Posted To Real World Economic Review Blog 06/24/2017 Regarding Mainstream Monetary Theory

Yes, the problematic paradigm of the money system is the primary and deepest problem of economics, and its resolution would literally transform it, stabilize it, make a lot of other related problems dissipate or disappear and virtually all other aspects of the economy would fall back into their proper place where if necessary they could be regulated along the philosophical lines of the new paradigm. Historically, this is the nature and effect of a paradigm change, a maximum of transformation, a minimum of structural destruction and a refinement of purpose and ethics in the area in which the paradigm change occurs. Everything adapts to a paradigm change….not the other way around.

c copyright 06/24/2017

Steve Hummel

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Me:  MK,

“…sure, but it can run out of Value that money could store or represent.”

What if you implemented a policy that integrated price deflation throughout the economy?

MK:  I am not clear what you mean Craig, too vague for me to answer.

Me:  The money and pricing systems are both digital. If you implemented a policy of discounting the retail product of each business model by 35-40% and created a separate monetary authority to rebate their discounts to consumers back to them you could integrate price deflation beneficially into profit making systems and help to break up the monopoly monetary and financial paradigm of Debt and Loan Only at the same time.

MK:  Do you mean that sellers would be free to set their own price but whatever the price paid the buyer would be entitled to a government rebate of X%, as a kind of reward for spending? I am assuming the money to pay for that rebate would be digitally ‘printed’ by the Government…

If my understanding above is correct this would not be deflationary but inflationary, as it would amount to subsidising consumption with newly created funds, thereby expending the money supply at the retail consumption end of the economy. The inflationary pressure on prices would of course be offset by indirectly also stimulating production, as well as possibly reducing the demand for bank credit, but it would also inevitably add to our foreign debt since the largest chunk of consumption is directed towards imports.

The main problem is not shortage of workable ideas for reform, but political willingness to even openly consider them, given the immense, lethal power of the global banking cartel. Very few politicians would be brave enough to challenge the credit monopoly of the banks on in a major way, especially knowing that the parliament is studded with backstabbing agents of the financial sector.

Me:  “If my understanding above is correct this would not be deflationary but inflationary, as it would amount to subsidizing consumption with newly created funds, thereby expending the money supply at the retail consumption end of the economy.”

The point of “retail product” sale is the point of summation of costs and prices for any product or service, so if the discount was applied exactly at that point and time, especially at each point of sale throughout the entirety of the economic/productive process….how could it possibly result in price inflation?

“but it would also inevitably add to our foreign debt since the largest chunk of consumption is directed towards imports.”

Not any more than it does already, and seeings how a sufficient universal dividend would make the “problem” of unemployment basically disappear domestic producers could harmlessly re-industrialize in the most efficient and productive way possible thus weaning ourselves off of Finance’s wet dream of globalization, and also get ahead of the curve of the just beginning disruptive force of AI which will be destroying aggregate demand at a far higher rate than it ever has before. Foreign trade will remain foreign trade.

“The main problem is not shortage of workable ideas for reform, but political willingness to even openly consider them, given the immense, lethal power of the global banking cartel. Very few politicians would be brave enough to challenge the credit monopoly of the banks on in a major way, especially knowing that the parliament is studded with backstabbing agents of the financial sector.”

Of course implementing every new idea is a political struggle. All the more reason to pitch it to self interested constituencies like the general populace, students in particular, and the small to medium sized business community all of whom stand to benefit from such policies.

Cynicism is irrelevant and defeatist. “Without a vision the people (and their civilization) perish.” Keep thinking about how the disintegration of our civilization (which we now see taking place continually right before our very eyes) would effect you personally. It keeps it more real to you, and ought to motivate you to actually do something positive about it….for your family and friends.

RA: After all this, it is still not clear what money is.

Me:  Money is most basically accounting, and most specifically its subset cost accounting. Take the data there and do the calculus on the rate of flow of total costs and so prices and the rate of flow of total individual incomes and that ratio exposes modern technologically advanced capital intensive economies’ most basic problem.

RA:  Yes, I think that topic is interesting but also how financialization seems to generate money or assets with moneyness. For example, if Miss Julia Investor moved $15,000 in 2013 from her checking account to a mutual fund with tech stock exposure and sold it now, she would have doubled that money and could buy a cute silver Audi sedan. So where did that “money” come from? No one was worse off and had to empty their checking account to pay her. The money just showed up because other investors thought tech companies went up in value. And Miss Julia does not know any macroeconomists and thought both that her checking account was money, but also thought of her investments as money. And in a way, her Audi is like money because she could sell it and buy a Caribbean Cruise. She does not know nor really is concerned that some macroeconomist is trying to figure out how and where to create and delete ledger entries to make his definition of money agree with her activities.

Me:  Yes asset inflation and demand push inflation are the fly in the ointment of many an economic theory. Liberal/Keynesian theorists tend to pretend it won’t happen in theirs, and Conservative/Libertarian/Austrian theorists are obsessed with stopping it or embrace deflation and the pain it causes.

What is necessary is to take adult responsible control of money and pricing….but with gracious and unobtrusive policies strategically timed and placed so as to benefit both the individual and enterprise. And even the correct and best policies cannot effectively control all human actions and counter intentions, so regulation will inevitably also be necessary even with a new paradigm.

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