Inability to fill appointed positions

[BS-87]

"Da modern world uses a token, a chit, to represent value in order to make commerce work. The token is really just a piece of paper. It's a crazy system in a way, but it sure beats the heck out of bartering chickens for medicine and labor for electricity."

 

You're completely underselling the success many communities are finding in localized currency. Some communities are even going so far as to barter their goods and services within "almost" completely self-sustained communities. The doctor eats for free where he wants and gets new shoes when he needs them. The waitress gets a check up as a tip. Things like that.

 

While that all sounds hokey, have you heard of the success "Berkshares" are experiencing?

 

Alternative currencies may be the only way of surviving the coming dollar crisis which you seem all too quick to be an apologist for...

[Beavah]

Oops. Missed your question.

 

Well, da logical thing if yeh wanted to base a currency on somethin' that would match economic growth without being jiggered might be energy. One dollar equals one kilowatt-hour of energy production. But it's hard to implement, and it has some of its own problems.

 

More important to my mind is that yeh have to keep the Fed independent of the government and focused just on monetary stability. Fed interest rates should be based on bond yield spreads (the difference in yields between long-term and short-term bonds, which reflects what the market feels about the long-term growth of the economy). That is transparent and allows for a growth of money supply matched pretty well with economic growth, thus maintaining a stable currency.

 

Where I think we blew it is when we expanded da role of the Federal Reserve from monetary stability to economic stability. That's a very different thing, and has resulted in this bubble-production machine, because they're always waitin' too long lookin' for signs of economic recovery or inflation. It's interestin', though, that all that increase in money supply hasn't caused much inflation, eh? It's just caused bubbles. That's sorta weird.

 

I think it's because we've cut capital gains taxes for businesses too far. Without capital gains taxes, it's more profitable in the short-term for businesses to "play the market" than it is for them to grow their business and increase employment. And short term is what most American businesses care about. So yeh have more money in the markets but less money actually building the baseline economy. Without that added employment/business growth, yeh don't get real inflation. Yeh just get asset inflation, whether it's stocks or home prices or speculation in oil and commodities.

 

So while there's all this money around, it's only the bankers and brokers gettin' rich on shufflin' it and producing nothing, while unemployment stays high. One of those weird situations where yeh need to increase taxes to improve business investment and the general economy.

 

Beavah

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[Beavah]

You're completely underselling the success many communities are finding in localized currency.

 

Nah, I'm completely ridiculing it.

 

People will always barter a bit, but it's terribly inefficient. Any society that uses it as a primary means of exchange is guaranteed to fall far behind a society that uses an exchange mechanism that has less friction and higher portability. It's just foolish except in small-scale edge cases. If yeh live in a commune or a prison, have at it!

 

And as yeh say, yeh can always create a new currency. There's a couple new internet ones out there now I understand, tryin' to become iCash. That can work OK for a bit among people of goodwill, though typically such things are wildly susceptible to speculation or fraud by less commune-oriented business types. Essentially, they're a great way for smart people to fleece fools.

 

Beavah

 

[BS-87]

You've succeeded in convincing me of one thing.

 

Punishment through taxation can be useful, because a capital gains tax deters speculation and derivatives investments and actually offers the incentive to reinvest FCF into infrastructure instead of simple monetary gains.

 

This encourages investment in other businesses with real employees instead of becoming just another bunch of zeros a broker has to play with. That's an example of nonexistent wealth becoming real wealth and that's something that we should be making incentives for.

 

I still don't feel something like energy should be used as the measure of wealth.

 

At least we're both in agreement that the FED shouldn't be playing the role it's playing.

 

The only difference is you feel they can be limited to only monkeying with monetary policy. I think they cannot help themselves, especially the Keynesians, from making their role go deeper to affect economic environment. When you give an organization the power to have that profound a role, you cannot expect them not to.

[BS-87]

"There's a couple new internet ones out there now I understand, tryin' to become iCash. That can work OK for a bit among people of goodwill, though typically such things are wildly susceptible to speculation or fraud by less commune-oriented business types. Essentially, they're a great way for smart people to fleece fools."

 

Like BitCoins.

 

It sounds like the biggest argument you have against the gold standard is it makes running a society that revolves around debt (like ours) impossible.

 

What's so awful about forcing people to live within their means and not be able to borrow?

 

Sure Americans wouldn't be able to live as opulent of lives as they do now, and the wealthy would easily become far more powerful than the poor, but are those such bad things?

 

Since when is opulence admirable? And wouldn't realizing just how unbalanced the current wealth picture is force the citizens of the world to balance it out a little more? Would we even value things of traditional wealth if that was the case?

[Beavah]

Nah, my opposition to da gold standard is that

 

(1) the supply of gold is limited and the growth of gold supply (from mining) does not match the growth of the economy. That will create a deflating currency, which discourages investment. In other words, if da currency is tied to gold, and the gold supply is not growing as fast as the economy, then you're best off to hold on to the currency because it will become more valuable with time. So it's not worth taking a risk and investing it. This "hiding money in mattresses" deflation is what causes depressions.

 

(2) historically, the volatility of gold and other commodities has been much higher than the volatility of fiat currencies. High volatility makes a currency unstable and risky, and makes it hard for businesses or consumers to make business and investment decisions prudently. Yeh want a stable currency.

 

Nothing about the gold standard prevents borrowing, either by the government or private individuals. When we were on the gold standard, we still had banks and savings and loans, and we still issued corporate bonds and treasury bonds and municipal bonds. Leveraged borrowing while on the gold standard contributed to the Great Depression.

 

What you're talking about when you talk about forcing people to pay as they go is eliminating banking. Yeh can do that. Da Catholic Church did in da middle ages, though folks then went to Jewish bankers. All it gets yeh is a much bigger government and a lot more serfs.

 

Beavah

 

 

[JoeBob]

Beavah: "So while there's all this money around, it's only the bankers and brokers gettin' rich on shufflin' it and producing nothing, while unemployment stays high. One of those weird situations where yeh need to increase taxes to improve business investment and the general economy."

 

Gag.

 

The unfinished Financial 'Re-Regulation' bill, 2000 pages of bad health-care law, and a strangulating energy policy are the controllable reasons why the economy remains mired.

 

Oh, and people who think that taxing business generates more business.

 

 

[Beavah]

Hiya JoeBob, welcome to da longrunnin' discussion. BS-87 is a a fun fellow and good to debate with. Thanks BS-87!

 

I'm not sure I quite understand yeh, JoeBob.

 

What "strangulating energy policy" are you referrin' to? Da U.S. energy policy hasn't changed in da last 2-3 years, or indeed in the last 20. It remains as incoherent as ever.

 

I agree with yeh that the financial re-regulation bill is a complicated mess that fails to achieve in 2000 pages what depression-era laws achieved in 50. That's mostly because the banking lobby got a hold of it. But since it's barely into implementation, I don't think yeh can honestly blame it for the economy.

 

And da health care industry is about the only industry that has been actively adding jobs, eh? So much as I agree with you that the health law is another monstrous mess that will cost taxpayers money in the long haul, in the short haul it controls the deficit and hasn't harmed the economy. Heck, very little of it is in place yet.

 

So perhaps yeh can explain your thoughts in more detail.

 

Now answer me this. You are an exec in an American business and yeh have a mess of cash in the bank. You are evaluated based on short-term performance (quarterly and annual), and da accounting rules say yeh can mark to market. You can take that cash and invest it in a new factory, hire new workers, and increase production. That will take at least 5 years to see results from, and odds are yeh won't even be with da company then. Or, you can take that cash and go play the market. Da market is up almost 100% in da past two years. That's 40% profit per year, mark to market. Yeh don't have to produce a thing, yeh don't have to wait 5 years to see a big boost to your bottom line. And what's more? Da business capital gains tax is so low that yeh get to keep most of it. It's a much better investment for your stockholders than doin' something slow and pedestrian like increasing production and hiring workers.

 

When yeh look at policy and its effects, look at what gets incentivized, eh? Low business capital gains taxes incentivize trading rather than building, while low personal capital gains taxes incentivize saving and investing. There's a difference.

 

Beavah

 

[NealOnWheels]

So Beavah, how exactly does raising taxes improve business investment and the general economy?

[Beavah]

Hiya NealonWheels.

 

Answer da question in my last post startin' with "Now answer me this."

 

Capital gains taxes on corporations incentivize business growth (not taxed as capital gains) over playin' the market (taxed as capital gains).

 

In a similar way, taxes raised to improve common infrastructure increase business investment and the general economy. Businesses look for a well-educated and reliable work force and will invest in those areas. Infrastructure like da federal highway system or the GPS satellite constellation spurs business investment and innovation by reducing costs. There's a reason why business startups are strongest in da areas served by large public universities supported by tax dollars, eh?

 

Go to any town or small city and get a sewer map. I guarantee yeh that where the sewer system stops so does 80% of the business activity. Taxes to build or maintain common infrastructure or appropriately regulate commerce so as to minimize fraud are good for business, business investment, and the economy.

 

B

(This message has been edited by Beavah)