By J. D. Alt
You know those radio collars they put on grizzly bears, so they can track where they go through the bushes and forests? Well, I’m pleased to announce they’ve developed a radio collar that fits on a U.S. Dollar. (This was a particular accomplishment since most U.S. Dollars now are electronic, the essence of their existence coded on magnetic discs, the embodied code appearing and disappearing, disc to disc, not unlike the quarks and neutrinos of quantum mechanics.) Without going into how they did it, then, we can simply announce that now we can track a U.S. Dollar through the bushes and forests of our economy and, hopefully, on this episode of NATURE, discover the roots and results of wasteful government spending.
Obviously, we can’t track ALL the Dollars, so we have to first decide which one to put the collar on. To avoid any accusations of hanky-panky, we’ll do this arbitrarily—blindfolded, so to speak: We’ll just count to three and pin it on the first Dollar that comes out of the Federal Reserve on the count of four. Here it comes—SPOOT!!—where’d it go? Turn on the radio direction finder!
Right off the bat we can see there’s a problem: Our Dollar went into a “contingency bank account” for Solyndra Corporation, the developer/manufacturer of a unique, experimental, solar energy technology that might or might not pan out. A pretty risky place for our Dollar to begin its adventure.
But look! There’s hope! Our Dollar has squeaked its way into the paycheck of a Solyndra engineer, who has deposited it in the family checking account and—we can already see—the mother of his three daughters has already spent it to…. Wait a minute. Adjust the gain on the radio-beacon please!….Spent it on…there it is! Our Dollar is now in the bank account of the Stony Creek Day Care Center. It seems stuck there momentarily—this is a good time for a commercial break brought to you by the GreatAmerica SuperPAC to cut wasteful federal spending.
Now our Dollar has jumped again! Strong signals are coming from Nelson’s Emergency Plumbing—“24 Hr. Service Day or Night.” It seems the Day Care Center had a broken water pipe, and now Arne Nelson is speeding toward a Bank of America ATM machine with a Stony Creek check in his pocket, desperate to get it deposited so he can make a payment on his new bass-fishing boat. How can the radio collar track that check? Amazing. We don’t know! Until the check clears, part of our Dollar’s code is still back at Stony Creek Day Care, but enough of it (quark-like) has glued itself to the check in Arne’s pocket that we can actually see the blue dot of our spotter square on the top of his pick-up’s cab as he pulls into Bank-of-America. And we should expect to see—yes, there it is, flashing now in the Bofa account for Bigger Bass Boats Inc.
Now this is interesting: the vice president of Bigger Bass Boats has just pulled up to an ATM machine in an entirely different state—Wyoming for heavens sake!—about 2000 miles from where we’re taping this episode of NATURE, and look! Our Dollar is popping out of that ATM machine as part of an actual, paper, ten dollar bill! And here goes the VP, walking across the street with it to Sammy’s Subways, and he’s buying a twelve inch steak-and-cheese with extra pickles! You have to admit, folks, our Dollar may be kind of ephemeral, but it makes things happen! First an experimental solar panel that may or may not work, then a day-care story-time session, then a fixed plumbing pipe, then a bass fishing boat with a 250 horse-power jet motor, then a steak and chees sub! What’s going to happen next?
Except look what Sammy’s doing now: he’s putting our Dollar into…. Is that a jar? Yes, it’s a five quart pickle jar with a slot cut in the lid. And it’s filled, we can see, with other Dollars! I think we’re going to need very long commercial break here. We may even need to show some back episodes—this is kind of like a major rain-delay in the seventh game of the World Series, because LOOK at the label Sammy has taped to the side his pickle-jar. Can we zoom in for a shot of that? “2012 TAXES”.
It looks like this is then end of the road for our Dollar. Our producer is cursing at all this bad luck. It turns out that’s the only U.S. Dollar radio-collar available, and there it is, stuck in Sammy’s pickle-jar. Nothing much to do—except (as we patiently wait for April 15th when we assume the Dollar will come out of the pickle-jar) we can report that Solyndra has, in fact, gone bankrupt. The uniquely efficient solar panels it thought it might be able to produce didn’t really perform as expected. So we can, at least, assure ourselves that our radio-collar experiment has uncovered a flagrant example of wasteful federal spending. That feels better.
But here’s April 15th, now, and look what Sammy’s doing! He’s removed the Dollar bills (including ours) from the pickle-jar, counted them out, put a thick rubber-band around them, inserted the bundle into a manila envelope with his tax filing, and is now boarding a Cheyenne metro-bus. What in the world is he doing? Of course! He’s getting off the bus at the Cheyenne IRS office, walking through the big glass doors, reading the building directory, getting on an elevator, walking down a hall, stepping up to a counter with his manila envelope—and paying his taxes.
Now Sammy’s gone, and the blue dot of our tracking spotter is blinking on the stack of Dollar bills sitting next to the attractive blonde clerk who is reading Sammy’s tax filing and entering its information into her computer. And then something completely unexpected happens! Our blue tracking dot disappears from the stack of Dollars next to her keyboard! What’s happened? Has the radio-collar stopped working? Our surprise changes to panic as we watch the clerk, moving with casual indifference, pick up the stack of Dollars, carry them a few steps to the hopper of a grey machine that looks like a…. No! Wait! The radio-collar!
Too late. We’ll have to make a new one.
Hah! Very clever 🙂
A great post as usual. I have saved all your pieces including “Playing Monopolis Monopoly” and frequently reference them. I am one of those readers of this website that is a big supporter and believer of MMT, despite it taking me much effort to unlearn what I was taught during years at University as an Econ major.
However, if there is one concern I think worth express regarding MMT is that it could lead “casual” readers to believe that Government spending carries no related risks or downsides. The “careful” reader will note that budget deficits and inflation are indeed highlighted as a possible inter-related problem by MMT proponents. However, some potential fans of MMT get put off early on in the learning process because they feel that the inflation issue is only tangentially addressed. Having paid close attention to this sort of comment which has surfaced in some blogs, I sense there is some merit to the argument.
Accordingly, I think that MMT needs to address the inflation issue head on, overtly, and for it to gain greater public acceptance… which would be a good thing. At the end of the day, what matters is the real economy, and if real resources are not put to good use, then the economy will suffer. Government Spending re-directs real resources… ideally for the “public good”.
Latin American economies are a good example of systems that, by and large, suffered (or are suffering) as a result of highly inefficient and corrupt governments; each in control of expenditure programs with little checks and balances. Other problems also contributed to the so called “lost decades” (including counter productive IMF policies), but even Lula and now Dilma from Brazil are the first to state that part of their success in getting so many millions out of poverty was a strict and careful control of government spending.
Not that the private sector’s track record is stellar when it comes to allocating real resources (especially witnessing the debt crisis and pre and post 2008 events), but I think that it is important for new readers of this website to understand that in either case, what really matters is what is done with real resources by those who are in power (be they from the public, or private sectors). If a Government consistently picks the “Solyndras” of this world, its economy will undoubtedly and eventually get into serious trouble.
MMT writers have addressed inflation many times. Here are Bill Mitchell’s posts on hyperinflation. And here are his posts on inflation.
Here’s another piece by Scott Fullwiler on PPCS and inflation. And here’s Randy Wray on the same subject.
I actually agree with Mr. Seferian – the monetarist propaganda of the 1980s has morphed into a more generic “fiscal responsibility” narrative, but the hold this mindset has on the American public has become vice-like. Even our “progressives” routinely concede this ground – by admitting that the deficit is a huge problem in the “long run” or even the medium run.
The American left purged its radicals in the 1950s. Joe McCarthy won. Bobbie Kennedy started out working for him and never repudiated the red-baiting he engaged in. Without the communists, socialists, anarchists and pacifists, the Democratic Party had no intellectual anchor. It defended the New Deal in the days when no one was attacking it and then let its institutions take care of themselves in the days when they were still “third-rails”. Now the dominant corporatist faction of the Democratic Party is the safety net’s worst enemy. The Grand-Bargainer-in-Chief is coming to save us from ourselves and help us learn to “live within our means” again. He means it. He’s a lawyer, not an economist, and he has outsourced his economic policy to re-treads from the Bush/Clinton teams.
MMT needs to get a lot sharper politically if it wants to get into this game for real. A sharper, simpler, more populist line on the real causes and dangers of inflation would be a good thing.
Biography of a dollar. It’s birth, life and death.
It seems to escape most individual’s attentions ( because they rarely think about money’s origins ) that any method of money creation be it government or private banks is going to be vulnerable to greedy and power seeking human beings recklessly creating too much money for their own ends and creating an over-bidding situation throughout an economy. The first step in educating the general population about money must be to explain the sources of its creation and then explain the dangers of inflation and then put forward recommendations as to how this can be restrained. MMT doesn’t really put forward any progressive ideas to achieve this and this makes it vulnerable.
Perhaps this stems from a failure to understand our human nature. We are a eusocial species that makes a great deal of use of altruism which is morality based. We do this because like eusocial ants we create a “nest” which we defend. This “nest” is our nation or our society although subsidiary “nesting” clearly operates with communities, loyalty to football teams, etc. We compete with other “nests,” or “nation” groups as well as internal groups within our societies, that allows more rapid evolutionary adaption and social and technological advancement than a “non-nesting” evolutionary strategy. If that society allows individuals or organizations within their society to over-pursue selfish objectives this is akin to permitting dispersive behavior which over-time genetically undermines the “nesting” instinct. Individuals reduce their level of cooperation with each other thereby reducing their capabilities of rapidly adapting to change. Reckless creation of money is, therefore, a “dispersive” activity just as large scale outsourcing jobs and investment ( driven by factors such as un-level playing fields and greed ) will weaken over time the ability to defend the “nest” particularly with a technology drain effect.
MMT needs to get a lot sharper politically if it wants to get into this game for real. A sharper, simpler, more populist line on the real causes and dangers of inflation would be a good thing.
Agreed!
It needs to be clear to people that prosperity is not the result of a fiat currency. It’s the other way around: the fiat currency frees the country to be as productive as it wishes to be and as its politicians allow it to be. Prosperity depends on a host of factors: infrastructures, education, legal system, political stability, cultural mores, the knowledge and expertise of its people, and in short, its overall productive capacity.