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Philip Pilkington: Matt Yglesias’ Plan to Seize Your Savings for the Good of the Economy

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By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil

“Oh no! This is going to get silly!” That’s what I thought when I read the first few lines of Matthew Yglesias’ post on how, in a cashless economy central banks would be able to ‘cure’ recessions. Actually, Yglesias first published this epiphany back in December of last year.

Yglesias claims that in a cashless economy central banks could easily cure recessions. How? Well, they’d simply threaten to debit bank accounts if the Great Unwashed refused to spend or invest their savings. And because people couldn’t take out cash and stash it under the mattress they’d have no choice but to go out and do something with their money before disappears.

This all comes back to the idea of a negative rate of interest that Paul Krugman and other ISLM adherents have been pushing as a way for Ben Bernanke to get his central bank mojo back. If interest rates fall to zero and the economy still doesn’t recover, these people claim, the central bank should try to stoke inflation so that, with their bank balances threatened with erosion, people would spend and invest.

Basically, this is a way for ISLM adherents to save face after saying for years that interest rate policies actually work in a really effective way. For example, in his original article Yglesias wrote the following:

Starting about 40 years ago, it became clear that central banks had the power to end most recessions pretty easily, independent of fiscal stimulus. If your economy is saddled with idle resources—unemployed workers, vacant office spaces, factories that aren’t running all their shifts, trucks cruising down highways half-empty—what you need to do is increase the flow of spending through the economy. You do that by cutting interest rates.

Yeah, that’s a bit of a howler. When recessions occur in a modern economy fiscal stimulus opens up automatically because as unemployment rises and production falls transfer payments increase and tax revenues fall. So, there’s no real evidence that Yglesias’ assertion is in any way true.

Indeed, some argue that monetary policy is not nearly as effective as neoclassical economists think it is. Some argue that it is akin to a shaman’s wand waved in the hope to revive ‘animal spirits’ which, if fiscal stimulus were not forthcoming, would wither and die regardless. This, for example, was clearly Hyman Minsky’s view of the 1974-75 recession; and, if you read his careful study of the government and central bank response (in ‘Stabilizing and Unstable Economy’) you’ll see that he’s probably right.

In addition to this not all recessions are caused by simple hoarding. Keynes was probably wrong when he focused purely on ‘liquidity preference’ as the cause of recessions/depressions. There are also debt deflation dynamics which take hold to ensure that certain segments of society remain underwater and in debt. This is what Richard Koo calls a ‘balance sheet’ recession. Eroding people’s bank accounts won’t do much if some people remain heavily underwater. He argues that in a balance sheet recession, private parties are preoccupied with paying down debt rather than seeking to increase profits (admittedly, we could try to inflate the debt away, but really, how much inflation are we talking about here?).

But let’s not even argue economics here. Yglesias’ plan is so outlandish that I think that we can debunk it with a simple thought experiment. You see, we could actually initiate the plan in a paper currency system. I’ve come up with two ways of doing this – note that there are probably more.

One way to do this would be for the central bank to announce that it was going to start eating into bank accounts, as per Yglesias’ plan. But they could supplement this by saying that all paper currency hereafter returned to the Treasury or central bank, in the form of reserve holdings or tax payments, would be debased by the same amount. Ta-da! Instant inflation. Banks and taxpayers, threatened with a debased currency, would rush to spend and invest.

Or the central bank could announce tomorrow that they were debiting bank accounts a la Yglesias and that there was no point in hoarding paper currency at all because they would shortly be printing new currency that would be debased by the same amount as bank accounts – once this new currency was issued the old currency would be worthless as the Treasury and central bank would not accept it in tax payments or for reserve holdings. So, you’d better return all your notes to your local bank and hold your balances in electronic form ready for debasing, scum!

So, why doesn’t Bernanke do this? Eh… because it’s stupid. First of all, we live in a democracy (shock!) and people, who already generally distrust the central bank, would not like a system that functioned like this. It’s weirdly dystopian and would make people feel completely impotent. And it would call all property rights into question. If your savings aren’t safe from government seizure, what is?

A politician would not have a hard time getting elected on a mandate of ensuring that the central bank doesn’t nakedly expropriate funds that are not working in the public purpose.

Terrifying people into thinking that their savings were going to be seized by the Matrix may do extreme economic damage too. Such actions might scare people in spending to the point of hyperinflation. This is not as remote a possibility as some might think. There is a psychological component to the value of a currency. If a central banker said that he or she is going to start literally stealing your money, people may become distrustful of the currency itself and try to offload their whole bank accounts in order to obtain real goods and assets. Or they might extract their funds for conversion into a new currency and stash it in a foreign bank account that was not threatened with expropriation. The Austrians would no longer look so dumb when they invoked hyperinflation as a real possibility of Big Government intervention.

It’s columns like this that demonstrate how technocratic (and anti-democratic) neoclassical economists actually are. They say they like freedom and all that – but they don’t really. They have a very scientistic view of how economies – which are ultimately just aggregates of real people (not utility-functions, guys!) – actually function. And they, like all technocrats, have an unflinching desire to control people no matter what the cost. But, as we learned in the monetarist experiment under Thatcher, should any foolish politician allow them access to the levers of power, their little fantasy constructions of how Everything works will come crashing down around them as quickly as… well… as quickly as Ben Bernanke could technically expropriate your earnings, peasant!

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102 comments

  1. Jeff

    What a great inspiration and goad to creating, using and promoting local currencies like the Ithica Hour, Fairbuck and other things that allow locals to earn some kind of spending money that can only be spent locally.

    1. different clue

      If this were discussed seriously by the upper class front government within earshot of the citizenry, those with savings would convert as much as they could into cash to use in the cash-based black markets which would arise upon the electronification of official savings.

      They might not be called “black” markets. They might be called Patriot Markets and the legacy paper currency would be called Patriot Dollars. The “physical paper dollar” might itself become one of those alternative parallel currencies people flee into as much as they can.

        1. F. Beard

          Many gold-bugs are lazy, methinks. They desire effortless and risk-free appreciation of their money hoards. The “Parable of the Talents” (Matthew 25:14-30 ) condemns such behavior. Even usury is preferable (but not from ones fellow countrymen, I assume)!

          1. amanasleep

            @F. Beard:

            I personally agree with your interpretation of Matthew 25 (the master is clearly portrayed as wicked himself). However, most historical commentators view it as having either the opposite message (that the slaves who increased their master’s money are in the right, and that a failure to do so by burying money in the ground is sin), or that the parable uncritically encourages the early evangelists to use their faith to increase that of others, lest they face judgement for having failed to use their “talents”, and that even one with little ability to spread the word shall be judged for not making the attempt.

            My only point here is that I think you will not convince many listeners that this parable supports your argument without exegesis.

          2. F. Beard

            I personally agree with your interpretation of Matthew 25 amanasleep

            I think you have misunderstood me.

            (the master is clearly portrayed as wicked himself). amanasleep

            Disagree.

            However, most historical commentators view it as having either the opposite message (that the slaves who increased their master’s money are in the right, and that a failure to do so by burying money in the ground is sin), amanasleep

            That IS my interpretation.

            What did you think I meant? That the Master was wicked? And the lazy slave wasn’t?

      1. Nathanael

        Practical considerations thanks to System D point to a system of taxation which involves taxing primarily the extremely wealthy, who will eventually get to the point where they can’t hide their wealth any more. And just not bothering with the majority of other people.

      2. Fiver

        First time I’ve encountered “System D” as a tag for the one-half of humanity desperately scraping out a living in terrible circumstances in the “developing” (into what?) world, or the growing numbers of abandoned in the “developed” world. While not a “system” it certainly is a Disaster.

    1. They didn't leave me a choice

      Indeed it does, and I’d love for an explanation from Philip on two questions:

      Why should money be eternal and not rot away like everything else in nature? Why should money alone be exempt from entropy? Why should it somehow be eternal while everything else around us is not?

      What makes you think that money is property, and not merely a social convenience, a contract, a scoreboard if you will?

  2. different clue

    ” . . . and it would call all property rights into question.
    If your savings aren’t safe from government seizure, what is?”

    Certainly not your house . . . ah ha ha ha . . .

  3. dSquib

    What’s up with this dude?

    He is paid to write this shit by rather influential people. Let us all think of the implications of that. It’s his job. It clearly isn’t his job to write anything halfway sensible, but it seems to be his job to be *persuasive* to certain groups.

    Though Yglesias is a subtly different animal I think to someone like Ezra Klein, these guys spend their time scolding lefties for not being realistic. For not getting the process, the politics, the facts on the ground and what have you. Then now and again they drop bizarre stuff like this for us all to ponder. This one is in the realm of T. Friedman even, particularly his oft stated desire for America to overcome its political dysfunctions by becoming “China for a day”. How would that work, exactly?

    What these tentative authoritarians have in common is a seeming belief that the American people have an unending appetite for humiliation. That they are unlikely to submit to such outrageous plans does not enter into any assessment of the viability of any plan or policy.

    So what exactly is going on here?

    1. different clue

      Mass mind-molding. Psy-ops in a long-running psy-ops campaign.

      Hoping the people are indeed sheeple who can be led over and off the Last Buffalo Jump.

      Its a cookbook.

      1. dSquib

        I’m sure there’s a degree of Psy-ops here but I’m still not clear on the specific purpose. Someone on here pointed to a post once made by Yglesias where he suggested COIN units in Iraq be trained to be deployed in America to respond in “hot spots”, in the most hideous euphemism ever. This despite Yglesias having been critical of COIN strategies in Iraq. Astonishing.

        What I mean is, are these ideas meant to be taken seriously? Are they designed to be laughed off at first? Is he a DNC stalking horse? If that’s the case, shouldn’t these modest proposals be at least a little plausible?

        I can only think that, as you suggest, even if the specific proposals will never happen, the idea is that people will be further inured to the idea of central banks having total control over people’s finances, or of the total militarisation of domestic policing, in the COIN example.

        1. different clue

          Just a slow steady pollution of the background thoughtfield. If any of the particular “ideas” get fastracked and mainstreamed by MSM action-groups, that’s just gravy perhaps.

          I read somewhere that every time there was an atom bomb test or an atomic waste release . . . the fallout eventually equilibrates and mixes into the “background” so that the “background radiation level” slowly rises incident by incident by incident.

          But the particular idea of the cashless society has been specifically referrenced in enough separate places as to make me think that it is a real OverClass agenda item. I heard about a journalist hyping the wonderful cashless society future and a book he wrote about it on . . . the Dianne Rehm show. And that was a couple of months before this Yglesias piece.

        2. Nathanael

          It’s amazing how many of these “futurist” ideas from authoritarians are *just plain stupid* — stuff which is flat out impossible and will never happen because of it. Have they ever stopped to think about the reasons why cash is used? Apparently not. Have they ever stopped to ask what the basic prerequisite of counterinsurgency tactics is (namely, getting to know what the locals are like and what they want)? No.

          I think the trouble is that authoritarians don’t actually bother to learn about the fields of activity they’re trying to control — they figure they can just yell orders at them.

    2. Woodrow Wilson

      What’s up with this dude?

      If you want a chuckle, go over to FT Alphaville and watch Philip get lit up, most recently on Peak Oil.

      1. skippy

        Wowzers! Hay… has anyone informed the euphonium crowd that technology is just leverage against the natural world and more leverage is just more stored potential.

        Skippy… the signs are everywhere yet so many remain blind. I guess entrails don’t have all the answers after all.

        1. F. Beard

          Hay… has anyone informed the euphonium crowd that technology is just leverage against the natural world skippy

          So women should go back to washing clothes by hand?

          Yes, mankind HAS exploited nature but vast knowledge and technology have been gained thereby to the point that a sustainable economy is plausible in the near future IF we can get to the future.

          And even if we were to somehow go back to a pre-industrial society (How many billions would die in the process?) what’s to prevent mankind from vainly repeating the cycle?

          We are well past the halfway point to a bright, sustainable future as far as technology is concerned. The problem is our money system.

          1. skippy

            More rubbish from beard. Never have I said anything about returning to pre-industrialization, there’s that tactic of yours again, projection.

            I’ll keep it simple for you, negate your wandering mind. Firstly money is a human creation, therefore its a people problem and not a tool problem, change the tool and you still have bad tool user behavior. Understand……

            Technology is a tool too, same problem.

            Skippy… Why don’t you and your ilk go out and get your hands dirty, travel a bit, really learn something.

          2. F. Beard

            Firstly money is a human creation, therefore its a people problem and not a tool problem, Skippy

            Does not follow. People can create good tools and bad tools. Now it’s true a good workman can do good work with a bad tool but he can do even better work with a good tool. And forget about a poor workman with a bad tool.

            change the tool and you still have bad tool user behavior. Understand…… skippy

            So YOU say. Others, including many famous people in history, claim that banking is fundamentally evil and with good reason too since it is rooted in fraud and based on usury and counterfeiting.

          3. skippy

            People create tools dip whit, tools are a product of people, no people – no tools.

            Skippy… give a poor tool user the best tool, and they will still screw the job up and the tool.

            PS. Banks / Corporations, same *mentality* different tools. Yet you extol one over the other for some reason?

          4. F. Beard

            PS. Banks / Corporations, same *mentality* different tools. Yet you extol one over the other for some reason? Skippy

            Yes I do. One (banks) are inherently evil while the other, corporations, are only as evil as 51% of the voting stock wishes or allows them to be.

            Ideally, the common stock of corporations would be so broadly owned that 51% of the voting stock would vote in accordance with 51% of the general population.

          5. F. Beard

            … give a poor tool user the best tool, and they will still screw the job up and the tool. Skippy

            Well, if the user is entitled to the tool it’s none of your business how well he uses it, is it?

            BTW, remember Robert McNamara’s solution to Ford cars that became too long for Ford’s painting booths?

            Cut them in half, paint each half separately and then weld the two halves back together!

            Elitists like him (and yourself?) are a menace.

          6. Skippy

            Still can’t grok anything save your pet beliefs.

            “Well, if the user is entitled to the tool it’s none of your business how well he uses it, is it?’….. but, but, beard.

            Skip here… entitled? whom is the agency that rubber stamps entitled?

            “it’s none of your business how well he uses it, is it?”… but, but, beard.

            Skip here… WOW…. Fookmeshima, GOM, and an endless list smaller hidden daily crimes.

            Skippy… elitist, me, ahahahahaha! I left the tall towers of my own volition, left the opportunity of vast riches, turned my back on the parasites. I’ve explained quite clearly what I do with my time, help others.

            I support my local Occupy mob, against fracking and mining that destroys arable land for short term profit, want to invert the economic pyramid in favor of all humanity, end all wars, give nature lawful rights, end slavery, etc, etc.

            All you want is corporations having the right to print. Any thing that forwards that agenda, is a tool to achieve it, a myopic endeavor IMO .

      2. Philip Pilkington

        He’s talking about Yglesias, not me.

        Regarding the FT debate, are you referring to the guy who started off saying that oil prices are set by marginal cost and then moved on, after I questioned him, to say that most of the price increaeses since 2008 have been due to speculation? Hmmm… yeah, I sure got ‘lit up’ in that particular argument.

        1. skippy

          My comment was directed at the thread in general, not at any one specific individual.

          If I may suggest, anyone opining about extraction / production plants / facility’s needs to get their hands dirty, understand every aspect intimately. Then apply it to the entrails.

          Skippy… chin up, PP.

        2. Fiver

          Just had to have a look at what transpired at FT Alphaville and cannot stop shaking my head in wonder, when faced with statements like the following in reply to someone you couldn’t just slap away:

          “That exists NOW. But you don’t know what might exist two years down the line. You don’t know what innovations might arise if oil producers really begin to find it harder to extract at an aggregate level. Just like Jevons and Malthus, you too cannot predict what innovations lie in the future. You cannot account for them in primitive models. Sorry. That’s just the reality of the situation. It has been since economic doomsayers started making these arguments in 1798.”

          You go after “Peak Oilers” for being physicists, or geologists, or something other than economists (leave aside that you also dismiss almost all economists, unless they subscribe to your own minority view) when it comes to assessing this issue, insisting it is “economics” NOT a physical limit. In other words, nothing can be admitted as real if it threatens your core belief in “infinite growth”.

          For someone who always claims to be taking a rational, reasonable, “scientific” or even “empirical” approach, virtually every argument you make re sustainability is faith-based, i.e., faith that humanity will “innovate” or “create” some new techno-fix no matter how large the scale of human activities and impacts/damage we inflict on ourselves and everything else on the planet. When it comes to the future, and in particular, what’s happening environmentally and with ALL remaining resource inputs vs what all 7 billion (and growing) of us must use into the future, you are about as truly ignorant and myopic as, say, Bush, or Cheney, or Thatcher, or BP.

          And what is that “faith” rooted in? Roughly 150 years of splendid Western “affluence” based on the release of the stored energy of hundreds of millions of years of Life, for a minority slice of the global population out of 5,000 years of recorded human history, a mere blip considered against even the entire human record, and a nano-second in terms of evolution, living and geologic.

          You are apparently completely unaware that the majority of current global population PRODUCED by that oil is poor, that 2015 marks the point at which greenhouse gas emissions’ effects cannot be “unwound” and devastating climate change is assured no matter what we do – and contrary to your absurd “empirical” statements, we have done virtually NOTHING, relative to the scale of the problem, to even begin to slow it down, let alone making any real, positive progress. And please, please note that Climate Change is but one among many ecosystem-critical problems our sheer weight of numbers have created.

          As for a “green bubble”, I’ve thought we would end up there for years – but it won’t really be “green” in any environmentally sound sense, just the “bubble” part will be delivered – for which we will have the likes of Bernanke, Obama, Goldman, you and everyone else so vested in the status quo as to commit suicide rather than change.

          Ignorance is indeed bliss.

    3. tom allen

      Hey, at least Yglesias was right about supporting the invasion of Iraq. Um, until he apologized for those hundreds of thousands of deaths. A few years later.

      Er, I mean, supporting the invasion of Afghanistan. And the subsequent Obama surge. Though he hasn’t apologized for those hundreds of thousands of deaths yet.

      No, no, I mean, Yglesias was right about embracing austerity. Kicking hundreds of thousands of people out of their homes. But I’m sure he’ll apologize about that later.

      No harm no foul, Matt. I mean, except for those hundreds of thousands of people who suffered and died because of the policies you supported. But hey, small price to pay for your advancement, isn’t it?

    4. Fred

      “Chattering class”, “Public Intellectual”.

      They normally produce a combination of light entertainment and dark humor.

      Stuck in a motel room for 3 weeks, first time I have watched TV in years. ‘News’ has become even worse than I remembered, and all the ‘heavy’ political and social analysis is so context-free, divorced from any reality I am in contact with, that I don’t recognize that world.

      And, if I hear about the Zimmerman case one more time I may screem. A normal tragedy, but otherwise so unimportant, such a non-example of anything outside of the scope of local news it makes one wonder why it is such a big story.

      Distraction from thinking about the important issues, I suppose, the same reason for all the ‘public intellectual’ output.

      1. Nathanael

        Actually, there’s something important in the Zimmerman case: the Sanford Police Department appears to be an unprofessional, corrupt organization. This is symptomatic of far too many police departments throughout the US. The Sanford mayor actually went to the people with the information he had because he distrusted the police department so much. This means something.

        Of course TV News is doing whatever it can to distract from THAT issue, by obsessively focusing on the murderer and the murder victim, and ignoring the culpability of the police department.

    5. Nathanael

      “This one is in the realm of T. Friedman even, particularly his oft stated desire for America to overcome its political dysfunctions by becoming “China for a day”. How would that work, exactly?”

      Someone would appoint the fellow who’s quietly masterminded China’s economic boom as the secretary of the Treasury, and Chairman of the Federal Reserve, all at once? I think he’s happier in China.

      China just got lucky that they got a competent man in power for a change. They had a long run of incompetent people in power before that. We’ve had the occasional competent people in power throughout our history too (FDR made some excellent appointments).

    6. Phil Perspective

      You do realize that MY was a philosphy major at Harvard, right? I haven’t heard what kind of economics courses he took while getting his degree. Then again, McMegan has an MBA but it doesn’t mean she knows crap about business.

  4. different clue

    ( By the way, the first place I saw the phrase “cashless economy” was in a book titled Five Plants That Changed The World. In the section on The Potato, the Irish survivors of the Cromwellian invasion who were backed into a corner of the Irish Island adopted a pure subsistence economy with essentially no buying and selling of anything at all whatsoever. Their main calorie source was the potato and they lived in a “cashless economy” which the author bitterly disrespected and condemned in hindsight.

    But that may well be the cashless economy that some of us adopt to escape from that other cashless economy which upper class spokesmouths like Yglesias hope to soften up the public mind for.)

  5. Travis

    @dsquib,

    Matthew is not a tentative authoritarian he is what passes for a VSP on the putative progressive left in the US. That is: a prison wife to real authoritarians. Look when they crossed the Rubicon from the meagre neoclassical synthesis to the new classical synthesis they said farewell to any pretence of humanist arms. What is the the success of monetary policy? After three recessions and decade and half they finally tamed inflation. Then they blew three massive bubbles and on the last wicket managed to get unemployment down to its early 1970s level. Bravo!

    The soviets set the bar higher with 5 year plans.

    This should be a purp walk not an intellectual conversation.

    1. chitown2020

      As predicted, Russia has spread her errors of communism around the world. Communism is slowly being sneaked in under many guises like a fake war on terror and a manufactured bad economy. All created by them. Abolish the FED!

      1. Thorstein

        Please. When “communism” overthrew the Tsar, the State took ownership of everything. But under the feudalism of the Tsar, the State already owned everything. Russian “communism” was just Russian feudalism with a new “nobility”–the Communist Party. What we see re-emerging in the world around us is not so much the “communism” that Marx or even Lenin imagined as it is the feudalism that kings and princes have gorged themselves on from Caesar down through George III and Elizabeth II. Will the voices from the “right” ever read more history and listen to less Limbaugh??

        1. JTFaraday

          But you yourself just said that “Russian communism” was “Russian feudalism” with new masters.

          You also said that what the contemporary US is becoming is something like “feudalism.”

          If you really believe that and think that’s an accurate description of pre-revolutionary and post-revolutionary Russia as well as the contemporary US, then how are you actually contradicting this other person who says the contemporary US is becoming something like “Russian communism”?

          Because on the face of it, you’re not. You’re just reacting to this person’s choice of words. As for Marx, they didn’t mention Marx either way.

          1. Travis

            No I did not mention Marx. The point was that over the last thirty years the public’s expectations have been massively lowered. Soviet planners should have been so lucky.

        2. chitown2020

          Thorstein…first of all I don’t listen to any of the talk radio or media propaganda. Second of all maybe YOU believe too many lies. What is in the history books are lies. Do you believe their story about the Titanic too? The NWO started sneaking in communism under Reagan. The fall of communism in Russia was a lie so they could sneak in communism under our noses. The NWO first socialized our wealth then stole it by way of debt fraud, the FED monetary system, taxation and many other guises like FDR’s SOCIAL SAFETY NETS… In Russia they just took everything away from the people like what they are doing in the non-judicial States. But, they are ignoring the Constitution and the rule of law in every state. The globalists snuck in the robbery of the people in Germany by lies and deception but, if you don’t believe it was a commie agenda you are a fool. They sneak communism in under many guises. We have feudalism yes, backed by a commie agenda. You may want to do some research into what really happened in history. It was predicted that Russia would spread her errs of communism throughout the world under many guises. Problem is we fail to see what is right in front of our eyes. That is how they win. I choose to call a spade a spade It has been the same commies hiding behind the scenes all through history. You are sugar coating it.

          1. chitown2020

            That is how the psychopaths who are running the world wants us to sound. The truth is that the inmates are running the asylum. Bottom line is the isms never work. Their great social experiment AKA the U.S.A. has turned out precisely the way the elite intended. As a result they managed to sneak in communism under many guises and almost complete Corporate Government control….Totalitarianism is knocking on the door. Marxist/Leninism was brought in during the last manufactured great depression. Obama is here to impose the global dictatorship…..Obama is way past a Marxist …he is a dictator. The globalists socialized the bank debt on to us to bring in TOTALITARIANISM by communist tactics under the guise of money lending….Here is an example for you. I met with an attorney about the mortgage fraud…We had a lengthy discussion….free of charge may I add…at the end of the conversation that attorney told me that “they” intend on taking EVER SINGLE PIECE OF PROPERTY FROM THE PEOPLE. I said that is COMMUNISM…The attorney replied…No, that is TOTAL COMMUNISM…! What is another name for that? TOTALITARIANISM. The attorney added that if the economy worsens, it wont matter who is in foreclosure..it will be anarchy and he for one does not want to be around to see that…So I guess I am not the only paranoid one.

  6. Max424

    Digital money means every transaction is traceable, no matter how insignificant, or innocent.

    You’re down at the rec center, playing one/two poker with granny and the gals, and BIG GOV knows what you’re playing for, and who is coming out the big winner.

    That’s Orwellian.

      1. Max424

        The point is freedom!

        The freedom to play (beat!) your niece and nephew in nickel/dime Pinochle without have to pay taxes on the spoils.

        Immediate taxes, too. Before I got in my car to go home, my hand held device would register that my winnings, 6.43 in digital credits, had been reduced by 42%.

        Note: The freedom to stack nickels and dimes in to intimidating columns! You can’t stack digital blips … I always say.

        1. different clue

          Also, the other point of the drive to cashless all-electronic money is so that private profiteers can chisel out a transaction fee on every single last little transaction. The plan is to force every single person to pay a “merchant fee” on every single transaction, including a 5 cent gumball from the electronic gumball machine at the gas station.

    1. chitown2020

      That is what the elite want, a paperless currency and a microchipped society. They want to keep track of everthing that you do via your microchip. They are doing that right now via your debit, credit cards and your drivers license. We have already been chipped and we are one step away from forced implantation. You will not be able to buy or sell without the WORLD BANK MICROCHIPPED MARK OF THE BEAST. You will pay for everything via the chip. The Obama healthcare plan requires everyone to be chipped. Google it. They also want no private ownership of property and no sovereign nations. They want us to own nothing…no wealth….just the debt their banks created out of thin air. They want a Global Totalitarian tyranny. The only way to stop this is by all of us not participating, paying, buying, complying and conforming.

  7. McGee

    Cashless society will lead directly to a barter society with black markets.

    The recent stories about Tide detergent being shoplifted en masse is a clear precursor to what will happen in a future where all transactions are attempted to be monitored. The other point that has been made about the major stumbling block to a cashless society are the few billion living in poverty around the world…and the millions here in the USA.

    The Luddite movement was once incomprehensible to me; it is no longer. Frank Herbert did a good job in hashing out this predisposition of humanity with his Butlerian Jihad storyline. Attempting to put the majority into a fishbowl is the singular sociological/psychological experiment ever staged.

    Pure hubris. Destined for failure.

    1. Nathanael

      Indeed, destined for failure. What these idjits don’t realize is that in a computerized system, the computer programmers control all that you see, and all that you hear. Our financial elites might be rather disturbed by a system where their wealth could be erased by a few keystrokes from a lowly computer programmer working in the bowels of their office building.

      I insist on paper statements for everything.

  8. chitown2020

    That is what the World Bank wants. A cashless, microchipped totalitarian dictatorship society that is enslaved to the debt fraud that their bankster/wall street perps created out of thin air. They want everyone working on their WORLD BANK / FED slave plantation. REJECT THEM and all of their fixes for the mess that they intentionally created. WE THE PEOPLE MUST ABOLISH THEM and all of their fraud or we will no longer be free, independent or sovereign. Do not accept their microchipped mark of the beast. The World Bank/Vatican/Rothschild monetary system is the mark of the beast. Stop using their banks and cut up their debit and credit cards. The microchip mark of the beast is even imbedded in our drivers licenses. They are evil incarnate in the ways they are spying on everything we do.

  9. J Sterling

    Recessions don’t happen because poor people won’t spend their wealth. Recessions happen because rich people won’t spend their wealth. But even they understand recessions are bad things. So they exhort you to empty your savings and spend, to take up their slack. Guess who’s got all the wealth when that’s all done.

    In a society not captured by the rich, a recession would be cured by involuntary spending by the rich, via progressive taxes, to pay for expanded government employment. Involuntary employment on their part, because they would not employ workers voluntarily.

  10. Literary Critic

    Well, this IS a start.

    But I would suggest a more complete fix to the economy – and economic theory – by introducing Frequent Die-er Miles.

    As you frantically spend your savings, participants accumulate FDMs. Once savings are depleted, the government mails the ex-savers a cyanide pill or something like that.

    This would have the added benefit of solving the social security and medicare problems.

    But don’t get me wrong – I appreciate all the things economists have done for us so far!

  11. par4

    Yggles is a perfect example for the dictum “Scratch a liberal and you will find a Fascist”.

    1. F. Beard

      So it seems.

      The general population has two enemies:

      1) The government backed/enforced counterfeiting cartel, the banking system.

      2) Misguided efforts to counter the predation from 1).

      Life would greatly simplify and improve if 1) were abolished and the population bailed out of all debt to it.

    2. Jimbo

      >This all comes back to the idea of a negative rate of interest that Paul Krugman and other ISLM adherents have been pushing as a way for Ben Bernanke to get his central bank mojo back.

      This is clearly mental illness.

        1. Philip Pilkington

          Kruman <3's negative real interest rates. Although his clearest statement on how it would work is that the central bank "promises to act irresponsibly" — which, to my mind, is somewhere between 95% and 98% voodoo.

          As for what he thinks about using coercion as a tactic? Who knows. The Economist trashed it recently — but they took the proposal seriously, which is rather depressing.

    3. b.

      “Scratch a liberal and you will find a fascist.”

      Heh. Who said that, “Lib Luv Big Guv” Stoller?

  12. yoganmahew

    I don’t normally agree with Mr. Pilkington, but I think he is on the money here.

    For me, a bigger worry is not that the scare tactics will induce hyperinflation, but that they will scare money into essentially unproductive or counter-productive assets – precious metals and commodities. The result would be a decline of ‘free’ money available for ‘worthwhile’ investment.

    Guess what we’re seeing…

  13. F. Beard

    (admittedly, we could try to inflate the debt away, but really, how much inflation are we talking about here?). Philip P

    One could inflate the debt away without significant price inflation risk IF further credit creation were banned and IF the monetary inflation were metered to just replace existing credit as it is paid off. With no change in the total money supply (reserves + credit) then neither price deflation nor price inflation should be expected.

    I suggest the monetary inflation be a universal bailout ala Steve Keen for reasons of justice – credit creation cheats both savers and borrowers.

    1. bluntobj

      Agree. Fraud should be unwound, and in this case the entire financial structure of modern banking is effective fraud.

      I do like Keen’s plan, and it delivers losses to the ones who should bear it; bondholders, investors, and the plutocrats.

  14. jsmith

    As I stated yesterday, the fact that fascists like Yglesias are able to be painted as “leftists” in America really speaks to 1) the reality that since WWII there really has been no true left in the US and 2) the propaganda system of the US used to convince the populace that people like Yglesias are “left” is really second to none.

    I’m glad to see someone bring up this propagandist’s track record as concerns his support for the murder of hundreds of thousands of human beings.

    Because the propaganda system allows people like Yglesias and others a constant platform from which to broadcast their drivel, only makes it all the more critical that people NEVER let them live down/paper over their war criminal pasts.

  15. F. Beard

    Well, when you think about it, the risk-free return for money should be zero. Add in storage costs and you have (slightly) negative interest rates.

  16. Lambert Strether

    Yglesias burbles:

    What if all transactions were electronic, so the only way to avoid keeping money in a negative-rate account was to go out and buy something with the money?

    Forced consumption. If that’s not the corporate state in all its glory, I don’t know what is. Yglesias really is a fascist shill. And it all happened so fast!

    1. Cynthia

      Reading Sheila Bair’s satirical piece entitled “Fix Income Inequality with $10 million Loans for Everyone!”(see link below) made me laugh, but it also made me angry once again about the big banks getting free money while the rest of us are subject to the FED’s war on saving. What is really maddening is when the lamestream media and CNBC anchors slobber praise all over Jamie Dimon for earning profits at JPM. I could take free money from the FED and turn a profit. There is nothing special about what Dimon is doing. A chimpanzee could be trained to run JPM when the FED is sending them money hand-over-fist.

      http://www.washingtonpost.com/opinions/fix-income-inequality-with-10-million-loans-for-everyone/2012/04/13/gIQATUQAFT_story.html

      1. Aquifer

        Hey, who’s laughing – i thought it was a great idea! :)

        Sheila Bair for Treas. Sec. or head of the Fed or whatever … she gets it!

        Wouldn’t that be a blast …

      2. chitown2020

        What Sheila Baird proposed made more sense than what any of these money grabbing politicians have promoted. Ms. Baird is a smart woman and she knows the bankster debt is unsustainable and can never be repaid. The only country so far that punished the real crooks, the bankers so far is Iceland. They knew robbing the people would lead to the failure of their nation. So that must mean the politicians in America want us to fail and they are all traitors. Too bad half of the country is still lulled into a false sense of security and as a result of that we will all wake up one day broke and homeless. That is how they will get way with stealing the country. Too many are still being obedient sheep and paying the tyrants who are robbing us out of our National Sovereignty.

    2. F. Beard

      Forced consumption. If that’s not the corporate state in all it’s glory, I don’t know what is. Lambert Strether

      Usury requires exponential “growth”. Common stock as a private money form requires no usury. Fiat spent into existence requires no usury either.

    3. different clue

      If the extorted-consumption society could not be prevented, the defensive response might be to spend one’s “money” on durable trade goods. Buy thousands of rolls of toilet paper, hundreds of gallons of decent quality liquor, hundreds or thousands of razor blades, thousands of rounds of the kind of ammunition most popular in your area, hundreds of cans of tuna fish, etc.
      Use these things in trade as another form of alternative currency for small and local transactions.
      As money decays under such a forced-inflation plan, the trade goods you have bought with the money will maintain their value against other trade goods or against barterable-for work.

  17. Nathanael

    “they would shortly be printing new currency that would be debased by the same amount as bank accounts – once this new currency was issued the old currency would be worthless as the Treasury and central bank would not accept it in tax payments or for reserve holdings. So, you’d better return all your notes to your local bank and hold your balances in electronic form ready for debasing, scum!”

    This has been done a thousand times by a thousand governments. When you run out of other options — for instance, when your currency is hyperinflating — it’s actually reasonably effective.

    Luckily, we have bundles and bundles of other options, starting with having the government just print and spend money, so this is indeed a really stupid idea right now.

  18. Frederic Mari

    Okay – I’ll step in it and defend Yglesias. Not his support for Iraq/Afghanistan (if he did, he was wrong and, although I am sure the posters here wouldn’t lie, you have to admit that’s quite strange for a supposed ‘liberal’ to have been down with W private wars).

    But what about this currency thingy? Well, in effect, this is just a formalisation of how inflation works.

    Commentators here pointed out that the issue in this crisis isn’t poor people not spending enough but rich people not spending enough. Roughly correct. And inflation is particularly devastating for ‘rich people’ while it’s technically (when not accompanied by a recession) favorable to debtors, ie. the younger and poorer part of the population.

    I am still not particularly in favor of the scheme but… are you guys basically saying that inflation + zero interest rate is not = to negative real rate?

    1. Philip Pilkington

      I think there’s a distinct difference between inflation eroding savings — which I’d probably be less concerned with than even Yglesias — and a central bank debiting savers’ bank accounts. Not to even get into the economic differences (there are many) the legal differences are too stark to ignore. The proposal is simply tyrranical and would discreit the central bank (as if they need further discrediting) in a heartbeat. Initiate this and Ron Paul will be in the White House before you can clear your throat.

      1. different clue

        If the OverClass wants Ron Paul for President, this might be the “three-cushion carom shot” by which they induce the voting masses to elect Ron Paul President.

        1. Frederic Mari

          Fair enough on the legality aspect of this proposal.

          Personally, I’d think that, if we are going to play these kind of games, we would be better off getting the Central Bank to charge banks for holding too much in their reserves (I still wouldn’t approve as we just saw how banks can suddenly look very thinly capitalised when things go wrong i.e. leverage of 15 seems plenty enough leveraged to me).

          But far better would be to overtly tax the (very) rich substantially and/or, my personal favourite, “simply” ‘force’ big corporations to pay their workforce better.

          You can also forgive some of the debt for the poorer people in debt but I suspect that such schemes will always run into some resistance from the people who were reasonable during the boom. This could be manage (give everyone below X income some sum $Y, applied first to debt reduction and, if anything is left or no debt was contracted, it’s a gift from the state. You could tranche it according to levels of income).

          Basically, all of these boost AD and they are less drastically tyrannical than Yglesias’ proposal. I suspect he was mostly making a point rather than being outright serious. But I do tend to see the best in “liberals”… :)

  19. Nicolas Boosh Sarkozy

    Could this be why people decided they had to buy a house during the boom or they would never be able to do so, or something similar? —

    “Terrifying people into thinking that their savings were going to be seized by the Matrix may do extreme economic damage too. Such actions might scare people in spending to the point of hyperinflation. This is not as remote a possibility as some might think. “

    1. Nathanael

      Investing in “hard goods” has gone up among those with money. This is due to *lack of trust* in anything which is mediated by the criminal financial system.

  20. Hugh

    Yglesias is a Democratic tribalist. He did some good work beating up on the excesses of the Bush years, but once his tribe was back in power, all that desire to question authority went away. What’s left is the essentials of the Establishment Democrat: neocon in foreign affairs and neoliberal in economic ones.

    What is described is a classic looting scheme. The wealthy have much of their wealth in stocks, bonds, property, and overseas accounts, safely away from anything the Fed can do. The ones who would be affected most would be the chump 99%, and what would happen is what always happens in kleptocracy. Their wealth would go down, and the wealth of the rich would increase. The rich afterall are the ones who own the banks and would profit most increased profits at American companies, which are already at historic highs. They would even profit from their investments of the foreign/Chinese companies that produce most of the goods Yglesias wants to force the 99% to buy.

  21. Rehabber

    What’s new? They’ve been talking for years about confiscating 401k/IRA accounts and coverting them to gov’t debt stuffies. Teresa Ghilarducci, the director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research, even wrote a book about how great it would be.

    1. different clue

      If you had enough money in your 401k to cash it out and pay the tax and penalty and still buy some gardenable subsistence-survivalist land with a house on it; and you could find such land-with-a-house title to which was physically recorded in a county registry of deeds and which was not MERSed-up in any way; that would be the best use of
      the 401k money before it is either outright confiscated or
      “value-stripped” leaving you an empty bag to hold at retirement.

      1. different clue

        Or even just the land, and build some kind of little survivalist fortress house on it in due time.

      2. Lambert Strether

        Yep. Put your money into things that give you sustainable access to food and shelter (bottom of Maslow’s heirarchy) and even if Yggles and Krugman manage to force you to spend your cash, what’s important isn’t in cash at all.

  22. Deus-DJ

    Philip,

    You misunderstand Keynes’ liquidity preference (via the liquidity “premium”), and more specifically you misunderstand it because you ignore his argument about user costs. It is through his concept of user costs that expectations about future determines the costs of holding or using a commodity in production or sale, and it is through this that it can be applied to the decision to hold or use money.

    I quote:
    “If the “use” of money is defined as becoming “illiquid”, then teh premium that is required to convince individuals to become illiquid and to part with money is the equivalent of the “user cost” of money. Liquidity preference determines this liquidity “premium” and is thus also a clear expression o the impact of the expectation of the future movement of asset prices on present prices.”
    “The rate of interest can then also be represented by the relation between the spot price and the expected future prices of money”

    -J. Kregel

    1. Philip Pilkington

      I don’t see how that conflicts with what I wrote in the above. Krugman and Yglesias focus almost wholly on the idea that people are hoarding money and that is the key problem facing the economy. I’m saying that they ignore debt dynamics and the balance sheet recession aspect of the recession. Keynes missed this too with his liquidity preference theory.

      Yes, Keynes had a nonergodic model with an uncertain outlook on the future. Yes, Krugman ignores this (Yglesias probably doesn’t even get that far). But such a model still ignores debt buildups and the like.

      1. BruceMcF

        People misusing the model might ignore the impact of debt, but the model itself does not. People’s balance sheet positions have a strong influence on their liquidity preference, because liquid assets are required to meet debt obligations when they come due.

        And with respect to Matt Yglesias’s devolved rendering: “What you need to do is increase the flow of spending through the economy. You do that by cutting interest rates” ~ one thing this ignores is the Finance motive for holding money. People whose balance sheets have been wiped out are less likely to be able to finance the spending that they may wish to make, and so the Finance Motive is especially strong in the wake of a financial crisis. And of course the Finance Motive which breaks the ISLM model, as it establishes a direct cause-effect link between the middle of the IS relation and the middle of the LM relation, so they cannot be considered to be two distinct relations ~ suggesting that the aftermath of a financial crisis is a period when the ISLM model ought to be expected to be even worse than it usually is.

      2. Deus-DJ

        No Philip, Keynes did not ignore “debt-deflation dynamics”, read what I said again. Now, the only way you would know this is if you understood why he brought up the concept of user costs, as I said. Almost everyone doesn’t, which is why your statement was inaccurate.

  23. Susan the other

    Isn’t it time for a democratic decision on all these “proposals?” Let’s define our options in good detail and put them all up for a vote. Let’s value the life and effort of a banker or a central banker on a human scale. And let’s prorate the value of his/her savings in the same way. Are they worth more than a bag lady? And if so, how so – by polluting the planet with their obscene over-comsumption; by impoverishing the rest of the world with their greed and fraud? Blah Blah Blah.

  24. Generalfeldmarschall von Hindenburg

    The Romans, once they started having severe troubles supporting their own military/slave complex started debasing their currency. They did it until it was basically a piece of tin noone wanted and without pay, the army fell apart (by then it was mostly composed of non-romans) in the 4th century AD or so. This is pretty close to what MY is proposing in effect. It will have the same result – an increased rot at the top and a flight to perceived safety (feudal lords) at the bottom. “I have seen the future and it doesn’t work”

    1. F. Beard

      The Romans, once they started having severe troubles supporting their own military/slave complex started debasing their currency. Generalfeldmarschall von Hindenburg

      I doubt that since the Roman Republic was built with inexpensive fiat and since fiat should be inexpensive. However, PMs might have made counterfeiting more expensive in those days.

  25. Dan Kervick

    Nice post Philip.

    The illusion of control here is mind-boggling. People will always have a desire to save. If the government doesn’t provide a convenient saving vehicle of stable value, people will find substitutes.

    Money is a medium between between investment and consumption, and that’s what makes it liquid. If the value of money is continually depreciating then people who have it will want to get rid of it, but people who have things of stable value will not want to exchange those things for money. Similarly if the value of money is continually appreciating, people who have things of stable value will prefer to exchange them for money, but people with money will not want to part with it.

  26. Fiver

    I’ve for years now been suggesting that before we’re done with this criminally captured security state and its multiple tentacles, it will be illegal NOT to be “plugged in” at all times, i.e., that the first phases of total control are nearly complete with the global Drone programs (nearly 20,000 deployed and growing fast)watching the big picture (in all its high-resolution detail) while our burgeoning E-lives are monitored around the clock – every thing you ever did – and will increasingly used as tools of the State in this or that program.

    Here’s where all that “innovation” PP is so in awe of gets you, if you never, ever have the courage to have it out with the Power That Be:

    http://www.democracynow.org/2012/4/20/exclusive_national_security_agency_whistleblower_william

    http://www.alternet.org/story/154641/exposed%3A_massive_new_spy_center_built_to_track_your_emails_and_phone_calls

    If they want someone to spend, tell the top 20% they must each year submit a plan to spend or genuinely invest a meaningful portion of their wealth over the next 3-5 years OR the Government will tax it, and do the job for them.

    Leave the Central Bank out of it, and don’t even think about something like all-electronic “credit/money” until there’s been at minimum a decade of solid governance people could actually trust as far as spit.

  27. Yancey Ward

    I don’t find a cashless society all that unfathomable, though I think it would be a travesty for liberty. It come under the guise of security- security from fraud, law-breakers, and tax cheats, and it will be hailed as a great development by many, if not most.

    And once in place, it is easy to see that Yglesias’s idea will be implemented almost the next recession.

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