Global Reserves of Stupidity

We have enough reserves all right.${}^\ast$

${}^\ast$I mean “reserves of stupidity,” but while I’m footnoting, let’s remind ourselves the central bank reserves are special purpose government scorepoints people, used to clear payments. Nothing more. Banks do not lend the reserves, they can’t, there is no software in place for that operation (because that software would then be illegal).

A Plea for Decolonizing Normie Minds

Decolonize your mind Mountain Tui. I beg you. re: https://mountaintui.substack.com/p/amateur-hour (a 999% good article, but with just a couple of terrible paragraphs of monetary nonsense).

US＄ are not a global reserve currency, never have been, never will be. Bretton-Woods is just a town in New Hampshire. But even in the Bretton-Woods era it was only an agreement to maintain fixed fx w.r.t the US$. Arguments get broken for pragmatic reasons all the time, for good or bad, just look around!

If you (government people) have domestic unemployment, then your obligation is to break any agreement that is imposing the spending constraint. It is a moral obligation. During Bretton-Woods regime it was the same, no nation had to tolerate unemployment. But they did. Why? It is because they did not understand fiat currencies. A fiat currency can be pegged to the US$, or to gold, of course, but that does not make it a hard currency, it makes it stupid. All IOU’s of governments (aka. tax credits) are soft currencies, always have been, always will be.

What is a Reserve anyway? It is an exchange settlement balance account (of government scorepoints). Banks do not lend them. They can’t, there is no software operation for it (if there were it’d be illegal).

No foreigner who is not resident in the USA ever needed a US＄. So why the insatiable demand for US＄? It is because of false psychology. When people falsely think of the US$ as a “global reserve currency,” as if it were gold, they want it. You cannot stop them wanting the tax credit from the other government, if they still think of it as convertible to gold, or whatever (globally accepted by Visa?🤣).

Every nation’s currency is global. (Have you not travelled recently?)

The problem is, the other governments also believe this lie about the US＄. This drives horrifically regressive policy, and is one of the main causes of domestic unemployment, in every nation. Completely needless. We never need the US$. We never have, and never will.

We do not need to offer a NZ Tsy bond at the US FED rate either. Why not? Because we are not competing the the US＄ since we tax here only in NZ＄. Moreover, we (in Aotearoa) do not need to ever issue a single NZ TSy bond = basic income, but only for people who already have NZ＄ and in proportion to how much NZ$ they already have.

Remember: The government debit is our credit. There is no government debt that is ever “too high” nor a “burden on the grandkids” — that is a nonsensical and inapplicable notion. The government debt should be higher (the evidence being unemployment) and it should be more equitably distributed (the evidence being we have no democracy).

Never Ask for a Hard Currency

The issuer can run out of the commodity backing a hard currency. You never want that thing. Maybe short-run, but then you are doing nothing else but trading a commodity, and if on a spot price then currency price is immaterial (literally).

In politics you seriously never want your government using a hard currency. When they run out, what do you think will happen, fool?

It is not going to be the wealthy hoarders and land owners crying at the (otherwise unnecessary) unemployment queue.

Unlike the neoreactionaries, I love the “normies”. It is not a derogatory word. I need them on our side, not on the side of the authoritarian “strong man” (that means objectively “weak man” in normal parlance, a strong government is a) not a man, and (b) one beloved by their people).

When Normies Go bad

This piece from Mountain Tui was 99% good. Unfortunately the 1% that was bad was truly bad. I put it in the big basket of “Why the Left Always Lose”.

The documentation of the ongoing far-right Clown Show, reflected by the ionosphere it seems down to the antipodes in Tory-led New Zealand, is all good, nothing wrong there. Only it stopped being clownish when people started dying because of the Show. It is more like a Michael Myers horror, but one of those Charlie Kaufman things where it becomes real life. I still hope to wake up from the nightmare myself…. any minute now… any minute… oh for heavens sake!

Anyway, I do not mean to dunk here on Mountain Tui, like I said 99% goodness. We cannot expect journalists to get the macroeconomics right 100% of the time. The professionals do not get it right, so how can any decent journalist get it right? The issue is that 1% of the time that myth can be truly damaging for social discourses and social policy. This is not Mountain Tui’s fault. It is mainstream opinion.

Bretton-Woods is Just a Town in New Hampshire Folks

Why the hell does this matter so much? Read on McDoofus.

I’m going to extract five consecutive paragraphs, perhaps the only bad things in Mountain Tui’s post. But they are exceptionally bad. I have nothing against the author of course, pretty much everyone in mainstream discourse thinks the same. Everyone. However, extraordinary fashy times call for extraordinary critical examination of mainstream political economy myths.

Why? Because the normie liberal (mis)comprehension of monetary systems is why & how we got to the fascist moment in the first place! No one seems to have learned from post-Wiemar history. The trouble is, the only proper history of post-Wiemar Germany is via the political historian who has the MMT lens firmly superglued to the bridge of their nose.

A lot of myths are false, and do us insidious harm, insidious because the harm caused is often unseen and invisible (which is to say, the burden of the lowest of the lower class, which was not a burden made of their own volition).

Let’s put under the microscope these seemingly very mainstream paragraphs. First is,

"[The USA] traditional status as the central currency of the world means that most economies follow its lead on interest rates, it’s able to borrow money at low rates and power its spending that has fueled growth, and it’s able to demand returns for every US$1 it prints for free."

It is all wrong. No sovereign government (like little old New Zealand) needs to follow the US FED on interest rate policy. Why not? Because we do not need to u=issue NZD Treasuries in the first place. If we for some unknown reason had to issue NZD Treasuries and needed buyers to take them, swapping NZD cash for the bonds, then yeah, we’d have to at least match to interest rate (basic income only for rich people) offered by the US FED. But NZ does not need to issue Tsy bonds, so we have no tie to the FED rate. None at all. It is a huge lie and myth we do. Unfortunately the RBNZ believe this myth and lie.

Though, to be fair it is only a lie if you perpetuate the myth knowing it is false. But they are well-educated professionals, so they have to know it is a lie, right? No???

In fact it is all the exact opposite of Mountain Tui’s normie assessment. If under US FED rate hikes, if the RBNZ had permanent zero rate policy, we (the NZD) would be deflationary with respect to the USD. Since fiat (soft) currencies are only numeriares, all that means is the NZD would appreciate on fx relative to the USD.

But again, that is neither here nor there. So what if the NZD appreciates? If the NZ worker is getting paid less the US goods are just as out of reach on Amazon.com or wherever. (Yo, Kids! — do not purchase using Amazon. Use the producers own website.)

(See Derek McDaniel‘s recent piece on this here at “Rate Disparity” .) Believing the lie is true does not make it true. It just makes our central bank policy look like the myth is true. If you believe in fairies and unicorns it will look to observers like there are invisible fairies and unicorns floating around your head.

Politcal Leaders “Getting it”… all backwards

OK, ok, “all backwards” is a bit of an exaggeration, but allow me the hyperbole for dramatix effect if you please.

Here is another bad take:

“Former French finance minister Valery Giscard d’Estaing once called the US’s position an “exorbitant privilege” because the US would never face a balance of payments crisis. Unlike other countries, their imports are purchased in their own currency.”

The Bretton-Woods Accord did for a few decades grant the US dollar a bit of a privilege. Theoretically. Until the gold ran out. But no one claimed the gold at Fort Knox, until the French had the idea they should try. Nixon went off Bretton-Woods tout sweet.

Shows you how much of a farce the US Dollar global reserve currency idea really was. All Smoke & Mirrors. Regrettably, once again, because people did not understand State currency operations, they all got suckered into believing the myth on a grand scale. It was truly shocking. The entire world fell for the veil of Bretton-Woods. The entire friggin’ workd! Just think about that! Like everyone just believed the Moon Landing by Armstrong et al was indeed a hoax.

Even Keynes sort of gave in. He was perhaps too old to put up more of an intellectual fight.

And once again, if you think the image in the mirrors is real, your policy will make it look like it is real. Epic tragedy. Generations of unnecessarily unemployed workers. Wastes of human lives. I’ve never said realpolitk is not a thing.

This is true:

““Unsurprisingly Trump is destroying a century of unprecedented soft and hard power for the USA.”

that’s part of the 999% good in Mountain Tui’s very good article. It was in the paragraph sequence.

This is semi-bad:

“USAID, which Elon Musk & Trump dismantled, putting the most vulnerable people in the world at risk, and condemning many to die, wasn’t only about charity for America. It was about exerting influence, gaining power, and leverage.”

I hardly know what to say anymore. This is mindless. Yes, it is true USAID was mostly about gaining leverage for US soft imperialism. But no one had to buy the koolaid, no one was forced to drink it. No one had to die when USAID was starved and the US koolaid supply shut off.

You cannot blame the USA for the deaths here. The blame is entirely with the governments where those people died, needlessly. Those governments have never lacked the currency capacity to solicit UN aid. They never needed US aid.

A foreign government does not need a foreign currency. It is as simple as that. What the poor countries need are real goods. Medicines. Clean water. Cooking equipment, local energy/electricity supply, all the rest. That does not have to be manufactured in the USA. But even less so does it need to be paid for with USA State tax credits.

USAID was partly a CIA front, for soft coup promotion, but whatever good they did, it could be done by the United Nations. I know a few people at UNHCR. They are good people. A darn sight better than the USAID crowd. They do not need the US tax credit for a single thing. US residents need the US tax credit. Period. Been that way for all time.

If the UN purchases in a country $X$ they only need currency-$X$. Or do they? In fact they do not. They only need some currency. The Ethiopian birr would suffice.

Sure, the UN is funded predominantly by the USA, but not entirely. They can only run out of purchasing power if all the other nations stop marking up the UN bank account in the “currency basket.”

I’d prefer the UN to start a parallel world currency myself — the UN IOU — but they’d have to sort out what it will redeem for. Presently I think it infeasible. It would require actual international unity of nations, what the UN should have been, not what it is at present. Collective security means securing the rights of the poor to a decent meal, clothing and shelter (plus oodles of free time and Internet… I’d say!), which means full employment with decent living wages, which means a UN claim on the output of every nation. We cannot even contemplate this in a fascist rising moment in history.

By “wages” I mean fair compensation for public service. Good jobs. Not ᲇ⋓ǁǁ𝕤ꖲⅈ╬ jobs. Not wage slavery. Work in the form of crafts, arts and professions performed in the spirit of service to one’s community. Wholesome stuff. The choice of the worker, within natural law of what defines “pubic purpose”.

It will have to be the slower road of each nation figuring MMT and a Job Guarantee out for themselves. But perhaps that is the better organic way, as depressingly slow as it feels from the vantage of a single human life span.

But heck man! Someone has to at least still carry the flame of working class emancipation.

This is half-funny:

“Most Presidents were clued in enough to understand this.”

Clued-in enough to believe the myth the USD was a global reserve currency”. Mr Presidents of the world dudes! Banks do not lend Reserves. Furrcryinoutloud! I know a high IQ is not a prerequisite for political office, nor should it ever be, but simple spiritual awareness is enough to get to an understanding of the source of all unemployment. You’d want to know if you have a single spiritual bone in your body.

This is half-funny:

“It’s hard to imagine how we could find a more stupid and amateurish clown show on the road.”"

Like I said at the start, it is no longer a mere clown show. It is professional state sponsored terrorism, mostly directed at their own domestic population.