Currency debasement is kind of immoral, but not in the way you think
November 5, 2015 § 50 Comments
If you’ve followed along with my recent posts you now know that fiat currency (really any sovereign currency at all) is a kind of financial security issued by the government: a tax voucher which entitles the bearer to the settlement of tax liabilities. And since you understand what a financial security is, you grasp that the government has theoretically plenary power to issue fiat dollars against its balance sheet just as Google has theoretically plenary power to issue new shares of Google stock. This theoretically plenary power is in fact limited by practical and moral considerations though; and now that we have conceptually separated fiat currency from goldbug ravings and ignorant ‘hard currency’ rants and the like, it is possible to coherently discuss those moral limitations.
When the government spends fiat dollars it is ‘spending’ its own security that it issues itself. When it takes in fiat dollars it is acquiring some of its own securities from the open market and retiring them. This is not at all comparable to Google spending cash (a third-party security) and receiving cash: it is much more comparable to Google issuing new Google stock and buying back existing Google stock. Even when Google sells or gives out ‘existing shares’ that it is holding itself the ‘existing shares’ part is really just an illusion of accounting, from a financial perspective. Google qua company ‘owning’ a batch of its own shares financially nets to nothing: to Google holding a claim on its balance sheet against its own balance sheet. So every time Google itself gives out or sells shares of Google to a third party it is in effect actually issuing new shares, in every sense that matters here.
The same is true for a government “spending” its own sovereign currency. When the government “spends” it is issuing currency; when it “taxes” it is retiring currency. So to come to grips with the moral constraints on it doing so it can be helpful to think about the moral constraints on Google issuing new stock.
It is unhelpful and obscurantist to think about it as if taxing and spending were equivalent in any sense to a company receiving revenues and spending in the medium of a third party currency or security, despite the fact that this is how most people try to understand it. The moral constraints on Google ‘spending’ its own stock are not related to some amount of its own stock that Google is holding in a treasury or dragon hoard somewhere; and it is likewise not related to how much of its own stock Google has bought back from the open market in the past year or what have you. That kind of ‘budgeting’ is meaningless when the currency under consideration is Google’s own stock as opposed to third party securities. Capital stock isn’t a claim against some separate treasury or dragon hoard. Securities like stock and fiat currency are claims against the balance sheet of the issuing institution itself: the institution and its property and powers just are the treasury against which securities are issued.
Our discussion of usurious bank loans can perhaps help here. Securitizing something which is actually valuable, spending balance sheet capital on something which improves the financial state of the institution, is fair to the shareholders of the bank and external stakeholders. Securitizing wasteful nonsense or empty promises as if they were property is not.
If Google started issuing new stock (not Larry Page’s existing stock, which he holds himself and can generally spend as he pleases, but new stock issued by Google itself) willy-nilly to friends of Larry Page just so they could all have private jets, that would be a violation of fiduciary duty: an immoral consumption of Google resources. Doing so would dilute current shareholders and damage the balance sheet of the company for the sake of private consumption which does not protect or advance the interests of shareholders. This is, in a sense, ‘debasement’ of Google stock. As with many ‘line drawing’ problems it may be difficult as a third party observer to say where suboptimal competence stops and selfish cronyism begins; but the difficulty in drawing a precise line doesn’t imply that selfish cronyism is morally acceptable.
Likewise, when government officials “spend” fiat currency on things which are selfish or wasteful and do not advance the financial and other interests of the governed community that is also, every bit as much as securities fraud in private business, a violation of fiduciary duty.
One problem with the current situation is that we don’t have even the conceptual tools – from a financially realist perspective – to tell when the sovereign is damaging his balance sheet or whatever the equivalent ought to be for sovereign finance. And we will never develop those tools as long as we are caught between the Scylla of leftist desire not to understand the objective wastefulness of their initiatives and the Charybdis of willful anti-realist right-liberal ‘common sense’ financial ignorance.
Zippy Catholic 
Everyone’s wrong!
I’ve been saying this to high school students for a few years. Kids always ask why money has value. A few think it is somehow backed by gold, others go with the “collective illusion” hypothesis. I usually call our dollars a “get out of jail free card” or some such.
It seems to me that the undergirding value is trust. In a sense trust is a kind of third party currency which we each get to issue and circulate.
Who is trustworthy?
People value dollars because they can buy things with them. They can buy things with them, because people value dollars.
I’m confused.
That is true. But why dollars and not something else? Because every April you have to fork a bunch of them over to uncle sam. If you have no dollars, your going to have to sell all of your gold dubloons for dollars in a serious sellers market. Might as well save in dollars and dollar denominated securities throughout the year.
josh:
Also because, by law, a great many transactions (e.g. income, sales) have to be valued in dollars quantitatively anyway in order to determine the quantity of tax owed. You can buy and sell bread with gold if you like, but the baker qua commercial operation is going to have to figure out how that relates ‘officially’ to dollars and pay the tax that way anyway so it is far more convenient for him to insist on dollars (or other securities denominated in dollars, e.g. an electronic transfer of a demand deposit at a reputable bank).
So pervasive use of the government’s tax securities (and other securities denominated in quantities of government tax securities) as currency in general is driven by the government’s tax power, and all of the ways and places in which the tax power ‘interfaces’ with the economy. The tax power creates demand for government tax vouchers and ‘equivalents’ – liquid assets denominated in dollars – everywhere it connects to economic transactions or other taxable events/situations.
If trust–faithfulness–is the actual thing of value, then the conceptual tool “to tell when the sovereign is damaging his balance sheet or whatever the equivalent ought to be for sovereign finance” in a democracy is an election. (I suppose monarchs and despots could hold polls.) This supposes that people will elect (or poll) in good faith; which is doubtful.
Can two walk together except they be in agreement?
Can two trade together except they be trustworthy?
Maybe it’s because I’m a positivist liberal Protestant, but the more I understand (I think) your perspective, the more monarchy sounds like a silly trap, and the more (some form of) democracy sounds like the only sane approach to government; despite conservative attempts to escape from the messiness of natural human cooperation.
One way to think of government financially is as ‘owner’ of marketplaces. (I propose, as a clarifying exercise not a comprehensive model).
(Keep in mind that ‘owner’ in this sense refers to its authority which derives from its responsibility to steward the common good of the community: the government’s fiduciary duty qua institutional ‘owner’ is the common good of the community, not the selfish interests of any party either within or without government).
As ‘owner’ (steward) of particular marketplaces the sovereign issues tax vouchers in which taxable transactions must be valued and with which taxes must be paid. This makes those tax vouchers intrinsically valuable inside of the markeplaces that it ‘owns’ (or stewards), based on the economic activity within that marketplace and the tax law which governs it.
So in order to figure out what constrains things morally and practically in that kind of situation we have to first accurately describe it. And describing sovereign taxation and spending as if it were denominated in some third party currency or commodity actually obscures the real situation rather than elucidating it.
Sure, Disney Dollars or Starbucks coupons entitling you to a Latte or gold dubloons are also valuable; but as a practical matter sovereign currency is the easiest currency to use inside the sovereign’s domain.
Cane Caldo:
It isn’t. In the case of private balance sheets, property is the thing of value. In the case of the sovereign’s balance sheet we don’t have a model or even the conceptual tools to build one; but to try to reduce it to trust-faithfulness is a mistake.
Who does?
If the answer is “no one, but we act like someone does”, then how is it not trust?
Cane:
Not to pick on you, but this:
… is a near perfect expression of anti-realism. Property and financial performance are not a matter of objective reality and objective performance within that reality, but are reducible to the outcome of a vote. If the free and equal superman asserts X in a democratic election, then X is true.
Cane:
The answer is no one. But a bunch of lunatics raving and howling in the darkness of ignorance is not trust.
Reality doesn’t care if we do or do not have an accurate understanding of it. Failing to comprehend the tiger doesn’t stop him from killing you.
Zippy:
Ha! I don’t feel picked on, and I hope you continue to call it like you see it. Your blog has been very valuable to my thinking. I am happily guilty of Protestantism and positivism (according to your terminology).
I think I am an anti-realist in practice, but not theory. This is a shadow world, and however much we want to observe the real things throwing those shadows, we don’t unless it has been revealed.
Cane:
Hopefully you would still flee from a tiger.
Perhaps I am misunderstanding you because otherwise that’s an outright false claim. Most people, most of the time, expect those in government to know what they’re doing. That is the salt of the earth experience, and also dead-simple Zippyism, too…which I co-sign.
Farmer Bob expects his dollars to be taken in good faith by the government, and the shopkeeper, and the burger joint, etc. So do they all. Unless they are a bunch of men over coffee, beer, or blogs they aren’t howling about it. And in the end, they pay their tabs in meek cooperation.
Of course, but money isn’t a tiger. It isn’t anything like a tiger. They don’t even care about money.
Zippy:
Yes, but not a paper tiger.
Cane:
Perhaps you are misunderstanding. Modern anti-realist economic theories are all raving lunacy disconnected from reality. As far as I am aware there is no even remotely accurate theory of sovereign finances.
I have no idea what any of what you said has to do with that claim.
Well played rhetorically, but if you think the tax power and other financial realities are a paper tiger you should try ignoring them and see what happens.
[…] Source: Zippy Catholic […]
Zippy,
In Adam Smith’s The Wealth of Nations, he discusses sovereign finance of England to penny and shillings. Was he entirely mistaken?
To the extent Govt finance is a mess, it is directly atttributable to money-printing and other socialistic devices. Socialism is meant to obscure all economic calculation as it is well-known.
Zippy,
“, by law, a great many transactions (e.g. income, sales) have to be valued in dollars quantitatively anyway in order to determine the quantity of tax owed.”
Is this “in order to” in the law-books or your own invention?
vishmehr24:
The suggestion that economics is well understood (including sovereign finance) and that everything would be just fine if we bent our knee to some modern economic theory (which one?) is risible.
It is simple enough for folks to verify the veracity of my claim for themselves. Just fill out your tax forms using bushels of wheat as the metric rather than dollars, offer bushels of wheat to the IRS as payment of your taxes, and see what happens.
[…] bearer to the settlement of tax liabilities which he incurs in carrying out public commerce in the sovereign’s marketplaces. (More on the backward troglodyte financially ignorant medieval perspective on sovereign […]
Zippy, have you considered the morality of legal tender laws?
If it was merely a matter of the government issuing and retiring tax vouchers, we could view it as “render unto Ceasar..” People could transact with the government in dollars and then use an alternative currency in private transactions if they wished — except they can’t. As I understand history, contracts specifying payment in gold were rendered void by legal fiat. So imagine we’re in a situation where Google can not only dilute current shareholders by issuing more shares, but that they also have the authority to make everyone trade in Google shares whether they want to or not.
Purple Tortoise:
What I know about the history of legal tender laws you can fit in a thimble and still leave room for a finger. I imagine it is an inconsistent mess especially given gold’s history and the constant confusion surrounding the economic nature of both gold and currency. Nothing I say should be construed as a defense of the morality of some specific positive law or other.
But I know that barter is perfectly legal in non-sovereign currencies as well as in actual property, as I’ve done quite a bit of it myself. And my goal here is to describe the objective reality of these things as something distinct from how various parties – often including legislators and other officials – subjectively understand them. There may well have been and still be perverse laws based on misconstrual of sovereign currency as something other than a securitization of the tax power, just as there are laws legitimizing contracts of sodomite “marriage”. But perverse positive law doesn’t change the nature of the objects it references; it just introduces perversity.
Thanks for the response, Zippy. I raised the point because I think much of the fear of fiat currencies is misplaced and should really be directed at legal tender laws. I don’t know much of their history, either, but I do know that “barter” in gold and even ownership of gold was outlawed for several decades in the United States, and private contracts specifying payment in gold were abrogated by force of law. The point being that barter is legal only to the extent that it is not a widespread alternative to fiat currency.
I appreciate you raising it Purple Tortoise. IIRC we discussed legal tender laws briefly at W4 during one of the conversations about this general subject. I didn’t know much about them then and still don’t know much about them now — as a practical matter I’ve never encountered them as something I’d have to consider. My own thinking continues to refine over time, but the positive law is just one factor, and we can’t even tell what the positive law should be until we’ve got a good handle on the objective situation.
At least for myself qua metaphysically realist finance nerd, fiat currency is more transparent – easier to disentangle and view as its own thing – than securities which scramble the claims of the tax power up with commodities that people wildly over-value for irrational, subjective reasons.
FWIW I came to my present understanding of fiat currency through two main paths.
One was theoretical: the suggestion by MMT theorists that currency gets its value from demand for currency, not only supply, and that the significance of the tax power was that it produces demand for currency. (Like all modern economic theories MMT is anti-realist and crazy; but all of them also have some interesting insights worth considering). In addition to the insight itself this immediately reminded me of corporate equity, and also highlighted that sovereign currency is a security which is not denominated in another currency. Securities can be roughly divided into indirectly valued and directly valued, that is, those which contractually fix their obligations in terms of other securities and those which do not. I’ve paid for services, rent, labor, property, etc with equity instead of cash-or-equivalents plenty of times, which leads to the second path.
The second, without which the first would be theorizing disconnected from reality, was to ask myself qua portfolio owner/manager why I ever hold currency. (I ask this question about every asset or investment, of course: all assets have to justify their presence in a portfolio; and cash, money market funds, etc are no exception. Any security that doesn’t entitle me to anything specific would be a ridiculous thing to own). Setting aside the requirement to pay taxes in it, currency and things like basic checking are a useless and unproductive asset. So the answer is that I hold actual cash – usually for very short term only – so that I have something to give to panhandlers when they ask, and that I engage in transactions in cash-denominated securities rather than other securities everywhere that the tax power interfaces with the economy — where I have to pay sales tax and income tax, mainly. Now I do sometimes own other securities denominated in cash (bonds, for example), but lumping together all securities denominated in cash with cash is an amateur mistake.
What matters is not how much cash a portfolio would produce if liquidated; what matters is how many houses, loaves of bread, cars, gigabits of bandwidth, etc it would buy if liquidated. Dollars as a fleeting intermediary – in order to calculate taxes – are basically meaningless in terms of evaluating the true value of a portfolio of property. I think I mentioned before that there is a financial index which values things in terms of how many Big Macs can be exchanged for it, because Big Macs are more ubiquitous internationally than dollars.
How things would adjust if people in general stopped being crazily irrational about them is an interesting question. But I always try to keep in mind that perception and reality often differ: an insight worth considering from a different insane anti-realist modern economic school is that the market can remain irrational much longer than I can remain solvent. But if the securities I own represent claims to actually existing property with real value, then short of the zombie apocalypse I’ll still be able to eat.
I’m still confused and I have an MBA.
Why the heck do these little rectangular pieces of paper have any value at all if they’re backed by nothing?
The only answer I can see: You have to pay the government taxes with those funny green pieces of paper. So you had better get some if you don’t want a man with a gun to take away your freedom of movement.
Ok, fair enough.
But if that’s the primary value, then we horribly overvalue those green pieces of paper, since most people make waaaaaaaaaay more than that needed just to cover their taxes. And everyone would riot if I dropped several thousands of these pieces of paper with Ben Franklin’s picture on it in a crowded city.
So I’m still missing the why here, other than the “it’s turtles all the way down” argument. Which is highly unsettling, to say the least.
It also implies that if the government changed their standard for paying taxes to, say, Russian rubles overnight, that these little green pieces of paper would be…. largely or completely worthless (depending on what other economies clung to the USD standard, if any).
That won’t happen of course, but it’s incredibly disturbing because it shows the frank reality: There’s really no intrinsic worth in dollars. At all.
When the US went off the gold standard by contrast, there wasn’t this rush to dump gold because… well, gold HAS intrinsic value.
Thoughts/objections welcome.
orthostrov:
That depends on what you mean by ‘intrinsic’. There is no intrinsic worth to the title to your house — other than that it entitles you to your house. Its value is ‘intrinsic’ in the same sense that anything can be ‘intrinsic’ to a legal entitlement or contract. As someone with an MBA, surely you can see that this is true of securities in general. Securities represent an entitlement to something other than the paper on which they are printed.
Right. Just as, if the government declared that the title to your house no longer entitles you to your house, the title to your house would be worthless. People might irrationally cling to the idea that invalidated titles are still worth something and trade in them, of course. But that people may and often do make irrational choices based in misperceptions of reality is hardly breaking news.
It would probably be unjust for the government to do that, of course. But in order to understand what it would be just or unjust for the government to do with securities we have to actually grasp what those securities actually are and are not in the first place.
By the way, this:
… suggests that sovereign currency and gold are de-facto independent even when they are dysfunctionally conflated with each other by people who don’t understand what they are doing.
Also, this is tendentious:
A less tendentious way to look at it is that if you are going to buy and sell goods and labor in the sovereign’s marketplaces under his protection, you have to pay the tolls; and those tolls are levied in the sovereign’s currency, so you have to acquire some of the sovereign’s currency in order to pay them.
That isn’t a defense of all taxes, of course. I’ve argued that property taxes are intrinsically unjust, for example. But the tendentious view of taxes as theft by men with guns is utopian libertarian crap.
I think you misunderstood me on the “man with a gun” comment, so I’ll try to explain. Or perhaps you understood me completely well.
I don’t see taxes as theft. The Bible and the Church Fathers are pretty clear that governments have the right to taxes.
I was just stating the obvious: Even if you see zero value in little green pieces of paper, you’d better have some to pay your taxes or you will be incarcerated.
It’s why those dollars have value. If the government was willing to be paid in gold or silver or McDoubles, then there would be less demand for dollars. If they were willing to be paid in anything of value (chickens, goats, whatever) then they would have very little value except to those who valued the simplicity and portability of a wad of paper vs. dragging, say, a live animal in to pay what they owe to the government.
As for ‘intrinsic’ value, I should have used a different word although I can’t think of what that word would be at present.
The point is that the title to your house, or the title to your car, has some value: it defends your right to own that piece of property.
It’s value, however, is limited to defending your right to that property. It is not equivalent to that property. Try to ride your car’s title to work, or to grow vegetables on the title to your house. So it’s really more like an insurance policy than anything.
But dollars aren’t worth anything.
I read your article criticizing the gold standard, but at least the gold standard had one thing going for it: the dollar was a true derivative. It derived its value from the fact that you could exchange it for (silver? I think?).
Even if dollars today could be exchanged for, say, 0.0001 acres of farmland in Nebraska, they’d have some underlying value.
All you can do with a dollar is 1) “Pay all debts, public or private” – which is a pretty big thing, I admit and 2) Exchange it for…. another dollar.
So it’s really backed by the strength of the US Government and nothing else.
I’m much better with practical than abstract problems, and (fiat) money strikes me as one of the more abstract things in life. The anecdote often retold of a victim of theft in 1920s Germany, wherein his wheelbarrow full of Deutschmarks was stolen…. after dumping out all the worthless Deutschmarks… is Exhibit A in my (blown) mind.
orthostrov:
Only if you trade in the sovereign’s marketplaces. (Or own property, but I’ve argued elsewhere that property taxes are intrinsically unjust.)
So this is no more notable than that trespassers may be shot.
False. They represent the extent of the bearer’s entitlement to trade in the sovereign’s taxable marketplaces. If you have enough of them to pay the taxes/tolls corresponding to your transactions in the sovereign’s marketplaces, you are entitled to do that much trade in his marketplaces.
This is not especially more (or less) abstract than the entitlement to sit on your front porch represented by the paper title to your house. I think folks are just used to thinking about sovereign currency as something that it is not.
Maybe I’m being dense, but I can’t see your point at all.
If I withdraw from the marketplace entirely, I still have to make a living. If you’re saying I have the right to starve to death, that’s well and good. But even barter is subject to taxation under US Tax Law, so unless I can make everything I need, I’m subject to the use of dollars whether I’d like to or not. And no man is an island.
Therefore, I cannot just “opt out” and live a very simple life without being a scofflaw.
Am I missing something here?
On top of that, I acknowledge your position that property taxes are unjust, but they exist and have been affirmed by the sovereign (to use your term) currently in place.
I have to pay a few thousand dollars per year to occupy the home that I ‘own’. As a result, I cannot just refuse to partake in this system either unless I want to be homeless with a wife and 7 children.
As for the dollars being worth something, if every shopkeeper tomorrow refused to accept dollars, they would have no (or very little) underlying value.
“All debts, public or private” are true debts – there is no debt currently owed to the grocery store or the clothier, and theoretically the gas company could install a meter requiring me to pay before being able to heat my home (although today that is truly a debt, since they bill me at the end of the month) and thus require payment as well.
orthostrov:
Right. Most people basically have to participate in the sovereign’s marketplaces and be part of a community which transcends themselves and their private property claims. Or emigrate to some other community, where the nature of things is the same although the particulars vary. Most people have to grow up subject to their fathers too, and other authorities and communities besides.
Reality is positively feudal, isn’t it?
But going from there to ‘dollars are uniquely worthless and abstract’ is where your logic goes off the rails. Dollars are no more (or less) worthless or abstract than the title to your house or car.
Zippy:
Is it your understanding that what we experience in the physical world is less-so than what exists in some Other Place (The appearances of things are shadowy here in comparison to Other Place; they taste less here than in Other Place; the smells are duller here than in Other Place; sounds are more muffled here than in Other Place; they are less solid to the touch here than in Other Place)?
I have no objections at all to a society based in subsidiarity. I have even less objection to submission and respect to property authority.
I just have a hard time understand money today. And I’m not exactly an idiot.
The fact that money is now available for *nominal* (not just real) negative interest rates in several places in Europe just blows my mind and would make precisely zero sense in a society backed by ‘money’ that had a real value independent of what you or I or my Mom thinks it is.
I guess I’ll just have to ponder it some more.
The title to my car isn’t abstract at all – it very explicitly says “Hey orthostrov, that 1992 Toyota Corolla is yours. And our government will back you up if someone says that it’s not and put them in jail if they try to take it from you.”
The dollar says….? I don’t know. I can’t eat it. Other than poor origami, I can’t make anything desirable out of it. I can burn it for fuel or write on it. But if society collapses, or the sovereign declares that it will no longer accept it for debts already in place, it’s materially not worth anything, unlike wheat or cigarettes or gold or silver or arrowheads or anything that has naturally developed as money over the years, because of those things’ real value independent of whatever someone else says it has.
That’s the real sticking point to me.
orthostrov:
Why is deflation in the value of a security intrinsically counterintuitive?
That you (the bearer) are entitled to make a transaction, in the sovereign’s marketplaces, for which one dollar is the tax.
If society collapses then the title to your car is also not worth the paper upon which it is written.
Cane:
No. I am not a ‘strong Platonist’. I might be convinced of the veracity of such a view if the ‘World of Forms’ was taken to be the Divine Ideas.
But I don’t have to float around in an embrace of the clouds of strong Platonism in order to reject metaphysical anti-realism.
As a metaphysical realist, my understanding is that reality is not reducible to nothing but the purely subjective perceptions, desires, and projections of human beings.
This understanding extends into the world of property, where I understand property and economic value not to be reducible to nothing but the purely subjective perceptions, desires, and projections of human beings. So the idea of a house is not the same thing as an actual house, and burning down a house in itself consumes economic value it does not create it. (It may well make way for building something better as an additional action; but as a metaphysical realist it is possible for me to distinguish between destroying valuable things and building or growing them).
I understand and agree with this, but it seems that there is some dimension to reality upon which we do not agree; some “matter” of reality in which you believe, but I cannot. Are you saying there is a “matter” of reality that is literally and totally imperceptible?
Cane:
Lets look at how we arrived at this line of questioning.
Earlier in the thread you said:
I replied:
I then later characterized your original comment as anti-realist.
I understand you to be proposing as a conceptual tool that economic value is reducible to trust and that whether or not the sovereign is financially damaging his balance sheet is not a question of objective fact, but is up for democratic vote. That is, the subjective perceptions of a majority of voters determines whether or not the sovereign is damaging his balance sheet (or whatever its equivalent happens to be).
Maybe that isn’t what you meant, but it is what I took you to mean in the bit that I just quoted.
I reject this because I am a metaphysical realist. Objective reality – including the objective reality of whether or not and in what way the sovereign is damaging his balance sheet – is not irreducibly determined by vote. People can affect reality by their actions, of course, but reality – including financial reality – is not reducible to nothing but human desire, perception, will, or any other subjective factor or combination of factors.
If the sovereign’s actions are in fact financially sound, a raving ignorant mob cannot make them unsound simply by voting that they are unsound.
What any of that has to do with your latest line of questioning is obscure. I’m not a Kantian, so I don’t believe that things-in-themselves are noumena which are impossible to perceive or apprehend, if that is what your latest question is asking.
But I’d also call a point of order and ask just what in the name of Zeus’s various orifices that has to do with the subject matter of the thread.
Zippy:
I proposed trust as a conceptual tool “in a democracy”.
Here’s my thinking: I take it as foundational Zippy 101 that a democracy is convoluted by cognitive dissonance which produces one absurdity after the other because it is not ordered from top to bottom. In the case of sovereign currency in a democracy, this absurd product is sovereign currency without a sovereign.
On the surface, it would seem like the question is why/how we value what we value in a dollar. But your argument is that the value is derived from the sovereign over his taxes and his market. But who’s the sovereign here? If there isn’t one, then that would be the problem, right? In that way it fits with your overall criticism of anti-authoritarian politics/philosophy.
Questions about the intrinsic value of the sovereign currency are about the sovereign; not the currency. So who is the sovereign of American (democratic) dollars? That’s the question.
I proposed that the valued thing (perhaps absurdly) is trust because there is no discernible sovereign; not necessarily because I think that is the way things should be, but because there’s nothing else there. It’s possible, I think, that you are right about sovereign currency and its reality, and that others are right about American currency’s unreality…because democracy.
1. To understand what you mean by “real”. It’s my belief that if I succeed, then I’ll understand what you mean about a whole bunch of things; including sovereign currency.
2. I like Zippy, and am fascinated with his answers.
Cane:
I would say that about liberalism. But democracy is a procedure, not a political metaphysic. I believe I’ve mentioned before that illiberal democracies (and liberal monarchies) are possible. The two are not unrelated but they are also not reducible to each other. But in any case I don’t think any of that has much to do with my understanding of sovereign currency, because my understanding of sovereign currency applies to all polities in which the sovereign acts as steward over marketplaces, not just illiberal ones or what have you.
As far as my discussion of ‘sovereign’ goes, I am not referring to the structure of governance; just governance. “The sovereign” is like “the company” or “the farm” or “the village”. It doesn’t necessarily mean a particular man nor does it imply a particular structure: it means the authority which rules, and in particular in this discussion, which rules marketplaces and levies taxes within them.
When I refer to ‘reality’ I mean the thing that modern people pretend to disbelieve in until you hit them with a rock.
Zippy:
Noted. I meant a liberal democracy; as in the USA.
How is this authority authenticated?
Funny, but wrong. You could hit people with rocks until your arm falls off and the real value of money won’t become any more apparent to them.
Cane:
And yet the tax man’s rock used against the tax evader in the sovereign’s marketplace is every bit as solid as the property owner’s rock used against the trespasser on the owner’s property.
[…] that banks turn into currency […]
Yes Kidd, it is a virtuous cycle, and if that faith is ever broken, the result is called hyperinflation: prices explode exponentially because people try to spend their money as soon as they get it because they do not trust that it will retain its value. If they can, they will avoid dealing in the collapsing currency at all, replacing it with either another currency, a commodity, or barter.
[…] [UPDATE: see also this more recent post.] […]
[…] transparent and honest than gold backed dollars here. I explain why currency debasement is immoral here. I explain that banks only ‘create money’ because of usury here, where I include an […]
[…] stupid and destructive it is. (It does not follow that ‘currency debasement’ is never immoral, of […]