Friday, June 22, 2012

Can't See the Situation for the Money

While we're limiting currency supply - by foolishly trying to hoard it, and to stabilize the "buying power" of a dynamic asset - we continue to spawn both more people AND more options.

Oxymoron:  noun;  e.g., stabilizing fiat.  Might as well stabilize evolution or thermodynamics, or quantum mechanics for that matter.

Our prime failure involves failing at situational awareness.

Our Output Gap is growing by leaps & bounds. Warren Mosler's phrase describing our current conditions, "Good for stocks & bad for people" mentions a dynamic that cannot be actually tracked with currency.

It's not just failure to understand currency operations that is troubling us.

We're also failing to understand the role of monetary policy subservient to national policy, which Warren typically calls Public Purpose.

Marriner Eccles described this vividly, back in 1932.

"We shall either adopt a plan which will meet this situation under capitalism, or a plan will be adopted for us which will operate without capitalism."

".. what can be done under communism or socialism, can be done under capitalism in the United States, if we have sense enough to set up an adequate flow of currency and credit in the right channels."

"YOU have got to take care of the unemployed or you are going to have revolution in this country."

"When you get enough unemployed they will control the Government and change our present political, social, and economic system."

How close we get to that sort of revolution is a social metric that CANNOT be accurately measured via currency, stocks or by bankers & financiers, either at the ECB or on Wall St.

We cannot peg all other policy to monetary policy. If we try, a time will come when the bankers will be the last to know that they're being swept away by a revolution. Then, the situation will quite suddenly be bad for both stocks and people, before we return to putting our own people before stocks.

There is a better way.  It only requires a more informed policy staff, appointed by a better informed electorate.   Does no one read in this country any more?  Why isn't the following common knowledge for every highschool sophomore?

'"Our leadership has delayed far too long in attempting to deal intelligently with our problems, which can be met only by the bold and courageous [and coordinated] action of .. our entire people."

"[We] can mobilize the resources of the Nation for the benefit of its people. "

"Unless the Government soon recognizes its position as the only stabilizer of our economic system and acts accordingly, unemployment relief required is due to Government failure to act sooner."

"Is there any program of economy and Budget balancing on the partof our Government as important as to stop this great loss and all theattendant human suffering, devastation, and destruction?"

"We have a complete economic plant able to supply a superabundance of not only all of the necessities of our people, but the comforts and luxuries as well. Our problem, then, becomes one purely of distribution. This can only be brought about by providing purchasing power sufficiently adequate to enable the people to obtain the consumption goods which we, as a nation, are able to produce. The economic system can serve no other purpose and expect to survive."

"The nineteenth century economics will no longer serve our purpose - an economic age 150 years old has come to an end. The orthodox capitalistic system of uncontrolled individualism, with its free competition, will no longer serve our purpose."

"I can conceive of no greater waste than the waste of reducing our national income about half of what it was. I can not conceive of any waste as great as tha t. Labor, after all, is our only source of wealth."


Roger Erickson said...

We need to seriously accelerate scaling up situational awareness.

Mobilizing Situational Awareness.

Only Open Source will do it.

It's no longer fiat currency that's limiting us, it's fiat situational awareness. Call it constraining our own group intelligence.

Group intelligence grows only with practice, not ANY accumulation of knowledge.

Only thing that matters is how to use the right data in the right place at the right time, in the right ways.

Anonymous said...

Maybe make it a bit more succinct?

paul meli said...

"Only Open Source will do it"

I've been working my way towards that same conclusion.

My grandson is trying to educate himself, sees everything he's learning in High School (11 th-grader) as useless in preparing for the future.

My son is re-educating himself, using the internet as his library.

Seems like most of the stuff people know these days contributes to the status quo.

We're fog-bound.

Roger Erickson said...

@Anonymous said...
"Maybe make it a bit more succinct?"

What's your suggestion?

Tom Hickey said...

@ Roger

I always try to keep in mind, What would Warren say? :)

Roger Erickson said...

@Tom Hickey

Warren understands monetary operations. He readily admits he does NOT understand political operations.

Tom Hickey said...

Roger, I am talking about his succinct and pithy writing style, almost aphoristic. Finely honed and pure genius in many cases.

Roger Erickson said...

@Tom Hickey

You know as well as I that most of what Warren said goes right over people's heads. Ditto for Wray, Mitchell, Godley, Vickrey.

Marriner Eccles had a more populist speaking style. Parts of his text will resonate more with the avg high school student.