Friday, March 4, 2011

Beckerath: The Public Good


From Must Full Employment Cost Money? by Ulrich von Beckerath, pages 126-127:

The value of money is primarily determined by the effective demand for it, precisely as the value of commodities generally.

Sounds like something Milton Friedman would say. Something I accept implicitly.

The same paragraph that begins with the above sentence, ends with the following:

So long however, as the effective demand is not regarded as the most important basis for the value of money and people believe that the value of money is created by the Government fiat, so long will people consider the State omnipotent and will turn to it for aid in every emergency, particularly for financing re-employment during a trade depression. And the following fallacy will last as long as this only supposedly logical association of ideas: If the State can impart value to money, it can without much difficulty impart value to that money which is printed and issued specially for financing employment and it would roundly neglect its duty if it did not use its monetary prerogative in this way for the public good.

Now, I need some MMT people to explain to me a few particulars of how their thinking differs from this fallacy described by Beckerath. Here, as a point of reference, is the first relevant MMT quote I found, from Ralph Musgrave's An introduction to Modern Monetary Theory:

MMT says basically that given excess unemployment, the government / central bank machine should just create more money and spend it.

Occam's razor applies.

5 comments:

piet said...

nice post, pain bears pointing out/at and/or at/out
wv magic: fidec

The Arthurian said...

Thanks, Piet.
What is "wv magic: fidec" ?

Greg said...

A couple things come to mind.

When he says "
The value of money is primarily determined by the effective demand for it, precisely as the value of commodities generally"

I cant help but think he is using "money" and " a particular currency" interchangeably, which is very sloppy. ALL currencies are money but some currencies are "more" money than others. A demand for a particular currency may change but the demand for money is relatively invariant I would argue. We all demand it when we dont have enough and once we have a certain level we demand it less.
How much money is demanded in an area is determined by the cost of food, housing, health care
etc.

I honestly cant decipher the rest of his quote. He SEEMS to be suggesting that the "state theory" of money, while true, is also tenuous. A sort of convenient myth if you will. He also seems to recognize that IF this is so, the state has a prerogative to use this power in a way that insures the public good.

If I read him correctly, I agree. People can turn on their countries currency if they feel it is not serving their needs. The US$ is in a unique position today in that a fairly significant number of Americans could reject it but there are enough non Americans in the currency area to give it value.

Ralphs quote is essentially saying "If enough people cant get your money, find a way to get it to them and you will keep your currencies value.

It seems to me it is better to have 1000 people holding 1000 dollars each than to have 10 people with 100,000$. The number of people seeking your currency is more important than the absolute amount of your currency in circulation.

piet said...

wv = word verification, very quickly teases out the 'bizarroity' of die-hard commentariats.
Commentarians lend that dressed down digital banking (key-click)trick weight and give it credence over-eagerly, not just a joycean key to fit the occasion kinda flippantly (though there's that, and with me that's as far as it goes), but often as if it is a divine password. The practice can be seen among intervention announcers, and since they are, often also, the stuck record, chronic type, a wv for desert after the hard slog of rearranging the furniture yet again, like the liddul lady chasing that elusive praps 'pass en core' or only just arrived dust). For them a wv jive provides a welcome break FROM the alchemical meticularity of rote, rut and recipe, if it doesn't break that UP and make light of it altogether. It's like the seal of approval, the proof in the pudding, the royal gesture, setting yold heir of heirs in motion, a stroke of the missing chord at last. Destiny meets random sense of identity. A last flare of the illusory lucidity and resolution literacy seemed to offer, make believe from the get go. Took flight with the bible, nuff said.

The wholly silly autist/occult slitslotting a whole world up (in lists and matrices) so the fragments fit on cranks in a box (fascinatingly, 'spy-shilly' wif a few flickrish laaits) and then janking a handle to see if the work avoiding spell won't be rewarded just this once (and for all .. lootery lottery like) is like putting in a request for confirmation of rite place ritime.
None of the grades they think they make have any grit whatsoever.
So convinced are folks of the 'verlossend woord gehalte'* of their toss off comment's content, a wv is revered as a cake's icing, the cutting edge of coincidence and synchronicity, a truly psychedelic poly-plot-clot of centricity compliant realms, whence vortextualized coinage emanates and 'emitates', the 'flat disc of mind' (synonymous with god a la Walter Russel who painted and damn near systematized it, his followers animated that - reminds me of a spinning top that turns inside out and back, and his house is a museum i stumbled into, serendipitously peddled up to in the 80s).

One wonders about wv programmers. How many rules like 'no cu before nt' will it take?

* - just rightness content.

Like i said, it gives rise to at least one linguistically original, genuinely Joycean, perhaps even brainy 'tempestestrian' moment per comment.

with 'fidec' i had a quick and dirty association with fedeocracy (via fidelity, fidecracy, fidocracy, etletterallittery

ps: Greg, your profile has the word 'not' missing, right?

As to emission rights and wrongs, i seeded the net with soundbites about that around the turn of the century, sample here:
http://poetpiet.tripod.com/index2.htm

conclusion:
i am watching way too many vids about James Joyce and am awful mad about the abuse that is alcohol, it, and everybody else too, seems to mask.

The Arthurian said...

Greg, I went with my first impression on that quote, and used it. I had trouble with the quote too, on the re-read. Much of the trouble arises from the way I wanted to use the quote. So much for quick-and-ill-thought-out blogging. :)

It seems to me it is better to have 1000 people holding 1000 dollars each than to have 10 people with 100,000$. The number of people seeking your currency is more important than the absolute amount of your currency in circulation.

I like that. It's like: The economy works better at the start of a Monopoly game than at the end of it.

Ralphs quote is essentially saying "If enough people cant get your money, find a way to get it to them and you will keep your currencies value.

"Find a way to get it to them." That's the trick, isn't it. The historical record shows that inflation -- "just create more money and spend it" -- works. It has worked repeatedly. In other words, we need to apply this solution again and again. In other words, it is not a real solution. It is only some kind of "fix" for the problem.

To me, the fact that inflation "works" is a clue in the process of discovering a better solution.