Friday, 5 August 2016

pushing on a string

Money of course has as much socio-cultural currency as it does utility as means of exchange or a store of wealth. And because it’s romanced beyond the scope of economics, I believe that that’s why it’s more or less acceptable for monetary policy and engagement left to the rarefied atmosphere of central banks, unelected and generally not accountable to anyone, and governments probably prefer it that way. Such hallowed things ought to be left to the vaulted chambers and excluded from public scrutiny. The economists populating these monasteries are usually very good handling impossibly large numbers and working out the mechanics of supply and demand but often fail to appreciate the human factor and irrational attachment.  As less than one percent of cash is hard currency, central banks see no reason why the rest of it shouldn’t be as well and are baffled by the response of members of the public for something tangible to hold on to amongst all this make-believe.
A wholly virtual monetary system, however, would become one without a fixed value, a rate-of-exchange when it came to automatic teller withdrawals—since there’d be nothing to take out, and the value of “cash” in one’s wallet would be unhinged and fluctuate like any other commodity on the market, with greater or lesser purchasing power from second to second. That does not sound comforting but I suppose it ought to. The other big idea of central bankers currently gaining traction is the idea of dissuading saving and encouraging lending and outlays by offering negative interests rates on depositors’ accounts—which theoretically could yield scenarios were one is paid to take out a mortgage, but only if all the people that believe in the almighty dollar behave perfectly sensibly would the economy be actually stimulated. There’s quite a lot of historical evidence to the contrary, in fact, and governments taking a more active role and perhaps deploy helicopter money—that is, to direct central banks to make payment to citizens, a term coined by Milton Friedman as it’s akin to the excitement experienced if someone was tossing money out of a helicopter to a crowd, despite the deflationary-pressures that might emerge—or consider funding a universal basic income, which might become not a choice but rather a necessity as robots take more and more jobs—and it’s not only the truck drivers and warehouse stevedores at risk but the lawyers and accountants too. The phrase, “pushing on a string,” is attributed, perhaps apocryphally, to economist John Maynard Keynes, and is meant to illustrate that markets can’t be nudged in both directions but rather tugged.