Cash is Dead

As a child, I thought I read a story about a tax bracket in Sweden exceeding 100%. Apparently the story is posted at TIME, April 5, 1976: SWEDEN: The 101.2% Solution

Not being a subscriber, I can read only the first paragraph online. If memory serves, this over the top bracket for some taxpayers, starting at $35,000, was a bureaucratic bungle, not an intended tax policy.

 

Do you have the pin coded credit cards with the chip in them? I think all credit and debit cards in Europe at this type which in some ways are more secure, BUT, and this is the reason I don't use them all the time, if your card AND pin are stolen then you end up being liable because how did the crim get your pin code? The onus has been put on the customer rather than the bank or the shop.

Erm, no thanks.

 

It's not a problem of there not being enough gold or other precious metals to back the money in our economy. We could easily place a trace amount of silver in our coinage (remember the old 90% silver coinage?) and back it up with something worthwhile. The reason why the old 90% silver coinage is not in circulation anymore is because a 1964 quarter is worth at least $5 if melted down. Gresham's Law dictates that bad money drives out good, because the only thing dictating that a "new" quarter is worth 25 cents is because the government declares it's worth 25 cents.

The gold standard did lead to some market imbalances and some boom and busts in the late 19th century, I will concede. However, what killed the gold standard was excessive government spending - namely, on wars. Germany, Austria, and Britain all went off the gold standard in 1914-1918 in order to finance the mutual slaughter. Germany was never able to return, because the Treaty of Versailles and its reparations payments depleted their gold reserves, forcing them to print unbacked money (with predictable results). Austria broke up, so I can't really address them here. Britain returned for another fifteen years or so.

Problem was, the inter-war period was only partially backed by gold - that is, some currencies were, and others weren't. When a currency not backed by gold showed signs of weakness, it triggered a run on foreign currencies (which weakened the latter, as well), eventually forcing everyone off.

Hence the Bretton Woods system after World War II, which established a gold exchange system. This held up just fine for decades until the United States government began ramping up spending out of control (although we would consider it miniscule in the face of today's deficit spending), spending money on the Great Society programs at home and funding the Vietnam War (and other anti-communist tin pot dictators). This is the strain that eventually destroyed the gold standard - too much government spending. Because a gold standard is designed for exactly that purpose - to force government to live within its' means.

So I would instate a "new dollar", backed by gold at say, $2,000 per ounce, with the gold held in the Federal Reserve Bank of New York as collateral. To prevent runs on the currency, make it only legal tender in the United States, by US citizens, for domestic transactions only. As it catches on, it can be rolled out on a wider basis to the world markets, with other governments following suit.

Of course, that would make deficit spending nearly impossible for our government - as it rightly should be.

Like every post-Marx left-field idea, it's great in theory but lamentable in practice. Mainly, because people suck. They'll find ways to cheat the system.

 

FAIL!

99.99% of people who depart from the mainstream are wrong. One out of ten thousand turns out to be right. And those have built on what was known before. Relativity and QM did not spring up full-grown in total contradiction to existing ideas. They were built up bit by bit from small discoveries that gradually pushed the "mainstream" towards a new direction, until someone puts together the accumulated knowledge to formulate a new paradigm.

If you were joking, then I apologize for taking your post seriously. It's just that there really are a lot of people who assume that the one person who disagrees with the crowd MUST be right, just because there are a few cases where a legitimate idea was at first rejected.

Every crackpot with a perpetual motion machine or a water-for-gas scheme says, "They laughed at Fulton." Yes, they laughed at Fulton. And they were wrong. But most of the time someone gets laughed at, it's for good reason. The 1% are wrong far more than 99% of the time.

I think most cards in the U.S. do not have the chip, though there is a move toward chips. Debit cards (and maybe credit cards???) do have PINs which can be used for debit transactions, but I believe there are very low limits on the customer's liability if the card is stolen, as long as the theft is reported promptly. A thief can get your pin by looking over your shoulder at the supermarket. And banks do not want to discourage use of the cards by putting too much of the onus on the consumer. With a $50 liability limit, most people will be vey careful, but won't be scared to use the card.

I always select "credit," however. So I'm never entering my PIN into a pad. Instead I sign a receipt.

 

Both of us can use reasonable sense on comments like this. I fully realized your initial comment was that a good justification is needed for leaving the mainstream. My comment was "majority rule" does not determine what truth is on hard science subjects.

Now whether economics is a hard science is much more subjective.

One update I will point out. Your statement "...QM did not spring up full-grown in total contradiction to existing ideas" is really debatable. When Planck proposed his quantum equation, the only think driving its acceptance was the empirical curve fitting equation that he created to make the (newly discovered) IR intensity curves fit. It was in total opposition to EVERY theory of blackbody radiation proposed in physics back in 1901. The first equation of QM actually did spring up full grown (Planck's equation is still 100% correct) in contradiction to existing ideas (Rayleigh-Jeans Law & Stefan-Boltzmann Law).

 

Again, I apologize if you were just using hyperbole, and I took it too seriously, but you seemed to be saying that the 1% are MORE RELIABLE than the 99%, and that's just nonsense.

Economics is not a hard science. Perhaps for that reason, it has far more quacks than the hard sciences. Gold was useful for a long time, when the economy was small and nobody trusted anybody, and kings regarded the whole country and all its people as their own private property, and the only thing you could trust a king on was to be greedy. But in modern times gold failed, for the reasons mentioned above. There's LOTS of room for dispute in economics, but advocating a return to the gold standard is quackery, and demonstrates a thorough ignorance of the discipline.

BTW, gold coins don't work because people shave them, and gold certificates still leave open the possibility of manipulation if the government prints more of them than the gold it has in reserve, or if it just decides not to redeem the certificates for metal.

 

Chaotic systems produce seemingly random results, even when the underlying system is well understood. This is because very small changes in input parameters completely restructure the end point. It isn't really random: if you could account for all of the inputs and process everything down to the last detail it would be deterministic, but that isn't practically possible with a chaotic system.

The economy is the very definition of chaos.

Tom

 

If we're speaking of the economy, people's choices are seldom rational, so even if you knew all the details I doubt you could predict the outcome. But some things can be predicted. Throw hundred-dollar bills off a balcony into a crowd and you'll create a riot. Deprive the issuers of money of the ability to adjust the money supply, and you'll have boom and bust cycles. But it's impossible to keep everything absolutely steady, either, because of the unpredictable behavior of individuals and the complexity and inherent chaos of the system.

 

People's choices are part of the system. You have to model people correctly to model the system, which, as you say, isn't going to happen.

Tom

 

I think the step before that is to model nature correctly. People have at least the chance to make the right decision if they're given complete and accurate information. But our current economic model specifically avoids that. It's designed to extract wealth from natural resources while ignoring the consequences. We're not really creating any value, we're just liquidating natural capital and calling it income. It seems to be working in the short term for those who control it, but as a global system, it's a dismal failure.

 

According to Marx (and even conservative economists respect Marx's analysis of the functioning of capitalism) we add value whenever we perform socially useful labor. Lifting oil out of the ground requires labor and therefore adds value. Processing the oil into a form we can use also requires labor, and therefore adds value. Cutting down trees to build houses adds value.

Adding value is not always a good thing, though, if we damage the environment in the process.

A line from a Royal Canadian Air Farce show of several decades ago said "Which would you rather have: old-growth trees or toilet paper?" And the reply was "That depends on the circumstances of the moment."

Some of us want to preserve the environment. But we also want toilet paper, and we want to drive cars. A full-on radical environmentalist wouldn't use either. I'm a moderate environmentalist. I'm willing to sacrifice a few trees in order to have toilet paper, but I'd like them to be grown and harvested sustainably.

Once I was sitting, handcuffed, in the back of a cop car with a friend. We'd been arrested at an anti-nuclear protest. As the very nice cop locked us in the car and went off to arrest some more protesters, he told us that he was leaving the motor on so we'd have the benefit of the A/C. It was a VERY hot, sunny day and the car was in the sun. My friend told the cop that he didn't have to leave the motor on because we were radical environmentalists. When the cop had left I told my friend to speak for himself, because I was a moderate environmentalist.

We all complain that SUVs burn too much gas. But really, even the Prius burns too much gas if we want a sustainable economy.

Anyway, all socially useful labor creates value. But creating value is not always a good thing, and may end up in the long term lowering our quality of life.

 

Oh, I do remember the days!

Paid $2700 for one car - all in cash on the barrel head, as they say, and, yes, that was in Bens - was a good bargaining tool, too. They were asking $4300 for it.

Also paid a house down payment... about $2000 (okay, it was a mobile home in a park) in Bens.

Locally, we have coffee stands offering cash discounts of $ 0.25 per cup now. I see more signs about cash discounts at places lately, too. I don't think it's entirely the underground economy - I think it is backlash for bank fees for electronic/card transactions.

 

After the local Arco stations started offering different cash vs. credit prices last year, I've recently seen a few other major brand stations doing the same.

 

we have a cash only gas station nearby. they used to take credit, but the last time gas prices spiked, he said is dollar profit was the same per gallon as the lower prices. so, 3% to the credit card companies was just too much to give up.