(Week 22 - Wednesday, Jan. 7 / 2009)
Perhaps the most common question I hear when the idea of direct public funding (as opposed to the issuance of money via private bank loans) comes up is, "What is to prevent all this currency being issued out of the US Treasury from flooding the economy with too much money and causing inflation?"
Public funding, assuming it is done with a minimal level of integrity, is by nature not inflationary. Indeed, it is the practical answer to inflation. It is amenable to being issued in a manner that is direct and proportionate to the actual economic activity monetized.
As with almost any other mode of disbursement, public money is, presumably, not passed out willy-nilly. It is, rather, issued as part of a transparent and orderly monetization process that is coupled with the production of real wealth (e.g. public infrastructure), or the provision of tangible human benefits (e.g. health care). Another way of saying this is that money is emitted as a complement to genuine human enterprise, which is indeed its "backing."
This process could still be abused, of course, but it is hard to imagine it ever becoming as disconnected from economic accountability as with the hundreds of billions of dollars that are being passed out currently to purchase "troubled assets" (e.g. the "securities" attached to already failed ventures) in the present financial crisis. This out-of-control issuance is caused by the supposed need to "keep the banking system from collapsing," which is another way of saying the need to make the "interest" payments on old loans required to maintain money in circulation. The resultant "need" to constantly expand the pool of circulating medium with ever more sums of borrowed money would not exist within a public system, and that, in turn, would remove the essential fuel from the "inflationary" fire.
Much has been made of the supposed tendency for uncontrolled spending by politicians when they get their hands on the public purse strings. Well, for better or worse, they have "their hands on the public purse strings" now.
Furthermore, even if we were to assume the worst concerning the character of our elected representatives, would it be better if they were spending money that had a compounding "interest" charge payable to private interests attached, or funds emitted essentially at no cost directly out of the Treasury?
I seem to recall scandalous reports in the news some years ago about how the space agency NASA had paid $900 dollars for a hammer, and other such outrages. I would ask, would it be better if that hammer were purchased with money issued directly out of the US Treasury, or with funds borrowed at "interest" from the Fed? If it were paid for with money borrowed at "interest" out of the Fed, the $900 dollar price tag would be only the beginning of the cost. The "interest" charge would be added to the Federal "debt," and more money would have to be borrowed by the government to make up for that charge, which would, in turn, cause over time a further compounding of the "debt." In practice, the "cost" of the hammer would always be with us and never cease to mount.
If, on the other hand, the hammer were paid for with money issued out of the Treasury, the "cost" would be $900, and no more. The unjustifiably high price (if indeed it is that) is not a function of the monetary system. It is the result of poor bureaucratic management and lax political control. However inflated the price of an item might be, nothing is gained, and indeed much is lost by purchasing it with money borrowed at "interest."
The problem with the current private system is that it has virtually no transparency. Indeed, the bank-money financial system is a knot of complexity that even the experts cannot seem to effectively penetrate. Instead the public is subjected to endless political promises, partisan ideologies and economic bromides within an intellectual atmosphere that is basically confused. If the public cannot understand how money is being created, issued and controlled, how then can there be accountability? The direct public issuance of money would cut through the lack of transparency, control and accountability, which, in the end, is the key to controlling "inflation."
In the next column I will describe more specifically the root mechanism that currently drives "inflation."
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Thursday, January 8, 2009
Tuesday, January 6, 2009
Column #103 FURTHER THOUGHTS ON THE "COST" OF HEALTH CARE
(Week 22 - Monday, Jan. 5 / 2009)
In the last column I talked about how, from a national (macro-economic) perspective, universal health care could be readily monetized ("paid for") to any extent deemed desirable within the limits of material and human resources available to provide it, by the issuance of money directly out of the US Treasury. The very notion that there is a national health care crisis because of a shortage of money is contrary to any real economic logic. That this idea even exists, and has moreover gained an iron grip over our culture's economic mindset, is largely attributable to the fact that our thoughts have been so taken over by the notion that our money supply must be borrowed into existence at "interest" from a private banking system that we have lost the ability to think in any other terms.
Let me state this emphatically so there can be no confusion. THE VERY IDEA THAT THE NATION IS LIMITED IN PROVIDING HEALTH CARE TO ALL ITS CITIZENS DUE TO A LACK OF MONEY IS AN ABSURDITY. This country possesses the macro-economic ability to issue its own money and thereby provide the circulating media necessary to finance its own health care to whatever extent is deemed appropriate. The task that remains, then, is to issue such funds in a quantity and mode that is optimal to make them accessible in the micro-economy to the people who need health care and the people that can provide it. This is essentially a matter of good monetary management.
The real limit to health care, then, is the availability of the material and human resources to meet the need. Such resources do entail a material and human cost in their development, but from a macro-economic (national) perspective the work to develop and employ them is something to be monetized (money issued on the basis of such activity). It is never a monetary "cost." That we are suffering as a society over a supposed lack of funds to take care of people is tragic and unnecessary. We will not, I suggest, resolve the cost-of-heath-care crisis until we wake up to that.
All this said, a caveat is in order. The assurance that health care services can be offered readily to all members of the society without any serious monetary impediment has the potential to be an immense blessing, but also carries with it a danger. The conscious taking hold by our society of our monetary prerogative unleashes a power into human affairs that has not been fully present heretofore. That is, the very ability for society to "monetize at will," so to speak, anything it decides to do up to limits of its material and human capabilities means, among other things, that we could created a "medical monster" that would have a virtually limitless powers for good, or oppression. A medical establishment could be conjured that would assume vast control over people's body's and minds, and, in a manner of speaking, "put everyone on meds." Increasingly, misgivings are voiced concerning the supposed intrusiveness, abuses and inappropriate influence of the medical system we already have, even by professionals within the system.
That said, I think one would find it difficult to deny that the medical discipline has provided many benefits, including extraordinary life-saving services. Regardless of how corrupted one might think the medical system has become, it is hard to imagine any but the most fanatical detractor (or perhaps most extraordinary person) turning down critical intervention at their own point of crisis.
My purpose in bringing this up is not to join the debate over the vices or virtues of this or that medical regime, but to suggest that such matters ought to be decided on their actual merits, free of being influenced unduly by the imperative to grow the medical economy to service the "interest" payments on bank-issued money.
Within a society that fully recognized its own power to provide the funds for any type and degree of health services it so chose, whether directly (as in a government paid system), or indirectly (as in insuring through public policy that there is enough money in circulation to enable people to manage their own medical finances), the possibility of developing diverse health regimens that are taken on their true merits and available to everyone who could benefit from them would at last be realizable.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
In the last column I talked about how, from a national (macro-economic) perspective, universal health care could be readily monetized ("paid for") to any extent deemed desirable within the limits of material and human resources available to provide it, by the issuance of money directly out of the US Treasury. The very notion that there is a national health care crisis because of a shortage of money is contrary to any real economic logic. That this idea even exists, and has moreover gained an iron grip over our culture's economic mindset, is largely attributable to the fact that our thoughts have been so taken over by the notion that our money supply must be borrowed into existence at "interest" from a private banking system that we have lost the ability to think in any other terms.
Let me state this emphatically so there can be no confusion. THE VERY IDEA THAT THE NATION IS LIMITED IN PROVIDING HEALTH CARE TO ALL ITS CITIZENS DUE TO A LACK OF MONEY IS AN ABSURDITY. This country possesses the macro-economic ability to issue its own money and thereby provide the circulating media necessary to finance its own health care to whatever extent is deemed appropriate. The task that remains, then, is to issue such funds in a quantity and mode that is optimal to make them accessible in the micro-economy to the people who need health care and the people that can provide it. This is essentially a matter of good monetary management.
The real limit to health care, then, is the availability of the material and human resources to meet the need. Such resources do entail a material and human cost in their development, but from a macro-economic (national) perspective the work to develop and employ them is something to be monetized (money issued on the basis of such activity). It is never a monetary "cost." That we are suffering as a society over a supposed lack of funds to take care of people is tragic and unnecessary. We will not, I suggest, resolve the cost-of-heath-care crisis until we wake up to that.
All this said, a caveat is in order. The assurance that health care services can be offered readily to all members of the society without any serious monetary impediment has the potential to be an immense blessing, but also carries with it a danger. The conscious taking hold by our society of our monetary prerogative unleashes a power into human affairs that has not been fully present heretofore. That is, the very ability for society to "monetize at will," so to speak, anything it decides to do up to limits of its material and human capabilities means, among other things, that we could created a "medical monster" that would have a virtually limitless powers for good, or oppression. A medical establishment could be conjured that would assume vast control over people's body's and minds, and, in a manner of speaking, "put everyone on meds." Increasingly, misgivings are voiced concerning the supposed intrusiveness, abuses and inappropriate influence of the medical system we already have, even by professionals within the system.
That said, I think one would find it difficult to deny that the medical discipline has provided many benefits, including extraordinary life-saving services. Regardless of how corrupted one might think the medical system has become, it is hard to imagine any but the most fanatical detractor (or perhaps most extraordinary person) turning down critical intervention at their own point of crisis.
My purpose in bringing this up is not to join the debate over the vices or virtues of this or that medical regime, but to suggest that such matters ought to be decided on their actual merits, free of being influenced unduly by the imperative to grow the medical economy to service the "interest" payments on bank-issued money.
Within a society that fully recognized its own power to provide the funds for any type and degree of health services it so chose, whether directly (as in a government paid system), or indirectly (as in insuring through public policy that there is enough money in circulation to enable people to manage their own medical finances), the possibility of developing diverse health regimens that are taken on their true merits and available to everyone who could benefit from them would at last be realizable.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Saturday, January 3, 2009
Column #102 THE "COST" OF HEALTH CARE: MICRO VS. MACRO
(Week 21 - Friday, Jan. 2 / 2009)
A debate has been raging for years as to how to make health care available to all the people of the nation, including the tens-of-millions of uninsured. Virtually everyone agrees that this is a need that should not go unmet for any human being, but finding a way to get it done seems to have eluded us. At one pole of the argument there are those who say that health care is an individual responsibility, the obtaining of medical services should be left up to personal initiative and the workings of the marketplace. Others assert that it is a human right that ought to be written into the Constitution.
Whatever view of a solution one might hold, it will invariably be centered around the question of how and by whom the spiraling "cost" of health care will be paid. Increasingly doubts are expressed as to whether health care for all is ultimately "affordable."
The existence of such doubts indicates a lack of awareness on the part of the citizenry that there is both a micro and macro-economic dimension of money, and of the respective characteristics and virtues of each.
From a micro-economic perspective, there is indeed a financial cost associated with health care because a source of revenue for employing medical resources must be found.
From a macro-economic perspective, however, there is not a financial cost associated with health care; only a question about much money to create and issue to assure that there is enough in circulation to pay for it.
Stated more succinctly, from a micro perspective health care must be paid for, but from the macro health care is monetized. The way this would ideally play out in practice is as that at the macro-economic level, the social order (through the Federal government) would look out over the society and discern what material resources are available to meet the health care needs of its members, and then formulate a picture as to how ideally they might be utilized. The Congress would then pass legislation that instructed the Treasury to issue money in sufficient quantity that this monetization picture could be realized in actuality.
The ability of our society to fully fund health care to whatever extent it decides is optimal within context of the material and human resources available is thus assured. The notion that the citizens of this country cannot "afford" medical services to the limit of the actual means available to provide them is economic nonsense.
In a micro-economic sense, health care carries with it a financial cost. In contrast, on a macro-economic level the activities associated with health care constitute the very basis or "backing" of the money required to fund them. Stated another way, on the micro level, medical care costs, but on the macro it pays for itself. The key, then, is to cover the micro costs from money issued at the macro level.
For example, to whoever is managing a hospital's budget, a doctor seeing a patient appears as a financial cost for which funds must be found. From the national perspective, however, that same doctor and patient coming together appears to the government, not as a "cost" to be paid for, but as economic activity for which money can be issued. Indeed, any bringing together of human need with the resources to meet it is the very basis for issuing money. It need only be done in an amount that is commensurate with the level of activity to be monetized.
In the light of this understanding, the way out of the nation's health care crisis is this: The Congress would authorize the issuance of money on the macro-economic level according to its Constitutional power to "…coin Money (and) regulate the Value thereof" in such quantity that the extent of enterprise that would naturally emerge in the health-care field if money were not a limiting concern could go forward. This could be accomplished in either of two ways.
One is that medical services could be paid for directly by the Federal government out of funds created for that purpose. This would resemble in appearance the mode of funding commonly referred to as "single payer," as often advocated by the liberal perspective in current political discourse.
The other is that an adequacy of funds to pay for health care could be assured indirectly through the Treasury maintaining sufficient money in circulation to finance whatever level of commerce would naturally occur in the economy, health care included. This would put a larger responsibility on people to manage their own medical-related finances, as is favored by the more conservative side of the political spectrum.
In reality elements of both approaches would almost certainly be employed. Regardless of the details of how that might be worked out, the important thing to know is that the availability of enough circulating medium to fully finance heath care at whatever level was deemed by our society to be optimally desirable and materially doable would be assured.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
A debate has been raging for years as to how to make health care available to all the people of the nation, including the tens-of-millions of uninsured. Virtually everyone agrees that this is a need that should not go unmet for any human being, but finding a way to get it done seems to have eluded us. At one pole of the argument there are those who say that health care is an individual responsibility, the obtaining of medical services should be left up to personal initiative and the workings of the marketplace. Others assert that it is a human right that ought to be written into the Constitution.
Whatever view of a solution one might hold, it will invariably be centered around the question of how and by whom the spiraling "cost" of health care will be paid. Increasingly doubts are expressed as to whether health care for all is ultimately "affordable."
The existence of such doubts indicates a lack of awareness on the part of the citizenry that there is both a micro and macro-economic dimension of money, and of the respective characteristics and virtues of each.
From a micro-economic perspective, there is indeed a financial cost associated with health care because a source of revenue for employing medical resources must be found.
From a macro-economic perspective, however, there is not a financial cost associated with health care; only a question about much money to create and issue to assure that there is enough in circulation to pay for it.
Stated more succinctly, from a micro perspective health care must be paid for, but from the macro health care is monetized. The way this would ideally play out in practice is as that at the macro-economic level, the social order (through the Federal government) would look out over the society and discern what material resources are available to meet the health care needs of its members, and then formulate a picture as to how ideally they might be utilized. The Congress would then pass legislation that instructed the Treasury to issue money in sufficient quantity that this monetization picture could be realized in actuality.
The ability of our society to fully fund health care to whatever extent it decides is optimal within context of the material and human resources available is thus assured. The notion that the citizens of this country cannot "afford" medical services to the limit of the actual means available to provide them is economic nonsense.
In a micro-economic sense, health care carries with it a financial cost. In contrast, on a macro-economic level the activities associated with health care constitute the very basis or "backing" of the money required to fund them. Stated another way, on the micro level, medical care costs, but on the macro it pays for itself. The key, then, is to cover the micro costs from money issued at the macro level.
For example, to whoever is managing a hospital's budget, a doctor seeing a patient appears as a financial cost for which funds must be found. From the national perspective, however, that same doctor and patient coming together appears to the government, not as a "cost" to be paid for, but as economic activity for which money can be issued. Indeed, any bringing together of human need with the resources to meet it is the very basis for issuing money. It need only be done in an amount that is commensurate with the level of activity to be monetized.
In the light of this understanding, the way out of the nation's health care crisis is this: The Congress would authorize the issuance of money on the macro-economic level according to its Constitutional power to "…coin Money (and) regulate the Value thereof" in such quantity that the extent of enterprise that would naturally emerge in the health-care field if money were not a limiting concern could go forward. This could be accomplished in either of two ways.
One is that medical services could be paid for directly by the Federal government out of funds created for that purpose. This would resemble in appearance the mode of funding commonly referred to as "single payer," as often advocated by the liberal perspective in current political discourse.
The other is that an adequacy of funds to pay for health care could be assured indirectly through the Treasury maintaining sufficient money in circulation to finance whatever level of commerce would naturally occur in the economy, health care included. This would put a larger responsibility on people to manage their own medical-related finances, as is favored by the more conservative side of the political spectrum.
In reality elements of both approaches would almost certainly be employed. Regardless of the details of how that might be worked out, the important thing to know is that the availability of enough circulating medium to fully finance heath care at whatever level was deemed by our society to be optimally desirable and materially doable would be assured.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Thursday, January 1, 2009
Column #101 MONEY AT TWO LEVELS: MICRO (PRIVATE) & MACRO (NATIONAL)
(Week 21 - Wednesday, Dec. 31)
There is a tendency in our culture to treat "money" as a commodity of a single nature that moves about in the matrix of economic relations, conveying value from one hand to the next. Is that not what we mean when we call it a "medium of exchange," "store of value," "unit of measure" or "common currency"? "A dollar is a dollar", so we are accustomed to saying, and if we want a stable economy the thing to be done is to pin down what exactly that means in terms of some representative "market basket" of goods. The orthodox view would say that a unit of currency may for the moment pass from this hand to that, play a roll in certain public or private cash flows, or facilitate trade in either the world of real goods or "investments" in the financial sector, but it remains a "dollar" nonetheless. It is, in a sense, presumed to be the common denominator of the whole economic order.
Outwardly this may seem obvious, but it is a narrow material assessment that produces only numbers and misses the many levels, essences and meanings that attend this all-pervasive social element. Money is a multifaceted manifestation, and to even begin to master it we must come to a living consciousness of that reality.
This is a huge topic, and there is not room to do it justice within the context of this short article. Indeed, it may seem too daunting to even approach the matter. It need not be so, as the topic may be opened up and developed on a digestible-bite-at-a-time basis from thoughts and observations that are perfectly within the reach of any thinking person. We, individually and as a race, simply have not done the work. That said, it is a consciousness that must be cultivated if we are to have any hope whatsoever of attaining a healthy social order, or perhaps for civilization to even survive. The question is, where to begin?
In the column previous to this I introduced the idea that the economic order has both a micro-economic and a macro-economic domain. This is a foundational concept upon which we can begin to build a new monetary/economic understanding. Micro-economics relates to the values, fortunes and acts of the "players" in the economy, while macro-economics relates to the structure, control and aggregates of the economy as a whole. The relationship of micro-to-macro is much like the trees to the forest, or sports teams to their league. The relevant question here is, "What is money with respect to the micro-economic, as differentiated from the macro-economic, domain?" Can money be described as dollars moving around within and between spheres, or does what we call a "dollar" have a different meaning and essence in each?
In my Econ. 101 course, I was taught (correctly I believe) that the micro and macro-economic aspects were indeed different realms with their own respective rules, functions and dynamics. The problem I experienced is that once that premise was established it was seriously violated to the point where orthodox economic thought has become a mish-mash of confused thinking caused in large part by failing to follow though on the rigor required to keep the micro and macro dimensions properly distinguished from each other, and in their rightful places. One manifestation of this is that a macro-economic function (the creation and issuance of money) has been vested in a micro-economic entity (the private banking system). The result is that the United States as a whole (a macro-economic entity) has become a business (micro-economic entity) in the portfolio of a private corporation, the Federal Reserve (See Col. #38 – The United States as a Business). What is more, a whole culture of inconsistent financial thought has grown up around that anomaly to obscure the inconsistencies thereby generated.
What, then, is money with respect to the micro-vs.-macro-economic domains?
In micro-economics money can indeed be described as a "medium of exchange", "store of value", "unit of measure" or "common currency." It is the very life's blood that circulates in the economic social body, and fits in a general way many of the descriptions commonly associated with money.
In macro-economics, on the other hand, money is a structured matrix of relationships established in the law which governs how currency is created, issued and controlled. Whereas money on the micro level manifests as the blood that circulates in the economic social body, on the macro level it is the economic social body itself. It does not conform to the micro-economic processes by which it is presumed to operate, but in fact the opposite.
One place where the confusion between the micro and macro aspects of money can be clearly seen is in the current debate concerning what to do about the enormous "debt" that is mounting in the current financial crisis. The remedy that is commonly put forth is that we have to get our taxing-&-spending priorities under control. For a governmental body that is below the Federal (e.g. state government, which operates on a micro level), this makes sense. For them money is a stream that flows into and out of their operations. Public bodies that do not issue money must, like any business, find sources of revenue to balance spending.
In actuality the phrase "balanced budget" has no meaning on the Federal level, as it is a micro-economic expression that pertains to micro-economic phenomena. It would be more proper to describe the creation and issuance of money at the Federal level as a "monetization" process, which is kept in balance by the collection of "taxes." "Taxes" on the macro level are not a way to fund Federal programs, but a mechanism to remove overflow currency from the monetary pool. The issue of money, then, on the Federal level is a matter of structuring macro-monetary body in such a way that its life's blood (currency) can ebb and flow naturally through its micro-economic organs.
The failure to differentiate between the functions of money at the micro vs. macro-economic levels is at the very heart of the current financial crisis. I would venture to say that if these two levels of money were fully understood (and presumably acted upon), there would be no "national debt" crisis. Indeed, there would be no "national debt."
In the next several columns my thought is to show how this confusion plays out through some of the major issues besetting our nation, and how a simple comprehension of the distinction between the character of money on the micro and macro levels of the economy could serve as a catalyst for the resolution of the current crisis.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
There is a tendency in our culture to treat "money" as a commodity of a single nature that moves about in the matrix of economic relations, conveying value from one hand to the next. Is that not what we mean when we call it a "medium of exchange," "store of value," "unit of measure" or "common currency"? "A dollar is a dollar", so we are accustomed to saying, and if we want a stable economy the thing to be done is to pin down what exactly that means in terms of some representative "market basket" of goods. The orthodox view would say that a unit of currency may for the moment pass from this hand to that, play a roll in certain public or private cash flows, or facilitate trade in either the world of real goods or "investments" in the financial sector, but it remains a "dollar" nonetheless. It is, in a sense, presumed to be the common denominator of the whole economic order.
Outwardly this may seem obvious, but it is a narrow material assessment that produces only numbers and misses the many levels, essences and meanings that attend this all-pervasive social element. Money is a multifaceted manifestation, and to even begin to master it we must come to a living consciousness of that reality.
This is a huge topic, and there is not room to do it justice within the context of this short article. Indeed, it may seem too daunting to even approach the matter. It need not be so, as the topic may be opened up and developed on a digestible-bite-at-a-time basis from thoughts and observations that are perfectly within the reach of any thinking person. We, individually and as a race, simply have not done the work. That said, it is a consciousness that must be cultivated if we are to have any hope whatsoever of attaining a healthy social order, or perhaps for civilization to even survive. The question is, where to begin?
In the column previous to this I introduced the idea that the economic order has both a micro-economic and a macro-economic domain. This is a foundational concept upon which we can begin to build a new monetary/economic understanding. Micro-economics relates to the values, fortunes and acts of the "players" in the economy, while macro-economics relates to the structure, control and aggregates of the economy as a whole. The relationship of micro-to-macro is much like the trees to the forest, or sports teams to their league. The relevant question here is, "What is money with respect to the micro-economic, as differentiated from the macro-economic, domain?" Can money be described as dollars moving around within and between spheres, or does what we call a "dollar" have a different meaning and essence in each?
In my Econ. 101 course, I was taught (correctly I believe) that the micro and macro-economic aspects were indeed different realms with their own respective rules, functions and dynamics. The problem I experienced is that once that premise was established it was seriously violated to the point where orthodox economic thought has become a mish-mash of confused thinking caused in large part by failing to follow though on the rigor required to keep the micro and macro dimensions properly distinguished from each other, and in their rightful places. One manifestation of this is that a macro-economic function (the creation and issuance of money) has been vested in a micro-economic entity (the private banking system). The result is that the United States as a whole (a macro-economic entity) has become a business (micro-economic entity) in the portfolio of a private corporation, the Federal Reserve (See Col. #38 – The United States as a Business). What is more, a whole culture of inconsistent financial thought has grown up around that anomaly to obscure the inconsistencies thereby generated.
What, then, is money with respect to the micro-vs.-macro-economic domains?
In micro-economics money can indeed be described as a "medium of exchange", "store of value", "unit of measure" or "common currency." It is the very life's blood that circulates in the economic social body, and fits in a general way many of the descriptions commonly associated with money.
In macro-economics, on the other hand, money is a structured matrix of relationships established in the law which governs how currency is created, issued and controlled. Whereas money on the micro level manifests as the blood that circulates in the economic social body, on the macro level it is the economic social body itself. It does not conform to the micro-economic processes by which it is presumed to operate, but in fact the opposite.
One place where the confusion between the micro and macro aspects of money can be clearly seen is in the current debate concerning what to do about the enormous "debt" that is mounting in the current financial crisis. The remedy that is commonly put forth is that we have to get our taxing-&-spending priorities under control. For a governmental body that is below the Federal (e.g. state government, which operates on a micro level), this makes sense. For them money is a stream that flows into and out of their operations. Public bodies that do not issue money must, like any business, find sources of revenue to balance spending.
In actuality the phrase "balanced budget" has no meaning on the Federal level, as it is a micro-economic expression that pertains to micro-economic phenomena. It would be more proper to describe the creation and issuance of money at the Federal level as a "monetization" process, which is kept in balance by the collection of "taxes." "Taxes" on the macro level are not a way to fund Federal programs, but a mechanism to remove overflow currency from the monetary pool. The issue of money, then, on the Federal level is a matter of structuring macro-monetary body in such a way that its life's blood (currency) can ebb and flow naturally through its micro-economic organs.
The failure to differentiate between the functions of money at the micro vs. macro-economic levels is at the very heart of the current financial crisis. I would venture to say that if these two levels of money were fully understood (and presumably acted upon), there would be no "national debt" crisis. Indeed, there would be no "national debt."
In the next several columns my thought is to show how this confusion plays out through some of the major issues besetting our nation, and how a simple comprehension of the distinction between the character of money on the micro and macro levels of the economy could serve as a catalyst for the resolution of the current crisis.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Monday, December 29, 2008
Column #100 TWO ECONOMIES – MICRO (PRIVATE) & MACRO (NATIONAL)
(Week 21 - Monday, Dec. 29)
It is timely and apropos in this landmark 100th column that the basis for understanding be taken to a bit higher level. To accomplish that, two concepts new to this discussion need to be introduced. These are already commonly referred to in the realm of economic theory, but not observed in a consistent way in the world of finance and banking.
As a beginning student aspiring to enter the realm of economics one is required almost invariably to take a course titled "Economics 101." From there the coursework divides into two streams, those being "micro-economics" and "macro-economics" (Econ. 102 & 103). Almost anyone who has found his life's work in dealing with money in a central way, whether as economists, fund managers, stock brokers, bankers or whoever, was introduced into the theoretical world of economics through this regimen of courses.
I took the Econ-101 course when I was 48 years old with the attitude of seeking answers to the dilemmas about money I had already encountered in my life. My life experience provided a basis for questioning, and not simply accepting, the premises of the course (an advantaged position few students experience). In the text out of which I was taught ("Economics", Case & Fair, 1989 ed.) the two streams of the economic discipline were defined as follows:
"Microeconomics – The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units, that is, business firms and households."
"Macroeconomics – The branch of economics that examines the economic behavior of aggregates – income, employment, output, and so on – on a national scale."
I would offer my own definition of these respective terms as follows:
Micro-economics is the science of how people provide for each other's needs in the context of the various influences they are subject to from without, and impulses that arise from within. Ideally such activity is an expression of cultural, spiritual and entrepreneurial freedom. Participants include individuals, businesses, corporations and governmental bodies, except for the Federal government.
Macro-economics is the science of how a society organizes itself to create an equitable context in which its citizens can conduct their micro-economic affairs. Resolving issues of societal equity are a natural function of the political realm, and for the way our society is constituted at present (around the nation-state), this means that the central arena of macro-economic life is the national government.
To lend a picture to these somewhat dry definitions, a micro-economy (the object of which micro-economics is the study) is related to the macro-economy in much the same way that the trees are related to the forest.
To offer a sports analogy, a micro-economy is related to the macro-economy in much the same way that the sports teams are related to the league they play in. Ideally, the league does not make any of the plays, accrue any of the points, or take a partisan position with respect to any team. Its function, rather, is to set up a matrix of rules, resources and arbitration whereby the teams can strive to make plays, earn points and be confident that it will be done on a "level playing field." It is alike in the interests of all teams that the league perform this service in a consistent manner, as it will provide a setting for the optimum expression of the talents of the players, and the maximum enjoyment of the games spectators.
If the distinction between the micro and macro aspects of the game were lost sight of, and one of the league's teams assumed the functions of the league itself, then trust in the integrity of the game would be lost. Indeed the business of the league would tend to be conducted in such a way that it was favorable to whatever team was given control.
The root problem with our economy is that the distinction between its micro and macro dimensions has been lost, and one of the teams (the banking industry) has been put in control. Consequently, the rules by which points in the economic game are allotted (via money) have become skewed in favor of the team in control (the private banking system). Now the micro-players in the economy (individuals, businesses and governmental bodies other than Federal) labor not only to work out the allotment of financial credits vis-à-vis each other, but also pay tribute to the league for the very playing of the game. It is as if there were a third posting on the scoreboard where for every "touchdown" scored by one of the teams, one of its points had to be donated to the league. In any individual contest the points tallied to the league would be less than the total points earned by the teams, but the league would accept its tribute on every scoreboard, and so come out with the dominant total with respect to everyone else.
This is a pretty silly situation, of course, and it is hard to imagine any sporting league that could live with such a nonsensical arrangement, but the question has to be asked, "Why do we arrange our monetary affairs in such a manner?" There is one team, the banking team, that has been given control of the game. The argument has been made that this is the way to keep politics out of money. It might also be suggested that this is the way to ensconce the fox in the henhouse.
I would add that what I am saying here is not an indictment of banking per se. After all, bankers have been put in the impossible position of having to serve two masters to even do their job; i.e. both the commonweal, and the private interests that would profit at the expense of the nation as a whole. This is a wholly inappropriate mixing of the private (micro) and public (macro) spheres.
The creation and issuance of money is a macro-economic function, and should be returned to the national government. Mixing money issuance and private enterprise in the way currently configured is in itself a corruption, and the system survives at all simply because the people involved in it (including bankers) have not allowed themselves to be wholly given over to corrupt influences on a personal level. That said, it is unrealistic to expect them to overcome the inherent inconsistencies involved in discharging their fiduciary responsibilities in ways that are in keeping with both their private for-profit, as well as public for-the-common-good missions. Can we expect, then, that these micro-economic players (bankers), who have been placed and continue to be maintained in this untenable position, to provide the macro-economic leadership that will lead this nation, and the world, out of the "debt"-crisis wilderness? Some may indeed emerge, but they will need help.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
It is timely and apropos in this landmark 100th column that the basis for understanding be taken to a bit higher level. To accomplish that, two concepts new to this discussion need to be introduced. These are already commonly referred to in the realm of economic theory, but not observed in a consistent way in the world of finance and banking.
As a beginning student aspiring to enter the realm of economics one is required almost invariably to take a course titled "Economics 101." From there the coursework divides into two streams, those being "micro-economics" and "macro-economics" (Econ. 102 & 103). Almost anyone who has found his life's work in dealing with money in a central way, whether as economists, fund managers, stock brokers, bankers or whoever, was introduced into the theoretical world of economics through this regimen of courses.
I took the Econ-101 course when I was 48 years old with the attitude of seeking answers to the dilemmas about money I had already encountered in my life. My life experience provided a basis for questioning, and not simply accepting, the premises of the course (an advantaged position few students experience). In the text out of which I was taught ("Economics", Case & Fair, 1989 ed.) the two streams of the economic discipline were defined as follows:
"Microeconomics – The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units, that is, business firms and households."
"Macroeconomics – The branch of economics that examines the economic behavior of aggregates – income, employment, output, and so on – on a national scale."
I would offer my own definition of these respective terms as follows:
Micro-economics is the science of how people provide for each other's needs in the context of the various influences they are subject to from without, and impulses that arise from within. Ideally such activity is an expression of cultural, spiritual and entrepreneurial freedom. Participants include individuals, businesses, corporations and governmental bodies, except for the Federal government.
Macro-economics is the science of how a society organizes itself to create an equitable context in which its citizens can conduct their micro-economic affairs. Resolving issues of societal equity are a natural function of the political realm, and for the way our society is constituted at present (around the nation-state), this means that the central arena of macro-economic life is the national government.
To lend a picture to these somewhat dry definitions, a micro-economy (the object of which micro-economics is the study) is related to the macro-economy in much the same way that the trees are related to the forest.
To offer a sports analogy, a micro-economy is related to the macro-economy in much the same way that the sports teams are related to the league they play in. Ideally, the league does not make any of the plays, accrue any of the points, or take a partisan position with respect to any team. Its function, rather, is to set up a matrix of rules, resources and arbitration whereby the teams can strive to make plays, earn points and be confident that it will be done on a "level playing field." It is alike in the interests of all teams that the league perform this service in a consistent manner, as it will provide a setting for the optimum expression of the talents of the players, and the maximum enjoyment of the games spectators.
If the distinction between the micro and macro aspects of the game were lost sight of, and one of the league's teams assumed the functions of the league itself, then trust in the integrity of the game would be lost. Indeed the business of the league would tend to be conducted in such a way that it was favorable to whatever team was given control.
The root problem with our economy is that the distinction between its micro and macro dimensions has been lost, and one of the teams (the banking industry) has been put in control. Consequently, the rules by which points in the economic game are allotted (via money) have become skewed in favor of the team in control (the private banking system). Now the micro-players in the economy (individuals, businesses and governmental bodies other than Federal) labor not only to work out the allotment of financial credits vis-à-vis each other, but also pay tribute to the league for the very playing of the game. It is as if there were a third posting on the scoreboard where for every "touchdown" scored by one of the teams, one of its points had to be donated to the league. In any individual contest the points tallied to the league would be less than the total points earned by the teams, but the league would accept its tribute on every scoreboard, and so come out with the dominant total with respect to everyone else.
This is a pretty silly situation, of course, and it is hard to imagine any sporting league that could live with such a nonsensical arrangement, but the question has to be asked, "Why do we arrange our monetary affairs in such a manner?" There is one team, the banking team, that has been given control of the game. The argument has been made that this is the way to keep politics out of money. It might also be suggested that this is the way to ensconce the fox in the henhouse.
I would add that what I am saying here is not an indictment of banking per se. After all, bankers have been put in the impossible position of having to serve two masters to even do their job; i.e. both the commonweal, and the private interests that would profit at the expense of the nation as a whole. This is a wholly inappropriate mixing of the private (micro) and public (macro) spheres.
The creation and issuance of money is a macro-economic function, and should be returned to the national government. Mixing money issuance and private enterprise in the way currently configured is in itself a corruption, and the system survives at all simply because the people involved in it (including bankers) have not allowed themselves to be wholly given over to corrupt influences on a personal level. That said, it is unrealistic to expect them to overcome the inherent inconsistencies involved in discharging their fiduciary responsibilities in ways that are in keeping with both their private for-profit, as well as public for-the-common-good missions. Can we expect, then, that these micro-economic players (bankers), who have been placed and continue to be maintained in this untenable position, to provide the macro-economic leadership that will lead this nation, and the world, out of the "debt"-crisis wilderness? Some may indeed emerge, but they will need help.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Friday, December 26, 2008
Column #99 MONEY, ECONOMIC LIFE & THE GARDEN
(Week 20 - Friday, Dec. 26)
The lead-up to the winter solstice, the darkest time of the year, has come to be illuminated by a fantastic profusion of bright lights heralding holiday festivities. This is ostensibly to celebrate the advent of the brightest spiritual light ever to incarnate in the earth over two millennia ago. What follows for many is a season of "Holy Nights" (Christmas to Epiphany) that is marked by a turning inward to meditate upon the outer events and inner experiences of the preceding year, and a prayerful contemplation of the new year to come.
There is understandably a tendency to shy away from devoting further attention to the subject of money in this soul-searching, especially given the fit of holiday shopping and material consumption that has come to precede Christmas, but, I would suggest, this is precisely the time when it would be well to meditate upon money in its deepest and most spiritual sense.
To seed the process, I have offered below a fresh perspective on the Garden of Eden story common to Christianity, Judaism and Islam. The late Joseph Campbell, renowned American mythologist, observed that in creation myths from all around the world mankind began his earthly sojourn in a Garden-like setting from which by virtue of his own rebellion he became estranged. My feeling is that there is a foundational universality to this story that speaks to people whether they are of the Christian, Judaic or Islamic faiths, or not. I leave it to the reader to judge whether this is so. In any case I would offer, to be taken howsoever one would, the following thought:
* * * * * * * * * * * * * ** * * * * * * * * *
In the primordial Garden Man was charged with the responsibility to "Be fruitful, and multiply, and replenish the earth, and subdue it." The state of Man was destined to unfold from a purity of innocence, into a full consciousness of knowledge of the dark and the light, under the harmonious guidance of an all–wise, all–knowing spirit. His purity, however, was fatally sullied as he failed to wait upon God, but willfully reached for powers he was not yet fit to receive. As the wages of this rebellion he was ejected from the Garden, and henceforth obliged to labor by the sweat of his brow to earn his comfort and keep.
The travail of subsequent effort took on a coordinated form which replicated roughly the divinely symbiotic material and energy flows of the Garden. The evolving matrix of relationships thereby established became an aspect of the social body known as the "Economic Life," while the vitalizing spirit of that body took on the guise of "Money." Money, then, is a proxy for the spirit that imparted a burgeoning harmonic order to the Garden, while the Economic Life became the vehicle in the material world by which Man would seek, upon requisite redemption of personal goodness and completion of social evolution, to return home to the unspoiled state of the Garden; this time in the full consciousness of the dark and the light, but also with a purity of spirit that partakes of the innocence of Man's original state.
In the interim, though, the spirit of Money, and in turn the Economic Life, has been hijacked by forces that would seek to derail human evolution. Humankind has descended into abject materiality; estranged from one another and seduced by the shadow forces of false dominion; all orchestrated by the spirit of opposition that has co–opted Money. The woes thereby unleashed are legion. Brother has been pitted against brother in a false competition for livelihood. Mankind's Mother, the earth, is counted as a body to be ravaged and consumed. Tyrannies of number haunt Man's sleep. Clearly the redemption of Economic Life in the material world is called for.
The path to economic rectification is threefold:
(1) – To strive for redemption in oneself and others from the spiritual dissonance that was the cause of Man's alienation from a harmonious relationship with God in the earth,
(2) – From which it becomes possible to transform Money and rectify the Economic Order to a condition which reflects truly the state of providence in human evolution at present,
(3) – Which would, finally, redeem the Economic Life as a fit vehicle for the reassertion of Man's fruitful, replenishing and faithful dominion over the creation.
Thus would the Kingdom of God materially in the earth be at last established.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
The lead-up to the winter solstice, the darkest time of the year, has come to be illuminated by a fantastic profusion of bright lights heralding holiday festivities. This is ostensibly to celebrate the advent of the brightest spiritual light ever to incarnate in the earth over two millennia ago. What follows for many is a season of "Holy Nights" (Christmas to Epiphany) that is marked by a turning inward to meditate upon the outer events and inner experiences of the preceding year, and a prayerful contemplation of the new year to come.
There is understandably a tendency to shy away from devoting further attention to the subject of money in this soul-searching, especially given the fit of holiday shopping and material consumption that has come to precede Christmas, but, I would suggest, this is precisely the time when it would be well to meditate upon money in its deepest and most spiritual sense.
To seed the process, I have offered below a fresh perspective on the Garden of Eden story common to Christianity, Judaism and Islam. The late Joseph Campbell, renowned American mythologist, observed that in creation myths from all around the world mankind began his earthly sojourn in a Garden-like setting from which by virtue of his own rebellion he became estranged. My feeling is that there is a foundational universality to this story that speaks to people whether they are of the Christian, Judaic or Islamic faiths, or not. I leave it to the reader to judge whether this is so. In any case I would offer, to be taken howsoever one would, the following thought:
* * * * * * * * * * * * * ** * * * * * * * * *
In the primordial Garden Man was charged with the responsibility to "Be fruitful, and multiply, and replenish the earth, and subdue it." The state of Man was destined to unfold from a purity of innocence, into a full consciousness of knowledge of the dark and the light, under the harmonious guidance of an all–wise, all–knowing spirit. His purity, however, was fatally sullied as he failed to wait upon God, but willfully reached for powers he was not yet fit to receive. As the wages of this rebellion he was ejected from the Garden, and henceforth obliged to labor by the sweat of his brow to earn his comfort and keep.
The travail of subsequent effort took on a coordinated form which replicated roughly the divinely symbiotic material and energy flows of the Garden. The evolving matrix of relationships thereby established became an aspect of the social body known as the "Economic Life," while the vitalizing spirit of that body took on the guise of "Money." Money, then, is a proxy for the spirit that imparted a burgeoning harmonic order to the Garden, while the Economic Life became the vehicle in the material world by which Man would seek, upon requisite redemption of personal goodness and completion of social evolution, to return home to the unspoiled state of the Garden; this time in the full consciousness of the dark and the light, but also with a purity of spirit that partakes of the innocence of Man's original state.
In the interim, though, the spirit of Money, and in turn the Economic Life, has been hijacked by forces that would seek to derail human evolution. Humankind has descended into abject materiality; estranged from one another and seduced by the shadow forces of false dominion; all orchestrated by the spirit of opposition that has co–opted Money. The woes thereby unleashed are legion. Brother has been pitted against brother in a false competition for livelihood. Mankind's Mother, the earth, is counted as a body to be ravaged and consumed. Tyrannies of number haunt Man's sleep. Clearly the redemption of Economic Life in the material world is called for.
The path to economic rectification is threefold:
(1) – To strive for redemption in oneself and others from the spiritual dissonance that was the cause of Man's alienation from a harmonious relationship with God in the earth,
(2) – From which it becomes possible to transform Money and rectify the Economic Order to a condition which reflects truly the state of providence in human evolution at present,
(3) – Which would, finally, redeem the Economic Life as a fit vehicle for the reassertion of Man's fruitful, replenishing and faithful dominion over the creation.
Thus would the Kingdom of God materially in the earth be at last established.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
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