Blog Tracker
08-07-2020, 17:24
Visit the Cooking Lager site (http://cookinglager.blogspot.com/2020/07/helicopter-beer.html)
It’s always good when a beer and pub related news article gives me an opportunity to bang on about economics, and what better news of the suggestion doing the rounds that the government are being mithered to dish us all £500 to spend boosting the economy. And by boost, I mean give us all 500 sheets of beer tokens to piss away as we choose as the article suggests (https://www.morningadvertiser.co.uk/Article/2020/07/07/Give-public-vouchers-to-spend-in-pubs-think-tank-urges-Chancellor). Whether that is a sorry looking amount of murky craft beer or buckets of cheap spoons lager, surely, we can all agree it’s a good thing yeh? I love free stuff and if the government wants to give me spends, well I’ve enough clobber and trainers. I could do with a new Flymo but would leave it in the box until the current one finally packs up. Nope, I’ll spend my £500 on pish. Maybe a box of German lager from an online craft shop, slabs of special offer lout from Tesco and lots of Spoons Krony and ping grub. Go on, I’ll throw in some CAMRA bitter as well, just to save it. That’ll do me. Why make it a one off? Let’s keep this going, yeh?
Helicopter money as it’s known, is an unconventional economic idea that appears to be having a moment. Wiki has a good gen up on it here (https://en.wikipedia.org/wiki/Helicopter_money). The proposal comes as a voucher you are forced to spend rather than save. Evidence from America, where the Fed has been doing this with dollars, suggests poorer households spend their cash, richer households save it. You can imagine here a richer household may not actually spend more. Simply use the voucher for existing spending and save the £500 not spent. Vouchering is neither here nor there. Free money, tokens, whatever, what’s not to love?
https://1.bp.blogspot.com/-UbbKJpqKNPY/XwX47uOvv3I/AAAAAAAABEk/j_japRKzbQYBBd_8hbVL0L8v3FJ_XiEMgCLcBGAsYHQ/s320/hqdefault.jpg (https://1.bp.blogspot.com/-UbbKJpqKNPY/XwX47uOvv3I/AAAAAAAABEk/j_japRKzbQYBBd_8hbVL0L8v3FJ_XiEMgCLcBGAsYHQ/s1600/hqdefault.jpg)
chase the free money like Budgie
Which is where the economics kicks in. Haven’t we been told for years that the country cannot afford it? Isn’t every suggestion of extra government spending by opposition parties met by the question, how you gonna pay for that? Magic money tree? You can’t add up, can you, Diane Abbot? Learn some arithmetic, babes. Whether the girl can or cannot add up is not for me to say but it has been relatively clear to me that a succession of actual chancellors going way back though Labour, Coalition and now Conservative governments have never been able to add up. You may look it up for yourself, but the year tax receipts matched or exceeded spending is an embarrassingly long time ago. The long fatuous argument over austerity was little more than an argument over whether the government should spend a lot more than it received in tax or slightly more than it received in tax thus having a large or slightly less large deficit. None of it was an attempt to balance income and expenditure or even pay off the existing national debt. It was an argument over the rate of increase of that government debt.
Who is lending the government money? As I have noted before, it is the Bank of England. It creates the money and hands it over to the government and records it as a debt. Oh, it is money printing, deficit financing, whatever you want to call it. It is Zimbabwe or Weimar Germany in a sense. It is funding government expenditure via newly created money, not taxes of pre-existing money. So long as it remains written on a ledger and it isn’t just written of it isn’t monetizing the debt though. We just have to believe it is debt that one day will be paid. Even if it isn’t. So long as we maintain faith, we will not have to push trolleys of bank notes down spoons with us.
This lends us to the question of who came up with this idea of money and can’t we just print what we like? Why not eh? If you like this idea I direct you to a branch of economics call Modern Monetary Theory (https://en.wikipedia.org/wiki/Modern_Monetary_Theory). It is linked to concepts like Universal basic income (https://en.wikipedia.org/wiki/Basic_income). As a lazy bastard, you might think I’m well up for that. This should give you the intellectual underpinning to make that argument. I’m not going to bang on about it because I think it’s bollocks, but it’s a great thought experiment to get your head around.
Helicopter money, of which these 500 sheets are, would be Keynesianism, though the term originated from Monetarism. The 2 branches of economics I learnt at school. School teaches us these are somehow opposing theories but when it come down to the function of money, they are very much 2 cheeks of the same arse, dependent as they are on a concept of fiat money a government can manage. Money that exists by the decree of governments, not freely chosen by people. A money supply you have enough control over to be able to manage. Historically it is a recent thing as money was not invented by governments and as the saying goes, every fiat currency in history has failed or is failing (https://www.dinardirham.com/the-rise-and-fall-of-fiat-currencies/). The longest surviving, our dear old pound sterling, has lost 99.5% of its original value as it crawls to its demise.
Austrian economics of the type advocated by noted thinkers such as Ludwig von Mises (https://en.wikipedia.org/wiki/Ludwig_von_Mises), offers the story every economics teacher at some point illustrates to his students. It either involves cavemen or fishermen or something. It illustrates what money is. An apocryphal tale not literally true but believable as an illustrative example. My teacher used cavemen hunting woolly mammoths in his story and I remember him to be a decent bloke. The only teacher to join us all in the pub when our A level results came in and to buy his students a pint.
One caveman or fisherman has a good day at the hunting or fishing, one a bad day at it. Rather than share the produce like dirty socialists, human nature lends itself to the use of a token. A pretty seashell, a rare naturally formed glass bead. A rare and desirable item. The early human accepts such a token and in return offers a side of woolly mammoth. Money has been invented. And what is money? It represents debt. In this case the debt is future meat or the fish for when the holder has the bad day. The token represents this debt. It is a medium of exchange, both parties being willing to accept it. It functions back and forth as a store of value, the value being in what it represents in woolly mammoth meat. It becomes a unit of account measuring the value of meat or fish by the number of tokens in circulation and how much meat you get per token. And there you have it. A debt instrument that is a medium of exchange, store of value & unit of account. Essentially what it is, is time and effort in a token. Or money. Money eventually evolved into Gold as gold has a unique property. The stock to flow ratio.
Technology allowed us to increase the flow of anything from seashells to beads, even most metals. Take copper. The use of copper as a monetary metal increases demand for a metal with utility beyond money, increasing production and price (flow). The utility of copper ensures only a fraction is used monetarily so its stock (how much is held as money) remains low. Then spending that monetary metal floods the market with stored metal and lowers the price. Making it a poor monetary metal. It has a piss poor stock to flow ratio for use as money. Low stock, high flow. You can only increase the amount of gold by around 4% per year in a good year, 1 or 2% in a bad year. Gold is pretty, has little actual use (okay, rings for when you want to put a ring on it, Beyoncé), rarity and has been prized by every society that has existed. Therefore, its stocks are held monetarily, and its flow restricted. A stock to flow ratio making it an ideal monetary token. (what about mobile phones? Well its utility as a conductor of electricity only became possible after its use as a monetary metal diminished making it cheap enough to stick in phones but it is still valuable enough to make it worth recycling old phones. Most electrical devices do not use gold despite being more efficient if they did due to its high price)
But transactionally gold is useless. Have you seen the size of a 1/10th ounce gold coin? It’s as small as fuck and worth shy of £200. Not handy for a trip to the boozer. So, a secondary monetary metal in silver emerged before banking brought us the bank note, deprecating silver as a monetary metal. Gold could be safely kept in vaults and an easily divisible paper monetary system could represent that gold. You could call it dollars, pounds, francs, marks, print it on notes and decide how much gold each unit represented all you liked and then divide that into ever smaller units, some of which as pennies represented little more than gold dust.
There is a problem. How can you finance a war? Anything expensive people might be unwilling to give large amounts of their wealth to. You need Gold. You need ordnance, soldiers and they want paying. You need more gold than people will willingly hand over. So you need to nationalise the monetary system and ensure the gold is in central bank vaults and then you can print as much representative banks notes as you like to finance anything that you like. You need to nationalise money.
At various points you will need to reset what your paper is worth in gold, when it becomes apparent there is too much paper and not enough gold. A century of war broke the gold standard and the current era of fiat currency emerged. That is government paper that is used as money because the government decree it and has no convertibility into the gold it once represented. Why would people suck that one up? When the world runs on hydro carbons and the biggest industrial military complex the world has ever seen cuts a deal that ensures the global token for oil is the paper dollar, then you got to get dollars, regardless and stop worrying about gold (https://en.wikipedia.org/wiki/Nixon_shock).
After the second world war the world agreed the Bretton woods agreement. It existed until the Nixon shock. This was an agreement to peg all currency to the dollar and make the dollar convertible into gold and via this all currencies were gold backed. When Nixon brought the dollar off gold, no currency was convertible to gold. But he made an agreement with the Saudis. In return for the backing of the biggest industrial military complex the world had ever seen the Saudis would accept nothing but dollars in return for oil. Maintaining the dollar as the world reserve currency and ensuring anyone that wanted oil needed dollars and backing the currency with guns.
So now the dollar is just numbers backed up by nothing other than you need dollars or you can’t trade for oil. The pound is just numbers backed by nothing other than it’s worth so many dollars depending on various trade variables today. All currencies are only worth whatever they are worth in dollars. That’s all of them. All currencies in the world. What they are worth is what they are worth in American dollars. You can now have as many wars as you like. You can finance a perpetual war or series of wars that never ends to ensure the industrial military complex is maintained. Here’s the rub. It needs to be maintained in order to ensure your paper is the global reserve currency everyone needs.
That is the flaw. In order to maintain the system, it has to be backed by something. It is backed by the industrial military complex. It is backed by war. Continual perpetual war. The industrial military complex is needed to back a fiat petrodollar and without war the industrial military complex might be dismantled. You don’t need the biggest military without enemies or wars to fight. And without it, nothing supports the dollar. If nothing supports the dollar, then nothing supports the pound or the euro or anything else.
So, the thing is. If we are all woke. I am woke. We want a better world. We believe in justice and equality and decency and helping people and the government dishing out free money to us all. Anyone decent wants more government spending from money that is created. But it’s only possible if money is just a number that can be created out of nothing by central banks and governments and is not a token that governments have no control over. It needs government money not the old private money. In order for that monetary system to exist we have to be at perpetual war. Not here. Good god no. That would be disruptive and messy. But you know, in foreign deserts with Jonny Foreigners with weird religions and dodgy attitudes and clothes. That’s the price. Free money. Perpetual war. Decide whether you want to pay it.
More... (http://cookinglager.blogspot.com/2020/07/helicopter-beer.html)
It’s always good when a beer and pub related news article gives me an opportunity to bang on about economics, and what better news of the suggestion doing the rounds that the government are being mithered to dish us all £500 to spend boosting the economy. And by boost, I mean give us all 500 sheets of beer tokens to piss away as we choose as the article suggests (https://www.morningadvertiser.co.uk/Article/2020/07/07/Give-public-vouchers-to-spend-in-pubs-think-tank-urges-Chancellor). Whether that is a sorry looking amount of murky craft beer or buckets of cheap spoons lager, surely, we can all agree it’s a good thing yeh? I love free stuff and if the government wants to give me spends, well I’ve enough clobber and trainers. I could do with a new Flymo but would leave it in the box until the current one finally packs up. Nope, I’ll spend my £500 on pish. Maybe a box of German lager from an online craft shop, slabs of special offer lout from Tesco and lots of Spoons Krony and ping grub. Go on, I’ll throw in some CAMRA bitter as well, just to save it. That’ll do me. Why make it a one off? Let’s keep this going, yeh?
Helicopter money as it’s known, is an unconventional economic idea that appears to be having a moment. Wiki has a good gen up on it here (https://en.wikipedia.org/wiki/Helicopter_money). The proposal comes as a voucher you are forced to spend rather than save. Evidence from America, where the Fed has been doing this with dollars, suggests poorer households spend their cash, richer households save it. You can imagine here a richer household may not actually spend more. Simply use the voucher for existing spending and save the £500 not spent. Vouchering is neither here nor there. Free money, tokens, whatever, what’s not to love?
https://1.bp.blogspot.com/-UbbKJpqKNPY/XwX47uOvv3I/AAAAAAAABEk/j_japRKzbQYBBd_8hbVL0L8v3FJ_XiEMgCLcBGAsYHQ/s320/hqdefault.jpg (https://1.bp.blogspot.com/-UbbKJpqKNPY/XwX47uOvv3I/AAAAAAAABEk/j_japRKzbQYBBd_8hbVL0L8v3FJ_XiEMgCLcBGAsYHQ/s1600/hqdefault.jpg)
chase the free money like Budgie
Which is where the economics kicks in. Haven’t we been told for years that the country cannot afford it? Isn’t every suggestion of extra government spending by opposition parties met by the question, how you gonna pay for that? Magic money tree? You can’t add up, can you, Diane Abbot? Learn some arithmetic, babes. Whether the girl can or cannot add up is not for me to say but it has been relatively clear to me that a succession of actual chancellors going way back though Labour, Coalition and now Conservative governments have never been able to add up. You may look it up for yourself, but the year tax receipts matched or exceeded spending is an embarrassingly long time ago. The long fatuous argument over austerity was little more than an argument over whether the government should spend a lot more than it received in tax or slightly more than it received in tax thus having a large or slightly less large deficit. None of it was an attempt to balance income and expenditure or even pay off the existing national debt. It was an argument over the rate of increase of that government debt.
Who is lending the government money? As I have noted before, it is the Bank of England. It creates the money and hands it over to the government and records it as a debt. Oh, it is money printing, deficit financing, whatever you want to call it. It is Zimbabwe or Weimar Germany in a sense. It is funding government expenditure via newly created money, not taxes of pre-existing money. So long as it remains written on a ledger and it isn’t just written of it isn’t monetizing the debt though. We just have to believe it is debt that one day will be paid. Even if it isn’t. So long as we maintain faith, we will not have to push trolleys of bank notes down spoons with us.
This lends us to the question of who came up with this idea of money and can’t we just print what we like? Why not eh? If you like this idea I direct you to a branch of economics call Modern Monetary Theory (https://en.wikipedia.org/wiki/Modern_Monetary_Theory). It is linked to concepts like Universal basic income (https://en.wikipedia.org/wiki/Basic_income). As a lazy bastard, you might think I’m well up for that. This should give you the intellectual underpinning to make that argument. I’m not going to bang on about it because I think it’s bollocks, but it’s a great thought experiment to get your head around.
Helicopter money, of which these 500 sheets are, would be Keynesianism, though the term originated from Monetarism. The 2 branches of economics I learnt at school. School teaches us these are somehow opposing theories but when it come down to the function of money, they are very much 2 cheeks of the same arse, dependent as they are on a concept of fiat money a government can manage. Money that exists by the decree of governments, not freely chosen by people. A money supply you have enough control over to be able to manage. Historically it is a recent thing as money was not invented by governments and as the saying goes, every fiat currency in history has failed or is failing (https://www.dinardirham.com/the-rise-and-fall-of-fiat-currencies/). The longest surviving, our dear old pound sterling, has lost 99.5% of its original value as it crawls to its demise.
Austrian economics of the type advocated by noted thinkers such as Ludwig von Mises (https://en.wikipedia.org/wiki/Ludwig_von_Mises), offers the story every economics teacher at some point illustrates to his students. It either involves cavemen or fishermen or something. It illustrates what money is. An apocryphal tale not literally true but believable as an illustrative example. My teacher used cavemen hunting woolly mammoths in his story and I remember him to be a decent bloke. The only teacher to join us all in the pub when our A level results came in and to buy his students a pint.
One caveman or fisherman has a good day at the hunting or fishing, one a bad day at it. Rather than share the produce like dirty socialists, human nature lends itself to the use of a token. A pretty seashell, a rare naturally formed glass bead. A rare and desirable item. The early human accepts such a token and in return offers a side of woolly mammoth. Money has been invented. And what is money? It represents debt. In this case the debt is future meat or the fish for when the holder has the bad day. The token represents this debt. It is a medium of exchange, both parties being willing to accept it. It functions back and forth as a store of value, the value being in what it represents in woolly mammoth meat. It becomes a unit of account measuring the value of meat or fish by the number of tokens in circulation and how much meat you get per token. And there you have it. A debt instrument that is a medium of exchange, store of value & unit of account. Essentially what it is, is time and effort in a token. Or money. Money eventually evolved into Gold as gold has a unique property. The stock to flow ratio.
Technology allowed us to increase the flow of anything from seashells to beads, even most metals. Take copper. The use of copper as a monetary metal increases demand for a metal with utility beyond money, increasing production and price (flow). The utility of copper ensures only a fraction is used monetarily so its stock (how much is held as money) remains low. Then spending that monetary metal floods the market with stored metal and lowers the price. Making it a poor monetary metal. It has a piss poor stock to flow ratio for use as money. Low stock, high flow. You can only increase the amount of gold by around 4% per year in a good year, 1 or 2% in a bad year. Gold is pretty, has little actual use (okay, rings for when you want to put a ring on it, Beyoncé), rarity and has been prized by every society that has existed. Therefore, its stocks are held monetarily, and its flow restricted. A stock to flow ratio making it an ideal monetary token. (what about mobile phones? Well its utility as a conductor of electricity only became possible after its use as a monetary metal diminished making it cheap enough to stick in phones but it is still valuable enough to make it worth recycling old phones. Most electrical devices do not use gold despite being more efficient if they did due to its high price)
But transactionally gold is useless. Have you seen the size of a 1/10th ounce gold coin? It’s as small as fuck and worth shy of £200. Not handy for a trip to the boozer. So, a secondary monetary metal in silver emerged before banking brought us the bank note, deprecating silver as a monetary metal. Gold could be safely kept in vaults and an easily divisible paper monetary system could represent that gold. You could call it dollars, pounds, francs, marks, print it on notes and decide how much gold each unit represented all you liked and then divide that into ever smaller units, some of which as pennies represented little more than gold dust.
There is a problem. How can you finance a war? Anything expensive people might be unwilling to give large amounts of their wealth to. You need Gold. You need ordnance, soldiers and they want paying. You need more gold than people will willingly hand over. So you need to nationalise the monetary system and ensure the gold is in central bank vaults and then you can print as much representative banks notes as you like to finance anything that you like. You need to nationalise money.
At various points you will need to reset what your paper is worth in gold, when it becomes apparent there is too much paper and not enough gold. A century of war broke the gold standard and the current era of fiat currency emerged. That is government paper that is used as money because the government decree it and has no convertibility into the gold it once represented. Why would people suck that one up? When the world runs on hydro carbons and the biggest industrial military complex the world has ever seen cuts a deal that ensures the global token for oil is the paper dollar, then you got to get dollars, regardless and stop worrying about gold (https://en.wikipedia.org/wiki/Nixon_shock).
After the second world war the world agreed the Bretton woods agreement. It existed until the Nixon shock. This was an agreement to peg all currency to the dollar and make the dollar convertible into gold and via this all currencies were gold backed. When Nixon brought the dollar off gold, no currency was convertible to gold. But he made an agreement with the Saudis. In return for the backing of the biggest industrial military complex the world had ever seen the Saudis would accept nothing but dollars in return for oil. Maintaining the dollar as the world reserve currency and ensuring anyone that wanted oil needed dollars and backing the currency with guns.
So now the dollar is just numbers backed up by nothing other than you need dollars or you can’t trade for oil. The pound is just numbers backed by nothing other than it’s worth so many dollars depending on various trade variables today. All currencies are only worth whatever they are worth in dollars. That’s all of them. All currencies in the world. What they are worth is what they are worth in American dollars. You can now have as many wars as you like. You can finance a perpetual war or series of wars that never ends to ensure the industrial military complex is maintained. Here’s the rub. It needs to be maintained in order to ensure your paper is the global reserve currency everyone needs.
That is the flaw. In order to maintain the system, it has to be backed by something. It is backed by the industrial military complex. It is backed by war. Continual perpetual war. The industrial military complex is needed to back a fiat petrodollar and without war the industrial military complex might be dismantled. You don’t need the biggest military without enemies or wars to fight. And without it, nothing supports the dollar. If nothing supports the dollar, then nothing supports the pound or the euro or anything else.
So, the thing is. If we are all woke. I am woke. We want a better world. We believe in justice and equality and decency and helping people and the government dishing out free money to us all. Anyone decent wants more government spending from money that is created. But it’s only possible if money is just a number that can be created out of nothing by central banks and governments and is not a token that governments have no control over. It needs government money not the old private money. In order for that monetary system to exist we have to be at perpetual war. Not here. Good god no. That would be disruptive and messy. But you know, in foreign deserts with Jonny Foreigners with weird religions and dodgy attitudes and clothes. That’s the price. Free money. Perpetual war. Decide whether you want to pay it.
More... (http://cookinglager.blogspot.com/2020/07/helicopter-beer.html)