By: Stacy M.
Back in the days when I was a college student, the hot trend featured at our college flea market was the posted sized autostereogram , which is a visual illusion featuring what appears to be random dots. When you stare at it long enough, the human eye finds a proper convergence point for focus and the image becomes a 3 dimensional object. Almost two decades later I’m still fascinated by a technology that allows a two dimensional object to become three dimensional by simply altering the perspective of the viewer without the use of any devices. Similarly, the human mind can have its perspective shifted on a whole range of subject matter simply by shifting perspective. In many of these cases, the problem is that humans are trained and conditioned to observe the world from a certain perspective. Without a shift in perspective, the perception of a subject may appear static from the viewpoint of the observer.
I recently had undergone my own conceptual “autostereogram” in the field of economics. And this perspective change not only affected my perception of economics but also impacted my whole political outlook ( as its difficult to separate economics from policy ) . In my situation, my study of macro economics had included Keynesian, Monetarism and Austrian philosophies. Without going too deep into the rabbit hole on their differences, one would say that they all share a common element which is an acceptance of the quantity theory of money. Money supply is related to price level, this is something all these theories agree on. From this simple concept each philosophy has a conceptual framework on how money works and the roles it plays within the economy. When flipping through random business channels on TV, these concepts are discussed – usually with the quantitative theory as it’s the foundation of the policy discussions for managing the economy. With governments seeking austerity measures to clamp down debt issues, it was always the foundation of quantitative theory that was at the heart of the discussion.
For decades I’ve viewed the management of money at a macroeconomic scale to be akin to home finance. If you spend more than you make, you are in a debt position. Sometimes debt can be good , but if it escalates then a person can find themselves in a position where they can’t make payments even on their interest. A responsible person manages their debt, an irresponsible doesn’t it. Sounds fair, right? Governments are the same way , right? It’s got morality and common sense in a neat little package that you can have rallies around with your gold-loving, gun toting friends. Obviously Greece, Italy and Spain are run by irresponsible politicians! You wouldn’t believe how long I’ve by staring at that autostereogram and seeing the two dimensional image. But one problem always escaped me. Shifting to the United States, I would see trillions of dollars in debt being racked up by those irresponsible politicians but we never have a run-away inflation. This defies the quantitative theory but the explanations always seemed to be economic apologetics rather than a anything resembling a concise observation of reality.
Along came Mike Norman, who is an economist that observers a branch of economics called Modern Monetary Theory. MMT is a modern version of a older study of economics called Chartalism. Unlike the other theories of ecomomics, MMT isn’t rooted in an ideological premise but instead describes objective realities of an economy. MMT describes not a premise of how an economy should run but the reality of how an economy does run. Money in a sovereign country that controls its own money supply does not have to be limited – and the constraints of inflation described by the quantitiave theory of money are observably false
MMT describes a system by which a government has access to near limitless quantities of money, where inflation is not an outcome of money supply but instead a problem of full employment ( everyone working and spending creates increased demand). In the world of MMT, Europe’s austerity measures are a consequence of sovereign nations that surrender their power to control their own money supply. In the MMT world, fiat is king and commodity-backed currency places limitations on governments. I had to cross my eyes REALLY hard to render this image in three dimensions. Accepting the MMT viewpoint had consequences. It meant that everything I learned about economics, from my first econ 101 class all the way to my readings of Freidman, were misguided understandings of reality. The image was in front of me, accepting its existence meant that my two dimensional universe was a perspective that I was conditioned to accept as the CORRECT perspective. Yet here was a model that not only explained the problems, but was downright rational in its historical context. From this understanding was born ideas that would be wrong under the “old” perspective. No sovereign currency producing government should “shut down” – ever. Household analogies to macro economics are a giant logic fallacy – people can’t make their own money. Fanaticism about government debt is in fact fanaticism. Taxes shouldn’t be the basis of sovereign government spending. All of a sudden the policies being discussed in the news lack any basis in reality. Politicians that once seemed reasonable now seem irresponsible.
When you finally see the three dimensional image, you look at others who still struggle with the two dimensional existence and you empathize with them. Some you help, trying to save them the time you invested in seeing the picture. Yet others are content with the two dimensional reality – they look at you as the oddball with nutty ideas. No matter how much you try to tell them that there is a picture they aren’t seeing, they don’t want to see it. And that is the the current mess we see in politics of austerity and debt reduction. Both systems can’t coexist. Policy in one system would be impractical in another system. If you see a 3d world, smiley faces and stick figures won’t work anymore. Yet most everyone , regardless of political ideology, still lives in a two deminsional existance.
Shoot, I should have done a better edit in this. Oh well, knock off the rust and all that
I figured out that money (regardless of its form) was fundamentally worthless without the social consensus that it is a meduim of exchange for goods and services long ago – paper money is just fiat currency, gold and silver and other “precious” metals have little or no real utility for most people and the electronic transfers of money are imaginary: all economies based on anything but direct barter require that things that have no value to people in and of themselves to be ascribed value in place of those things that people would naturally value – in other words, all non-barter economies are based on the exchange of IOUs between its members.
When you have a system that relies the swapping of IOUs, such a system can be artifically manipulated to the benefit of a few oligarchs – increasing/decreasing the money supply can enhance the holdings of those who are already wealthy, allowing them to have more buying power relative to everyone else and giving them the ability to purchase all the *real* resources and sell them back to us at prices set for the benefit of the owner of those with tile to them (a concept that has no place in the natural world – titles are meaningless without some artificail monopoly on force to ensure that they are enforced).
The nature of fiat was never in doubt, the problem ( at least in my mind) is that the paradigm being taught in schools for how money ( and monetary policy) is antiquated. I’d venture to guess most people have no idea how reserves work or how treasuries function. A dated view of economic policy premiates all the networks, so the public is being misinformed on a great deal of policy decisions. MMT economists recently half a conference in Italy and it was widely attended, I think people are starting to grasp that the EU is going to have to reform its policy else all the governments will eventually be held hostage to tight money policy.
Sorry for typos – typing while walking…
I don’t think you understand me – I’m not talking about “reforming” the monetary system (I don’t even think that’s possible, as too many people in power would have too much to lose from doing that…), I’m taking about *abanddoning* it altogether: it’s a system that’s all-too-easily abused by powerful interests (be they governments, corporate entities or something else altogether) – interests that can use the system to acquire the *real* wealth and enslave the rest of us with it.
And of course the news media (basically a propaganda outlet for the etablished order) will lie to people about how the system really works – they want the common man to think that those in power are looking out for their interests while they repeatedly fuck him over!
The only way to end this process once and for all is to destroy it and go back to bartering real goods and services – no more IOUs backed by some third-party entity that can pull the strings and manipulate the buying power of themselves as well as regular people: what I envision is an economy that’s completely local – based entirely upon what the people residing in a given locallity can produce for themselves or trade directly with other localities.
There is another method of paying debts that can be applied to collecting taxes and other financial functions of Government.
Suppose two people didn’t have enough money to buy a loaf of bread on their own, so they pool their money and share a loaf. When they divide the loaf ( unsliced ), one brakes it in half and the other choses a portion for their own. Greed would be removed from the process, as the one doing the dividing would be sure to be as accurate as possible.
You can do that with property taxes and other debts. Let the citizen appraise his own property for tax purposes. The Government then has the choice of either accepting that amount of tax, or buying it if the citizen under-estimates it’s value.
Going back to barter would literally destroy the modern world. There has to be a medium of exchange else nothing requiring time and research would ever be done. No one is going to make the next iPad or construct a jumbo jet for barter payments. The IOU has to exist, fiat has a purpose that is practical. Left out if the discussion above was the talk of taxation. In the MMT universe , taxes serve one purpose: to destroy wealth. Governments don’t need taxation to run anymore – they can rely on debt (which is why the US debt elevated after dumping commodities). But taxation CAN reduce the income gap IF it’s allowed to . The moral dellema is asking whether it’s fair for governments to destroy wealth based in income bracket which is why Warren Buffet chimed in. The rich argue that their money helps hire people. The problem is that thei investment tends to chase cheap labour hence all the billionaires moving production overseas.
The autocorrect is killing me!
@ Stacy,
“Going back to barter would literally destroy the modern world.”
That’s fine by me – a very large portion of modern life is unhealthy (centralized power structures, environmental poisoning, etc…) as well as incredibly resource intensive (meaning that it’s not sustainable for the long run anyway). With Peak Oil rapidly approaching, most today’s modern societies are headed for a collapse anyway: when that resource base is exhausted it won’t matter what kind of monetary policy that the “civilized” world adopts (all the money in the world won’t be able to create new oil – the resource upon which most of modern life is based) – all this talk of managing debt and income gaps will be akin to rearranging the deck chairs of the Titanic as it goes down!
Stacy, putting aside the entire debate concerning barter for a moment; at what point do you consider inflation runaway? Gas prices are now over four dollars a gallon, whereas just three years ago, people began screaming in alarm when the prices went over two dollars a gallon. All other goods and services have risen exponentially with the price of gas, but the wage earner income remains the same. This means the wage earner has four times less the buying power than he had four years ago.
Back to the practicality of bartering; The Euro-dollar is a prime example of why each country should retain control of its own currency, but it is also an example of why “bartering” should be the consideration of goods and services. Each country has defined resources that are its trade revenue, whether that resource is in solid assets, technology or services. When a single unit of measurement is used across the board as the weighing factor of worth; i.e., the Euro-dollar or the American dollar, the worth of these goods, services or technology is not measured by its worth but how much of this paper currency each country has for conducting business. It is a false value.
Bartering is a true value system. Trade implies the ability to trade one commodity for another. In an ideal system, each country would determine the value of its trade assets, i.e., food, potable water, energy resources, etc., and trade them for other desired commodities it does not have. Instead, what we have, is a monopoly over trade values by corporations and banking institutions through the use of a currency system with no value beyond the paper it is printed on. Real assets are placed under siege and manipulated to give these corporations that hold allegiance to no one but themselves, the ability to control even more resources.
Breaking it down to the individual, we do not truly need the controls set by fiat money and big government, nor will this system remain self-sustaining very long. Individuals can, in fact, trade their goods or abilities with each other. Communities are perfectly capable of governing themselves. As evidenced by Iceland, Russia, Cuba and Bolivia, countries can become self-sustaining without the interference of globally dominated corporations and banking institutions.
As we shift to a system of real value, certainly the banking institutions, Wall Street and the entertainment industry, which has bought into this delusion of measured wealth lock, stock and barrel, will suffer, but from out of the ashes of worthless junk, we will see more innovations, better technology and production efficiency than ever before.
Think for a moment about the world you live in. Most if the populace is in cities. By advocating barter you are saying “fuck you city people”. There is no way barter will ever be effective – ever – in feeding an housing large populations. Barter fails in large populations as an exclusive value transfer. That’s not to say individuals can’t barter (heck even I do that) but it can’t replace money.
You have to use inflation metrics rather than pointing to one commodity but even in that situation ( talking about oil) it’s bubble inflation caused by futures speculation – in the same way that the housing bubble was speculative. Inflation across the board is still relatively low, in other words it isn’t post ww2 Germany despite the government expanding money supply. The reason for this is because the nature of inflation is antiquated.
@ Stacy,
“Think for a moment about the world you live in. Most if the populace is in cities. By advocating barter you are saying “fuck you city people”. There is no way barter will ever be effective – ever – in feeding an housing large populations.”
Since there’s likely going to be a population crash shortly after Peak Oil hits (due to lack of fertalizers for crops and petrochemical-based medicines) I doubt this will be a problem in the next couple of decades – the simple fact of the matter here is that the human population only reached these levels due to the technological advancements of the Industrial Age, and those marvels are based on fossil fuels (a finite, non-renewable resource – at least on the human timescale…): in short, the urbanites are fucked anyways because they are part of a resource-intensive system that’s about to run out of gas (both figuratively and literally).
The goal isn’t to feed and house large populations because there won’t be quite so many people in the near future – thus your point is moot…
I stood at the autostereogram for an entire semester and apparently saw a completely different picture from anyone else around me at the time. (or at least anyone else raising their hands)
The problem you describe was clearly always there and nobody wanted to talk about it, teach it or admit to there being any different way. Because of this and my resultant questioning I of course flunked economics.
What I learned from this is nobody really wants to “learn” anything. Or ask why or why not? Status quo is so “quo” that there is a fear of non-“quo”. Or anti-quo.
And just like with the pictures, nobody wants to admit that they just don’t see it…even if they don’t. They nod along with the crowd and wonder what they are missing, even if maybe their eyesight is clearer, or different or less “quo”
And that’s the scary part , right? Unlike the autostereogram, the picture revealed is reality.