Commentary by Roger Erickson
Introducing Peasant's Logic Concerto, a Political Movement in Three Parts.
Question #1: How many times, and how often, do you have to restate the obvious, to each generation?
Answer #1: Until the message is even heard by - then actually sinks in for - a just-adequate proportion of the electorate.
Question #2: Do fiat taxes fund anything in fiat currency systems? (Seriously, we need to ask? Ok. Fine. Proceed.)
Answer: #2: Consult a dictionary, look up the word "fiat." Then actually think.
Question #3: Do USA FICA taxes "pay" for Social Security benefits?
Answer: #3a: (see answer 2, above; apply critical thinking; if still confused, proceed to answer 3b)
Answer: #3b: FICA taxes are - functionally - completely irrelevant to Social Security benefits. Rather, they represent pure politics.
Seriously folks, in countries using a fiat currency system, fiat taxes fund neither DoD or SocSec, nor any other public policy. "Fiat" is a dimensionless, dynamic metric used in agile management of static assets. In the USA, what part of fiat do we choose, by fiat, to NOT understand - since 1933? A "fiat" currency system - by definition, means that we issue currency as needed, then just stay between the tolerance limits of deflation vs inflation. A deficit in fiat is semantic nonsense, used only by politicians and lobbyists to confuse themselves as well as a carelessly thinking electorate.
Don't agree to behave like one of PT Barnum's marks. Be a citizen. Demand that people and politics can't prosper simply by under-estimating your intelligence. Our economy deserves more than circus work for clowns. Adequate amounts of daily thinking is good for our nation's cultural health.
"A "fiat" currency system - by definition, means that we issue currency as needed..."
ReplyDeleteThat sounds like an argument which might be used by someone favoring the gold standard.
No matter how often you repeat it, it remains a weak argument.
The Arthurian,
ReplyDeleteyou missed out the next sentence:
"then just stay between the tolerance limits of deflation vs inflation."
1. Keep saying it. Over and over. I want the public to finally understand what a looting/counterfeiting monstrosity fiat funny money really is.
ReplyDelete2. Stephanie Kelton said that no country at present just creates fiat funny money willy nilly via its treasury.
It's a good thing "y" wasn't in charge of maintaining "stable" computer prices back in 1996.
ReplyDeletevia @stf18, someone repeating the message on a Ron Paul forum:
ReplyDeleteHow Banking Actually Works In Fiat World
Now I just want to know which one of you put on a fake goldbug uniform and went behind the lines to pull off this mission :)
Re: Ron Paul forum.
ReplyDeleteThe more unconstrained the system really is from reserve requirements and the like, the more horrifying and prone to catastrophe it really is. The spreading of the "truth" about the actually operation of the funny money system does not help MMTers or Keynesians in the slightest in the promotion of an even larger funny money regime.
Bob, you're part of a miniscule fringe group (aka "Rothbardians").
ReplyDeleteYou don't speak for "average people". "Average people" have zero interest in your opinions. Stop deluding yourself.
Bob,
ReplyDeleteIn 1996 the inflation rate was around 3%, yet the price of computers was falling.
There's a difference between the general price level, and the prices of specific goods and services.
There's a difference between the general price level, and the prices of specific goods and services.
ReplyDeleteI know that. The "general price level" is a garbage concept made up of an aggregate of "the prices of specific goods and services" which are quite specific, essential and important. Employing the government and its SWAT teams to maintain some arbitrary "general price level" is baseless, unnecessary, insane, corrupt and disastrous and is a program that could only be promoted by the morally and intellectually challenged. People like you.
There's a difference between the general price level, and the prices of specific goods and services.
ReplyDeleteI know that. The "general price level" is a garbage concept made up of an aggregate of "the prices of specific goods and services" which are quite specific, essential and important. Employing the government and its SWAT teams to maintain some arbitrary "general price level" is baseless, unnecessary, insane, corrupt and disastrous and is a program that could only be promoted by the morally and intellectually challenged. People like you.
Hayek was in favour of general price level stability. He thought that a system of competing privately-issued token monies would generate price level stability equivalent to 0% average inflation/deflation, which is why he advocated them.
ReplyDelete"General price level stability" is a tendency that will tend to result from a free market commodity money system. It is nothing more than a unplanned RESULT of such a system of voluntary and free exchange but it is not necessarily an intended and designed result.
ReplyDeleteAnd it is not something that must be manipulated on a daily basis by a funny money bureaucrat. If the prices of electronics go down substantially due to innovation, it is idiotic to try and raise the price of food for poor people via funny money dilution to artificially maintain "GENERAL price stability". But that is the purpose of funny money dilution proposed by people who cannot see past their own nose.
Mike Norman, or Tom Hickey:
ReplyDeleteI have no problem with Bob Roddis commenting here so long as he behaves himself.
If, however, he starts insulting and accusing people, and spewing his usual contemptuous and hate-filled rhetoric, then his comments should be deleted.
From the moment he started commenting here, he has relentlessly insulted readers of this blog. In turn this has led others, including myself , to respond in kind.
This really needs to stop.
"y" is so right. He always maintains the most impeccable decorum. Like when he made me this poster:
ReplyDeletehttp://www.flickr.com/photos/bob_roddis/8413813679/
I'm still holding my breath wondering why the Keynesian bureaucrat has to raise the price of food for poor people to offset the decrease in prices for electronics.
As I said Bob, your incessant insults, infantile rhetoric and sanctimonious posturing gets on people's nerves.
ReplyDeletey, get a grip. Bob is playing a useful role as our tormentor. Everyone needs at least one good tormentor to help them develop equanimity in combat. The world is a rough and tumble place, and learning out to take insults and even punches in stride is a necessary tool. For example, in martial arts training, you want your training opponent to look for openings and hit hard when one is found. No way to learn if there isn't some blood on the mat now and then.
ReplyDeleteLook at this a "social kung fu." In the Taoist tradition, one can learn as much from negative teaching as positive, so as not to repeat those errors on one hand and to neutralize attack on the other.
Bob has actually wasted his insults by spreading them too thin. He would serve his side better by taking a more measured approach. Major Freedom was more useful in that regard, but he made the mistake of making his arguments too long and involved, ending up talking to himself much of the time.
Tom, if this was a real world discussion/debating forum Bob's behaviour would never be tolerated.
ReplyDeletePerhaps you are not aware of it, but Bob has a visceral and very real hatred for you. Please don't believe that he respects you in any way.
This isn't "social kung fu". It's Bob coming into your living room and shitting on your carpet, and you letting him do it because you're a "open minded guy".
As I said, if he behaves himself then there's no problem. But there's no reason why we should have to face a constant barrage of insults and hate-filled rants from this guy.
great poster, Y
ReplyDeleteBob Roddis, you complain vehemently about every added degree of freedom that people practice wielding.
You would have preferred we halted evolution 3 billion years back, and remained amoebas?
Despite YOUR preferences, the rest of the world moves on, at a dizzying pace. Yes, everything gets more complicated, but we thrive through it all, by updating nested discipline, not sitting in the middle of the road.
Have you ever tried juggling, or do you just complain bitterly about the uncertainty of manipulating N+Y things with only N hands?
Evolving systems vote with their feet, Bob. If you haven't noticed, the world left you behind. Just get on with your life. The rest of the world isn't going to come back to your level. Among the 7 billion people on the planet, you're already forgotten, as are all of us eventually.
Maybe there's an afterlife, and you can complain there too?
Mr. Erickson:
ReplyDeleteI guess you told me.
BTW, I'm turning purple holding my breath waiting for the explanation of why the Keynesian bureaucrat has to raise the price of food for poor people to offset the decrease in prices for electronics.
"Now I just want to know which one of you put on a fake goldbug uniform and went behind the lines to pull off this mission :)"
ReplyDeletegeerussell - It wasn't me, but I often post on http://www.dailypaul.com/l, as well as on http://www.supplysideforum.com/ where I to inform readers about MMT.
"The world is a rough and tumble place, and learning out to take insults and even punches in stride is a necessary tool. For example, in martial arts training, you want your training opponent to look for openings and hit hard when one is found. No way to learn if there isn't some blood on the mat now and then."
ReplyDeleteTom Hickey - You are a Sage.
If we choose to call people morons, which we do all the time, then we have to allow others to call us morons, too, in order to avoid being hypocritical.
ReplyDeleteIt's like war. If you are going to shoot at people, you have to get used to them shooting back. If you are going to conduct dirty ops, then you should expect to get dirty ops back, even though you explain it as "terrorism" from those "who hate our liberties." :o
The fact is that people feel strongly about some things like politics, and that makes having a dispassionate intellectual discussion about issues difficult.
Right,
ReplyDeleteYou're supposed to not talk about politics or religion....
so therefore all I usually want to talk about is politics and religion.... ;)
the way I often look at it is that Mike is running a synagogue here not an academy ....
Could we imagine the world without the synagogue?
rsp,
Mister Roddis: "I'm still holding my breath wondering why the Keynesian bureaucrat has to raise the price of food for poor people to offset the decrease in prices for electronics."
ReplyDeleteBob's "Keynesian" is actually Neo-Liberal Policies which uses Neo-classic economics to justify it's incompetence.
Neo-Liberals are siblings of Libertarians (different side of the same coin). So When Bob criticizes what he calls "Keynesians" its actually Neo-liberals & Libertarian policies which have been a disaster (capitalism) for the past several decades that he is unwittingly criticizing.
A mixed economy works best because government's and the private sector each have their own strength's and weaknesses.
Broken Records are good for a LMAO once in a while, and eventually to make rap music.
Could we imagine the world without the synagogue?
ReplyDeleteIn the ancient world, the synagogue (Gk: speak together or alike) was complementary to the academy and forum. It was a place that was not just for Jewish worship and religious study, It was also a venue that Jews and Gentiles gathered to discuss intellectual issues. The forum (agora) was more for controversial issues of the day, and the academy (akademia) for "philosophical" studies in the ancient sense, i.e., higher learning.
This comment has been removed by the author.
ReplyDeleteIf some guy with emotional or psychological issues turned up every day at the synagogue or academy and shouted offensive nonsense at the people there *he* would get kicked out.
ReplyDelete:0
If some guy with emotional or psychological issues turned up every day at the synagogue or academy and shouted offensive nonsense at the people there *he* would get kicked out.
ReplyDeletey - That is a smear! I believe that we need to be civil in our public discourse as it is a reflection not just on ourselves, but on our ideals. If we demonize each other we can not effectively persuade, even as we passionately defend our mutual cause(s).
Y,
ReplyDeleteIn the scriptures seems Jesus got away with it (till the end of course...), while Paul often got his ass kicked repeatedly (not just in synagogues btw) but in the end he got out of it (Roman citizenship)....
But in both cases, it looks (to me) that it was key that they both got to at least be given a chance to make their original out of paradigm points there in the synagogues which can be literally translated 'together-teach'.
They may have been in a way the 'blogs' of their day... Seems like they were important institutions for revelation to take place... Interesting places to hang out back in the day...
RSP,
"I believe that we need to be civil in our public discourse as it is a reflection not just on ourselves, but on our ideals. If we demonize each other we can not effectively persuade, even as we passionately defend our mutual cause(s)."
ReplyDeleteTell that to Dobby Robbis.
Speaking of civility, I count 51 uses of the term “moron” in these blog posts just since late December 2012:
ReplyDeletehttp://mikenormaneconomics.blogspot.com/search?q=moron
I always attempt to be 75% more civil here than these blog posts.
I posted the Daily Paul post. I am a regular user there and have a long history of posts.
ReplyDeleteI've been an avid student economics since around 2007 when I worked in the financial industry, and most of my initial interest and education came from seeing the very public and accurate forecasts of Austrian or Austrian aligned commentators, like Schiff, Faber, and Rogers.
Whatever else they turned out wrong about, they nailed the housing bubble in a very public way, and accurately forecast the precious metals boom, whether for the right reasons or not.
I took a deep interest in economics from this point on both for practical reasons and out of intellectual interest. I already had strong political views going back tears before.
By 2009 I had already moved beyond the boilerplate pop Austrianism to a more nuanced view. I found my way to MMT via post-Keynesians like Steve Keen and semi austrian semi-post keynesians.
Mish would be a popular example of someone who started out Rothbardian and sort of crossed over to become more Steve Keen-sian in his positions.
Another example of an austrian post keynesian hyrbid would be the guy behind Eric Janszen of iTulip... I like Hussman still and Contraryinvestor, et all.
Less popular examples would be blog called post-Austrian economics, seems to now be defunct now.
Found my way to winterspeak via Steve Randy Waldmann.
I just read everything I could in economics in every direction, the broader Austrian school (as opposed to the pop Austrians), and in the other direction the MMT people, post keynesians, steve keen, michael hudson, sectoral balances, wray, fullwiler, mosler, et al.
Luckily, I was immune to political naivety, so I was able to absorb the descriptive aspects provided by MMT without stumbling into having a faith in government or a belief in the virtue of the democracy.
Likewise, my political realism prevented me from swallowing the faith in the free market dogmatists/utopians.
I expected the negative response by and large to my post on the DailyPaul, but some of the commenters were open minded and sympathetic.
I appreciated the attention the post got on some MMT aligned blogs, but noted with disappointment the prejudiced, arrogant tone and pejorative use of the phrase gold bug to characterize my views. I gave no indication of being a gold bug in the post and I sort of find that kind of response equivalent to the segment of Daily Paul commenters who called me a socialist or a greenbacker or, of all things a paid Obama blogger.
Sometimes people can be a mirror image of those they oppose.
continued...
ReplyDeleteSome of the points that argue against public monopoly on money are valid points. The frailty and short life span of governments, especially dysfunctional, poorly run governments. The corrupt, private control of our government by a small coterie of top banking interests and a few aligned industries. When the tail wags the dog, the power of fiat money will be carte blance for the banks to run a giant racket with the public backed credit. That can't be remedied by a better understanding of money, it is a political problem that will have to be resolved politically.
Opposition to fiat money is often a practical position based on the recognition that we have a very bad government, and any restraint is a good restraint. It may be naive to actually think state power can be limited by a gold standard, but it is an understandable position.
Likewise, eloquent arguments have been made by people like the disgraced Greenspan or the father of Warren Buffet, linking the inviolability of private property (the foundation of individual political freedom) to a money that has value independent of government decree and good on both sides of a states border.
Another point that most of you guys seem to overlook is that worldwide fiat reserve currency is contingent upon the fact of US empire and isn't really imaginable without a uni-polar organization of world power. Fiat really requires the absolute political supremacy of the issuer, for other states to accept it in payment for settling trade balances.
Pre-WW2, a multi-polar power distribution was the norm, and states could really only support paper money within their own borders, since states would not put their trust in the currency management or goodwill of rival states. See 1971.
It is also a valid point that governments have been very poor at managing fiat currencies historically, and the monetary graveyard is crowded with past attempts. Whether this time will be different is still an open question, but judging from the massive bungling and incompetence of the US government and ruling class, I would not wager on its long term prospects.
continued...
ReplyDeleteAmerica 1945 inherited a situation that, with even basic competency and political acumen, could have become a pax Americana unlike anything in history. Today's American elites are so ideologically demented, so selfish or incompetent, that they are now, less than 70 years later, dismantling the country economically, erasing the middle class, gutting the country's industry, and laying the groundwork for internal disorder on an epic scale by transforming the population into a Babel of rival, barely mutually intelligible groups from every corner of the world. No time or encouragement is given for assimilation. No standards of any kind govern the admittance. No reasonable limitation is placed on the numbers.
Economic inequality, growing rapidly for reasons beyond venality and greed, and rooted deeply in the characteristic of the new economy and its high cognitive demands, is going to continue to grow.
This inequality, magnified by the inpouring of the worlds poor, will produce ethnic rivalry and identity politics that dwarfs anything we've yet seen.
This social disorder will produce a kind of alienation and political fragmentation that will make the continuation of America's civil creed of individualism and personal liberty impossible to maintain. Responsible, public-purpose government, which we have never yet mastered in America even marginally, will become a pipedream.
Social capital will evaporate and the economic basis for a potentially sound fiat currency will go along with it.
When there is eventually inflation, and there always is eventually a point where the deficit will be too large, it will be a deficit composed largely of political payouts, both to the elite, the underclass, and the apparatus that maintains order domestically and internationally.
Whatever its cause or source, the political paralysis will make it irreversible, short of a move toward exclusive executive control of the state and a shelving of the political liberty and institutional checks and balances that define the American state historically. Executive concentration of power will keep fiat going, but if the economic basis for its value goes, or the military basis for its international acceptance goes, force or terror alone won't keep it alive in any form worthy of being kept alive.
continued...
ReplyDeleteI don't think a return to the gold standard is likely or politically possible. And I don't think it is in any way a constraint on government. Gold never constrained governments; rather, governments that were limited in their ability to claim power could not impose fiat money until they overcame those limits.
So it is a mistake to think a gold standard would limit the power of the state; the cause and effect goes the other direction.
Once a state has the ability to assert monopoly on a currency, having a gold link or not means nothing. It would just be suspended or abandoned when needed (1933, 1971).
But whether it is a good idea or not, people turn to it when they have no confidence in the ability of the government to act responsibly and competently for the public interest.
Millions of intelligent people look with horror or disgust at the quality and nature of our public officials. I think it is a sign of more healthy political instincts than the worshipers of the state who get giddy when they contemplate the power that a full formal adoption of MMT principles would avail to their favorite crook or charlatan in DC.
The free market worshipers are amply naive in return, but their naivete is no worse, and possibly better, than the other.
Finally, there is much truth to the Hayekian framework for understanding the value of private property in allowing dispersed knowledge to act through the price system and entrepreneurship, to solve problems that are possible to solve via the profit motive and the market, rather than through planning, command and control.
There is truth, I think, to the understanding of private property as the basis for an extended order of society that is necessary to sustain the needs of the billions of people that capitalism, with all its flaws and egregious crimes, have allowed to be spawned on this shrinking planet, for better or worse.
Just some thoughts.
Bill
Bill, those posts over at Daily Paul were very nicely done. There are people of diverse political views here, so feel welcome to adopt any point of view that you chose. MMT is based on an operational description of the existing monetary system, and it is compatible with any economic theory or policy stance that recognizes Godley-based monetary economics and stock-flow consistent modeling.
ReplyDeleteAs you probably know John Carney at CNBC and Ed Harrison at Credit Writedowns acknowledge MMT influence although they operate out of an Austrian POV.
Tom I love your work, have learned a lot from you! Thanks for the encouragement.
ReplyDelete@Bill3;
ReplyDeleteThanks for you comments. It's encouraging to see people from diverse backgrounds building a more complete context.
Maybe there's hope for the USA yet.
Your recent articles at DP about fiat currency operations are certainly encouraging.
Bill3 - - -
ReplyDeleteWe have been posting links to your work at The Daily Paul on our Reading Links (with hat tips to Roger Erickson). I like your work.
John Lounsbury
Global Economic Intersection11iracti 3