tag:blogger.com,1999:blog-8764541874043694159.post7620748337523784232..comments2024-03-18T09:09:07.887+00:00Comments on Coppola Comment: The illusion of safetyFrances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger32125tag:blogger.com,1999:blog-8764541874043694159.post-60213942480282379502012-11-14T08:57:53.137+00:002012-11-14T08:57:53.137+00:00KeenFan
The link to that page is in the post.
W...KeenFan<br /><br />The link to that page is in the post. <br /><br />Wikipedia has included in its definition of "sovereign default" devaluation of the currency used to pay trade deficits and/or reneging on trade obligations under a gold standard. Neither of these constitutes "sovereign default" in the sense that we would normally understand it, i.e. failure to meet obligations incurred through issuance of debt instruments. Neither the US nor the UK has ever defaulted on sovereign debt instruments, but both have reneged on international trade obligations and/or devalued trade currency on more than one occasion. I mentioned one occasion of each in the post - the UK in 1932 (I said 1931) and the US in 1971. Both were a consequence of abandoning the gold standard. <br /><br />We should, as always, be a little careful with Wikipedia. The citation for the defaults listed is the Ludwig Von Mises institute - hardly a supporter of fiat currency.Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-54798866831962061232012-11-14T04:44:28.067+00:002012-11-14T04:44:28.067+00:00Frances, An excellent analysis on this important ...Frances, An excellent analysis on this important subject. Thank you. However, perhaps you could take a look at the list at the bottom of this page (especially in regard to the US and UK entries). http://en.wikipedia.org/wiki/Sovereign_default#List_of_sovereign_debt_defaults_or_debt_restructuring<br />KeenFannoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-49348098325781081812012-11-12T07:55:24.082+00:002012-11-12T07:55:24.082+00:00Here, here! But there is no one, single "budg...Here, here! But there is no one, single "budgetary cycle". It's a rolling show, never ending, always has been and always will be. Dividing time up into slices of varying length does not effect the general direction, or rather the velocity of an action(s). Also, this idea of a "country" invites confusion. Nation States don't really exist anymore. You have some rulers, sure, and they reference symbols like flags and particular buildings, ok, but there is no real "country"; just people. Alisternoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-62423694036034629702012-11-11T19:50:20.874+00:002012-11-11T19:50:20.874+00:00Alister,
Yes, in the LONG TERM government spendin...Alister,<br /><br />Yes, in the LONG TERM government spending more than the production of the country can comfortably support through taxation would produce poverty. But over a budgetary cycle, or even over several budgetary cycles, that is not true. <br /><br />I'm not going to discuss your belief that taxes will be eliminated.Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-40705492137485642672012-11-11T19:13:00.481+00:002012-11-11T19:13:00.481+00:00Also, relieving and preventing poverty requires me...Also, relieving and preventing poverty requires means (of production, for example). Living outside the relevant means actually produces poverty! Alisternoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-76518739198607426262012-11-11T19:10:26.314+00:002012-11-11T19:10:26.314+00:00The debt is not payable. Business leaders will con...The debt is not payable. Business leaders will convene and all taxes will be cut to around 0. Alisternoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-34261141047601601252012-11-11T15:03:38.858+00:002012-11-11T15:03:38.858+00:00I have several responses to this.
1) Why is the m...I have several responses to this.<br /><br />1) Why is the moral imperative to "live within your means" greater than the moral imperative to relieve and prevent poverty?<br /><br />2) "Living within your means" is meaningless for a democratic open economy. Yes, in theory governments can only spend what they can extract in taxes from their population. But it isn't that way round! Tax revenues depend on economic performance, which itself is influenced by government spending patterns. Trying to match government spending and income over a single budgetary cycle resembles alchemy and is about as successful, frankly.<br /><br />3) Government austerity can result in reduction of real incomes for the people of the country, which reduces government income forcing more austerity....this is the Eurozone death spiral in a nutshell. <br />Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-79739925972847164282012-11-11T14:41:34.706+00:002012-11-11T14:41:34.706+00:00I regard protecting transaction accounts as sensib...I regard protecting transaction accounts as sensible - I'm sure I've said that before. The debate is around the best way of achieving that, given that transaction accounts are constantly moving and the value of the money they represent is also constantly changing. Positive Money's scheme would actually cope with this, although there would be a problem with accounts dipping in and out of overdraft. My only concern, as I've said, is that without a debt jubilee it places the central bank's solvency at risk.<br /><br />I also agree with you that there should be no taxpayer protection for investments, including interest-bearing deposit accounts. However, I would like there to be voluntary insurance available for risk-averse individuals. They need to understand that the price of this insurance is a lower rate of return on their investment. That way it becomes their choice. The present insurance is compulsory and paid for by bank levy rather than directly by the customer. I don't think customers should be "nannied" like this, and I don't think it is fair to penalise well-managed banks for the losses of badly-managed ones. I'm aware of the potential mis-selling problem, but that is a matter for regulation - and as I have noted elsewhere, a culture change in retail banking.<br /><br />Where you and I part company MASSIVELY is on money creation. I've said a number of times now that it is not Positive Money's banking I disagree with, it's their economics. I don't want to go into that again, but I do not agree that moving to a situation where banks can only lend money they already have would be better for the economy. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-19772369041051279532012-11-11T14:15:54.822+00:002012-11-11T14:15:54.822+00:00I’m in 90% agreement with your last sentence: “I c...I’m in 90% agreement with your last sentence: “I can't begin to justify protecting even small amounts of savings by extracting money from people who are too poor to save at all.” That’s pretty much full reserve thinking.<br /><br />So I’m now in a muddle as to exactly where we agree and disagree. So to summarise, I say:<br /><br />1. No taxpayer support whatever (inflation proofing, or insuring the capital sum) where the depositor wants to act in a COMMERCIAL fashion and have their bank lend on or invest their money.<br /><br />2. Taxpayer backing for the capital sum IS ALLOWED where the depositor wants 100% safety, but in that case the money is NOT loaned on or invested, thus the money is almost 100% safe anyway. I.e. the additional support from taxpayers won’t cost the taxpayer much. But no inflation proofing is involved there.<br /><br />3. As a sop to the plebs kicking up a fuss about not having savings accounts that are inflation proofed and pay interest, perhaps let everyone have up to say £10,000 in a National Savings inflation proofed and interest paying account. But that’s pure politics: it doesn’t make economic sense.<br /><br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-57994221036620156622012-11-11T09:01:29.074+00:002012-11-11T09:01:29.074+00:00It stands to reason that as rates continue to rise...It stands to reason that as rates continue to rise...entrepreneurs have a greater incentive to shuffle and hide the existing wealth...opposed to concentrating on creating new wealth...Verizonnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-28980531599054453482012-11-09T18:54:17.172+00:002012-11-09T18:54:17.172+00:00Your argument that taxpayer support protects large...Your argument that taxpayer support protects large investors is false. The present deposit insurance scheme is limited to £85K - hardly a lot of money. When Southsea bank went south earlier this year, people with deposits over £85K lost money. And can I remind you that in Musgrave world, there would be no protection at all for "at risk" deposits - the ones that actually would be lent out and used productively? <br /><br />Your arguments against inflation proofing for large deposits equally apply to small ones. The taxpayer loses - and many of those are people who have NO savings. I can't begin to justify protecting even small amounts of savings by extracting money from people who are too poor to save at all. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-57416753868839914672012-11-09T17:07:30.211+00:002012-11-09T17:07:30.211+00:00I agree that National Savings and gilts are near i...I agree that National Savings and gilts are near indistinguishable.<br /><br />I don’t have much sympathy with your hypothetical large investor. First, if someone invests directly in a small business or in stock exchange and it all goes pear shaped, they lose their money. But if they plonk money in a bank and the bank invests in or lends to small or large businesses and it all goes pear shaped, the taxpayer rescues them. That’s a completely unwarranted subsidy for banks, depositors, etc.<br /><br />Re guaranteeing inflation proofing for large investors, much the same point applies. That is, inflation proofing can only be absolutely guaranteed if the taxpayer is standing in the background. <br /><br />Obviously if large investors are provided with inflation proofing thanks to taxpayers then you’ll get more investment. But I don’t think you can justify “more investment” or more anything else simply on the grounds that subsidising it produces more of the commodity concerned. Subsidise baked beans and more baked beans will be produced and consumed. To justify a subsidy, you have to demonstrate market failure, i.e. prove that the market is underproviding the commodity concerned.<br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-27859138114130115592012-11-09T16:25:51.436+00:002012-11-09T16:25:51.436+00:00The idea that living within your means is a form o...The idea that living within your means is a form of austerity, and not (other than in exceptional circumstances) the elementary moral duty of people of honor, shows that, underlying the economic crisis is a profound moral crisis in western societyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-82828832204458871542012-11-09T15:47:48.165+00:002012-11-09T15:47:48.165+00:00I am watching this thing at the moment...It is min...I am watching this thing at the moment...It is mind boggling how much sense this man is making...Everything revolves around GDP, apparently, yet GDP is at best an extremely vague and fairly random indicator of mere activity, arguably quite detached from wealth creation... Must Watch<br /><br />http://www.youtube.com/watch?v=WQ9x1RiV6HIAlisternoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-6577656182970388692012-11-09T15:45:19.035+00:002012-11-09T15:45:19.035+00:00Robbing Peter to pay for Paul means Peter is less ...Robbing Peter to pay for Paul means Peter is less likely to save from producing wealth so you can pacify Paul, however! Even socialists need an income! Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-87746733655178614512012-11-09T15:35:30.146+00:002012-11-09T15:35:30.146+00:00That's easy - everyone!That's easy - <a href="http://en.wikipedia.org/wiki/Socialism" rel="nofollow">everyone</a>!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-73970651271103533392012-11-09T15:29:59.772+00:002012-11-09T15:29:59.772+00:00Prevent wars? Direct taxation? Neither do I think ...Prevent wars? Direct taxation? Neither do I think that this would serve as any type of panacea to the sheer horror, as you put it, no matter how desirable that may be. Perhaps I was unthinking in my communication; I suppose I just meant to say that relieving decision makers of options that are inherently more costly to them (ie: choosing/needing to tax subjects) for the sake of, in turn, making war a less undesirable option to them, in terms of their political aspirations, is suboptimal. Alisternoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-87678677731673426102012-11-09T15:23:41.128+00:002012-11-09T15:23:41.128+00:00Don't forget, Alister, that during the times o...Don't forget, Alister, that during the times of Kings...as well...there was then at least one individual who signed a contract with financiers and could (theoretically, at least) be held accountable...compared to now...where it is totally unclear...if not from a technical, legal point of view...then at least from a moral standpoint...who exactly it is that's supposed to be shouldering the giant burden of all these public debtsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-76085349767630295692012-11-09T15:20:36.809+00:002012-11-09T15:20:36.809+00:00I don't agree with you that direct taxation wo...I don't agree with you that direct taxation would prevent wars. History does not support your argument. The information revolution is a much better preventive. And the sheer horror of modern warfare, of course.Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-88149384823289426392012-11-09T15:03:03.584+00:002012-11-09T15:03:03.584+00:00I'm happy to admit that you're probably a ...I'm happy to admit that you're probably a better historian than myself, but nowadays with the Internet - which really does rival the Gutenberg revolution; which in itself is really saying something, considering how quickly & far that invention advanced Western civilisation - it's not as easy for rulers to misbehave as it was 2 or 300 years ago. Yale Uni Law school is running academic work shops analysing the power of information to shape (or prevent the implementation of) laws, for example. See "The Constraining, Liberating, and Informational Effects of Non-Binding Law" @ http://www.law.yale.edu/documents/pdf/LEO/LEO_Stephenson.pdf. Unfortunately, I agree there's a high chance some aggressive/warlike behaviour will always exist amongst humans, but obviously sane people agree it is optimal to reduce this as much as possible. What's the point to wealth if you live in a war zone, after all? My point was that if rulers/democrats/politicians/bankers had to impose, directly and forcefully, taxes on subjects to run wars like in the times you I suppose are referring to in the above - our world would be more peaceful. Alisternoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-6645854059046516422012-11-09T14:41:49.239+00:002012-11-09T14:41:49.239+00:00I think you aren't looking far enough back in ...I think you aren't looking far enough back in history. Kings have always gone into wars that their subjects haven't liked, and they have financed them generally through direct taxation and borrowing, not through money creation and inflation - those are modern phenomena. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-12063694747660293692012-11-09T13:48:49.253+00:002012-11-09T13:48:49.253+00:00I just think it's important to note that 75+ p...I just think it's important to note that 75+ percent of people on Earth do not like violence or war, and that throughout history it seems to have in most cases been obscure politicians who have instigated most of the (pointless) wars, and that this is possible mainly because of the chance to tax through inflation rather than impose taxes that are more easily observable to their poor subjects. Employees of the BBC even produced a 1 hour documentary based on the historical record to demonstrate that some of the bankers who financed Hitler were "British" & "American" (http://www.youtube.com/watch?v=YauM5dHLn1s). Inelastic money supplies absolve rulers of the need to pay for their aggressive adventurism, in short, surely a feature of the modern financial system that is suboptimal.Alisternoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-63924376645538597002012-11-09T10:12:04.332+00:002012-11-09T10:12:04.332+00:00Alister,
I did not make any judgements about the ...Alister,<br /><br />I did not make any judgements about the cause of war. I was merely discussing the economic consequences. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-49423853810001060152012-11-09T10:10:36.321+00:002012-11-09T10:10:36.321+00:00National Savings and index-linked gilts are indist...National Savings and index-linked gilts are indistinguishable except for their target market.<br /><br />I suppose a large investor would argue that if their money is placed "at risk", so can be lent out productively, it is sensible to protect it from inflation, as otherwise there is less to invest in the economy. In fact a large investor might argue that there is MORE justification for protecting large sums placed "at risk" than there is for protecting small sums that are not placed at risk, because the investments made with those large sums benefit far more people. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-36916163256939240172012-11-09T10:09:16.780+00:002012-11-09T10:09:16.780+00:00You write that "war...need[s] governments to ...You write that "war...need[s] governments to create money", as if war is some pre-determined and avoidable thing, thrust upon innocent government employees. Rather, governments choose to engage in war and as a consequence of that stupid decision sometimes feel the need to conjure up money to satisfy their misguided aspirations. This lecture explains <br /><br />http://www.youtube.com/watch?v=Tl9lS5k7H5M<br />Alisternoreply@blogger.com