“Zero Money”: First Principles Thinking About Monetary Value
Change the Money, Change the World (13)
Part 4(A) — Phases of transition to a novel paradigm 1
I hope enough has been said already for the reader to be open to the understanding that a new paradigm for a global monetary system which employs a new monetary medium is mandatory for our future. Such a system also has to have a structure that eliminates the possibility of bad governance. There are four simultaneous phases that need to occur. Each successive phase is built on the previous ones, as the previous ones are being completed:
1. The Keynesian model will continue to operate, as there is no choice in the nearer future. It should continue, however, without our allegiance, and with a willingness to operate its levers to the greater benefit of all. This may require everyone accepting some pain, but mostly it means the masses begin taking back the sovereignty they have abdicated to the banks, and to their political overlords serving the greed of their donors. We can adhere to the Dalio prescriptions with an emphasis on some specific best practices.
2. Understanding not just the inherent hubris of Keynesian economics and its dystopian outcomes and the need to mitigate its continuing degradation of currency, we also need to grasp the actuality of and impact of geometric progression of technological disruption for the current paradigm. This is not easy for us to see and accept that these deflationary forces will annihilate inflationary policies.
3. The first principle of subjective absolute sovereignty should be key to sound money policy decisions made at the register of objective governance. Essentially this means fostering decentralized power structures. Scarcity congruent with the absolute subjective sovereignty of nature is happening now, in the technological disruption afforded in the information age with saturation of the planet by computer networks running algorithms insuring decentralized governance.
4. Beginning during phase 1 and going forward, is the need to create transitional political and financial bridges targeting a completely novel monetary system. Phase one is about continuing best practices for the fiat Keynesian paradigm to mitigate its negative outcomes. Phase four is completely different strategies for evolution of a “Zero Money” world economy. Mass adoption of such a novel monetary system will require bridging decentralized finance systems with the legacy system. It will require pan-national political movements to resist the combinations of centralized political and central bank regimes.
Nobody knows how all this will actually ensue. It is history in the making. I want to show that it is in the process of happening, and engage in the necessary dialog, study and personal action that are inevitable. Its personal because I believe we need and are evolving personal Peer to Peer monetary sovereignty free of third-party governance.
1. The Keynesian model continues without our allegiance: objectives for political resistance
It is safe to say we can expect the party to continue in full swing: the Fed will out of necessity respond with money printing and bank regulation changes, particularly as to the interest rate, in order to please its shareholders and other members of the political donor class funding the major political parties. Politicians need the funding for an electoral process that is coupled to the amount of campaign spending. It would take politicians ready to lose their seat, if necessary for proposing legislation bucking the system. A point of social resistance, if we are to replace the current economic paradigm, is to find and support such individuals. They don’t necessarily need to be people who have “gone down the rabbit hole” for a new monetary paradigm, they could just be those supporting some effort to get the money out of politics. An initial “softer-target” would be to apply what non-violent social resistance could be organized to change existing regulations for leveraging peoples bank deposits, bail outs, tax revenues, grants and other money resources. This would curtail expansion of the debt and credit cycles. We cannot expect to extract ourselves from the clutches of the oligarchs overnight. We need to take an approach making it incrementally harder for them to conduct business as usual.
Continuing without allegiance to the current Keynesian model is a form of peaceful class warfare. We can also work the existing system more to the advantage of the middle and lower classes. Already there is a great advantage to the middle class as a secondary effect of interest rates primarily manipulated for the wealthy donors, those who benefit from rising stock prices even as unemployment skyrockets. Low interest rates may serve corporations by enabling buying back their own stock, but a secondary effect, is a benefit to middle class homeowners also profiting from lower rates through refinancing. Its not so much lower rates that are the problem, it is who is using them to do what. Maintaining advantages to the middle class, and improving them, is also adding to redistribution of wealth. For the lower classes, the best way to “change the money, change the world” within the current fiat system is to do it with tax credits, universal basic income and stimulus checks. Passive social resistance pushing for this redistribution of wealth is how Dalio’s lever in this regard can occur. It is the middle and lower classes that have the greatest propensity to consume in the medium of fiat exchange. The upper class is more focused on moving fiat value into far better stores of value such as real estate, art, gold, and more recently allocating for the digital currency Bitcoin.
A monetary value paradigm for a society maintaining sovereignty for individuals will be years in the making. We have reason to hope it will be an egalitarian, stable and far superior abundant world. It depends on our allegiance to making it happen, not waiting fruitlessly for bad monetary and fiscal governance to continue to fail the world. In the meantime as struggle continues, if we are successful, we should not see long periods of booming economic followed by recessionary threats. Meanwhile, we understand the end story of the present trajectory is deeper class divisions and eventually “not this time” for the traditional solutions. If we are to extract ourselves from this system of ever more serious crises it is better to all along accept a degree of economic pain till a transition to a novel paradigm is accomplished. We endure this while still agitating for serious limits on bailing out creditors of insolvent corporations, banking institutions and others. In effect some of what is too big to fail now should be allowed to fail even though it hurts by leading to unemployment and bankruptcies. Unemployment payments should be extended and increased along with stimulus checks if institutions fail to save themselves. Why shouldn’t such enterprises and even agencies be required to create reserves to bail themselves out when needed? We can cause ourselves some pain but avert “the big one”, the massive world depression we can see now at the end of the tunnel.
The legacy economy is only offering more of the same. I think there is full evidence that Ray Dalio is correct about our having reached the end of a series of crises gradually building to the final crisis we are now in. His proposition is that a reset of the present situation will provide a reversion to another series after a period of what he calls “a beautiful deleveraging”. I have suggested social resistance will be needed for the enforcement of contained leveraging by our government and the Fed. They can be expected to instead foster a series of new crises if they can survive the present one, which is in some serious doubt for reasons outlined. But the series of crises leading to the culmination of today should be as Yanis Varoufakis implies: “Crises are the past’s death knell. They function like laboratories in which the future is incubated.” Have we not reached a point where future productivity growth in the USD economy could not possibly withstand the accumulating burden of the debt and credit model. That future would have to be a growth in production coupled with a much greater rate of consumption than we have already achieved, greater than the consumption we struggle to maintain now by cash infusion seriously decoupled from production growth. Isn’t there no actual “maybe” in Byrne Hobart’s questioning of the Dalio analysis:
“… maybe our current economy is overextended, and has been for years; maybe our baseline GDP expectations should be reset lower, and we should treat increasing macroeconomic volatility as a necessary result of increasingly desperate measures to keep the consumption trend steady as it continuously compounds faster than the production trend … The optimistic view is that we’ve merely screwed up our priorities for a generation or two, regulating our way into superficially low-risk economic stasis. The pessimistic view is that we’ve picked all the economic low-hanging fruit … Take a look at the US, culturally, financially, politically, and ask: is it more likely that people in authority are overestimating how weird the world is, or underestimating it? And if we’re underestimating the magnitude and nature of the future’s weirdness, do we really want our main approach to crises to be a big bet on mean reversion?”