FOFOA’s argument against modern money theory can be summarized as follows:
A staggeringly massive hyperinflationary event is already latent in the global economy. The dollars currently in circulation only retain their purchasing power because of the function of money as medium for the circulation of commodities. Modern money theory, which proposes the fascist state faces no monetary constraint on spending in excess of its ability to tax or issue debt, is making an argument for monetary policies that will only exacerbate the latent hyperinflation already present in the economy. The problem posed by hyperinflation, “too little money”, is not mitigated when the state creates new currency out of nothing. Rather, the case is the reverse: emitting new dollars does not create additional purchasing power; it simply dilutes the purchasing power of the dollars already in circulation, adding to the implosive potential of the inevitable hyperinflationary event.
According to FOFOA, the hyperinflationary event has been held back so far by the self-interested action of Europe, Japan, and China; who have recycled their dollars back to the US to buy its debt over the past thirty years. This recycling of dollars into US debt has supported the purchasing power of the dollar, but it has reached its limit. The dollar is now suffering a credibility crisis among US creditors, that must lead to an effort by these creditors to exchange their dollars for real, not fictional, assets. With the US’s creditors losing faith in the stability of dollar purchasing power, and boycotting the purchase of US debt, the US is actually engaged in wholesale creation of dollars out of nothing to fund its operations, driving the dollar into actual hyperinflation.
This latter scenario, the impending and irreversible loss of dollar credibility, is where FOFOA badly stumbles in his argument against the advocates of modern money theory.
QUESTION: What’s a “Right” libertarian (or a “Left” Libertarian for that matter)?
What the fuck does this headline mean?
Does “Right” libertarian mean: “I want to abolish the state because I hate those damn leftists?”
Does “Left” libertarian mean: “I want to abolish the state because I hate those damn rightists?”
Do “Right” libertarians ever get confused and suddenly abolish the state for “Left” libertarian reasons.
If so, do they get to take it back?
Toward the end of his case against the modern money school, FOFOA offers this insight into Wiemar Republic hyperinflation, and what he argues is the basis for the coming hyperinflation set to be unleashed in the dollar system:
As the German Mark fell, there was “not enough money” to pay the debt. And with a little inflation, there is “not enough money” to buy our necessities from abroad.
Hyperinflation, FOFOA argues, is commonly described as a rapid rise in the general price level — an incredibly sharp burst of inflation where the prices of commodities increase a hundred-fold, even a thousand-fold, as a result of a rapid depreciation of the purchasing power of the currency. But, hyperinflation can also be thought of as a sudden implosion — collapse — in the supply of money in relation to the prices of commodities. A situation emerges where there is “not enough money” to pay for commodities.
It turns out my first reaction to FOFOA’s post, Moneyness, was the correct one: the Moneyness of the dollar is to Money what Stephen Colbert’s Truthiness is to Truth, i.e., NOT.
To really understand the significance of FOFOA’s pure concept of money, I will compare it to Karl Marx’s and classical political-economy’s view of money. In the latter view, value drives and determines price; while in FOFOA’s pure concept of money, price is wholly indifferent to value. Marx argued the price realized by the sale of a commodity in any exchange was, at root, a function of the duration of socially necessary labor time it takes to produce it. The realized price of the commodity included the wages paid to the worker plus a quantum of unpaid labor time realized as profit by the capitalist. However, because this is a social process, and the actual exchange is heavily influenced by imbalance between supply and demand and many other factors, a direct connection between the price and value of a commodity in a given transaction could not be established in any obvious fashion.
I am now reading FOFOA’s Moneyness, an epic length blog on the history of money. I was lured into reading it by the title, which I stupidly misinterpreted as tongue in cheek on the order of Colbert’s Truthiness. In fact, it is an attempt to bring his view on money to an analysis of the current global monetary crisis.