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In response.. February 10, 2009

Posted by olvidadorio in Economics.

.. to @jagalicious (and thank you for your input) :

if fed ties “printing money” to concrete assets cf. sweden 1990s. & pipes toward production, may avoid harsh too many $s chasing 2 few goods that is, avoid classic inflation.

Sweden 1990s definately looks like the type of intervention that I would prefer (basically nationalizing  banks).
Piping towards production would be a very, very good idea for the afore consumption-reliant states. But how? There would have to be quite a bit of investment (credit!), but with banks being nationalized they could be forced to extend credit!
An additional problem is that consumer demand is a lagging trend, that is, we won’t be seeing the real slouch until after a few months, exactly in time to dampen producer’s spirits who already have to deal with plummeting prices and overcapacity all over the world (wave to China). [Oh glumm, glumm ­čÖé ]
It is not really clear whether the US would be able to actually retrieve the value put in to save the banks, as in the case of Sweden 1990s. If the current crisis is changing the global economy fundamentally, then less value will be retreivable. The intervention will have been much larger, also proportionally, after all this goes through, including the feds humungous swap-lines, as well as structural changes all around the world, Sweden was more-or-less an isolated case. But the model is well worth considering as far as I can tell.

so werg, will human nature change enough to invent a better model than money as a medium of exchange?

No, I really don’t believe that human nature will change any time soon (hey, by definition that won’t happen — and I’m convinced that evolution via selection is rather broken among us humans at the moment). The question would be whether the form of money we employ today is truly connected to human nature!
I don’t think so. Sure, the concrete form of coins or similar tokens of value has been around for quite a long time and in many cultures. It’s just dead useful, as long as you have a mercantile society! However, those tokens used to (have to) have society-independent (material- or production-) value! This is no longer the case. Ever since those italian merchants developed modern book-keeping we’ve been messing around with our underlying monetary system, changing it all the time. Nowadays it’s not about money — it’s all about credit! And I’m quite sure that our monetary system will continue to change!

Even though I can’t foretell in which direction, I know which direction I’d find interesting: Make banking and money-issuance a peer-to-peer process along the lines of ripple.

In our current system the role of the bank is more and more superfluous. Clearing is done electronically, there is no need for physical institutions. They aren’t absorbing risk as the should, they hand out credit which in the end needs to be guaranteed for by the whole society anyway. Hence credit procedures must be standardized which leaves little room for actual contribution. The whole sector of investment-banking has kind of bloated (though initially potentially useful system of distributing value to initiative).

Banks and credit-based money have for long been the social method to make people work, even if their work is not directly connected to satisfying basic needs, by giving them buying power via money. Of course all this is totally based on people’s confidence in the currency’s value. To maintain economic confidence in pieces of paper and numbers on hard-drives, such a system necessitates continuous growth and — almost all over the world — big government debt.

Personally I believe that a market-economic system less based on perpetual growth would be better. Changes in such directions need crises, though. Hence my heightened interest. ­čśë


The roof is on fire February 7, 2009

Posted by olvidadorio in Economics.
1 comment so far

Folks, this economy is going to pot. And it’s just amazing to watch it unfold. It is so striking that this is a necessary and inevetable occurrence of (finally) a dose of economic, even physical reality in the guise of market forces. These have been determined by our overspending, overblown infrastructuring overblown consumption and askew distribution of value in our world economy (i.e. US long-long standing trade deficit & export surplus in Germany, China — the US consumer has been getting a free lunch for decades!). And all these bailouts, stimulus packages and what not are doing is a) pay off those who still are clinging to power (specifically monetary power) and b) increase the pressure for downward adaption of our entire system.