sell me on becoming a right-winger
June 9, 2009 7:35 PM Subscribe
There are many left-wing movies that document the apparent obscurities created by banks such as money as debt and countless others.
I am looking for the opposing view - in the form of response through a documentary.
Please - someone sell me on the why countries like Canada and the U.S. choose to borrow money from banks with interest rather than create their own money without interest? I'm sure there are detailed economic explanations to do with competition - this is the stuff i am looking for. There must be also be specific historical cases that a right-winger can point to and say, look it didn't work. Also i am looking for "pro-privatization" documentaries in general, not just banking, although that seems to be the essence of it all.
thank you meta-filter!
Please - someone sell me on the why countries like Canada and the U.S. choose to borrow money from banks with interest rather than create their own money without interest? I'm sure there are detailed economic explanations to do with competition - this is the stuff i am looking for. There must be also be specific historical cases that a right-winger can point to and say, look it didn't work. Also i am looking for "pro-privatization" documentaries in general, not just banking, although that seems to be the essence of it all.
thank you meta-filter!
Also, if you are looking for information on "pro-privatization" you would do well to start with Milton Friedman's "Free to Choose" lecture series.
(Milton Friedman is no relation to me.)
posted by dfriedman at 7:44 PM on June 9, 2009
(Milton Friedman is no relation to me.)
posted by dfriedman at 7:44 PM on June 9, 2009
To answer your specific question, I imagine it all boils down to inflation.
If a government creates money, it increases the supply of money into the economy devaluing the currency.
If a government borrows from a bank, it's borrowing from a limited pool of money, the supply isn't increased. Interest is simply a side-effect of borrowing (or else who would lend?).
posted by puddpunk at 8:01 PM on June 9, 2009
If a government creates money, it increases the supply of money into the economy devaluing the currency.
If a government borrows from a bank, it's borrowing from a limited pool of money, the supply isn't increased. Interest is simply a side-effect of borrowing (or else who would lend?).
posted by puddpunk at 8:01 PM on June 9, 2009
Response by poster: @ dfriedman: "Countries like the US and Canada create their own money via the printing press."
they might in in charge of actual physical printing of it, but that is a moot point. The point is they literally "borrow" the money WITH INTEREST from banks. Governments create debt for themselves this way.
Thanks for your suggestions on readings
posted by figTree at 8:15 PM on June 9, 2009
they might in in charge of actual physical printing of it, but that is a moot point. The point is they literally "borrow" the money WITH INTEREST from banks. Governments create debt for themselves this way.
Thanks for your suggestions on readings
posted by figTree at 8:15 PM on June 9, 2009
Governments borrow money from whomever will buy their debt. Those buyers can be banks, sovereign central banks (China, etc.), large institutions, wealthy investors, etc.
Borrowing money is not creating money; governments borrow money in order to fund their operations. You may question the propriety of this, and there certainly is a (conservative) argument to be made that the less money the government borrows, the better.
But, bar Islamic finance, no party will lend money to another without charging interest on that loan; this is compensation for using the other party's money.
posted by dfriedman at 8:32 PM on June 9, 2009
Borrowing money is not creating money; governments borrow money in order to fund their operations. You may question the propriety of this, and there certainly is a (conservative) argument to be made that the less money the government borrows, the better.
But, bar Islamic finance, no party will lend money to another without charging interest on that loan; this is compensation for using the other party's money.
posted by dfriedman at 8:32 PM on June 9, 2009
Constitutionally the congress is supposed to 'do' the money, after lots of ups and downs they hired a consortium of private banks to do the job and created the federal reserve system.
If you want the right wing meme listen to Myron Fagen's lp records, more up to date and believable is Grieder's Secrets of the Temple.
posted by hortense at 8:53 PM on June 9, 2009
If you want the right wing meme listen to Myron Fagen's lp records, more up to date and believable is Grieder's Secrets of the Temple.
posted by hortense at 8:53 PM on June 9, 2009
Response by poster: dfriedman said:
"Governments borrow money from whomever will buy their debt. Those buyers can be banks, sovereign central banks (China, etc.), large institutions, wealthy investors, etc."
why do they not choose to borrow it from their citizens - and therefore avoid interest charges? why does a government not borrow from "itself"? Indeed this is how it used to be done in Canada up to somewhere mid 70s. Since the change, debt went from a about 20 billion (which was maintained for the past 50 years or so since then), and now has escalated to about 400 billion over 20 or so years. Basically there were lobby groups that persuaded the Canadian government that somehow its a better idea to be paying interest on money they choose to introduce to the economy.
Again, i hate to sound left wing, but really i have not found an argument that explains to me the benefit of being what some might call straight up robbed by interest (as in the documentary "money is debt") that can just as well not be there for the system to function. The interest paid goes to the profit of the banks rather than being put into the benifit of society such as paying for people's education. I am obviously not seeing the big picture of the ring-wing freedom to choose model - i am hoping that there is a documentary that can persuade me that this is indeed the best system to have.
posted by figTree at 9:01 PM on June 9, 2009
"Governments borrow money from whomever will buy their debt. Those buyers can be banks, sovereign central banks (China, etc.), large institutions, wealthy investors, etc."
why do they not choose to borrow it from their citizens - and therefore avoid interest charges? why does a government not borrow from "itself"? Indeed this is how it used to be done in Canada up to somewhere mid 70s. Since the change, debt went from a about 20 billion (which was maintained for the past 50 years or so since then), and now has escalated to about 400 billion over 20 or so years. Basically there were lobby groups that persuaded the Canadian government that somehow its a better idea to be paying interest on money they choose to introduce to the economy.
Again, i hate to sound left wing, but really i have not found an argument that explains to me the benefit of being what some might call straight up robbed by interest (as in the documentary "money is debt") that can just as well not be there for the system to function. The interest paid goes to the profit of the banks rather than being put into the benifit of society such as paying for people's education. I am obviously not seeing the big picture of the ring-wing freedom to choose model - i am hoping that there is a documentary that can persuade me that this is indeed the best system to have.
posted by figTree at 9:01 PM on June 9, 2009
The government does "borrow" from its citizens. US Savings Bonds is an example of this type of financial instrument.
posted by mmascolino at 9:19 PM on June 9, 2009
posted by mmascolino at 9:19 PM on June 9, 2009
Best answer: Ah, 'Money as Debt.' It's like the 'Loose Change' of the financial crisis. (It should come as no surprise that "Lifeboat News," the people behind 'Money as Debt,' are also 9/11 Truthers and general conspiracy theorists.) That's not to say that it's total Timecube, but that you may have trouble finding a lot of serious rebuttals to it, because there are a fair number of people who just won't take it seriously because of the direction it's coming from.
There is a specific critique of it here, and some more in the MetaFilter thread where the video was first discussed. In particular this post by Malor starts to get at some of the issues.
It's not that anything in the film is incorrect, it's just a bit...hysterical. And one-sided. People have a false idea of how the banking system works gleaned mostly from watching It's a Wonderful Life, and when they realize the system is more complex and has this strange-on-first-glance money multiplier effect, it can be a shock. "Money as Debt" simply takes advantage of that 'the world is not what you thought it was' shock, and uses it to push a political point. There are similar 'exposés' of the fractional-reserve lending which also go after fiat currencies and use it to push a return to the gold standard. (Interestingly, in this case you have the far ends of the political spectrum using the same talking points but pushing different proposed 'solutions' — the "Money as Debt" people want complete government control of the money supply, while orthodox von Miseians and gold bugs want to hobble the government as thoroughly as possible from money-supply manipulation by going to a commodity-backed currency. So even if you accept that fractional-reserve is bad, it's not clear what solution should be drawn from it.)
Anyway, there are more general defenses of fractional reserve banking which are not direct rebuttals of "Money as Debt." There is a long bibliography here that lists both pro- and anti-fractional-reserve sources. Many of them are dead-tree, though, and some of the electronic ones come from publications with an obvious axe to grind.
Basically any general defense of the Chicago school (as opposed to the Austrian) will be an implicit defense of the underpinnings of fractional reserve. Not really being a fan of the Chicago school myself, I can't really speak for them, but I suspect that they just don't take the "fractional reserve" hysteria seriously because it doesn't look like a problem, and it seems to generally serve a legitimate money-supply function that would otherwise have to be performed at some other level of the economy, probably one further removed from consumers and thus less efficient.
posted by Kadin2048 at 9:32 PM on June 9, 2009 [3 favorites]
There is a specific critique of it here, and some more in the MetaFilter thread where the video was first discussed. In particular this post by Malor starts to get at some of the issues.
It's not that anything in the film is incorrect, it's just a bit...hysterical. And one-sided. People have a false idea of how the banking system works gleaned mostly from watching It's a Wonderful Life, and when they realize the system is more complex and has this strange-on-first-glance money multiplier effect, it can be a shock. "Money as Debt" simply takes advantage of that 'the world is not what you thought it was' shock, and uses it to push a political point. There are similar 'exposés' of the fractional-reserve lending which also go after fiat currencies and use it to push a return to the gold standard. (Interestingly, in this case you have the far ends of the political spectrum using the same talking points but pushing different proposed 'solutions' — the "Money as Debt" people want complete government control of the money supply, while orthodox von Miseians and gold bugs want to hobble the government as thoroughly as possible from money-supply manipulation by going to a commodity-backed currency. So even if you accept that fractional-reserve is bad, it's not clear what solution should be drawn from it.)
Anyway, there are more general defenses of fractional reserve banking which are not direct rebuttals of "Money as Debt." There is a long bibliography here that lists both pro- and anti-fractional-reserve sources. Many of them are dead-tree, though, and some of the electronic ones come from publications with an obvious axe to grind.
Basically any general defense of the Chicago school (as opposed to the Austrian) will be an implicit defense of the underpinnings of fractional reserve. Not really being a fan of the Chicago school myself, I can't really speak for them, but I suspect that they just don't take the "fractional reserve" hysteria seriously because it doesn't look like a problem, and it seems to generally serve a legitimate money-supply function that would otherwise have to be performed at some other level of the economy, probably one further removed from consumers and thus less efficient.
posted by Kadin2048 at 9:32 PM on June 9, 2009 [3 favorites]
Response by poster: mmascolino said: "The government does "borrow" from its citizens. US Savings Bonds is an example of this type of financial instrument."
Agreed, although from my understanding of "the system", this represents a vast minority of the workings of the borrowing market to the point where these types of bonds are a drop in the ocean. The question at hand is why not lend/borrow ALL money from ourselves without private company intervention to avoid interest? It used to be this way - what exactly (besides debt) have we gained from this new model?
posted by figTree at 9:36 PM on June 9, 2009
Agreed, although from my understanding of "the system", this represents a vast minority of the workings of the borrowing market to the point where these types of bonds are a drop in the ocean. The question at hand is why not lend/borrow ALL money from ourselves without private company intervention to avoid interest? It used to be this way - what exactly (besides debt) have we gained from this new model?
posted by figTree at 9:36 PM on June 9, 2009
What you're basically proposing is that the government print money for its current expenses, instead of borrowing it (as it does now). This is generally regarded as a Bad Idea because of the inflation risk.
Right now, when the government wants to spend more money than it takes in, the Treasury auctions off various securities which pay an interest rate determined at auction. Thus the actual money for the debt spending is brought in from the market. It's not (directly) inflationary.
The US Treasury is not supposed* to create money; that's left to the Federal Reserve, as the central bank. This separation of powers — Treasury as the treasury, Federal Reserve System as the central bank — is supposed to isolate the central bank from the political process (I assume to help maintain confidence in the currency).
However, a very large amount of US government debt is held by other parts of the government rather than private-sector entities, so it's not as though this separation is rigidly maintained. Also, the Federal Reserve can buy Treasury notes, which basically amounts to creating new money and giving it to the government to spend. (It's a form of "quantitative easing" i.e. printing money.) This is inflationary in that it dilutes the dollars currently in circulation, but that's intentional. The inflation is seen as either desirable in itself, or as a lesser evil than trying to sell all the debt at auction to the public and pulling more desperately-needed capital out of circulation.
* The Treasury actually has the authority to produce "United States Notes" in limited quantity ($300M a year), but has not issued any since 1971. The official answer is because they "serve no function that is not already adequately served by Federal Reserve Notes."
posted by Kadin2048 at 10:23 PM on June 9, 2009
Right now, when the government wants to spend more money than it takes in, the Treasury auctions off various securities which pay an interest rate determined at auction. Thus the actual money for the debt spending is brought in from the market. It's not (directly) inflationary.
The US Treasury is not supposed* to create money; that's left to the Federal Reserve, as the central bank. This separation of powers — Treasury as the treasury, Federal Reserve System as the central bank — is supposed to isolate the central bank from the political process (I assume to help maintain confidence in the currency).
However, a very large amount of US government debt is held by other parts of the government rather than private-sector entities, so it's not as though this separation is rigidly maintained. Also, the Federal Reserve can buy Treasury notes, which basically amounts to creating new money and giving it to the government to spend. (It's a form of "quantitative easing" i.e. printing money.) This is inflationary in that it dilutes the dollars currently in circulation, but that's intentional. The inflation is seen as either desirable in itself, or as a lesser evil than trying to sell all the debt at auction to the public and pulling more desperately-needed capital out of circulation.
* The Treasury actually has the authority to produce "United States Notes" in limited quantity ($300M a year), but has not issued any since 1971. The official answer is because they "serve no function that is not already adequately served by Federal Reserve Notes."
posted by Kadin2048 at 10:23 PM on June 9, 2009
Not exactly the answer to you question but there is a kooky 60's film on google video entitlement "The Capitalist Conspiracy".
Part of it's premise is that the banking system is the real ruler and that political ideologies are of little consequence.
posted by santogold at 11:10 PM on June 9, 2009
Part of it's premise is that the banking system is the real ruler and that political ideologies are of little consequence.
posted by santogold at 11:10 PM on June 9, 2009
Best answer: I would agree with most of the above posters that you're on the wrong track thinking of seigniorage (the govt printing money to pay for stuff) as a left-right issue – although it's true that many right-wingers would go ballistic at the idea of seigniorage, few left-wingers like the idea either.
But, to answer your question, if you're looking for documentaries that put forward an argument for the free-market, here are a few:
Johan Norberg's "Globalization is Good".
Milton & Rose Friedman's "Free to Choose". (The link given a poster above is for extracts from the series, this link should have everything.)
"Tory! Tory! Tory!" is an excellent BBC series about the rise of Thatcherism in Britain.
"Money, Banking and the Federal Reserve" probably goes the closest to answering your particular example, although the guys at the Mises Institute are quite a bit more extreme than your common or garden right-winger.
I can't help you with the so-con stuff, because I'm the type of right-winger who just gets embarrassed by the intellectual inconsistency of social "conservatives" and annoyed that they dominate the right-wing side of American politics – most of the documentaries from that section of thought are sub-Michael Moore.
posted by SamuelBowman at 1:52 AM on June 10, 2009
But, to answer your question, if you're looking for documentaries that put forward an argument for the free-market, here are a few:
Johan Norberg's "Globalization is Good".
Milton & Rose Friedman's "Free to Choose". (The link given a poster above is for extracts from the series, this link should have everything.)
"Tory! Tory! Tory!" is an excellent BBC series about the rise of Thatcherism in Britain.
"Money, Banking and the Federal Reserve" probably goes the closest to answering your particular example, although the guys at the Mises Institute are quite a bit more extreme than your common or garden right-winger.
I can't help you with the so-con stuff, because I'm the type of right-winger who just gets embarrassed by the intellectual inconsistency of social "conservatives" and annoyed that they dominate the right-wing side of American politics – most of the documentaries from that section of thought are sub-Michael Moore.
posted by SamuelBowman at 1:52 AM on June 10, 2009
The US government borrows money from all comers- the largest cohort of people the US owes money to is its own citizens. I'm not sure how your plan would work- to me, borrowing money without interest is more like taxes.
There is a theory out there that we'd all be better off if the government quit taxing everyone and just printed the money it needed. I can't remember the source, but their claim was that this would be beneficial both in reduced interest and reduced costs of having to have an IRS.
posted by gjc at 4:23 AM on June 10, 2009
There is a theory out there that we'd all be better off if the government quit taxing everyone and just printed the money it needed. I can't remember the source, but their claim was that this would be beneficial both in reduced interest and reduced costs of having to have an IRS.
posted by gjc at 4:23 AM on June 10, 2009
Check out Brad DeLong's posting and links to items on Austrian Economics (he's not a fan) To my mind its the Austrians who really preach this whole "Non Gold Standard Currencies are a sham" idiocy.
BTW nthing the whole "not a liberal stance" re:the evils of fractional reserve banking and of abandoning the gold standard.
It was FDR who took us off the gold standard actually.
posted by JPD at 5:30 AM on June 10, 2009
BTW nthing the whole "not a liberal stance" re:the evils of fractional reserve banking and of abandoning the gold standard.
It was FDR who took us off the gold standard actually.
posted by JPD at 5:30 AM on June 10, 2009
FDR did not take us off the gold standard.
Or, more accurately, the Bretton Woods accords reinstated the gold standard after the Yalta Conference.
Nixon permanently ended the US's reliance on gold, in 1972.
posted by dfriedman at 7:33 AM on June 10, 2009
Or, more accurately, the Bretton Woods accords reinstated the gold standard after the Yalta Conference.
Nixon permanently ended the US's reliance on gold, in 1972.
posted by dfriedman at 7:33 AM on June 10, 2009
Apologies FDR took us off the gold standard the first time and LBJ was president when Bretton Woods collapsed. LBJ had a choice to defend the peg (by forcibly reversing the balance of payments) or let the peg evenutally break. Nixon only made the inevitable announcement.
So you've got the guy behind the new deal and the great society making the decisions to move towards fiat money. The point is it is not a conservative creation.
posted by JPD at 9:51 AM on June 10, 2009
So you've got the guy behind the new deal and the great society making the decisions to move towards fiat money. The point is it is not a conservative creation.
posted by JPD at 9:51 AM on June 10, 2009
The question at hand is why not lend/borrow ALL money from ourselves without private company intervention to avoid interest?
Who exactly is it who has reserves of cash that you think would be interested in lending it out at no interest?
You can't borrow "from yourself" [if you have the money to lend, you don't NEED to borrow].
If a govt needs to borrow, it can't avoid interest [except by use of force]. If you had several million in cash, and you could invest it at X% or put it in the bank at Y%, or lend it to the govt at 0%, what do you think you'd do?
posted by HiroProtagonist at 8:16 PM on June 10, 2009
Who exactly is it who has reserves of cash that you think would be interested in lending it out at no interest?
You can't borrow "from yourself" [if you have the money to lend, you don't NEED to borrow].
If a govt needs to borrow, it can't avoid interest [except by use of force]. If you had several million in cash, and you could invest it at X% or put it in the bank at Y%, or lend it to the govt at 0%, what do you think you'd do?
posted by HiroProtagonist at 8:16 PM on June 10, 2009
Who exactly is it who has reserves of cash that you think would be interested in lending it out at no interest?
I think the assumption in such proposals (and this isn't the first time I've heard it) is that the government just prints money and spends it as-needed. It's not borrowed from anybody, it's just created — presto, here's money, go build roads. The problem is that it dilutes the dollars already in circulation, meaning that it causes inflation.
In some of the more extreme proposals like gjc alludes to, where the government gets rid of the IRS and all traditional taxes, and just prints money as-needed, you accept this inflation as a matter of course. It becomes a tax on savings, and is especially rough on people dependent on fixed incomes, which is why I think it's never really been a popular idea.
There are probably other reasons why it might be bad (a currency suffering from rapid inflation seems like it wouldn't be popular as an international reserve, or to price goods in for international transactions, both things generally thought to be helpful if it's your currency), but the tax issue seems like the most immediate deal-breaker.
posted by Kadin2048 at 10:55 PM on June 10, 2009
I think the assumption in such proposals (and this isn't the first time I've heard it) is that the government just prints money and spends it as-needed. It's not borrowed from anybody, it's just created — presto, here's money, go build roads. The problem is that it dilutes the dollars already in circulation, meaning that it causes inflation.
In some of the more extreme proposals like gjc alludes to, where the government gets rid of the IRS and all traditional taxes, and just prints money as-needed, you accept this inflation as a matter of course. It becomes a tax on savings, and is especially rough on people dependent on fixed incomes, which is why I think it's never really been a popular idea.
There are probably other reasons why it might be bad (a currency suffering from rapid inflation seems like it wouldn't be popular as an international reserve, or to price goods in for international transactions, both things generally thought to be helpful if it's your currency), but the tax issue seems like the most immediate deal-breaker.
posted by Kadin2048 at 10:55 PM on June 10, 2009
Response by poster: thanks for your insight everyone!
Kadine2048 said:
"I think the assumption in such proposals (and this isn't the first time I've heard it) is that the government just prints money and spends it as-needed. It's not borrowed from anybody, it's just created — presto, here's money, go build roads. The problem is that it dilutes the dollars already in circulation, meaning that it causes inflation."
the inflation thing makes sense - in theory. however, in practice - this USED TO BE DONE in Canada up to 1974ish. We quite literally just printed the money ourselves, we also had taxes, but the only difference was that the government did not have to pay interest on money it introduced.
therefore in practice, in Canada, the mad inflation did not occur. A government would be ousted if it was incompetent with that. While i understand this has happened in other countries, the point is it is not a given. if you print your own money is does not imply that you will have crazy inflation -IF you manage your situation properly.
inflation is funny, it supposedly drives all economic activity, but no one really can be sure what its full role really is (ie. there are two types of schools of thought in economics- some that thinks inflation is the driver, while others believe it is a byproduct. )
posted by figTree at 9:21 AM on June 11, 2009
Kadine2048 said:
"I think the assumption in such proposals (and this isn't the first time I've heard it) is that the government just prints money and spends it as-needed. It's not borrowed from anybody, it's just created — presto, here's money, go build roads. The problem is that it dilutes the dollars already in circulation, meaning that it causes inflation."
the inflation thing makes sense - in theory. however, in practice - this USED TO BE DONE in Canada up to 1974ish. We quite literally just printed the money ourselves, we also had taxes, but the only difference was that the government did not have to pay interest on money it introduced.
therefore in practice, in Canada, the mad inflation did not occur. A government would be ousted if it was incompetent with that. While i understand this has happened in other countries, the point is it is not a given. if you print your own money is does not imply that you will have crazy inflation -IF you manage your situation properly.
inflation is funny, it supposedly drives all economic activity, but no one really can be sure what its full role really is (ie. there are two types of schools of thought in economics- some that thinks inflation is the driver, while others believe it is a byproduct. )
posted by figTree at 9:21 AM on June 11, 2009
From 62-70 the CDN was pegged to the dollar - which also means they couldn't print free money or they would break the peg. Where are you getting your idea that canada devalued its currency pre-74? Or as you put it - "just created money" w/o creating inflation. Additionally Canadian inflation exploded in the early 70's - peaking north of 10% in 74.
Here is a link to the rates they were paying to borrow money at (you may need to search the book I'm not sure I can link the page). If you look a few pages after that you'll see that the spread between US rates and Canadian rates during the 70's (a relatively inflationary period in the US & especially in Canada) were similar to history.
I'm looking at the StatCan website right now and can't seem to find any evidence for what you are alluding to. Can you maybe clarify?
posted by JPD at 6:32 PM on June 11, 2009
Here is a link to the rates they were paying to borrow money at (you may need to search the book I'm not sure I can link the page). If you look a few pages after that you'll see that the spread between US rates and Canadian rates during the 70's (a relatively inflationary period in the US & especially in Canada) were similar to history.
I'm looking at the StatCan website right now and can't seem to find any evidence for what you are alluding to. Can you maybe clarify?
posted by JPD at 6:32 PM on June 11, 2009
This thread is closed to new comments.
I'm not sure what you're getting at here--the question of how currency is created is not a left- or right-wing argument; it is merely fact.
posted by dfriedman at 7:43 PM on June 9, 2009