The Long View 2008-11-09: Zero Point History
I especially like this description of MMT in Federal finance as “quantum finance”.
I have heard Republicans console themselves with the thought that the new Administration will not be able to carry out any very ambitious domestic projects, because it will operate under fiscal restraints. This is pre-quantum-finance thinking. There don’t seem to be any fiscal restraints, except for a theoretical limit to the world’s appetite for US federal debt.
Also this bon mot about libertarians:
I have every confidence that the current crisis will be overcome. If you ask me, the basis for a general financial reform would be the principle that risk attendant to revenue should always stay with the revenue, but maybe that’s just me. The longer term problem for financial capitalism is that it takes a great deal of good government to keep libertarians living in anarchy, but good government, like good chamber music, is something that not every historical epoch can provide.
Zero Point History
Here’s a bad idea that no one has yet quite proposed, but I await it hourly: why doesn’t President Bush resign now so that Senator Obama can deal with the financial collapse and the various wars immediately? If this suggestion were made, it would not be new, as we see from Paul Johnson’s description in Modern Times of the unhappy transition from the Hoover Administration to that of Franklin Delano Roosevelt:
There was then a huge hiatus between the election and the transfer of power, from early November to March. Both men agreed action was urgent; except on details, they agreed on what it should be – more of the same. Roosevelt conceived the fantastic notion that Hoover ought to appoint him Secretary of State immediately, so that he and his vice-president could both resign and Roosevelt could constitutionally move into the White House immediately. Hoover, equally optimistically, thought Roosevelt should be persuaded to disavow some of his campaign remarks and promises, which he thought had made a bad situation worse, and humbly endorse, in public, measures which the President proposed to take, thus restoring confidence and ensuring continuity of (Hoover’s) policy. Granted these ludicrous misapprehensions, it is not surprising that their contacts over the long interregnum were confined to icy epistles and a mere courtesy call by Roosevelt on 3 March 1933, the eve of the transfer.
It is a mark of real progress, perhaps, that the outgoing and incoming administrations today are by no means alienated in this way, though maybe the same cannot be said of the parties in Congress. Certainly it’s an interesting similarity that there is no heated disagreement between the administrations about what needs to be done immediately. The Obama Administration could actually suffer a bit from that: as Johnson notes, FDR benefited from the perception that he had utterly repudiated his predecessor and all his works.
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Except in my capacity as a Stargate Atlantis fan, I have little interest in Zero Point Energy. Maybe it is possible to run civilization on the agitation of the quantum foam, but I would not bet on it. Nonetheless, the idea has occurred to me repeatedly in recent days in the context of fiscal policy. Just three months ago, shouts of horror and cries of lamentation would go up if Congress or the president proposed some measure that would increase the federal deficit by $10 billion; now measures are proposed daily that would increase it by $100 billion or more, and no one turns a hair.
I have heard Republicans console themselves with the thought that the new Administration will not be able to carry out any very ambitious domestic projects, because it will operate under fiscal restraints. This is pre-quantum-finance thinking. There don’t seem to be any fiscal restraints, except for a theoretical limit to the world’s appetite for US federal debt.
I have every confidence that the current crisis will be overcome. If you ask me, the basis for a general financial reform would be the principle that risk attendant to revenue should always stay with the revenue, but maybe that’s just me. The longer term problem for financial capitalism is that it takes a great deal of good government to keep libertarians living in anarchy, but good government, like good chamber music, is something that not every historical epoch can provide.
As an analogy of the arc of development of Western finance from about 1800 to the 22nd century, consider this medley of quotations from John King Fairbank’s China: A New History (1992):
During the Southern Song [1127-1179], foreign trade bulked large in Chinese government revenues for almost the only time before the nineteenth century...The demand was so high that the famous Chinese exports of silks and porcelains and also copper cash were not enough to balance the imports...[The taxation of trade facilitated by the Islamic diaspora] enabled the Southern Song to rely more on salt and trade taxes than on the traditional staff of imperial life, the land tax. One effect of this increase was to revive the use, inaugurated on the Tang [608-917], of paper money, beginning with government remittance notes to transfer funds, promissory notes, and other paper of limited negotiability, and finally arriving at a countrywide issuance of paper money by the government...[Under the Yuan or Mongol Dynasty 1271-1368] Khubilai’s [sic] great public works such as the second Grand Canal system contributed to some degree of economic prosperity...as tax farmers [Muslim merchants] ...helped the Mongols collect the agrarian surplus and channel some of it into trade. Commercial growth was signaled by the extensive issue of paper money, superintended by Muslim financiers at court...[The currency system of the Ming Dynasty 1368-1644] was a failure, quite unable to keep up with the growth of trade. At first the government relied on paper currency, but [founding emperor] Hongwu was unaware that unlimited paper money produces inflation, so he kept on handing out paper currency as awards. By 1425 the paper currency went out of use. Meanwhile, the government forbade the use of silver...[Afterward the]fiscal establishment seems to have followed the founder’s strong sense of frugality because of his conviction that profit was in itself evil...At the same time the state had to be prevented from “enriching itself” because any gain to the government in this naive view, automatically meant a loss to the people.
It’s quite possible to go from the perfection of the Central Bank back to trade based on weights of precious metals in less than 300 years. Finally, the government gets off the people’s back.
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Speaking of dynastic transitions, I doubtless further secured my own reputation as a prophet by suggesting a few week’s ago:
[T]he expansion of the role of the vice president, beginning with the Carter Administration, has been extraordinary; not unconstitutional, I would say, but aconstitutional. This trend reached a climax with Vice President Dick Cheney, who functions as a prime minister, a role usually performed by the White House Chief of Staff.
If the Obama-Biden ticket is elected, this pattern is likely to recur.
Well, maybe not. At any rate, a prime-ministership for Joe Biden does not seem to be consistent with the recently announced appointment of Rahm Emanuel as White House Chief of Staff. Until recently, the Chief of Staff had usually managed the executive branch from day to day. Representative Emanuel seems to have been selected with that role in mind; Vice President Biden will, perhaps, be encouraged to spend time at the Naval Observatory discussing zero-point energy with the federal astronomers. Actually, the most interesting thing about the new appointment is that all the news stories take care to emphasize the appointee’s ferocity, rudeness, and general ruthlessness. This is interesting because the Chief of Staff, unlike the vive president or the presidential spouse, is easily dismissed. One might almost think that the people who selected him had in mind this definition from The Devil’s Dictionary:
CABBAGE, n.
A familiar kitchen-garden vegetable about as large and wise as a man's head. The cabbage is so called from Cabagius, a prince who on ascending the throne issued a decree appointing a High Council of Empire consisting of the members of his predecessor's Ministry and the cabbages in the royal garden. When any of his Majesty's measures of state policy miscarried conspicuously it was gravely announced that several members of the High Council had been beheaded, and his murmuring subjects were appeased.
I know I have quoted that definition before. I will certainly have occasion do so again.
Copyright © 2008 by John J. Reilly
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