Friday, January 31, 2014

The Campaign to Neuter Our Fiat

   (Commentary by Roger Erickson)

Neuter our Fiat?
May the gods, universe and our own MiddleClass please take pity upon these sad people for their lack of insight, and lack of situational awareness.

This is a growing, ironically "well funded" and strangely distorted campaign. These folks do NOT grasp semantics OR fiat currency operations.

Over 2000 years ago the Sophists "proved" - using a linguistic loophole since named semantics - that if you owned a cat, and that cat was a mother, that it was therefore "your" mother. Ergo, we all have a responsibility to neuter our mothers.

It took over 2000 years before Walter Shewhart noticed the depth of the resulting problem, and publicly declared that

Seriously, I'm more than half afraid that the Neuter-The-Fiat campaigners might endorse the same faux "logic" - and start neutering their mothers.

After all, just because the process by which a nation creates it's own, sovereign fiat currency is referred to by accountants as a "nominal," fiat debt, and is an expression of Public Initiative or "fiat," .... semantic sophism dictates that the nominal fiat accounting "debt" is OUR real "debt," right? Weepin' Erbles in a Marriner Eccles trap! Is that the best we can do here in the USA, in the year 2014?

Hence, a foolish population and it's public fiat are soon neutered, and hoisted on their own semantics. Worst, the emasculating campaign is funded, ironically, by the very people most desperate to maintain the buying power of their hoarded fiat currency. They desperately want to stop the flow of what they want! What can you do with such simpletons? Send them back to highschool?

Maybe the people running the Neuter-The-Fiat campaign will fall for a dose of their own logic? Fine. I hereby suggest that they maintain their cranial blood pressure by tightening a tourniquet around their neck, one twist per day, until their middle section gives up the battle & dies. They'll succeed, by stopping the flow of what they want.

Maybe it'll werk fer thum!


Calgacus said...

Roger, the semantic mistake, the sophistry is the opposite of what is indicated here. (Your position here seriously conflicts with your earlier musings on Total Participation, which I endorsed in an earlier thread.)

The accountants might not understand why they are right, but they are right. The National Debt, and in particular, the "fiat" currency which constitutes the most traditional and ancient form of it is a very real debt = a very real credit = a very real social relation. It truly is OUR real "debt" - where "OUR" means the whole society, as represented by the government, which thereby (usually) owes a part of that same whole.

The National Debt is just like any other debt, financial or not. Like any other, it is a purely "nominal", moral concept. Thinking that fiat currency is something other than a perfectly ordinary debt from A to B - a concept here left as primitive, as it is sufficiently well understood in all human, even non-human societies - is a crucial, decisive step back to the commodity theory of money. That is the core of MMT, which treats public and private credit/debts on the same footing - best elucidated by Mitchell-Innes. Simmel & earlier philosophers are invaluable too.

I note that MMT = worldly philosophy = philosophy. Nobody can read real philosophy like Mitchell-Innes and understand it after one, or even three readings. Nobody was ever that smart.

Ralph Musgrave said...

Private banks have always fought dirty so as to grab central banks’ money creation activities. I mean if you’ve got your own printing press which you use to produce and lend out $100 bills (which is in effect what commercial banks do) you don’t want the Fed competing with you, do you?

Abraham Lincoln said, “The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers.”

Roger Erickson said...

The root of the semantic mistake is the contention (by following your proposed logic) that a purely nominal "debt" can cause us to run out of "real" ways to service our obligations our real aggregate.

That's where the whole semantics goes awry, on yet another level.

Roger Erickson said...

Abe had it right, Ralph.

Tom Hickey said...

That sums it up, Ralph. The whole "free market" BS is about getting government out of the markets so banks and other firms can reap more and moret from rent-seeking.

Calgacus said...

Ok, Roger, I went off a bit half cocked and understand you better now. Of course a purely nominal debt can cause us to "run out" only if we price the "real thing" we sell too low in terms of the debt. Excessive debt issuance could make probable a price rise / tax hike, though. There is no prospect of this, even in the fixthedebt idiots terms. Their "reasoning" is just nuts, so I don't see the relevance of their semantic mistake. Inflation is low and could be easily lowered, so those idiots could be satisfied even in their own semantically mistaken terms!

But what irked me is - why refer to "nominal" when there isn't any other kind of debt, and why put scare quotes around "debt" or apparently criticize accountants when referring to the National Debt or suggest the National Debt is not OUR genuine debt? The "OUR" or the "real" might cause confusion, not the "debt", and a lot of people, MMTers or not, do get confused about such semantic points. Scare quotes cause, rather than remove, confusion here. I haven't seen academics use or suggest them.

Roger Erickson said...

Never got around to answering further until now.

a debt of citizens to their currency-issuing agency is real only if that agent has to rely upon a tax in order to get the actual currency, e.g. with a commodity-backed currency such as gold

However all currencies are fiat currencies in the end, since it's always a policy decision concerning which currency regime to use, and how to protect it from other nations. In the end, Public Initiative funds everything, even expedient decisions like using a commodity-pegged currency system.

Regardless of all that, it is NOT historical norm to link currency creation to savings accounts (T-Securities). In fact, many fiat currencies started out the other way, with merchants having to PAY interest in order to get a public-guaranteed note to utilize in transactions.

Taxes are irrelevant to fiat currency, since no income is needed to express fiat. We could do away with T-Secs altogether (as Australia supposedly did for a few years, back in the '90s). T-Secs are only used as one, arbitrary way to attempt to centrally manage interest rates.