Stanley Dundee

Top: Getting Money Right

Affording What We Want

Stanley Dundee

2017-10-20 v. 1.2

Money is unbounded. Resources are not. If the resources exist, money is no object: the sovereign can spend the money into existence to mobilize the resources. Lack of money is a policy choice.

So: Universal healthcare. Universal child and elder care. Great schools. Safe roads and bridges. Clean water and reliable electricity. Basic communications facilities. Housing for all. Jobs for all.

Do you really believe we lack the resources (mainly effort) to do these? Shouldn't we be trying, at least? What we truly lack is the will and the skill to mobilize society's resources for the public good. And the knowledge that lack of money is a lie.

Not that the technical challenges aren't daunting. There's a long chain from the sovereign to the plurality of local care-giver institutions where most of the care would be given. Bridge that gulf with a plenitude of stewardship boards of respected elders and others to vet proposals from care-givers, mainly for wage lines, but also for purchase and divergence to stewardship from private property assets such as buildings, transportation, utilities, etc. Boards would exist at local, regional, state, and federal levels.

Proposals would roll up to the sovereign, where the funds are winkled then sluiced back down to the care-giving originators. Audit requirements by the sovereign would accompany the flow of sovereign funds. Stewardship board elections would be held in the manner of school board elections. Let's make these local elections fully democratic by carrying them out entirely with paper ballots counted in public. On a proper holiday! Why not?

A beloved friend with extensive US and international economic policy experience cautions:

Yes, while government can issue fiat currency/obligations to pay for nearly anything a society's political process decides it wants, there are some important limitations. The question raised by a big boost in social spending along the lines you outline is whether, for a given economy (and context matters very much here), the deficit spending that would/could ensue would create a substantial, sustained increase in prices by virtue of the big increase in median purchasing power and economy-wide aggregate demand.

And in turn whether this would create a self-reinforcing change in inflationary expectations that could lead to the dreaded spiral that, yes, would help debtors relative to creditors but at a certain point would also generate a considerable amount of pain (there are a lot of people on fixed incomes who are big losers from inflation) and lead to a loss of confidence, investment and a general degeneration of economic conditions to the point of bartering substituting for financial transactions, contraction of credit and economic activity, etc.

Or, in a less dramatic scenario, whether in the context of an open economy with reasonably open capital markets and a floating exchange rate, a substantial increase in inflation well short of a spiral would nevertheless fuel a marked depreciation of the exchange rate that would render imports and foreign debt service much more expensive, thereby lowering living standards and being self-defeating in significant part.

I do think that there is a fair amount of headroom remaining in the fiscal and monetary policy of the US and other countries before they would get to either of these points. But this is the crux of the biscuit --- where I would want to see the debate focus: how much headroom, under what circumstances, to what extent is technological disruption, international integration shifting the ground under the feet of policymakers (i.e., old assumptions about public debt sustainability), etc. For me, this is ultimately not a black and white, binary matter. I suppose it helps to frame it that way to get people off of their old assumptions -- and that is how I interpret your intentions with this piece. But I'd encourage you to look into these further considerations and dynamics as you continue your reading and writing in this domain.