The Case for Overt Monetary Financing

September 20, 2016
Written by: John Kelly
55 Replies

During the election campaign we were nearly bored to death with the Coalition mantra “jobs and growth”. The slogan was nauseous in the extreme and the mechanics were vague and unconvincing.

Not one government member was able to give a convincing explanation of how jobs would be created and growth delivered, or what the slogan itself actually meant. It was a hollow campaign tactic and not surprisingly, few fell for it.

But now, hollow or not, the government must deliver on jobs and growth. So where are they? The truth is, nowhere in the government plan, does a job creation program that will bring growth, exist. Growth over the last three years has failed to keep pace with the increase in population.

Unemployment has increased over the past three years and would be far worse but for current government spending which is propping up a stagnant private sector.

Despite this, the government wants to further cut spending to a level that will suffocate growth, simply to balance a budget. A balanced budget is the opposite of what we need to stimulate growth.

At the moment our Coalition government and the Labor opposition subscribe to managing our economy as if it were a corporation or a household. Every expense must be balanced by taxation revenue or deficit spending sourced by issuing bonds.

Government spending is a vertical transaction where new money is introduced into the economy, as opposed to a horizontal transaction where money already in circulation simply moves around from one point, to another, one bank account to another.

New government money is being introduced into the economy every day and progressively drained through taxation and bond issuance. The present method of accounting for government net spending, i.e. debt and deficit, is a political decision, not an economic one.

There is no cut and dried economic dogma or argument that says a sovereign currency issuing government must borrow to cover deficit spending. It is purely a political choice.

Long term economic stagnation, such as we are facing now, poses serious social risks for all nations currently recovering from the GFC. Unemployment, underemployment, a lowering of living standards and greater inequality will, if not checked, eventually lead to civil unrest.

There will be a day of reckoning, either for the country or a government that fails to deliver. If the government and opposition are serious about jobs and growth, serious that is, beyond repeating a slogan ad nausea just to win an election, they should be thinking about Overt Monetary Financing.

The timetable for the implementation of both the NDIS (National Disability Insurance Scheme) and the National Broadband Network (NBN), two Labor devised programs worthy of fast tracking, could be brought forward and funded through Overt Monetary Financing (OMF), a source of funding that would not cost anyone a cent. Nor would it require borrowing from any source, nor would it be inflationary.

This is not a pipe dream, it’s not funny money, it is economic management the way it should be, in a fiat currency environment. Overt Monetary Financing means dispensing with the unnecessary procedures of governments matching their deficit spending with bond-issuance to the private bond markets, as if the latter are funding the former, and simply creating the money from nothing.

With OMF, the Reserve Bank simply credits one government account with the necessary funds and debits another with a corresponding amount. The RBA’s books balance and the government then spends the money accordingly. It’s really just rearranging numbers in a computer.

The debit never has to be repaid, or if they chose to, the RBA could simply repay itself. It’s all just numbers in a computer. With Philip Lowe about to take charge at the Reserve Bank, there’s never been a better time.

Neo-liberal economists see OMF as inflationary because the additional money is not compensated by revenue being removed from circulation. But this view is quite wrong and short-sighted. Inflation occurs when too much money is chasing too few goods.

Funding projects like the NDIS and the NBN with new money does not create excessive demand for goods and services, rather it stimulates activity proportionate to the employment it creates. Furthermore, it adds value to the economy reflected in our GDP. In short, it creates jobs and stimulates growth.

Those who oppose OMF will argue that once you begin funding this way, politicians will go crazy funding everything from salary increases for public servants and politicians and dropping money out of helicopters, to bankrolling stock market investment, all of which would set off an inflationary spiral that would send us down the same path experienced by Zimbabwe and Venezuela.

This is a valid argument. Any funding that simply increases the money supply without a corresponding increase in production can cause inflation. But funding major infrastructure projects like the NDIS or the NBN that grow the economy, where a clear benefit is provided, a benefit that serves the interests of the general public and the business community, cannot be inflationary.

As for politicians mis-using this viable, yet cautionary economic tool, while such is possible, it is unlikely. Governments have to be really stupid, reckless and unconstrained to create hyperinflation of the kind experienced in Zimbabwe and Venezuela.

If an argument not to proceed with OMF is based on the competency of those managing it, then our country is already doomed. We just don’t know it yet.

Either way, this is a debate we should be having in the mainstream and while it is above the heads of our current government, it is a vastly superior option to the mamby-pamby they quack on about, at the moment.

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diannaartSeptember 20, 2016 at 3:02 pm

I understand the balance of creating a positive which, in turn, benefits our society; NBN in particular would enable more people to work from home, give instant communication across rural areas, provide online education, enable the poorest a connection with the rest of us (if done properly) and much more.

There is not a single politician in the LNP and in the right-faction of the ALP capable of implementing Overt Monetary Financing responsibly. Not a one.

jimSeptember 20, 2016 at 6:27 pm

Nay these donors just like their government do not want change, what and risk their loot not while the good ‘ol LNP is in power,now back to the fifties ,after all jobson growth was around then too.

Matters NotSeptember 20, 2016 at 6:37 pm

Here’s an interesting video on MMT. Short and to the point. Plenty of ‘pictures’ as well

And a more nuanced discussion.

There seems to be more and more ‘converts’ (does it require ‘faith’?) in the wider world, but political spear carriers seem decidely reluctant. Risk averse? Too counter-intuitive? What?

Jennifer Meyer-SmithSeptember 20, 2016 at 8:17 pm

Keep up the good work, John Kelly.

Every article produces another convert.

BacchusSeptember 20, 2016 at 10:30 pm

Excellent article as usual John.

Keep an eye out for someone new ‘dipping his toes’ into the MMT pool tomorrow over at The Political Sword. (Michael will probably post it here as well.)

IMHO Ken Wolff does a very good job of communicating the essence of MMT – I’ll be interested in your thoughts. It’s part three of his four-part economics series and is titled What is Modern Monetary Theory and will it help?

While I’m busy promoting other authors on your feed, 😉 I notice Tim Dunlop has released the introduction chapter to his book on Facebook – also well worth a read…

Jennifer Meyer-SmithSeptember 20, 2016 at 10:44 pm

Bacchus,

you might want to assume it is a woman who provides that breakthrough.

BacchusSeptember 20, 2016 at 10:58 pm

Sorry Jennifer, you lost me there…

To what ‘breakthrough’ do you refer?

John Kelly has produced yet another excellent article, Ken Wolff has a new article on MMT at TPS tomorrow, and Tim Dunlop’s recently released book is also generating interest in where the future might head.

Confused…

DavidSeptember 21, 2016 at 9:55 am

As I recall, the OMF approach was used to help fund the Snowy Mountains Scheme. But that was a while ago before we had Canberra-based public servants and politicians from occupations other than accounting, law, education and unions.

Jennifer Meyer-SmithSeptember 21, 2016 at 10:20 am

This Overt Monetary Financing concept can also be used to fund micro businesses for unemployed and under-employed people on Newstart, so they can be humanely eased off Newstart over a reasonable period of time, if they choose and are capable of beginning their own micro businesses.

OMF would provide $10,000+ Micro Finance Grants and/or $20,000+ Micro Credit Loans over and above the Newstart payment for a reasonable period of time, so that the unemployed person can feed and house her/himself while also conceiving and growing their enterprise that reflects their knowledge, experience, skills, qualifications and talents.

The benefits are multitudinous:

1) significant reduction of unemployment and under-employment;
2) eventual and effective reduction in welfare reliance achieved in a humane way significantly different from Hatchet Porter’s;
3) rise in general community moral and health benefits as more people are able to re-enter a viable job market;
4) significant growth in homegrown grassroots diverse industries which would keep economic viability within Australia;
5) significant continued job market opportunities for other unemployed and under-employed Australians as these micro businesses take root; and
6) many other benefits.

HarquebusSeptember 21, 2016 at 12:58 pm

More drivel from John Kelly. Wishful thinking of a magical dreamland where nothing really costs anything because, hey, we can just create currency from nothing and will never have to face reality. We can now kick the can indefinitely.
Bullshit! You can not create resources from of nothing and you can grow food with nothing.

Fiat currencies, no matter which method is used to conjure them into existence, are still just that; fiat currencies. Intrinsically worthless and doomed to fail.

“The belief that diminishing marginal returns are temporary is probably related to the belief that there are substitutes for everything, including energy supplies. Unfortunately, this is not the case; the laws of thermodynamics dictate otherwise.”

What really causes falling productivity growth — an energy-based explanation

“Despite its outlandish theoretical flaws and nonsensical economic jargon and the catastrophic empirical evidence of its failure to prevent financial downturns or “stimulate” sustainable growth, Keynesianism remains the ruling paradigm of economic thought.”
“A number of trenchant reasons have been given for the General Theory’s continued dominance, however, one stands above all else: Keynesian economics provides the intellectual justification for economists, statisticians, technocrats, bureaucrats, and policy wonks in their exalted positions as “fine tuners” of economies the world over.”
“That Keynesianism continues to reign supreme, despite its theoretical and empirical bankruptcy, speaks volumes of the state of Western intellectual and academic life. Instead of the pursuit of truth and the refutation of error, Western intelligentsia is primarily concerned with securing privilege and power for itself.”

John Maynard Keynes’ “General Theory” Eighty Years Later

“there is no such thing as the Infrastructure Fairy that takes government spending and magically turns it into economic growth.”
“many economists inside and outside of DC are more than happy to give the political class intellectual respectability under the new version of alchemy that is the “multiplier effect.””
“Nevertheless, old lies about stimulus spending never quite seem to go away.”
https://mises.org/blog/infrastructure-spending-does-not-grow-economy

“For the last couple decades, however, growth in the industrialized world has slowed down. Europe and Japan have entered a long period of stagnation. The United States has seen various ups and downs, but the purchasing power of your wages really hasn’t budged since 1973.”
http://www.commondreams.org/views/2016/09/17/yolo-economics-growth-burning-planet

“Finally it filters down to the last-to-know: the rank-and-file.”
https://medium.com/deepconnections/prevailing-gray-swans-1-august-19-2016-6fbb3455175c

BTW: It is very rare for me to post a link to something that I have not read.

diannaartSeptember 21, 2016 at 2:33 pm

Far as I am concerned ALL currencies are fiat.

“Fiat” from the Latin “let it become” as in a decree. We can pretend that “commodity” or “representational” money is somehow real, but basing value on such as (precious) metals are only given value because we (humans) have decided that it is so.

Precious metals are finite – our beliefs – not so much.

totaramSeptember 21, 2016 at 3:03 pm

Just one example in Harquebus’s links that caught my eye:

““Nevertheless, old lies about stimulus spending never quite seem to go away.”
https://mises.org/blog/infrastructure-spending-does-not-grow-economy”

This site is run by the “Austrian School” who believe that we should go back to the “Gold Standard” for currency. The same gold standard and the Bretton Woods Agreement that the developed economies of the world decided to ditch, because it was causing problems. In this “Gold Standard” you dig gold out of one hole in the ground and put it into another hole in the ground (called a vault) and then say you have become richer (I think that quote is attributable to Bertrand Russell) . No matter how many cars, houses, tonnes of grain, etc. you produce, you cannot claim you are any richer, unless you have produced more gold and put it into your vault.

So as you can expect, you follow the link and find an article which completely ignores history, data, etc. and finally can be summed up like this:

“Ultimately, spending on infrastructure no more “creates wealth” than any other kind of government spending. Like all other government spending, it’s a matter of taking money from some people to give to others. The money taken from the taxpayers must be subtracted from the money spent, and we’re left with no net gain. Of course, after the politicians and the government contractors take their cut, they’ll do pretty well. The rest of us won’t be so lucky. ”

Got it? Thousands of people and machines may have put labour and materials into building a bridge, but it won’t create any wealth. (Why? Because the amount of gold hasn’t increased!) Actually, the author doesn’t seem to realise that his logic applies equally well to a bridge built by the private sector. In fact by his logic nothing we build, or invest in, can ever increase wealth.

This is the simple minded logic of the article, and I can guess what the others are like.

And we saw only recently, how stimulus spending got us over the effects of the GFC, as even the leftie IMF conceded. However, according to the article, that must be another old lie. (No data given, or discussed, mind you)

I invite other readers to do the same investigation for each of the links posted by Harquebus. I’m sure it will be a useful exercise in understanding macroeconomics.

diannaartSeptember 21, 2016 at 3:20 pm

Got it!

diannaartSeptember 21, 2016 at 3:22 pm

Only problem, the more I understand how we can get the economy to work for us instead just for the 1% – the angrier I get. Just sayin’

HarquebusSeptember 21, 2016 at 3:23 pm

totaram
I also advocate adopting precious metals as currency.
As for ignoring history, no fiat currency has ever persisted. They have all inflated themselves out of existence. Government after government has tried to inflate their way to prosperity and all have failed or are in the process of.

totaramSeptember 21, 2016 at 6:37 pm

Harquebus: You are free to advocate your preferred model of currency, and I shall continue to show how silly it is. Your fundamental misunderstanding about fiat currency is that it is not designed to have any intrinsic value, and people who think it should, tie themselves into knots because of that. Fiat currency is just a “Unit of Account” by which we denominate the value of goods and services in the economy. It is no different than the runs on the scoreboard in a game of cricket. You can read more here.

6.2 The National Currency (Unit of Account) Let us look at money as the unit of account in which stocks and flows are denominated.

Wray, L. Randall; Watts, Martin. Modern Monetary Theory and Practice: An Introductory Text (Page 124). . Kindle Edition.

As for your statement:
“As for ignoring history, no fiat currency has ever persisted. They have all inflated themselves out of existence. Government after government has tried to inflate their way to prosperity and all have failed or are in the process of.”

This statement fails because a true understanding and use of fiat currencies has hardly ever occurred, historically, and even if it did, the governments that used them fell for all kinds of other reasons, such as war, pestilence, famine, etc. Not being a history buff, I won’t go into this. Suffice it to say that even today, the users of fiat currency do not (or wish not to) understand its true meaning and usefulness. The desire to hide its true significance is of course motivated by vested interests. I notice Ad Astra very naively assumes that people in treasury will tell the politicians all about MMT. No they will not, on pain of losing their jobs!

My reference to ignoring history was in the article posted by you, that claimed that infrastructure spending never creates wealth and never was of any use, basically ignoring the “new Deal” after the great depression. The author ignored it and tried to say it was world war two and then gave some spurious reasons to debunk that. There are lots of other instances in history showing that infrastructure spending does wonders for the economy, providing it is done correctly. Our own Snowy Hydro scheme as mentioned above is a perfect example. It did not use OMF by the way, as Australia did not have a fiat currency at the time. It simply used deficit financing, which is almost as good and is required when the govt. is not an issuer of its own currency. After all , corporations borrow to invest, so why not govt., especially when govt. can borrow at hugely lower rates of interest?

Jennifer Meyer-SmithSeptember 21, 2016 at 6:54 pm

I’m surprised you don’t see the benefits of MMT. I understand your worries about uncontrolled population growth and resource use. Haven’t use considered that MMT could be an asset to control both of those concerns?

HarquebusSeptember 21, 2016 at 7:20 pm

totaram
Spare me, please.
Not having intrinsic value and constantly inflating currency only works temporarily. The first shortage of a vital resource for which no amount of currency can purchase, (IOW: Stick your worthless crap), the currency will collapse just as all fiat currencies do.

Jennifer
I can not see how MMT which, also requires growth, can curb population, scarcity and depletion.

Cheers.

Jennifer Meyer-SmithSeptember 21, 2016 at 7:29 pm

one asset of MMT that I can see is the capacity to utilise the existing assets we have in our human wealth.

Consider how the skills, knowledge, qualifications and talents of existing unemployed and under-employed people can be utilised to get them out of deadend, life-defeating unemployment and into making worthwhile projects that pay them for their labour and help our natural and human systems.

It could be re-cycling. It could be renewables. It could be all the good stuff you seem to support. It does not need to mean resource depletion.

totaramSeptember 21, 2016 at 8:07 pm

Harquebus: I see that you have run out of useful things to say, so you now resort to :

“(IOW: Stick your worthless crap), ”

and making unsupported and non-falsifiable statements about how eventually you will triumph.

You failed to argue against the criticism I made of the post on the mises web-site. The beauty about your statements is that they are not at all falsifiable. How long do you expect before “all fiat currencies will collapse” ? 50 years, 100 years, 200 years? I too can state that before I am dead you will see how stupid your position on various matters is. Just because you can point to some links that you have read means nothing on the internet. Do your links have any credibility? They are just links from the usual neoliberal apologists. In your case, they are links from the “Austrian Gold Bugs” in one case. Admittedly, it is a heterodox school of economics, but I can argue against their position.

There are people with not much formal education, who post on the internet and are clearly not only very well read but able to understand what they read and critically evaluate it. I have also come across some people who aver that Quantum Mechanics is “mathematical wankery” but are OK with Einstein’s tensor calculus but have “their own theory of everything”. I don’t know what your background and qualification is, but obviously you are opinionated way beyond your intellectual capability.

I have already indicated that it is probably not worth engaging with people like you and I shall take my own advice in future. But I will continue to point out the foolishness of your posts wherever I see them, in the same way I have done with Neil of Sydney.
Have a nice evening!

The rest of the readership will hopefully carry out the homework exercise of going through those links and examining them critically!

HarquebusSeptember 21, 2016 at 9:34 pm

totarum
Sticking worthless fiat crap is what is going to bring us down. That is how long it takes the first to say it is when.
The bottom line is, fiat currencies never survive and for the first time in history, all currencies are fiat and when one goes, they will all go.
Some gold and silver that is being used today is the same as that used two thousand years ago.
The future will tell one way or another and going by the economic elites performance over the last eight years, abysmal, one would be a fool to think that, this time is different.

Jennifer
It is not currency creation that drives an economy. It is energy.
Here is something for you. I only just read it today.

What really causes falling productivity growth — an energy-based explanation

Jennifer Meyer-SmithSeptember 21, 2016 at 9:44 pm

Congrats Totaram and Harquebus,

for losing the less scientific rest of us in the discussion.

Maybe keep the discussion more open from now on which means it will be more equitable.

(H tries sometimes. I don’t know about you, Totaram.)

Matters NotSeptember 21, 2016 at 10:04 pm

totaram, you advance powerful arguments. My advice is along the lines of not to tolerate fools. And certainly not to do so gladly. Even a kindly ‘pat on the head’ is one step too far. Perhaps you might do as I do and never respond to his nonsense because it only encourages him.

Attention seeking and all that.

HarquebusSeptember 21, 2016 at 11:18 pm

Matters Not.
We won’t talk about all those from history who were foolish enough to think that their brand of fiat currency was different. They all failed but, hey, it’s different this time because, you’re no fool.

John KellySeptember 22, 2016 at 6:23 pm

Harquebus, can you give us some examples of failed fiat currencies. I can’t find any.

Pingback: The Case for Overt Monetary Financing | THE VIEW FROM MY GARDEN

HarquebusSeptember 22, 2016 at 7:17 pm

John Kelly
I was only reading about one the other day except, it is lost somewhere in my history list. Centuries ago Japanese fiat currency became worthless and Chinese currency was desired instead. Currently, one can look to Venezuela for a currency in the process.

My search yielded arguments on both sides. Yes some have, no they haven’t. Here’s a couple for my side.
Search criteria: failed fiat currencies

Here is a reference to a study that I am aware of but, admit that I have not read it for myself.
“Vince Cate wrote an excellent piece that was presented by the well respected David Morgan during the Silver Summit 2012 (at the end of October). The researcher analyzed 599 paper based money forms over the past millennia.”
http://goldsilverworlds.com/gold-silver-insights/research-shows-all-paper-money-systems-failed/

“History has a message for us: No fiat currency has lasted forever. Eventually, they all fail.”
http://moneywithmanuel.info/3408-2/

John KellySeptember 22, 2016 at 8:32 pm

Harquebus, I have had a brief look at both links you have provided. It is not true to say that it was the fiat currency that failed. All the cases listed in the second link were the result of political mismanagement, not a failure of the currency. This is a reflection on politicians, not the currency. The first link posted by a metals trader would say that fiat currencies fail when it is in their interests to have people buy and invest in metals.

All currency systems are open to abuse. That doesn’t mean they have failed. It does, however, tell us that the checks and balances in place to prevent them, were insufficient.

Venezuela, today, is a classic case of corruption and mismanagement. Blame the politicians, not the currency.

HarquebusSeptember 22, 2016 at 10:17 pm

John Kelly
That is true. Causes do differ but, for whatever reason the fact remains that, or as far as I am aware should I say, all have failed. Those currently in use temporarily excepted. Fiat currencies do not have a good track record.
Using precious coins as legal tender denies governments and bankers the ability to ~~rig~~ abuse the system.

For what it is worth John, this is all just hypothetical for me. The decay in the global economy is accelerating and a big fall is now unavoidable. Fiat creation might keep this current ponzi going a little while longer but, the damage is done and hardship for all of us not far ahead..
Cheers.

Jennifer Meyer-SmithSeptember 22, 2016 at 10:26 pm

Harquebus,

do you have anything positive to add?

Never say die.

HarquebusSeptember 22, 2016 at 10:55 pm

Jennifer.
Short and long answer, no. Things are not very promising on all fronts.
There’s always hope for the better or that it all might just go away and then there’s courage. Courage to face up to the coming challenges no matter how dire.

Did you read Gail Tverberg’s article that I posted for you? Probably not your thing.
Try this one.
http://www.debozarko.com/courage/

Deb Ozarko and Gail are two that I follow regularly.

Miriam EnglishSeptember 23, 2016 at 12:11 am

Harquebus, on about doom and gloom again, spruiking extreme right-wing viewpoints. [sigh]

Here’s a little thing for you to note: all precious metal-based currencies have failed.

Money is a construct. It can be used to represent various things. People like you want it to represent precious metals. Most of the rest of humanity use it to trade for everyday items. Most of us never ever get to see precious metals. They have no meaning for us. As money derives its meaning from the minds of humans that alone indicates the precious metal argument is worthless.

One reason why limiting money to precious metals is that it means that cultural creations are limited by some stupid metal. It doesn’t make sense to limit humanity like that. Why should there be no payment for an artist creating music simply because there was not enough of a stupid metal?

Another reason why limiting money to precious metals is stupid is that those metals actually have important uses. Locking them away in a vault instead of using them is just plain ridiculous. Gold is especially useful for forming non-corroding electrical contacts.

Your adherence to what amount to religious doctrine astonishes me. You think you understand what you’re talking about but you don’t. You merely regurgitate what the Von Mises idiots keep spouting. It is wrong on so many levels.

diannaartSeptember 23, 2016 at 10:32 am

Well said, Miriam

Miriam EnglishSeptember 23, 2016 at 7:26 pm

(Actually, I’m embarrassed at all the typos I made. 🙂 )

diannaartSeptember 23, 2016 at 7:51 pm

Miriam

Your meaning was clear and succinct – never be embarrassed by typos – one can always blame the spell/correct function

🙂

OPPOSE THE MAJOUR PARTIESAugust 7, 2017 at 4:13 pm

a fiat currency is simply one that is made valuable by law – it is legislated to be the monopoly legal tender. It’s value does not relate to the amount of gold held in reserve. In other words, it is not dependent upon being converted to gold for its value. A government that has the monopoly on the production of that fiat currency has a sovereign currency and can potentially, at least, produce as much of it as it likes or needs to. However, MMT tend to subscribe to the view that only as much currency should be produced as the value of the capacity of the economy if inflation is to be avoided. How they propose that capacity should be measured I don’t know but technically if a government makes laws saying wooden discs, or anything else, are to serve as legal tender then they can be used as such and would be a fiat currency. Whether the citizens have confidence in the wooden discs is another matter.

OPPOSE THE MAJOUR PARTIESAugust 7, 2017 at 4:30 pm

Harquebus beside Miriam’s astute criticisms above, as a conservative neo-liberal you would have to agree that the gold standard is a regulation on the money supply and hence contrary the free market principles espoused by the economists in the theories you link above. Gold is regulated twice per day in London by a group of private bankers and gold traders mostly the Rothschilds. So much for the free market! The biggest neo-liberal myth. Would you prefer the people and their country were at the behest of a few private individuals who have a vested interest in the fluctuations of the gold price and, hence, of their national currency? Would you prefer that a few super wealthy private bankers and international gold traders had the power to wreck economies by gold and currency speculation. I know certainly wouldn’t because, frankly, that seems insane.

OPPOSE THE MAJOUR PARTIESAugust 7, 2017 at 4:39 pm

‘Using precious coins as legal tender denies governments and bankers the ability to rig abuse the system’. Laughable!….it gives the international private gold merchants and banks who hold the precious metals the opportunity to rig the system. Are you aware that ancient Egypt up until the Ptolemies had no currency at all and yet it achieved what it did – great pyramids and all – on a barter system! Gold had no value other than a symbolic one in religious ritual and ceremony. It was reserved for the Pharoah and had no exchange value. So much for your requirement for precious metals – that’s just a fantasy. LOL!

jimhazAugust 7, 2017 at 4:56 pm

https://blogs.cfainstitute.org/investor/2013/03/13/president-nixon-the-man-who-sold-the-world-fiat-money/

Miriam EnglishAugust 7, 2017 at 8:36 pm

Majour, all good points. I’d like to add that the pyramids were built voluntarily. The workers were supplied with free food and beer (or was it mead?) and achieved those amazing structures because they wanted to. Historians up until recently thought the pyramids were built by slaves because the “modern” way of thinking couldn’t believe voluntary effort could produce such things.

Now we have enormous efforts like the Linux Operating System created by thousands of volunteers without any coercion or payment — done simply because people like to do great things. And it turns out that Linux is superior to all the Operating Systems made by people working for money. In fact many of the best computer programs now are created by unpaid volunteers, just for the love of it. It shouldn’t really be a surprise. All through history almost all the world’s greatest art (writing, painting, music, sculpture) has been done for the artists’ desire, not for money.

The sharing networks that companies have tried with governments to make illegal have proliferated because people like to share with each other without money intruding.

Enormous repositories of free stuff have sprung up where people willingly offer their services for no monetary reward — Project Gutenberg, Gutenberg Australia, Librivox, Archive.org, Wikipedia, epguides.com, YouTube, EscapePod, Wikibooks, Wikiversity, The Linux Documentation Project, The Interactive Fiction Archive, The Ren’Ai Archive, TED Talks, BrisScience, and much more.

I look forward to a time when money will be a little-used curiosity.

HarquebusAugust 7, 2017 at 8:59 pm

I am reasonably sure that I will always be able to trade my pieces of silver for something. My critics are not expecting bank bail ins, I am.
The future from which we have borrowed has now arrived, is demanding payment and will get it. Fiat currencies not accepted.

“Our central banks have caused our financial crises, not saved us from them.”
“That most people still find it hard to believe that America -and the west- has been getting poorer for the past 30-40 years, goes to show how effective the narratives have been.”

Central Banks ARE The Crisis

“The thoery of autonomous creation of scriptural currency holds that just as banks can conjure debt based money out of thin air, so can citizens. Money thus created by citizens can then be used to extinguish their own debts.”

Bank of Italy Warns Against Creating Your Own Currency

diannaartAugust 7, 2017 at 9:08 pm

Miriam

Side-stepping, working around, ignoring, creating alternatives are among the best and most workable ways to de-fang capitalistic monopolies.

Smaller, diverse, independent, cooperative, collaborative are other values big “C” capitalism attempts to stifle.

Never going to be easy though, part of the rape of the original NBN policy, was not so much about cost (another neo-con furphy IMHO) but a way to control who gets access to what and how much access they may or may not be permitted. I have not researched the following in any depth, but I do know of some country towns with populations of around 15,000 are lucky if they get 2 NBN nodes for the entire region.

My reason for giving the NBN as an example, is that the internet is the public’s best hope to swap ideas and help ourselves.

Matters NotAugust 7, 2017 at 9:24 pm

will always be able to trade my pieces of silver for something

You reckon? Today I booked a trip to Singapore, Sri Lanka, Bangkok and surrounds. Guess what, even though I offered partridges, turtle doves, french hens, calling birds and even gold rings as payment, they wanted a fiat currency in exchange. Silly buggers. For some strange reason they demanded Australian dollars. And wouldn’t be swayed. Worse, it was all done electronically. Key strokes and all that.

I wasn’t surprised. Not sure how you buy chips and dim sims on a Friday night without a fiat currency but I am open to explanations? Perhaps Chinese yuan (RMB) for the dim sims?

BTY, is your silver ‘chewable’?

RoswellAugust 7, 2017 at 10:02 pm

Matters Not, when I was a kid I swapped a bag of lollies for a Donald Duck comic (used and torn, unfortunately).

Matters NotAugust 7, 2017 at 10:32 pm

Roswell, in my younger days, I offered charm, wit, wisdom, humor, physical attributes, intellectual depth, sarcasm and the like in anticipation of sexual activity. It was my fiat currency.

Don’t tell me that a fiat currency is worthless. If nothing else, it creates enduring memories.

RoswellAugust 7, 2017 at 10:37 pm

Matters Not, I’m sure that you still have all those fine attributes. But no doubt your price has gone up.

Matters NotAugust 7, 2017 at 10:43 pm

Roswell, now everything is for free. And there are ‘no takers’. (Thankfully!)

HarquebusAugust 7, 2017 at 10:46 pm

Matters Not
One doesn’t have to ask if you shared your activity. It’s obvious that you didn’t.

Matters NotAugust 7, 2017 at 11:04 pm

And I thought there were ‘no takers’. Something about – hook, line and ..

Harquebus, you take yourself so seriously. That’s the sad part. You claim to ‘know’ while asserting others don’t. The arrogance, the …

Joseph CarliAugust 7, 2017 at 11:28 pm

” Roswell, in my younger days, I offered charm, wit, wisdom, humor, physical attributes, intellectual depth, sarcasm and the like in anticipation of sexual activity. It was my fiat currency.”…

If THAT isn’t a confession of personality bankruptcy , nothing is!

Matters NotAugust 7, 2017 at 11:32 pm

Joseph Carli, recognising irony is clearly not one of your strong points.

But maybe next time. After all, everyone is entitled to a second chance?

HarquebusAugust 7, 2017 at 11:35 pm

Matters Not
Let me tell you something. My little stash of silver has taken me a long time to save because, I am not financially well off, at all. I am at the bottom of the economic heap and I wasn’t kidding when I said that a feed of fish and chips is a night out for me.
You think that you are so funny. Having a good laugh at my expense because of that but, hey, that’s okay. You confirm every time you do, that you are just another jerk.
So go ahead arsehole. Keep it up. What other fish and chips jokes have you got? Let’s hear ’em and show everyone what you’re really made of.
If you were in my situation and with my limited physical capacity, you would not do anywhere near as well because, you are an idiot.

Miriam EnglishAugust 7, 2017 at 11:57 pm

H, you haven’t thought the whole precious metals thing through fully. You don’t realise how much more precarious the entire financial system becomes if it rests on the banks having to base their money on gold. As soon as a financial instability looks like turning into a depression people make a run on the banks to pull their money out. If it is all based on gold then that crashes the whole thing. Everybody is screwed as the entire economic system grinds to a halt. Only the very wealthy manage to get by, while everybody else is utterly destitute. But if the currency is floating then the banks (and the people whose life savings are tied up in them) are bailed out. Things are somewhat harder for a while, but they come good again relatively easily.

H, you are saving up some silver against the day when things get so screwed that money is worthless and people want to pay in precious metals. You don’t seem to have noticed that if things get that bad there won’t be anything to buy with the silver and other people will have no use for the damn metal anyway. You’d be better off trading dried biscuits, or white flour (less nourishing than wholemeal, but lasts longer without going off), or sugar, or solar panels (they’ll generate electricity for more than 60 years — nobody will give a flying fluck about their EREOI), or high lux white LED lights. Nobody will have any real use for silver… stainless steel, maybe, but not silver. Better to cash the silver in while it’s still worth something.

Miriam EnglishAugust 8, 2017 at 12:05 am

H, I don’t know why you got so testy with Matters Not. He definitely isn’t an idiot. He was just clowning around. What he said wasn’t even barbed. It did have some good relevance too. You can’t eat silver and I think you’d find it harder to trade than you realise.

In post-apocalyptic Australia if someone wanted me to do some work for them I know I’d be much happier to be paid in food than silver. In fact I currently barter work for food — eggs, cheese, fruit…

HarquebusAugust 8, 2017 at 12:39 am

Miriam English
Thanks for the tips. Obtaining precious metals is only a part of my preparations. The things you have suggested are obvious. Add rice, pasta and tinned fruit to the list. The most important thing to have ready are hand tools, especially garden tools. Other trade goods of value will be drugs, tobacco and alcohol.
Thanks for calming me down. Sometimes, I do get a little angry.

I hope we are not getting too far off topic. Did not Michael invite us over to his page?

Matters Not
If you are willing to give up the barbs that you continually direct towards me, I will reciprocate.
How ’bout it? There are other more pressing matters that need our attention.

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diannaartSeptember 20, 2016 at 3:02 pm

I understand the balance of creating a positive which, in turn, benefits our society; NBN in particular would enable more people to work from home, give instant communication across rural areas, provide online education, enable the poorest a connection with the rest of us (if done properly) and much more.

There is not a single politician in the LNP and in the right-faction of the ALP capable of implementing Overt Monetary Financing responsibly. Not a one.
jimSeptember 20, 2016 at 6:27 pm

Nay these donors just like their government do not want change, what and risk their loot not while the good ‘ol LNP is in power,now back to the fifties ,after all jobson growth was around then too.
Matters NotSeptember 20, 2016 at 6:37 pm

Here’s an interesting video on MMT. Short and to the point. Plenty of ‘pictures’ as well

And a more nuanced discussion.

There seems to be more and more ‘converts’ (does it require ‘faith’?) in the wider world, but political spear carriers seem decidely reluctant. Risk averse? Too counter-intuitive? What?
Jennifer Meyer-SmithSeptember 20, 2016 at 8:17 pm

Keep up the good work, John Kelly.

Every article produces another convert.
BacchusSeptember 20, 2016 at 10:30 pm

Excellent article as usual John.

Keep an eye out for someone new ‘dipping his toes’ into the MMT pool tomorrow over at The Political Sword. (Michael will probably post it here as well.)

IMHO Ken Wolff does a very good job of communicating the essence of MMT – I’ll be interested in your thoughts. It’s part three of his four-part economics series and is titled What is Modern Monetary Theory and will it help?

While I’m busy promoting other authors on your feed, 😉 I notice Tim Dunlop has released the introduction chapter to his book on Facebook – also well worth a read…
Jennifer Meyer-SmithSeptember 20, 2016 at 10:44 pm

Bacchus,

you might want to assume it is a woman who provides that breakthrough.
BacchusSeptember 20, 2016 at 10:58 pm

Sorry Jennifer, you lost me there…

To what ‘breakthrough’ do you refer?

John Kelly has produced yet another excellent article, Ken Wolff has a new article on MMT at TPS tomorrow, and Tim Dunlop’s recently released book is also generating interest in where the future might head.

Confused…
DavidSeptember 21, 2016 at 9:55 am

As I recall, the OMF approach was used to help fund the Snowy Mountains Scheme. But that was a while ago before we had Canberra-based public servants and politicians from occupations other than accounting, law, education and unions.
Jennifer Meyer-SmithSeptember 21, 2016 at 10:20 am

This Overt Monetary Financing concept can also be used to fund micro businesses for unemployed and under-employed people on Newstart, so they can be humanely eased off Newstart over a reasonable period of time, if they choose and are capable of beginning their own micro businesses.

OMF would provide $10,000+ Micro Finance Grants and/or $20,000+ Micro Credit Loans over and above the Newstart payment for a reasonable period of time, so that the unemployed person can feed and house her/himself while also conceiving and growing their enterprise that reflects their knowledge, experience, skills, qualifications and talents.

The benefits are multitudinous:

1) significant reduction of unemployment and under-employment;
2) eventual and effective reduction in welfare reliance achieved in a humane way significantly different from Hatchet Porter’s;
3) rise in general community moral and health benefits as more people are able to re-enter a viable job market;
4) significant growth in homegrown grassroots diverse industries which would keep economic viability within Australia;
5) significant continued job market opportunities for other unemployed and under-employed Australians as these micro businesses take root; and
6) many other benefits.
HarquebusSeptember 21, 2016 at 12:58 pm

More drivel from John Kelly. Wishful thinking of a magical dreamland where nothing really costs anything because, hey, we can just create currency from nothing and will never have to face reality. We can now kick the can indefinitely.
Bullshit! You can not create resources from of nothing and you can grow food with nothing.

Fiat currencies, no matter which method is used to conjure them into existence, are still just that; fiat currencies. Intrinsically worthless and doomed to fail.

“The belief that diminishing marginal returns are temporary is probably related to the belief that there are substitutes for everything, including energy supplies. Unfortunately, this is not the case; the laws of thermodynamics dictate otherwise.”

What really causes falling productivity growth — an energy-based explanation

“Despite its outlandish theoretical flaws and nonsensical economic jargon and the catastrophic empirical evidence of its failure to prevent financial downturns or “stimulate” sustainable growth, Keynesianism remains the ruling paradigm of economic thought.”
“A number of trenchant reasons have been given for the General Theory’s continued dominance, however, one stands above all else: Keynesian economics provides the intellectual justification for economists, statisticians, technocrats, bureaucrats, and policy wonks in their exalted positions as “fine tuners” of economies the world over.”
“That Keynesianism continues to reign supreme, despite its theoretical and empirical bankruptcy, speaks volumes of the state of Western intellectual and academic life. Instead of the pursuit of truth and the refutation of error, Western intelligentsia is primarily concerned with securing privilege and power for itself.”

John Maynard Keynes’ “General Theory” Eighty Years Later

“there is no such thing as the Infrastructure Fairy that takes government spending and magically turns it into economic growth.”
“many economists inside and outside of DC are more than happy to give the political class intellectual respectability under the new version of alchemy that is the “multiplier effect.””
“Nevertheless, old lies about stimulus spending never quite seem to go away.”
https://mises.org/blog/infrastructure-spending-does-not-grow-economy

“For the last couple decades, however, growth in the industrialized world has slowed down. Europe and Japan have entered a long period of stagnation. The United States has seen various ups and downs, but the purchasing power of your wages really hasn’t budged since 1973.”
http://www.commondreams.org/views/2016/09/17/yolo-economics-growth-burning-planet

“Finally it filters down to the last-to-know: the rank-and-file.”
https://medium.com/deepconnections/prevailing-gray-swans-1-august-19-2016-6fbb3455175c

BTW: It is very rare for me to post a link to something that I have not read.
diannaartSeptember 21, 2016 at 2:33 pm

Far as I am concerned ALL currencies are fiat.

“Fiat” from the Latin “let it become” as in a decree. We can pretend that “commodity” or “representational” money is somehow real, but basing value on such as (precious) metals are only given value because we (humans) have decided that it is so.

PS

Precious metals are finite – our beliefs – not so much.
totaramSeptember 21, 2016 at 3:03 pm

Just one example in Harquebus’s links that caught my eye:

““Nevertheless, old lies about stimulus spending never quite seem to go away.”
https://mises.org/blog/infrastructure-spending-does-not-grow-economy”

This site is run by the “Austrian School” who believe that we should go back to the “Gold Standard” for currency. The same gold standard and the Bretton Woods Agreement that the developed economies of the world decided to ditch, because it was causing problems. In this “Gold Standard” you dig gold out of one hole in the ground and put it into another hole in the ground (called a vault) and then say you have become richer (I think that quote is attributable to Bertrand Russell) . No matter how many cars, houses, tonnes of grain, etc. you produce, you cannot claim you are any richer, unless you have produced more gold and put it into your vault.

So as you can expect, you follow the link and find an article which completely ignores history, data, etc. and finally can be summed up like this:

“Ultimately, spending on infrastructure no more “creates wealth” than any other kind of government spending. Like all other government spending, it’s a matter of taking money from some people to give to others. The money taken from the taxpayers must be subtracted from the money spent, and we’re left with no net gain. Of course, after the politicians and the government contractors take their cut, they’ll do pretty well. The rest of us won’t be so lucky. ”

Got it? Thousands of people and machines may have put labour and materials into building a bridge, but it won’t create any wealth. (Why? Because the amount of gold hasn’t increased!) Actually, the author doesn’t seem to realise that his logic applies equally well to a bridge built by the private sector. In fact by his logic nothing we build, or invest in, can ever increase wealth.

This is the simple minded logic of the article, and I can guess what the others are like.

And we saw only recently, how stimulus spending got us over the effects of the GFC, as even the leftie IMF conceded. However, according to the article, that must be another old lie. (No data given, or discussed, mind you)

I invite other readers to do the same investigation for each of the links posted by Harquebus. I’m sure it will be a useful exercise in understanding macroeconomics.
diannaartSeptember 21, 2016 at 3:20 pm

Got it!
diannaartSeptember 21, 2016 at 3:22 pm

Only problem, the more I understand how we can get the economy to work for us instead just for the 1% – the angrier I get. Just sayin’
HarquebusSeptember 21, 2016 at 3:23 pm

totaram
I also advocate adopting precious metals as currency.
As for ignoring history, no fiat currency has ever persisted. They have all inflated themselves out of existence. Government after government has tried to inflate their way to prosperity and all have failed or are in the process of.
totaramSeptember 21, 2016 at 6:37 pm

Harquebus: You are free to advocate your preferred model of currency, and I shall continue to show how silly it is. Your fundamental misunderstanding about fiat currency is that it is not designed to have any intrinsic value, and people who think it should, tie themselves into knots because of that. Fiat currency is just a “Unit of Account” by which we denominate the value of goods and services in the economy. It is no different than the runs on the scoreboard in a game of cricket. You can read more here.

6.2 The National Currency (Unit of Account) Let us look at money as the unit of account in which stocks and flows are denominated.

Wray, L. Randall; Watts, Martin. Modern Monetary Theory and Practice: An Introductory Text (Page 124). . Kindle Edition.

As for your statement:
“As for ignoring history, no fiat currency has ever persisted. They have all inflated themselves out of existence. Government after government has tried to inflate their way to prosperity and all have failed or are in the process of.”

This statement fails because a true understanding and use of fiat currencies has hardly ever occurred, historically, and even if it did, the governments that used them fell for all kinds of other reasons, such as war, pestilence, famine, etc. Not being a history buff, I won’t go into this. Suffice it to say that even today, the users of fiat currency do not (or wish not to) understand its true meaning and usefulness. The desire to hide its true significance is of course motivated by vested interests. I notice Ad Astra very naively assumes that people in treasury will tell the politicians all about MMT. No they will not, on pain of losing their jobs!

My reference to ignoring history was in the article posted by you, that claimed that infrastructure spending never creates wealth and never was of any use, basically ignoring the “new Deal” after the great depression. The author ignored it and tried to say it was world war two and then gave some spurious reasons to debunk that. There are lots of other instances in history showing that infrastructure spending does wonders for the economy, providing it is done correctly. Our own Snowy Hydro scheme as mentioned above is a perfect example. It did not use OMF by the way, as Australia did not have a fiat currency at the time. It simply used deficit financing, which is almost as good and is required when the govt. is not an issuer of its own currency. After all , corporations borrow to invest, so why not govt., especially when govt. can borrow at hugely lower rates of interest?
Jennifer Meyer-SmithSeptember 21, 2016 at 6:54 pm

H,

I’m surprised you don’t see the benefits of MMT. I understand your worries about uncontrolled population growth and resource use. Haven’t use considered that MMT could be an asset to control both of those concerns?
HarquebusSeptember 21, 2016 at 7:20 pm

totaram
Spare me, please.
Not having intrinsic value and constantly inflating currency only works temporarily. The first shortage of a vital resource for which no amount of currency can purchase, (IOW: Stick your worthless crap), the currency will collapse just as all fiat currencies do.

Jennifer
I can not see how MMT which, also requires growth, can curb population, scarcity and depletion.

Cheers.
Jennifer Meyer-SmithSeptember 21, 2016 at 7:29 pm

H,

one asset of MMT that I can see is the capacity to utilise the existing assets we have in our human wealth.

Consider how the skills, knowledge, qualifications and talents of existing unemployed and under-employed people can be utilised to get them out of deadend, life-defeating unemployment and into making worthwhile projects that pay them for their labour and help our natural and human systems.

It could be re-cycling. It could be renewables. It could be all the good stuff you seem to support. It does not need to mean resource depletion.
totaramSeptember 21, 2016 at 8:07 pm

Harquebus: I see that you have run out of useful things to say, so you now resort to :

“(IOW: Stick your worthless crap), ”

and making unsupported and non-falsifiable statements about how eventually you will triumph.

You failed to argue against the criticism I made of the post on the mises web-site. The beauty about your statements is that they are not at all falsifiable. How long do you expect before “all fiat currencies will collapse” ? 50 years, 100 years, 200 years? I too can state that before I am dead you will see how stupid your position on various matters is. Just because you can point to some links that you have read means nothing on the internet. Do your links have any credibility? They are just links from the usual neoliberal apologists. In your case, they are links from the “Austrian Gold Bugs” in one case. Admittedly, it is a heterodox school of economics, but I can argue against their position.

There are people with not much formal education, who post on the internet and are clearly not only very well read but able to understand what they read and critically evaluate it. I have also come across some people who aver that Quantum Mechanics is “mathematical wankery” but are OK with Einstein’s tensor calculus but have “their own theory of everything”. I don’t know what your background and qualification is, but obviously you are opinionated way beyond your intellectual capability.

I have already indicated that it is probably not worth engaging with people like you and I shall take my own advice in future. But I will continue to point out the foolishness of your posts wherever I see them, in the same way I have done with Neil of Sydney.
Have a nice evening!

The rest of the readership will hopefully carry out the homework exercise of going through those links and examining them critically!
HarquebusSeptember 21, 2016 at 9:34 pm

totarum
Sticking worthless fiat crap is what is going to bring us down. That is how long it takes the first to say it is when.
The bottom line is, fiat currencies never survive and for the first time in history, all currencies are fiat and when one goes, they will all go.
Some gold and silver that is being used today is the same as that used two thousand years ago.
The future will tell one way or another and going by the economic elites performance over the last eight years, abysmal, one would be a fool to think that, this time is different.

Jennifer
It is not currency creation that drives an economy. It is energy.
Here is something for you. I only just read it today.

What really causes falling productivity growth — an energy-based explanation
Jennifer Meyer-SmithSeptember 21, 2016 at 9:44 pm

Congrats Totaram and Harquebus,

for losing the less scientific rest of us in the discussion.

Maybe keep the discussion more open from now on which means it will be more equitable.

(H tries sometimes. I don’t know about you, Totaram.)
Matters NotSeptember 21, 2016 at 10:04 pm

totaram, you advance powerful arguments. My advice is along the lines of not to tolerate fools. And certainly not to do so gladly. Even a kindly ‘pat on the head’ is one step too far. Perhaps you might do as I do and never respond to his nonsense because it only encourages him.

Attention seeking and all that.
HarquebusSeptember 21, 2016 at 11:18 pm

Matters Not.
We won’t talk about all those from history who were foolish enough to think that their brand of fiat currency was different. They all failed but, hey, it’s different this time because, you’re no fool.
John KellySeptember 22, 2016 at 6:23 pm

Harquebus, can you give us some examples of failed fiat currencies. I can’t find any.
Pingback: The Case for Overt Monetary Financing | THE VIEW FROM MY GARDEN
HarquebusSeptember 22, 2016 at 7:17 pm

John Kelly
I was only reading about one the other day except, it is lost somewhere in my history list. Centuries ago Japanese fiat currency became worthless and Chinese currency was desired instead. Currently, one can look to Venezuela for a currency in the process.

My search yielded arguments on both sides. Yes some have, no they haven’t. Here’s a couple for my side.
Search criteria: failed fiat currencies

Here is a reference to a study that I am aware of but, admit that I have not read it for myself.
“Vince Cate wrote an excellent piece that was presented by the well respected David Morgan during the Silver Summit 2012 (at the end of October). The researcher analyzed 599 paper based money forms over the past millennia.”
http://goldsilverworlds.com/gold-silver-insights/research-shows-all-paper-money-systems-failed/

“History has a message for us: No fiat currency has lasted forever. Eventually, they all fail.”
http://moneywithmanuel.info/3408-2/
John KellySeptember 22, 2016 at 8:32 pm

Harquebus, I have had a brief look at both links you have provided. It is not true to say that it was the fiat currency that failed. All the cases listed in the second link were the result of political mismanagement, not a failure of the currency. This is a reflection on politicians, not the currency. The first link posted by a metals trader would say that fiat currencies fail when it is in their interests to have people buy and invest in metals.

All currency systems are open to abuse. That doesn’t mean they have failed. It does, however, tell us that the checks and balances in place to prevent them, were insufficient.

Venezuela, today, is a classic case of corruption and mismanagement. Blame the politicians, not the currency.
HarquebusSeptember 22, 2016 at 10:17 pm

John Kelly
That is true. Causes do differ but, for whatever reason the fact remains that, or as far as I am aware should I say, all have failed. Those currently in use temporarily excepted. Fiat currencies do not have a good track record.
Using precious coins as legal tender denies governments and bankers the ability to ~~rig~~ abuse the system.

For what it is worth John, this is all just hypothetical for me. The decay in the global economy is accelerating and a big fall is now unavoidable. Fiat creation might keep this current ponzi going a little while longer but, the damage is done and hardship for all of us not far ahead..
Cheers.
Jennifer Meyer-SmithSeptember 22, 2016 at 10:26 pm

Harquebus,

do you have anything positive to add?

Never say die.
HarquebusSeptember 22, 2016 at 10:55 pm

Jennifer.
Short and long answer, no. Things are not very promising on all fronts.
There’s always hope for the better or that it all might just go away and then there’s courage. Courage to face up to the coming challenges no matter how dire.

Did you read Gail Tverberg’s article that I posted for you? Probably not your thing.
Try this one.
http://www.debozarko.com/courage/

Deb Ozarko and Gail are two that I follow regularly.
Miriam EnglishSeptember 23, 2016 at 12:11 am

Harquebus, on about doom and gloom again, spruiking extreme right-wing viewpoints. [sigh]

Here’s a little thing for you to note: all precious metal-based currencies have failed.

Money is a construct. It can be used to represent various things. People like you want it to represent precious metals. Most of the rest of humanity use it to trade for everyday items. Most of us never ever get to see precious metals. They have no meaning for us. As money derives its meaning from the minds of humans that alone indicates the precious metal argument is worthless.

One reason why limiting money to precious metals is that it means that cultural creations are limited by some stupid metal. It doesn’t make sense to limit humanity like that. Why should there be no payment for an artist creating music simply because there was not enough of a stupid metal?

Another reason why limiting money to precious metals is stupid is that those metals actually have important uses. Locking them away in a vault instead of using them is just plain ridiculous. Gold is especially useful for forming non-corroding electrical contacts.

Your adherence to what amount to religious doctrine astonishes me. You think you understand what you’re talking about but you don’t. You merely regurgitate what the Von Mises idiots keep spouting. It is wrong on so many levels.
diannaartSeptember 23, 2016 at 10:32 am

Well said, Miriam
Miriam EnglishSeptember 23, 2016 at 7:26 pm

(Actually, I’m embarrassed at all the typos I made. 🙂 )
diannaartSeptember 23, 2016 at 7:51 pm

Miriam

Your meaning was clear and succinct – never be embarrassed by typos – one can always blame the spell/correct function

🙂
OPPOSE THE MAJOUR PARTIESAugust 7, 2017 at 4:13 pm

a fiat currency is simply one that is made valuable by law – it is legislated to be the monopoly legal tender. It’s value does not relate to the amount of gold held in reserve. In other words, it is not dependent upon being converted to gold for its value. A government that has the monopoly on the production of that fiat currency has a sovereign currency and can potentially, at least, produce as much of it as it likes or needs to. However, MMT tend to subscribe to the view that only as much currency should be produced as the value of the capacity of the economy if inflation is to be avoided. How they propose that capacity should be measured I don’t know but technically if a government makes laws saying wooden discs, or anything else, are to serve as legal tender then they can be used as such and would be a fiat currency. Whether the citizens have confidence in the wooden discs is another matter.
OPPOSE THE MAJOUR PARTIESAugust 7, 2017 at 4:30 pm

Harquebus beside Miriam’s astute criticisms above, as a conservative neo-liberal you would have to agree that the gold standard is a regulation on the money supply and hence contrary the free market principles espoused by the economists in the theories you link above. Gold is regulated twice per day in London by a group of private bankers and gold traders mostly the Rothschilds. So much for the free market! The biggest neo-liberal myth. Would you prefer the people and their country were at the behest of a few private individuals who have a vested interest in the fluctuations of the gold price and, hence, of their national currency? Would you prefer that a few super wealthy private bankers and international gold traders had the power to wreck economies by gold and currency speculation. I know certainly wouldn’t because, frankly, that seems insane.
OPPOSE THE MAJOUR PARTIESAugust 7, 2017 at 4:39 pm

‘Using precious coins as legal tender denies governments and bankers the ability to rig abuse the system’. Laughable!….it gives the international private gold merchants and banks who hold the precious metals the opportunity to rig the system. Are you aware that ancient Egypt up until the Ptolemies had no currency at all and yet it achieved what it did – great pyramids and all – on a barter system! Gold had no value other than a symbolic one in religious ritual and ceremony. It was reserved for the Pharoah and had no exchange value. So much for your requirement for precious metals – that’s just a fantasy. LOL!
jimhazAugust 7, 2017 at 4:56 pm

https://blogs.cfainstitute.org/investor/2013/03/13/president-nixon-the-man-who-sold-the-world-fiat-money/
Miriam EnglishAugust 7, 2017 at 8:36 pm

Majour, all good points. I’d like to add that the pyramids were built voluntarily. The workers were supplied with free food and beer (or was it mead?) and achieved those amazing structures because they wanted to. Historians up until recently thought the pyramids were built by slaves because the “modern” way of thinking couldn’t believe voluntary effort could produce such things.

Now we have enormous efforts like the Linux Operating System created by thousands of volunteers without any coercion or payment — done simply because people like to do great things. And it turns out that Linux is superior to all the Operating Systems made by people working for money. In fact many of the best computer programs now are created by unpaid volunteers, just for the love of it. It shouldn’t really be a surprise. All through history almost all the world’s greatest art (writing, painting, music, sculpture) has been done for the artists’ desire, not for money.

The sharing networks that companies have tried with governments to make illegal have proliferated because people like to share with each other without money intruding.

Enormous repositories of free stuff have sprung up where people willingly offer their services for no monetary reward — Project Gutenberg, Gutenberg Australia, Librivox, Archive.org, Wikipedia, epguides.com, YouTube, EscapePod, Wikibooks, Wikiversity, The Linux Documentation Project, The Interactive Fiction Archive, The Ren’Ai Archive, TED Talks, BrisScience, and much more.

I look forward to a time when money will be a little-used curiosity.
HarquebusAugust 7, 2017 at 8:59 pm

I am reasonably sure that I will always be able to trade my pieces of silver for something. My critics are not expecting bank bail ins, I am.
The future from which we have borrowed has now arrived, is demanding payment and will get it. Fiat currencies not accepted.

“Our central banks have caused our financial crises, not saved us from them.”
“That most people still find it hard to believe that America -and the west- has been getting poorer for the past 30-40 years, goes to show how effective the narratives have been.”

Central Banks ARE The Crisis

“The thoery of autonomous creation of scriptural currency holds that just as banks can conjure debt based money out of thin air, so can citizens. Money thus created by citizens can then be used to extinguish their own debts.”

Bank of Italy Warns Against Creating Your Own Currency
diannaartAugust 7, 2017 at 9:08 pm

Miriam

Side-stepping, working around, ignoring, creating alternatives are among the best and most workable ways to de-fang capitalistic monopolies.

Smaller, diverse, independent, cooperative, collaborative are other values big “C” capitalism attempts to stifle.

Never going to be easy though, part of the rape of the original NBN policy, was not so much about cost (another neo-con furphy IMHO) but a way to control who gets access to what and how much access they may or may not be permitted. I have not researched the following in any depth, but I do know of some country towns with populations of around 15,000 are lucky if they get 2 NBN nodes for the entire region.

My reason for giving the NBN as an example, is that the internet is the public’s best hope to swap ideas and help ourselves.
Matters NotAugust 7, 2017 at 9:24 pm

will always be able to trade my pieces of silver for something

You reckon? Today I booked a trip to Singapore, Sri Lanka, Bangkok and surrounds. Guess what, even though I offered partridges, turtle doves, french hens, calling birds and even gold rings as payment, they wanted a fiat currency in exchange. Silly buggers. For some strange reason they demanded Australian dollars. And wouldn’t be swayed. Worse, it was all done electronically. Key strokes and all that.

I wasn’t surprised. Not sure how you buy chips and dim sims on a Friday night without a fiat currency but I am open to explanations? Perhaps Chinese yuan (RMB) for the dim sims?

BTY, is your silver ‘chewable’?
RoswellAugust 7, 2017 at 10:02 pm

Matters Not, when I was a kid I swapped a bag of lollies for a Donald Duck comic (used and torn, unfortunately).
Matters NotAugust 7, 2017 at 10:32 pm

Roswell, in my younger days, I offered charm, wit, wisdom, humor, physical attributes, intellectual depth, sarcasm and the like in anticipation of sexual activity. It was my fiat currency.

Don’t tell me that a fiat currency is worthless. If nothing else, it creates enduring memories.
RoswellAugust 7, 2017 at 10:37 pm

Matters Not, I’m sure that you still have all those fine attributes. But no doubt your price has gone up.
Matters NotAugust 7, 2017 at 10:43 pm

Roswell, now everything is for free. And there are ‘no takers’. (Thankfully!)
HarquebusAugust 7, 2017 at 10:46 pm

Matters Not
One doesn’t have to ask if you shared your activity. It’s obvious that you didn’t.
Matters NotAugust 7, 2017 at 11:04 pm

And I thought there were ‘no takers’. Something about – hook, line and ..

Harquebus, you take yourself so seriously. That’s the sad part. You claim to ‘know’ while asserting others don’t. The arrogance, the …
Joseph CarliAugust 7, 2017 at 11:28 pm

” Roswell, in my younger days, I offered charm, wit, wisdom, humor, physical attributes, intellectual depth, sarcasm and the like in anticipation of sexual activity. It was my fiat currency.”…

If THAT isn’t a confession of personality bankruptcy , nothing is!
Matters NotAugust 7, 2017 at 11:32 pm

Joseph Carli, recognising irony is clearly not one of your strong points.

But maybe next time. After all, everyone is entitled to a second chance?
HarquebusAugust 7, 2017 at 11:35 pm

Matters Not
Let me tell you something. My little stash of silver has taken me a long time to save because, I am not financially well off, at all. I am at the bottom of the economic heap and I wasn’t kidding when I said that a feed of fish and chips is a night out for me.
You think that you are so funny. Having a good laugh at my expense because of that but, hey, that’s okay. You confirm every time you do, that you are just another jerk.
So go ahead arsehole. Keep it up. What other fish and chips jokes have you got? Let’s hear ’em and show everyone what you’re really made of.
If you were in my situation and with my limited physical capacity, you would not do anywhere near as well because, you are an idiot.
Miriam EnglishAugust 7, 2017 at 11:57 pm

H, you haven’t thought the whole precious metals thing through fully. You don’t realise how much more precarious the entire financial system becomes if it rests on the banks having to base their money on gold. As soon as a financial instability looks like turning into a depression people make a run on the banks to pull their money out. If it is all based on gold then that crashes the whole thing. Everybody is screwed as the entire economic system grinds to a halt. Only the very wealthy manage to get by, while everybody else is utterly destitute. But if the currency is floating then the banks (and the people whose life savings are tied up in them) are bailed out. Things are somewhat harder for a while, but they come good again relatively easily.

H, you are saving up some silver against the day when things get so screwed that money is worthless and people want to pay in precious metals. You don’t seem to have noticed that if things get that bad there won’t be anything to buy with the silver and other people will have no use for the damn metal anyway. You’d be better off trading dried biscuits, or white flour (less nourishing than wholemeal, but lasts longer without going off), or sugar, or solar panels (they’ll generate electricity for more than 60 years — nobody will give a flying fluck about their EREOI), or high lux white LED lights. Nobody will have any real use for silver… stainless steel, maybe, but not silver. Better to cash the silver in while it’s still worth something.
Miriam EnglishAugust 8, 2017 at 12:05 am

H, I don’t know why you got so testy with Matters Not. He definitely isn’t an idiot. He was just clowning around. What he said wasn’t even barbed. It did have some good relevance too. You can’t eat silver and I think you’d find it harder to trade than you realise.

In post-apocalyptic Australia if someone wanted me to do some work for them I know I’d be much happier to be paid in food than silver. In fact I currently barter work for food — eggs, cheese, fruit…
HarquebusAugust 8, 2017 at 12:39 am

Miriam English
Thanks for the tips. Obtaining precious metals is only a part of my preparations. The things you have suggested are obvious. Add rice, pasta and tinned fruit to the list. The most important thing to have ready are hand tools, especially garden tools. Other trade goods of value will be drugs, tobacco and alcohol.
Thanks for calming me down. Sometimes, I do get a little angry.

I hope we are not getting too far off topic. Did not Michael invite us over to his page?

Matters Not
If you are willing to give up the barbs that you continually direct towards me, I will reciprocate.
How ’bout it? There are other more pressing matters that need our attention.

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