Running Out of Money?

    “You can never be too rich or too thin” (or something like that) said, uh, somebody or other . . . maybe — it’s attributed to a bunch of people few members of the public today ever heard of.  Leaving aside the “too thin” bit as a bit beyond our competence, we’ll focus on whether you can be “too rich.”  Quick answer: yes, you can be too rich, especially if no one else has any money . . . money here defined as “all things transferred in commerce.”  (That’s in Black’s Law Dictionary, at least the edition we have.)

Inflation and Job Creation

Under the hegemony of Keynesian economics, the global economy must be inflationary.  Why?  Because . . . well, because, that’s why.  Which, of course, is not an answer — but it makes more sense than the actual Keynesian answer.  It all lies in how you define inflation.  You see, the different schools define inflation differently, and not entirely consistently.

What is the Federal Reserve For, Exactly?

George Will’s November 30, 2024, column asked the question as to what, exactly, is the purpose of the Federal Reserve System.  This is a reasonable concern, especially given the way governments throughout the world have been using their central banks to spend money like drunken sailors on leave.  Unfortunately, although Will pontificated for 750 words or so, it was evident that, while he clearly intended the title of his column to be rhetorical, he himself has no realistic idea of the role or function of a central bank, much less any bank other than a bank of deposit.

How Much Money?

One of the problems with the global monetary system is the so-called experts are never able to decide how much money to create so that there is low inflation, high employment, low prices, and high wages . . . and you get the idea.  The experts argue endlessly about everything except what they’re really concerned about: how to get the money they want and prevent everyone else from getting it.

Central Banking, II: Commercial Bank Problems

In the previous posting on this subject, we noted that a single commercial bank is always riskier than several commercial banks acting together as part of a system.  There is also the problem that, however sound an individual bank may be and stable its issues with respect to their value over time, the banknotes of one bank will never have the same value as the banknotes of another bank which is independent of the first bank.

What is “Inflation”?

’Way back in the Stone Age, someone once asked a politician or a judge . . . or it could have been the person ahead of them in line at the supermarket . . . to define pornography.  The answer was something along the lines of the individual couldn’t define it, but he knew it when he saw it.

Helicopter Money

 

A recent book about money — and that coincidentally costs a lot of it — is John Cochrane’s The Fiscal Theory of the Price Level, which came out in January of this year from Princeton University Press after being revised.  It seems that new data keep flowing in that require the basic theory to be tweaked continuously or it will drift too far from plausibility and some typos seem to have sneaked into the original version.

America’s Kryptonite

Saturday, March 25, 2023, saw an astonishingly stupid article appeared in the Washington Post.  “The Dollar is Our Superpower, and Russia and China are Threatening It.” by Fareed Zakaria (p. A18), while no doubt well-intentioned, reinforced some very bad, even extraordinarily dangerous ideas about money.  These have not only the potential to destroy every economy in the world, including that of the United States, they have gone a long way toward doing it.

What is the “Banking Principle”?

Frequently, we have made the statement that, where the so-called mainstream schools of economics (the Keynesian, Monetarist/Chicago, and the Austrian) are based on the “Currency Principle” and belong to the “Currency School,” the binary economic of Louis Kelso is based on the “Banking Principle” and belongs to the “Banking School.”  What does this mean?

You Can Bank On It

Most people, when they think of what a bank is, imagine a giant metal vault, something on the order of Uncle Scrooge McDuck’s Money Bin, where people with money deposit cash and the bank lends it out to other people.  Well, it turns out that banking is substantially different from the image it has in the popular mind.

Standard Value and Price Level Illustrated

In the previous posting on this subject, we looked at a possible solution to the problem of implementing a monetary standard when the commodity chosen as the standard has different prices in different regions.  We proposed that it should be feasible to use the highest price of a Kilowatt hour in the economy, which would have no adverse effect if (and only if) the Economic Democracy Act has been implemented, and all consumers of electricity own the electricity producer(s) in direct proportion to their usage.

Standard Value and Price Level

In the previous posting on this subject, we looked at what can happen if you impose a uniform monetary standard when the price of the standard is not uniform.  Of course, before any standard at all is considered, it is essential that the reserve currency be 100% or at least predominantly asset-backed . . . and “asset” does not include debt issued by the issuer of the reserve currency.

Federal Reserve Follies

On Halloween, the Wall Street Journal reported the frightening news that the government’s money machine, the Federal Reserve, has been losing money.  “How is this possible?” you ask in wonder.  How can an institution that creates money out of thin air for politicians to spend like drunken sailors on leave be losing money?

A Modest Meditation on Money

The other day we came across an article in Catholic World Report all about how we shouldn’t make a false god out of money, etc., so on, so forth.  Nothing to see here, move one, yaddah, yaddah.  No, this isn’t a lecture on Catholic or even religious views of money, other than to agree with St. Paul when he reminded Timothy that love of money is the root of all evil.  You can probably find the same thing expressed by most other faiths and philosophies in the world, so it’s not particularly Christian; it’s human.

A New Philosophy of Money

In the previous posting on this subject, we noted that the Industrial Revolution made it possible for a few people to produce far more than they could ever consume, while the discovery by politicians that they could finance government operations using newly created money backed only with their own debt made it possible to consume massive amounts of goods and services without producing anything at all.

Inflation v. Employment, or, Cotton is King

Regular Readers of this blog may have gotten the idea that we’re not exactly enamored of Keynesian economics.  If so, they have the right idea: we’re not.  And there are a lot of very good reasons for it.  For today, however, we’ll confine ourselves to the alleged tradeoff between inflation and employment.

A New Monetary Philosophy

We closed the previous posting on this subject by wondering why, when the history of backing a financial asset with government debt had proved so disastrous in the South Sea Bubble and the Mississippi Scheme (which we didn’t go into), anyone would have been tempted to try it again.  After all, one definition of insanity is doing the same thing over and over and expecting different results — and the one thing Ebenezer Scrooge was not was crazy, either before or after his completion.

More Mad Money Myths Meliorated

You wouldn’t have been able to trip up Ebenezer Scrooge on the subject of today’s posting.  He was a banker and worked in the City of London, that is to say, the financial district, sort of the British Wall Street (very sort of).  He knew the difference between a mortgage (a past savings financial instrument) and a bill of exchange (a future savings instrument), and it’s doubtful whether you could have persuaded Scrooge to speculate in government debt, especially foreign government debt.  He would probably have said “Bah, humbug” to it even after the visits of the three spirits and his completion and reformation.

Hijacking Financial Reform

 In the previous posting on this subject, we noted that as the “free land” of the 1862 Homestead Act ran out, the concentration of wealth accelerated.  This, however, is pretty much built in to the assumption that new capital formation can only be financed by cutting consumption below what is produced.

3. Five Roadblocks to Social Justice: Monetary Theory

 

As we again stated in the previous posting on this subject, five situations need to be addressed in order to carry out a program of restructuring the social order.  As we noted, there may be more, but these are the ones we think are key to carry out a just, effective, and sustainable restructuring of the social order: