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View Diary: Guess Who’s America’s Largest Creditor (Hint: It’s NOT China) (160 comments)

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  •  A dollar is a certificate of a debt. (7+ / 0-)

    That is, the debt is made certain or guaranteed to be valid. How is that debt to be honored? With goods and services that are accepted as satisfying the expected return or meeting the obligation.
    Perhaps because Cons are not good at symbolic thought, they mistake the record of an obligation for the obligation itself. That, or the concept of obligation itself is anathema to them.

    Not being able to distinguish between the symbol and the act also leads to the misconception that a marital relationship is created by the issuance of a certificate of marriage. It doesn't. A marriage, also a kind of mutual obligation, exists or not regardless of whether it is certified. Certification is useful because communal recognition is helpful. But, the possession of a certificate doesn't make a marriage that isn't.

    A dollar similarly represents an obligation. However, whether that obligation is honored and something of value is given in exchange depends on the good faith of the participants in a transaction. If the U.S. Treasury is to be faulted, it's for issuing certificates of obligation to banksters and financiers who had failed to act honorably with the certificates they collected and issued previously. On the other hand, absent the new regulations in Dodd-Frank, it really wasn't possible for our agents of government to determine the extent or the source of the dishonorable behavior. Self-regulation by the banks had obviously failed.
    What hasn't been settled definitively either in the U.S. or the Euro zone is who's in charge of the certificates of obligation. The U.S. Constitution assigns that responsibility to the Congress, but Congress has been inclined to delegate because the members don't want to be held to account for the management. The Euro is being managed by unelected bankers, as far as I can tell. Switzerland and the UK have opted not to cede responsibility for the currency to the banks.

    The bankers are the modern version of theologians arguing over how many angels can dance on the head of a pin. Since the quality is indisputably ephemeral, they focus on quantity.

    by hannah on Mon May 26, 2014 at 03:09:05 AM PDT

    •  Wrong! (1+ / 0-)
      Recommended by:

      The Bank of England is a separate institution from government - possibly more so than the Fed. It (or rather its economic committee) sets interest rates monthly and controls lending, using Quantative Easing if necessary. It has an overall brief which includes managing the economy and has targets set in the Monetary Policy Framework  

      I'd also point out that the US dollar is being "managed by unelected bankers".

      "Come to Sochi, visit the gay clubs and play with the bears" - NOT a Russian advertising slogan.

      by Lib Dem FoP on Mon May 26, 2014 at 06:52:49 AM PDT

      [ Parent ]

      •  That's a relatively recent development, though. (0+ / 0-)

        And I think it is effectively true: tl;dr skip the next two paragraphs.

        It was one of the first acts of the New Labour (Blair) government in 1997, and was a pretty much direct reaction to the consequences of the mortgage interest rate increase the Conservatives used in 1992 to try to stay in the European Exchange Rate Mechanism (ERM) a precursor to the Euro, or at least an attempt to bring about currency stability in Europe. The BoE is mandated to keep inflation low (at 2%), in line with conventional economic wisdom.

        That is an arrangement which, despite widely-accepted propaganda, benefits investors over workers. Inflation rises well above the limits set for the BoE could be dealt with by wage increases without imposing hardship. And low inflation has hardly brought low unemployment. In so far as there was high(er) employment for a time, it was a side-effect of the personal debt bubbles. That is true in the US and UK, and elsewhere. It looks to me like Germany is expanding one at the moment, which is part of why they are (for the time being) the most influential economy in Europe.

        It should also be mentioned that the BoE is a non-profit institution. It does not have shareholders, and was set up to execute policy. It is not the same as other banks, and in a very different category. In that sense, it is quite true to say that the "UK ha[s] opted not to cede responsibility for the currency to the banks".

        I agree that the Fed is greatly influenced by financial institutions. The degree to which that has been true has varied over time, however, and is a reflection of govt policy.

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