Capital not Trade Regulation

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Chris Dierkes

Chris Dierkes (aka CJ Smith). 29 years old, happily married, adroit purveyor and voracious student of all kinds of information, theories, methods of inquiry, and forms of practice. Studying to be a priest in the Anglican Church in Canada. Main interests: military theory, diplomacy, foreign affairs, medieval history, religion & politics (esp. Islam and Christianity), and political grand bargains of all shapes and sizes.

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13 Responses

  1. Avatar Mark Herpel
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    says:

    You can’t create real change without honest money. With paper-instant-money the wrong people are in charge. Get rid of the dollar and bring back honest money or at least allow the states to use it. There are still 5 states with pending honest money legislation. We have devoted an entire issue to it this month on DGC Magazine

    MarkReport

  2. Avatar E.D. Kain
    Ignored
    says:

    Fantastic post, Mark. Chris. I’m going to have to follow a few of those links to get a better sense, but you’ve certainly got me thinking on capital flow. On a sort-of-side-note, where do you stand on matters of monetary policy? The Fed? The gold standard?Report

  3. Avatar Mark Thompson
    Ignored
    says:

    E.D. – this was a Chris post, not mine.

    Chris – thought provoking post.Report

  4. Avatar E.D. Kain
    Ignored
    says:

    Damn. I swear I saw your name at the top there…but nope. It’s Chris alright…Report

  5. Avatar Rortybomb
    Ignored
    says:

    “Namely since the ability to make loans comes from the social trust”

    It may have been developed elsewhere, but what work is ‘social trust’ doing here? Is it, as a vector of our money supply (and perhaps as a result of moral hazard in the business model) and depending on savings accounts from the commons to make loans requires people trusting their savings accounts are going to be there – they require the government and people to trust their actions? If so, they already pay to the commons (interest on your savings account) and pay a large fee in time/energy/wages to assure FDIC that they are properly capitalized. It’s not a small amount of money.

    Or is it a more radical critique – that the idea of an interest rate is really just a proxy for communities and social interactions?Report

  6. Avatar Chris Dierkes
    Ignored
    says:

    rortybomb,

    i think it’s more like the right to print money and to essentially create (fictively) money through debt has massive ramifications upon the society at large. 1. That means the industry should be tightly (and I mean tightly) regulated. That’s more a government role I think. But 2. That the banking industry depends upon this commons (who feel the effect as we’re seeing of an ideology that only looks to buyer-seller and not the other third parties intrinsically involved). This commons idea is a way to propertize/legalize and in fact internalize what are currently externalities in the bookeeping and economic practice of various private enterprises.Report

  7. Avatar jfxgillis
    Ignored
    says:

    Chris:

    I have an I believe original theory that I think fits your essay.

    Up until the 1990s, there were transaction costs related to the global flow of capital related to either actual costs of moving either large flows of capital or currency exchange rates. There were elements of both fixed overhead AND risk involved, which applied the tiniest bit of brake to potential capital flows.

    But there’s no “friction” in the system anymore and, it turns out, that may not be a good thing. When Capital arbitrage can be profitably exploited almost to the degree of however far to the right of the decimal point the zeroes end, well, it will be profitably exploited. Possibly even without human intervention.

    Now the Capital flows are literally too efficient, information is too perfect. One of the proposals for reducing the exchange-rate risk for years has been the Tobin Tax, but there’s no reason why that kind of
    transaction tax
    can’t be applied to all global capital flows.

    Even the tiniest tax would serve two purposes: 1) Returning a bit of friction to the system so that actual human decisionmakers have to make a cost/benefit analysis of proposed flows, and 2) It would re-finance and help balance global public-sector fiscal deficits.Report

  8. Avatar Dave
    Ignored
    says:

    Too efficient? With all due respect, one of the causes of the financial meltdown was an enormous information asymmetry between what the market believed was the underlying risk on the various securities backed by, among other things, subprime mortgages, and what the actual default and credit risks were.

    I strongly recommend reading Roger Lowenstein’s Triple A Failure:

    http://www.nytimes.com/2008/04/27/magazine/27Credit-t.html?_r=1

    Please keep in mind I’m no fan of the efficient markets hypothesis, especially in volatile markets where investor behavior fails to fit the “rational investor” assumption.Report

  9. Avatar jfxgillis
    Ignored
    says:

    Dave:

    Okay, thanks. I’ll check your cite. I’m brainstorming here anyway so I’m more than willing to modify my hypothesis. How’s this for a working mofification?

    Increases in ruthless efficiency attendant to the remarkable changes in the technology of Capital flows from the 1990s onward combined with an illusion of more perfect information also attendent to those technological advances removed “friction” from the system.

    And when you got no friction, you get things like bubbles more easily, and when you start sliding on the ice like a hockey player who just got body-checked, you just keep sliding until you crash head-first into the boards.Report

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