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The MoA Week In Review – OT 2023-323
Last week's post on Moon of Alabama:
Palestine:
Ukraine:
This WSJ journo is staying at interesting places –>
Yaroslav Trofimov @yarotrof – 18:09 UTC · Dec 30, 2023
By now, seven hotels where I stayed and four restaurants where I had eaten in Ukraine have been struck by Russian missiles. Kharkiv, Zaporizhzhia, Kramatorsk, Druzhkivka, Pokrovsk …
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Other issues:
RIP:
2023:
Empire:
Europe:
Russia:
China:
> At the same time, as spending on China at the C.I.A. has doubled since the start of the Biden administration, the United States has sharply stepped up its spying on Chinese companies and their technological advances.
…
Though the U.S. intelligence community has long collected economic intelligence, gathering detailed information on commercial technological advances outside of defense companies was once the kind of espionage the United States avoided.
But information about China’s development of emerging technologies is now considered as important as divining its conventional military might or the machinations of its leaders. <
Use as open (not related to Ukraine and Palestine) thread …
“The value of a currency is based on trust. Trust that one will be able to purchase commodities of the same value in the future. Fluctuations in the value, like inflation and deflation, are usually caused by micro- and macroeconomic circumstances of a given country.The purchasing power and value is entirely on a trust basis.”
Is complete hogwash.
I impose a tax liability on you in $’s, which I will enforce by confiscating all your assets and denying you your liberty. Whether you trust $ or not, you’ll endeavour to get some – because that is cheaper than the alternative And going to jail.
And the only way to get some $’s is to offer your assets or effort for sale to the issuer of $ (me). Or exchange with somebody who already has $’s.No trust required. Just a simple market calculation and a selection of the discounted option.
The value of the currency is then simple. It’s how much effort I require from you in return for the $’s you need to settle your tax liabilities to me. It has the sovereign’s head on it. That’s whose money it is. If the tax rates go up next week, you’ll have less of it.
1. The state imposes tax liabilities with penalties for non-payment. The tax credits required for the payment of taxes are units of the state’s currency, issued only by the state.
2. The tax liabilities, by design, create sellers of goods and services seeking the appropriate tax credits needed to extinguish the liability imposed on them. The tax liabilities are designed to create unemployment, so that the state can then buy the skills and real resources it needs to provision itself.
3. The state then provisions itself by spending its currency to purchase the goods and services it desires.
4. Taxes can then be paid and, if offered for sale by the state, state securities can then be purchased.
5. State spending in excess of tax receipts remains outstanding as the net financial assets in the economy that fulfill savings desires until used to pay taxes.
The $ is nothing more than a tax credit.
With the state the sole supplier of that which it demands for payment of taxes, the economy needs the state’s currency and therefore state spending sets the terms of exchange; the price level is a function of prices paid by the state when it spends.
There are two primary dynamics involved in the determination of the price level. The first is the introduction of absolute value of the state’s numeraire, which takes place by the prices the state pays when it spends. Moreover, the only information with regard to absolute value as measured in units of the state’s currency is the information transmitted by state spending. Therefore, all nominal prices can necessarily be traced back to prices the state pays when spending its currency.
The second dynamic is the transmission of this information by markets allocating by price as they express indifference levels between buyers and sellers, and all in the context of the state’s institutional structure.
The price level, therefore, consists of prices dictated by government spending policy along with all other prices subsequently derived by market forces operating within government institutional structure.
The state sets the terms of exchange for its currency with the prices it pays when it spends, and not per se by the quantity of currency that it spends. For example, if the state has an open-ended offer to hire soldiers at $50,000 per year, the price level as thereby defined will remain constant regardless of how many soldiers are hired and regardless of the state’s total spending. The state has set the value of its numeraire exogenously, providing that information of absolute value that market forces then utilize to allocate by price with exchange values of other goods and services determined in the marketplace. Without the state supplied information, however, there would be no expression of relative value in terms of that currency.
Should the state decide, for example, to increase the price it pays for its soldiers to $55,000 per year, it would be redefining the value of its currency downward and increasing the general price level by 10%, as market forces reflect that increase in the normal course of allocating by price and determining relative value. And for as long as the state continues to pay soldiers $55,000 per year, assuming constant relative values, the price level will remain unchanged. And, for example, the state would have to continually increase the rate of pay by 10% annually to support a continuous annual increase of the price level of 10%.
“China is still willing to accept Dollars for its products and commodities.”
Because that’s what American consumers have in their pockets. I can walk into any car dealership in the UK and buy a German car using £’s.
Switch yourself around to the point of view of a Chinese producer. Put yourself in their shoes. Then what happens is this.
There is insufficient demand at home to keep your factory going. Just not enough orders coming in. So you either close or you entertain these orders from a foreign nation offering funny green bits of paper that are worthless to you.
So you have a word with your local PBC branch and they let you know that they’ll take the funny green bits of paper and give you real money in exchange. And they can even tell you how much real money you’ll get.
That reassures you and off you go producing safe in the knowledge that you’ll get real money for your output which you can spend in the shops in China.
So how does the PBC do that.
Again, put yourself in the shoes of the PBC. In the hands of a bank foreign currency is a loan asset. It’s collateral. What does a bank do with collateral? it discounts it for the local currency.
The bank has gained ownership of a valuable foreign asset *and created local money against it*.
This is how foreign export-led economies maintain circulation of their local money in the face of the drain to savings. They hold foreign currency assets to make the balance sheet look good. It is far, far easier politically to discount against so called ‘hard currency’ than it is against the apparently nebulous ‘taxpayers equity’ asset. Even though functionally it has precisely the same effect – injection of local money into the economy.
For every trade there are *two* transactions. The first is the real transaction of real goods and services and they cross borders as you would expect.
The second is the finance transaction in the opposite direction.
In every finance transaction that happens the buyer gets to use what they want to pay for the transaction, and the seller receives what they want to receive for the transaction. Everybody has to get what they want in finance terms *or both legs of the transaction would never have happened in the first place*.
Here:
https://new-wayland.com/blog/anatomy-of-an-fx-transaction/
The job of the finance sector is to match the mismatches, allow more finance transactions to complete and scrape a bit off for enabling that process.
So you can buy US goods and services with anything you want – bottles of wine, even Bitcoin and your friendly neighbourhood finance sector will sort it all out so the seller at the other end gets what they want.
So if I’m in the US and I’m an anarchist with a deep distrust of government, I will want Bitcoins. I may even charge for my stuff in Bitcoins. Then I’d use a finance invoice processor (like coinvoice) which allows buyers to pay with whatever they fancy and I’ll get Bitcoins.
However at some point I’m going to have to pay my $ tax Bill and so I’ll use another payment processor to pay my tax bill with Bitcoins.
But none of this is magic. The finance sector is just doing the exchanges in the background. If somebody pays me with dollars and I want Bitcoins, then that gets matched with somebody paying in Bitcoins and wanting dollars. And what happens in effect is the person paying with Bitcoin pays me, and the person paying me in dollars pays those wanting dollars. It’s a simple swap transaction that redirects the currency flows back into the currency area.
Matching those flows is what moves the currency prices relative to each other until everything matches up.
The key point is that in every transaction the buyer pays with what they want to pay with and the seller gets what they want to receive. Otherwise the transaction will never happen.
So all that nonsense about other countries *needing* dollars to pay for things is rubbish. If we have Sterling we pay for things in Sterling and the exchange system matches that up. If there is no match. If liquidity dries up then the *transaction fails* and never happens.
What that tells you is that the ‘trade deficit’ is a result of transactions that have succeeded. Therefore the other side must have wanted $ savings of some kind or the excess transaction would never have happened in the first place. So the trade is balanced by $ savings. See the national debt for details as the exporters exchange their surplus $’s for US treasuries.
The foreign coins they throw in the back of the drawer AFTER they get the imports They need.
BRICS know all of this – Slavyangrad is way out of his depth and his ideology is entrapped by GROUPTHINK.
Posted by: Echo Chamber | Jan 1 2024 13:55 utc | 46
Posted by: Refinnejenna | Jan 1 2024 20:12 utc | 66
Excellent response and very, very thoughtful Refinnejenna. Brilliant infact.
But that is how you WIN at trade in real terms as you have very quickly realised. Yet, their gold standard, fixed exchange rate propaganda embedded so deep it is now GROUPTHINK. Promotes exactly the opposite so these countries you are so rightly worried about lose at trade.
The NATO charters and the EU treaties impose spending rules that reduce imports and instruct countries like Greece to export their way to growth. How they have entrapped the global South.
We call it Neocolonialism and the Unholy Trinity.
We say stop that immediately
Here
https://realprogressives.org/podcast_episode/episode-175-neocolonialism-and-the-unholy-trinity-with-fadhel-kaboub/
With alternatives that require strategic thinking. Read the whole thing it is excellent but here is a snippet.
” Let’s say you have a block of 20 African countries in the same trap, facing the same issues. If we have an acknowledgement that those 20 countries as a block have 300 million consumers, let’s say, and have all the natural resources that they need for renewable energy technology, raw materials, but also have a huge energy deficit, a huge food deficit.
So now collectively, they can pursue a form of industrialisation that prioritizes manufacturing and value-added creation and retention of renewable energy infrastructure, water irrigation systems, and real investments that will actually build the first pillars, the building blocks of actual economic development and fighting climate change and creating good paying jobs in that market of 300 million consumers.
Then you can say, well, where do we get the technological capabilities, the infrastructure. Then you say, well, who are the major countries today that actually have the manufacturing capabilities, the research and development capabilities. Who are we going to partner with? Is it Germany? Is it the US? Is it China? Is it Russia?
Then you have a block that says, we know what needs to be done to build a solid economic development model for our trading block. And you start using your economic diplomacy to find the right partners to actually help with the technological setup to get you started. Once you do that, you have a nice set of bargaining chips.
When you don’t have food sovereignty, when you don’t have energy sovereignty, you can’t afford to walk away from a trade negotiation table because they’ll literally tell you your people will starve. Or like Paul Volcker said, you will not get the insulin shipments this month.
But when you have those first pillars of food and energy and basic industrial capabilities, industrial capabilities NOT for exports, but for your DOMESTIC MARKET, because you have a large domestic market that needs plenty of that type of manufacturing.
Once you establish that, then you move to the next big ticket item in your industrial list. And that could be transportation infrastructure, high speed rail, that could be medical equipment. So you industrialise based on your needs, not based on what the global north wants you to produce for them. And that’s what we’re talking about.
It starts with an acknowledgment that the actual development model that countries are using is a model of underdevelopment. It’s not a model of development and that their economies are being steered from abroad, controlled from abroad. It’s not for the benefit of their people. And that there is power in unity.
( I think we are now at that point of acknowledgment, if not very close to it )
And unity, literally in the economic sense, not just in the political and geopolitical sense, in the economic sense, because a small sized country with ten or 20 million consumers can not industrialise and have economies of scale necessary to actually industrialise successfully unless you have access to an export market.
And today you’re just not going to compete with Germany or Japan or the US when it comes to exports, on cost and quality, on brand name recognition, all of that is already working against you. So you have to look to the global south for partners who can complement your resources and capabilities and industrialise together by building collective resilience within that block of 20 countries”
A global South collective with domestic first policies.
Posted by: Echo Chamber | Jan 1 2024 23:29 utc | 75
@ Roger | Jan 2 2024 1:10 utc | 79
Hi Roger, I have no issue with the thrust of your comment. eg “We are seeing a contest between two parts of the capitalist elite” and the other aspects. Though I’d like to query the premise if I may, because I think it might be overblown or missing a more important critical event.
While I do not deny the ‘religious right / rapture stew’ has played a role, I have a few minor problems with hearing things like : “The capitalist elite did not like that so” and “they allied with” and “They also utilized” and “combined with the” – because I believe it overstates, by implication, the degree of conscious intent and coordinated actions by this “elite group” which is a bit vague to apply (imo) – and lacks a historical ref of “they doing xyz”, at some point in time.
Now sure, as a general thrust I can “see” those kinds of things did unfold over time, but my own impression is these matters were more likely random opportunistic or accidental acts, by multiple actors, than by design with a planned intent of a defined group over decades who is able to be named / pointed to specifically. (sorry bit of a mouth full) iow this presentation is a bit vague and not grounded in historical evidence. (?) Now maybe you know of some specific things that support your pov, but if so they should be ref’d in some way, even as footnotes. Yes? Only my own thoughts, no big deal, because I do see where you’re coming from.
Personally I believe the coordinated plans and actions across many decades of the Israel/Jewish AIPAC, and the Revisionist Zionist / NEOCON underhanded backroom conspiracies have been far more effectual than anything the ‘Christian right’ may have helped to influence as far as Capitalism on steroids (or Inverted Totalitarianism) is concerned.
As a way to support my own impressions, may I point you to the Powell Memo of 1971?
To me this is the important critical event. What unfolded from it for decades ahead in material terms was substantially more responsible in sustainably shifting the economic and social culture of America with a long term planned intent than anything else (even the zionist neocons.)
That this Powell Memo was far more responsible for shifting things and driving the change these so-called “elite capitalists” sought at that time, than anything else over the long haul including those various issues you pointed to at the beginning of your article. What do you think?
Regards.
On August 23, 1971, less than two months before he was nominated to serve as an Associate Justice of the Supreme Court of the United States, Lewis F. Powell, Jr. mailed a confidential memorandum to his friend Eugene B. Sydnor, Jr., Chair of the Education Committee of the U.S. Chamber of Commerce. The memo was titled Attack On American Free Enterprise System and outlined ways in which business should defend and counter attack against a “broad attack” from “disquieting voices.”
https://scholarlycommons.law.wlu.edu/powellmemo/
Though Powell’s memo was not the sole influence, the Chamber and corporate activists took his advice to heart and began building a powerful array of institutions designed to shift public attitudes and beliefs over the course of years and decades. The memo influenced the creation of the Heritage Foundation, the Manhattan Institute, the Cato Institute, Citizens for a Sound Economy, Accuracy in Academe, and other powerful organizations. Their long-term focus began paying off handsomely in the 1980s, in coordination with the Reagan Administration’s “hands-off business” philosophy.
Most notable about these institutions was their focus on education, shifting values, and movement-building — a focus we share, though often with sharply contrasting goals.
https://reclaimdemocracy.org/powell_memo_lewis/
05.27.21
The Scheme 1: The Powell Memo
Mr. WHITEHOUSE. Madam President, there is a scheme afoot, a scheme I will be talking about in weeks ahead – a long-running, right-wing scheme to capture the Supreme Court.
Special interests are behind the scheme. They control it through dark money – hundreds of millions of dollars in anonymous hidden spending. We will dwell in later speeches on how the scheme operates. This first speech seeks its origins. The scheme is secret, and because of its secrecy, it is hard to know exactly where the story should begin.
https://www.whitehouse.senate.gov/news/speeches/the-scheme-1-the-powell-memo
and also
Justice, it seems, is hard to find. Thousands of grassroots organizations across the country seek justice for their concerns. In the US, over 13,785 nonprofits work for civil rights and social justice. Organizations focused on international justice such as peace, refugees, and international aid number 23,532. Environmental groups number 27,402.
Until corporate monoliths are disassembled and defanged, justice will be hard to find.
From peace to prison, the environment to economic inequality, many Americans fight for their cause, and plead for justice. The dynamic is similar in other countries.
Who, or what, are the forces behind so much injustice and suffering? Is there a common culprit, a common thread or a threat?
https://www.commondreams.org/views/2022/12/08/powell-memo-revisited
Posted by: Lavrov’s Dog | Jan 2 2024 4:10 utc | 84
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