Showing posts with label currency. Show all posts
Showing posts with label currency. Show all posts

Friday, April 5, 2019

Lars P. Syll — The money ‘trick’


"Modern money" is state money. Abba Lerner explains the "trick" by which a state creates its money.

Imposing taxes and accepting its own liabilities in payment creates demand for the currency. In this sense, state money is "monopoly money" in the truest sense, since modern have a monopoly on the issuance of currency, regardless of whether or how they choose to exercise it.

Monopolists are prices setters rather than price takers. Hence, the value of the currency is established based on what the state is willing to pay in markets to move private resources to public use. 

Or the state can choose to fix the price for it to exchange a real resource for its currency, such as fixing the conversion rate for gold under a gold standard. A state can also choose to peg the value of its currency to another currency. If the state fixes the price, then it loses currency sovereignty, since it must obtain the good to meet demand for conversion.

A state is a currency sovereign if and only if it lets its currency float and doesn't create obligations that are out of its control, such as borrowing in a currency that it does not issue and must obtain to meet its obligations. Then the state becomes a currency user of that currency.

Presently, the one price that most  modern states that are currency sovereigns is the own rate of the currency (along with the discount rate) that is set by the central bank. MMT proposes setting the own rate to zero and providing liquidity as necessary for the payments system to clear. This obviates the ned for a discount rate. 

MMT proposes anchoring the price of the currency to the value of a unit of unskilled labor  (MMT JG). The price anchor sets the MMT JG proposal apart from other job guarantee proposals that do not anchor the currency, which risks inflation if the wage is indexed, for example.

Lars P. Syll’s Blog
The money ‘trick’
Lars P. Syll | Professor, Malmo University

Friday, December 22, 2017

Peter Schiff says bitcoin is going to zero. That's exactly why you should buy every dip.

Peter Schiff, the guy who has been so wrong about everything, is now saying that bitcoin is going to zero. This is why you should probably buy every single dip.

Remember Schiff's predictions?

QE will cause hyperinflation.
The Chinese will stop "lending" to us and interest rates will skyrocket.
Gold is going to $10,000.

And more.

Bitcoin is not a bubble. It's a symptom of the world's desire to "de-dollarize." And while it will not become any kind of mainstream currency anytime soon because of its highly finite nature (like a gold standard or fixed FX regime, only worse), it reflects the desire on the part of people, institutions and nations to diversify out of the dollar.

The need to move away from the dollar has been prompted by increasingly aggressive and antagonistic policy emanating out of Washington. It's policy that is intended to use the dollar and the global, dollar-based, clearing and transaction system as a weapon.

No nation, not even one that is a U.S. ally, can afford to have the risk of being shut out of that system so the search is on for alternatives. Witness--bilateral, non-dollar trade agreements in yuan between Russia and China. Venezuela accepting yuan for payment of oil. Yuan-based oil trading, etc.

Technology (blockchain, etc) and need (US policy) have created the impulse behind bitcoin. There will be other cryptocurrencies emerging and, like I said, none of them will end up being the new global currency, but the desire to diversify into non-dollar units of account is very real and that means bitcoin is not a bubble.

Friday, September 29, 2017

Mish — Bitcoin vs Dollars: Which One is a Fraud? Which One is a Ponzi Scheme?

MMT Foolishness: Modern Monetary Theory (MMT) suggests that debt does not matter and governments can print at will creating a virtual utopia of constant growth. MMT, Keynesian, and Monetarism all suffer from the same fatal flaw: They promise something for nothing, in various ways.
For discussion, please see Debunking MMT, Keynesianism, Monetarism: Reader asks “What theories do you believe?” Mish Reading List.
Those who believe in the absurdity that a benevolent government would spend the money wisely, cancel all the debt or pay interest to itself and everyone will essentially live happily ever after, seriously needs to investigate my reading list.
By the way, MMT cannot possibly be correct for a reason I have not heard anyone else state: It’s based on fraud.
Mish continues to display arrogant ignorance. He is actually a pretty savvy guy in other ways. I used to read him and assumed that he would overcome his Austrian bias eventually and grok MMT. Nope.

Bitcoin is real currency, USD fraudulent, you see.

Mish is implying that  portfolio cash saving should be switched from the USD into bitcoin as a safer haven?

Just who is being foolish here?

FXStreet
Bitcoin vs Dollars: Which One is a Fraud? Which One is a Ponzi Scheme?
Mike “Mish” Shedlock | Sitka Pacific Capital Management,Llc

Wednesday, February 22, 2017

Ruble is up 11% since the rate cuts last June. I said to buy it back then.

The ruble is up 11% since the rate cuts last June. I said to BUY THE RUBLE at the time. By the way, an 11% move in currency markets is big.

Rate cuts are bullish for currency, all else equal. People don't understand that, yet we see it over and over again.

Rate cuts are price reductions--deflationary. It literally means the currency has more purchasing power. It's reflected in forex markets as a higher exchange rate.

Rate hikes are the opposite. They are bearish, not bullish. Rate hikes are price increases and that means the currency buys less, not more. It's reflected in forex markets as lower exchange rate.

Another way to think about it is, a currency is like a government security of zero maturity. Everyone understands that when the central bank raises rates the PRICE of the government security (a Treasury, for example) goes DOWN. Price is inverse to the rate. The discount to "par" reflects the interest rate. 

Conversely, when the central bank cuts rates the PRICE of the government security goes UP.

Same with currency. The dollar is a Treasury of zero maturity.

Sunday, February 14, 2016

Randy Wray — THE VALUE OF REDEMPTION: DEBT-FREE MONEY PART 3

Sorry that it has taken me a while to get back to my multi-part series on debt-free money. This is the third part of the current series, although I had previously written several other blogs on the related topics of debt-free money, positive money, and 100% money. See links at the bottom.
New Economic Perspectives
THE VALUE OF REDEMPTION: DEBT-FREE MONEY PART 3
L. Randall Wray | Professor of Economics, Bard College

Saturday, November 21, 2015

Saturday, October 24, 2015

Don Quijones — The “War on Cash” in 10 Spine-Chilling Quotes


You can't make this stuff up.
Citigroup’s Chief Economist Willem Buiter responds to the monetary economist Charles Goodhart’s description of abolishing currency as “shockingly illiberal.”
(T)his cost has to be seen against the cost that the anonymity of currency presents to society. Even though hard evidence is hard to come by, it is very likely that the underground economy and the criminal community are among the heaviest users of currency.
This, I believe, is the hidden intent behind all the excited talk about banning cash: to do away with the personal anonymity it offers.
Raging Bull-Shit
The “War on Cash” in 10 Spine-Chilling Quotes
Don Quijones
(Reposting of April 15, 2015 post at Wolf Street)

Monday, August 17, 2015

Brian Romanchuk — The Limited Role Of Currency In Government Finance

To briefly recapitulate the Simplified Framework, it is a system in which bank reserves do not exist. Since bank reserves have not yet been abolished in the United States, and most economic textbook writers are American, too much emphasis is placed upon the role of bank reserves in most descriptions of the financial system. Moreover, the "monetary base" consists of the sum of currency outstanding and bank reserves, which leads some analysts to treat bank reserves as somehow being interchangeable with currency. The beauty of eliminating bank reserves from the analytical framework is that such confusion is essentially impossible.

The key assumption of the Simplified Framework is that in the absence of bank reserves, all net transactions at the end of the day between the government and the banking sector have to be settled with a transfer of government bills and bonds (since those are the only instruments that appear on the central bank's balance sheet at the end of the day). This assumption colours our analysis of the role of currency within the system.

During the day, banks could have non-zero settlement balances, but those balances have to be netted out to zero by the close. Yes, the situation is slightly more complicated in the actual Canadian banking system, and those complications are addressed later in Understanding Government Finance. However, it is best to understand a simpler framework before attempting to deal with every possible complication that has been embedded within financial systems.…
Bond Economics
The Limited Role Of Currency In Government Finance
Brian Romanchuk

Thursday, July 9, 2015

Peter Cooper — Introducing a New Currency

Warren Mosler (for example, here) has explained very clearly and succinctly the key steps involved in effectively introducing a currency such as the drachma. (See, also, Bill Mitchell’s recent post, ‘A Greek exit is not rocket science‘.) Fears of exchange-rate catastrophe would be unfounded if these steps were followed....
heteconomist
Introducing a New Currency
Peter Cooper

Thursday, May 28, 2015

It's Amazing How Close People Can Get To Simplicity, Before Irrationality Returns

   (Commentary posted by Roger Erickson)

Image result for ben franklin & the birth of a paper money economy images
https://www.philadelphiafed.org/-/media/publications/economic-education/ben-franklin-and-paper-money-economy.pdf

For example, take our dimwit reporters ... please! In an otherwise incredibly useful article, this fateful comment was still found lurking.
"How would government pay for prolonged 'deficits?' It would get the money by selling securities to the central bank in exchange for cash."

BMHOTK! Whatever! [That dull throbbing you hear is the sound of logicians pounding their heads on tables in frustration.]

If we "get" money by selling securities, how do we pay off the securities? Let me guess. We "get" securities back by selling money? So why bother?

What do YOU do when you have a prolonged deficit in fiat? Nothing? :( 

(Does anyone bother speaking intelligible language anymore, or only sophism?)

As an alternative to "buying" fiat, a public could just track & monitor currency issuance, as north american colonies did, starting from ~1680 onwards. If not for our revolution, we might still be using someone else's currency, and in the same position as Greece today.

Today, issuing & tracking our own currency supply could be done with cell phone apps. As MRW notes, we don't need a semi-independent, supposedly private Central Bank to pretend to independently "own" or even administer our currency supply. We only need a Central Bank by any other name, without all the mystical baggage. As has been noted in past MMT discussions, all CB functions could easily be run out of a basement room in the Treasury Dept, maybe one called the "Ministry of Money."

Since we let Central Bankers simply mark up bank accounts by striking a key on a keypad, then we can also just get rid of our Central Bankers, and instead automate the process of denominating transactions between ALL debtors and creditors! Fiat by fiat. Wotta concept! Sovereign currency could be just another Automatic Stabilizer (instead of an Automatic Destabilizer).

That way we could bail out regulators instead of bailing out banksters. :( Ya think?

Wake me if this electorate ever wakes up (to logic-101).

However, until then, it's full head of steam towards convenient wall.

Hoarded Fiat Currency Units Are Arbitrary Liens On Other People's Initiative. It's Financial Sharecropping, Pure & Simple.

   (Commentary posted by Roger Erickson)


Eric Tymoigne writes that "Half of surveyed U.S. individuals saved 5% or less of their income."


Saving large amounts of denomination units? Does that make any sense at all?

Why should a dynamic electorate try to "save" EXCESSIVE amounts of their fiat? Citizens can't save Aggregate Public Initiative any more than they can individually save personal initiative. Initiative can only be invested when it appears ... or it's lost forever.

The only alternative is sacrificing teamwork by trying to hoard units denominating the personal initiative of other people, including emerging citizens (grandchildren). In other words, slavery, indentured servitude or sharecropping.

Yet hoarded fiat currency units are unproductive liens on other people's initiative (and your grandchildren's options). Savings beyond basic liquidity needs inevitably undermines current & future teamwork. That's why it's CALLED a "demand leakage." It's financial sharecropping, pure & simple. Otherwise, we would have called off D-Day back in 1944 and "saved" all that munitions output ... and those human lives as well.

If NeoLiberals (those promoting every man for himself) were remotely honest (or intelligent), they'd urge us to save lives and teamwork and other things, not just fixate on saving excessive amounts of fiat denomination units (which is what they secretly crave). NeoLiberalism is merely a psychological disorder. One of endless flavors of obsessive-compulsive behavior.

Why do voters preferentially elect OCD patients who obsess over saving excessive amounts of fiat? Why not elect people obsessed with saving other things? Lives? Democracy? Real output? National capabilities? Cultural Adaptive Rate? Our grandchildren's options? What's so uniquely special about nominal accounting numerals?

Maybe only an association of sports coaches can save us. After all, there's no "i" in teamwork. Only in unregulated capitalism.

To pursue the absurdity, is there no "i" in teamwork ONLY because most "me, me, me" is hoarded in politics? If we reform politics, will all sports teams fall apart? What are we afraid of? Cross contamination, or cross training?

Do we have to amend Jefferson's maxim, and insert a clause into our Constitution requiring that we formally regulate the ratio of personal greed to teamwork, to keep that ratio within survival tolerance limits for our social species? Shouldn't that be obvious, after the last 100K years? Or is homo sapiens regressing into homo saps?

Preamble to a Constitutional Amendment banning financial Benedict Arnolds:
"[NeoLiberal capitalists] have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their [stolen, fiat liens]." Thomas Jefferson

Hell, I'd vote for that amendment.

Thursday, April 9, 2015

Euro getting crushed

This is a shout out to Matt Franko, who contributes to this blog and who has CONSISTENTLY been right on the euro (and yen, Canada, etc) all along because of a correct understanding that IT'S ABOUT PRICE NOT QUANTITY!!!

(It's also not about "technicals" or charts, btw.)

Someone sets the price and Matt has been telling us, no, SHOWING US, exactly who: non-dollar exporters. (i.e. German exporters, Japanese exporters, Canadian exporters, etc.)

This is how it works, people.

Kudos, Matt. Don't give this info out anymore, just trade it and make yourself a fortune!

Wednesday, April 1, 2015

Iceland's PM Allows Brits To Recommend Degradation of Iceland’s Monetary System

   (Commentary posted by Roger Erickson)


(That didn't need solving, only properly using.)


This report imagines going from "fractional fiat" to100% reserve fiat?

    Doh!

That's what you get when you hire a British Bankster to report on YOUR fiat currency system.

Repeat after me.

There is no "fractional reserve" in a fiat currency system.

Only on an archaic gold-std currency system. For Pete's sake! What does "fractional fiat" even mean? Arbitrarily keeping some Public Initiative in reserve? Why? For what?

A "fiat" currency system is SUPPOSED to automatically denominate any & every transaction that is both desired-AND-allowed (by public feedback). Adding cash hoards in various places doesn't solve the need for increasingly distributed feedback within growing, national economies.

The solution is to REGULATE and oversee all credit underwriters, public & private ... and NOT to restrict the access to denomination numbers. That way the "currency supply" is always what it's supposed to be, neither too large nor too small ... and both inflation & appreciation become trivial, archaic metrics coincidental to sustainable systemic development. Rather like Cubits. Or released "demonic airs" once said to possess the ill.

Currency supply or liquidity logic is similar to the logic of a blood circulatory system. We don't regulate personal + group behavior by squeezing the oxygen supply in the air (good luck with that). Similarly, banks can't Centrally Plan currency supply - and they admitted so back ~1933, on account of abject failure. Quit beating our aggregate heads on that discredited idea. Instead, since ~1933 we've been fitfully practicing distributed regulation of our net & local goals, activities, methods, tactics & tools ... plus a host of local/aggregate tricks ... to utilize, on demand, as much of an inexhaustible metric as is PRACTICALLY needed.

If this is hard to follow, please read this little bedtime story.


Then please read about Marriner Eccles, Abba Lerner, William Vickrey, Warren Mosler, Abe Lincoln, Benjamin Franklin and John Law. And about the fact that "Success follows the quality (including tempo) of DISTRIBUTED decision-making."

A currency system involves drop dead simple operations. It takes ideology (and lots of self-deceiving fraud) to make it seem complicated.

There are other issues with "Lord" Turner's claims, but there's no use beating a dead horse. It just distracts people from the fact that it was dead on arrival.



ps: You can't even comment at the Icelandic Review without capitulating to use of the Narcissist's Network. How's that for democracy?

ps: ps: Will someone who's already a narcissist please post this commentary at Icelandic Review? Thanks.


Thursday, February 12, 2015

Dirk Ehnts — Benjamin Franklin on “Paper-Currency” (1729)

As Europe struggles with its currency – well, at least parts of Europe – it might be interesting to take a look back at the history of the United States of America, back when they were part of the British Empire. There is a text by Benjamin Franklin from 1729 titled “A Modest Enquiry into the Nature and Necessity of a Paper-Currency“.
econoblog 101
Benjamin Franklin on “Paper-Currency” (1729)
Dirk Ehnts | Berlin School for Economics and Law

Thursday, October 23, 2014

How About Fiat Currency Operations 101, For 5th Graders? Or "Context-101" For All Citizens?

   (Commentary posted by Roger Erickson)

"Recent accounts of athletes falling into financial distress have spurred some business schools to create specialized MBA programs for [athletes]"


? Business Schools?

Why not start long before that? With citizens? With an ounce of cheap prevention, instead of a MiddleClass flesh-pound of expensive repair? Especially since the repair so far is grossly too little, too late. [Yes, because of the lame fear that we've "run out of fiat."]

And no, an MBA wouldn't save us. They're among the dingbats saying that we're out of fiat. :(

How about mandatory, early Citizen Schools, for all citizens? Wow. Wotta concept! :)

To do something that simple, it seems that we have to STOP doing a lot of dumb stuff - but that list of dumb does NOT include constraining Public Initiative. Just redirecting MORE of it, to exploring more of our constantly emerging new options.

How much? As much as is needed to improve the quality of distributed decision-making ... because that ALWAYS pays for itself, by definition.

We need more - many more - reasonable people with context awareness.

Marriner Eccles types?

Luther Gulick types?

Beardsley Ruml types?

Warren Mosler types?

You know, people with common sense, and the audacity to simply insist on using it.


Tuesday, September 2, 2014

Peter Cooper — Value of Fiat Money on the Basis of Marx in Light of MMT

In Marx’s theory, formulated in terms of the gold standard of his day, the value of commodity money is taken to be the amount of simple, socially necessary labor time required to produce gold. This treatment of the value of commodity money is consistent with Marx’s treatment of commodity value in general, which always represents amounts of socially necessary labor time. Since the value of the currency under a gold standard depends not only on the labor time required to produce gold but the rate at which gold is exchanged for currency, the question arises as to whether it is gold that is actually “real money” in such a system, or, rather, state currency, issued and exchanged at a fixed rate for gold, that is real money.…
heteconomist
Value of Fiat Money on the Basis of Marx in Light of MMT
Peter Cooper

Tuesday, August 19, 2014

A Vaccine Against the CDDC Virus (Confuse-Disorient-Divide-&-Conquer Social Virus) .... Coming to a K-12 Curriculum Near You (If We Want To Maintain A Resilient Democracy)

   (Commentary by Roger Erickson.)

Madison, Washington et al warned us against factionalism ... the measles of mankind.




"One way to keep [a voting block of] 50 million [poor people] fractured is through disinformation."


Once retired professional athletes are waking up to that fact, maybe there's hope.

It's also a hopeful sign that other citizens are starting to notice that many politicians don't know how fiat currency operations work.

Yet why is it taking so long for all these signs to be noticed, by more people? Is it partly because voters, in their turn, don't understand politics or politicians?

In general, most people in nearly all of our rapidly growing variety of disciplines don't understand much about the other disciplines. The downside is that our electorate understands LESS about its nation's context every year.

To generalize from an old academic joke, "citizens receiving increasingly specialized education and training know more and more about fewer and fewer of themselves, until they end up knowing everything about nobody (and about no aggregate context)."

Here's another old joke. Our nation and it's context have become hidden from our own view, buried beneath a churning mass of blind specialists, like a cloud of mosquitoes obscuring a victim. No wonder we're stumbling around like a drunken policy apparatus. We can't even tell if that's a pink elephant encapsulated by all the blind men!

More fundamentally, not enough citizens formally recognize that over-adaptation to transient context - excess efficiency - is a death knell. Why? Too much specialization, thereby shedding the capacity for resiliency, while also instituting runaway feed-forward loops cementing institutional momentum!

That constitutes growing dissociation rather than growing coordination.

What we have is a blind cultural growth spurt, where growing aggregates have to GET clumsier before they can discriminate the signs of their growing clumsiness (aka, less agile democracy). Recognition is required before an electorate can start taking steps to regain agility, on yet another scale.

Until then, we're all stuck with understanding less about ourselves, about our context and about our options.

We have a name for classes of humans stuck in that limbo, devoid of the talent of discernment.

Homo lemmings - defined as a sub-class of homo sapiens who regularly say that "no one could have expected" reality.

No pain, no urge to adapt. What if there's less capability to recognize looming cultural pain soon enough to take early evasive action? Then there's less willingness to adapt and survive, even if options are clearly presented.

Tell that to our legions of citizens with 30 second attention spans, who have come to accept countless exhortations to not read, not explore and, worst of all, not think - and certainly not outside the boxes - or cubicles - they've been handed.

Give these people an opportunity to think, and they are prone to call you a "lazy writer."



Is there a vaccine for lazy writing? Yes, and we call it extinction, ironically, since provocative writing, which asks readers to actually think, IS a cultural vaccine. A vaccine against a vaccine is therefore an example of self-assisted suicide. Those who don't get enough remedial practice at agile thinking are sometimes termed "literalists" - people who can only see what is, not what can be.

Literalists are people who, when faced with contexts describable ONLY through a seemingly near-infinite polynomial set of interdependent variables, have difficulty imagining more than one variable changing at one time. Agile thinkers, on the other hand, practice the cultural equivalent of combinatorial chemistry - throw everything together, change many variables simultaneously in many, interleaved, experiments, and practice the ability to discriminate novel signals, on the fly, from the expanding mass of noisy data.

Literalists, ironically, often call agile-thinkers lazy. Usually because the literalists won't stoop to asking enough questions to keep up. So who are the lazy ones?

In the end, there is a simple solution to that particular friction - between the literalist and agile ends of the thinking spectrum. How much could it hurt to add many more agile-thinking "games" to all levels of K-12 education, so that a threshold proportion of citizens get adequate practice at our constantly escalating task of coordinating on a larger scale - aka, get them practice at emulating evolution? That's one elegant way to prepare a growing electorate for a better balance between long-term cultural resiliency and instantaneous cultural efficiency.