The government is already printing money

The government is already printing money

People tend to be uncomfortable with the idea of “the government printing money,” and given some ugly incidents with hyperinflation in recent history, this is understandable. But opponents  should consider that when the Federal Reserve buys government bonds, it is essentially providing a way for the government to print money and lend it back to itself, with the banks taking a cut, a process that has been dubbed “stealth monetization.”

So in fact this dreaded money-printing is already going on, and has been for some time. Even when the country was technically on the Gold Standard, there wasn’t nearly enough gold to exchange for all the dollars in the economy at the set rate of exchange.

So the question then becomes, not should we print money, because we already are, but why are we giving the banks a cut of it for doing essentially nothing?

And why are we letting the banks, through the Fed, control how much money is printed and what it is bought with it?

The Fed is the legally deputized agent of Congress in charge of the currency. Its authority comes from Congress and can be returned to Congress.

The Goals of the Money Revolution

The Goals of the Money Revolution

1.) End Central Bank control of the money supply

Whether this is done through Chartalism, private currencies, or some combination of the two, it must be done. Currency is the lifeblood of any modern economy, and it should not be controlled by a private monopoly. Either a public monopoly or a private free market of competing currencies is preferable to the current arrangement.

A Chartalist system will reduce or perhaps eventually even eliminate the need for governments to collect taxes, allowing business and individual tax rates to be lowered, stimulating the economy. The Money Revolution will be about creating new wealth, not redistributing existing wealth.

At the same time, the existence of competing private currencies will put a check on any excess money-printing by the government that is done for purely short-term political gain, as opposed to sound economic reasons.

 

2.) Create a robust social safety net, including Universal Health Care and a Basic Income, both as a moral imperative and to improve economic efficiency

Many of the regulations that impose serious dead-weight losses on the economy, for example minimum wage laws and the requirement that companies offer health insurance coverage, are only in place because the State is not fulfilling its duties with respect to the welfare of its citizens.

The American system of having companies act as government-subsidized welfare providers (for example through the tax deduction for offering health insurance) is dishonest and distorts the political dialogue in this country. It has established a “shadow welfare state,” where employed persons believe that they are receiving market goods in exchange for the value of their labor when they are really receiving state benefits in disguise.

Creating a robust social safety net, including a Basic Income, will remove the political pressure that sustains these costly regulations and the shadow welfare state that lurks behind them. Wages should be set by the free market, not government dictat, and requiring employers to offer health coverage places an undue burden on free enterprise.

A Basic Income in place of a minimum wage would dismantle the huge and coercive welfare bureaucracy. It would apply equally to all citizens, removing the disincentive to work which is inherent in the current welfare system.

Once the new system is in place, governments will no longer fear the consequences of allowing large corporations or banks to fold. Unemployment will simply mean the period in which one searches for a new job, rather than being a term of dread. The era of Too Big to Fail in which governments keep “zombie” firms operating for political reasons will be at an end.

 

3.) Establish a clear delineation between the duties of the private sector and those of the public sector

Markets work best in most sectors of the economy, but not all. Defense, infrastructure, health care and to some extent education are all public-sector duties. Markets have been shown to work poorly or to be extremely corrupting in these sectors.

On the other hand, agriculture, auto manufacturing and mortgages are clearly private-sector duties. The government should exit these sectors of the economy and let private markets function as they should. The massive corporate welfare that exists in these sectors is a drag on the economy and a theft from the taxpayer.

The prices currently seen in the equity and mortgage markets are political prices, not market prices. The destruction of the price discovery mechanism in these markets is incredibly harmful to the efficient functioning of the economy.

 

4.) Formulate a strong, consistent ideology that can implement and maintain these goals

Thomas Jefferson held that there was a “Wall of Separation” between Church and State in the Constitution, not just to protect the State from the Church, but to protect the Church from the State.

The modern economy needs a new Wall of Separation, this time between Market and State, to protect both entities from each other. Public financing for elections should be a critical part of this New Wall, as well as the development of laws forbidding the “revolving door” between government and the businesses it regulates.

Such radical changes can only gain acceptance if all parts of the political spectrum come to see them as necessary and inevitable. Advocates must present the Money Revolution to Conservatives and Libertarians as a way to preserve and extend the domain of free enterprise (which it is), to Moderates as a way to safeguard social stability (which it is), and to Liberals as a way to strengthen and protect social welfare (which it is.)

 

Could chartalism and Bitcoin could work together?

Could chartalism and Bitcoin could work together?

Chartalism, the idea that governments can create money ex nihilo unconstrained by anything other than inflation, and Bitcoin, an alternative currency with a strictly limited supply, are universally seen as being at opposite ends of the ideological spectrum when it comes to monetary economics.

I have a sneaking suspicion that this is not the case, and that the new economic and monetary system that will emerge will involve both a chartalist element and something resembling Bitcoin, if not Bitcoin itself.

This is merely a protoplasm of an idea in my head right now, not a fully thought-out position. But I know it involves separating what have been considered two of the essential features of a currency: Currency as a means of exchange, and currency as a store of value.

Right now all currencies try to fulfill both roles. But what if they were separated? What if a chartalist token served as the means of exchange, and a capped currency like Bitcoin served as the (inherently appreciating) store of value?

 

Capitalism is like nuclear power…

Capitalism is like nuclear power…

When nuclear power is properly contained, nothing can match its ability to create vast amounts of energy.

When capitalism is properly contained, nothing can match its ability to create vast amounts of wealth.

When not properly contained, nuclear power can spew toxic waste all over the landscape.

When not properly contained, capitalism can spew negative externalities all over society.

What is the proper containment vessel for capitalism? It can only be a strong and consistent ideology.

An ideology cannot be strong if it does not have emotional appeal. Therefore an appreciation of the “two faces of capitalism” leads to a defense of charisma and vision in politics.

My goal in writing the Money Revolution is to develop this ideology.