Wednesday, February 27, 2013

Izabella Kaminska — Savers are not sacred cows

I am so bored of the “government is stealing from us by debasing the currency” argument. 
I understand why some people are predisposed to this way of thinking. It relates to society’s general predisposition to treating savings and savers as sacred relics.
You worked for these savings, thus you and your savings must always be protected.
What people forget is that everything is relative.
Toward a leisure society
Savers are not sacred cows
Izabella Kaminska

47 comments:

JK said...

Last night I watched the movie Hardwired (http://www.crackle.com/c/Hardwired).

Its fully privatized world that it seems most of us would say Bob doesn't realize his ideal would lead to.

Seriously. Give it a watch and tell me I'm wrong. Just the first 15-20 minutes should be enough to get the feel for it. And I'm talking about the general layout of the world, not necessarily all the specifics of the movie.

I like this better: (http://www.newdream.org/resources/sao-paolo-ad-ban)

Roger Erickson said...

Neither are reporters. :)

Greg said...

From her post;

"Here’s the thing. Savings are not supposed to do anything but maintain relative value. They are not supposed to outperform relative to the economy. They are supposed to track it in such a way, that by the time you liquidate the savings, you can still buy the same amount of stuff you could buy when you first created them. The interest earned is supposed to compensate for lost purchasing power.'

I'd take it even further. There is and SHOULD NOT BE any guarantee thet your savings will even maintain relative value...... at least past a few years at most.

This should be drilled into peoples heads ;

If you need something get it NOW there are no future guarantees.

For the rest of the world to have to suffer from reduced present period consumption and employment options just so a few savers can make sure they havent lost ANY purchasing power is absolutely sick. The world doesnt need their savings, if they had never saved a dime we would be no worse off. If you are forgoing buying a car today and you think you are doing the rest of us a favor by not buying it...........you are wrong, but if you are not buying because you dont need it and dont wish to needlessly consume..... BRAVO, however if you think you should, with the money you decided not to spend on a car today, be able to save it and get an equivalent car in 10 years............ well maybe not. But your chances will be much greater of getting that car if you invest into the car company you like and urge them to build that car in the future. Dont just sit back and expect it to happen

Now, full disclosure, I have lots of savings. Way more than the average human on this planet so Im not talking my book here. Im so sick of all this Calvinist type moralizing about saving and consumption crap

The Rombach Report said...

Isabelle Kaminska makes no distinction between monetary deflation which is bad and deflation which comes about as a result of technological progress and increasing labor productivity. The latter kind of deflation is good because even if wages are more or less stable, purchasing power nevertheless rises over time. Think of the steadily dropping price of computers and related electronic devices. Laser eye surgery is another good example because the cost is continuously dropping in contrast with the cost of delivering most other health care services which is rising at a faster rate than the general rate of inflation. The reason for that difference is because laser eye surgery operates in a free market while health care in general is distorted by government intervention, subsidies and bureaucracy.

The Rombach Report said...

"I'd take it even further. There is and SHOULD NOT BE any guarantee thet your savings will even maintain relative value...... at least past a few years at most.

This should be drilled into peoples heads ;

If you need something get it NOW there are no future guarantees."


So... maybe the government should confiscate savings? Oh no wait... they already do that.

Get over it Greg. Sometimes people feel a need to save and sometimes they like they want to splurge.
That's the way it is in a free society.

Ralph Musgrave said...

Bob Roddis, the Mike Norman blog site’s very own village idiot, might like to contemplate the fact that the state “loots the masses” out of vastly more via bog standard taxation than it does via inflation. Now he’ll be telling us that taxation per se is evil and a “blueprint for how the unconstrained police state can loot the masses by "purchasing" whatever it thinks it needs”. Which indeed it is. If the state seriously ignores the wishes of the people, it can rob them via taxation of any amount it wants.

Anonymous said...

Is that really Kaminska? The blogger isn't identified.

Greg said...

Mr Rombach

What exactly have I said that contradicts this?;

"Sometimes people feel a need to save and sometimes they like they want to splurge.
That's the way it is in a free society."

People feel all sorts of needs, I fully understand saving for the future, I do plenty of it as I said, however MY saving is not necessary to anyone else BUT ME!! The rest of you dont need me to save so we can all have something better later.

Further I have NO right to complain in 20 years if the money I didnt spend 20 years ago doesnt buy what I THOUGHT it should.

You wish for the savers to have a free society and everyone else to have to do with less today so the savers can get what they think they deserve. Or do you really think that EVERYONE can save all they need for the future?

The Rombach Report said...

"MY saving is not necessary to anyone else BUT ME!"

Right, and I have no problem with that. It's your business just like it is for everyone else who wants to save. That said, unless you're putting your savings in a mattress or burying it in the ground, it becomes a borrowing for someone else who can deploy it productively.

"Further I have NO right to complain in 20 years if the money I didnt spend 20 years ago doesnt buy what I THOUGHT it should."

Sure you do. Greg, I don't know where you are from, but in the US the 1st Amendment guarantees citizens the right to complain about whatever they want, no matter how unpopular the complaint may be.

"You wish for the savers to have a free society and everyone else to have to do with less today so the savers can get what they think they deserve."

Don't presume to know what I wish.

"Or do you really think that EVERYONE can save all they need for the future?"

Of course EVERYONE cannot save all they need for the future. Wealth is distributed rather poorly and unevenly throughout the world. Nor can EVERYONE save at the same time, as in the Paradox of Thrift. Not sure what your point is?

Bob Roddis said...

It looks to me like this isn't a post by Ms. Kaminska at all. It appears to be by someone else commenting on her tweet.

It was too clear of a statement to have been made by a High Court MMTer.

Greg said...

' That said, unless you're putting your savings in a mattress or burying it in the ground, it becomes a borrowing for someone else who can deploy it productively."

Wrong. My saving does not automatically become someone elses borrowing. Thats a fallacious view of our banking system. In fact its not even necessary for anyone else to borrow

I was very sloppy in saying I have no right to complain. I should have said that no rational person should consider that complaint a legitimate one on grounds my prior saving was necessary and deserves protection.

The Rombach Report said...

Ryan - I'm still not quite clear what you are trying to say, but my point is that savers are being taxed via inflation, which by-passes any legislative process. Even at the Fed target of 2%, the dollar loses 17% of its purchasing power in a decade. That's a bad deal for anyone who has to work for a living whether they are saving or not. The 1% are well equipped to game the system and have continued to syphon wealth from the 99% for the past 40 years and aggregate it for themselves. Sooner or later there will be a reckoning.

Unknown said...

Bob, given that you're obsessed with shiny metals, why don't you use your savings to buy things like gold?

Unknown said...

According to Bob, every time a new car is sold that is theft. Every time a new house is built that is theft. Every time metal is dug out of the ground that is theft. In fact, every time anything is produced that is theft.

Unknown said...
This comment has been removed by the author.
Bob Roddis said...

Re "Hardwired". A dangerous corporation hell-bent on controlling mankind through mind manipulation....

This sounds like a severe violation of the non-aggression principle and also sounds fraudulent both of which should and would be strictly prohibited. This has nothing to do with the proposition to strictly ban fraud and the initiation of force. You refuse to familiarize yourself with the propositions you are intent upon hating without any thought or understanding.

Bob Roddis said...

If the state seriously ignores the wishes of the people, it can rob them via taxation of any amount it wants.

The people can readily see the amount of taxes they pay. That’s why the Fed was created to help fund WWI so that the government’s theft was made obscure. I review uber-Keynesian Daniel Kuehn’s paper on the 1920 depression:

This is the pure Rothbardian explanation. WARS ARE FUNDED WITH FIAT MONEY WHICH ROBS AVERAGE PEOPLE OF PURCHASING POWER WITHOUT THE VICTIMS UNDERSTANDING EXACTLY WHAT IS BEING DONE TO THEM AND WITHOUT ANY DUE PROCESS OF LAW. IF THE CITIZENS HAD TO MAKE AN IMMEDIATE SACRIFICE IN THE FORM OF A FORCED CONTRIBUTION OF TAX MONEY TO FUND WARS ON A PAY-AS-YOU-GO FORMAT, THERE WOULD BE FAR FEWER WARS. Kuehn then notes that the inflation encountered by the populace had been caused by the “expansionary policy of the Federal Reserve” and thus not any alleged “market failure”. After the war, such policy was “sharply curtailed” as was government spending leading to the predictable bust

http://bobroddis.blogspot.com/2012/08/daniel-kuehn-provides-factual-basis-for.html

On Kuehn’s blog, I wrote:

1. Kuehn’s paper is consistent with the Rothbardian narrative;

2. Kuehn demonstrates that the problems of 1920 were caused when the government changed gears after the war in attempting to unwind its massive wartime interference in the market; and

3. THE LESSON TO BE LEARNED FROM THE EVENT was that [not "Kuehn's paper shows that"], as always, the market does not and did not fail and that these types of problems are always caused by government interference in the market.


Kuehn responded:

For what it's worth (hopefully worth something!) I agree with Roddis's #1, somewhat agree with #2 (government was not the only cause, and the governmental cause I cite is far more Friedman and Keynes than it is Rothbard!), and I strongly disagree with his #3.

http://factsandotherstubbornthings.blogspot.com/2013/01/poor-kid-was-just-couple-years-too.html?showComment=1358998365568#c2813953362544372035

Unknown said...

Bob, is there a crime called "theft of purchasing power"?

Or is that something you guys made up?


Tom Hickey said...

Your "theory" is a blueprint for how the unconstrained police state can loot the masses by "purchasing" whatever it thinks it needs with an unlimited supply of funny money via the now admitted theft of purchasing power.

The political debate is over whether the "loot" goes to building the empire and cronyism or to social welfare. The US Constitution, art. 8, sec. 1, gives the federal govt the power to "loot," so it would take a change to the constitution to prevent that. Fat chance of that ever happening as long as the nation state exists.

I agree that the nation state is an idea that ought to have become obsolete, but they way the evolution works, there is a lot of hysteresis in the system that results in characteristics that emerged earlier persisting longer than needed.

In this respect, the nation state is hardly the worst holdover of the past. This problem is not only institutional but also cognitive.

Tom Hickey said...

The issue regarding saving is a saving vehicles whose return is equal to or greater than the real interest rate. Generally speaking cash or equivalent (non-interest bearing deposit acct) is not that.

Cash and deposit accts are for servicing current liabilities. Anyone who uses them for anything else is just uneducated or stupid.

Have any of the complainers presented a graph of savings since 1913 at compound interest at the going rates over the period to the present? Of course, a saver would have lost with cash under the mattress. But were there any?

Tom Hickey said...

Is that really Kaminska? The blogger isn't identified.

Yes. I've checked.

Bob Roddis said...

Is that really Kaminska? The blogger isn't identified.

Yes. I've checked.


Marvelous. Excellent.

Unknown said...

That "Hardwired" movie is pretty crappy. Straight-to-DVD B-movie.

Bob Roddis said...

The Feds have only 17 or so powers. Art. 1, section 8 grants the very limited power to TAX (not dilute) for the GENERAL welfare of THE STATES as united (not for the individual welfare of specific individuals groups). Further, Congress is only granted the power to coin money which the founders clearly believed would consist of only gold and silver coins. It does not have the power to "spend" funny money into existence.

Article 1 - The Legislative Branch

Section 8 - Powers of Congress

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States [focus on the term "states”]; but all Duties, Imposts and Excises shall be uniform throughout the United States; ****
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

Unknown said...

Bob, let's say you own car x. If the car company produces another car x, is it "stealing your purchasing power"?

Unknown said...

Or say you own a load of silver coins. If a mining company digs up more silver, is it "stealing your purchasing power"?

Bob Roddis said...

Bob, is there a crime called "theft of purchasing power"?

Or is that something you guys made up?


The 5th Amendment clearly states:

[N]or be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

http://www.usconstitution.net/xconst_Am5.html

I know. Picky picky picky.

Unknown said...

Bob, the 5th Amendment doesn't say anything about "purchasing power".

You're just making things up, aren't you.

Tom Hickey said...

Bob, we also have amendments and court decisions that become established precedent. It's called "constitutional law."

Unknown said...

The constitution also says:

"To borrow Money on the credit of the United States"

and

"To provide for the Punishment of counterfeiting the Securities and current Coin of the United States"

Federal Reserve notes are 'obligations of the United States' or US government securities. In other words they are US government debts. They can also be redeemed for coin.

http://www.law.cornell.edu/uscode/text/12/411

http://www.law.cornell.edu/uscode/text/18/8

JK said...

y: "That "Hardwired" movie is pretty crappy. Straight-to-DVD B-movie."

Indeed. I wasn't recommending it because it's good. I was recommending it as a visual point of reference for dystopia that Lefty's seem to fear if Bob Roddis and Co. get their way. The layout of the the world in the movie, and the general nature.

Of course Bob responded saying the violence in the movie goes against the non-agression principle and Hardwired concept sounds fraudulent etc.. (Bob, you just read a summary of the movie or did you watch some of it?)

Since when does outlawing agression stop it?

If we outlaw agression, enforce property rights, and then leave everyone alone… all will be swell!

Riiiight. All this does is shift power away from any form of democratic public-control, to Domination by Property Accumulators (which I guess we always have this one way or another).

Bob Roddis said...

Except that "Domination by Property Accumulators" is facilitated by the very vast government powers you Keynesians insist upon granting to governments so that they can violate the non-aggression principle. And all to solve "problems" that do not exist but for the distortions caused in the first place by "progressive" and Keynesian policies. For 87th time, Kolko showed that the elite could not gain monopoly control without the ruse of "progressive reform".

http://tinyurl.com/brujz6c

Laissez faire leads to to neither monopoly nor significant unemployment. Keynesian and "progressive" cures are the CAUSES of our miseries.

Further, you cannot begin to stop aggression unless and until it is relentlessly outlawed and the vast majority of the society insists upon the enforcement of such prohibitions. If vast numbers of people are going to engage in aggression and/or do not care about such barbarism, then you don't and won't have much of a civilization in any event. My point is always that aggression is THE PROBLEM of mankind, and it is certainly not a "lack of aggregate demand".

Unknown said...

Bob, taxation is not "aggression"

Economic "problems" existed before Keynes and progressive policies, so it's not logically possible for your statement to be correct.

Standard Oil became a monopoly during the 'laissez faire' era, before the 'progressive era'.

There were periods of significant unemployment during the 'laissez faire' era.

Your statements are false.

Bob Roddis said...

Standard Oil became a monopoly during the 'laissez faire' era, before the 'progressive era'.

Not according to Kolko. His book is only $7. Read it.

There were periods of significant unemployment during the 'laissez faire' era.

True as that era is currently defined. The unemployment was caused by greenbacks and fractional reserve banking distorting the price structure.

Unknown said...
This comment has been removed by the author.
Unknown said...

By the time the 'progressive era' began, Standard oil already controlled about 90% of the refined oil market.

Greenbacks did not cause unemployment.

"Fractional reserve banking" is a creation of the market.

Bob Roddis said...

1. Standard Oil had 90% of the market because of its amazing innovations and because it charged continuously lower and lower prices. But it was unable to rid itself of competitors or to charge higher prices. Read the Kolko book.

A monopoly (from Greek monos μόνος (alone or single) + polein πωλεῖν (to sell)) exists when a specific person or enterprise is the only supplier of a particular commodity (this contrasts with amonopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry).[1] Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods.[2] The verb "monopolize" refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power, to charge high prices.

http://en.wikipedia.org/wiki/Monopoly

The very largest companies required state help to acquire the “power” to charge higher prices and “monopolize” the “market”.

2. I consider most fractional reserve banking to be fraudulent whether or not it’s caused by “the market”. Fraud is to be prohibited.

3. All unemployment is caused by price distortions. All busts are caused by price distortions. It is self evident. The reason there are busts is because the makers of goods cannot sell them AT PRICES THAT ARE PROFITABLE. There is always sufficient “demand” at the right price for anything. The makers of goods can always sell them for something [OMG!!!!! Liquidation!!!]. The same with labor. The issue is why were people drawn into lines of investment and work which appeared to be a good idea at the time but which turned out to be unsustainable. The reason is because of the temporary higher and/or distorted prices caused or induced by funny money or fractional reserve banking. Prices make the world go ‘round.

You people just don’t want the self evident truth to be true.

Unknown said...

Standard Oil gained 90% of the market through different means, some good, some bad. These included secret collusion with railroad companies and oil producers, aggressive buyouts, predatory pricing, discriminatory practices, espionage, and fraudulent accounting, all specifically designed to eliminate competition. As a result Standard Oil's profits reached astronomical levels and Rockefeller became the wealthiest man in the world, possibly in history.

Your argument is that companies like Standard Oil and plutocrats like Rockefeller tried or managed to use their vast accumulated wealth and power to corrupt government legislation in their favour. Your illogical conclusion is that we should therefore get rid of government. Note that your conclusions are completely different to Kolko's.

Standard Oil was eventually broken up as the result of anti-trust legislation.

"I consider most fractional reserve banking to be fraudulent"

Some supporters of state or 'fiat' money would agree with you. But what are your grounds for believing this exactly? What do you mean by "most"?

According to you the history of capitalism is inextricably linked with massive fraud.

"All unemployment is caused by price distortions. All busts are caused by price distortions."

That's just your opinion.

"The reason there are busts is because the makers of goods cannot sell them AT PRICES THAT ARE PROFITABLE"

That's a symptom rather than a cause. It's like saying that illnesses are caused by people getting ill.

Unknown said...

You define "price distortions" as prices which deviate from what you imagine they would be in your imaginary anarcho-capitalist world without government where only gold and silver coins are used as "money" and there is no credit or debt.

Because you think that gold and silver coins are barter items, you basically believe that price distortions occur automatically in any economy that is not a barter economy.

You define the barter "prices" in your imaginary barter economy as "correct prices", and then simply assert that there are no economic problems whatsoever in your imaginary barter economy because the "prices" in this imaginary barter economy are "correct".

Your arguments are completely circular. And completely irrelevant to reality.

Bob Roddis said...

The entire raison d'etre of Keynesianism is to "repair" prices that you guys think are "wrong". Finished goods might not sell at their anticipated prices so you insist that the government must provide funny money to the masses to increase "demand" so that the stuff might sell at what you deem is the "correct" price.

Asset prices might collapse to their true value (which to you are the "wrong" prices) so you guys want to use funny money to reflate those "wrong" prices back to their artifically inflated "correct" prices.

Your entire theory is based upon artificially using government funny money and spending to "repair" prices that you, in your infinite wisdom, deem "incorrect". And all the while you are oblivious to the "problem of knowledge".

Unknown said...

You argument amounts to this:

1. You make the completely unfounded assertion that there are no economic problems whatsoever in your perfect imaginary anarcho-capitalist barter economy without government, which only exists inside your imagination.

2. You conclude that, as such, in the real world, there is no rationale for any government involvement in the economy whatsoever.

That is the full extent of your very silly argument.

The slogans you mindlessly repeat over and over again ("price distortions", "problem of knowledge", "funny money", "initiation of force") are just different ways of saying the same, stupid thing.

Bob Roddis said...

The slogans you mindlessly repeat over and over again ("price distortions", "problem of knowledge", "funny money", "initiation of force") are just different ways of saying the same, stupid thing.

It's a pretty simple dispute. I say that the economic actors (aka "the people") can have all the economic knowledge and tools they need and that it is the activities of government and Keynesians that impair their knowledge and ability to act wisely. You say that (somehow) the people need YOUR HELP because they are stupid and without your help, they will run off the cliff of unemployment. However, the source of informed economic knowledge is unadulterated prices and the entire purpose of Keynesianism is to adulterate prices.

We can go around and around on this forever. But since 1971, those prices have been adulterated fiat money prices, not free market unadulterated prices.

Tom Hickey said...

The entire raison d'etre of Keynesianism is to "repair" prices that you guys think are "wrong". Finished goods might not sell at their anticipated prices so you insist that the government must provide funny money to the masses to increase "demand" so that the stuff might sell at what you deem is the "correct" price.

You assume that price are flexible and adjust to demand quickly across the board without severe social, political, and economic effects domestically and internationally. The choice is between government using it money power/purchasing power to address severe economic adversity resulting from debt collapse and liquidation of debt with the resulting period of high unemployment and capital destruction.

This is precisely what is happening in the euro zone now because governments don't have money power'purchasing power and debt deflation is biting. That's a political choice.

We'll see how how that choice turns out. So far the results are not encouraging as France crumbles and even Germany is now caught in the downdraft.

Bob Roddis said...

debt collapse and liquidation of debt with the resulting period of high unemployment and capital destruction

Which, of course, was all caused by funny money loans created out of nothing and thereby artificially bidding up the price of assets to unsustainable levels. Again, you think you know the "correct" price of things and insist upon inflicting your "wisdom" upon society.

Unknown said...

yeah Bob so if we just adopt your imaginary barter economy then there will be no problems because there are never any problems in your imaginary barter economy because you say so! Hooray! Why don't we ALL live inside your imagination! No problems - Ever! A magical wonderland barter world with no problems! Yippeee!!!!!

Unknown said...

Constantly rising private debt levels leveraged against ever-rising asset prices has nothing to do with Keynesianism. The explosion of finance and debt and leverage and asset bubbles is due to right wing policies - deregulation, reaganomics, supply-side, trickle-down, neoliberalism etc. You just lump everything into "Keynesianism" because you are determined not to understand anything. Because actually understanding something might make it more difficult for you to spout your idiotic simpleton slogans.



Unknown said...
This comment has been removed by the author.