I've been hoping that someone would explain and basically defend modern monetary theory, because it goes over my head even with having had university-level studies in economics and economic history. — ssu
Think about the debt based monetary system of ours. Basically there has to be economic growth for the interest to be paid. Then think about the "pay-as-you-go" system of pensions (and basically health care system, as old people use it far more than the young).
Both are designed for a World were there are more younger generations than older. As I said, Japan is the case example of what is going to happen. It may not be a dramatic collapse, but Japan has serious problems. It is already in a situation where it cannot raise interest rates (as then too much of the government income would go to pay the interest). If you in this situation take more debt (as Japan has done year after year), what will you think the outcome will be? — ssu
Imagine a World the machines are as old as B-52s are now, which the youngest bombers are 58 years old. One hundred or two hundred year old power plants. A World where your fathers computer from two or three decades ago are as fast and capable of running the current programs as a new computer you can buy from the store. — ssu
That's the alarming issue here. There are enough smart people on the PF that at least someone ought to have understood it and be a firm believer in it...if it was an economic school of thought with genuinely valid ideas. Once there is nobody defending a position, then that position might not be so strong in the first place.Yeah I'm not sure I get it either. — ChatteringMonkey
I don't think that the MMT disagrees with the thought that printing too much money will create inflation and finally a total loss of trust in the currency (which basically is what hyperinflation is). There argument is basically that the US is different.The mistake was in thinking that they are regular economic entities that need to balance their books, as they can't default and print money as needed... they aren't subject to standard economic theories, but rather subject to monetary theory which comes with it's own particular set of regularities. — ChatteringMonkey
That's the name of the game now.You print money? ;-) — ChatteringMonkey
Basically the thing is that the so-called "smart money" uses the low interest rates in Japan and then uses the debt to invest in some other country (usually in China and in Asian countries).I can imagine it, but I don't see why the has to follow from population decline. Has innovation slowed down in Japan? I wouldn't know exactly, but they seem relatively up to par with the rest of the world technologically. — ChatteringMonkey
Net investment (after covering depreciation) is very low and even gross private investment is crawling along. Japanese companies prefer to employ more labour at low wage rates rather than invest, or take their investment overseas
Yeah I'm not sure I get it either.
— ChatteringMonkey
That's the alarming issue here. There are enough smart people on the PF that at least someone ought to have understood it and be a firm believer in it...if it was an economic school of thought with genuinely valid ideas. Once there is nobody defending a position, then that position might not be so strong in the first place. — ssu
I don't think that the MMT disagrees with the thought that printing too much money will create inflation and finally a total loss of trust in the currency (which basically is what hyperinflation is). There argument is basically that the US is different.
And I can understand this...partly: The global monetary system is based on the US dollar so much that other countries and market agents have let the US to take as much as debt it wants (which has basically been the reason why it has had the ability to be the sole Superpower in the world). Besides, their first worry would be if the dollar collapsed (would devaluate to other currencies) what will happen to their exports. — ssu
That's the name of the game now.
But somehow it doesn't feel like a sustainable answer. So when would you be worried about the value of the currency? When the debt-to-GDP ratio is 10 000%? When the central bank has to double it's balance sheet in six months? Or every month? Or in a week? Inflation rates in the US are creeping up now...
All this comes to mind as yesterday the richest man in the World mimicked Alan Shepard's first space flight (but not Yuri's). When the internet billionaires can do things like that, some clever things towards replacing fossil fuels can be and are done also. But what happens when those financial cornucopias suddenly dry out? Suddenly the belief in tech saving us gets a whack by an anvil in the back. — ssu
Basically the thing is that the so-called "smart money" uses the low interest rates in Japan and then uses the debt to invest in some other country (usually in China and in Asian countries). — ssu
The Swiss have high living standards too, yet their population is still growing. They don't have similar problems.Yeah but isn't this more a function of high living standards and costs in Japan, rather than a decline in population. — ChatteringMonkey
Btw, a consol bond is a perpetual bond without any maturity date. Hence they are considered equity rather than debt. Basically what is so wrong with equity? People have owned things, real estate and businesses and they have been inherited by their children for a long time in history. Family businesses have actually been quite persistent in history, even if sometimes there comes the generation that ruins the business (or spends the wealth away). With stocks that ownership can just be divided and easily bought and sold. I'm not so sure what is so wrong with that.A loan has a maturity. A mortgage has a maturity. But stock doesn't. But it doesn't fulfill an essential different role than other loan instruments but it does give a right to profit in perpetuity. And this is weird, why should a shareholder who invested 100 guilders in 1910 in Shell stock still receive dividends for Shell's activities today? — Benkei
Family businesses have actually been quite persistent in history, even if sometimes there comes the generation that ruins the business (or spends the wealth away). — ssu
With stocks that ownership can just be divided and easily bought and sold. I'm not so sure what is so wrong with that. — ssu
Ok, but then our insurance system and also pension system uses these corporations too. The non-human "legal person" owner if equity is a reality. Lot of things would have to be restructured then.I'm not against stock. Additional stock is issued and given to employees but can still be traded. — Benkei
I think an important way for societies to minimise the consequences is to move from shareholding to stakeholding. In my view that starts at reacquainting ourselves with the role of corporations and stock as it was understood originally. Original corporations received a charter and were gifted limited liability for activities that required a large upfront capital investment. This was considered fair in order to protect investors from liability since they did not receive a direct benefit from this investment (no interest could be calculated, no profit could be made). The goal of the corporation was limited in scope and upon reaching it the corporation would be dissolved. Why would people invest? Because the indirect benefits outweighed the capital investment. Roads, bridges, important buildings etc. were typically the subject of a corporation's charter. — Benkei
The system of stock market has been about bringing borrowers and lenders together and easing the transfer of rights related to such loans.
Where the combination went off kilter is mostly the possibility for a corporation to exist in perpetuity.
A typical bond has a maturity (there are exceptions, perpetual bonds but these were still intended to be paid off put the moment of repayment wasn't enforceable). A loan has a maturity. A mortgage has a maturity. But stock doesn't. But it doesn't fulfill an essential different role than other loan instruments but it does give a right to profit in perpetuity. And this is weird, why should a shareholder who invested 100 guilders in 1910 in Shell stock still receive dividends for Shell's activities today? — Benkei
The other point is that goodwill and market value increases due to the added value of labour and nothing else (ignoring financial industry for a moment which can passively generate profit). If I put 1 million into a company it's not going to magically increase in worth, if I buy capital goods (buildings, machinery, tools) it's not going to increase in worth. If I hire people to utilise capital goods for a specific purpose, there's a likelihood something will happen with the market value of the company. — Benkei
And it's clear that companies like Shell, Google, Amazon etc. are worth a multitude of the paid up capital but we insist only those that originally provided capital and any persons subsequently buying the rights related to that initial capital investment (e.g. stock) are owners of the total worth of the company and the only ones with a right to profit. Whereas if I had funded this with a loan, after say, 5 years the loan was paid off, the interest received, everything else would be owned by other people.
My point is, that at some point capital investment is not responsible for the value of a company and the relationship between profit and initial capital investment is negligible. If this is the case, I don't see an ethical reason why a shareholder should continue to receive benefits from that initial investment.
My proposed solution would involve a dynamic equity system where the initial capital investor starts out with a 100% right to the profit but as the company grows in value and this added value is the result of labour activity, additional shares are issued diluting the share value of the company. These shares will go to employees and as long as they continue to work there, they receive more shares. If they move to another company, they too will see their shares dilute over time but will build up capital in another company.
What would have to be worked out is at what rate initial capital investments should dilute. We do have a lot of bond pricing that we can use as a benchmark.
I'd also get rid of all intellectual property rights except the obligation of attribution. But different story. — Benkei
Limiting liability seems necessary to incentivise any type of investment in larger companies. Typically the amount of money any one person has is insignificant in relation to the amounts of money circulating in the books of any decent sized company. If you wouldn't limit liability, a company of any decent size failing, would typically mean the investors would be in debt for the rest of their lives. So even if there were only a small chance of failing, nobody would want to take that chance because very few things are worth the risk of being financially crippled for the rest of your life. — ChatteringMonkey
Isn't the issue just ownership, property here? A share is a piece of ownership right? Suppose there were no shares, everything would stay with the founder/owner of the company and you'd have essentially the same problem of a person getting a return on his initial investment in perpetuity. — ChatteringMonkey
You want to distribute added value to everybody that has contributed to it, and not only to the owners. I can get behind that goal certainly. And the idea of giving out shares which dilute over time seems like a clever way to do that. No sure how it would work out in practice, but at least it's a concrete idea to try to solve the issue, got to give you props for that! — ChatteringMonkey
Limiting liability was indeed necessary to incentivize investment in undertakings that wouldn't yield profit. Adding the possibility to corporations to make profit could've been incentive enough (partnerships don't have limited liability either) but politics resulted in profit and limited liability. I think that was a mistake. Limited liability externalises the costs of damages caused by the corporation to wider society, which is a reasonable exchange if the corporate activity is performed for a goal benefiting wider society but not if it's only for private gain. In that case, if you have all the profits, you should also bear all the responsibility.
In my ideal world, we would see non-profit pharmaceutical companies developing the "riskiest" treatments with limited liability and for-profit pharmaceutical companies but with normal liability that would automatically go for simpler products. — Benkei
That's how it was defined. It could also have been structured as a piece of a loan and related interest, pretty much like a variable interest rate bond, possibly collateralised but not necessarily involving ownership in property of the corporation directly. I do think that now that it is considered "property" there's a lot more resistance to making changes to how corporations are set up. — Benkei
In any situation those that have power will not want to lose their power, hence societal change is always difficult, no matter what the situation is. And do notice that not in all societies it's just a extremely rich who have the power, in many places there is a small cabal of career political people who are in charge and who aren't exactly super rich. Thinking that in every country the rich control everything is an exaggeration.The rich, some successful business people, elites and privileged people will resist the degree of sharing and cooperation required for any of these solutions to solve the problem.
Rather what I see is the super rich hoarding as much wealth as they can, by unscrupulous means sometimes. Also powerful people might prefer to live in a dystopian world, than a progressive sustainable world.Because of this fear of sharing that will be required and to continue exploitation and profiteering. — Punshhh
In my view the UK has a distinct and quite strict class system, where it isn't just the upper class that preserves and maintains the class structure. When you can notice the class from language, hobbies and the sports people watch, the class system has quite deep roots. For British what class they come from is very important.Here in the U.K. we have a distinct privileged class. An overthrow of our class system. — Punshhh
Yet you have universal health care and the Labour party. Something which actually the US doesn't have.These people are dead against any kind of levelling up, or Universal basic income. It suits them fine for the status quo to continue, by proving up a Tory government. — Punshhh
And just like the Labour Prime Ministers Tony Blair, Harold Wilson and Clement Attlee who also graduated from Oxford. And btw, Keir Starmer, the present leader of the Labour party and the opposition leader has also graduated from Oxford. You see societies that function basically as meritocracies do not erase classes. Those who get to the top universities will make the future elite, independently of what their political views are. France is another example of this.Johnson has stepped into that role, groomed by Eton college and Oxford. — Punshhh
It’s difficult to provide proofs for things like global tipping points. — Punshhh
Another point worth mentioning on the pro-capitalism side is that the promise capitalism makes of luxury is a just another way of framing a basic human desire for prosperity, flourishing, and not really something unique to capitalism. — ChatteringMonkey
Another point worth mentioning on the pro-capitalism side is that the promise capitalism makes of luxury is a just another way of framing a basic human desire for prosperity, flourishing, and not really something unique to capitalism.
— ChatteringMonkey
If you have to manipulate your customers to want the luxury in the first place, and the means by which organisations do this are varied, sly and grim, then this doesn't really hold up. — Kenosha Kid
part of the point that we still would need a system that could provide "prosperity/flourishing" stands I think. — ChatteringMonkey
part of the point that we still would need a system that could provide "prosperity/flourishing" stands I think.
— ChatteringMonkey
I dunno. Maybe because now we're anchored to the myth of sustainable growth, it might be difficult to sell real sustainability. But again I feel that this is something that's been indoctrinated rather than meeting some demand. There is a very powerful (I can't say "good") capitalist reason to compel earners to exchange their salaries for luxuries, so if you live in a capitalist democracy, no one's going to allow the electorate to labour under the belief that keeping more of their earnings for the future is a good idea. But we used to do just that. Saving and thrift were virtues once. — Kenosha Kid
As their population has boomed it's hard to see how one would return to small scale sustainability. — ChatteringMonkey
As their population has boomed it's hard to see how one would return to small scale sustainability.
— ChatteringMonkey
And yet the more people, the less of a share of the Earth's resources they should have. But yeah I understand your point about poorer countries levelling up, and this only reinforces the need for richer countries to recede. The growing emissions of the third world are principally a problem while the first world is already unsustainably over-emitting. If we drop back, there's wiggle room to approach equilibrium. — Kenosha Kid
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