Imagine you find yourself in one of those underground malls, where they design it such that you never have to go above ground. Now, instead of just the mall, your living and working space is also underground. It is an underground community that is like a small town, except everyone is stuck there, unable to leave the mole utopia. You know, however, that there is a world outside and that people live above ground. It’s a not prison, just a system that is complete, so you have no reason to leave the mole utopia.
In your world, everything works like it does in the world of today. People have jobs, socialize, conduct commerce, and have families, all the stuff we associate with normal human society. The one difference between the mole utopia and this world is their economy is based on jelly beans, the little candies given to kids at Easter. Each color has a different value and people treat them in the same way you would treat coins or bills. When you get paid, it is in jelly beans. When you buy stuff, it is in jelly beans.
No one knows where the beans come from or who is responsible for making sure the supply of beans is correct. There’s some vague notion of a jelly bean consortium and people who spend their days keeping track of all beans in circulation. There are people, who police the bakers to make sure they are not making fake jelly beans. Otherwise, the beans are just the thing that is there, taken for granted by everyone. The jelly beans used in commerce are as much a part of reality as the air people breathe.
Now, there are people in charge and they do control the supply of beans. At first, when they set the system up, they figured the goal was to keep the supply of beans constant, as beans are fragile and people will tend to eat them. The best bean counters in mole utopia were recruited to keep track of the flow of beans in order to determine the overall supply and rate of bean decay. They would order up new beans to be introduced into the supply to keep the supply of beans steady, so there could never be a shortage.
At first they would just have people hand out beans under the guise of charity, but before long the people doing that started cheating. They would keep the beans or only give them to friends and family. The next scheme was to have the government of mole utopia disperse the new beans, by hiring people and buying stuff. This worked pretty well until government started cheating and ordered up beans whenever it needed to buy votes or reward friends of the government. This caused people to lose faith in the jelly beans.
Finally, the bean counters landed on a scheme where they would lend the new beans to banks at extremely low interest. The bean banks, flush with new beans, would then lend beans to people at very low rates. This got the beans into the economy, without anyone stealing them or using the supply to corrupt the system. The one flaw is the bankers got rich from the scheme, but bankers are always rich, so no one really noticed much of a change. It also made the bankers dependent on the bean counters.
The bankers could lend to anyone, including the government. Since rates were so low, the government could borrow vastly more than under the prior arrangements. That meant they could spend vastly more than in the past. The bankers were never worried about the government repaying, because ultimately they controlled the supply of beans, so they could always order more beans. That meant it was the safest type of loan, because the government would always make its payments and make them in full.
The only constraint on the government spending was how fast they could increase spending. Too fast an increase and too many beans would enter the economy of mole utopia, lowering the value of each bean. This could distort markets in unpredictable ways, by increasing demand unexpectedly in some areas, but not in others. This would also raise prices and force lending rates to increase. Therefore, inflation became the only check on spending. As long as inflation remained low, spending was unlimited.
This description of mole utopia may sound simple and ridiculous, but it is how the modern American economy is run by the Federal Reserve. Modern Monetary Theory is the economic argument that government spending is only constrained by inflation, as long as the government has control of the money supply. Here is a short video lecture on the topic from Professor Stephanie Kelton of Stony Brook University. Here is a much shorter version in the form of a post that appeared on Zero Hedge last week.
The basic argument of the MMT people is that as long as there are resources not being utilized by the private sector, the state has a duty to step in and put those resources to use through government spending. That’s a moral argument, not an economic argument or a factual observation. The economic argument is that spending and debt is meaningless, as long as the state is not crowding out the private sector and the spending is not driving up retail inflation. Otherwise, the government can spend as much as necessary.
To many people, this sounds like a version of the old joke about the stranger who comes to a small town looking for a room. He plops down a few hundred dollars and the inn keeper tells him to wait while his room is prepared. In the meantime, the innkeeper rushes out to pay his vendors, who then rush out to pay their vendors. Eventually, that new money reaches the town’s prostitutes, who use the inn for their clients, renting rooms on credit. They rush in with the new money and pay the innkeeper what they owe.
In that old gag, the stranger changes his mind about a room, takes his money back and leaves town, but everyone that was owed money is now paid. That’s the joke. The lesson, of course, is that as long as everyone is getting paid, especially the prostitutes, the system keeps spinning and everyone is happy. That’s the moral theory of MMT in a nutshell. As long as productive resources are being utilized and everyone is getting paid, the system keeps spinning. Just as important, the society remains stable.
The critics will instinctively shoot back that this sort of economics is inherently unstable and the apparent stability is short lived. In the long run, the accumulation of debt becomes untenable and the system collapses. The response to that is no one, especially government, lives in the long run. More important, MMT answers the question as to how government should respond to automation. As robots eliminate jobs, more people become idle. How does the state address the problem of fewer jobs for a growing population?
There’s another way to look at this. The custodial state runs on the same premise as a prison. The first job of the warden is to maintain control of the prison. He does that by making sure the prisoners are always kept busy in ways that work toward his goal of maintaining control of the prison. One mechanism for doing that is controlling the supply of goods and services in circulation in the prison. Prisons have an economy based on items from the commissary and that commissary is controlled by the warden.
What MMT seeks to do is make the sovereign state, by which is meant the issuer of currency, the commissary of the American economy. By controlling the supply of goods and services, via currency manipulation, spending and debt, the state can keep an increasingly useless population busy. It can always reward activities that enhance control of the system and punish activity that creates disorder. Inevitably, the communications companies, banks and technology firms become the prison guards of the system.
There’s an article on Zero Hedge about this also.
https://www.zerohedge.com/news/2019-02-07/mmt-sounds-great-theory
It seems to me that the people with big belly laughs about MMT forget that the FED has been doing exactly this but the money all goes to the banking class. There’s no way to defend this, unless you’re a banker and want to shit on everyone else.
There’s no doubt that too much money printed by the government will cause inflation but there’s also a reasonable assumption that if they balance the money printing to the expansion of the economy that the money supply will be stable. It’s also a 100% mathematical fact that if all money is debt like our present system eventually debt, by compounding interest, will crowd out all of the money supply.
As I said earlier why is it moral to give the bankers $30 trillion, it’s probably more, in money for essentially nothing yet give the people on the hook for the debt…nothing. Especially since the bankers are the ones that profited of off loose loans in the first place. It’s obscene. We should start building guillotines.
What bothers me is not a single person noted that the whole entire money system in the US, and most everywhere else, is based on debt. This is inherently unstable. All money must be created with debt. So say the treasury needs a million dollars they borrow it from the FED plus interest. When they pay it back where do they get the interest money? They must borrow it too. Over time the compounding of interest crowds out all money. There’s only interest left. The people who own the FED give us nothing and in turn we pay then for every single last dime we own. Now that’s stupid. With the MMT at least we don’t have to pay some shady bankers to get cash and even if the currency collapses we won’t still be on the hook for trillions of dollars. The MMT sounds perfectly sane compared to the structural disaster we have now.
What if we took all the money the banks got at close to zero interest during the bank bail out and gave it to citizens instead? We know they gave them $16 trillion and I’ve read analyst that say the amount was closer to $29 Trillion. At $29 Trillion and 300 million Americans we could have given a zero interest loan for every family of four of $386,666. Housing crisis solved and the economy would have roared with all that cash going into people’s pockets.
As it is we are just further in debt, housing cost have not gone down and we have nothing to show for it and the banks own everything.
I may forward this to the Social Studies teachers I know – this is the most understandable explanation of the Fed that I’ve ever seen.
“In the long run, the accumulation of debt becomes untenable and the system collapses. The response to that is no one, especially government, lives in the long run.”
You got it exactly backwards. In the long run nominal variables like inflation have no effect on prosperity. In the long run, what determines living standards is the productivity of real capital (i.e. the global level of technology) and labour productivity (i.e. the education and inherited ability of the domestic population).
It’s only in the short run that nominal stuff like a debt crisis – which amounts to nothing more than numbers changing in a computer – affects living standards. Think about it: more debt doesn’t make people any less productive, and it doesn’t lead to technological regression. So why should it lead to (a permanent) collapse? Well, like in your jokey story it could lead to a temporary situation in which no one has enough ones and zeros on their bank account to pay each other. But that’s where MMT or Keynesian economics comes in to shorten this temporary problem.
Hence, it’s only in the short-run that MMT (or Keynesians) claim that they can work their magic. (This implies that MMT is not a solution to technological unemployment or capital-biased technological change: technology after all is a long-run and very real – not nominal – variable.)
This is called the neutrality of money.
(‘m happy to see though that you’re moving away from the “end-the-Fed” goldbug kookiness that is all too common on the American right.
I’ve never been a gold bug nor argued against the Fed. In fact, it is not very common on the Right. You should probably stick with creating elaborate, plausible, and intellectually very challenging systems that do not, in fact, have any truth content.
Wow, that “economist” you link to is a nut job. When the government spends money, there are three ways it can pay for it: taxes, borrowing, or printing money (inflation tax). Let’s take a look at what happens when the government can’t or won’t raise money via taxation. First, they borrow. Then, they continue to borrow. At some point creditors realize that there is no way the money can be paid back, and the government gets cut off. Then the government starts “printing money” (massive open market operations by the central bank). This is a tax on money holdings, and hyper inflation results, and it almost always ends in chaos and regime change.
Don’t believe me: check Weimar Germany, Zimbabwe (more than once), and even now Argentina is in the beginning of the meltdown. (Countless other examples.)
The idea that we don’t have to worry about what something costs because our government can always print up money. Think about the implications of that. We could have EVERYTHING we wanted. Any student who has had a principles of economics course could destroy her. All those African countries can just turn on the printing press, and create Western prosperity…WAIT. They’ve tried that…
The U.S. currently funds its massive deficits via borrow. At some point the accumulated debt will panic creditors, and the game will be over. How much longer until we reach that point? No one really knows. We may very well soft default by printing money, but the idea that we don’t have to worry about the cost of some green energy initiative or universal health care because we can always just print up the money — LOL.
The problem with Modern Jellybean Theory is the fact that it is convoluted with a lesser known population of graham crackers which are a stand-in for future jelly beans.
People who manage and naniipulate graham crackers are often paid in jellybeans or sometimes other graham crackers. Many people know this and pretend that the amount of graham crackers, not counted in J1, J2, or J3 measures of jelly beans, are not a problem. The charade is that the government cannot possibly have enough jellybeans to redeem all the graham crackers but everyone assumes would be redeemed in small enough numbers to keep graham cracker holders happy, the maker of jellybeans happy (government), and the common participants in the mole utopia economy clueless.
Should the common person ever get hold of graham crackers and start treating them as actual jelly beans or convert them to new jelly beans, the system collapses.
The trick is to keep the jellybean-based economy separate from the graham-cracker-based one.
Thank gosh somebody finally mentioned graham crackers!
I plan to dabble in forex and commodities (eurodollars, DAX) a bit, just so I can understand what Zerohedge and Dutch are talking about.
(Bonds are too illiquid, out of my range, to do more than watch.)
Wealth is “fuck off it’s mine and there’s nothing you can do about it.”
What is Wealth?….Knowledge converted into Labor, of some type, or skill that is passable to a following generation.
Knowledge is the only thing all of us have, at one level or another, that no one else can “own”. Typically, the more knowledge we have as individuals who can convert it into a more valued labor for a desired product/solution, the more desirable our time is worth in trade. Time for currency.
However, that ability to apply our knowledge is also valuable to us as individuals as it can save us currency if we can “do” for ourselves.
As I was told once, “Those with money buy time. Those with time, sell it to those with money. The value of the time is reflected by the knowledge contained within a fixed period of time. Hence the creation of wages. “
M.M.;
You are absolutely right that it is knowledge/information that makes labor valuable. That’s even true if the labor is done by robots.
This insight is one big reason why Marxism is stupid, evil and destructive. Being ignorant materialists, Marxists of any stripe, economic, cultural, sexual, etc. cannot admit of there being immaterial factors of production/wealth such as knowledge/information. It would mess with their atheism: Might have to bend the knee….
Economic theory is over my head. So I only enjoyed the first part of this post, and took it literally. I love jelly beans. The first 3 paragraphs read in a Burl Ive’s Christmas Special voice is delightful. “Mole utopia”, wow. I was hoping it would continue like a children’s story but then it got all serious.
Serious question: I’m a yuuuge book reader, because I’ll autisticslly consume anything I can get my hands on; including texts scripted in blood. But are there any truly solid authors on MMT? Blogs are all right, too.
Who owns the Fed? Anyone know? Who has rights to create our money from nothing? That’s a hell of a gig…
I thought this was going to be about how the Jelly Bean printers used to their control over the supply of Jelly Beans to enrich their friends and impoverish their opponents (us), to the point where they own everything and we own nothing.
An amusing allegory Z Man.
I may have read the comments too fast but I didn’t see very much talk about *production*. Somebody is feeding and watering the naked mole rats in the story, after all. Who is it_? They must Iive above ground and really, really like jelly beans.
Seriously, I don’t think I’m being profound or radical to say that, ‘wealth is the ability to call in the production of others for your own private use at times and places of your own choosing.’ Money is the token of exchange used to make this call. All the rest of the financial engineering is grifters telling us they can spin gold out of straw and us believing them.
After all, Venezuela has lots of money. Skid loads of it come in from the German bill printers every week. Besides that, they’ve got lots of socialist geniuses like Mrx Stephany working on the distribution and redistribution of all that money, baffling the perplexed and themselves as well. But nobody would call Venezuela a wealthy country any more. They just have this little problem with production. The actual producers won’t take the money in exchange for their products any more except at the point of a gun. They’ve stopped working and run away. So Venezuela’s people are starving, eating the zoo animals.
As soon as Stephanie said “we need to have this discussion”, there was no longer a reason to hear more from her. You know damn well she has no intention of including you in the “we” and “discussion” is just another code word for freedoms that will be taken from you by Stephanie and her lefty pals. As long as she can define inflation, her fantasy works. If inflation is determined by the price of a dozen eggs, it doesn’t.
Holy Ginormous Black Pill, Zman.
MMT:
An economic perpetual motion machine encased in a vacuum tube behind barbed wire, to keep the dirt people from poking their dirty thumbs into the works and bringing it all crashing down.
With the USD as the reserve currency and the petrodollar, this can go on without necessarily collapsing. All other countries subsidize the MMT policy and find it in their interest to keep the economic perpetual motion machine going.
Current economic theories are bad enough for a middle class mercantile republic, but MMT is absolute poison. Dirt people absolutely can not be allowed to poke around policy, as any disruption from without the Deep State/Ruling Class vaccum tube will result in catastrophe. Above and beyond H8YT, keeping uppity white 100IQ+ white folks from influencing or even discussing economic policy will result in the communications companies ruthlessly repressing whites who question the wisdom of the status quo and/or the direction of this polity and policy. No one with real power will come to their senses, domestic & foreign plutocrats and other external forces will keep it propped up and going as long as possible.
Voting will not see us out of this. No mere electoral victory will result in a change. Only internal or external explosive/disruptive forces will manage that trick. Things like large-scale internal strife. Think some multitude of Yellow Vests, but violent. Or a foreign military debacle of the sort experienced by Athens at Syracuse during its struggle with Sparta.
Yeesh.
The ruling class already buys off many sources of domestic unrest with direct cash payments such as welfare, so they think they can do that effectively and indefinitely. With the rainbow coalition at least. Since you can’t pay off everyone and you need a scapegoat, YT takes it in the face.
Were the ruling class wise, they would also retrench and start writing checks to dictators instead of leaving us vulnerable and spread out in the foreign policy arena so as to limit risk of a Syracuse.
Sad to say, I suspect the greater probability of disruption to MMT & the ruling class comes from without.
The MMT card will be played until it is played out, and then there will be something else. As usual, Monty Python got it right. In the “Holy Grail” movie, it was just one thing after another until the cops busted everyone and the fourth wall fell at the end. Trump isn’t breaking down the fourth wall, but it is getting some cracks in it.
This stuff doesn’t bother me as much as it used to. Yes, there is a big machine pulling all the levers and acting in its best interests. No, it does not care one bit about me or even notice I exist. It has always been this way. Governments used to hoard gold too. It’s not like the Europeans 400 years ago plundered South America for gold, and then when the ships docked in London or Venice they started throwing it to eager citizens standing on the pier.
Money is just a platform to transport value around. There will always be people trying to find an arbitrage situation which makes them rich. There will always be a battle between those guys and the guys who got left out in the cold to regulate the arbitrage to “spread the money around”. There will always be politicians bribing people for votes.
I’ve been a lot happier since getting off the corporate hamster wheel and focusing on activities that increase my personal wealth and happiness. Is the stock market over priced due to the Fed? Yeah, sure it is. Do I still buy stocks? Damn right I do. I’m not an idiot. I also have real estate. And practically no debt. And I didn’t raise stupid kids who will cost me a fortune after they turn 18. (or a fortune getting them to 18) I don’t use my house like an ATM. My last car I had for 10 years and 150,000 miles. The F150 I’ve had for 6 years and they’re gonna have to pry my dead body out of that if I have my way. I paid cash for the education I needed to maintain the careers I wanted which helped provide the standard of living I seek. I married well and kept it strong.
Yes, the system is rigged. But as Mr. Holden said, “In confusion, there is profit.”
https://www.youtube.com/watch?v=OR7kuJ9VpSo
The only asset that survives a severe financial collapse is the ability to produce something of value to others and the concurrent ability to defend your life and property. Allies are an important force multiplier, but that is best accomplished in a small town setting. In large cities, roving plundering gangs will be the norm and life will be cheap. Plan ahead.
The part that MMT enthusiasts leave out – or the part that they purposely ignore – is that all of this is all fine and dandy because the US has the world’s reserve currency. There is no inflation because people all over the word want to hold dollars. If the “only constraint is inflation” and there is no inflation, well, their little theory works out pretty well. But they don’t seem to get that the reason the world wants to hold dollars is monetary discipline. Give up the monetary discipline and there goes the reserve currency and then here comes inflation.
By order of magnitude. The monetary deluge from dollar inflows will be incredible.
The thing is, the rest of the world continues to have *worse* monetary discipline than the USA. Until that changes (and there’s not a lot of indications that it will), we can print for a very, very long time. It’s about being better than the rest, even if we’re bad. Our welfare state is run on the backs of the middle class all over the world. Most countries are only able to run it on the backs of their own people.
Check out Steve Keen. Guy’s one of the best economists out there right now and is onboard with (some) of MMT.
https://www.youtube.com/watch?v=QyzKblOtZjg
Agreed. It’s all relative and it’s why we didn’t tank very much when our debt rating got lowered a few years ago. The grade my look objective and be claimed to be objective, but to the actual users of the grade it’s all on a curve. You don’t have to be perfect, just better than the other guy and the game can keep on going.
It figures that a female would be the big voice behind MMT. Females always seem to be looking for ways to get hold of high-limit credit cards paid by someone else.
MMT is claptrap, of course. It is yet another Free Lunch Theory (FLT).
Of all of the lies told, needing UBI because of automation is one of the biggest.
If 100% of everything were to be automated, whoever owned the automation could not sell anything to anyone.
Prices will adjust downward from what is automated so that people can buy, because, otherwise, again, no one could sell anything if no one can buy anything.
A more automated future means that people will work fewer hours but still gain the same buying power.
Think of it this way. Every car factory is automated to a degree, even going back to the 1930s. And yet, as automation grew, every car factory worker became much richer precisely because he became ever more productive.
And as mankind has become ever more productive, the prices of products have fallen. In the future, owing to automation, it should take little time for the typical worker to afford to buy cars, food, clothing, entertainment, etc.
All of these schemes by whatever name they give such schemes such as universal basic income is socialism by other means.
Automation is another way of saying capitalism. And where there is increased capital, there are higher wages. Where there is no capital, no returns to capital happen and no wages can be paid.
Wage rates are prices. Wages form the basis for all other prices. Wage rates will adjust in the face of less work. Otherwise, no one can buy anything.
If lawgivers can merely ramp up spending by following the FLT of MMT, sellers of resources will prefer to sell to the biggest guarantor of prices. Thus, before long product shortages will exist.
To make any kind of product not being bought by government but relying on the same kinds of resources favored by government will require prices of capital to rise. To break even, this will cause higher winning bids to be accepted and lower output.
Look at the medical economy. In effect, Congress already practices MMT for Medicaid, Medicare and Obamacare subsidies. Prices have gone up exorbitantly over the decades since 1965 but medical outcomes have not improved nearly as fast.
Higher education is another MMT arena. Prices are through the roof but there have been no gains in efficiency in producing higher education.
People simply do not think through things either because they are too lazy or too stupid.
Stephanie Kelton simply does not understand economics.
Stephanie Kelton is an educator. She may or may not understand what she is saying, but she is doing a good job of protecting her own financial grift. Follow the money, always follow the money (VA governor Northam got $2 mill from Planned Parenthood, of course he stands where he does. Selling baby parts for big bux needs to buy advocates inside the system.)
“…as automation grew, every car factory worker became much richer precisely because he became ever more productive.”
And here I thought a government-protected union racket had something to do with it, with the result that the productivity of the native US auto industry cratered.
Nailed it.
Great post.
As a side note, the bean counters can create their own bureaucracy by self funding with as many beans that they would like to make. A perk of being responsible for the beans. Also, there are rumors that the executive bean counters get private shares of the vast bean watching/counting/manufacturing outfit, but those rumors are unsubstantiated because this bean counting concern, in its 100+ year history has never been audited. The government is too afraid that a bad audit will put the whole concern into question and destroy the confidence on which it rests.
Also, there is a revolving door between bankers and bean counters, much like the Star on Star Off Machine in the Sneetches. Suddenly they all become half banker/half bean counter.
Debt has a lot in common with physics. It’s like a vortex held together by interest payments. The larger the vortex, the faster the perimeter (the outlying economy) has to spin to service the debt. The size of the vortex gets big enough where the economy just can’t spin fast enough to hold it together. Hence our fixation on GDP growth numbers. It then flies apart. MMT doesn’t account for this, as it was an artificial creation to expand government and service debt. MMT didn’t come out of common sense, but a need to hastily create white papers to justify a project that was already ongoing. It’s sad that human nature allows us to believe just about anything as long as we’re still getting paid.
I’ve got a different fable for ya.
Beehives only work because they’re filled with bees. If you fill the beehive with ants and hornets, who don’t know how to make honey, the beehive is just a funny-looking hut where lots of insects live, but no honey gets made.
Let’s say there was a beehive, full of bees busy scouting and gathering plant nectar, taking it back to their hive, then turning it into honey. The only measures of wealth are: a) honey, which is the end-product, b) nectar, which is necessary for making honey, c) the knowledge of where to find nectar, and d) the ability to bring it back home to the beehive for honey-making.
Then one day a tribe of weevils arrived at the beehive. The weevils loved honey, but could not make it. But they had a strange talent: the ability to persuade bees to do their bidding. They derived this talent from an ancient weevil legend, which taught them that of all insects, only weevils were noble and good and wise, and all other insects were just dumb stupid bugs, fit only to serve weevils.
The weevils persuaded the bees to let them live in the beehive and share in the honey. In return, they would do the hard, wearying mental labor of distributing all the honey, figuring out who deserved how much, and making sure weevils got a large share.
One day the weevils had a council, where they reasoned: before we came here, the bees already knew how to distribute honey. Sooner or later they will figure out that we contribute nothing, and they’ll kick us out of the hive! What to do?
The weevils decided to persuade the bees to let hornets come live in the hive: after all, Hornets have six legs too, so they are equal insects to the bees, so they deserve to live in a beehive. Hornets do not eat honey, but they do eat bees. The bees, reasoned the weevils, will become so distracted worrying about being eaten by hornets, they won’t notice that the weevils are taking all the honey.
This hornet-introduction system worked out fine for the weevils for a while, and they grew ever fatter on honey. But eventually the hornets had eaten so many bees, and there were now so many hornets, it was impossible to make any more honey.
So the weevils took what was left of the honey, and went off searching for another beehive.
I especially like in this obvious allegory that you choose Weevils in particular because they have rather prodigious and long proboscises. So that insect like nose conjures up a certain comical image in my mind. Well played…
Weevil rhymes with evil.
https://www.youtube.com/watch?v=440l8poSQiA (0:53)
Great allegory! Well done. Hair on the back of my neck stood up. You said it all.
Always try and choose the lesser of two weevils.
Thought about this listening to the SOTU last night. I didn’t see any representatives or senators, just weevils everywhere.
If the USD were to lose reserve currency status, it would be more difficult to moderate inflation within the domestic economy. Interest rates would rise to tighten money supply by reducing credit availability and foreign consumer goods (cell phones and toothpaste) would cost more.
The real problem with our mole economy is that no one saves jelly beans and exchanges them for productive assets. The entire economy is predicated on hyperconsumption. We buy real estate to live in a house that requires constant upkeep, not to grow food or manufacture value-added widgets. We buy depreciating vehicles as status markers rather than tools for transport. We buy bigger TVs and newer phones to keep up with the Joneses as much as for their incremental technological improvement. We allocate capital to social media networks that are purposefully designed to stoke our envy and acquisitiveness.
Some smart folks have put the brakes on consumerism, increased their savings rate and invested in productive assets. Those don’t necessarily require personal labor to unlock value. You can lease your farmland or buy dividend-paying stocks and exploit the labor of others as a rentier. The risk, of course, is that AOC and her demon horde will target you for death as a capitalist pig or undeserving kulak. So invest in some guns and ammo and learn how to use them effectively.
The USD isn’t going anywhere soon because so many are held by other countries either as a reserve currency or because of trade imbalances. Those dollars can only be retired by repatriating them to the US in exchange for tangible goods, land, or intangible assets like corporate stock or intellectual property. China is betting its future on creating a robust enough middle class that it can unleash significant demand for American consumer goods and capital assets to soak up all its dollar reserves. But its GDP growth is slowing and may eventually stall, frustrating that plan.
Why couldn’t they burn the dollars and start using their currency to buy their own output. Also building military can run you plenty. Why not use those excess dollars to build kick ass military (i hear russia is sellin)? I think you are using a variation of the-you owe bank 100k -it owns you, if you owe it 1 billion, you own it argument.
“tangible goods, land, or intangible goods…”
Tangible goods the Chongs don’t need, and intangible goods like IP they can steal with ease.
Nope, it’s land, and the Chongs are busily hoovering it up all over the planet. And you better believe they’re buying up America, at an epic pace.
They can’t believe their luck: how stupid this all is, and how they’re on the right end of it. They give us useless plastic crap, and in return we give them worthless green paper, but we tell them that the paper can be used to buy our country, which is the finest real estate on earth.
The Chongs are like an art expert who sees a Rembrandt at a garage sale. They’re just going to keep us busy talking long enough to seal the deal.
Explains why the Japs still own Pebble Beach.
Not. https://www.cbsnews.com/news/group-buys-pebble-beach/
“communications companies, banks and technology firms”
Reading this I thought “wow, you have basically described the Canadian economy, save natural resources”. Probably why we have such a plantation mentality up here.
Money used to be a physical medium of exchange (gold and silver coins) for goods and services. Now it is pixels on a screen, but the function of payment of the pixeled entries for goods and services provided is still the norm. That is because there is still the illusion of scarcity involved. Ledgers, spreadsheets and all.
The insidious danger of MMT is how it encourages the thinking that government is the rich uncle parsing out the family savings to the good boys and girls. It is the EBT card thing, you get for showing up, not for actually doing something. It is a socialist’s wet dream. Scratch the surface of Bernie Sanders or AOC and what you get is a person who wants to get personally well paid for basically nothing more than good attendance and following the script handed to them (the definition of a typical politician). MMT is the intellectual framework for paying everyone to simply line up and get their piece of the action.
There’s one key component missing from your parable: jelly beans is the only thing that will buy you water. Or rather: oil. The US dollar is not really a fiat currency, more like a specie currency with oil (and other minerals) as a base. Its reserve status is maintained by aircraft carriers.
Which makes a new aircarrier buster particularly worrisome. One of the scariest stories i’ve read lately is the decline in the competency of our blue water navy and its’ vulnerability to new weapon systems.
The supercavitating torpedo keeps the Pentagon up at nights.
They did 10 years ago when they were the latest and greatest. The Shkval (et. al) are old tech now. They are still carrier killers in the right window of circumstance but they pale in comparison to the hypersonic cruise missile or even the hypersonic glide bomb (kinetic kill vehicle, KKV). Either can make handy work of sending a carrier to Davy Jones Locker.
The Chinese have their fake railgun on the front of their ship but the Russians have the REAL hypersonic weapons on standby.
see https://outline.com/39b8zq
I read that story too. And saw the photos of the implicated: something like 3 pocs, 2 girls, one white man, one mystery meat. You go figure, but at the end of the day, it’s really the nukes that count.
I saw a video about a Canadian icebreaker, where there was a change of watch: a girl was taking the helm. So they go on about this icebreaker: a trillion horse powers, made of solid titanium with a vibranium ram in the prow, it can part tectonic plates with ease.
Thirty seconds after the woman takes the con, she manages to get the vessel stuck on an ice floe.
https://www.youtube.com/watch?v=gNk1mY01UyE
Ha! It’s a shame that women won’t see nor acknowledge how their chick brains work. Example: I left water treatment to advance to water distribution because I noticed my brain was not quick enough to handle emergencies in in-line treatment plants in which the water was in and out in about 10 minutes and into the system, or a conventional plant in which due to heavy rain incoming raw water would turn to mud and a ton of coagulant is then thrown at the sediment basin. I hated rapid fire emergencies. Most guys were quick and good under fire. Women must face and recognize their on-the-job weaknesses. Everyone has them. Water distribution for me was about patterns, memorizing the capabilities of 150 pressure zones, 175 pumping plants, and other appurtenances. I was really good at moving water around. When problems occurred there was time to think over solutions and pull from my kit bag of experience. Plus supervisors instituted procedures that they were consulted and not blindsided. Plus on day shift we were partnered up. Plus I would radio and consult with the men I knew in maintenance, electric shop, instrument techs. I had men with whom to consult if needed. And because I didn’t cop an attitude, they were happy to work with me. The last couple years I stood graveyard solo, plus had control of upcountry dams, because I gained the competence, confidence and knew my weaknesses and if needed who to consult. Rule of thumb for women working with men: Don’t chatter and natter and think out loud. Speak calmly and purposely with clarity. Thank. Then shut up.
Also modern young women don’t take time to cultivate A Beginners Mind. (Was certified in Tai Chi Chih short form)
In the beginners mind, there are many possibilities.
In the experts mind, there are few.
—-some Zen smartass
A young woman on Heartiste pointed out that while men can move on, a woman’s mistakes can be permanent (kids), so it pays no dividends to imagine what they might’ve done differently.
I’m fine with deriding feminism when it gets out of control, but Krull misrepresented what happened.
…
“Video unavailable
This video contains content from Discovery Communications, who has blocked it in your country [USA] on copyright grounds.”
But it’s available on DailyMotion.
You misrepresent what happened, of course, It’s at about the 10 min mark. The Canadian Coast Guard captain has a female navy captain on board for training and gives her the helm (it’s not a “a change of watch”). She’s supposed to run into an ice sheet and does, and it’s not due to any mistake on her part that the sheet is too thick for the two engines that they are running. So they go to five engines and the icebreaker plows through. And, no, no titanium is involved and the ram is steel over concrete.
And it doesn’t really have a trillion horse powers either, and no, it can’t cleave through tectonic plates.
it’s not due to any mistake on her part that the sheet is too thick for the two engines that they are running.
So what? She takes the helm, the vessel gets stuck, period. That’s the joke.
We are rapidly reaching the point where the other team simply has to “show up”. The home team will panic themselves into indecision, collisions, and retreating to ‘Safe Spaces’ somewhere aboard the ship. May not even require a single shot be fired before long. Which may be a good thing depending on how invested in this failed experiment called the FUSA / USSA you are.
Want your kid sent to the bottom of the sea or home missing limbs to protect people that would like nothing more than to see you under their boot heel for the next century? Pass…
-deleted-
It’s interesting that Saddam Hussein was removed after wanting to price his oil in Euros. Gaddaffi was removed after wanting to go on a gold standard and price his oil in that, Iran is being sanctioned after trading oil for gold, Russian sanctions tighten after they use currency swaps and create a new transmission network for currencies, and Venezuela is currently feeling heat after wanting to tie oil to a cryptocurrency.
It’s almost like there’s a pattern. It’s almost like countries are playing currency frogger with the U.S.
It’s also interesting that we were told to go to the mall and shop they day after 9/11.
As Zman and others have pointed out, you first need to get the biology right…
If we got the biology right would MMT have even evolved to this point? How could it have manifested differently?
At a very fundamental level, the only way to make widespread diversity even marginally functional is by getting everybody into the hamster wheel to buy buy buy – produce produce produce. By its very nature this requires MMT to keep that wheel spinning.
After a while everyone forgets about other things like community, culture, even family : the kids move across the country, the old folks live with their families and die alone. The old neighborhood get overrun by primitives, etc etc etc.
In other words, economics isn’t physics. It was part of moral philosophy for a reason.
If we ever get the biology right again and actually learn from our mistakes…MMT fades away.
Yeah but one could imagine (and maybe we are approaching this) a world where the ai and robots produced material prosperity. I guess you would need a few robot repairmen but what do you do with all the excess people? Pay them to make art and join bowling leagues? Dystopia.
Yeah, this is exactly why consternation about “falling fertility” is a globalist misdirection. Lessening fertility is a self-correction for increasing automation and mechanization.
Falling fertility is only a problem in a democracy that is being invaded by alien parasites and is trying to fight at the ballot box.
The quality of life in Japan for the average Japanese has, with a decreasing population – mechanization – no foreign invasions, improved.
Depends on how long it continues. If it goes on for a while than stabilizes, its a net good. If it goes on for so long that modernity itself comes to an end, not so much
As an example, the US has had 42 years of constant below replacement fertility which if a biologist saw this in a species would result in the species being thought in serious danger
This amount of time is 1/4 of the amount of time required to have the majority of the US population be Amish at current fertility rates . This is obviously not going to happen but its a serious implication in that a societal implosion in which modern technology extincts itself is not only quite possible but probable.
Immigration doesn’t help and everyone now has lower fertility and lack of homogeneity increases pressure on families thus lowering the birth rate
And as for automation, even pro mass immigration globalist types like Darrel Bricker over at Ipsos (just wrote a book on population decline called the Empty World ) realize that robots don’t buy goods so you can’t fix the problem with more efficiency
If we want to preserve our tech we will have to find a way to ameliorate the effects of it on our fertility now not much later.
Otherwise 2219 will look like 18 or 1919 not Star Trek
Left alone, free of foreign influence, many of us would find purpose. And by purpose I mean something noble and challenging. Some, maybe many would become slothful. But in a civilization run by us bowling would be a Wednesday night out with the guys, not a meaning life pursuit.
So is Jerome Powell the Easter Bunny?
I’m only a few steps above being an economic illiterate, despite minoring in it and reading about it over the years. But Powell is the first Gentile to be Chairman since Volcker. And Volcker did a good job, high inflation never explicitly returned.
In this scenario, as time goes on, idleness in the population increases, eventually becomes a habit, and then ultimately some people lose the ability to fend for themselves. This transition is slow and bears no cost to the individual so long as government continues to provide the basic necessities of survival. In time, society bifurcates into producers and parasites, with government providing the strong-arm pressure needed to accomplish redistribution of wealth. Venezuela is what happens when the plates stop spinning.
Tom, very Randian. 😉
Rand was an idealist. Ask the starving Venezuelans if they can eat idealism or if it has defended them against tyranny.
Good start! It is a challenging job to educate the population on economics and personal finance. Reducing it to simple terms is worthwhile, but necessarily limited. Maybe we need to ‘explain’ it beginning with comic books in elementary schools followed by a test for recieving a high school diploma. Then we would need someone to police the perpetual attempts to corrupt the textbooks and comic books to avoid what the Left has already done with history, gender and sexuality.
I’ve heard this described as magic money trees.
It’s sort of a neo-chartlalist argument against the two big lies that sophisticated parties tell dirt people about the economy:
(1) that it is just like a household budget only bigger and,
(2) God Money is a jealous and vengeful god and will smite any economy which sins against Him by angering the Bond Market.
Maybe it would be better to handle our current situation in the venerable European manner: liquidate the debts by liquidating the creditors.
Dirt people better than anybody – should know that wealth originates from the dirt.
I’m not sure what “this” is. The video by MMT guru Kelton that Z links to makes a big point of debunking the idea that the Fed budget “is just like a household budget only bigger”.
Doesn’t the first part of your essay negate the last part? If the feds were going to build their continental prison, they should have done it while the beans were working. how will the feds build it now that the game is almost up? The world is moving towards the opposite of the prison camp model…
To the contrary. The prison doors are just slamming shut.
I always said Trump was selling The Wall the wrong way. He should say it’s to force Americans IN, then the left would sign on. They’re always for wall to keep people from escaping their Utopia’s.
The East Germans said the Berlin Wall was there to keep the West out of their ‘perfect’ country, not keep the East Germans inside. However when their troops shot East Germans who tried to leave it suggested the opposite. Should Trump actually build the wall, I would presume the end product wouldn’t have the East German approach of mined land and barbed wire on the US side.
I would be interested in what US citizens (and not lefties, who are citizens of Lunacy) think the wall might be.
The chains are forged by everyone’s debt…
What would be a recent concrete example of the prison doors shutting? Because to me, it looks like the progs are trying to hive themselves off from the rest of society…
Opposite of the prison camp model? Your Google App has alerted the federal secret police of your subversive thoughts, while your iPhone has recorded your every conversation, spoken word, financial transaction, and reported them to the NSA, IRS, and DHS. Your social media apps have alerted all of your banks and credit cards to unperson you as well for FaceCrime.
Now, you were saying something about prison environments?!?
You don’t get out much do you? The continental prison is BUILT. Just because it is an open air prison and you are allow nominal freedom of movement doesn’t mean it doesn’t exist.
You are monitored 24x7x365 on any piece of tech you engage with. Any traffic you light you happen to spot in front of at a major intersection, when moving down the highway past various cameras. Spotshotter microphones record everything in any Bluetopia city. Shall I continue?
Just because the razor wire isn’t up yet doesn’t make it any less restrictive. The illusion of ‘freedom’ is just that, an illusion. I marvel at how many people still don’t understand how tight the noose already is around their neck.
If you believe what you write, why are you speaking so openly about things that would cause you to be arrested? And why haven’t you been arrested and this blog shut down? No, this prison thing is just another example of Chicken Little’s running around clucking
Bean counters! *chortle*
Among unmarried women without children, a largely left-wing class, there is no pay gap vis-a-vis men. But that doesn’t stop these people from being progressively angrier that they are not getting theirs.
That may be the future of the economy, and our envy based politics. Empirical truth could follow the path of revealed religion into the closet. The question of automation is whether or not an economy without beta males is possible.
As Occasional-Cotex said: facts don’t matter because she’s morally right.
BTW, it’s the “privileged left-wing class”
Well, in her defense, there is a debt gap, even if the wage gap is largely a partisan myth. Women hold something like 2/3rd of the student debt, while being 3/5ths of the students. In economic terms a lot of that debt is only getting paid back if they are getting married. When Mr. Beta goes his own way, retribution at the ballot box ensues.
66% vs 60%. Doesn’t seem like a big gap. What I suspect is a bigger gap are the majors taken in school. That is to say, STEM degrees vs worthless degrees—like feminist studies, sociology, etc. Hard to pay back that college loan on a job that pays a couple of dollars over min wage.
The interest on the loans is rather high, and they can’t be discharged in bankruptcy without considerable difficulty. The usurious compounding is what trips many up, as many expected to be earning far more than what is actually commanded in the market.
And from their perspective, two thirds of the debt is unfair. It must be divided 50-50, so it is a big difference. Usually no one says anything about their being too many women in college, but eventually they will complain about that too.
Sure it’s six percent, but it’s 6% of $1,400,000,000,000. That’s 84 Billion in extra personal debt, amongst a cohort of a few million people – probably >$10,000 more debt for your average gogrrrl v. average Joe. That’s a powerful motivator for political action- a large, visible burden on a small group. That’s why we don’t have IQ tests for employment anynore.
So Debeers is right, something bad comes from that statistic.
$84B is still 6%, which is nothing and probably explained by men dropping out faster as well as starting out as a minority.
Who is this “small group”, btw? Women going to college isn’t a “small group”.
Clearly, MMT is what is being taught for an “economics degree”…
The federal govt runs on the MMT principle in practice. Feds have printed virtual money by computer keystrokes to the tune of a $20 trillion plus deficit and yet we still have a functioning economy, absent hyperinflation. Not saying it’s good or bad, just saying it’s the reality staring us straight in the face of everyday money creation-commerce.
Money is only printed to maintain the illusion for us Dirt People that the government has some sort of control. Today’s real money is virtual. Don’t exist except on account balances.
My question is since $1,000 in 1950 would be worth about $9,000 today why did they have thousand dollar bills then but not now? It’s been said to made it harder for drug dealers but anybody knows that BS.
Actually, $1000 from 1950 would be worth about $50,000 now.
In the mid 1960s, a NYC school teacher made ~$4000/year,
now it’s about $70,000.
If you’re looking for a nine to one ratio, you only have to look back as far as the 1970s: a brand new Ferrari … $11,000.
brand new VW ~ $1500. NYC subway ride.. 25cents (currently $2.75).
Zman: “Modern Monetary Theory is the economic argument that government spending is only constrained by inflation, as long as the government has control of the money supply. Here is a short video lecture on the topic from Professor Stephanie Kelton of Stony Brook University.”
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Obviously inflation (theft) hasn’t been much of a constraint, though the lack of constraint hasn’t reached Zimbabwean levels… yet.
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I watched Kelton’s performance, and it was dumb as rocks. Her bete noir was people who think the government won’t be able to send out Social Security checks because the SSA will be broke, but anyone with a clue realizes that the only issue is whether the checks will buy anything. MMT is not the slightest bit new or insightful, it’s just repackaging FDR’s “debt is no problem because we only owe ourselves” in new, even dumber, form.
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What else would one expect from the Bernie Sanders campaign’s “chief economic adviser” and former Democrap Budget Committee staffer?
BTW, if we eliminate the national debt vis a vis taxation, we would literally destroy the economy, which is why it hasn’t been done, nor will ever be done.. However what taxation does on a yearly basis is remove money from the economy to reduce the yearly deficit ( not eliminate it) thereby reducing purchasing power while also restricting any possibility of hyperinflation. But the federal deficit is not a financial boon to the individual as much as it is to government itself, which is why liberals — and not a few conservatives— love it to death.
The EU took the path that conservatives wanted, forcing through unwanted austerity plans, and actually did reduce debt-to-GDP. Similar policies were rejected here, and arguably were implemented undemocratically over there. That said, the ratio is still 20 points higher than it was pre-recession.
The EU forced selective austerity, but has MMT waiting in the wings as a less odious response. The danger for them is that the Yellow Vests have moved beyond policy prescriptions, and now wholly dwell in the “fart in your general direction” mode. There is likely no policy appeasement that will work now. Interesting times.
MMT, with its “vertical government spending” and “horizontal private transactions” structure, does a good job of showing how the system actually functions today, and why a balanced budget, as things are currently constructed, would crush the system. Like so many other things, it’s ability to describe how things actually are is better than its ability to make policy prescriptions. Take a look at Hayek’s “Road to Serfdom”. The second part is a decent theoretical defense of free markets, but the power is in the first half of the book, which demolishes socialism as it sat on the ground in the mid 20th century. Even Marx has some value as a tour guide, just don’t use it as an instruction manual.
“we still have a functioning economy, absent hyperinflation”
…still…
“There’s a lot of ruin in a country” – Adam Smith
Something that can’t continue, won’t. It’s only the timescale that’s in question.
At least you can eat jelly beans. Hell, with some vitamin supplementation you could prolly live off them. Ever try eating a dollar? On a serious note, i would love to read an analysis of the practical consequences of the dollar losing its reserve status. I assume toyotas will become more expensive, but will it be Armageddon for us in america? I also assume huge distortions have developed because the world takes our fiat for hard goods. Better buy some heirloom seeds just in case.
In my heretical moments, I imagine that it would be a blessing for our country, in the long term, if the dollar was to lose its reserve status.
That only happens at the end of a collapse. That’s about the only part of the collapse scenario we know with any certainty, as there is no model of stability that does not include the dollar as the reserve currency. The dollar is like carbon. Imagining an economy not based on the dollar is like imagining a life form not based in carbon.
Hmm, i not so sure. A barter economy is easy to imagine, albeit inefficient as hell. The USA is self-sufficient for food, so total collapse wouldn’t necessarily occur with loss of reserve status. Maybe just violent readjustment down of living standard. If i understand it correctly, the USA is making other countries eat our inflation. We print dollars and they give us stuff (more than we give them anyways) I have studied what happened in Argentina a bit. Maybe one of the big-brained commentators knows a source for practical analysis of what will happen when the dollar loses reserve?
That’s why China’s long con has always been knowledge/tech transfer and not mercantilism. Can’t have a mercantile system when one side is sending digital numbers and the other side is sending finished goods.
This is exactly correct regarding the dollar. The only useful addendum to add to this thought exercise is to imagine that there are dozens of other underground malls that use something other than jelly beans as currency, but their societies are collapsing and they will soon be forced to use your jelly beans as their currency.
Demand for dollars is going to rise, not fall, in the future as governments and economies in South and Central America collapse and have to abandon their currencies or peg to the dollar. The dollar will not lose its status as reserve currency in the lifetime of anyone reading this.
Why couldn’t they use yuan? I hope you are correct, but question your certainty. Things are happening fast these days.
Fundamentally, becuase the US still controls the global banking system. Think banks, not tanks. Trading in Venezuelan bonds effectively ceased after the US imposed sanctions. Without a secondary market Venezuela is effectively unable to issue debt.
China has no such leverage in the financial markets.
I disagree with the fundamentally part. China has her own banks. Also, my cruise missile could blow the hellouta your bank, you know if push-came-to-shove
People don’t trust the Chinese government or economy…
This differs from why they should trust the US government or economy how?
Another way of looking at it: if everyone is a drug addict, nobody notices there is a drug problem…until the bodies start piling up.
A contrary (and entertaining) view is given by Lionel Schriver in her novel, “The Mandibles: A family, 2019-2047”. About 40-50 pages in the speech of President Alvarado renouncing the national debt is priceless. Schriver could be a speech writer for the parasites that currently rule over us.
This is kookery. By definition American consumption can only exceed American production by the size of the current account balance. And that balance maxed out at -6 percent of GDP in 2009 and has now declined to -2 percent. Even if we assume the remaining balance is entirely due some kind of dollar premium, I strongly doubt a further 2 percent decline would be apocalyptic.
The idea that American living standards is somehow a product of the dollar reserve status is a weird conspiracy theory perpetuated by people with a poor grasp of economics and national accounting, on both the “anti-imperialist” left and the right.
The reason that enemies of the US like Venezuela, Iran and Saddam Hussein’s Iraq keep selling stuff for USD isn’t that anyone is holding a gun to their head. It’s simply convenience. If the Ayatollahs and a all the other surly third worlders really could’ve crashed US hegemony through non-violen financial action, they would’ve done so in a heartbeat.
What does the United States HAVE to trade for? Energy? No. Food? No. Minerals? No. If the dollar lost its reserve status it might be worse for the rest of the world than for the United States.
Well, it’s not as bad as all that. We are a net energy exporter, especially if you count coal. We also have strong minerals, agriculture and aerospace. It would be interesting to see how it would shake out, but i fairly sure that i wouldn’t like to run the experiment.
I may not really understand your point, but the U.S. has a lot of energy and food to export. It’s the biggest food exporter in the world.
I should have worded as import. The United States does not have to import anything. It does import, but it doesn’t have too.
Thanks. I see your point. I was reading it wrong.
Ditto what Fed said.
You could burn dollars for their warmth. Or to cook food with. They could be fed to weevils which you could then eat.
I hope Mike Enoch and other MMT advocates take Z’s allegory to heart. I guess that Mike’s response would be, “If our people control the economy, how can MMT go wrong?”
I instinctively believe that, just like there are natural physical laws, there are natural economic laws. And just like there is no perpetual motion machine, there is no perpetual money machine. To believe otherwise it to break from reality and reality eventually wins.
If you assume human nature is a constant then how humans respond economically would also be a constant. Laffer curve anyone?
This is a point that Martin Armstrong makes over and over again:
https://www.armstrongeconomics.com/blog/
Human nature is a constant. Every dumb thing that we see in the current age – has been tried before.
Armstrong sees no good coming from the current trajectory of where things are headed
““If (((our people))) control the economy, how can MMT go wrong?””
Fixed that for ya, and it answers itself once you correct the statement.
One of the more disappointing features of dissident right is that they’ve basically turned out to be New Deal Democrats. The only distinction is that they think that busting the trusts and throwing the billionaires under the bus in the interests of Da People will work better if all the people are white.
Unfortunately, when your politics revolves around catering to Da Little Guy, there’s always going to be the temptation to throw open the borders and admit ever littler guys.
And then you’re right back where you started.
Yep, you can see this in the financial markets. The Fed hinted at faster rate hikes, and the Dow lost 25%. Gravity always wins. They have barely enough room when another (inevitable) financial crisis hits. In 2008 the prime rate went from 5.45% to ZIRP. Same thing today? They’ve only got 2.5% to play with. Gravity is winning.
The question has always been: what is wealth? Mr. Smith would make the claim that currency isn’t wealth, but it still doesn’t answer the question. Gold? Silver? Land? Gems? Certain groups of people concern themselves with portable wealth because they don’t have a nation. Portable wealth (gold, jewels, art, fiat currency) is one sucker looking for a bigger sucker. That being said, a reformed thug biker once told me that there are only two things you can walk into any pawn shop in the world and walk out with cash. Gold and guns.
Have often joked various “business continuity” exercises I’ve had to participate in over the years that in some of the more dire scenarios it’s all pointless since we’ll be in the “guns, gold and food’ stage. Nobody will give a shit about their insurance policy…
The question has always been: what is wealth?
Labour.
Wealth is a thing. My nail clippers sitting in front of me at this moment is wealth. The $s I used to purchase the nail clippers are not wealth. Labor may create wealth and, it may not. What we are really talking about here is wealth storage.
I own a farm and I spend my weekends there. On the farm I have a large garden and an orchard. The rest of the farm is row crops. In an total economic meltdown what would I accept in trade for food? A gun pointed at my face? Most assuredly. Diamonds? Likely no. Labor? Depends.
My nail clippers sitting in front of me at this moment is wealth.
Only if you live in a world where people have nails.
My reply was a bit tongue-in-cheek though, a suggestion to your list. The labour theory of value is on a slightly different subject, namely what drives wealth creation, rather than about the nature of money.
The value of your nail clippers is not in the implement itself, says the LToV, it’s in trimmed nails, and you don’t get to have trimmed nails unless somebody is operating the nail clippers.
Labor, likely you would take. Those vegetables don’t pick themselves.
Nope. Labor is something people trade for wealth by barter, or for money which can be exchanged for wealth. Those who trade labor for fiat currency run the risk that inflation with destroy the value of their labor over time.
The definition of wealth is something the commies and socialists can never get straight in their head. Ask them to define it – and what you’ll typically get in a response is a bunch of yelling and screaming and an effort to change the subject. They don’t want to actually define and acknowledge that which they’re trying to steal and redistribute.
What I’ve noticed is that (as Zman has pointed out) they sure seem to be a religious cult – because it seems the underlying problem most of the lefties have – is that they think that wealth just “exists” …. God has provided them a bountiful earth – and all the rich people stole everything , or something like that.
Here’s a good definition of wealth :
https://www.investopedia.com/terms/w/wealth.asp
” Wealth measures the value of all the assets of worth owned by a person, community, company or country. Wealth is determined by taking the total market value of all physical and intangible assets owned, then subtracting all debts. Essentially, wealth is the accumulation of resources. Specific people, organizations and nations are said to be wealthy when they are able to accumulate many valuable resources or goods”
So money is not wealth. Money is just a measure of wealth – and a convenient way to exchange the value of wealth. That’s why (again) lefties like to play around with counterfeiting the jelly beans that measure wealth – because it allows them to steal. It’s especially bad to allow the crowd that controls government to also have control of the money supply – and history has proved this again and again.
It’s also why the hard money crowd insists that any money not tied to gold is a method of stealing wealth. Pure fiat currencies have (again) not proven to work out so well historically.
I think the best way to keep everything straight – is to think about how “things” are actually created. EVERYTHING comes out of the ground at the beginning. That means it must be cut down, farmed, dug up, dug out, pumped out – whatever. That requires labor – used to be pure human labor – then we added machine augmentation. Then that stuff you pull out of the ground is melted down, processed, cut into pieces, cooked…. etc. to make it into actual products that can be used and consumed.
Without the injection of labor – there is no wealth creation. Perhaps this speaks to the root of why the white man has grown wealthy and built the civilization that he has. Humans living on South Sea islands have little need to scratch a living out of the ground. The food actually does just fall from the trees and swim up to the shore. Temperate climate lends no need to plan much for the future.
But in the end – wealth is the application of human labor, except possibly in the case of land , which can be taken and possessed by force of arms. But the value of land is still – that which it can produce. Pure possession gets you nothing.
If you can’t get the concept of wealth straight – then the money used as a medium of exchange for that wealth is always going to be based on incorrect principles.
Cal;
Excellent exposition. I would add that wealth is the product of *labor properly directed by information*. Labor all by itself is not necessarily productive (though, obviously, it can be). If I give you a pile of sand and a few ounces of rare earths, you couldn’t make a smart phone out of it (nor could I) no much how much labor you added: We both lack the specific information (and the applied energy) to transform those materials into anything of value.
The Labor Theory of Value remains the lynchpin of economic Marxism. It is darkly amusing how easy it is to refute yet it remains a major article of faith for them. How can it be easily refuted, you ask_? Viz: ‘Go to the dog park and pick up a dog turd. Now polish it all you want, but all your pick-up-and-polish labor doesn’t add *any* value.’
Agreed. Just because you apply labor – doesn’t necessarily make something valued.
That’s what the market is for.
One “farmer” sits around polishing rocks all day.
Another farmer plants potatoes.
Both of them setup a stand at the market in a town full of starving people. Which one do you think is going to get paid?
Apparently the Commies think all labor is the same – it is not.
That information you referred to – is what the market is for. The market feeds back the information to the producers as to where they should PROPERLY apply their labor.
Absent the market you get a Supreme Soviet forcing everybody to buy polished rocks from the rock farmers.
JP Morgan had a great quote: “Gold is money, everything else is credit.”
Credit is vastly superior as a unit of exchange, but gold is vastly superior as a unit of value. You need both. So, ideally, any money you want to save more than three or four years should be in gold, while any short term funding you may need should be in dollars. Gold is perfectly safe as the Fed (as of right now) does not possess a neutron star to make more of it. Paper gold is not gold however. It’s a claim to gold, once again depending on the trust of people…bankers.
Also, Gold does not really go up or down in value, it’s the currency floating against it that moves. If gold goes down by $100 it’s the dollar strengthening, and vice versa. Therefore you never make money in gold, you just keep what you have in gold. It’s not an investment, just a storage unit, a very good one. If I had an ounce of gold for every article that called gold “an investment” I would have all the gold in the world. No one has cash in his wallet and calls it an investment.
I don’t doubt you. If you were to dig up gold roman coins from 2000 years ago it would still, at the very least, be worth the value of the gold. Does anyone believe that if you dug up a box of perfectly preserved crisp dollars two thousand years from now that they would be worth anything?
Not even in 20 years. Watch the State of the Union tonight, preferably drunk, take a hard look at the people “leading us” then pull the paper out of you wallet and stare at it, and say to yourself “I own a share of this.” I would rather own a pink sheet penny stock.
https://cdn.shopify.com/s/files/1/1141/7948/products/zimbabwe-10-trillion-dollar-banknote-2008-aa-series-new-3.jpg?v=1527184620
Go lookup how much it’s worth on Ebay.
Wealth is simply access to capital. Wealthy people can obtain money (a form of capital) pretty much at will and usually in the amounts they need. Wealthy people can store their capital in the form of assets like real estate or equities or even a mattress.
That’s why wealthy people do not talk about their paycheck. A paycheck is a source of capital, but it is not the only source of capital, which is why the truly wealthy are compensated with assets which increase their wealth. They may also collect a “paycheck”, don’t get me wrong, but the paycheck is not their wealth. It is just another vessel to transport the capital. It’s also why wealthy people might not have any useful skills whatsoever…their wealth is inherited…so they are heavily invested in protecting their wealth. So, they invest that wealth in things which will protect their wealth, things like politicians and lawyers.
That leads to some interesting implications in terms of who is really “wealthy”. If you own your home (paid off), have no revolving debt or long-term debt of any kind, and produce enough income (active and passive) to obtain the things you deem valuable to you, and generally do not have to do a lot of math before you purchase something…regardless of your net worth…you are wealthy.
A lot of rich people, for example, are not wealthy. They are mortgaged to the hilt. They have large balances of revolving credit. They have a highly specialized job that is ripe for automation but not a fungible set of desirable skill if they lose that one job. They most likely try to impress people by talking about their salary at Borg Enterprises. A lot of middle class people are quite wealthy, particularly if their kids are out of the house, the house is paid, and they’ve been investing since their 20’s. That’s why the Government is constantly eyeballing 401Ks and IRAs to steal…that is where a lot of the wealth is…the capital.
People talk about freedom like it is something you get from the Constitution or something. There’s some truth to that, enshrined rights and all that stuff. But real freedom is when you don’t owe anybody something, and as long as you stay within certain boundaries of good judgement and the law, you can pretty much do what you want when you want. That’s also wealth.
I just had a friend tell me he had paid off a $1300/mo student loan. 10 YEARS he was paying that, and it’s more than my mortgage payment if I don’t include the escrow. He’s in a panic because his son wants to go to an expensive school. “I don’t want to root against my kid, but I’m broke,” he told me over drinks recently. Dual income, beautiful 4000sqft house, Escalade and a Lexus in the garage, all the trappings of being rich. But they’re not wealthy at all.
I have another friend who is a financial advisor. She’s great at what she does. So great that once the kids were out of the house, she and her husband downsized to an 800sqft cottage on half an acre in the boonies which they paid cash for. They spend all their time traveling the world and hanging out in craft beer brew houses. No debt. No barriers. Wealthy.
What is wealth? That is easy.
Wealth is property (right of ownership) at the moment of trade of one thing for another. A gold bar to man dying of thirst in the desert is not wealth.
A new bicycle and the credit traded for it in a purchase and sale are wealth, but only in the moment of trade. For that bicycle if left to rust with bent wheels and flat tires likely could not be sold again and would not be wealth (excepting of course, if it could be sold for scrap metal).
Oh and Adam Smith was a bad plagiarist.
Wealth is what anybody is willing to pay for.
Wealth is the sum total of everything man has extracted from the earth and has converted to something of value. War is the ultimate destroyer of wealth. Fiat currency has no intrinsic value except as toilet paper when people perceive it has no convertibility to objects of wealth.