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The Inflation / Money Sink Thing:
Crash Course (http://www.chrismartenson.com/crashcourse) is very interesting, but seems to have a massive anti-inflation, pro-savings, pro-commodity-backed-money standard thing. (I thought economists worth their salt were meant to be laughing at the gold standard, not idolising it?)
Then there's a rather old text on Stamp Scrip http://userpage.fu-berlin.de/~roehrigw/fisher/ which neatly demonstrates that a money sink is good to kick-start an economy.
Edit: This theory is now a bit out of date since![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-userinfo.gif)
ilanin poked a big hole in the side of my uncritical 'buying stuff / investment is always good, right?' axiom. The people-backed money one below is still mostly current to my thinking, apart from 'how to control inflation here', though.
My thoughts are:
* Money is primarily a medium of exchange. If you want a commodity-backed store of value then buy some assets - that way your risks due to the commodity properties are more transparent and you have to take on the burden of storage etc etc.
* As a medium of exchange, money is no use in the bank. Savings encourage people to work less. People working less is bad :) that's what kills most socialist systems, after all.
* If you're going to destroy the desirability of long-term saving you also have to guarantee at least one of a minimum standard of living or a constant supply of money to each person. Fortunately there are many systems that can do this in various ways; see below for one...
* Pensions / retirement are an interesting special case - you do want people to be able to save money to have whatever advanced standard of living their productivity has sustained throughout retirement as well (and let people save in order to compete for scarce end-of-life medical interventions, quite possibly - it's a great motivator). But there are ways to deal with this too. You can exempt money that's being locked away in saving accounts that only let you take money out at 70 or so or for direct life-saving medical expenditure from your money sink, for instance.
You also need a wealth tax for this whole thing to work, because otherwise the rich mostly ignore your monetary system and trade in commodities, which they have the wherewithal to do - which does erode the 'save in commodities' thing a bit, but hopefully not too much.
To go with this, I am very interested in the idea of 'people-backed money'.
Instead of controlling the money supply by buying government bonds / interests in insurance and pension schemes / interests in businesses, you control the money supply by giving every individual a certain sum of money every (week/month/year) directly into their account. You can vary the sum of money to control inflation - but you also control inflation by some kind of stamp scrip like method, basically an explicit tax on holding money, so that people are motivated to spend their money instead.
You might say 'everyone would fly to foreign exchange, which they could hold onto' - but you can tax that too, or you can say 'well, yes, some economies are going to be forex-standard whatever you do, it's not a bad idea for a developing economy, but someone has to be the root economy and they need something like gold-backed or debt-backed or people-backed money.'
You don't get the weird thing of debt-backed money where you can massively benefit financial institutions and corps by printing money especially for them, because the money you're printing has to be distributed across the whole population. You don't get the constant-growth-requiring interest treadmill of debt-backed money, because the only 'paying it back' that happens is the anti-inflationary taxation, not an obligation to keep paying it back with interest.
You probably still do fractional reserve banking and end up in the situation where you have more debt than money, but because the liquidity of the system is so insanely high the government can easily fix a round of defaults on debt which threaten to fuck the system up by injecting money which spreads evenly across the economy and bolsters the reserves of all the banks directly (as it goes into the accounts of people some of whom won't withdraw it right away).
I know that this is undoubtedly a stupid idea for many reasons because I haven't seen anyone who isn't crazy advocating anything even similar - so can people enlighten me? :)
Crash Course (http://www.chrismartenson.com/crashcourse) is very interesting, but seems to have a massive anti-inflation, pro-savings, pro-commodity-backed-money standard thing. (I thought economists worth their salt were meant to be laughing at the gold standard, not idolising it?)
Then there's a rather old text on Stamp Scrip http://userpage.fu-berlin.de/~roehrigw/fisher/ which neatly demonstrates that a money sink is good to kick-start an economy.
Edit: This theory is now a bit out of date since
ilanin poked a big hole in the side of my uncritical 'buying stuff / investment is always good, right?' axiom. The people-backed money one below is still mostly current to my thinking, apart from 'how to control inflation here', though.My thoughts are:
* Money is primarily a medium of exchange. If you want a commodity-backed store of value then buy some assets - that way your risks due to the commodity properties are more transparent and you have to take on the burden of storage etc etc.
* As a medium of exchange, money is no use in the bank. Savings encourage people to work less. People working less is bad :) that's what kills most socialist systems, after all.
* If you're going to destroy the desirability of long-term saving you also have to guarantee at least one of a minimum standard of living or a constant supply of money to each person. Fortunately there are many systems that can do this in various ways; see below for one...
* Pensions / retirement are an interesting special case - you do want people to be able to save money to have whatever advanced standard of living their productivity has sustained throughout retirement as well (and let people save in order to compete for scarce end-of-life medical interventions, quite possibly - it's a great motivator). But there are ways to deal with this too. You can exempt money that's being locked away in saving accounts that only let you take money out at 70 or so or for direct life-saving medical expenditure from your money sink, for instance.
You also need a wealth tax for this whole thing to work, because otherwise the rich mostly ignore your monetary system and trade in commodities, which they have the wherewithal to do - which does erode the 'save in commodities' thing a bit, but hopefully not too much.
To go with this, I am very interested in the idea of 'people-backed money'.
Instead of controlling the money supply by buying government bonds / interests in insurance and pension schemes / interests in businesses, you control the money supply by giving every individual a certain sum of money every (week/month/year) directly into their account. You can vary the sum of money to control inflation - but you also control inflation by some kind of stamp scrip like method, basically an explicit tax on holding money, so that people are motivated to spend their money instead.
You might say 'everyone would fly to foreign exchange, which they could hold onto' - but you can tax that too, or you can say 'well, yes, some economies are going to be forex-standard whatever you do, it's not a bad idea for a developing economy, but someone has to be the root economy and they need something like gold-backed or debt-backed or people-backed money.'
You don't get the weird thing of debt-backed money where you can massively benefit financial institutions and corps by printing money especially for them, because the money you're printing has to be distributed across the whole population. You don't get the constant-growth-requiring interest treadmill of debt-backed money, because the only 'paying it back' that happens is the anti-inflationary taxation, not an obligation to keep paying it back with interest.
You probably still do fractional reserve banking and end up in the situation where you have more debt than money, but because the liquidity of the system is so insanely high the government can easily fix a round of defaults on debt which threaten to fuck the system up by injecting money which spreads evenly across the economy and bolsters the reserves of all the banks directly (as it goes into the accounts of people some of whom won't withdraw it right away).
I know that this is undoubtedly a stupid idea for many reasons because I haven't seen anyone who isn't crazy advocating anything even similar - so can people enlighten me? :)
