Wednesday, March 30, 2011

Working on economics post...

... and alas, ran out of time today due to end-of-quarter crunch at work. Anyhow, your homework: Answer these questions:

  1. What is money?
  2. What is a market?
  3. What is capitalism?
  4. Why are banks necessary for capitalism to work well?
  5. When you deposit your money in a "savings account" at a bank, what are you actually doing?
That should get you started :).

-- Badtux the Busy Penguin


  1. Thanks to Robert Heinlein, I can answer #1: A unit of exchange that the government will always accept as taxes.

  2. Glib, Nang. Heinlein was a Libertarian before it was fashionable. Libertarianism was horse shit then, and it's horse shit now.

    1) Money - medium of exchange, store of value, unit of account, something else I can't remember . . .

    2) Market - a theoretical place where goods, services, equities, labor, or anything of real or perceived value can be exchanged for something else of perceived value, like money, frex.

    3) Capitalism - a system that uses markets to distribute value-added items (of goods or services) produced by business persons for the purpose of generating a profit.

    4) Why banks - a capitalist needs funding in advance of receiving generated revenues in order to cover ongoing expenses. Banks extend credit for that purpose. The farming analogy is seed money.

    5) Savings account - a loan to the bank. This provides funds for the bank to loan to capitalists.

    Counter-assignment: compare and contrast capitalism and modern corporatism.


  3. 1) Don't know, I never have any.

    2) Place where I try to trade a few meager possessions for day old bread and wilted produce.

    3) The art of striking off the head of a traitor with one blow of the axe.

    4) This is a rhetorical question, right?

    5) See the answer to #1

  4. Glib? Me or Heinlein?

    I see you have a problem with him, but is that definition wrong? I said "unit of exchange" you said "medium of exchange."

    The government accepting it in payment for taxes is an acid test that any "money" must pass.

  5. Money is debt. Seriously.

    Watch the video. It's a cartoon. Really simple, but factual. You'll never think the same about money again. What you think of as money is actually an IOU from the Federal Reserve, which is neither federal nor has any reserves. Their money is all a fiction. We use it every day, but at heart, it's a lie.

  6. Funny, Bukko, the person who accepted my $5 in exchange for a sandwich at Subway didn't seem to think my money was a lie. Yes, the Fed prints money by buying (sometimes) fictitious debt obligations in exchange for freshly printed money. But it'd be no different if they simply dropped money from helicopters over depressed neighborhoods, money is money, regardless of what legal fictions you're using to print it.

    Yes, we do have a fiat currency that in and of itself has no intrinsic value. But it is a "lie" only in the same way that any token is a "lie" -- as long as it can be exchanged for things that *do* have actual value, it is useful and thus no more a "lie" than these 0's and 1's in this computer, which you're accepting as having value by the simple act of reading them and giving meaning to them. Similarly, the sandwich artist at Subway gave my money meaning by accepting it and exchanging a sandwich for it.

    As for the MMT types, they're only one step removed from the gold bugs. The gold bugs say paper money has no value and thus should be eliminated. The MMT types say paper money has no value and thus should be printed with abandon. Which is a reasonable thing to do at the present time, when we have slack resources that said freshly-printed money could mobilize into the economy, but the MMT types basically say that printing more and more money is *always* the right thing to do. Which is nuts, we tried that in the 1970's and it did not work...

    -- Badtux

  7. Nang -

    OK - deep breath - slow down. I have no problem with either you or Heinlein. I've been a big fan of his for decades. Unlike Ayn Rand, he could both write, and tell a story.

    Note, I did not disagree with you or his glib statement

    But - he was a libertarian, and libertarianism was, is, and always will be horse shit.



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