An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Saturday, August 10, 2013
Kevin McKenna — Scotland has the most inequitable land ownership in the west. Why?
Scotland still operating under the manor system of late feudal times?
Perhaps part of the reason the profession of economics and the public discussion is so screwed up is because our society is so economically specialized and atomized, and so many people are so far removed from the important facts of economic life and a comprehensive grasp of the economic organization of our society.
What does a person who sells shoes in Philadephia, or writes code in California, know about how hogs are raised in Iowa, or how they are bought sold and processed?
One thing everybody does know something about is money. Apart from their own specific jobs, they interact with the economy through the medium of money. As a result, when something goes wrong, the first impulse is to think there is something wrong with the "money system/"
Most of the monetary reformers are barely scratching the surface of what is going on. The economic world is about production, labor, transportation, distribution. It's about who owns what resources and what production systems. People seem unwilling to come to grips with how much of what ails us is rooted in the systemic inequalities and hierarchies of control and exploitation.
People seem unwilling to come to grips with how much of what ails us is rooted in the systemic inequalities and hierarchies of control and exploitation. Dan K
And you seem unwilling to recognize that there is no such thing as creditworthiness when it comes to government-privileged banks.
Sure, let's redistribute land and common stock and provide debt relief without disadvantaging non-debtors but let's not leave in placed the system that caused so much inequality in the first place!
What has stopped all of us from having a just share (or fiat equivalent) in US corporations is your government-backed counterfeiting cartel for the benefit of the so-called creditworthy.
Because why share when one can legally steal instead? Especially since one's competition might not be so scrupulous?
Beard, you never actually engage with anything anyone says. You're in your own world. Isn't it painful having only three thoughts in your head that bounce back and forth there for years on end without any possibility of penetration from outside opinions.
F, We don't have any shares because we don't have any 'money' to buy the shares... We don't have the 'money' because we don't have the INCOME ...
its about FLOWS F., not stocks...
If I had a huge secure INCOME, I would NEVER want to buy any of these f-ing shares you drone on about... NEVER... why would I want them if I had robust income????
Common stock shares would be a pretty awful form of money, because as we know, stock prices fluctuate wildly. You might make a contract with your employer to be paid X shares of common stock for 40 hours a week, and not know whether that would be enough to buy a car, a lawnmower, or just a week's groceries.
Marx called it "primitive acquisition." Great wealth can almost always be traced by to enclosure of the commons, a government-related advantage, or some privilege in law usually involving a property right or claim.
According to conventional economics economic inequality is natural in that arises from the operation of a near perfect market.
According to political economy, which combines economics with sociology, anthropology, law, and political science, the conventional economic narrative is false in that other factors are much more significant than the operation of the market. Moreover, the neoclassical view of markets is untenable economically. So the conventional narrative fails on both counts.
This whole hoi poloi thing they have going on here with the hunting fishing golf up there looks like it would go belly up wo the govt support.... as with everything as usual ... rsp
We don't have any shares because we don't have any 'money' to buy the shares... Franko
Of course you don't because government-backed credit creation makes honest saving, a necessary first step to acquiring wealth, untenable because it suppresses real interest rates.
its about FLOWS F., not stocks... franko
Shares in Equity can flow too but why share when one can legally steal?
Current Government monetary policy RAISES interest rates.... rsp franko
Yes, to counteract the huge government privileges* that allow the banks to ignore savers. Why, for example, pay honest interest rates for savings when savers have no risk-free options for fiat storage and transaction outside the banking cartel anyway?
*1) Government-provided deposit insurance instead of a government-provided risk-free fiat storage and transaction service, i.e. a Postal Savings Service. 2) A fiat lender of last (or any?) resort for the banks. 3) Sovereign borrowing.
Common stock shares would be a pretty awful form of money, because as we know, stock prices fluctuate wildly. Dan K
Sure because one can get a margin loan from the counterfeiting cartel, the banks, and bid the shares up in an instant. Or sell the shares short naked. Both are forms of counterfeiting. Not to mention the boom-bust cycle the credit cartel imposes on the economy.
Otherwise, why should the real value of a company fluctuate much in the short term?
Perhaps what you could do is when you get paid, immediately buy the S&P 500 Index etf shares until you have to pay a bill then liquidate just enough shares to make the payments..
The dividend is well above the current depo rates and you get some price appreciation over time ...
I have rejoiced in the way of Your testimonies, as much as in all riches. Psalm 119:14
I didn't have to search for the above; in fact I did not remember it. Instead, it was verse of the day at the Bible site I use. And it's true or not far from it.
Otherwise, why should the real value of a company fluctuate much in the short term?
First, even in the absence of tricky regulation, stock prices don't represent the real value of a company. They represent investors's perception of the real value of the company.
Also, the real value of a company can fluctuate in the short term. If some company had a big contract that gets cancelled, for example, that might do it. If the company mainly produces something that is suddenly found to be toxic, that will do it. There are all sorts of reasons. The values of many things in the economic world are in constant flux.
That's a crazy way to live. I'm an ordinary workaday schmuck, not a stock trader or investor. I don't want to spend my days figuring out how to manage a portfolio just so I can make sure I can pay my bills and buy the usual stuff for my family.
F. Beard, what you want is for the central bank and federal deposit insurance to be abolished.
But all that will do is take the US back to the 19th century (other countries have of course had central banks for far longer). People won't start using common stock as money just because there's no central bank or FDIC.
"redistribute land and common stock"
Redistribute all land and the ownership of all common stock companies.... hmm. Is that an essential part of your plan? Because I can tell you now that it isn't going to happen.
I'm not necessarily advocating the use of common stock as private money. Completely private banks where the depositors are completely voluntary and where bank failures are considered normal business failure might be adequate.
But if we need endogenous money creation beyond what purely private banks can create as credit then common stock as private money is an ethical option.
So we DON'T NEED central banking and should abolish that abomination.
I'm not against the idea of redistribution btw, just skeptical.
"As for common stock redistribution, I'd guess that that will occur naturally anyway once central banking is abolished".
Economies with no state central bank have not necessarily been any more equal, with ownership more equally distributed.
The most stable period financially, with the highest degree of wealth equality (in the US), was probably the post-war period up until the late 1970s. This was a period with a central bank, but the banking sector was properly regulated and very limited in what it could do. In contrast the period in the 19th century when there was no central bank was characterized by a lot financial turmoil and a high degree of wealth inequality.
you argue that in the absence of a central bank interest rates would rise. You also say that the government shouldn't borrow, and should just issue fiat money when it spends.
However we've seen recently what happens when the central bank replaces a large proportion of outstanding government bonds with money - the base (interbank) interest rate falls to zero. It follows that if the government were to run deficits without issuing bonds (i.e. just issue money when it spends) interest rates would generally fall as the total quantity of base money increased. This would be the case even in the absence of a central bank, even if the interbank interest rate never fell all the way to zero.
In a no-government-bonds scenario, interest rates would generally only be likely to rise substantially if the government were to run budget surpluses, or perhaps balanced budgets for an extended period of time. Whenever the government ran deficits and issued new money, interest rates would generally be pushed downwards.
In the absence of a central bank (or equivalent operations by the Treasury), there would probably be more short term volatility in interest rates however, as government receipts either exceeded or fell short of expenditures at any given point in time, alternately draining and adding money to the economy.
It follows that if the government were to run deficits without issuing bonds (i.e. just issue money when it spends) interest rates would generally fall as the total quantity of base money increased. y
Given the history of uninsured banks and the inherent instability of borrowing short to lend long, everyone but sophisticated investors and the reckless would not keep deposits with uninsured but instead keep their deposits at a risk-free fiat storage and transaction service provided, as it should be, by the monetary sovereign - IF THAT SERVICE WAS AVAILABLE.
So we can't really say what interest rates would be if government deposit insurance and the Fed were abolished, as they should be. And if they got too high for business then business can always use its own shares as private money and bypass the need to borrow altogether.
In contrast the period in the 19th century when there was no central bank was characterized by a lot financial turmoil y
Bank failure should be considered as normal as any business failure. And only sophisticated investors should have deposits in the banks to begin with. Everyone else should have their fiat deposits at a risk-free fiat storage and transaction service provided by the monetary sovereign.
and a high degree of wealth inequality. y
Well, there was a government-enforced gold standard and government privilege for what should only be a private money form at most is bound to produce unjust wealth inequality. Why indeed should he who has the gold rule? Says who?
I think your "fiat storage and transaction service" is similar to what the UK Girobank and other state postal giro services were supposed to be. In the US a similar sort of example might be the Postal Savings System. Any kind of state banking system available to the general population would likely be a good idea as it would increase competition in the private banking system and increase standards.
Assuming your giro system existed (along with no central bank or FDIC), then the private bank interest rates would presumably be above whatever rate was paid on deposits in the giro system. You're right that it's difficult to know exactly how market interest rates would behave in such a scenario, but in general 'money-financed' budget deficits would put downward pressure on short term interest rates and low-risk long-term rates, whilst surpluses would tend to have the opposite effect.
"if they got too high for business then business can always use its own shares as private money and bypass the need to borrow altogether".
Let's say I own a business, and need to pay my suppliers. If interest rates are high this makes it more expensive to borrow. Does that mean I can just issue shares to my suppliers for a much lower cost instead? In most cases, no. Let's forget about banks for a minute and assume my supplier is my creditor, i.e. they sell me stuff on credit, so I'm borrowing from them to pay for the supplies. If interest rates rise, they will charge me a higher rate for that credit. If I offer to pay for the supplies by giving them shares in my company instead, assuming they agree, they will logically demand more shares in exchange for the supplies than they would have if the interest rate was lower. i.e. it becomes more expensive for me to buy my supplies in this way as the interest rate rises, and not the other way around.
Of course there are other basic practical and logical problems with the idea of paying for everything by issuing shares, which is why businesses don't do it, but the idea that it would become a lower-cost option for companies when interest rates rise doesn't make much sense.
If I offer to pay for the supplies by giving them shares in my company instead, assuming they agree, they will logically demand more shares in exchange for the supplies than they would have if the interest rate was lower. i.e. it becomes more expensive for me to buy my supplies in this way as the interest rate rises, and not the other way around. y
The value of those shares is ultimately determined by the demand for the goods and services the company produces. And if the company insists on its own shares to buy those goods and services then what do interest rates in a "foreign" currency matter to the real share price? You could tell the supplier "I'm making stuff people want and they need those shares I'm offering you to buy that stuff. So help me out and we'll both profit from the capital gain and together we'll expand the use of OUR private money supply so long as we meet consumer demand."
Perhaps part of the reason the profession of economics and the public discussion is so screwed up is because our society is so economically specialized and atomized, and so many people are so far removed from the important facts of economic life and a comprehensive grasp of the economic organization of our society.
ReplyDeleteWhat does a person who sells shoes in Philadephia, or writes code in California, know about how hogs are raised in Iowa, or how they are bought sold and processed?
One thing everybody does know something about is money. Apart from their own specific jobs, they interact with the economy through the medium of money. As a result, when something goes wrong, the first impulse is to think there is something wrong with the "money system/"
Most of the monetary reformers are barely scratching the surface of what is going on. The economic world is about production, labor, transportation, distribution. It's about who owns what resources and what production systems. People seem unwilling to come to grips with how much of what ails us is rooted in the systemic inequalities and hierarchies of control and exploitation.
People seem unwilling to come to grips with how much of what ails us is rooted in the systemic inequalities and hierarchies of control and exploitation. Dan K
ReplyDeleteAnd you seem unwilling to recognize that there is no such thing as creditworthiness when it comes to government-privileged banks.
Sure, let's redistribute land and common stock and provide debt relief without disadvantaging non-debtors but let's not leave in placed the system that caused so much inequality in the first place!
What's stopping you Beard? Buy some common stock go down to the local store and try to buy something with it.
ReplyDeleteOh, and maybe ask someone to lend you their common stock, and see if they are not interested in your creditworthiness.
What has stopped all of us from having a just share (or fiat equivalent) in US corporations is your government-backed counterfeiting cartel for the benefit of the so-called creditworthy.
ReplyDeleteBecause why share when one can legally steal instead? Especially since one's competition might not be so scrupulous?
Beard, you never actually engage with anything anyone says. You're in your own world. Isn't it painful having only three thoughts in your head that bounce back and forth there for years on end without any possibility of penetration from outside opinions.
ReplyDeleteUsury
Purchasing power
Equity
Usury
Purchasing power
Equity
Pusury
Equissing power
Perquity
Usequisy
Puchassory
Equibloy
Jibberish
Jabberish
Usiggorish
F,
ReplyDeleteWe don't have any shares because we don't have any 'money' to buy the shares... We don't have the 'money' because we don't have the INCOME ...
its about FLOWS F., not stocks...
If I had a huge secure INCOME, I would NEVER want to buy any of these f-ing shares you drone on about... NEVER... why would I want them if I had robust income????
FLOWS. F. F.L.O.W.S. my friend...
Rsp
Common stock shares would be a pretty awful form of money, because as we know, stock prices fluctuate wildly. You might make a contract with your employer to be paid X shares of common stock for 40 hours a week, and not know whether that would be enough to buy a car, a lawnmower, or just a week's groceries.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteMarx called it "primitive acquisition." Great wealth can almost always be traced by to enclosure of the commons, a government-related advantage, or some privilege in law usually involving a property right or claim.
ReplyDeleteAccording to conventional economics economic inequality is natural in that arises from the operation of a near perfect market.
According to political economy, which combines economics with sociology, anthropology, law, and political science, the conventional economic narrative is false in that other factors are much more significant than the operation of the market. Moreover, the neoclassical view of markets is untenable economically. So the conventional narrative fails on both counts.
Right Tom,
ReplyDeleteThis whole hoi poloi thing they have going on here with the hunting fishing golf up there looks like it would go belly up wo the govt support.... as with everything as usual ... rsp
We don't have any shares because we don't have any 'money' to buy the shares... Franko
ReplyDeleteOf course you don't because government-backed credit creation makes honest saving, a necessary first step to acquiring wealth, untenable because it suppresses real interest rates.
its about FLOWS F., not stocks... franko
Shares in Equity can flow too but why share when one can legally steal?
This comment has been removed by the author.
ReplyDeleteF.,
ReplyDeleteCurrent Government monetary policy RAISES interest rates.... rsp
Current Government monetary policy RAISES interest rates.... rsp franko
ReplyDeleteYes, to counteract the huge government privileges* that allow the banks to ignore savers. Why, for example, pay honest interest rates for savings when savers have no risk-free options for fiat storage and transaction outside the banking cartel anyway?
*1) Government-provided deposit insurance instead of a government-provided risk-free fiat storage and transaction service, i.e. a Postal Savings Service.
2) A fiat lender of last (or any?) resort for the banks.
3) Sovereign borrowing.
Common stock shares would be a pretty awful form of money, because as we know, stock prices fluctuate wildly. Dan K
ReplyDeleteSure because one can get a margin loan from the counterfeiting cartel, the banks, and bid the shares up in an instant. Or sell the shares short naked. Both are forms of counterfeiting. Not to mention the boom-bust cycle the credit cartel imposes on the economy.
Otherwise, why should the real value of a company fluctuate much in the short term?
But in any case, one should diversify.
F.,
ReplyDeletePerhaps what you could do is when you get paid, immediately buy the S&P 500 Index etf shares until you have to pay a bill then liquidate just enough shares to make the payments..
The dividend is well above the current depo rates and you get some price appreciation over time ...
Rsp
I have rejoiced in the way of Your testimonies, as much as in all riches. Psalm 119:14
ReplyDeleteI didn't have to search for the above; in fact I did not remember it. Instead, it was verse of the day at the Bible site I use. And it's true or not far from it.
Otherwise, why should the real value of a company fluctuate much in the short term?
ReplyDeleteFirst, even in the absence of tricky regulation, stock prices don't represent the real value of a company. They represent investors's perception of the real value of the company.
Also, the real value of a company can fluctuate in the short term. If some company had a big contract that gets cancelled, for example, that might do it. If the company mainly produces something that is suddenly found to be toxic, that will do it. There are all sorts of reasons. The values of many things in the economic world are in constant flux.
But in any case, one should diversify.
ReplyDeleteThat's a crazy way to live. I'm an ordinary workaday schmuck, not a stock trader or investor. I don't want to spend my days figuring out how to manage a portfolio just so I can make sure I can pay my bills and buy the usual stuff for my family.
Yeah, how can we get realistic equity prices with 16T under management in US pension funds alone? Only about 500B of it is in T-securities.
ReplyDeleteF. Beard, what you want is for the central bank and federal deposit insurance to be abolished.
ReplyDeleteBut all that will do is take the US back to the 19th century (other countries have of course had central banks for far longer). People won't start using common stock as money just because there's no central bank or FDIC.
"redistribute land and common stock"
Redistribute all land and the ownership of all common stock companies.... hmm. Is that an essential part of your plan? Because I can tell you now that it isn't going to happen.
I'm not necessarily advocating the use of common stock as private money. Completely private banks where the depositors are completely voluntary and where bank failures are considered normal business failure might be adequate.
ReplyDeleteBut if we need endogenous money creation beyond what purely private banks can create as credit then common stock as private money is an ethical option.
So we DON'T NEED central banking and should abolish that abomination.
Because I can tell you now that it isn't going to happen.
ReplyDeletey
Land reform is Biblical (Leviticus 25) and so is debt relief so it is a mistake to rule out either given the Judeo-Christian roots of the US.
As for common stock redistribution, I'd guess that that will occur naturally anyway once central banking is abolished.
I'm not against the idea of redistribution btw, just skeptical.
ReplyDelete"As for common stock redistribution, I'd guess that that will occur naturally anyway once central banking is abolished".
Economies with no state central bank have not necessarily been any more equal, with ownership more equally distributed.
The most stable period financially, with the highest degree of wealth equality (in the US), was probably the post-war period up until the late 1970s. This was a period with a central bank, but the banking sector was properly regulated and very limited in what it could do. In contrast the period in the 19th century when there was no central bank was characterized by a lot financial turmoil and a high degree of wealth inequality.
F.
ReplyDeleteyou argue that in the absence of a central bank interest rates would rise. You also say that the government shouldn't borrow, and should just issue fiat money when it spends.
However we've seen recently what happens when the central bank replaces a large proportion of outstanding government bonds with money - the base (interbank) interest rate falls to zero. It follows that if the government were to run deficits without issuing bonds (i.e. just issue money when it spends) interest rates would generally fall as the total quantity of base money increased. This would be the case even in the absence of a central bank, even if the interbank interest rate never fell all the way to zero.
In a no-government-bonds scenario, interest rates would generally only be likely to rise substantially if the government were to run budget surpluses, or perhaps balanced budgets for an extended period of time. Whenever the government ran deficits and issued new money, interest rates would generally be pushed downwards.
In the absence of a central bank (or equivalent operations by the Treasury), there would probably be more short term volatility in interest rates however, as government receipts either exceeded or fell short of expenditures at any given point in time, alternately draining and adding money to the economy.
It follows that if the government were to run deficits without issuing bonds (i.e. just issue money when it spends) interest rates would generally fall as the total quantity of base money increased. y
ReplyDeleteGiven the history of uninsured banks and the inherent instability of borrowing short to lend long, everyone but sophisticated investors and the reckless would not keep deposits with uninsured but instead keep their deposits at a risk-free fiat storage and transaction service provided, as it should be, by the monetary sovereign - IF THAT SERVICE WAS AVAILABLE.
So we can't really say what interest rates would be if government deposit insurance and the Fed were abolished, as they should be. And if they got too high for business then business can always use its own shares as private money and bypass the need to borrow altogether.
In contrast the period in the 19th century when there was no central bank was characterized by a lot financial turmoil y
ReplyDeleteBank failure should be considered as normal as any business failure. And only sophisticated investors should have deposits in the banks to begin with. Everyone else should have their fiat deposits at a risk-free fiat storage and transaction service provided by the monetary sovereign.
and a high degree of wealth inequality. y
Well, there was a government-enforced gold standard and government privilege for what should only be a private money form at most is bound to produce unjust wealth inequality. Why indeed should he who has the gold rule? Says who?
I think your "fiat storage and transaction service" is similar to what the UK Girobank and other state postal giro services were supposed to be. In the US a similar sort of example might be the Postal Savings System. Any kind of state banking system available to the general population would likely be a good idea as it would increase competition in the private banking system and increase standards.
ReplyDeleteAssuming your giro system existed (along with no central bank or FDIC), then the private bank interest rates would presumably be above whatever rate was paid on deposits in the giro system. You're right that it's difficult to know exactly how market interest rates would behave in such a scenario, but in general 'money-financed' budget deficits would put downward pressure on short term interest rates and low-risk long-term rates, whilst surpluses would tend to have the opposite effect.
"if they got too high for business then business can always use its own shares as private money and bypass the need to borrow altogether".
Let's say I own a business, and need to pay my suppliers. If interest rates are high this makes it more expensive to borrow. Does that mean I can just issue shares to my suppliers for a much lower cost instead? In most cases, no. Let's forget about banks for a minute and assume my supplier is my creditor, i.e. they sell me stuff on credit, so I'm borrowing from them to pay for the supplies. If interest rates rise, they will charge me a higher rate for that credit. If I offer to pay for the supplies by giving them shares in my company instead, assuming they agree, they will logically demand more shares in exchange for the supplies than they would have if the interest rate was lower. i.e. it becomes more expensive for me to buy my supplies in this way as the interest rate rises, and not the other way around.
Of course there are other basic practical and logical problems with the idea of paying for everything by issuing shares, which is why businesses don't do it, but the idea that it would become a lower-cost option for companies when interest rates rise doesn't make much sense.
If I offer to pay for the supplies by giving them shares in my company instead, assuming they agree, they will logically demand more shares in exchange for the supplies than they would have if the interest rate was lower. i.e. it becomes more expensive for me to buy my supplies in this way as the interest rate rises, and not the other way around.
ReplyDeletey
The value of those shares is ultimately determined by the demand for the goods and services the company produces. And if the company insists on its own shares to buy those goods and services then what do interest rates in a "foreign" currency matter to the real share price? You could tell the supplier "I'm making stuff people want and they need those shares I'm offering you to buy that stuff. So help me out and we'll both profit from the capital gain and together we'll expand the use of OUR private money supply so long as we meet consumer demand."
How wonderful
ReplyDelete