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epic economic fail
Feb. 9th, 2012 04:16 pmI came across a random blog while looking for something else, and read this entry because of the unusual title.
Are states really trying to create their own coinage? Yes, apparently so.
But the blog author seems to be, to put it gently, rather simple-minded.
"Why not have a universal state coin..."
Probably because there is only one authority or agency capable of regulating the financial actions of all states at once--the federal government. Which already has a perfectly adequate currency and coinage.
"By virtue of the coins being made of gold or silver they would have more perceived value and worth than a piece of paper."
But neither gold nor silver have any more *real* value than paper currency. Because there is no such thing as absolute value. Value is not fixed; it depends entirely on relative accepted worth.
"The coins would be minted similar to coins that are minted at different presses now under strict standards and supervision."
It's difficult to prevent counterfeiters from producing false currency with only one system and federal control. With as many as fifty different sets of coins (presumably of various denominations), is anyone really going to trust that all will come out to comparatively equal values? I wouldn't.
And what's to stop states from debasing their coins in order to inflate the value of their precious metal holdings? Or just to make them usable. A coin actually made out of (only) gold or silver would be worth so much, at current precious metal prices, that it would be useless for day to day spending. If the metal is degraded down to make the coins at all useful, the concentration of metal in them will be very low. Why not just push it close to nil, thus stretching a state's metal reserves that much further?
"I submit that it would also create more jobs with people accepting the coins, moving back to handling commerce face-to-face and locally versus the Internet. "
Bwuh? The stupidity here is too great to easily address. For one thing, even if this were true, it would be tremendously destructive to the economy. We get huge benefits in efficiency from being able to buy and sell all over the country. If we had to conduct all business face to face, it would cripple the economy. If we could only buy things from people we could walk over and see, our entire commercial transportation network would be destroyed, and thousands, maybe tens of thousands of people would lose their jobs.
But don't worry--there's no way that banks could be kept from allowing customers to stash coins with them and then transfer portions of their value electronically or by paper bank draft or check. It's what banks have always done, even back before the greenback existed. After all, I never see most of the dollars I am paid--they don't exist in paper form, but go from my employer's bank to my bank over a giant system of tubes and then go the same way to most of the people to whom I owe money, via the medium of my swiping a card, writing a check, or inputing data in a computer.
"I wouldn’t like to see it devolve into dozens of states with their own currencies – that would make us as messy as Europe or the early United States."
Erm, OK, apparently the author doesn't know that (most of) Europe uses a single currency now. And they also don't seem to grasp that just what they are saying they don't want to see--dozens of different states having their own separate forms of money--is exactly what is being mooted.
"The American dollar does work great as a tool for commerce, thanks, but it wouldn’t hurt to actually deal with gold and silver just in case."
In case of what? This is what baffles me about the whole movement. The US dollar is not going away. Yes, it buys less than it did in 1789, but so does every currency on earth. A salary of £50 per annum in 1890 would be roughly equivalent to a salary of £20,000 today according to the calculators at Measuring Worth. But the dollar has survived over 200 years of crashes, depressions, recessions, and bank failures. It's not going anywhere.
Are states really trying to create their own coinage? Yes, apparently so.
But the blog author seems to be, to put it gently, rather simple-minded.
"Why not have a universal state coin..."
Probably because there is only one authority or agency capable of regulating the financial actions of all states at once--the federal government. Which already has a perfectly adequate currency and coinage.
"By virtue of the coins being made of gold or silver they would have more perceived value and worth than a piece of paper."
But neither gold nor silver have any more *real* value than paper currency. Because there is no such thing as absolute value. Value is not fixed; it depends entirely on relative accepted worth.
"The coins would be minted similar to coins that are minted at different presses now under strict standards and supervision."
It's difficult to prevent counterfeiters from producing false currency with only one system and federal control. With as many as fifty different sets of coins (presumably of various denominations), is anyone really going to trust that all will come out to comparatively equal values? I wouldn't.
And what's to stop states from debasing their coins in order to inflate the value of their precious metal holdings? Or just to make them usable. A coin actually made out of (only) gold or silver would be worth so much, at current precious metal prices, that it would be useless for day to day spending. If the metal is degraded down to make the coins at all useful, the concentration of metal in them will be very low. Why not just push it close to nil, thus stretching a state's metal reserves that much further?
"I submit that it would also create more jobs with people accepting the coins, moving back to handling commerce face-to-face and locally versus the Internet. "
Bwuh? The stupidity here is too great to easily address. For one thing, even if this were true, it would be tremendously destructive to the economy. We get huge benefits in efficiency from being able to buy and sell all over the country. If we had to conduct all business face to face, it would cripple the economy. If we could only buy things from people we could walk over and see, our entire commercial transportation network would be destroyed, and thousands, maybe tens of thousands of people would lose their jobs.
But don't worry--there's no way that banks could be kept from allowing customers to stash coins with them and then transfer portions of their value electronically or by paper bank draft or check. It's what banks have always done, even back before the greenback existed. After all, I never see most of the dollars I am paid--they don't exist in paper form, but go from my employer's bank to my bank over a giant system of tubes and then go the same way to most of the people to whom I owe money, via the medium of my swiping a card, writing a check, or inputing data in a computer.
"I wouldn’t like to see it devolve into dozens of states with their own currencies – that would make us as messy as Europe or the early United States."
Erm, OK, apparently the author doesn't know that (most of) Europe uses a single currency now. And they also don't seem to grasp that just what they are saying they don't want to see--dozens of different states having their own separate forms of money--is exactly what is being mooted.
"The American dollar does work great as a tool for commerce, thanks, but it wouldn’t hurt to actually deal with gold and silver just in case."
In case of what? This is what baffles me about the whole movement. The US dollar is not going away. Yes, it buys less than it did in 1789, but so does every currency on earth. A salary of £50 per annum in 1890 would be roughly equivalent to a salary of £20,000 today according to the calculators at Measuring Worth. But the dollar has survived over 200 years of crashes, depressions, recessions, and bank failures. It's not going anywhere.
I love my fellow alumni
Aug. 24th, 2011 08:46 amOne of the chaps from my college wrote in to our alumni review to say that as he wrote his check to the IRS in April, he thought,
You might imagine this to be one of the hippy generation of the 1960s, or one of my lefty classmates of the 1980s. But, no, this gentleman is Class of 1951. Sir, I salute you. :-)
Oh, and by the way, GE's quarterly profits in 2Q2011 were up 18% to $3.7 billion. Good thing they are cutting back those salaries...
I hope my contribution will help the boys and girls in Afghanistan, Iraq, maybe Libya and who knows where else, and I thank my lucky stats that General Electric doesn't have to make that sacrifice, so it can preserve ALL their income to create economic growth in our country. Meanwhile, the newspapers say that Jeffrey Imelt, GE chairman and a member of Mr. Obama's Council of Economic Advisors, is cutting back the salaries of 15,000 GE workers to help cover the costs of pensions and benefits and spur our country's economic growth.
You might imagine this to be one of the hippy generation of the 1960s, or one of my lefty classmates of the 1980s. But, no, this gentleman is Class of 1951. Sir, I salute you. :-)
Oh, and by the way, GE's quarterly profits in 2Q2011 were up 18% to $3.7 billion. Good thing they are cutting back those salaries...
many thanks to Diane Rehm!
Jul. 13th, 2011 12:06 pmEnjoyed the Diane Rehm Show this morning. DR called out one of her guests on using the term "Obamacare", and when one ultra-business participant said the federal stimulus spending was a failure because no businesses would be foolish enough to use stimulus money to fund expansion, one of the others came up with a major US company--ALCOA--off the top of his head who had done just that.
We needed (still need) a better focused and LARGER stimulus program. The problem was not that it was put in place, but that it was too late and too small. Even so, it helped. We need more government spending *sensibly targeted*, not less.
Two of the participants also debunked the myth that the same pro-business presenter put forward, the old lie that cutting taxes and reducing regulation creates jobs, by pointing out that no such job growth occurred during the pro-business Bush administration that did both of these things, while during the Clinton and Reagan presidencies, taxes had been high and job growth had boomed
another good piece
Feb. 18th, 2011 06:59 pmCompletely different, this one, about the financial disaster in Ireland.
But it has this wonderful simile (my emphasis):
I'm still not much further ahead with economics than I was after Professor Srinavashnan's Intro course in senior year, but I have a glimmering that this article goes some way to confirm what I'e always suspected: that if you can "create" wealth from nothing (which has always seemed dubious to my 17th century mind) that the reverse is also possible, and vast amounts of wealth can actually be consumed by the mysterious engines of commerce and leave nothing behind. Nothing, of course, but debt and misery.
This passage
Reminded me of the section in Charles Palliser's The Quincunx where the protagonist finds himself in a neighborhood of 19th century London filled with half-built houses, constructed, he discovers, as part of a huge confidence scheme. Just enough work was done to show investors in a development scheme, but once the capital for the whole project was accumulated, the projectors left with most of the dosh unspent. It seems as if the Irish housing boom was almost the same idea, just on a larger scale.
But it has this wonderful simile (my emphasis):
Ireland’s financial disaster shared some things with Iceland’s. It was created by the sort of men who ignore their wives’ suggestions that maybe they should stop and ask for directions, for instance. But while Icelandic males used foreign money to conquer foreign places—trophy companies in Britain, chunks of Scandinavia—the Irish male used foreign money to conquer Ireland. Left alone in a dark room with a pile of money, the Irish decided what they really wanted to do with it was to buy Ireland. From one another.
I'm still not much further ahead with economics than I was after Professor Srinavashnan's Intro course in senior year, but I have a glimmering that this article goes some way to confirm what I'e always suspected: that if you can "create" wealth from nothing (which has always seemed dubious to my 17th century mind) that the reverse is also possible, and vast amounts of wealth can actually be consumed by the mysterious engines of commerce and leave nothing behind. Nothing, of course, but debt and misery.
This passage
In October, Ireland’s Department of the Environment published its first audit of the country’s new housing stock after inspecting 2,846 housing developments, many of them called “ghost estates” because they’re empty. Of the nearly 180,000 units that had been granted planning permission, the audit found that only 78,195 were completed and occupied. Others are occupied but remain unfinished. Virtually all construction has now ceased. There aren’t enough people in Ireland to fill the new houses; there were never enough people in Ireland to fill the new houses.
Reminded me of the section in Charles Palliser's The Quincunx where the protagonist finds himself in a neighborhood of 19th century London filled with half-built houses, constructed, he discovers, as part of a huge confidence scheme. Just enough work was done to show investors in a development scheme, but once the capital for the whole project was accumulated, the projectors left with most of the dosh unspent. It seems as if the Irish housing boom was almost the same idea, just on a larger scale.
I am so tired of hearing small-minded fiscal conservatives try to justify their catastrophic and wrong-headed attempts to cut government budgets during a recession (when we *should* be deficit-spending) by claiming that "governments should be just like families, and only spend the money they have brought home".
Even setting aside the issue of how valid it is to say that a macroeconomic entity should behave like a microeconomic entity (I would say "not"), the very premise is flawed.
Familes only spend the money they bring home? Bullshit. Before America's unhealthy love-affair with credit cards got started, very few families bought homes, cars, or even major appliances with cash or cheques. Investing in capital goods and services (has anyone reading this NOT had college loans?) with borrowed funds is a long-standing American tradition. To suggest that everyone spends only what they earn, and that this is somehow a wise and realistic goal, either for individuals or governments, is an argument only made (IMO) but those well out of touch with reality.
Even setting aside the issue of how valid it is to say that a macroeconomic entity should behave like a microeconomic entity (I would say "not"), the very premise is flawed.
Familes only spend the money they bring home? Bullshit. Before America's unhealthy love-affair with credit cards got started, very few families bought homes, cars, or even major appliances with cash or cheques. Investing in capital goods and services (has anyone reading this NOT had college loans?) with borrowed funds is a long-standing American tradition. To suggest that everyone spends only what they earn, and that this is somehow a wise and realistic goal, either for individuals or governments, is an argument only made (IMO) but those well out of touch with reality.
also in Foreign Affairs
Jul. 9th, 2010 04:07 pmThis article on the move to cut government deficit spending
The authors make a good case that by reducing the stimulus of government spending (whether intended as such or simply as regular government programs like police, fire safety, roads, libraries, etc.) the G-20 nations will cut back employment, consumer spending, imports and exports, and thus kick the slow economic recovery in the stones, instead of in the arse where they intended to strike it.
They close by saying
Sometimes I find "the dismal science" opaque and boring. This, though, I can follow readily and find quite credible; I only wish more people could... and did.
The authors make a good case that by reducing the stimulus of government spending (whether intended as such or simply as regular government programs like police, fire safety, roads, libraries, etc.) the G-20 nations will cut back employment, consumer spending, imports and exports, and thus kick the slow economic recovery in the stones, instead of in the arse where they intended to strike it.
They close by saying
There is no silver bullet to avoid the macroeconomic fallout associated with financial crises. The question, then, is where (and by whom) this pain will be felt. So far, it appears that although the financial sector was largely responsible for creating the $2 trillion in losses since the crisis began, it is determined to avoid paying for it. Instead, the taxpayers that paid to bail these firms out are now being doubly taxed as government services are cut in the name of “growth-friendly fiscal consolidation,” in the words of the G-20. What lies ahead, then, is a harmful populism that allies U.S. Tea Party activists with Greek public-sector unions.
In sum, both of the following statements are true: countercyclical spending worsens government finances, and austerity compounds an already miserable unemployment situation. But cutting spending in the middle of a recession is no solution -- especially when market participants conflate stimulus spending with bailouts of the financial system. Refilling a $2 trillion hole in the global financial architecture does not have the same effect on demand as, say, a $2 trillion stimulus package spent on brick-and-mortar projects. Such a conflation damns fiscal stimulus to ineffectiveness -- even though a large portion of the stimulus is yet to be spent in the United States and abroad and almost all of the debt accrued since the crisis comes from tax-revenue losses and bailout costs.
It is a shame that many of the most powerful ideas of dead economists are the most fallacious. The Great Depression proved that supply does not create its own demand. The mortgage debacle showed that good and bad money can co-exist quite happily. Although the idea of “austerity” may have the immediate ring of virtue, in the long term it is a vice. Keynes was indeed right, but with a twist. It is not the ideas of dead economists we have to worry about, but rather the dead ideas of very much alive ones.
Sometimes I find "the dismal science" opaque and boring. This, though, I can follow readily and find quite credible; I only wish more people could... and did.
OK, this sort of thing bothers me.
Dec. 24th, 2009 09:27 amThe Globetrotter can't understand why I loathe Marketplace (NPR's business news program). Partly it's because I hate its promotion of the Cult of Business, which worships and adores anything and everything having to do with making money, and either strips every happening or event of any context or meaning except profit or actively perverts things that have nothing to do with finance or business into some crippled, sickly version of themselves that is all about How To Make More Money. I have a special hatred of selfishness and greed, and corporate greed is in the top five of my list of Most Evil Things Ever. So that's the main reason I detest Marketplace.
But another reason I hate it is because they treat facts casually and recklessly or outright distort or lie about them. Case in point: today their "short" in the main NPR news had a snippet interview/factoid with an economist (?) about healthcare. He posed the question "In ten years, what will the average American family of four pay for health insurance?" and gave four possible alternatives, the largest of which, $31,000, was the answer. He stated that this was the projected cost of premiums for employer-provided health coverage in 2020. He then 'discussed' this with the 'interviewer' who 'asked' him, among other things, what the average American family earns, to which the 'economist' replied "$51,000".
[The scorn quotes are there because, although it was staged as an interview, the two of them were clearly reading from a script.]
So it sounds as if health insurance costs are going to take up a huge chunk of family income, right? about 60% of income, right?
Not so fast. ( Read more... )
But another reason I hate it is because they treat facts casually and recklessly or outright distort or lie about them. Case in point: today their "short" in the main NPR news had a snippet interview/factoid with an economist (?) about healthcare. He posed the question "In ten years, what will the average American family of four pay for health insurance?" and gave four possible alternatives, the largest of which, $31,000, was the answer. He stated that this was the projected cost of premiums for employer-provided health coverage in 2020. He then 'discussed' this with the 'interviewer' who 'asked' him, among other things, what the average American family earns, to which the 'economist' replied "$51,000".
[The scorn quotes are there because, although it was staged as an interview, the two of them were clearly reading from a script.]
So it sounds as if health insurance costs are going to take up a huge chunk of family income, right? about 60% of income, right?
Not so fast. ( Read more... )
