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View Diary: David Stockman: “get out of the markets and hide out in cash” Corruption Of Capitalism (122 comments)

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  •  Money is a tool. It needs to be readily (6+ / 0-)

    available, as available as the alphabet to write and the inch to measure a mile. There have to be standards and those standards have to be maintained by the issuers of the currency, but the quantity should be irrelevant. After all, although it is issued as a tangible token, the dollar is a figment of the imagination and virtually limitless.
    The problem is that some people prefer the supply of currency to be limited because of their mistaken impression that a unit has intrinsic value and, if there are fewer units, each will be worth more. They are convinced that because a dollar used to be associated with a smidgeon of gold, a scarce mineral and ispo facto valuable, it should continue to have intrinsic value, even though it doesn't. We now have "the best money" Galbraith called for. It is worthless. Putting more into circulation aims to prove that, but old habits are hard to change.
    There is another problem in that Congress, which is responsible for spending dollars into the economy, has figured out that rationing dollars to favor special interests and punish people who don't vote for them is a nice substitute for the property rights they used to dole out until the natural resource cupboard got empty. It's not certain whether Congress rationing dollars is responsible for the hoarding response on the part of industry and commerce. But, the dollars keep being siphoned off by the esoteric crowd on Wall Street that's determined to play with the dollars and inflated derivatives, instead of passing them on to the producers of real goods and services.

    Motivating real enterprise is difficult, I suspect, because U.S. enterprise is addicted to public subsidies in the form of free resources, cheap labor, legislated monopolies, and protected markets. Absent these public guarantees, which U.S. industrialists deny even exist, U.S. enterprise doesn't know how to proceed. Competing in the global market place without U.S. military might at their backs is a scary proposition and the voting public has made it pretty clear that producing military hardware is one thing, a show of force overseas is another. The U.S. being responsive to the U.N., NATO, SEATO and other international organizations effectively means that dominion is at an end. The New World is not issuing orders; the New World is the new kid on the block who's expected to play nice.

    Stockman urging cash hoarding is a distress signal.

    We organize governments to deliver services and prevent abuse.

    by hannah on Mon Apr 01, 2013 at 12:34:40 AM PDT

    •  Oh, it's distressing alright. It shows that yet (4+ / 0-)
      Recommended by:
      Deep Texan, gramofsam1, jiffypop, gzodik

      another poor soul has fallen for the conspiracy theories of the Paul family, Glenn Beck, and Alex Jones.

      Anyhow, if a person seriously believes that the dollar is about to become worthless, hoarding cash is the absolute last thing you'd want to do - you'd want to convert it into the safest investments one could find before this vaunted collapse of the monetary system comes about.  But if he is freaked out about the printing of money, then he believes that excess liquidity has debased the value of the currency.  I mean, this is Econ 101 here, simple supply and demand.  If the US currency is worthless, then it will no longer be in demand, supply will skyrocket, demand will plummet, and people won't pay one red ruble for it.

      But that's not what he's saying at all - he's saying that the US government has printed too much cash, rendering it all worthless, so we should all sell all of our assets and hold cash instead.  It's totally nuts, even if you totally buy into every one of his policy goals.  Absolutely bonkers.

      "The first drawback of anger is that it destroys your inner peace; the second is that it distorts your view of reality. If you come to understand that anger is really unhelpful, you can begin to distance yourself from anger." - The Dalai Lama

      by auron renouille on Mon Apr 01, 2013 at 05:21:03 AM PDT

      [ Parent ]

      •  Supply and demand to not apply to a unit (0+ / 0-)

        of measure.
        Dollars have not become worthless; they are worthless. Always have been. That only people who had stolen gold from some far-off place (South America) could issue certificates of worth was a delusion perpetrated by the Dutch.

        Currency used to be made out of metals to give them a long life and make them more difficult to counterfit the units (gold is such a soft metal that it could be clipped and other metals were mixed in to make it harder and more durable).

        The Federal Reserve requisitions dollars from the Treasury, issues them to the banks and then the banks lend them back to the Treasury via bonds on which, for some unknown reason, the Treasury promises to pay them a premium for keeping the dollars safe. There was a time that people into investing still remember when the Treasury paid 8% on 30 year bonds. The people who are complaining about too much money being around are convinced that the reason the dividend is down to less than 3% is because there is too much money, not because the Treasury and the Federal Reserve have wised up and realized that the interest rate does not determine the quantity available to be lent, nor does the quantity available deterimen the interest rate. The latter is set by the Federal Reserve. It isn't related to production cost, either, because there is no production cost associated with electronic transfers. A dollar bill costs eight cents to produce. But, that's what a hundred dollar bill costs, as well.
        In 2012, the Bureau of Engraving and Printing produced three billion one hundred dollar bills.
        Worthless money is not useless, just as the alphabet and the inch and the centimeter are not useless. They are tools.  Dollars are IOUs, an aide memoire so we don't forget who owes what to whom. Every dollar is a certificate of a debt, a monetary obligation. Cons get upset at the thought because they can't deal with obligation. The only thing they understand is ownership.

        Economics, as a science, seems to have been invented by people with a poor sense of time and a poor understanding of the proper sequence of events. As a consequence, their models never reflect reality. So, they put a lot of effort haranguing society to conform its behavior to their models.
        Economics is normative. It promotes a secular morality.

        Money is to be spent. Souls are to be saved.

        We organize governments to deliver services and prevent abuse.

        by hannah on Mon Apr 01, 2013 at 07:44:43 AM PDT

        [ Parent ]

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