestablished harmony and synchronization of interests among these persons, conflicts over the use of one's own body would be unavoidable. I might, for instance, want to use my body to enjoy drinking a cup of tea, while someone else might want to start a love affair with it, thus preventing me from having my tea and also reducing the time left to pursue my own goals by means of this body. In order to avoid such possible clashes, rules of exclusive ownership must be formulated. In fact, so long as there is action, there is a necessity for the establishment of property norms.
http://mises.org/daily/4630
MMT is based upon trying to pretend that human beings, time, goods and services are not scarce and that property norms can and should be obliterated.
@ Bob,
ReplyDeleteThe "must" you continue to cite comes from principles needed to create the kind of economic society you happen to want. There is nothing natural about it, as we know from anthropology. There is no apriori naturalism.
Natural law and first principle arguments may be appealing but they are fallacious when they pretend to be absolute criteria. The only way criteria get to be considered absolute in this universe is through science, like the constant speed of light and the laws of thermodynamics. Even these are tentative to new experience, as QM wrt classical physics showed.
Social, political and economic "absolutes" are rigidly defined norms that establish the boundaries of a universe of discourse. A society accepting that universe of discourse and its boundary conditions will accept those norms as absolutes.
The view that there is a "natural law" that his not reflected in human behavior and universal preference and not scientifically established on a causal basis is medieval superstition. Everyone is welcome to their values and preferences but not their putative metaphysical status as "naturally" privileged, which really means supernaturally.
Roddis makes a couple valid points, there are real resource constraints to economic growth but he misrepresents the MMT position that fiat money should NEVER be one of the constraints as fiat can always be created and destroyed by government to maximize output and productivity. I think MMTers agree with Bob, about "government’s nefarious schemes" lately. Anyone would have to be blind to miss the corruption and self serving politics. Until the democratic process has been fixed, the politicians, if they understood the power of MMT, could reasonably be expected to also abuse that power.
ReplyDeleteWhile the Limbaugh transcipt is moronic, I think it is important not to dismiss the state of current law. Under current budgeting laws, we do have a zero-sum system where government MUST borrow or tax before spending. The Congressional rules require pay as you go -- while the rules ARE stupid those rules are as very real as the fiat currency we use.
ReplyDeleteThe "must" you continue to cite comes from principles needed to create the kind of economic society you happen to want. There is nothing natural about it, as we know from anthropology.
ReplyDeleteWe learn from anthropology that people have always engaged in informal exchanges based upon their own unique subjective values. The objective manifestation of those subjective values consists of the terms of those exchanges. That is the essential Austrian School insight. Everything written by Graeber simply reinforces those basic concepts.
Time, bodies and matter are scarce. A society must have rules regarding property rights is to prevent interpersonal conflict over scarce resources whether those rules involve allegedly shared, co-owned or community owned property.
The US is based upon the English common law for its basic property and contract rules despite multitudes of rules and regulations that violate those rights. MMT is fundamentally dishonest by glossing over its radical obliteration of what remains of those rights. Implicit in everything MMT is the naïve assumption that a government can and will have the omniscience and benevolence to shift around resources to better uses than the voluntary participants in the market. Employing that long refuted and baseless assumption, you jump to the conclusion that this can and should be accomplished with no muss or fuss because the government can create its own fiat money from nothing. You are oblivious to the fact that while a hand-to-mouth primitive society might engage in simple credit/barter exchanges, a prosperous society requires working property rights and a pricing process that accurately reflects the terms of the billions of complex exchanges that take place.
Keynesian policies and especially MMT proposals do and will fatally impair those essential property and contract rights and distort the objective REAL terms of exchanges so that the necessary guidance is no longer available in society to allow for informed economic calculation. That’s a fact of nature, a law of the universe.
With your concerted lack of understanding regarding the nature of prices, you might as well be Leninists or Trotskyites:
What we have with Trotsky and his comrades in the Great October Revolution is the spectacle of a few literary-philosophical intellectuals seizing power in a great country with the aim of overturning the whole economic system — but without the slightest idea of how an economic system works. In State and Revolution, written just before he took power, Lenin wrote,
The accounting and control necessary [for the operation of a national economy] have been simplified by capitalism to the utmost, till they have become the extraordinarily simple operations of watching, recording and issuing receipts, within the reach of anybody who can read and write and knows the first four rules of arithmetic.
With this piece of cretinism Trotsky doubtless agreed. And why wouldn't he? Lenin, Trotsky, and the rest had all their lives been professional revolutionaries, with no connection at all to the process of production and, except for Bukharin, little interest in the real workings of an economic system. Their concerns had been the strategy and tactics of revolution and the perpetual, monkish exegesis of the holy books of Marxism.
The nitty-gritty of how an economic system functions — how, in our world, men and women work, produce, exchange, and survive — was something from which they prudishly averted their eyes, as pertaining to the nether-regions. These "materialists" and "scientific socialists" lived in a mental world where understanding Hegel, Feuerbach, and the hideousness of Eugen Duehring's philosophical errors was infinitely more important than UNDERSTANDING WHAT MIGHT BE THE MEANING OF A PRICE.
http://mises.org/daily/4515
TYPO
ReplyDeleteThere should have been no "is" in this sentence:
A society must have rules regarding property rights [no "is"] to prevent interpersonal conflict over scarce resources whether those rules involve allegedly shared, co-owned or community owned property.
Bob "A society must have rules regarding property rights [no "is"] to prevent interpersonal conflict over scarce resources whether those rules involve allegedly shared, co-owned or community owned property"
ReplyDeleteI would state this as most societies have had some rules regarding allocation of scarce resources in that society, and these rules have differed widely in the course of history. Even in societies which did not recognize private property, this was an informal rule in the institutional arrangements that society. Not all rules that figure significantly in institutional arrangement are formally stated. These are called "cultural norms" and "values."
Historically, they have often been given institutional status through religion, and different religions reflect different cultural institutional social infrastructures. Even in contemporary society, anyone who travels is aware of divergence even within a certain homogeneity.
I think the fundamental difference between the Austrians and MMT on this issue is that we don't see creation of extra fiat as a redistribution or transfer tax. We see it as being used to produce more real goods and services than would have otherwise existed up to the point where inflation would occur. Technically that would be where redisribution starts to occur... I don't think MMT is as radical as people make it to be.
ReplyDelete"I think the fundamental difference between the Austrians and MMT on this issue is that we don't see creation of extra fiat as a redistribution or transfer tax. We see it as being used to produce more real goods and services than would have otherwise existed up to the point where inflation would occur. Technically that would be where redisribution starts to occur... I don't think MMT is as radical as people make it to be."
ReplyDeleteBroadly speaking, economics is the study of allocation of scarce resources. Allocation of scarce resources in a market economy is by price. This is the ultimate arbiter in a "free market." However, in a mixed economy, which prevails in the world today, adjustments in allocation are made through economic policy. Economic policy is based on political choice in a liberal democracy rather than by an arbitrary authority. According to MMT, these choice will be made politically based on availability of real resources.
we don't see creation of extra fiat as a redistribution
ReplyDeleteOMG. Then what is "increasing aggregate demand" all about? The guy who was just about to buy the apple now cannot because someone was just given fiat funny money he didn't earn and bought it up.
We see it as being used to produce more real goods and services than would have otherwise existed up to the point where inflation would occur.
The essence of Austrian theory and for which Hayek won the Nobel Prize is that the creation of fiat money MUST distort the pricing process inducing the production of goods and services in unsustainable lines of production. Of course it "stimulates". It stimulates the wrong things and those lines of production will collapse. You guys are oblivious to the entire argument.
Well. Finally, we get to the nub of the dispute.
ReplyDeleteBroadly speaking, economics is the study of allocation of scarce resources. Allocation of scarce resources in a market economy is by price. This is the ultimate arbiter in a "free market." However, in a mixed economy, which prevails in the world today, adjustments in allocation are made through economic policy. Economic policy is based on political choice in a liberal democracy rather than by an arbitrary authority. According to MMT, these choice will be made politically based on availability of real resources.
Actually, in the market, there is no official "allocation". People own property. Economic exchanges occur which produce objective prices which guide individuals in making economic decisions. Without those prices, you have the Soviet Union 1920. Injections of fiat funny-money distort those prices impairing economic calculation.
Basing the allocation of property upon majority rule obliterates the protections which private property provides. That is why we now suffer from rule by special interest. The frosting on the cake to this horrible system as provided by MMT would be to further unconstrain the government through the use of unlimited fiat funny-money injections. If you want to see REAL special interest looting of the populace, just go that route.
Democracy: Two sharks and a puppy voting on what's for dinner.
"Without those prices, you have the Soviet Union"
ReplyDeleteThe old black or white fallacy.
"Democracy: Two sharks and a puppy voting on what's for dinner."
Democracy is admittedly "the best of the worst," even as as majority rule instead of a facade for elite capture, but it's the best that human collective consciousness has been able to muster so far wrt governing large complex societies. You have a suggestion for something superior to democracy that is a practical alternative?
This comment has been removed by the author.
ReplyDeleteMatt -- I know of six to ten people who are paying off student loans and they are all paying Sallie Mae. I don't know Sallie Mae's current status, but it was originally set up much like Fannie Mae. I think many banks that were active in student loans gave them up to Sallie Mae as the government's vehicle for guaranteeing the loans. But, who owns Sallie Mae? I don't know.
ReplyDeleteJohn here is the wiki
ReplyDeletehttp://en.wikipedia.org/wiki/Sallie_Mae
Looks like it is private but govt is doing direct student loans for a couple of years and looks like sallie is in decline... probably still do servicing, perhaps some securitizations ... ?
Resp,
Bob,
ReplyDelete"The guy who was just about to buy the apple now cannot because someone was just given fiat funny money he didn't earn and bought it up."
maybe in a transitional period between one where the govt has not been providing enough NFA into one where enough NFA is being provided.
Once the supply side can effectively judge the new adequate levels of AD, supply will adjust to meet the new demand.
If there is increased apple demand, growers will put more acres into production. What happens in your scenario where the growers respond to the increase in AD but no additional settlement balances are provided?
deflation?
What if the growers have sunk costs invested at the higher price structure?
Then the revenues from the apple crop at the now decreased prices leave inadequate revinues at harvest time and they go bankrupt?
I dont get how the Austrian system can work?
Resp,
Quote: "Because of the scarcity of body and time, even in the Garden of Eden property regulations would have to be established. Without them, and assuming now that more than one person exists, that their range of action overlaps, and that there is no preestablished harmony and synchronization of interests among these persons, conflicts over the use of one's own body would be unavoidable. I might, for instance, want to use my body to enjoy drinking a cup of tea, while someone else might want to start a love affair with it, thus preventing me from having my tea and also reducing the time left to pursue my own goals by means of this body. In order to avoid such possible clashes, rules of exclusive ownership must be formulated. In fact, so long as there is action, there is a necessity for the establishment of property norms."
ReplyDeleteYes. We start with the assumptions that the world is without harmony and synchronicity. It's not like the physical world is knowable and it's not like science since Kelper is about finding physical harmonies and synchronicities i.e. physical laws.
I don't know why you seem to think that having sex and drinking tea cannot be coordinated activities. It simply doesn't follow. Abundance isn't refuted by the fact that "everyone can't do everything at the same time" rather it's about the relatively equal potential consumption being available to everyone.
Absolute property by definition limits the amount of consumption available to all and claims some divine right to limit everyone else in their right to use the same external resource. By definition you can only secure such a by force. Property=force.
Quote: " Time, bodies and matter are scarce"
No they are not. Time, space, and matter are relative. You cannot say they are scarce because you do have not absolute frame from which to measure. You can claim scarcity measure in terms something that relatively abundant. The Austrian school is fundamental Newtonian and therefore wrong in scientific sense.
Continued...
Quote: "A society must have rules regarding property rights is to prevent interpersonal conflict over scarce resources whether those rules involve allegedly shared, co-owned or community owned property."
ReplyDeleteNO! NO! NO! NO! Property Rights are rules to organize interpersonal claims over what society views as relatively scarce and thus property is not absolute but an invention of society and the right individuals socially and politically determined.
What you said is logically circular. X (property) is necessary for Y( rules) therefore for Y is dependent on (X). You haven't made an argument. You've just repeated yourself twice.
Quote: "
The US is based upon the English common law for its basic property and contract rules despite multitudes of rules and regulations that violate those rights. MMT is fundamentally dishonest by glossing over its radical obliteration of what remains of those rights. Implicit in everything MMT is the naïve assumption that a government can and will have the omniscience and benevolence to shift around resources to better uses than the voluntary participants in the market."
Anglophile and Imperialist Lies! United States law based on the US Constitution which does not rest of English common law. I suggest you read Vitter for the real basis of US and Colonial Law. The colonists can here to get away from the Oligarchial common laws of Europe.
MMT rests on the assumption there no such thing in any human society that rests on "absolutely voluntary participation" because such a claims politically relative. One man's voluntary is another's coercion. After all we have a scarcity of choices what wouldn't conflict with another man's choices or did you forget your own argument?
Quote: "
Keynesian policies and especially MMT proposals do and will fatally impair those essential property and contract rights and distort the objective REAL terms of exchanges so that the necessary guidance is no longer available in society to allow for informed economic calculation. "
Really? You want to go there? MMT policies such as not creating unregulated environments that create breeding grounds for fraud somehow interferes with "informed economic calculation"?
Somehow we have to allow the free market to keep the cheaters because it's not like Grishams dynamic could ever take place in a "free market."
It's not like people can actually know something about other people's near universal behaviorial bias can use the power of a sovereign government to direct credit to activities that are more productive than oil speculation and gambling because without a "free market" we can't make any decisions at all.
Only by the power of the collective calculating of the "market" can anything be decided at all. The individual counts for nothing. There is no knowledge or principles that can be learned about the real physical requirement for existence scientifically allowing a individual universal knowledge. No. Only collectivism of the market and madness of crowds can be the basis of human decision i.e. the dictatorship of "animal spirits." Typical of the Austrian collectivist!
A Sovereign authority based on a public government of reason i.e. a republic isn't allowed only the the imperial dictatorship of the oligarchial speculation in a market can be basis of governing relations. Hail Britannia and the City!
Sorry Bib, I'm not into free market feudalism. Go back to Austria and your take your Hapsburg and Rockfeller sponsored royalists arguments back with you.
Apparently, non-Austrians and non-libertarians are congenitally unable to understand the concept of the non-aggression principle or when it is and is not being enforced. Warren "Hut Tax" Mosler has said:
ReplyDeleteModern Monetary Theory recognizes that certain people need to be empowered to force others into involuntary exchanges. This is an operational reality.
That is not really an economic theory. It’s a hackneyed indefensible political “theory” (Facts! No theory!). The initiation of force is never justified. Further, the implication here is that the Austrians have not accounted for and rejected forced intervention in the market. This is preposterous. Ever heard of autistic, binary and triangular intervention? Probably not.
1. Types of Intervention
Intervention is the intrusion of aggressive physical force into society. The economic analysis of “private” coercion is the same as government coercion, but we focus on the latter because of its greater prevalence and number of apologists. Autistic intervention occurs when the aggressor uses force on an individual such that no one else is affected. Binary intervention occurs when the aggressor establishes a hegemonic relationship between himself and the victim. Triangular intervention occurs when the aggressor uses force to alter the relations between a pair of subjects.
2. Direct Effects of Intervention on Utility
A. INTERVENTION AND CONFLICT
In a free market, people only participate in an exchange if they believe they will benefit; thus the market “maximizes” ex ante utility of everyone in society. Any intervention, in contrast, increases the utility of the aggressor and necessarily reduces the utility of the affected subjects.
See:
http://mises.org/rothbard/pm/PM_2.PDF
Speaking of feudalism, MMT is based upon colonial enslavement according to Warren "Hut Tax” Mosler:
The following is not merely a theoretical concept. It’s exactly what happened in Africa in the 1800’s, when the British established colonies there to grow crops. The British offered jobs to the local population, but none of them were interested in earning British coins. So the British placed a “hut tax” on all of their dwellings, payable only in British coins. Suddenly, the area was “monetized,” as everyone now needed British coins, and the local population started offering things for sale, as well as their labor, to get the needed coins. The British could then hire them and pay them in British coins to work the fields and grow their crops.
Maybe this is true and maybe it isn’t. My initial reaction is that I would never support the invasion of Africa or force Africans to pick my crops in lieu of some strict penalty nor would any moral person. My initial response would be to find the perpetrators to try them and convict them as the criminals that they are.
Of course, if some nasty coercive scheme does in fact force or trick people into a certain behavior pattern at a certain time, this says nothing about Austrian theory but says everything about the basis of MMT.
I would ask what coercion is being applied to the zombies eternal to the US who are absolutely zealous to acquire ever increasing electronic balances of USDs in exchange for real products and services?
ReplyDeletehttp://www.factcheck.org/2012/02/did-obama-approve-bridge-work-for-chinese-firms/
Nobody is coercing these firms to provision the US govt sector in exchange for USD electronic balances.
So it is not "all" coercion obviously...
Resp,
Where did the money come from to pay these Chinese firms? It was extracted by the government upon threat of jail. The citizens didn't each offer to voluntarily to pay them.
ReplyDeleteIf there is no threat of violence, then the act is voluntary and it's none of my business. If there is a threat of violence, then the act is coerced. This isn't all that complicated.
Bob, as I have said before, MMT is descriptive of the monetary system we have. If it is replaced, then the description will be different. MMT is not advocating for the present system as far as I have seen, although it has pointed out relative advantages and disadvantages of fixed and floating rate, convertible and non-convertible monetary systems.
ReplyDeleteCriticizing the existing system and debating alternatives is all well and good, but it has little to do with the current situation, with which MMT is chiefly concerned.
I don't like the present system anymore than you do, for every different reasons, but I understand that as long as the present system is in place, this is the one have to deal with day to day. There are different approaches to dealing with it, and MMT is one of them, along with New Classicalism, old Keynesianism, New Keynesianism, Post Keynesianism, Austrian economics, and MMT. Each has its own framework and methods, and they are generally incompatible across approaches. Many of us have examined other approaches and prefer MMT, generally because it is the only one that correctly describes the existing monetary system, in our view. That is not necessarily to embrace the existing monetary system as the optimal one.
Moreover, there is also the question of practical feasibility. Government is here to stay, as well as giant interests. The optimal system, therefore, has to be one that harnesses both to an optimal social outcome, and which prevents either from dominating the process, as well as preventing an alliance of government and giant interests through capture of government, on the one hand. or government control on the other.
As long as there is government under the rule of law, government is going to be the position of enforcing the law as sole enforcer. The solution is not getting rid of government, which is tantamount to ending the rule of law, but rather instituting good government that works for every one in society. How that is accomplished is a political question that every society has to deal with in its own way. But nations are not completely free, even though sovereign, since they exist in a hostile world and one in which the global economy is increasing interdependent and cohesive, as well as increasing competitive, preventing nations from going their own way and acting unilaterally.
"Where did the money come from to pay these Chinese firms?"
ReplyDeleteUh, government and banks created it.
Money is not a thing in a fiat system. It is a social construct, in which government issues currency, the availability of real resources and therefore inflation nominally being the sole constraint, and banks create credit money by risking their capital, ie., unlike government they can become insolvent.
What happens is that Chinese firms sell good to US firms and invoice in dollars. The Chinese government does not permit Chinese firms to hold dollars or to convert them to yuan to bring home to China. They are controlled by the PBoC and held at the Fed. The PBoC has two choices, either to hold dollars as reserves or in tsys. Since tsys pay more interest than rb they choose to hold reserves. All the US government owes China is converting the tsys back to reserves plus interest accrued. That is to say, Chinese firms earned dollars through trade with the US in excess of purchases in dollars. That which is not consumed is saved. Chinese firms aren't allowed to save in dollars themselves, so the PBoC holds the dollars in savings at interest as tsys. If the PBoC did not do this, then either the dollars would have to be converted to another currency, used for purchases in the US, or Chinese firms would have to cut back on sales to the US, decreasing Chinese exports to the US.
Uh, government and banks created it.
ReplyDeleteBut in the short run, the money was extracted by force by the state government from the citizens. And the fiat funny-money creation resulted in stealing purchasing power surreptitiously from those holding the existing money. And the government maintains its monopoly on creating fiat funny-money through the threat of force. I can't believe how you guys need to mangle basic, simple definitions of common language.
If there is no coercion, it's not government. If you are asked "pretty please" to do something, say no, and there is no sanction as a result, it's not government.
You've proven my point that you cannot or will not differentiate a violation from an enforcement of the non-aggression principle.
"If there is no coercion, it's not government."
ReplyDeleteIf there were no coercion, there would be neither state money nor credit money. All money would exclusively a thing that serves as a medium of exchange, like metals or some other commodity unit. That would really result in a blazing economy now, wouldn't it. Humanity would still be back in the agricultural age and mercantilism for international trade. How well did that work out?
Oh, and without enforcement there are no contracts either.
ReplyDeleteThere are historical reasons that things developed they way that did.
Bob,
ReplyDeleteThere is coercion on the part of entities that would take USD balances in return for goods and service to acquire the USD balances to "be able to stay out of jail".
But this does not/cannot explain the behavior of the Chinese firms who are contracting with California for bridge assemblies payable in USDs.
Why would a Chinese entity agree to receive an electronic USD balance in exchange for anything real?
Resp,
All money would exclusively a thing that serves as a medium of exchange, like metals or some other commodity unit. That would really result in a blazing economy now, wouldn't it.
ReplyDeleteIndeed, it would result in a blazing economy. Money would maintain its value over time, long term projects would not be impaired by fiat funny-money price distortions and the war-making, looting, torturing and impoverishing government would be constrained on a short leash.
Oh, and without enforcement there are no contracts either.
What does that have to do with our advocacy of enforcement of the prohibition against both fraud and the initiation of force?
There are historical reasons that things developed the way they did.
Right. The super-rich elite and banksters wanted a central bank to help them loot the public and to help pay for wars like WWI. If the government had been limited to “pay as you go”, people probably would not have supported war because they would have suffered the financial cost of war immediately. Paying for war (or anything) with funny money makes accounting for the cost more difficult. The whole point of a fiat funny-money currency is to hide the shifting of purchasing power to the elite from the oblivious public.
Bob, you need to read some history and study evolution. The natural state is the law of the jungle, that is, the rule of the strongest. The reason that we don't find the kind of society that you advocate historically is due to the fact that at a certain point in evolution, animals learned how to coordinate, cooperate and organize to increase power.
ReplyDeleteThe rule of history has been that authoritarian, hierarchical, well-organized groups under the leadership of the warrior class easily dominated loosely organized tribal groups, which were either destroyed or enslaved. Since then, relations among nations have generally been adversarial, as nations sought to dominate other nations either militarily or economically. That situation persists today.
That pretty much persists down to the present day, although there have been cycles of greater and less authoritarian control.
The trend toward liberalism only began to get traction globally with the social revolts of the 18th and 19th centuries. However, the institution of representative democracy instead of direct democracy allowed the wealthy to retain control, largely supplanting the rule of the warrior class.
People of property know that democracy has a socialist bent, as Plato observed, which needs to be controlled to preserve the privilege of power that property affords.
While I believe that an anarchistic society will evolve as humanity comes of age and collective consciousness matures, it will not be based on property. Capitalism, which is incompatible with direct democracy, is a phase. But that is a belief that has no historical precedent.
I am very enjoyed for this blog. It help me very much to solve some problems. Thanks a lot for sharing this with all of us. I appreciate it very much! Looking forward to another great blog!
ReplyDelete