Observations on Credit and Surveillance

For some reason, liberal technocrats seem to think that printing gobs of money when money can’t flow into the real economy has some sort of impact for wage earners. In the United States, it’s called quantitative easing and we’re doing it to the tune of trillions. The signature example for this isn’t the U.S., it’s Japan, where the printing presses are really going hot.

Is it working?

Well, Paul Krugman wrote this about Japan in January, 2013.

Enter Mr. Abe, who has been pressuring the Bank of Japan into seeking higher inflation — in effect, helping to inflate away part of the government’s debt — and has also just announced a large new program of fiscal stimulus. How have the market gods responded?

The answer is, it’s all good. Market measures of expected inflation, which were negative not long ago — the market was expecting deflation to continue — have now moved well into positive territory. But government borrowing costs have hardly changed at all; given the prospect of moderate inflation, this means that Japan’s fiscal outlook has actually improved sharply. True, the foreign-exchange value of the yen has fallen considerably — but that’s actually very good news, and Japanese exporters are cheering.

In short, Mr. Abe has thumbed his nose at orthodoxy, with excellent results.

How’s the experiment going?

In short, not good. This is a headline picked out at random, but they all say the same thing: Japan’s economy makes surprise fall into recession

There’s a lot to say about this policy. Printing money isn’t a bad thing, per se. It is what governments need to do. It’s probably true that QE is juicing some lending in some areas of the economy. The problem is that the financial system is at this point only very marginally connected to the real economy, so when you print more money, it goes into corporate treasuries and from there into speculation. Japanese exporters, for instance, are just keeping the extra money they are making from a lower yen rather than investing it into factories.

This money piles up, and since corporations can’t put it into regular deposits, they stick it into the shadow banking system via money market funds, fancy things called ‘repos’ (which are basically just uninsured deposits), the central bank and some government and corporate debt. From there, the money is lent to hedge funds, pension funds, or other funds who buy financial assets. The stock and credit markets go up.

At no point does this money touch the real economy or the hands of consumers, it just inflates financial markets.

The main function of a credit system should be to put funds to work in useful endeavors. That’s not happening, for a lot of reasons, but on a fundamental level because Japanese corporations are too powerful and stagnant, and no one else can get access to money. That is why Japan is in recession. We face the same problem.

This is the Republican Party platform in 1936.

The unemployment insurance and old age annuity sections of the present Social Security Act are unworkable and deny benefits to about two-thirds of our adult population, including professional men and women and all those engaged in agriculture and domestic service, and the self employed while imposing heavy tax burdens upon all. The so-called reserve fund estimated at forty-seven billion dollars for old age insurance is no reserve at all, because the fund will contain nothing but the Government’s promise to pay, while the taxes collected in the guise of premiums will be wasted by the Government in reckless and extravagant political schemes.

Ok, so this is your standard ‘the trust fund is a Ponzi scheme’ style rhetoric. But check out the part I bolded. The Republicans are criticizing the new Social Security program for not going far enough. Originally Social Security did actually exclude whole categories of workers for complicated reasons mostly involving the South, but over the next 50 years or so, Social Security was improved to cover those excluded workers. The Republicans attacked the program from the left. They had, earlier in this 1936 platform, offered a broad-based pension style program for all American citizens over 65, and one of its virtues was it did cover workers excluded from Social Security. 

The criticism was valid, but of course, disingenuous. Republicans never believed in Social Security, and the 1936 Republican campaign was organized around the theme that the New Deal was simply unconstitutional. Hence, here’s FDR mocking the Republicans for their criticism of Social Security from the left. Watch the video and see what an incredible politician and funny guy he was. Damn he was good.

The Third Amendment to the Constitution reads as follows:

No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law.

The reason this amendment was added to the bill of rights is because the British would quarter soldiers in Americans’ homes when they ran out of barracks space, and the British would force Americans to pay for these ‘guests.’

The amendment hasn’t really mattered since then, being the least cited amendment in the Constitution. There has never been a Supreme Court case citing the Third Amendment as the primary basis for a decision.

But this may change. Malware is a form of quartering of military assets on one’s computer. As the digital wave envelopes all aspects of our culture, malware will mean that the quartering of military assets in every appliance could become the norm.

So I’m interested in this paper by EPIC scholar Alan Butler.

When Cyberweapons End Up on Private Networks: Third Amendment Implications for Cybersecurity Policy 

Major multi-national bank BNP Paribas just pleaded guilty to money-laundering a little less than $200 billion over the course of the last ten years. According to New York Superintendent of Financial Services Benjamin Lawsky, “BNPP employees – with the knowledge of multiple senior executives – engaged in a long-standing scheme that illegally funneled money to countries involved in terrorism and genocide.”

Oh dear, that sounds awful.

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