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View Diary: How much longer can the Austerians and their puppets go on with their failed policies and lies? (125 comments)

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  •  money is a human-created resource (17+ / 0-)

    unlike fossil fuels or rare earth metals, we cannot possibly run out of money. We can print as much as we like. There will never be such a thing as true scarcity of money, the way there could be a scarcity of potable water.

    The hard-money system has given way to a tiered fiat system--one where money is readily available in plenty to the top tier of banking and finance (for instance, in the form of quantitative easing), and kept artificially scarce for the lower tier, in the form of austerity--that is, saying that the government doesn't have enough money to provide public services.

    HVPCS was not a "magic trick". It was really a fundamental debate about who has the power to create money: the government, or the banks?

    Article I of the Constitution guarantees the power of money creation to Congress, in order to serve the public good. The banks are saying that that isn't allowed--that only the banks can create money, through fractional reserve banking and QE--both of which, of course, are powers Congress gave the banks in the first place.

    Who runs the show here? The people's government, or the banks? That is the question here.

    "In America, the law is king." --Thomas Paine

    by limpidglass on Tue Jan 29, 2013 at 11:38:53 AM PST

    •  Excellent comment (9+ / 0-)

      Great way to hammer home the point.

      Balancing the budget gives all the power to private banks to create the money and send us into debt.

      Running deficits is a the people's way of distribution of money for the public good.

      I'm shocked that people in the media and DC punditry don't see this for exactly what it is, a balance between the government distribution of money directly through spending and the creation of money by banks.

      In my opinion, we should run the show by committing to healthy levels of government spending, then regulating wall street and the banking system so that it produces socially optimal outcomes that financial mediation can provide.

    •  Money is NOT a resource. At all. (4+ / 0-)
      Recommended by:
      katiec, Sparhawk, mrkvica, DBunn

      Go, eat some money.

      Money is not a resource. Money is a mutually agreed placeholder for resources. Its worth rests not in itself, it rests in that mutual agreement. That means it follows fundamentally different  rules and mechanisms.

      You can not print food.  

      You actually have to work to create food.  

      Get used to it.

      "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

      by cris0000 on Tue Jan 29, 2013 at 03:24:11 PM PST

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      •  Corollary to this (1+ / 0-)
        Recommended by:

        No amount of printing or pushing paper around by the government or central banks creates one iota of value.

        (-5.50,-6.67): Left Libertarian
        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

        by Sparhawk on Tue Jan 29, 2013 at 05:20:30 PM PST

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      •  *sigh* (1+ / 0-)
        Recommended by:

        Okay. But you can talk about money as a resource, in the same way you can talk about, say, educated workers as a resource, even though they're, you know, people and not resources. It's a metaphor. And if you read his comment you'd see that he agreed with you about everything important.

        Save your obviously vast quantities of bile for people who actually disagree with you, huh?

        •  No (1+ / 0-)
          Recommended by:

          because to GET educated workers you have to invest real resources - education, quality of life, whatever.

          Again - money is just a stand in. It has no substance in itself.  If your country is piss-poor and can not feed its children, printing money won't change a bit.  

          That is a fundamental difference. The ability to print money is not an ability to create a resource - it means only that a government can unilaterally manipulate the consensus about money's worth, and thus easily redistribute  wealth from some citizens to others, and to itself.  With quite obvious implications.

          "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

          by cris0000 on Tue Jan 29, 2013 at 08:12:54 PM PST

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          •  when money can be loaned at interest, (0+ / 0-)

            i.e. can be used to make money, it becomes a resource, a commodity - this is in addition to its use as a medium of exchange, & in some ways negates its utility as such (as for instance when high interest rates or ultra high profits devalue it/inflate it)

            recall that the definition of "profit" is - money got for giving nothing of value

            "Never let your sense of morals get in the way of doing what's right." - Isaac Asimov

            by greenotron on Wed Jan 30, 2013 at 07:05:27 PM PST

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    •  The whole thing is about "who runs the show." (9+ / 0-)

      Liberals and reasoned moderates keep being dumbfounded by the blatant irrationality of governments' persisting in Austerian policies in the face of their obvious pervasive failure.  But seeing the promotion of Austerity by the Western elites as irrational assumes that they share the almost universal goal of liberals, moderates, and most economists -- I.e., an economy with healthy growth and something close to full employment.

           Of course, the fly in the ointment for elites in that widely-desired situation is that THEY LOSE POWER when growth is good and unemployment is high, relative to what they have in the current situation.  It never ceases to amaze me that it's not a universally-accepted truism that the real powers among Republicans vastly prefer moderately high unemployment to near-full employment even at the cost of slower growth.  

          Of course, this preference also stems in part from the negative pressure on wages -- and thus upward boosting on profits -- created by high unemployment.  But I think an even more influential motivation is the extra POWER over workers that high unemployment gives employers and managers; and I think the way that relationship operates are pretty obvious.  Finally, increases in power also create increased differences in perceived status, which is determined much more by relative than absolute levels of wealth and power.

      Evidence for my hypothesis:  Stories today that the powers that be in Davos are celebrating the end of the world financial crisis and don't seem to be the least concerned with the astronomical unemployment rates in Greece, Italy, and Spain, much less the more moderate but still high ones in the UK and US.  Seriously -- could their "let them eat cake" attitudes have been any more blatant but offhand?

    •  This sounds like you are saying we will never run (4+ / 0-)
      Recommended by:
      limpidglass, hmi, FG, melo

      out of money as long as we do not run out of numbers.  However, money needs to have some connection to a country's production to remain stable.  Now, production, unlike the Austrian school and Ron Paul-types, does not have to be tied to the production of gold or some other metal or basket of commodities, but it needs to have some connection to the total productivity of a country.  The Austrian school adherents discount the value that labor has as an asset.  This is their failing (and it is tied to their general disdain for labor in general; and their continual push to reduce labor compensation of all kinds, not just wages).

      As an example, look at which industries seek to reduce labor costs the most: extraction industries.

      These two schools -- the Austrian school and the Keynesian school -- are the crux of the political divide that represent the two visions of the kind of economy we will have in the future.

      •  Fiat utilizes infinity. It is backed by the (0+ / 0-)

        health of the real economy and society in general.

        But yes, infinity is infinity.

        •  the real goldmine (0+ / 0-)

          is the energy millions of citizens wake up with every morning to commit to work.

          that's what they're counting on to pay off debt and fill coffers.

          what this system tries to ignore is the inherent social pact between the lines of this agreement, namely that people believe their work will be valued enough for them to do it.

          money has reflected value, just as social approval does, or the joy of doing what you love to do.

          it has become out of whack, where people will do even what will be socially disapproved to make money.

          eg it doesn't matter if my skills as engineer are used to make bombs, because the money is good enough to compensate for that nagging doubt as to my real usefulness.

          this illusion is being stripped away, yet a still sizable part of the population is still trapped in this paradigm, and as the unease grows, the salaries don't, so the only way to keep people doing unsavory jobs is to put the fear of poverty into them, hard, deep and repeatedly.

          this is why high unemployment is a feature, not a bug to our gracious overlords. ditto debt, as it is a little-known fact that the poorer you are, the more honest about paying off your debts. indeed if you are rich enough, you can buy senators and congressmen to make laws so you can offload your debt onto the public in the best of all worlds, ultimate affirmation that you are a god amongst mere men. summum optimum.

          the levels of mystification used to veil this heist are impressive, as they need to be to stop open revolt. as the 800lb gorilla continues to lurch closer to the center of the room, we can expect the media pinicchio's olfactory organ to grow to unheard of lengths to prolong the agony for the rubes, and the ecstasy of the 'savvy ones'.

          extend and pretend.... consumer confidence is leaving town, so it's the markets we need to 'stay calm and carry on' for now.

          dem fillies are nervous...

          why? just kos..... *just cause*

          by melo on Wed Jan 30, 2013 at 05:47:04 PM PST

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      •  Our fiat money is tied to our economy (3+ / 0-)
        Recommended by:
        OkieLawyer, MKinTN, ozsea1

        The only time money is "printed" in the traditional sense is when the Federal Reserve Bank buys bonds as part of its open market operations designed to control the floor of inter-bank interest rates.  All the other money in our economy, including the money the government deficit spends, is "temporary."  

        When you deposit money in a bank, that bank deposits your deposit, along with a bunch of other people's, with their Federal Reserve Branch bank.  This gives them the right to loan out 90% of what they have deposited with their bank.  This 90% is "new money" but it's only temporary.  It's created when it's borrowed, and destroyed when it's paid back.  It's not your money being lent out, because in principle, you and everybody else could go and get their deposits back out, up to the FDIC insured amount, without the immediate recall of all that lent out money.

        So most money is automatically tied to the economy through being created by lending and being destroyed by being paid back.  But when you pay back your loan, you always pay back more than you borrowed in the form of interest.  Does this mean more money than you borrowed is being destroyed?  Not at all.  That interest creates a demand for more money, created either by more borrowing by others, which leads to a more interdependent economy with higher interest rates and greater indebetedness, or more bond-buying by the Fed, in order to lower the floor for inter-bank interest rates, in the hope those trickle down to consumer and investment lending.

        As long as the "printing" of our fiat money is done through intervening in the secondary (read:NOT primary) bond markets, we can be assured that the value of the newly created money is tied to the value of economic output.  That said, interest rates are so low the government would be fools not to borrow as much as they can and lock those rates in before rates start to go back up.  The Fed is printing all the money banks are demanding.  The problem is government (read:House Republicans) is reluctant to borrow any more even though banks and investors would prefer to lend to the government rather than to the private sector, and they're reluctant to spend any more because they can't agree on what to spend on.  Well, that and the biggest banks subverting the entire process to their own benefit.

        Private investment banking is looking for leadership, both to help clean up their acts and to point the way to the future of private investment.  Government has to lead the way, but we've got Republicans who absolutely refuse to let the government lead in any way, and Democrats who don't know which way to go.  Though some Democrats are better than others with that.

        From such crooked wood as that which man is made of, nothing straight can be fashioned. -Immanuel Kant

        by Nellebracht on Tue Jan 29, 2013 at 09:52:36 PM PST

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        •  Then again, the Tsy could mint a high value coin (0+ / 0-)

          out of thin air, and pay off bonds as they come due, as well as pay for future spending.

          Why do we need a market to tell us that the cost of fiat is $0, and the risk of making a computer key stroke is pretty much 0%?

          Our money would still be tied to the health of the real economy.

          What's a dollar worth if there's nothing to buy?

        •  In response (and perhaps in support of) your (4+ / 0-)
          Recommended by:
          katiec, MKinTN, ozsea1, melo


          The problem is government (read:House Republicans) is reluctant to borrow any more even though banks and investors would prefer to lend to the government rather than to the private sector, and they're reluctant to spend any more because they can't agree on what to spend on.  Well, that and the biggest banks subverting the entire process to their own benefit.
          I have come to theorize that Austrian economics creates a "bi-polar" economy (think "bi-polar disorder"), in which there are certain financial interests who are somewhat dependent on a "boom and bust" business cycle (again, to reiterate another point I made somewhere else, it is related to those in the extraction industries, who make money from booms and busts).  However, Keynesianism seeks to "smooth out" these booms and busts by creating a "steady Freddy" economic cycle.

          So yes, in support of your statement, I think that the same economic interests who support the Republicans benefit from the "boom and bust" economy that the Austrian school creates.

          •  And MMT understand that you can't actually save (2+ / 0-)
            Recommended by:
            Calamity Jean, hubcap

            up infinity, so smooths out even more.

            And since it leads to the inevitable conclusion that borrowing infinity makes no sense, then bonds, including speculating in them makes no sense.

            Personal savings accounts?  Why not just pay interest on checking accounts?

            SS?  Why not just mark up the accounts of seniors once a week at an agreed upon amount?

            What if nimble robots and AI create a lot of leisure?  Just mark up everyone's account in accordance to the level of robot production.

            In other words, rather than correcting boom and bust cycles, why not try to not have them in the first place?

            •  Makes too much sense. (1+ / 0-)
              Recommended by:
              In other words, rather than correcting boom and bust cycles, why not try to not have them in the first place?

              Renewable energy brings national global security.     

              by Calamity Jean on Wed Jan 30, 2013 at 09:25:41 AM PST

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            •  Actually, you make a point about one of my pet (2+ / 0-)
              Recommended by:
              ozsea1, katiec


              What if nimble robots and AI create a lot of leisure?  Just mark up everyone's account in accordance to the level of robot production.
              The U.S. is the only western democratic market economy that does not have mandated vacation time (the same applies for sick leave, maternity leave and retirement guarantees).  In the 1960's, increased automation and technology ("robot production," if you like) was supposed to lead to more leisure time for workers.  Instead, it has led to less, because the benefits of automation was not shared with all of society.

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