Some thoughts on monetary policy

No need to reinvent the wheel, so I’m just reposting my recent entries on a topic about cheap money policies:

The problem with the cheap money policy lies in for whom the money is cheap — the big banks and financial institutions that get all those QE dollars. The stated assumption is that the banks who receive the QE money will turn around and spread around all those dollars in a manner that will lead to the ‘wealth effect.’ But of course the term ‘wealth effect’ is merely a rebranding of the discredited and largely refuted trickle down economics theory. The irony there is that the easy money policies of the Fed have been championed by the same political side that most fervently touts the failings of trickle down economics. Perhaps the heart of the problem lies there insofar as there is a mismatch between what the supporters of the Fed’s cheap money policy envision and the reality of that policy. The perpetuation of the widespread false beliefs about the Fed’s policy is only encouraged when certain ‘authorities’ on the subject, perhaps out of a conspiracy to support the plutocracy, fail to point out, but rather completely ignore or even present those false beliefs as being true.

It is the worst kept secret of the Fed that all those QE dollars have gone largely straight into the financial markets, thus boosting them including the commodities traded on those markets. But with business loans remaining tight and incomes flat, it seems clear that few of those dollars have found there way on to main street. However those same small businesses that are having difficulty getting any loans to grow there business now also have the further strain of having to fork over more capital to pay for all those QE inflated commodities that the business needs to operate.

I think a true, easy money for everybody could indeed help not merely stimulate the economy but also foster a sustained long term state of prosperity for the masses. But if we take as a given that there is a certain degree of necessary scarcity of material wealth, then the increased prosperity of the masses will correspondingly result in a decreased level of prosperity for the wealthy few. As a result, those very rich folks will use there influence in the media to plant experts that will never propose or support such a policy of relative mass affluence. But that doesn’t mean we can’t at least try to come up with some new system that could work and emerge as an actual policy brought on by the seeds of a benevolent meme first planted on forums such as this.

To bring about this alteration, here in the US we need to first clarify in our minds the correct nature of the relationship between the citizens and its government. Too often the citizens seem to think of themselves as customers to the government as the vendor. Their thinking that they are paying their taxes in exchange for some good or services offered by the government. But that general thinking is an incorrect characterization the legal relationship between US citizens and their government. A much more correct analogy would be for the citizens to think of themselves as members of a very large ownership group that owns an entity The United States of America and the US Government as the board of directors tasked with managing the affairs of the group. In this case the Fed would be considered a private contractor hired to do something that the board itself could do, and do so with all the transparency they are required that helps to insure that they are acting in the groups best interest. But instead of doing that job themselves, the board turns it over to a contractor that has virtually no transparency and could be acting in their own self interest at the expense of the group and neither the group nor the board would know any better. While many have called for an end to the Fed, I disagree. If the Fed wants to exist as a group that oversees member banks that have consented to that oversight then that is fine. But the Fed should definitely be stripped of their authority to govern over matters of the public realm.

Ok, once we establish our US Government, the management board, as a fiduciary looking after our best interests, we can finally sit down and go over with the board members like we would with a financial adviser, and determine what the optimal coarse we should take is that will maximize both our financial returns and also help us reach our charitable goals.

Here ares some of my suggestions:

– While I tend to favor nature conservation over exploitation and development, insofar as some federal lands will be opened to natural resource extraction, those federal lands should be treated the same from a business standpoint as privately held lands or mineral rights are. That is, just as no private land or mineral rights owner would ever hold a no reserve auction for all the bounty of their land, the federal government shouldn’t be doing that either. We should all think of ourselves as part owners of federal lands and be looking to private land owners for guidance on how best to maximize economic returns on on any natural resource extractions.

– Take Bil Still’s suggestion from his documentary ‘The Secret of Oz’ and bring back the equivalent of the Lincoln Greenback, a fiat currency issued by the US Treasury that seemed to bring about widespread prosperity among the masses during its issuance.

– Higher and more tariffs. Keep raising them until there is no more trade deficit.

– Implement a high frequency trading tax. High finance should be seen as a potential bounty for potential tax revenue — especially where it is a ‘Wolf of Wall Street’ world of golden trash cans where public esteem of it is low and the public benefit from its practices is highly dubious.

According to that Fed chart, there seems to have been some substantial growth in the assets of financial businesses varying directly with the Fed pumping out QE dollars. I would be interested to see another chart with lines superimposed with our original graph tracking wages and small business loans during the same period. I doubt that either a line tracking the wages or the loans would come close to keeping up with the financial assets chart line. Also that Fed graph seems to reflect a grand total that includes all financial businesses which would then include the smaller companies that are very far removed from the big bank recipients of QE dollars.

I would agree though that money is not cheap at all right now in the US and that fact can be attributed to QE first boosting and then indefinitely levitating the price of commodities traded on the markets that all of us living on ‘main street’ require or desire for or day to day living. The average citizen is then having to endure these inflated commodity prices while simultaneously not enjoying the ‘QE fruits’ that the Fed dumped by the truck load onto the financial markets. So the common man now doesn’t have any extra the money to pay for the higher cost of living that comes from higher commodity prices. The common man has now taken a step downward that the plutocratic elite wants him to become accustomed to as the new normal. Even though this ‘new normal’ is neither inevitable nor acceptable, the masses are numbed into thinking that it is so they don’t put up much of a fuss as the rich rake in the wealth hand over fist.

I believe high tariffs would encourage mass reshoring of manufacturing and other businesses to the US which along with the US government now being flush with all these tariff dollars, the increased income from all the newly reshored jobs would further boost the economy by causing a real monetary easing on main street. These benefits would only be multiplied if the Lincoln Greenbacks were brought back and the money supply could grow organically along with the overall economy.

We in the US have a multifaceted brass ring of natural resource wealth (with the exception and possible achilles heel of a dearth of rare earth elements), the best higher education on the planet, a great high-tech base, a pre-existing infrastructure of business. All of which makes the US a country that has a lot to offer in trade and also if we are shunned due to any high tariffs we can be self sufficient.

Your second and third points sort of answer each other as it is the owners of the stocks and commodities that are traded on the financial markets such as oil and mining companies that are getting rich because they are the ones that have exclusive access to that cheap money that the guy on main street doesn’t. The common man wont have all those stocks and commodities that he can give up so little of to get a lot of money like an oil company can. But really anyone with skin in the financial markets game, typically those individuals and organizations that are already wealthy, are the ones benefiting from all the cheap money at the expense of those poorer individuals with little or no skin in that game.

I looked at your and am scratching my head wondering if we are looking at the same graph. I don’t know if financial businesses could have been said to be doing great, but the charts seem to indicate that they have been doing just fine and perhaps without QE perhaps they would have gone the opposite direction and done poorly.

Interesting comparative chart. I was surprised how much incomes grew during QE but I have to wonder if those incomes from wealthiest individuals, such as executives, working for corporations that do have a large stake in the financial markets, disproportionately skewed the chart in an upward trajectory that wouldn’t be seen if, for instance, only hourly workers incomes were included when plotting the graph.

The lack of small business loans just lends support to the theory that QE dollars aren’t trickling down to ‘main street’ as the Fed would allege is supposed to occur. The Fed, according to their mandate, are supposed to be improving employment. But if the engines of employment, small businesses, aren’t getting the loans they need to expand and hire more employees, how can the Fed claim they are helping in that area through QE when the evidence indicates otherwise?


Libertarians should give big government a chance

Libertarians should give big government a chance. 

-The Fed is a private organization that libertarians frequently call for abolishing.  But if the fed is abolished then wont an expansion of the government then automatically take place in order to fill the need to set monetary policy?

-The term ‘Libertarian’ is based on the Latin word for freedom.  So if freedom is the goal, then can’t big government actually act as a vehicle for making possible increased freedom.  Just one example is the publicly owned roads and highway systems that we take for granted but for which the government makes possible which in turn makes the ‘freedom of the open road possible’ as well.

-Libertarians frequently rail against big government restricting our freedoms.  But in the most egregious cases of government tyranny, there often is big business behind the scenes pushing for those restrictions we all hate.  So maybe it isn’t big government that is necessarily the problem but rather big business that is.  For instance, much of our excessive prison population can be attributed to a malign influence by the for-profit prison industry pushing for heavier prison sentences for drug crimes.  Now, if all of our prisons in this country were publicly run and all of the suppliers to those prisons were government operations as well, that would be a situation where government would have grown larger and the influence by big business in promoting tyranny would have correspondingly grown much smaller.  The capitalist market incentive to fill our prisons would be removed and in its place would be the just the incentive put on by the public to at least reduce the prison population to reduce the public expense if not the injustice of putting into cages thousands who committed the non violent offense of possessing or distributing a mood altering substance.

-If freedom is the goal, why stop with roadways, why not expand to other utilitarian structures such as internet broadband cabling and distribution, cell phone systems, credit and debit card point of sale systems, cable TV, and health care payment systems?


Medical Prescriptions as Normative Statements

Are medical prescriptions categorized as a normative or positive statements?  Positive statements are ones describing a state of affairs now or in the future that has some way to test for veracity.  Normative statements, on the other hand, present untestable value judgements about how things should or ought to be.

In a doctors office a prescription would typically be given after the physician makes some a posteriori conclusions about the patients empirical presentation, the signs and symptoms the patient is having.  The physician at that time would then be taking either written or mental notes about the patients condition that still would be categorized as positive statements (rather than normative).   While the doctor is still in the positive stage of reasoning she is still acting within the realm of her primarily scientific medical school training.  But at some point the physician transitions over to formulating in her mind what should be done for the patient in the form of writing a prescription.  It is at that point that I believe the MD has transitioned categorically over to a more philosophical area that she may not have received the best training in a schooling that focuses primarily in the purely descriptive, empirical, scientific realm.  Medical school focuses primarily on how things are, not on deliberating on figuring out how things ought to be.  But in writing a prescription, a doctor is doing just that — saying how things ought to be.

When a pre-scription is written, the doctor is writing (scribing) something that has not yet occurred (the ‘pre’ part)–taking some medicine.  What is the doctor doing then? Is she making a prediction about what will occur in the future or is she stating what the patient ought to do — take ‘X’ medicine for so many days?  I believe it is the latter.  Given that the doctor is writing a prescription as a statement of how some future events, the patient taking some medicine, is better, or more ideal than some other future state of affairs, than the patient not taking some medicine, a prescription, then would correctly be categorized as a normative statement.

The difficulty that arises at this point is the ambiguity of not knowing what to do in cases of an apparent wash.  Such a scenario occurs when given a certain diagnosis there are two possible treatment routes:  One is the mainstream treatment that is well justified as being rather ineffective, has lots of bad side effects and is very expensive and the other route is an alternative treatment that is moderately justified as being very effective, with few if any side effects and is very affordable.  There is no scientific way to determine what route a patient ought to take there.  Rather, the values of the patient become paramount in determining the best course of action.  However, a confusion persists whereby the common understanding is that  a prescription is a statement that has the epistemological foundation supported by the  scientific principle of testability.


Open Letter to Minnesota Governor Dayton re. Medical Marijuana

Open Letter to Governor Dayton re. Medical Marijuana

by Glen Wallace

Governor Dayton, your decision to defer to law enforcement in deciding the medical marijuana issue demonstrates an abdication of your responsibility as governor to make decisions on public matters such as the medical marijuana issue. If you think it is acceptable for law enforcement to make the call on this issue, why stop there? Why not cede the governorship entirely over to a consortium of Minnesota law enforcement associations? After all, with medical marijuana, you are already allowing law enforcement to have authority over an area very dear to the citizens in how they treat their own bodies in regards to a field that law enforcement has absolutely no expertise — medicine. It seems like you have already jumped into the slippery slope of creating a totalitarian police state. Why put the brakes on now?

A hallmark of a police state is that the state puts a priority on what law enforcement wants over the basic human rights of the citizens. With the medical marijuana issue, you, governor Dayton, has done just that — you have put the wants and desires of law enforcement ahead of the basic inalienable right of Minnesota’s citizens to treat their own bodies medically as they see fit. But a hallmark of a free country, that we are supposed to be living in, is to put the inalienable rights of its citizens ahead of the desires of law enforcement. Sure legalizing marijuana will make the job of cops more difficult and therefore they will oppose such legislation. But given that the ability to use medical marijuana is a basic human right, in a free country laws should allow it and law enforcement just has to find ways to work around such laws. That is just the way it is or is supposed to be in a free country that is not a police state and respects the inalienable rights of its citizens. But in a police state, it is the other way around where the citizens have to somehow find a way to navigate their way around police state laws in their quest for to live a life with some glimmer of freedom. And effectively, with the medical marijuana issue, we are already living in police state where otherwise law-abiding, upstanding, honest hard working citizens of the state of Minnesota have to delve into the underworld of the illegal drug trade in a quest to relieve the suffering of their loved ones through the use of medical marijuana.

Governor Dayton, while many people have focused their criticism over the resistance to the passage of the Compassionate Care Act on the unwillingness of law enforcement to consider approving the act, I have have not. You, by your threat to veto, are responsible for jeopardizing the possibility for thousands of Minnesotans to ease the anguish and agony of diseases that would be ameliorated or be completely removed by medical marijuana. Members of law enforcement are only doing what comes naturally to them — they want to preserve or enact laws that make their job easier. But what you must remember is that there is often a conflict between laws that make law enforcement’s job easier and laws that protect the basic human rights of the citizens of a state. I’m sure it would be easier for cops if they didn’t have to Mirandize suspects upon arrest. It sure would be easier for cops if they could just search any premise without a warrant as well. It would be easier for law enforcement officers not to have to go to court and testify in a case but instead be able to act as a judge and jury right there in the street and declare guilt or innocence and hand out any punishment on the suspect right there in the street. But since we don’t entirely live in a police state, cops just have to find a way to navigate through all the ‘hoops and ladders’ that make their job more difficult. And because we still live in a semi-free country we don’t defer to law enforcement community to decide if warrantless searches should be allowed or if cops should be allowed to meter out punishment on the streets. And under the pretense that we are living in a free country and state, you shouldn’t be deferring to law enforcement to decide if the citizens of Minnesota should continue allowing cops to throw in jail and swipe away medical marijuana from the hands of anyone desperately trying to ease their pain and suffering through the use of an herb that seems to have been put on this planet by the Creator as a gift to humanity for the purposes that the Compassionate Care Act would allow.