Seeds of entitlement planted on fertile ground

September 30, 2016 § 33 Comments

Entitled Eddie: “It is terribly unfair that inflation erodes the purchasing power of bank deposits.  A dollar today just doesn’t buy what it used to buy.”

Realist Rob: “If the basic problem is inflation – that the purchasing power of other property is rising relative to the value of bank deposits- then why not put your savings into other property like mutual funds or company stocks?”

EE: “Most people don’t understand mutual funds or company stocks.  They just want to keep their cash in the bank and maybe earn a little interest.”

RR: “Anyone who thinks that bank deposits are cash doesn’t understand bank deposits.”

EE: “You can’t expect everyman to grasp esoteric financial arguments.”

RR: “So everyman is entitled to freely purchase and hold a financial security as his long term savings plan: a financial security that he doesn’t understand and about which he has done no due diligence; a financial security about which vast amounts of information is readily and publicly available; and he should be protected by the government from the consequences of his own free choice of what property to buy?”

EE: “But if he buys other property it might lose purchasing power relative to bank deposits. It is the government’s responsibility to keep the purchasing power of dollars stable over time.”

RR: “So it is a terrible injustice that everyman’s long term investments (savings), which he freely chose to acquire and keep even though you admit that he hasn’t bothered to do the work required to properly understand what he has bought, in the context of a vast array of options and a vast body of public information explaining different investment options, might lose purchasing power? Do you also feel that getting older or getting sick or catching an unlucky break or getting in an accident or doing something stupid is an injustice which must be remedied by the government specifically as an injustice?”

EE: “It is terribly unfair that inflation erodes the purchasing power of bank deposits.  A dollar today just doesn’t buy what it used to buy.”

 

 

§ 33 Responses to Seeds of entitlement planted on fertile ground

  • orthostrov says:

    Zippy, love you man – your articles on usury are amazing – but for some reason you have as much compassion for folks whose IQs are under 120 as sedevacantists do for mainstream Catholics.

    God has a pretty dim view on defrauding workingmen of their wages, the oppression of the poor/widows and the like. Probably because He realized that there would always be men who would try to use their intelligence to create usurious and fraud-laden systems to create wealth. That you can take these concepts and pretend that they’re really just an entitlement mentality smacks the gob out of me.

    There’s a book somewhere with some really interesting information on this…. name escapes me at the moment. Think there are some good Proverbs in there on this.

    As an aside, I’m not sure why traditional Catholics are so eager to embrace the (incorrect) Protestant work ethic position on this topic – if only those idiots would invest in a sensible asset allocation of stocks, bonds, REITs and cash… hedged appropriately for the impact of non-dollar-denominated securities & maximizing alpha. So, so simple. But they’re just a lazy lot who deserve the oppression, er, natural consequences they get.

  • Zippy says:

    orthostrov:

    God has a pretty dim view on defrauding workingmen of their wages, the oppression of the poor/widows and the like.

    Yes. And middle class entitlement when it comes to the preservation of their wealth hurts the poor the most. It certainly doesn’t hurt the rich.

  • orthostrov says:

    Nothing hurts the (working) poor more than inflation.

    If you’re making $8/hour today and getting no raises while the value of that $8/hr continues to decline, how exactly do you see this as not being a form of theft against the poor?

    I’m not sure why you resent the middle class for not wanting to be poor. In many cases, they are just one job loss away from being poor themselves.

    It’s not senior analysts making $65K a year who are oppressing the poor – they’re also being sinned against, albeit not exactly at a “cry to heaven for vengeance” level. Yet.

    That giant sucking sound is all the net wealth floating from poor and middle classes to the banked (rich) class who make money using inflation as a lever.

    There isn’t even any controversy on this point – talk to just about any (upper class) banker and they’ll tell you that inflation and its big brother, fractional reserve lending, is absolutely critical to the health of the banking system… and by extension their personal wealth & success.

  • Zippy says:

    orthostrov:

    Nothing hurts the (working) poor more than inflation.

    The poorest of the poor can’t work, and the ‘nothing’ business is histrionic. Beyond that, the same sort of folks who feel entitled to a constant purchasing power for dollars tend to be against a minimum wage which rises with the cost of living.

    I’m not sure why you resent the middle class for not wanting to be poor.

    I don’t.

    In many cases, they are just one job loss away from being poor themselves.

    Been that, done there. When that was my situation myself I didn’t have any savings, so inflation was mostly irrelevant.

    That giant sucking sound is all the net wealth floating from poor and middle classes to the banked (rich) class who make money using inflation as a lever.

    You might consider the possibility that your “I’m not sure why you resent…” remark was projection.

  • Zippy says:

    I suppose it is factually true that I’ve never really been middle class – defined as those with modest income and a net worth / savings building credibly toward retirement – as an adult. Financially I went from two paychecks away from an eviction notice with a small family to being able to buy several suburban houses with cash, with enough left over to pretty much never work if I didn’t want to, in less than a year’s time. Though of course I had been working toward that outcome for years, and was blessed by Providence.

    The notion that my personal background makes me lack empathy and disqualifies my understanding is one view. An alternative though is that my outsider’s perspective makes it easier for me see things that folks swimming in the soup don’t see.

  • orthostrov says:

    I certainly wasn’t implying that your experience disqualifies you. That would just be silly – Either one of us could be correct independent of whether we’re both rich, both poor, one of each, middle-class, etc.

    Given your response, I *am* suggesting that you’re demonstrating a common attitude in far too many financially-independent people: a struggle to relate or empathize with those who live paycheck-to-paycheck or those who are a few paychecks away from crisis, and to suggest that any financial issues related to an inflationary system where the cards are stacked against them are Entitlement rather than sins that cry to heaven for vengeance.

    Realism, as you’ve defined it, is the Realism of the top 1% who have no worries about inflation. And more power to you – nothing inherently wrong with making money if it’s not the obsession of your life.

    That said, I can’t see any rational line of thought wherein saying “Hey Zippy, you’re a pretty smart guy, but you seem to have a blind spot when it comes to systemitized monetary inflation, which is obviously sinful, that makes you look like you just don’t care about most working & middle-class folks in opposition to the Bible, Catholic dogma & the Church Fathers” translates to “I am just projecting my contempt for the working poor in my personal bourgeois self-centeredness and really am just angry that I can’t be rich myself.”. (If I’ve misunderstood your projection comment here, please let me know.)

  • Cane Caldo says:

    @Orthostrov

    God has a pretty dim view on defrauding workingmen of their wages

    […]

    As an aside, I’m not sure why traditional Catholics are so eager to embrace the (incorrect) Protestant work ethic position on this topic

    I’m just a dumb and greedy Protestant, but wages is not a synonym for purchasing power.

    An agreement, made at 8:37am on the 27th, to trade one hour of labor for eight USA coupons IS NOT an agreement to trade one hour of labor for the purchasing power of eight USA coupons as it was recorded at 8:37am on the 27th. And anyone who is not capable of understanding that isn’t worried about it in the first place. Such a man doesn’t look at his bank account on Tuesday and say, “Sonuvabiscuit! He paid me Tuesday’s wages for Monday’s work!”

    The wealthy in brains or money should have sympathy on those less fortunate, but that’s not what the OP was about.

  • Zippy says:

    orthostrov:

    I *am* suggesting that you’re demonstrating a common attitude in far too many financially-independent people: a struggle to relate or empathize with those who live paycheck-to-paycheck or those who are a few paychecks away from crisis, …

    I lived paycheck to paycheck as an independent adult for 21 years myself, 17 with responsibility for not just myself but a family. The idea that I can’t relate to that situation is risible.

    That said, concern trolling about my putative lack of empathy isn’t really relevant to the subject matter. It just clutters up the thread.

    Realism, as you’ve defined it, is the Realism of the top 1% who have no worries about inflation.

    No, realism is rejection of subjectivism and physicalism, not a relativism of the rich (or relativism of the entitled for that matter).

    Cutting away from all the fun and games in criticizing Zippy’s supposed lack of empathy and back to the actual subject matter, the only substantive objection I can find in your comments after filtering out all the ad hominem is this:

    systematized monetary inflation … is obviously sinful

    This is actually very far from obvious, even with the ‘systematized’ qualifier.

    In fact from my perspective it is far from obvious that the sorts of people who say things like that even grasp what the words they are using actually mean in reality. I have yet to encounter someone who says things like that who grasps what bank deposits are (and are not), what fiat currency is (and is not), and even what inflation is (and is not). Furthermore, there seems to be absolutely no awareness of who inflation does and does not harm (in the sense of real financial detriment) and the precise reasons for that harm or non-harm.

    So if someone proposes a statement like ‘systematized monetary inflation is sinful’ I am willing to discuss it, once they have demonstrated enough of a grasp of the concepts involved to actually discuss the matter substantively.

    But “obvious” doesn’t cut it.

    (NB I have explained myself why some kinds of ‘money printing’ are morally licit and other kinds are not).

  • Mike T says:

    The notion that my personal background makes me lack empathy and disqualifies my understanding is one view. An alternative though is that my outsider’s perspective makes it easier for me see things that folks swimming in the soup don’t see.

    But it does make it harder to see the kernel of truth in EE’s argument which is that inflation can be an injustice. It is unjust to use the printing press as a way of papering over a budget deficit that is 25% of more of the tax revenues simply because the authorities don’t want to come to a responsible solution that involves them living within the funds they raised through lawful taxation.

  • Mike T says:

    Or rather, makes it harder to appreciate that kernel of truth.

  • Zippy says:

    Mike T:

    … inflation can be an injustice …

    The qualifier ‘can’ isn’t an objection to what I wrote, it is a concession to it.

    It is unjust to use the printing press as a way of papering over a budget deficit that is 25% of more of the tax revenues simply because the authorities don’t want to come to a responsible solution that involves them living within the funds they raised through lawful taxation.

    That statement demonstrates a complete lack of understanding of what is happening financially when the government taxes and spends in its own currency.

  • Mike T says:

    The qualifier ‘can’ isn’t an objection to what I wrote, it is a concession to it.

    It wasn’t an objection.

    That statement demonstrates a complete lack of understanding of what is happening financially when the government taxes and spends in its own currency.

    I believe you have said that taxation is akin to a recall and destruction of currency each year. That might be the case, but it is also the case that the government accepts bank deposits–which are not sovereign currency–as fungible with sovereign-issued currency for the purpose of paying tax debts. So the exact state of the money supply is a bit of a hot mess in our society.

  • Zippy says:

    Mike T:

    I believe you have said that taxation is akin to a recall and destruction of currency each year.

    Not precisely, but I’ll give you points for having read it.

    Also, all government spending is issuance of new currency, financially speaking: it is not spending of revenues previously received and stowed away somewhere. The idea of ‘balancing the budget’ – matching government revenues to expenditures – is financially meaningless: it is like saying that when Google issues the same number of shares that it retires in a given year it has achieved a ‘balanced budget’ for that year.

    it is also the case that the government accepts bank deposits–which are not sovereign currency–as fungible with sovereign-issued currency for the purpose of paying tax debts

    More strictly speaking, the government allows a reputable bank to assume your tax liability on your behalf.

    … the exact state of the money supply is a bit of a hot mess in our society.

    It is hard to say what the reality is. None of the generally accepted definitions of ‘money supply’ used by economists are even remotely unequivocal, let alone financially meaningful. Mostly it is just shaman reading the entrails. As I’ve said before, the kind of management and financial accounting we would need to understand what is really going on in government finance doesn’t even exist conceptually.

  • orthostrov says:

    Zippy, since you either 1) truly believe I’m slamming ad hominems around and/or concern trolling(??) OR 2) are doing some heavy-duty trolling yourself, I’ll just bow out at this point.

    Cane, if you are happy to have your paycheck show up in 2 weeks only to have been hit by Zimbabwee-like inflation in the interim, then have at it. Good luck feeding your kids (if you have them).

    If that happens to me, I’m going to be Zippy-Certified Entitled(TM) and state that I was defrauded.

  • Zippy says:

    I’ll just point out that hyperinflation – the sort that makes a material difference in the buying power of a paycheck over a 2 week period – is a change of subject, and isn’t exactly good for anyone.

  • Mike T says:

    More strictly speaking, the government allows a reputable bank to assume your tax liability on your behalf.

    Strictly speaking, perhaps. In reality, policy makers and the IRS actually think of the deposits themselves as dollars in a literal sense being issued to them. That’s one of the things that makes this such a mess. The sovereign issuer doesn’t even really grasp the nature of its own currency and relationship with other things that are considered fungible insofar as they are “money.”

    One thing I suspect is at play here is that fractional reserve banking + the shenanigans the banks have been permitted to play with usury has a force multiplier effect on whatever currency issuing the government does above and beyond its tax revenues.

    So where the government might only increase the currency supply 20%, by the time that 20% works its way through the banks’ labyrinth of financial corruption, it has the effect of increasing the “money supply” by at several times that, if not one or more orders of magnitude.

  • Zippy says:

    Mike T:
    Still, though, fiat currency is issued as a one time transaction claim against the taxable US marketplaces (like “mouse groats” in this post); and we have absolutely no way to measure their value — we don’t even have a unit of measure, because you can’t measure dollars in units of dollars — let alone to analyze the characteristics and health of the balance sheet (or whatever is analogous to it) against which they are issued.

    So even the vague claims you are making about multipliers and such in a not-well-defined money supply are really just a story.

    It isn’t really that I object to your particular account of reality. It is that I am quite certain that it is not possible for you to even have an accurate account of reality. I object to the assumption that it is even possible for you to be giving an accurate account of reality, whatever that account may be.

  • Zippy says:

    As for what various officials think they are doing, that is all over the place. And largely irrelevant.

  • Alex says:

    Zippy, I think I have mostly understood what I’ve read you say about currency, inflation and the like. But one thing is a bit murky to me.

    Well, I think the comparison between currency and shares help. But one aspect I am having trouble understanding is what exactly is being promised in the currency.

    When we are talking about shares, you are being promised dividends of the issuing company’s profits. Now, this promise is a bit fuzzy, given that companies can issue new shares.Your actual share of the profit can become smaller as time goes by. But, at least as far as I understand, what you are entitled to by a share is something more or less definite. You get a piece of the profits proportional to the number of shares you have and inversely proportional to the total number of shares that there are.

    However, what exactly does currency entitle you to? I understand you have a promise of the government to accept the currency as a way to pay your taxes. But shouldn’t there be some kind of promise over how much those taxes will be? I mean, there are promises about their values, but it seems that those promises are made over the dollar value of transactions… which seems to be self-referential and lead nowhere? Or maybe we have to consider that the calculations of today’s taxes are made over yesterday’s evaluations (so you don’t end up in an infinite self reference). It also seems to me that having a minimum wage set in law somewhat bases the currency more in reality. though I am not sure.

    Anyway, I am a bit confused about this and I was hoping you might be able to help me understand better how currency derives its value.

    @Orthostrov

    I began to agree with Zippy on this when I started to see the government as the steward of the nation’s wealth (among other things). A nation’s currency isn’t some kind of impartial measure of value, but is very linked to the ensuing nation’s well being. In a way, by living in a nation, using it currency and paying its taxes, you are “investing” in that nation, much like you could invest in a company by buying some shares, Much like shares, currency isn’t static. Shares tend to represent the (at least perceived) well being of a company, and new shares can be ensued in situations that demand it, like an immediate need of funds or a well planned, long term plan to grow its assets.In the end, however, as a shareholder, you can’t expect the company to simply do what is best for you, personally. Instead, it is up to you to figure out whether a company’s long term plans match your own.

    Of course, once we are talking about national currencies, you don’t get a lot of choices, usually. In fact, most people are stuck with the one they were born into (you also usually don’t usually get the choice to go make your own nation, like you could with a company). I don’t think this is substantially different than not being able to choose your own family,however (although I do think there is something to be said for smaller and more numerous nations).

  • Mike T says:

    Still, though, fiat currency is issued as a one time transaction claim against the taxable US marketplaces (like “mouse groats” in this post); and we have absolutely no way to measure their value — we don’t even have a unit of measure, because you can’t measure dollars in units of dollars — let alone to analyze the characteristics and health of the balance sheet (or whatever is analogous to it) against which they are issued.

    And even if you could find such an accounting system to answer that question, it would not apply to “money” as a whole within the US because it would not account for the value of bank deposits from a variety of institutions.

    Federal employees are paid in bank deposits, not currency issued by the federal government. The government transacts almost 100% in bank deposits, not currency. Even between agencies, it deals almost entirely in bank deposits. When Congress looks at the value of the treasury, it is looking at bank deposits of some form that don’t represent currency issued under sovereign authority.

    In fact, I’ve seen estimates that actual issued sovereign currency are only about 1% of the money supply in the US economy.

  • Zippy says:

    Mike T:

    And even if you could find such an accounting system to answer that question, it would not apply to “money” as a whole within the US because it would not account for the value of bank deposits from a variety of institutions.

    Sure, but that is easy. Bank deposits are backed by the balance sheets of banks, so there is an explicit GAAP inventory of exactly what property is impaired. The deposits are liabilities; the loans are assets. (Yes, it is a bit more complicated than that, but it is all explicitly tracked using well established accounting procedures).

    The only ‘holes’ there, as I have explained many times, are usurious loans to consumers, which are basically slavery claims against consumers as opposed to census claims against property.

    EDIT: Not enough coffee yet this morning. Other ‘holes’ arise when securities are self-referential.

  • Zippy says:

    Alex:

    When we are talking about shares, you are being promised dividends of the issuing company’s profits. Now, this promise is a bit fuzzy, given that companies can issue new shares.Your actual share of the profit can become smaller as time goes by.

    Yes, but management has a fiduciary duty to issue new shares in a manner which in some way correspondingly improves the balance sheet, over some time frame. (Sometimes of course this means taking a short term hit in order to achieve long term gain).

    Again my post on currency debasement is pertinent. Shareholders have legal remedies if management violates this fiduciary duty: which is to say, shareholders are legally entitled to the exercise of this fiduciary duty by management.

    In the simplest case the company sells new shares to an investor in return for new ‘cash’ (usually bank deposits). So yes, your shares are diluted percentage-wise by the issuance of new shares; but at the same time that new cash has been added to the balance sheet, so your financial claims as a shareholder have not been diminished.

    But, at least as far as I understand, what you are entitled to by a share is something more or less definite. You get a piece of the profits proportional to the number of shares you have and inversely proportional to the total number of shares that there are.

    This includes, at liquidity, all property left over after liabilities have been satisfied. So yes, it is very definite and concrete.

    I understand you have a promise of the government to accept the currency as a way to pay your taxes. But shouldn’t there be some kind of promise over how much those taxes will be?

    There is: the current state of tax law. What is missing is a concrete understanding of the fiduciary duties of the sovereign; but at this point that isn’t even possible, because the kind of accounting which would be required to make it concrete doesn’t even exist conceptually.

    As you say later in your comment though it remains the case that the sovereign is steward of the nation’s wealth — concretely, through his regulation, defense, and taxation of sovereign marketplaces.

    there are promises about their values, but it seems that those promises are made over the dollar value of transactions

    Part of the problem is that tax law is so complicated. But consider a simple fixed-percentage sales tax on just one particular product. A 5% sales tax on widgets doesn’t care how many dollars you charge for your widget. It just requires you to take 5% of the sale of the widget, convert it into fiat dollars, and surrender that number of fiat dollars to the government. So if a 5% tax on widgets were the only tax, fiat dollars would represent a government claim on 5% of the value of every transaction in widgets in sovereign marketplaces.

    The percentage-of-widget paid to the sovereign for each (new or used) widget transaction is the sovereign’s economic claim. The sovereign ‘owns’ 5% of every widget transaction under this example tax law. When the sovereign ‘spends’ fiat dollars (say by paying employees), he is selling ‘5% of widget transaction’ vouchers.

    Of course in reality tax law is horrendously complicated and pervasive. But conceptually you can think of the tax percentages levied against transactions (including payment of wages) and property as the price paid to the sovereign for transacting (or, in the case of property taxes, merely existing) in sovereign marketplaces.

    Now, I haven’t developed a system of accounting to track this specific area, let alone to track government finance more generally taking into consideration its undefined balance sheet (or equivalent) in a way that accurately reflects the structure of its wide variety of fiduciary duties. But a partial accounting for the security we call ‘fiat dollars’ or ‘sovereign currency’ in particular does seem possible in principle.

    Hope that wasn’t tl;dr.

  • Zippy says:

    To circle back to the entitlement mentality I discuss in the OP:

    Folks who think they have a right to fixed-value fiat dollars over time are asserting that the government’s overriding fiduciary duty is to ensure that the precise number of fiat dollars which trades for a loaf of bread today stays the same for the next fifty years.

    That is just an insane, monomaniacal, breathtakingly entitled view of sovereign fiduciary duty. To add insult to injury, it is very straightforward to own property other than fiat dollars and bank deposits as long term ‘savings.’ So these entitled maniacs don’t even need government cooperation to decisively break correlation between their personal ‘savings’ and the purchasing power of fiat dollars, if that is what they want to do.

    ADDED:
    Not only are they asserting a monomaniacal entitlement: they are asserting a monomaniacal entitlement for which they have no need. The reason they think they need it is because they think they are entitled to have the government preserve their wealth for them without any effort or risk on their own part, effort to understand and do the work of wealth preservation and take responsibility for the outcome, to make choices about their own property which may or may not pan out for them in reality.

  • […] folks seem to think that in suggesting that people are responsible for preserving their own property, from which it follows that they should not put their […]

  • Alex says:

    “Hope that wasn’t tl;dr.”

    Not at all, Zippy. Sorry if I went too off topic, but I thought that maybe the reason people don’t get that devaluing currency isn’t intrinsically bad is because it isn’t very clear what currency is in first place, so I thought it might be useful to ask it here.

  • Mike T says:

    The only ‘holes’ there, as I have explained many times, are usurious loans to consumers, which are basically slavery claims against consumers as opposed to census claims against property.

    So what happens when Bank A provides a $10k usurious loan to Consumer 0, then Consumer 0 spends the money at another financial institution Bank B that then uses that $10K to act as the reserve backing a dozen other $10K loans to Consumers 1-12? Seems like a recipe for a royal clusterf#$% in managing the reality of the monetary supply.

  • Zippy says:

    Mike T:

    You shouldn’t expect me to disagree that usury is a confounding factor, along with circular security loops.

    But that has pretty much nothing to do with turning ‘zero inflation’ (by some measure or other) into a sovereign fiduciary duty.

  • […] I hadn’t given yet though, before prompting by commenter Alex in a previous thread, is a concrete picture of the relationship between tax law and the real value of a dollar.  This […]

  • Mike T says:

    You shouldn’t expect me to disagree that usury is a confounding factor, along with circular security loops.

    I wasn’t disagreeing with you. I was making an observation and wondering if it was a sufficiently correct understanding of how usury+FRB = a financial rabbit hole.

    As a software engineer, one thing that seems obvious to me about the role of usury in this cycle is that it has a potential for an epic “unwinding of the stack” so to speak of the financial system as fake security built on fake security unwinds the moment an exception goes uncaught.

  • Zippy says:

    Mike T:
    OK, agreed, usury plus circular securities; and in 2008 we just about core dumped when money markets broke the buck.

    It can’t be fixed without a fundamental re-think of finance and economics on metaphysically realist grounds.

  • Mike T says:

    Every so often, I see glimmers of hope on the right that some people are considering the student loan business ($1.5T? and counting) insane, but then it gets killed by the habitual beeline to stupid that mainstream conservatives tend to make.

  • Zippy says:

    Re: ‘beeline to stupid’, that is because only liberals are electable; and liberalism is stupid and insane.

    See this post:
    https://zippycatholic.wordpress.com/2016/02/04/electability-and-qualification-for-office/

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