Tag Archives: fiat money
But what is Money?
Posted by on Aug 17, 2019
This week on Facebook: I have posted a lot on the subject of money, often referring to Investopedia, the International Monetary Fund, European Central Bank (which is not a ‘central‘ bank at all) and the Encyclopaedia Britannica¹.
- Investopedia: Everyone uses money.
- IMF: Money may make the world go around, as the song says.
- ECB: The nature of money has evolved over time.
Holding the views I do about money and especially ‘the double coincidence of wants‘ problem, I now find myself torn between the notions of commodity money and fiat money. Of course whether or not either money has value ultimately comes back to the double coincidence of wants, this time being set by the Foreign Exchange Market².
The value of a country’s currency depends on whether it is a “free float” or “fixed float”. Free floating currencies are those whose relative value is determined by free market forces, such as supply / demand relationships. A fixed float is where a country’s governing body sets its currency’s relative value to other currencies, often by pegging it to some standard. Free floating currencies include the U.S. Dollar, Japanese Yen and British Pound, while examples of fixed floating currencies include the Chinese Yuan and the Indian Rupee. Foreign Exchange Market
The reasons for a State investing in another State’s money may be quite complex, which raises the question of if China’s wealth is in the free floating USA dollars debt that it owns, or the fixed floating currency of the Yuan. Read more of this post
What does inflation mean!
Posted by on Aug 10, 2019
This week on Facebook: I am still being asked, “Who is it that this debt is owed to“. The examples of public debt that I referred to last Sunday appear’s to be of little concern to an electorate who assume that economic growth can continue unabated. The electorate’s assumption appears to be that the distribution of this perceived economic growth will be used to support the State’s spending on a social welfare programme. It ignores the history of their public administration’s attitude to debt and particularly to austerity. It was Germany that adopted the earliest modern social welfare programme under the aegis of Otto von Bismarck in 1889 (3).
Sunday 4/8/2019
Posted by on Aug 4, 2019
This Sunday on Facebook: It’s impossible to separate money from inflation in a fiat money world, then it is also impossible to separate money from the gold standard if the rate of exchange is determined by the State.
Money, it’s a crime
Share it fairly, but don’t take a slice of my pie
Money, so they say
Is the root of all evil today
But if you ask for a rise, it’s no surprise
That they’re giving none away
Pink Floyd’s lyrics, “Share it fairly but don’t take a slice of my pie“, hold as true today as nearly 50 years ago when the song was written. A ‘slice of my pie’ is always the issue. In my post of 2011, I wrote that the war reparations of WWI that were imposed on Germany 100 years ago caused the resignation of John Maynard Keynes from the British delegation. In Keynes’ book The Economic Consequences of the Peace Keynes pointed out that the principle of accumulated wealth based on inequality was a vital part of the pre-First World War order of Society and ‘progress’ as it was understood then. Echoing a principle common in todays world that it is unnatural for a population minority to accumulate such huge wealth when so few enjoyed the comforts of life.
The hyperinflation brought about by The Weimar Republic, compounded by the Treaty of Versailles a 100 years ago, being tempered by the thought that it couldn’t happen to money in the UK. Of course I didn’t count on the Bretton Woods Agreement introducing fiat money to the world in 1971. In my naivety (I was very young at the time), I assumed that politicians acted as the representative of their electorate. Instead the State’s public debt is a common function of all working economies. There has been an increase in the debt to GDP ratios throughout the world in past decades and yet The U.S. Dollar Still Dominates Global Reserves.
Perhaps it is time that the eccentric heroine of Christopher Isherwood’s novella Sally Bowles is resurrected — thought I doubt very much that any new terms will be invented for the inflation created by the State in a fiat money world.
Part of the fascination of Weimar Berlin lies in the mirror it holds up to our own time. In Cabaret, fictional Nazis beat up the gay hero and kill cabaret owners who dare to criticise, or simply to make people laugh at, pomp and stupidity. If the musical is at last being staged in a Berlin that never made much of Isherwood, then it may be because the producers want to emphasise alarming parallels. A newly vibrant German and European capital, Berlin today has record unemployment and recession is a returning threat. Some of the young have embraced the violent right, with its hatred of foreigners and permissiveness, and parade menacingly through the streets. Wicked joys (2004)
Inflation!
Posted by on Aug 3, 2019
This week on Facebook: Last Sunday I tried to show the inflationary effect of fiat money that was introduced at Bretton Woods in 1971. While I think it was something that I failed to do successfully, I may have indicated how difficult it is to arrive at a figure for inflation that is not subject to government fiscal policy. Read more of this post
Sunday 28/7/2019
Posted by on Jul 28, 2019
I did consider withdrawing this post, but it has made me look at ‘Measuring Worth‘ in a new light and is useful to me. Specifically it made me consider how complex the issue of inflation actually is in a fiat money world. Especially in the light of the Retail Price Index and the Consumer Price Index that comprise the items making up the UK’s ‘shopping baskets’.
The best that I could do was to measure the value of one pound (UK) using three sequential periods from 1947 until 1970 and from 1972 until 2018. I missed out 1971 as it was the year that fiat money was introduced into the global economy. Even so the cost of inflation to the consumer for a basket of goods not included in the RPI or CPI indices was hard to identify. This is particularly true of groceries that are considered to be a necessary expenditure. Food is approximately 10% of the basket depending on the percentage variability of the other included items. The following notes below point out that measurements of inflation are based on a fiscal policy that is related to the RPI, CPI indices.
Short Stories
Posted by on Dec 8, 2018
This week on Facebook: I have decided to have a lazy December, which turned out to be not as lazy as I had assumed. Nevertheless: December 2018 is going to feature reprises from Aasof’s Reflections beginning with some short stories that I have enjoyed writing. Clearly my first love is web research and I have enjoyed writing and researching material for all of my short stories. The following (in chronological order) are a selection of those that I enjoyed writing and researching the most.
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Cassandra on debt
Posted by on Oct 27, 2018
This week on Facebook: I can’t think of an answer to a financial dilemma constantly driven by political imperatives and am not so conceited that I would ever try to suggest one¹. Regression at my age is a common occurrence and my diffuse dissatisfactions increase day by day, with my belief that the world “is going to hell in a handcart”. On becoming an octogenarian next May what other view would I hold! Perhaps my interest in history is an expression of that regression. I constantly regard events as being a case of “one step forward two steps back” and history replete with stories of debt. Read more of this post
The Money Tree
Posted by on Oct 13, 2018
This week on Facebook: Most of those who believe in the existence of ‘A Money Tree’ and particularly those who choose to write about it (either from the political left or right), are not so naive as to believe that the State uses its fiscal policy wisely. The term money tree is used for political effect, yet regardless of political leanings most remain mute regarding the money that grows on it and where it comes from.
The issue of affordability never arises when the proposed spending relates to activities like going to war or bailing out the banks. There Is A Magic Money Tree
Countries like the UK that have their own central bank with which to create and borrow its own currency, claiming that deficit financing is part of a fiscal policy and not a problem as it is only incurred as an investment that is part of government economic policy. Those committed to the political left or right claim that their fiscal policy will encourage economic growth and resolve any deficit financing problem. The State has consistently failed to cover the costs for the future in its management of fiscal policy such that deficit financing always increases the national debt and fails in its social responsibilities.
To paraphrase Peter F. Drucker, it could he said that: The first responsibility of government is to cover the costs for the future. If this social responsibility is not met, no other social responsibility can be met. Peter F. Drucker, The Practice of Management
The Value of Money
Posted by on Oct 6, 2018
This week on Facebook: In ‘The Coming Dark Ages?’ I criticised all the articles for failing to point out that (in my view) the prevalence of an economic global hegemony by Western Philosophy relied on a reserve currency in a fiat money world. Money at the centre of globalisation, whether it is trade or war that is the dominant driving force for global economic growth. I was especially critical of the article America enters the dark ages concluding that in my opinion money, war and a rising nationalism, are the most likely harbingers in any coming of a new dark age.
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The Coming Dark Ages?
Posted by on Sep 22, 2018
This week on Facebook: Judao-Christian and Greco-Roman values is under vicious attack everywhere, or so the writer of ‘Return of the Dark Ages’ (1) believes. The article seems to be written as defence for the values of Western Philosophy, and yet it is the ethos of this Western Philosophy that suggests its evolving interpretation into the beginning of a new dark age (2). Read more of this post
