Some more thoughts on the Left, the Right, the Center, and myself

[WeepingElf]

Both radical leftists and rightists tend to think of the economy as a zero-sum game, i.e. nobody can become richer without someone else becoming poorer by the same amount. The difference is that the leftists want to redistribute wealth in favour of the poor, while the rightists want to improve the situation of their nation, class or whatever by taking away from the others. The common ground of both is the notion that there is a fixed amount of wealth that can only be distributed in different ways. Of course, that's a fallacy - there are plenty of win-win situations.

[rotting bones]

Both radical leftists and rightists tend to think of the economy as a zero-sum game, i.e. nobody can become richer without someone else becoming poorer by the same amount. Of course, that's a fallacy - there are plenty of win-win situations.

My point is that everyone can't be saved by having them start a small business and doing quality work. This is true even though win-win situations exist.

As for the right, they want society to be a zero sum game. The fact that it's not saddens them.

[Raphael]

I’m no economist, but I’m pretty sure that money supply is controlled as much by commercial banks as by the central bank. Most money is not in the form of physical cash created by the government.

rotting bones might have meant "printing money" as a general metaphor for every process that creates new money.

[Raphael]

My point is that everyone can't be saved by having them start a small business and doing quality work. This is true even though win-win situations exist.

As for the right, they want society to be a zero sum game. The fact that it's not saddens them.

Agreed on all points this time.

[rotting bones]

I’m no economist, but I’m pretty sure that money supply is controlled as much by commercial banks as by the central bank. Most money is not in the form of physical cash created by the government.

As Raphael mentioned, "printing" is a metaphorical term. Other than that, I don't see the contradiction between this and what I said. I explicitly said "private banks". The government gives them a lot of power to control the financial system. So much so that McKenzie Wark thinks we are living in something worse than capitalism: https://monoskop.org/images/5/5e/Wark_M ... e_2019.pdf

[zompist]

The closed monetary system is the libertarian fantasy. The semi-closed monetary system is the current financial system, where the government prints money to bail out private banks. These private banks then use their money as leverage to give loans to sections of the economy that they think will be profitable in the future. Note that these loans are intended to be paid back somehow, even though the printed money mostly goes out to institutions giving loans, which are hoping to recoup the loaned cash. None of which makes any sense if you look at the system as a whole. Unless money radically changes in value, which will send the economy into a spiral. Literally psychotic.

That's nothing resembling a proof.

It's also not how money works... do you think money is a fixed commodity rather than a social fiction? Even the libertarians figured out how to make money out of nothing.

Governments can create money, though not infinitely. You're missing however that banks can create money without the government. Money does not have to be physical objects issued by the government.

You're also assuming your conclusion. Nothing about a financial system requires that banks favor one set of people; e.g. they could distribute money randomly.

Finally, you're forgetting the velocity of money. With some toy economies*, you can show that if everyone spends their money twice as fast, the economy doubles and everyone is twice as rich. It's not as magic in a real economy, but it does underlie the paradox of thrift. (If no one spends their money, there is no economy; and if everyone slows down their spending, the economy shrinks.)

*Krugman used the example of a babysitting co-op. Each couple gets two vouchers. If you need babysitting, you pay for it with a voucher. One stable situation is that everyone goes out twice a month. But four times a month is stable too. So is everyone babysitting every other day, and going out on the other day. He used this example to show how recessions work (everyone feels poor and stops going out) and how money is created to end recessions.

(Again, none of this is a defense of a capitalist system. Still, when criticizing a system it's good to know how the system works. BTW, if you haven't read Graeber's Debt, do try it, it'll expand your brain.)

[rotting bones]

It's also not how money works... do you think money is a fixed commodity rather than a social fiction? Even the libertarians figured out how to make money out of nothing.

It's an artificially limited social fiction. It is given value by making it scarce and having governments ask for taxes to be paid in it.

Governments can create money, though not infinitely. You're missing however that banks can create money without the government. Money does not have to be physical objects issued by the government.

1. I said "print" metaphorically.

2. I did mention using "leverage" to give out loans. IIRC this is the mechanism banks use to create money.

You're also assuming your conclusion. Nothing about a financial system requires that banks favor one set of people; e.g. they could distribute money randomly.

No, they could not. A banker who isn't able to justify to his boss why he thinks the enterprises he gave loans to will be profitable will be fired. The financial institutions creating money are for profit enterprises.

Finally, you're forgetting the velocity of money. With some toy economies*, you can show that if everyone spends their money twice as fast, the economy doubles and everyone is twice as rich. It's not as magic in a real economy, but it does underlie the paradox of thrift. (If no one spends their money, there is no economy; and if everyone slows down their spending, the economy shrinks.)

*Krugman used the example of a babysitting co-op. Each couple gets two vouchers. If you need babysitting, you pay for it with a voucher. One stable situation is that everyone goes out twice a month. But four times a month is stable too. So is everyone babysitting every other day, and going out on the other day. He used this example to show how recessions work (everyone feels poor and stops going out) and how money is created to end recessions.

This example ignores the physical economy underlying the financial system. It doesn't matter whether everyone has twice the money. If twice the number of goods aren't available in the market, the money will halve in value with respect to those goods.

(Again, none of this is a defense of a capitalist system. Still, when criticizing a system it's good to know how the system works. BTW, if you haven't read Graeber's Debt, do try it, it'll expand your brain.)

I don't think I will be in a position to be reading any time soon, sorry.

[rotting bones]

(If no one spends their money, there is no economy; and if everyone slows down their spending, the economy shrinks.)

Also, my entire proposal is based on something like this idea, except for the physical economy.

[zompist]

You're also assuming your conclusion. Nothing about a financial system requires that banks favor one set of people; e.g. they could distribute money randomly.

No, they could not. A banker who isn't able to justify to his boss why he thinks the enterprises he gave loans to will be profitable will be fired. The financial institutions creating money are for profit enterprises.

Are you kidding? 82% of US adults have credit cards, for a total debt of $1.2 trillion. (Another way money is created.) Consumer debt is probably why plutocracy has kept working even though it stopped raising wages. Your banker would be fired if he stopped handing them out.

Finally, you're forgetting the velocity of money. With some toy economies*, you can show that if everyone spends their money twice as fast, the economy doubles and everyone is twice as rich. It's not as magic in a real economy, but it does underlie the paradox of thrift. (If no one spends their money, there is no economy; and if everyone slows down their spending, the economy shrinks.)

*Krugman used the example of a babysitting co-op. Each couple gets two vouchers. If you need babysitting, you pay for it with a voucher. One stable situation is that everyone goes out twice a month. But four times a month is stable too. So is everyone babysitting every other day, and going out on the other day. He used this example to show how recessions work (everyone feels poor and stops going out) and how money is created to end recessions.

This example ignores the physical economy underlying the financial system. It doesn't matter whether everyone has twice the money. If twice the number of goods aren't available in the market, the money will halve in value with respect to those goods.

You're missing the point. Money is a social fiction. Yes, it doesn't work if it's overabundant. But to an extent— an extent of tens of trillions of dollars— you can indeed create money out of nothing and goose the economy. WeepingElf is right, this notion of the economy being zero-sum is inherently conservative.

If you're trying to be a cultural materialist, great, so am I. Physical limits matter. But abstract goods are a huge part of a modern economy and work in some very non-intuitive ways.

[rotting bones]

Are you kidding? 82% of US adults have credit cards, for a total debt of $1.2 trillion. (Another way money is created.) Consumer debt is probably why plutocracy has kept working even though it stopped raising wages. Your banker would be fired if he stopped handing them out.

Are you referring to the American phenomenon where they give out credit cards to anyone who will take them? I feel like that's a phenomenon in rich societies where bankers can count on salaries and family property to bail people out, and competent police to seize their assets. In India, it is not easy to be approved for a credit card. You need to have the kind of official job that most of the population simply doesn't have access to. Even in America, I'm sure it's harder to be approved for larger loans for longer periods.

You're missing the point. Money is a social fiction. Yes, it doesn't work if it's overabundant. But to an extent— an extent of tens of trillions of dollars— you can indeed create money out of nothing and goose the economy. WeepingElf is right, this notion of the economy being zero-sum is inherently conservative.

My notion of the economy is not zero sum. My notion of money is somewhat zero sum-ish, and that is only because its suppliers are indeed conservative. I think that if people demand goods, you should produce more even if it's not profitable in monetary terms. This is not a zero sum economy.

[rotting bones]

Clarifications:

Are you kidding? 82% of US adults have credit cards, for a total debt of $1.2 trillion. (Another way money is created.) Consumer debt is probably why plutocracy has kept working even though it stopped raising wages. Your banker would be fired if he stopped handing them out.

With the pressure the bankers will be under to give out loans, I can imagine the justification doesn't necessarily have to be a good one. The intent need not be fraud within the institution either. I always suspected that banks prefer people to not fully pay back their loans, but keep them on perpetually as a source of passive income. Rent out the capital, as it were.

You're missing the point. Money is a social fiction. Yes, it doesn't work if it's overabundant. But to an extent— an extent of tens of trillions of dollars— you can indeed create money out of nothing and goose the economy. WeepingElf is right, this notion of the economy being zero-sum is inherently conservative.

I agree that everyone would be better off if poor people had more money to raise effective demand. I only mean to say that giving everyone more money is not the solution to the major structural problem with the economy I'm aiming at.

If you're trying to be a cultural materialist, great, so am I. Physical limits matter. But abstract goods are a huge part of a modern economy and work in some very non-intuitive ways.

Gary Stevenson had some great terminology to describe the status of money in the video of his I posted here. Unfortunately, I don't have time to hunt through a video. I think it was similar to Marxist terminology, that it has exchange value, not use value?

[rotting bones]

With the pressure the bankers will be under to give out loans, I can imagine the justification doesn't necessarily have to be a good one.

However, banks are still infamous for refusing to offer loans even after being bailed out by the government.

PS. Debt by Graeber comes with no extra charge as an audiobook on Audible. Hm.