Various news sites and blog posts have presented different ways to look at what caused the financial crisis and how that crisis will be resolved in a way that will not destroy the vulnerable populations of America.
One set of essays that attempts to answer the questions of what went wrong and how corrections can be made is written by Dan Kervick. He approaches these questions from a monetary point of view; that is, how the monetary system works and how that work can be perverted or renewed.
This series is presented by both Naked Capitalism and New Economic Perspectives and the links here take you to the sixth part from which you can reach the other five parts.
The series is worth reading in its entirety because it is well written and non-partisan. It isn't written to aid investors in their stock choices; it isn't written to promote a political agenda. It is written to advance a point of view that is sympathetic to the collective nature of community and to the individuals in that community that is called the United States of America.
Below is an excerpt from Part III:
Public Money for Public Purpose: Toward the End of Plutocracy and the Triumph of Democracy
By Dan Kervick - Naked Capitalism and New Economic Perspectives
. . . .A democratic public that possesses seignorage power should be very hesitant to give it up, as it would for example, by ceding monetary power to private sector corporations with their relatively small collections of self-seeking owners and their hierarchical, non-democratic forms of government. If the creation of the various forms of money were permitted to be strictly a private sector endeavor in the modern world, we might reasonably suspect it would all end up in the hands of a few financial sector oligarchs – Goldman Sachs, Barclay’s, Chase, etc. – just as these oligarchs have come to dominate other forms of financial power. Nor should the public take a casual attitude toward free-styling monetary entrepreneurs who might seek to employ innovative technologies to invent forms of money that have the potential to succeed in supplanting the public’s money. They would thereby reap seignorage profit for their own private benefit, while at the same time diminishing public control over the public’s monetary system, and robbing a democratic public of its monetary power. And the romantic and entrepreneurial monetary rebel of today could easily become the monopolizing monetary kingpin of tomorrow without the restraint of democratic governance.So let’s turn away from these anti-democratic nightmare scenarios of the public’s monetary powers falling into private hands, and return now to our simple model of the monetary sovereign, which we will regard as a democratic government connected to a public sector, wielding its monetary and other powers on behalf of public purposes.It is important to recognize that a monetary sovereign has no operational need, strictly speaking, to borrow or tax in order to spend. By an operational need I mean something that the government must do in order to carry out some operation, and without which that operation simply cannot occur. Because the monetary sovereign can always create any money it needs in order to carry out a spending operation, there is no operational need for it first to acquire that money from some other source. In the end, recall, the monetary sovereign is responsible for all of the money that exists in the monetary system which it governs. It is the producer of the currency in that system, not a mere user of the currency. It is just flat wrong to view a monetary sovereign as an enterprise like any other enterprise – such as a household, a small business, a corporation – mere users of the monetary sovereign’s money whose monetary power is limited to the making of exchanges, and whose monetary scorecard is subject to ordinary budget constraints.So the monetary sovereign has no operational need to tax or borrow in order to spend. However, the monetarily sovereign government may have a policy need to tax or borrow. That is, the government may have reasonable policy goals – such as the maintenance of price stability, the encouragement of private sector production and commerce, the promotion of economic equality or other goals- that are best carried out with the aid of taxing or borrowing. The economist Abba Lerner encouraged us to view all government financial operations functionally - that is in terms of their effects. Whether a monetarily sovereign government should engage in some particular monetary or financial operation depends entirely on the government’s policy goals, and the degree to which the operation helps advance those policy goals. Lerner thus called this approach to government financial operations “functional finance”, and contrasted it with the ideal of “sound finance” – an ideal based on misconstruing monetarily sovereign governments as mere currency users subject to ordinary budget constraints.Now this idea of a monetary sovereign might seem frightening. Surely the discretionary power to create and destroy the money that is in common use is an awesome and potentially threatening power indeed. The trepidation experienced here is not at all misplaced. But it is also important to realize that the existence of such power, or at least the potential existence of such power, is inherent in the very idea of governmental sovereignty, and that much therefore depends on the specific form of government that possesses this sovereign power, and the wisdom of those who determine the actions of that government. A democratic public - in which sovereignty is distributed equally among its entire people, which endeavors to subject itself and its own governmental operations to the rule of law and appropriate checks and balances, under durable and vigilantly maintained democratic institutions - can employ its monetary sovereignty wisely and on behalf of enlightened public purposes and the general good.The idea of monetary sovereign can also inspire a different kind of emotional reaction in people: not fear, but disapproval. The public sector under a monetarily sovereign government, if such a thing exists, seems to receive something for nothing by virtue of a seignorage power. The employment of that power effectively delivers benefits to the public that are not received in exchange for something else. All the rest of us private individuals, on the other hand, are generally required to produce something of value in exchange for the benefits we received. This asymmetry might not seem fair or appropriate, since the monetarily sovereign government has an unfair advantage over private sector economic actors. Various inhospitable terms might come to mind here to describe the monetary sovereign’s advantage: “free lunch”, “ill-gotten gains”, “theft over honest toil”, “counterfeiting” etc.This emotional reaction can be hard for people to shake, and is even in some sense natural, but it is grounded in a profoundly wrongheaded and false analogy between the sovereign role of a self-governing people under a democracy, on the one hand, and the role of private individuals, households and companies on the other. First of all, The United States government and its people have made a substantial investment – of work and sweat and tears, and even including an investment of many lives – in order to secure something approaching monetary sovereignty for their society. So if they exercise this monetary sovereignty in the pursuit of public purposes and the general good they are hardly receiving something for nothing. They have invested a whole lot of something in the past in order to control a monetary system they can use to accomplish these public goals.Second, a democratic government like the government of the United States is not just one enterprise among others in a competitive economic game of rising and falling fortunes, a game in which the government must therefore “play by the same rules” as every private sector individual, household or firm. The United States government is the instrument by which we the people are supposed to organize and direct our common efforts toward the fulfillment of our most important national goals and aspirations, including such things as “promoting the general welfare” and “establishing justice.” It is absurd to suggest that because a corporation like Goldman Sachs, for example, does not possess the seignorage power that comes from monetary sovereignty, then the American people must decline to employ that power themselves, in the spirit of fairness to Goldman Sachs and the desire for a level playing field. Goldman Sachs is not entitled to a level playing field with the sovereign American people. We’re the constitutionally recognized boss in our society. If the people of the United States have been strong enough, and diligent enough, and have sacrificed enough to deny seignorage power to Goldman Sachs but preserve it for themselves and their democratic government, then tough for Goldman Sachs. But good for us.
. . . .
1 COMMENTS:
The Constitution and the Fourth Estate
I have a right, even a duty, to resist, with violence or civil disobedience. You should pray I choose the latter.
—The Great Debaters—
Government is a living, breathing organism that exists to
perpetuate itself. There is nothing that says evolution must create a
pleasing government better suited to individual liberties. History
paints an altogether different picture. Possibly the single largest
selection pressure is money. It has always bought political favor. When
our government was a few percent of GDP and the industrialists were
buying favors while building a nation, government had little power to
wield. When money commandeers the machinery of a huge government,
however, you have a monstrously expensive and intractable problem.
We should be particularly nervous as money commandeers the
press. The media is a critical mechanism by which we transmit freedom of
speech: it is an essential tool of a democracy. Mainstream media has
collapsed like a dream sequence in Inception. Fox News gets a disproportionate share of the blame. The blogosphere discovered that Roger Ailes's formulated his plan for Fox News
in the 1970's. It sounds very Orwellian but so what? Different news
agencies are privately owned and, consequently, have different angles.
The problem I see is that they all appear to be captured. With a remarkable regularity, The Daily Show includes montages in which the different news anchors parrot identical
talking points. A severe affliction that first appeared during the 2008
presidential election—Ron Paul Blindness—continues unabated. He's
rocking in Iowa—some claim he's leading at this moment—but the press
want no part of it. Both he and Howard Dean do not fit somebody's image
of a viable candidate. Only journalists with editorial control seem to
provide a fair treatment. I find credible news comes from some of the
most unlikely sources: Russia Today, Al Jazeera, Asia Times, the London-based Telegraph, Zero Hedge, Rolling Stone, Vanity Fair, and, of course, The Daily Show. That's pathetic. Thank God for the internet.
http://www.chrismartenson.com/blog/2011-year-review-david-collum/67586?#constitution
Post a Comment