Posts Tagged ‘money’
“In the absence of value judgements, value goes up in flames. And it goes up in a sort of ecstasy.”*…
When Pablo Picasso’s “Les Femmes d’Alger (Version O)” sold at Christie’s in New York for $179 million dollars in May 2015, it was only the 36th time in the past 315 years that a world auction record had been set, and the sale raised questions well beyond the art world. How could a single painting be worth so much? Why is art so important to wealthy households? What economic and social factors could lead to enshrining Picasso’s colourful near-abstract portrait as the most valuable picture in the history of the modern world?…
Three economists offer an an explanation based on an analysis of art auctions dating back to 1701: “A History of the Art Market in 35 Record-Breaking Sales.”
* Jean Baudrillard
In this sense, therefore, inasmuch as we have access to neither the beautiful nor the ugly, and are incapable of judging, we are condemned to indifference. Beyond this indifference, however, another kind of fascination emerges, a fascination which replaces aesthetic pleasure. For, once liberated from their respective constraints, the beautiful and the ugly, in a sense, multiply: they become more beautiful than beautiful, more ugly than ugly.
Thus painting currently cultivates, if not ugliness exactly – which remains an aesthetic value – then the uglier-than-ugly (the ‘bad’, the ‘worse’, kitsch), an ugliness raised to the second power because it is liberated from any relationship with its opposite. Once freed from the ‘true’ Mondrian, we are at liberty to ‘out-Mondrian Mondrian’; freed from the true naifs, we can paint in a way that is ‘more naif than naif’, and so on. And once freed from reality, we can produce the ‘realer than real’ – hyperrealism. It was in fact with hyperrealism and pop art that everything began, that everyday life was raised to the ironic power of photographic realism. Today this escalation has caught up every form of art, every style; and all, without discrimination, have entered the transaesthetic world of simulation.
There is a parallel to this escalation in the art market itself. Here too, because an end has been put to any deference to the law of value, to the logic of commodities, everything has become ‘more expensive than expensive’ – expensive, as it were, squared. Prices are exorbitant – the bidding has gone through the roof. Just as the abandonment of all aesthetic ground rules provokes a kind of brush fire of aesthetic values, so the loss of all reference to the laws of exchange means that the market hurtles into unrestrained speculation.
The frenzy, the folly, the sheer excess are the same. The promotional ignition of art is directly linked to the impossibility of all aesthetic evaluation.
In the absence of value judgements, value goes up in flames. And it goes up in a sort of ecstasy.
There are two art markets today. One is still regulated by a hierarchy of values, even if these are already of a speculative kind. The other resembles nothing so much as floating and uncontrollable capital in the financial market: it is pure speculation, movement for movement’s sake, with no apparent purpose other than to defy the law of value. This second art market has much in common with poker or potlatch – it is a kind of space opera in the hyperspace of value. Should we be scandalized? No. There is nothing immoral here. Just as present-day art is beyond beautiful and ugly, the market, for its part, is beyond good and evil.
The Transparency of Evil: Essays in Extreme Phenomena
###
As we appreciate appreciating art, we might recall that it was on this date in 1862 that (in order to create liquidity to finance the Civil War) the U.S. government issued its first official paper money. “Demand Notes,” the first federal issues of the Civil War, were immediately exchangeable in gold or silver “on demand” at seven banks spread across the country. They were quickly replaced by very similar-looking “legal tender” notes that could not be readily converted to specie. These issues were notable for the bright, dark green imprints on their backs, and ever since then American paper currency has been familiarly nicknamed “greenbacks.”
“Exorbitant privilege”*…
Economic history books will commemorate the era we currently live in as the second wave of financial globalization, following the first wave during the Classical Gold Standard period. Our era is characterized by an unprecedented expansion of global financial flows. Partly, these flows form the counterpart to global value chains and the globalization of trade in goods and services. In the last few decades, however, they have been increasingly decoupled from the real sector. The financial infrastructure that enables this expansion is the international monetary system…
In its current shape, [the international monetary system] has a hierarchical structure with the US-Dollar (USD) at the top and various other monetary areas forming a multilayered periphery to it. A key feature of the system is the creation of USD offshore – a feature that in the 1950s and 60s developed in co-evolution with the Bretton Woods System and in the 1970s replaced it. Since the 2007–9 Financial Crisis, this ‘Offshore US-Dollar System’ has been backstopped by the Federal Reserve’s network of swap lines which are extended to other key central banks. This systemic evolution may continue in the decades to come, but other systemic arrangements are possible as well and have historical precedents. This article discusses four trajectories that would lead to different setups of the international monetary system by 2040, taking into account how its hierarchical structure and the role of offshore credit money creation may evolve. In addition to a continuation of USD hegemony, we present the emergence of competing monetary blocs, the formation of an international monetary federation and the disintegration into an international monetary anarchy…
Americans tend to take the global primacy of the U.S. Dollar for granted (indeed, often complaining about the current account imbalances to which huge quantities of off-shore dollars lead). But there’s no mistaking that this system has been been hugely advantageous to the U.S. Yet, as Steffen Murau (@steffenmurau) explains, it may not last: “The evolution of the Offshore US-Dollar System: past, present and four possible futures.”
See also Mernau’s “International Monetary System” (from whence, the image above), and Ben Bernanke’s “The dollar’s international role: An ‘exorbitant privilege’?“
* Valéry Giscard d’Estaing (then the French Minister of Finance; later French President), referring to the benefit that accrues to the U.S. as a result of the U.S. Dollar being the world’s reserve currency
###
As we count our blessings, we might recall that it was on this date in 1890 that journalist Nellie Bly completed her 72-day trip around the world.
In 1888, Bly suggested to her editor at the New York World that she take a trip around the world, attempting to turn the fictional Around the World in Eighty Days into fact for the first time. A year later, at 9:40 a.m. on November 14, 1889, with two days’ notice, she boarded the steamer Augusta Victoria, and began her 24,899-mile journey.
She brought with her the dress she was wearing, a sturdy overcoat, several changes of underwear, and a small travel bag carrying her toiletry essentials. She carried most of her money (£200 in English bank notes and gold in total as well as some American currency) in a bag tied around her neck.
Bly traveled through England, France (where she met Jules Verne in Amiens), Brindisi, the Suez Canal, Colombo (Ceylon), the Straits Settlements of Penang and Singapore, Hong Kong, and Japan. Just over seventy-two days after her departure from Hoboken, having used steamships and existing railway lines, Bly was back in New York; she beat Phileas Fogg’s time by almost 8 days.
“If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you”*…
Everyone always talks about how much money there is in politics. This is the wrong framing. The right framing is Ansolabehere et al’s: why is there so little money in politics? But Ansolabehere focuses on elections, and the mystery is wider than that.
Sure, during the 2018 election, candidates, parties, PACs, and outsiders combined spent about $5 billion – $2.5 billion on Democrats, $2 billion on Republicans, and $0.5 billion on third parties. And although that sounds like a lot of money to you or me, on the national scale, it’s puny. The US almond industry earns $12 billion per year. Americans spent about 2.5x as much on almonds as on candidates last year.
But also, what about lobbying? Open Secrets reports $3.5 billion in lobbying spending in 2018. Again, sounds like a lot. But when we add $3.5 billion in lobbying to the $5 billion in election spending, we only get $8.5 billion – still less than almonds.
What about think tanks? Based on numbers discussed in this post, I estimate that the budget for all US think tanks, liberal and conservative combined, is probably around $500 million per year. Again, an amount of money that I wish I had. But add it to the total, and we’re only at $9 billion. Still less than almonds!
What about political activist organizations? The National Rifle Association, the two-ton gorilla of advocacy groups, has a yearly budget of $400 million. The ACLU is a little smaller, at $234 million. AIPAC is $80 million. The NAACP is $24 million. None of them are anywhere close to the first-person shooter video game “Overwatch”, which made $1 billion last year. And when we add them all to the total, we’re still less than almonds.
Add up all US spending on candidates, PACs, lobbying, think tanks, and advocacy organizations – liberal and conservative combined – and we’re still $2 billion short of what we spend on almonds each year. In fact, we’re still less than Elon Musk’s personal fortune; Musk could personally fund the entire US political ecosystem on both sides for a whole two-year election cycle…
[A consideration of the factors that limit political giving/spending]
I don’t want more money in politics. But the same factors that keep money out of politics keep it out of charity too.
The politics case is interesting because it’s so obvious. Nobody’s going to cynically declare “Oh, people don’t really care who wins the election, they just pretend to.” It’s coordination problems! It has to be!
So when I hear stories like that Americans could end homelessness by redirecting the money they spend on Christmas decorations, I don’t think that’s because they’re evil or hypocritical or don’t really care about the issue. I think they would if they could but the coordination problem gets in the way.
This is one reason I’m so gung ho about people pledging to donate 10% of their income to charity. It mows through these kinds of problems. I may not be a great person. But I spend more each year on the things I consider most important than I do on almonds, and this is the kind of thing that doesn’t happen naturally. It’s the kind of thing where I have to force myself to ignore the feeling of “just a drop in the ocean”, ignore whether I feel like other people are free-riding on me, and just do it. Pledging to donate money (and then figuring out what to do with it later) ensures I will take that effort, and not end up with revealed preferences that seem ridiculous in light of my values.
Scott Alexander with a counter-intuitive– and provocative– take on politics and money: “Too much dark money in almonds.”
[Image above: source]
* Mick Mulvaney, Director of the Office of Management and Budget (OMB), as well as acting White House Chief of Staff, in 2018, while serving as interim head of the Consumer Financial Protection Bureau
###
As we take the pledge, we might recall that it was on this date in 1957 that the words “In God We Trust” first appeared on U.S. paper currency– when the updated one-dollar silver certificate entered circulation that day.
Though it had only been adopted by Congress as the official motto of the U.S. the prior year, the phrase had appeared occasionally (as had variations on the theme) on coinage since Civil War times; regularly– despite Theodore Roosevelt’s conviction that it was sacrilegious– from 1908.
“A nickel ain’t worth a dime anymore”*…
The instruments of trade and finance are inventions, in the same way that creations of art and discoveries of science are inventions—products of the human imagination. Paper money, backed by the authority of the state, was an astonishing innovation, one that reshaped the world. That’s hard to remember: we grow used to the ways we pay our bills and are paid for our work, to the dance of numbers in our bank balances and credit-card statements. It’s only at moments when the system buckles that we start to wonder why these things are worth what they seem to be worth. The credit crunch in 2008 triggered a panic when people throughout the financial system wondered whether the numbers on balance sheets meant what they were supposed to mean. As a direct response to the crisis, in October, 2008, Satoshi Nakamoto, whoever he or she or they might be, published the white paper that outlined the idea of Bitcoin, a new form of money based on nothing but the power of cryptography.
The quest for new forms of money hasn’t gone away. In June of this year, Facebook unveiled Libra, global currency that draws on the architecture of Bitcoin. The idea is that the value of the new money is derived not from the imprimatur of any state but from a combination of mathematics, global connectedness, and the trust that resides in the world’s biggest social network. That’s the plan, anyway. How safe is it? How do we know what libras or bitcoins are worth, or whether they’re worth anything? Satoshi Nakamoto’s acolytes would immediately turn those questions around and ask, How do you know what the cash in your pocket is worth?
The present moment in financial invention therefore has some similarities with the period when money in the form we currently understand it—a paper currency backed by state guarantees—was first created. The hero of that origin story is the nation-state. In all good stories, the hero wants something but faces an obstacle. In the case of the nation-state, what it wants to do is wage war, and the obstacle it faces is how to pay for it…
The ever-illuminating John Lanchester explains how, over three centuries, the heresies of two bankers became the basis of our modern economy: “The Invention of Money.”
[Lanchester’s latest novel, The Wall, was just long-listed for the Booker.]
* Yogi Berra
###
As we learn from the past, we might recall that it was on this date in 1861 that the U.S. government, in anticipation of the expense of the looming Civil War, levied its first income tax as part of the Revenue Act of 1861. It assessed 3% of all incomes over $800, but included no enforcement mechanism, and so generated very little revenue. It was revised in 1862 in a more effective form, then rescinded in 1872.
The first peace-time income tax was established in 1894, but was ruled unconstitutional by the Supreme Court (the 10th amendment forbade any powers not expressed in the US Constitution, and the Constitution provided no power to impose any other than a direct tax by apportionment). It was in 1913, with the Sixteenth Amendment to the United States Constitution, that income tax became a permanent fixture in the U.S. tax system.
source
“O Gold! I still prefer thee unto paper”*…
The once-fringe fantasy of a return to the gold standard is creeping back into the mainstream.
It has long been dismissed as a fool’s errand, on par with abandoning the Federal Reserve and other trappings of the modern economy. Mainstream economists deride it almost without exception. Reintroducing the gold standard would “be a disaster for any large advanced economy,” says the University of Chicago’s Anil Kashyap, who connects enthusiasm for it with “macroeconomic illiteracy.” His colleague, Nobel laureate Richard Thaler, struggles with its very underlying principle: “Why tie to gold? Why not 1982 Bordeaux?”
Yet the idea that every US dollar should be backed by a small amount of actual gold is more popular than economists’ opinions might suggest. Advocates include members of Congress and president Donald Trump. Enthusiasm for a return to the gold standard has become more prominent since Trump’s most recent nominees to fill the vacant Federal Reserve governorship have endorsed a return. The first two—Herman Cain and Stephen Moore—both dropped out of consideration, but the third, economist Judy Shelton, announced… in a Trump tweet, may be the most ardent in her support…
What exactly is the gold standard, and what would it mean if it were re-established? Timely questions: “The quiet campaign to reinstate the gold standard is getting louder.”
* Lord Byron
###
As we ponder the pecuniary, we might recall that it was on this date in 1795 that James Swan (who had financed privateers during the Revolutionary War, and used some of his proceeds to support the Continental Army) refinanced the national debt of the United States– $2,024,899 in obligations to the French government– by assuming them personally, at a higher interest rate; he then sold them off to private investors in the U.S. and Europe.
Gilbert Stuart’s portrait of Swan, 1795
You must be logged in to post a comment.