[Martin Lewitt 2011 July 25 0315 MDT]
[From Bill Powers (2011.07.25.0015 MDT)]
Martin Lewitt 2011 July 24 2131 MDT --
[Shannon Williams (2011.07.24.2130 CST)]
(Gavin Ritz 2011.07.25.11.40NZT)
It has always been a commodity like any other commodity right from the
earliest times. Rather a special one with special obligations.
SW: Ok. But Bill is essentially saying that we need to change the rules
of your 'game'. If we changed the rules so that you cannot treat
money as a commodity, what do we need to do to ensure that you have
proper cash flow? For example, we could make the rules such that you
would be taxed very heavily on any savings that exceeds three times
your normal needs. How would that affect you? Or would it affect
you?
ML: Wouldn't that be treating money as a commodity, albeit perhaps like one on the cold war national security list?
BP: Yes, I think we have to find some other approach that doesn't try to gauge how much anyone "needs" but simply supplies the money necessary to keep the circular flow going freely. Printing it might be a way to do that. Putting it into the hands of the consumers rather than the producers would allow the producers to get their money by supplying goods and services in the usual way, but of course they'd need some to tool up and get into production or to expand to meet demand, so money would have to be available for doing that. Spending that money would help keep the flow going, relieving the printing presses and putting it into circulation (whether in tangible money or magnetic domains on hard disks).
Exactly. The federal reserve currently puts money into circulation by purchasing bonds. In a recession the money goes nowhere fast.
One main thing I recommend is to find ways to make gaming the system difficult or impossible.
People take more risk when playing with someone else's money rather than their own, that is why it is counter productive to double tax equity capital and highly leverage corporations, the decision makers are the equity holders but it is really the bond holders money that is at risk. The equity holder can't make much money because their earnings would be double taxed, so they take bigger risks going for the big win, instead of a solid business.
That seems to me to be a main source of our current problems. Another recommendation is that we find a way to make the very rich spend their money instead of sitting on it or trying to use it to gain power -- a free flow of money might make capital investments less attractive, since there would be low interest rates or none at all and capital would be freely available as needed.
When are you going to understand that the rich aren't sitting on money, they are sitting on stock, in order to spend money, they'd have to sell stock for money, taking as much money out of the economy before they spend it.
Corporations ARE sitting on money, but that is because the prospects for investing it are not good, the "rich" would probably love to redeploy that money, but it doesn't make sense to distribute it to the rich because it would get taxed again. Because of that big hit, they are better off sitting on the money until the prospects improve for internal investment. In the meantime those profits are sitting overseas instead of being repatriated.
It's like some ideas about the drug trade; making drugs legal and freely available, say some, would take the profit out of it and the huge supplies would dry up. See how well that has worked for alcohol? Um ...
We don't have to try to keep anyone from getting rich, but we have a problem similar to the one faced by the Founding Fathers of the USA. How do you allow the maximum freedom to live and prosper while preventing too much power from falling into too few hands, as is the case now?
I think von Hayek said it well, socialism substitutes the plans of the few for the plans of the many. Get the government out of the way so that the oil companies can make a contribution, would instantly create jobs in the US market and eventually reduce the money leaking to overseas. Abandon the plans of the few at the EPAs to control the US economy by regulating CO2 everywhere, and substitute the plans of many businesses to create wealth. Abandon the plans of the few at the FDA to continue to delay approval of drugs, and let them out on the market sooner with after market monitoring that the Cato Institute has shown to cost fewer lives overall than the delays do.
The framers of the constitution did it by setting up conflicts, so one group of selfish people tended to cancel out the efforts to grab power by other groups, while having their own canceled out in return. That kind of brute force solution has worked fairly well, but it's terribly wasteful of energy and resources. It worked when there were few of us and lots of untapped resources, but it won't work forever, and we may already be seeing the signs of its impending failure. Conflict paralyzes the system. The current congressional deadlock is a perfect example of that. And we're running ourselves out of resources (including patience) at an ever-increasing rate. We have to solve these problems pretty soon.
Actually, it failed to paralyze spending, and to keep government within its constitutional limits, that is why we are in this trouble. Winner take all geographical districts were probably a practical necessity at the time of the founding, but proportional representation would help produce parliamentary type compromise in the House, instead of big winner take all ideological swings.
Of course the changes I imagine would meet with a lot of objections, similar to the ones I heard when told I had to give grades to those in a student-sponsored seminar I ran at Northwestern University in the early 70s. I said "Everyone has a B to start with. If you do something extraordinary, you get an A. I haven't got time for this grading crap." That went over like a duck buzzing a skeet-shooting club. How can you tell who is better than who, I was asked. Are you going to give someone a B who did half as well as I did? I'm working hard to get high grades so I can get the best jobs (or, I thought, so only the worst jobs would be left for others). If we all get B's why should we bother to learn anything?
Actually, they all learned quite a lot and gave me good reviews at the end, so I ended up handing out As and Bs as planned and to hell with the curve, and nobody complained (not even the University). Some of them even said that the seminar was the high point, so far, of their intellectual experience in college. So after all, as I thought all along, being better than other people is not the most important thing in life.
For 200 thousand years being better than other people was the most important thing in life, since modern humans came out of Africa into occupied territory. It is the human way.
Isn't that what we need to return to?
Return to? Which history or anthropology texts have you been studying? Humans have a small effective population size because human groups were continually going extinct, either by being exterminated or being displaced to marginal resources where they couldn't make it.
We need to learn how to have a good opinion of ourselves that doesn't depend on having others around for comparison who are worse off. Economics is, for people with any real interests in the world or the universe, a pretty dull subject. Making incredibly huge amounts of money is a form of mental illness, an obsession that takes the place of a real life.
But it is also a service to your fellow man.
You can't really spend huge amounts of money unless you just throw it away on gold faucet handles or expensive fish eggs and fungi and such things. Or raise private armies or try to corner the market in air. Wierd things that people do when they have too much money.
Exactly, they can't spend it, they can only manage it, so why are you sweating it at all?
But who's to say they have no right to be wierd? At least we can stop admiring them for being that way, so those who are doing it to be admired will have to think of something else to do. But those who are trying to get rich so they can control what the rest of us do are a very real problem and we have to figure out how to keep that from getting worse and maybe even to reverse the trend. Only a king has a right to control other people arbitrarily, without their permission, and there are no kings in this country. No real ones. There aren't many real ones left in the world and one day they'll all be gone.
You are right, only a king or government can control people arbitrarily, if people want to be rich, they have to give other people what they want, i.e., they have to be controlled by other people, responsive to market demand and conditions, more efficiently utilize resources, etc.
If we give money the same role as lubricating oil, everything will run smoothly and there won't be much point in trying to have more lubrication than is actually needed. That will change a lot of motives. I don't know if it will cure any mental illnesses, but it might make them less dangerous to others.
Right now there is good reason to have more lubrication than is actually needed, ultimately the only way out of this debt is to either produce or inflate our way out of it, we'll be better off to the extent that production is a greater proportion of the solution. The first people to get access to the money in an inflationary environment are the ones that get the benefit of the printed money. That should be the consumers and not the bondholders.
-- Martin L
···
On 7/25/2011 1:48 AM, Bill Powers wrote:
On 7/24/2011 8:23 PM, Shannon Williams wrote:
Best,
Bill P.