Interestingly, you can see the emergence of small-scale credit forming with things like how a group of mutual friends splits the tab when going out to meals. "I'll get mine, you get yours" doesn't usually survive as people get to know each other and start interacting more regularly, rather it's "I'll get this time, you get the next time", and it all works out as long as everything feels fair, because everybody has a pretty good memory for when they get shafted.
Is exactly my point which is why said that Debt is a terrible book to understand money in the real world.
> deserves props for debunking the myth of barter coming before credit
Do you think Graber came up with this? Or that this wasn't the mainstream view amongst economists? Allyn Young wrote matter-of-factly about it for a popular science book in 1924[0]. And I don't mean to say he was the first one to realise this, I'm saying this was a common view. And Young wasn't some avant-garde heterodox radical. He was the president of American Economic Association. It doesn't get more mainstream than that!
And this what I mean by misrepresentation of the history and ideas of mainstream economics. And Graber doesn't stop there. He pretends like somehow all of economics is hinged upon this Myth of Barter.
Adam Smith is not the supreme arbiter and law-giver of economics. FWIW, Graber's critism of Adam Smith in this instance is justified. But as is typical of Graber, he doesn't stop there. He goes on to say thet Adam Smith's famous "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest" thesis is wrong because shopkeepers of the time mostly sold goods on credit and thus the customers were in fact depending on their benevolence.
If credit was benevolence, that would make banks the most benevolent entities on the planet.
0: https://d396qusza40orc.cloudfront.net/money/readings/Allyn%2...
However, what does it even matter, when the zombie keeps walking to this day? The linked article repeats the myth of barter.
And lest people think it's only right-ish economists that keep repeating it, Yanis Varoufakis did so too (in his book "Talking to my daughter about the economy").
And yeah sure, nothing "hinges" on the myth of barter. But it is a symptom, a glaring illustration that economists are really bad at arguing from how real people actually act, and cheerfully embrace just-so stories that support their preferred ideas - which is the linked article's whole game, too.
I didn't say Graber claimed that. I was refuting the common defence of the book and emphasising that it was already a mainstream view.
> However, what does it even matter, when the zombie keeps walking to this day?
> But it is a symptom, a glaring illustration that economists are really bad at arguing from how real people actually act
How much does the historical origin of money matter to the understanding economics of today?
Economists aren't particularly interested in the origin of money. Any references to barter are usually in fluffy lines like this article or as dumb thought experimens. The fact that some of them get it wrong is not indicative of anything.
> cheerfully embrace just-so stories that support their preferred ideas
Which is rife across the humanities and not exclusive to economics. Hell, Graber's entire book is full of just that.
If you look at popular books or even school text books, they will cheerfully claim that seasons are caused by the change in distance between the earth and the sun. That doesn't mean people working on climate models don't know that's not the case.
And Varoufakis is <insert polite term for crackpot>, not exactly representative of mainstream economics.
That said, I do think Graeber is right to emphasize the role of culture and belief--anthropological ideas--as an antidote to overly quantitative/mechanistic models. I'm not an economist, but it does seem like behavioral economics was pretty revolutionary in advancing the idea that humans are not just rational utility maximizers, despite Keynes using the term "animal spirits" nearly 100 years ago.
Again, speaking as a layperson, it's frankly a bit weird to me how distant economics, anthropology, and psychology seem to be from each other.
This is a false and misguided dichotomy. Nothing prevents you from taking culture and beliefs into account when you create a model.
Labor search models usually have a notion of bargaining power.
"Just-so stories that support their preferred ideas" + "so nothing prevents you from taking culture and beliefs into account when you create a model."
A litte OT but,... years ago i read a HN-Topic, about um 'What to change if we could'. I read some postings, where people seem realy angry with abuse, misuse and malpractice, done by people who may or even may not wanted to be remembered as: 'This is our work, we do this cos we are in empowered to do so' (won't explain it more, back to more context:)
My conclusion by that time was, questioning: 'Is privatizing favourable?' Cos there is confusing data, complex situations and a need for easy hypotheses...(and solutions maybe) The assumption that time was, that the gov spend a (huge) budged to pacify many more conflicting 'partys' than a private entity would like to do/or will, cos generating income through excessive spending (may 'only work when'/'need expotential growth') means nothing more than the need to reinvest profits to bigup the businesses.
(sry, non native english-speaker)
And now really OT, I remember some of the friends around Putin are building contractors, and the TV-shows about the war in Ukraine or Syria before um...
[turns-around-in-a-circle] (-;
How I understood your comment: "This whole field, consisting up of many people trying to do understand things, is just a bunch of nonsense generalizations."
This is a relatively fair take. That being said, at least it's damaged and dethroned the equally misguided frictionless spheres of homo economicus.
The idea that humans are not perfectly rational self-interested actors has been part of mainstream economics at least since Keynes.
Is it the whole story? Probably not. Like I said, I'm not an economist.
But given the extreme challenges in empirically testing macroeconomic models, it should be no surprise that economists might--as somewhat irrational humans--over-rely on theoretical models.
A lot? Money is a social construct, so the history of money is something like a record of empirical observations that must be accounted for by any proposed theory of money. The fact that most modern economists don't seem too concerned with this doesn't mean that it's not important.
My favorite course I took in college was historical linguistics. But I was a linguistics major…
I do expect CS students to take a history of computing course.
Maybe it's interesting to linguistics majors but the rest of us tend to ignore typos when the meaning is clear from the context.
> My favorite course I took in college was historical linguistics.
And?
> I do expect CS students to take a history of computing course.
The overwhelming majority of them don't and seem to do just fine.
The idea that Varufakis is not mainstream is not even remotely controversial. I have issues with Graeber's misrepresentation of economics, not his anthropology.
You can tell that Graeber isn't an economist because he mistakes the oversimplified educational narrative for what monetary economists actually believe about the history of money and credit. But you have a fair point--even economists often fool themselves about this, possibly because the field has grown to the point where many aren't as familiar with this topic as they should be (I don't think that was the case 100 years ago).
A moral justification for what?
It's not necessarily wrong though. Giving credit can still be a self-interest motivated action, in fact it would most often only be that - generating a higher reward to the risk taken by giving it - as banks try to manage. So yes, banks aren't run by benevolence, and they aren't the most benevolent entities on the planet (far from it) - they're just economically rational actors, that are benefited by offering credit.
Or did I misunderstand your comment?
I believe Graeber acknowledge that Marcel Mauss came up with https://en.wikipedia.org/wiki/The_Gift_(essay) long before him ("1925 essay by the French sociologist Marcel Mauss that is the foundation of social theories of reciprocity and gift exchange")
https://economics.rutgers.edu/joomlatools-files/docman-files...
L. Frank Baum's The Wonderful Wizard of Oz, however, is not only a child's tale but also a sophisticated commentary on the political and economic debates of the Populist Era.1 Previous interpretations have focused on the political and social aspects of the allegory. The most important of these is Littlefield ([1966] 1968), although his interpretation was adumbrated by Nye (1951), Gardner and Nye (1957), Sackett (I960), and Bewley ([1964] 1970). My purpose is to unlock the references in the Wizard of Oz to the monetary debates of the 1890s. When the story is viewed in this light, the real reason the Cowardly Lion fell asleep in the field of poppies, the identity of the Wizard of Oz, the significance of the strange number of hallways and rooms in the Emerald Palace, and the reason the Wicked Witch of the West was so happy to get one of Dorothy's shoes become clear. Thus interpreted, the Wizard of Oz becomes a powerful pedagogic device. Few students of money and banking or economic history will forget the battle between the advocates of free silver and the defenders of the gold standard when it is explained through the Wizard of Oz.
The Wikipedia article is actually pretty good overview: https://en.wikipedia.org/wiki/Political_interpretations_of_T...
I had forgotten about the Wizard of Oz bit! I don't recall if it was meant as an aside or it was meant to support a larger point about public opinion of bimetallism.
The bulk of the middle section of the book is mostly just meh. The final chapter though is something to behold! It's comically bad.
The book remains fairly popular in certain circles. If not for anything else, read it so you can politely refute the person who brings it up at a party.
The Wizard of Oz bit is mostly color, but he relates it to the difficulty state-money theorists have had in coming up with similar narratives, and also that the myth of barter has persisted for lack of a similar anthropological myth for money.
By misrepresenting what economists actually believe? How exactly did that improve the public discourse?
The myth is certainly taught by mainstream economists, here is one example:
http://www2.york.psu.edu/~dxl31/econ14/lecture18.html
>And Graber doesn't stop there. He pretends like somehow all of economics is hinged upon this Myth of Barter.
I think he was specifically targeting neoclassical economists. The idea of Homo Economicus is essentially rooted in a number of myths that depict humans as spherical cows, Adam Smith's story of money emerging from barter being just one.
>Adam Smith is not the supreme arbiter and law-giver of economics.
Nope, he just has an unusual take because his analysis is more rooted in historical and anthropological study and, of course, he's kind of left wing. This angers people who try to gatekeep economic thought, limiting it to the likes of neoliberal (but still somehow mainstream) ideologues like Mankiw or Milton Friedman.
I guarantee that when David Koch made an large donation to Florida State U economics department he didn't do it with the idea that they would teach more Graeber.
Can you please state what you think the supposed myth actually is? I'm asking because people seem to have very different ideas about what it actually is as seen in this very thread.
> I think he was specifically targeting neoclassical economists.
Quoting Graber:
> The answer seems to be that the Myth of Barter cannot go away, because it is central to the entire discourse of economics. Recall here what Smith was trying to do when he wrote The Wealth of Nations. Above all, the book was an attempt to establish the newfound discipline of economics as a science.
> Nope, he just has an unusual take because his analysis is more rooted in historical and anthropological study and, of course, he's kind of left wing.
I'm sorry, Adam Smith is left wing?
>I'm sorry, Adam Smith is left wing?
I was referring to Graeber. He was left wing and anticapitalist.
Orthodox (neoclassical) economists like Mankiw tend to be very strongly pro-corporate due to way funding flows in the profession.
Interesting. Did you actually read Debt? Because Graeber himself says that economists don't claim a barter system as a historical fact:
> It's important to emphasize that this is not presented as something that actually happened, but as a purely imaginary exercise.
As I suspected, it seems you're arguing something else entirely
I lifted a different example from some other lecture notes in my link above where they just flat out said "this is what used to happen".
Really, there is no shortage of examples. It's the same myth in all cases, (although I wouldnt be surprised if some econ textbooks got patched since the book came out).
Im not sure exactly what youre trying to prove here. The distinction you're trying to highlight is hardly material.
Yes, I obviously did read the book. I also used to believe the myth because I first read it in an undergraduate econ textbook.
> It's important to emphasize that this is not presented as something that actually happened, but as a purely imaginary exercise. "To see that society benefits from a medium of exchange" write Begg, Fischer and Dornbuch (Economics, 2oos), "imagine a barter economy. " "Imagine the difficulty you would have today," write Maunder, Myers, Wall, and Miller (Economics Explairzed, 1991) , "if you had to exchange your labor directly for the fruits of someone else's labor." "Imagine," write Parkin and King (Economics, 1995) , "you have roosters, but you want roses".
He quotes Stiglitz after this and remarks:
> Again this is just a make-believe land
Before claiming it's the same myth it's necessary to clarify what the myth actually is and why it supposedly is so important for capitalism.
> Yes, I obviously did read the book. I also used to believe the myth because I first read it in an undergraduate econ textbook.
In a deleted comment you claimed you read it in Mankiw. There it is most definitely presented as a thought experiment asking the reader to imagine the inconvenience of barter.
A) it's been presented as both. The example you pointedly ignored that I posted above is one such example.
B) It's not really that material. The story serves the same purpose either way - both in the above example and in, say, Stiglitz.
>it's necessary to clarify what the myth actually is and why it supposedly is so important for capitalism.
It is which is why Graeber did explain why it's important.
I thought you read the book?
>In a deleted comment you claimed you read it in Mankiw.
After writing that comment I double checked the 8th edition of the text to see if i remembered correctly and ctrl-f and found zero about barter in the whole book so I guess we both misremembered.
I cant honestly remember which econ textbook I read it in since it was 16 years ago, but I do know that I read it and believed it and there are plenty of other examples that can be found via google, so whatever.
Nobody thinks this is the mainstream consensus view, not even Graeber.
> The story serves the same purpose either way
> It is which is why Graeber did explain why it's important.
The whole thread is about why Graber's just-so explanations are wrong. And your arguments are materially different from what is actually in the text.
> I guess we both misremembered.
From The Principles of Macroeconomics, 3rd Edition. Chapter 15 - The Monetary System
> The social custom of using money for transactions is extraordinarily useful in a large, complex society. Imagine, for a moment, that there was no item in the economy widely accepted in exchange for goods and services.
This borders on conspiracy theory. I was in an econ PhD program for years (though I never quite finished the dissertation), and trust me, economists working in the neoclassical tradition do not need corporate funding to be right of center. Most academic economists aren't getting corporate funding.
And there are plenty of left-wing economists whose work is nevertheless mainstream in the sense of living within the neoclassical paradigm.
> The myth is that barter arose spontaneously throughout history and that currency arose as a more efficient means of mediating barter.
Economists mostly don't care how money arose, and 99.999% of theories in economics would be unchanged if money arose after barter, after credit and debt, or as a result of aliens implanting the idea in ancient peoples' brains.
I find it overwhelmingly ironic that economists consider "people respond to incentives" as a fundamental building block of economic theory but when the topic is "do economists respond to incentives?" the answer is no, they are only interested in truth.
>Most academic economists aren't getting corporate funding.
Most programmers arent employed by FAANG but that doesnt stop armies of the ones that arent from idolizing the goog. Using money to build prestige that goes with money does a better job than straight up bribery.
Economists are the best paid social scientists by far thanks to the injection of money. Having a seat at the policy table has its advantages - advantages that anthropologists dont get.
>And there are plenty of left-wing economists whose work is nevertheless mainstream in the sense of living within the neoclassical paradigm.
I wonder if you are using, say, Paul "footsoldier of the DNC" Krugman as an example of "left wing" here because I cant think of any.
>Economists mostly don't care how money arose
The book addresses this point and explains why Adam Smith (and subsequent thinkers) did care. It's worth a read.
Not debunked at all. How do people even agree what things are worth in order to offer credit before there exists any prices?
The issue with Graeber and others is they are looking for a historical account of barter pre-dating a historical record of debt, but they will never find it, because the record-keeping begin for the purpose of recording debt. Any barter would pre-date any record keeping, and would likely be very shortly-lived before people converge onto a common money. They have completely misinterpreted Menger's 'On the Origins of Money' to begin with, and are debunking a straw-man.
> "We have actual case studies of communities developing money prices from scratch: namely, prisoners who end up using cigarettes as the common medium of exchange. [...] The prisoners certainly weren't giving each other things from their Red Cross kits as gifts or as loans. No, they first were trading (in a state of direct exchange) and cigarettes quickly became the money in their community [...] The prices (quoted in cigarettes) of various items were posted on a board. If Graeber and his colleagues stumbled upon the ruins of this P.O.W. camp, they would presumably conclude that there was never a preexisting state of barter, because they only found boards listing prices quoted in terms of cigarettes." - https://mises.org/library/have-anthropologists-overturned-me...
Is this is the case, it seems to me that the issue is not with Graeber and others but, with the guys that claim something about which there is not historical account.
>>"We have actual case studies of communities developing money prices from scratch: "
The point is not if barter is used sometimes or if some people, in some circumstances, would start using cigarettes as money, but if that's the main history of money, specifically in the context of early states, as has been claimed for many years without any kind of evidence.
The burden of proof is not in the guys that examine the historic and archeology evidence, but in the ones that want to sell a narrative without evidence.
Both sides of the argument are making claims without evidence, because evidence prior to record-keeping of debt doesn't exist, and never will. There are only theories about how money came into being, and some are more plausible than others.
Graeber himself contradicts his own "debunking" of Menger's theory:
> "All evidence that exists points to money emerging as a series of fixed equivalents between silver – the stuff used to measure fixed equivalents in long distance trade, and conveniently stockpiled in the temples themselves where it was used to make images of gods, etc – and grain, the stuff used to pay the most important rations from temple stockpiles to its workers. Hence a silver shekel was fixed as the amount of silver equivalent to the numbers of bushels of barley that could provide 2 meals a day for a temple worker over the course of a month. It was the Temples that actually had a need to extend a silver system from a unit used to compare the value of a limited number of rare items traded long distance, used almost exclusively by members of the political or administrative elite of the societies in question – to something that could be used to compare the values of everyday items, like planks of wood, jugs of beer, and so forth."
Why silver?
Why were they already stockpiling silver?
How was it decided that silver would be used to measure fixed equivalents in long distance trade?
How was it decided the ratio of silver to bushels of barley?
What were these political and administrative elite doing when they proposed to offer a certain amount of silver for some long-distance traded rare items? (We have a word for this: 'barter')
Why would the foreigners they are trading with even want all this silver?
It takes some circular reasoning to get to where Graeber thinks he is, because he misinterpreted Menger to begin with. The above does not discredit Menger at all.
So, you have record-keeping that contradict the barter history and you have anthropology evidence that human semi-nomad tribes, even if they could barter sometimes, don't organize their society around barter, but, somehow, the more plausible evidence is barter. Don't know what to say to that.
He argues that where barter exists, people will quickly converge onto one or more forms of money for organizing trade. Even if it is not the intention of individual tradesmen, some astute traders will realize that they can profit by matchmaking (a necessity when there is a double-coincidence of wants). These astute traders will pick commodities which have the best saleability (those which are mostly likely to be accepted in exchange for other goods, and which retain value) as their means of measuring trade value. The successful traders will in turn, define which commodities emerges as the common monies in that economy, because traders who chose other (less saleable) commodities as their unit of measure will not be as successful.
It is not surprising that there are no historical documents outlining this, for it would likely pre-date even the written word by centuries or millennia. If it were the intention of a matchmaker to profit from establishing trades through use of goods with high saleability, they would also not likely advertise their tactics willingly, as they would be in competition with others attempting to make similar trades.
There are many historical accounts of monies being displaced when new, superior forms of money enter into economies, which is an extension of Menger's thesis (Also known as Thiers' Law). If a society is using a form of money which for whatever reason becomes much less saleable, and a new commodity enters the market which is more saleable, the more saleable commodity will eventually displace the old money.
So if it were the case that silver was selected (by who?) as the first money, 'for reasons', it seems like they hit jackpot on first try, for silver would remain the most saleable commodity for millennia until it would be later displaced by gold. Call me sceptic, but I don't buy such coincidences.
Huh? During the 17th and 18th century European colonization of North America there was no existing standard of payment which all settlers had access to. Before the circulation of paper money by colonial assemblies, tax and wages for public servants shifted to tobacco due to the liquidity of the export market.
> There are many historical accounts of monies being displaced when new, superior forms of money enter into economies, which is an extension of Menger's thesis (Also known as Thiers' Law). If a society is using a form of money which for whatever reason becomes much less saleable, and a new commodity enters the market which is more saleable, the more saleable commodity will eventually displace the old money
In the American colonies, commodity money based on farm products was replaced by paper credit money loaned by governors on security of property. Gold and silver were skipped over as official forms of money because they were not in large supply, and because activists such as Benjamin Franklin argued that if people invested time in digging for Spanish gold and buried treasure they would be poorer than if they spent time plowing fields.
> for silver would remain the most saleable commodity for millennia until it would be later displaced by gold
What's important is not simply salability but liquidity. In industrial countries the value of credit money is secured by the value of the assets of borrowers, they have to collect money back in same unit of account after investing or spending it to avoid default and foreclosure. In America the colonies tobacco-money or farm-product money was displaced by paper money with no metallic backing. Metal-backed money was imposed by Great Britain.
Being inside a deeply rooted paradigm, it is hard to imagine that the idea of "the worth" of a thing might not have been a paradigm that pre-historic people comprehended.
The thing that anthropologists like Graeber excel at is how they can take themselves out of their own conditioned thinking.
Think off this, when you see a n expensive car drive by you will most likely reflexively say "That car is probably worth $300,000". You assign an objective worth to the car, when classical economics will tell you that the actual worth of a car is subjective.
Personal ownership was not seen in the same way in the past as we see it today so objective worth might not have been in their mental framework.
This is prominently discussed by Graeber in the book, so this comment leads me to believe you have even read it.
However, when I later began studying Austrian economics, it became quite clear that Graeber's assumptions were based on circular reasoning, and that Graeber's writings on economics are through a left-leaning lens. That isn't to cast doubt on his work on Anthropology, which is fascinating to read, but I have doubts that he truly understood Menger's argument to begin with (or perhaps willingly chose to filter it to fit into his world-view.)
"Occasionally, we can even find some kind of currency beginning to develop: for instance, in POW camps and many prisons, inmates have indeed been known to use cigarettes as a kind of currency, much to the delight and excitement of professional economists. But were too we are talking about people who grew up using money and now have to make do without it - exactly the situation "imagined" by the economics textbooks."
1) Have you ever met a good economist?
2) Is it possible you think he is a poor economist because he deeply understood it from the outside and you are still too "in it" to see? That is not a criticism, it is a question.
Not just humans. Chimpanzees demonstrate jealousy or a sense of fairness in experiment. I'm pretty sure I've seen dogs show it, too.
If people aren't qualified, as opposed to having credentials, to understand and comment on a subject, they should get a good co-author. Because the look at monetary policy through the ages is a very interesting one. If the authors do have an actual grip, and the ability to explain things to the layman unless we talk about dry scientific books, of the subject. If they don't it's just pseudo-science sold with confidence.
* Interestingly, I think that was meant as exculpatory for economists, which is itself a bit revealing.
And it would have been fine if Debt stuck to the anthropology. But perpetuating inaccuracies about money can be actively harmful.
For example, I-series bonds are the safest instruments available to US residents to hedge against inflation. Now, in popular conception, if US treasury bonds are seen as a debt that will never be paid, people might instead put their savings into assets that are suboptimal. You already see gold shilling targeted at senior citizens which makes for a terrible investment.
That the national debt will never be "paid off" is hardly inaccurate. It's barely even controversial. It wouldn't be a good idea either.
Hell, I remember the news articles from the 90s during a brief period of budget surplus that fretted about what pension funds and insurers would do if they couldnt buy t bills any more. The mask briefly slipped as the reality of the national-debt-is-basically-just-a-savings-account before we returned to our regularly scheduled implied bankruptcy doom-mongering and budget ceiling theatrics.
So overall, debt isn't paid back. The particular debt is paid back very much indeed. And whatever was paid for with that debt is ideally here to stay. National debt isn't anywhere close to private debt or a mortgage. Looking at it that way is just wrong.
By no account do I understand monetary theory or how national debt works in detail. I know enough to understand that it is a very complex topic, one that isn't easily understood. So I am cautious when it comes to easy explanations.
In fact, you probably don't want the public debt to be payed.
If debt is a liability, that means that is also an asset of somebody. In the case of public debt is an asset of the private sector. A country without public debt would mean those senior citizens wouldn't have safe assets.
Also, a reduction of public debt means a lower deficit, that means less public expenses, that means, or a GDP fall or a higher private debt. Everything has to balance.
Barter is just trading without the use of money. It isn't mutually exclusive with credit. What Graeber describes in his book is still barter. It's just a primitive credit system based promises of goods and services instead of promises of money.
This does not match with any definition that I've seen. Graeber debunks a parable used by Adam Smith and economists used to explain why money is more efficient than barter. The problem is that the central thesis of the parable still stands: trade is more efficient with through a medium of exchange.
> barter, for example, features immediate reciprocal exchange
Reciprocality requires figuring out how many chickens a Ford Taurus is, i.e. the exchange rate.
This isn't the contradiction you think it is.
The US has been in debt permanently since the civil war. When exactly did you think it was going to be paid off in its entirety? Why would it even make sense to do so while there is a permanent demand for high quality securities?
Did you think Graeber was saying that treasuries weren't the safest security for you or me? He didn't. This is a gross misinterpretation of the book.
> American imperial power is based on a debt that will never-can never-be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.
Graber then likens the large holdings of US treasuries by Western Europe, Japan and Korea to a tribute system which siphons wealth from these supposed client states to the American Empire. And then in the very same chapter he also says China accumulating US treasuries is the first stage of a very long process of reducing the United States to something like a traditional Chinese client state.
No mention of the actual conventionally understood reason of why US treasuries are favored as reserves i.e. safety and liquidity.
Tell me again how I am misrepresenting the book.
Doesn't it kind of keep interest rates low and create needed liquidity in the US markets? I'm a layman but to me this reminds me of how i heard it explained that the status of the dollar as reserve currency and for oil transactions, etc subsidises subsidises the perpetual american trade deficit on the back of other nations. That person also referenced north african nations trying to protect their currency pegs even tho US fiscal policy was in part leading to issues for them leading up to the arab spring. I wonder how much truth there is to that.
Why do you think Russia dumped its treasuries in 2018 if they're such a safe investment for military opponents of US hegemony? How liquid would they be right now if they'd kept them? Which buyer of treasuries do you really think China shares most in common with? Is it State Farm or Calpers? Or is it Russia?
What you're doing right now is the economic equivalent of trying to apply Newton's second law to relativistic speeds. Yes, that's absolutely misrepresenting the book.
> Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.
The larger their holdings and the more the US is reliant upon their industrial output the larger the inflationary spike they can trigger just by flipping a switch.
Whether that spike is large enough to break confidence in the US dollar entirely and break its hegemony is another matter.
The longer China manages to maintain a trade surplus with a US and siphon US industry away the better their odds are though and the scarier them unloading is.
It's kind of like adage about how you owing the bank $1000 is 100% your problem and you owing the bank $10 mil is now the banks problem.
As interesting as this thesis may be, this is not even remotely close to what Graeber was alluding to:
> From a longer-term perspective, China's behavior isn't puzzling at all. In fact it's quite true to form. The unique thing about the Chinese empire is that it has, since the Han dynasty at least, adopted a peculiar sort of tribute system whereby, in exchange for recognition of the Chinese emperor as world-sovereign, they have been willing to shower their client states with gifts far greater than they receive in return. The echnique seems to have been developed almost as a kind of trick when dealing with the "northern barbarians" of the steppes, who always threatened Chinese frontiers : a way to overwhelm them with such luxuries that they would become complacent, effeminate, and unwarlike. It was systematized in the " tribute trade" practiced with client states like Japan, Taiwan, Korea, and various states of Southeast Asia, and for a brief period from 1405 to 1433, it even extended to a world scale, under the famous eunuch admiral Zheng He. He led a series of seven expeditions across the Indian Ocean, his great " treasure fleet"-in dramatic contrast to the Spanish treasure fleets of a century later-carrying not only thousands of armed marines, but endless quantities of silks, porcelain, and other Chinese luxuries to present to those local rulers willing to recognize the authority of the emperor.
At the same time they have been exporting cheap goods to the US which the US has become slowly accustomed to. Treasury purchase operations were an integral part of discounting these goods by artificially pushing down the value of the yuan. I suspect theyll try to keep this up more or less indefinitely until something snaps - they get slowly stronger and the US gets slowly weaker.
It has led to the US slowly deindustrializing and relying more and more upon artificially competitive Chinese imports.
The key feature of this strategy is the destruction of US industrial ecosystems through systematic, persistent undercutting. This is something the US tolerates because A) the frog is being boiled slowly B) US corporates have the same relationship with short term profits that an addict has with crack. In a way it's similar to the alliance the US made with the first batch of the post USSR oligarchs.
It takes 15-20 years give or take to build or destroy an industrial ecosystem while a currency can collapse in hours.
So yes, the strategy is very much like zheng he - service the US oligarchy's addiction to profit for a few decades before finally pulling out the rug and leaving the US to realize that it making an iPhone in the US will cost $3000 and you're actually all rather poor now.
I don't know what you think the tribute system was but it most definitely did not involve a rug pull.
I can totally get down for this interpretation. When you think of Humanity (collectively-singular) as an entity destined to invent everything, we will obviously eventually invent the concepts of money, interest, debt, etc. The money can reproduce faster than Humanity can, so we're effectively in debt to ourself and have spent so many years trying to pay it off that we've forgotten we're truly One.
And that is not what Graber is talking about. The point was about US Treasuries. Everyone treats them as cash equivalents because nobody believes that the US Government will default. But Graber says and I quote:
> American imperial power is based on a debt that will never-can never-be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.
And this is the kind of nonsense that is sprinkled all over the book.
If you incur debts to your body, you'll pay for them in the future.
If we squander intergenerational assets, our children will pay.
October: +100, finally paid back the 100 taken in March.
Anothet option: you have multiple personalities.
Btw. Semi joking
so what? Have they missed an interest payment? Is their economy unproductive and cannot pay the interest?
Having the debt means you are entitled to a portion of the economic output of the machine behind that debt. Why is it a must for the debt to be repayable in one go? Esp. if the debt was not all issued in one go?
each time a particular treasury bond is due in full, the US treasury has been able to repay it. Whether they repay it by issuing new bonds, or increase their taxes and pay it off, makes no difference to the holder of that bond.
I guess this comes down to semantics. Paying off an old loan with a new one isn‘t ”paying off your debt“ in my eyes. You are still in debt afterwards.
The total amount of debt will never come down again without hyperinflation. Whether that is good, bad, or doesn‘t matter is up to economists. But that‘s how it is.
In the context of meeting obligations to creditors, which is what is being discussed, it absolutely is.
> The total amount of debt will never come down again without hyperinflation.
What has fundamentally changed since the last time it did which was (checks) Q2 2019?
> Whether that is good, bad, or doesn‘t matter is up to economists. But that‘s how it is.
There is very little reason to believe that. In fact, to the extent that the debt and inflation are related, the same acts which drive the debt up drive inflation, not the other way around.
Graber's point is primarily about foreign holders of US debt and how this is the American empire extracting tribute from its vassals. Whether America is debt-free or not really relevant.
Ironically, the people that are most opposed to MMT on the basis of outright lies about its content are the people that are most likely to argue against large deficits on inflation grounds even when there is no problem borrowing enough money to fuel it.
At the level of the world's biggest economies, the concepts of debt (bonds), money, and interest rates are more abstract economic levers that central banks pull in order to keep economies chugging. They're not really the same things they are to individual people and corporations, e.g. in the way debt can cripple someone's finances.
The central banks and governments are the game masters who set the rules and issue tokens, and we're the players interacting within the game and responding to the environments that they create.
To restate: bonds and other loans are literally a policy tool to take in USD from or inject USD into circulation, in order to intentionally change the size of the money supply: "Open market operations (OMO) refers to a central bank buying or selling short-term Treasuries and other securities in the open market in order to influence the money supply." It's not like the central bank actually needs to borrow USD from the money supply; it's literally the issuer of USD and could create more at any time (or take it in and destroy it).
Why can the US do this? Because its bonds are denominated in its own currency, which world investors use. The demand for USD-denominated debt is a major benefit of the USD being the world's main reserve currency.
And if I Google "united states per capita debt", I see a box:
According to the last data point published, United States per capita debt in 2020 was 84,850 dollars per inhabitant. In 2019 it was 70,557 dollars, afterwards rising by 14,293 dollars, and if we again check 2010 we can see that then the debt per person was 46,284 dollars.
The US already defaulted on their gold promises.
Right. So this supposed "revelation" that fiat money is debt created by elites out of thin air, has been the hocus-pocus story that every goldbug, sovereign citizen's movement and crypto-coin huckster has memorized to absolutely wow the gullible with conspiracy theories for the last 100 years. It's a guaranteed way to make a (fiat) buck if you sell a book along these lines.
But the ridiculous thing is, in every situation other than US dollars, all people understand that buying debt is gambling on the risk of not being paid back. Whether you're buying some Argentine note that pays 30% or a municipal bond (or a war bond) or a ticket to see a movie in a theater that might close next week, you understand that the paper is worth more at maturity but it comes with risk. Everyone outside America who actually buys US debt fully understands this and makes the risk calculation, so how is it that average slackjawed Americans are just dumbstruck, generation after generation, year after year, by the notion that their evil government or central banks together are pulling off some sort of fast one on the rest of the world? No one buys this shit who doesn't weigh the risk. To whatever extent it's a house of cards, that's on the investors anyway, so there's no reason the average American should trouble themselves about it until/unless they need to learn what a national default looks like.
Graber misinterprets the history and ideas of mainstream economics, calls the safest securities on the planet a debt that will never be paid and spins bizarre conspiracy theories about the Iraq invasion. You might learn about the quaint cultural practices of remote tribes but I strongly disagree that it is a good book to understand money in the real world.
A far better resource is Perry Mehrling's Economics of Money and Banking course: https://www.ineteconomics.org/education/courses/the-economic...