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Quick Thoughts on Chartalism

Chances are that you’ve never heard of chartalism (unless you arrived here because you Googled the word). I’ve been reading an increasing number of articles which argue certain points which are central to the economic theory of chartalism. This theory is centrally focused on characteristics of a fiat currency regime. The basic assumptions and conclusions are sound although I have not studied it enough to have a fully informed opinion. Further, I disagree on principle with some conclusions on the surface level.

So what is it all about? Basically, the chartalists suggest that the state issues fiat currency via government spending and recoups (destroys) the money via taxation. Thus, fiat issue is no more than printing money and, if the government did not do so, there would be no money for citizens. This extends to a conclusion that the private sector cannot save money unless the government runs a deficit. This is further shown by using simple algebra with the formula for GDP. This reinforces the argument of the adherents.

I see a few basic flaws in this theory. First, if there were no fiat money, that would not destroy economic activity. There would be, at a minimum, barter activity. Second, it seems to ignore debt (or at least under-appreciate its role like most all schools of economic thought). Since private banks issue credit, the state is not the only entity which can issue currency (depending on one’s definition).

Nonetheless, this is important. Governments can and do print money. The U.S. Dollar is essentially backed (primarily) by U.S. Treasuries. In other words, the value of the Dollar is derived by the use of it to pay government debt. The point remains that next time you find yourself in a debate about the nature of the state and deficit spending, one can not summarily dismiss the notion that deficits don’t matter or the suggestion that the U.S. will not default on its debt. There are shades of gray to this. Again, I don’t completely agree with all the assumptions or conclusions of this theory. But, well-informed (and sometimes even well-intentioned) adherents will make good points – specifically that this theory is sound due to its identity relationship from the GDP math.

One of the main goals of Stop Taking Soma! is to educate and inform. Shouting matches between ideological opponents and semi-informed debate participants are a problem in the political environment. If libertarians (small “l” or big “L”) or other marginalized political (or economic) groups fail to understand the perspective of our opponents, we will risk continued marginalization and be reduced to nothing more to uninformed noisemakers.

For more on chartalism and its post-Keynesian cousin circuitism, visit the forum on Steve Keen’s blog and read this thread. (Full disclosure: I have not yet read it.)

Quick Thoughts on Chartalism

Chances are that you’ve never heard of chartalism (unless you arrived here because you Googled the word). I’ve been reading an increasing number of articles which argue certain points which are central to the economic theory of chartalism. This theory is centrally focused on characteristics of a fiat currency regime. The basic assumptions and conclusions are sound although I have not studied it enough to have a fully informed opinion. Further, I disagree on principle with some conclusions on the surface level.So what is it all about? Basically, the chartalists suggest that the state issues fiat currency via government spending and recoups (destroys) the money via taxation. Thus, fiat issue is no more than printing money and, if the government did not do so, there would be no money for citizens. This extends to a conclusion that the private sector cannot save money unless the government runs a deficit. This is further shown by using simple algebra with the formula for GDP. This reinforces the argument of the adherents.I see a few basic flaws in this theory. First, if there were no fiat money, that would not destroy economic activity. There would be, at a minimum, barter activity. Second, it seems to ignore debt (or at least under-appreciate its role like most all schools of economic thought). Since private banks issue credit, the state is not the only entity which can issue currency (depending on one’s definition).Nonetheless, this is important. Governments can and do print money. The U.S. Dollar is essentially backed (primarily) by U.S. Treasuries. In other words, the value of the Dollar is derived by the use of it to pay government debt. The point remains that next time you find yourself in a debate about the nature of the state and deficit spending, one can not summarily dismiss the notion that deficits don’t matter or the suggestion that the U.S. will not default on its debt. There are shades of gray to this. Again, I don’t completely agree with all the assumptions or conclusions of this theory. But, well-informed (and sometimes even well-intentioned) adherents will make good points – specifically that this theory is sound due to its identity relationship from the GDP math.One of the main goals of Stop Taking Soma! is to educate and inform. Shouting matches between ideological opponents and semi-informed debate participants are a problem in the political environment. If libertarians (small “l” or big “L”) or other marginalized political (or economic) groups fail to understand the perspective of our opponents, we will risk continued marginalization and be reduced to nothing more to uninformed noisemakers.For more on chartalism and its post-Keynesian cousin circuitism, visit the forum on Steve Keen’s blog and read this thread. (Full disclosure: I have not yet read it.)

The Trees

While browsing through some music earlier I was reminded of how much I like the lyrics to Rush’s song The Trees. If you’ve never heard the song or are not familiar with the words, please take a moment to consider it and the message contained within.There is unrest in the forest,
There is trouble with the trees,
For the maples want more sunlight
And the oaks ignore their please.

The trouble with the maples,
(And they’re quite convinced they’re right)
They say the oaks are just too lofty
And they grab up all the light.
But the oaks can’t help their feelings
If they like the way they’re made.
And they wonder why the maples
Can’t be happy in their shade.

There is trouble in the forest,
And the creatures all have fled,
As the maples scream “Oppression!”
And the oaks just shake their heads

So the maples formed a union
And demanded equal rights.
“The oaks are just too greedy;
We will make them give us light.”
Now there’s no more oak oppression,
For they passed a noble law,
And the trees are all kept equal
By hatchet, axe, and saw.

The Trees

While browsing through some music earlier I was reminded of how much I like the lyrics to Rush’s song The Trees. If you’ve never heard the song or are not familiar with the words, please take a moment to consider it and the message contained within.There is unrest in the forest,There is trouble with the trees,For the maples want more sunlightAnd the oaks ignore their please.The trouble with the maples,(And they’re quite convinced they’re right)They say the oaks are just too loftyAnd they grab up all the light.But the oaks can’t help their feelingsIf they like the way they’re made.And they wonder why the maplesCan’t be happy in their shade.There is trouble in the forest,And the creatures all have fled,As the maples scream “Oppression!”And the oaks just shake their headsSo the maples formed a unionAnd demanded equal rights.”The oaks are just too greedy;We will make them give us light.”Now there’s no more oak oppression,For they passed a noble law,And the trees are all kept equalBy hatchet, axe, and saw.

Cool Trilemmas

I’ll admit that my vocabulary did not contain the word “trilemma” until a few weeks ago. It’s a natural extension of the commonplace “dilemma” where we have three options. Then, in a span of no more than days, I was exposed to two interesting trilemmas.

The first trilemma that I would like to introduce is the so-called “Impossible Trinity”. This hypothesis states that a national economy can only achieve two of the following three characteristics: a fixed exchange rate, free capital movement, independent monetary policy. A nation with a fixed exchange rate is able to maintain a stable currency as it relates to the rest of the global economy. China, for example, maintains a fixed exchange rate by pegging its currency to the U.S. Dollar. Nations with free capital movement allow goods and services to be (relatively) freely traded by private citizens across borders without significant taxes or other restrictions. This is a common feature of globalization. Finally, independent monetary policy implies that a nation’s banking system (usually via the central bank) can set interest rates and manage the supply of money without outside interference.

This trilemma is an important one to understand (and I think it is generally accurate) in the context of global political economy. Using the China example again, it is clear that as they open up their economy to freer movement of capital, they have to cede monetary authority in order to maintain their fixed exchange rate. This is one major factor in the accumulation of U.S. debt by China. If they wanted to exert a more independent monetary policy, they would either have to be more restrictive in managing capital flows (i.e. less exports to the U.S.) or abandon their fixed peg to the Dollar.

The second trilemma comes courtesy of Dani Rodrik, a Turkish economist at Harvard. Rodrik suggests that the world economy is subject to the following: we cannot simultaneously achieve a deeply integrated global economy, maintain national sovereignty, and operate democratic governments. We can only achieve two of the three at any time. This argument appears to hold true. If we want advanced globalization while maintaining the nation-state, governments would have to forgo much domestic policy – national policy would be focused on policies which enable global economic integration (this appears to be the general direction today, in my opinion, fueled by financial elite corporatism). The second choice would be to pursue globalization while protecting democratic principles. Such an option would require a global government which could act in the interest of the entire world under a democratic framework. Third, we could maintain democratic government and national sovereignty while settling for less global economic integration. Rodrik suggests that this is what the Bretton-Woods system sought to achieve.

So, in summary, trilemmas provide cool thought experiments. These two are interesting and are good to keep in mind when attempting to understand the working of the global political and economic system.

Cool Trilemmas

I’ll admit that my vocabulary did not contain the word “trilemma” until a few weeks ago. It’s a natural extension of the commonplace “dilemma” where we have three options. Then, in a span of no more than days, I was exposed to two interesting trilemmas.The first trilemma that I would like to introduce is the so-called “Impossible Trinity”. This hypothesis states that a national economy can only achieve two of the following three characteristics: a fixed exchange rate, free capital movement, independent monetary policy. A nation with a fixed exchange rate is able to maintain a stable currency as it relates to the rest of the global economy. China, for example, maintains a fixed exchange rate by pegging its currency to the U.S. Dollar. Nations with free capital movement allow goods and services to be (relatively) freely traded by private citizens across borders without significant taxes or other restrictions. This is a common feature of globalization. Finally, independent monetary policy implies that a nation’s banking system (usually via the central bank) can set interest rates and manage the supply of money without outside interference.This trilemma is an important one to understand (and I think it is generally accurate) in the context of global political economy. Using the China example again, it is clear that as they open up their economy to freer movement of capital, they have to cede monetary authority in order to maintain their fixed exchange rate. This is one major factor in the accumulation of U.S. debt by China. If they wanted to exert a more independent monetary policy, they would either have to be more restrictive in managing capital flows (i.e. less exports to the U.S.) or abandon their fixed peg to the Dollar.The second trilemma comes courtesy of Dani Rodrik, a Turkish economist at Harvard. Rodrik suggests that the world economy is subject to the following: we cannot simultaneously achieve a deeply integrated global economy, maintain national sovereignty, and operate democratic governments. We can only achieve two of the three at any time. This argument appears to hold true. If we want advanced globalization while maintaining the nation-state, governments would have to forgo much domestic policy – national policy would be focused on policies which enable global economic integration (this appears to be the general direction today, in my opinion, fueled by financial elite corporatism). The second choice would be to pursue globalization while protecting democratic principles. Such an option would require a global government which could act in the interest of the entire world under a democratic framework. Third, we could maintain democratic government and national sovereignty while settling for less global economic integration. Rodrik suggests that this is what the Bretton-Woods system sought to achieve.So, in summary, trilemmas provide cool thought experiments. These two are interesting and are good to keep in mind when attempting to understand the working of the global political and economic system.

Twenty-Five Days

Well, it looks like it’s been twenty-five days since my last post. That’s pretty bad! My excuses aren’t necessarily that great, but it’s been a combination of three factors: a) busy work/personal life stuff, b) getting more up-to-speed on local issues/politics, and c) reading some books.

In the meantime, Sen. Evan Bayh (D-IN) announced that he would not run for re-election. This was a bit of a surprise and big news here in Indiana. Bayh timed his announcement well with clear knowledge that no Democrat would be able to get enough signatures to have ballot access in the primaries. This will allow the party insiders to choose the candidate rather than the electorate.

I truly do hope to post more regularly going forward, but I am undecided on how I plan to focus my efforts. I have some desire to focus on more local issues – especially as the 2010 election cycle ramps up and I get more involved with the local LP. This blog may not be the best outlet for that. The national/global/economic scene always interests me, but I probably won’t churn out content as frequently and would prefer to focus on analytically-driven essays rather than the news cycle.

I’m open to all comments, feedback, and requests… I’d like to thank everyone who frequents the site and enjoys my ramblings.

Twenty-Five Days

Well, it looks like it’s been twenty-five days since my last post. That’s pretty bad! My excuses aren’t necessarily that great, but it’s been a combination of three factors: a) busy work/personal life stuff, b) getting more up-to-speed on local issues/politics, and c) reading some books.In the meantime, Sen. Evan Bayh (D-IN) announced that he would not run for re-election. This was a bit of a surprise and big news here in Indiana. Bayh timed his announcement well with clear knowledge that no Democrat would be able to get enough signatures to have ballot access in the primaries. This will allow the party insiders to choose the candidate rather than the electorate.I truly do hope to post more regularly going forward, but I am undecided on how I plan to focus my efforts. I have some desire to focus on more local issues – especially as the 2010 election cycle ramps up and I get more involved with the local LP. This blog may not be the best outlet for that. The national/global/economic scene always interests me, but I probably won’t churn out content as frequently and would prefer to focus on analytically-driven essays rather than the news cycle.I’m open to all comments, feedback, and requests… I’d like to thank everyone who frequents the site and enjoys my ramblings.

Defend Your 2nd Amendment Rights: Testify to allow guns in the Park: LOCATION CHANGE

NEW LOCATION

The will be a meeting of the Parks and Recreation Committee on Thursday, February 25, 2010, at 5:00 p.m. at Garfield Park’s Art Center, 2432 Conservatory Dr.

PROPOSAL NO. 39, 2010 amends the Code to clarify provisions with respect to possession of firearms on park property. The amendment will allow honest citizens to protect themselves in the park by allowing us to bring our firearm in to the park (like we can in State Parks). Please forward email and get friends to show too!  

 
Ed Coleman (L) introduced this proposal to strengthen gun rights, and to bring Indianapolis Park regulations in line with State and Federal Parks .  You can watch Timothy Maguire and Ed Coleman on Channel 6 (with video): http://www.theindychannel.com/news/22394972/detail.html
 
 
As it turns out, our Republican Mayor, Greg Ballard, has announced he will veto Ed Coleman’s proposal to protect gun rights in city parks.  It hasn’t even been heard in committee yet, and he has preemptively stated that he won’t help Ed Coleman protect our right to carry while in City Parks.  Now is the time to turn up the heat; let’s all show up on February 25 to the public hearing at 5:00 PM at the Parks Committee meeting, to tell them all how much we all support this bill.  Get friends to show up too. 
 
IndyStar quotes Timothy Maguire: http://www.indystar.com/article/20100202/LOCAL/100202032/Ballard-vows-to-veto-gun-in-parks-bill
 
Channel 13 (with video) interviews Chris Spangle, with FOP support: http://www.wthr.com/global/story.asp?s=11919374
 
To read a full version of the proposal as introduced, visit: http://www.indy.gov/eGov/Council/Proposals/Documents/2010/PROP10-039.pdf

 
Ed Coleman welcomes all help for his 2011 re-election campaign. Feel free to check him out here: http://www.indylp.org/elected_officials/ed_colemam
 

Self Defense in City Parks, Washington State Validates Right to Carry and Gun Free Zones Continue to Be Violence Magnets

A female Superior Court judge in King County, Washington has ruled in favor of individuals who sought to end a ban on carrying firearms in city parks.

Judge Catherine Shaffer did not mince words in her order, part of which was handwritten and issued from the bench following an afternoon hearing in her Seattle courtroom.

“The court finds that the plaintiffs have a clear legal or equitable right to carry firearms under the federal and state constitutions,” she ruled.

The judge also noted that the “court finds that there is no genuine issue of material fact on which reasonable minds could differ.”

As some people are aware, Indianapolis Councilor Ed Coleman (Libertarian – At Large) has introduced legislation which would eliminate the unconstitutional city ban on individuals, who have gotten permission from the government by way of a permit to exercise their rights (sarcasm intended), carrying their personal firearms onto city park property. In other words, he has introduced a proposal to restore an individuals right to defend themselves in a way that would align city code with both state and federal law where such restrictions either don’t exist or are expiring this month.
Now before the anti-gun folks have a fit, let’s consider the following.
You walk up and down city streets and drive all over public roads every day with countless other people who are licensed to carry their firearms and have them on their person or in their vehicles either openly or concealed. The streets are not running red with law abiding citizens shooting each other are they? Do you feel unsafe walking around Monument Circle at lunch time because some of those folks have guns on them? Of course not. Interestingly enough, in some states (like New Hampshire) one can legally “open carry” into the State House (although bureaucrats are trying to play games with it now [see this link and associated video] )!
Where should you feel unsafe? So-called “gun free” zones maybe?
This past week we saw a faculty member at the University of Alabama kill three people and wound others when she was denied tenure. We also saw this month where an elementary school teacher shot other faculty members when he was told he would not have a job next year. We all remember what happened at Columbine or at Virginia Tech. All “gun free zones”. Yet, that didn’t stop crazy people with criminal intent from taking a gun into those areas and attacking people who were legally (but unconstitutionally perhaps?) denied the choice of defending themselves.
It was great to see the Fraternal Order of Police speak publicly in favor of Mr. Coleman’s proposal. Unfortunately, the proposal caught Mayor Greg Ballard (R) off guard and he probably spoke too quickly when suggesting he would veto the proposal if it landed on his desk. There is never a wrong time to restore rights or liberty to the people.
Most conservatives and libertarians would expect Republican officials to fully support this kind of thing if they truly believe in protecting people’s natural rights. One can only hope that the Mayor doesn’t feel backed into a corner as after careful consideration there would be no reason not to support this except to play silly political games.
There was a rumor that councilor Mike Speedy, who is running for State House this year, has been interested in this kind of proposal in the past but never thought it would get enough support. Now that with the Heller and the Seattle decisions showing courts will support individual rights, there should be no reason other councilors shouldn’t jump on as co-sponsors. But, again, political games could trump actually doing the right thing. We’ll see.
The important thing to remember is that “gun bans” are “massacre enabling” restrictions and do not protect anyone. You can’t protect the sheep from the wolf by making all of the sheep weaker.

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