Year 2002
 
                Currencies of Improving Quality
 
     From the viewpoint of parties domiciled outside of the territory 
of where a specific currency (such as, e.g. the currency of Brazil) is
established the "quality" of that currency is evaluated according
to the reasonable appraisals of the probabilities of loss in value 
of the unit of that currency, particularly in comparison with other 
currencies and also in comparison with alternatives available for use 
for "storage of value", like gold or commodities in general. 
     The more that the probabilities of loss seem to be large the more
that currency will be evaluated as of "low quality".
     On the other hand, "Keynesian" central bankers or associated and
advising economists, WITHIN the state responsible for the currency 
in question (such as, e.g. Brazil), may be arguing that they should
have and use methods of operation that will tend to act in varying
degrees at various times to increase the supply of the currency and
thus cause, ultimately, declines in its value. They may argue that these actions, 
in which they have some discretionary options, are beneficial 
for the general welfare within the territory of the state (e.g., Brazil).
    Whether or not the options exploited by "Keynesian" central bankers 
     and advisors are beneficial to the general welfare in the corresponding
      territories (e.g., Brazil) it is very clear, game theoretically, 
      that they give those who can act on these options ADDITIONAL STRATEGIES 
      that they otherwise would not be likely to have available. So it is also 
      plausible that psychologically the having of these options would seem to 
      be very desirable in contrast to their renunciation.
     So I want to suggest now the possibility that, within the context
of varieties of currencies which are of the type typically found nowadays 
and since the time of the influence of "the Keynesians" (and after the time
 of the formerly used "gold standard" or other forms of currency linked 
 to a value standard), there is some real possibility that the typical 
 "rate of depreciation" of currencies may tend 
to decrease. Thus there may evolve more disillusionment with the "Keynesian" 
methods that tend to cause to exist a continual (sometimes intermittent) 
deterioration in the internationally observable value 
of a specific national currency. (This would apply to "the euro" also, 
as if that were effectively the currency of an "United States of Europe".)
     The actors on the stage of the drama formed by the actions that
determine the trends in the value of a national currency are themselves
players in a game and they can be rationally viewed as such. The theme
of "rational expectations" naturally enters. Those who ARE NOT in
control but who ARE naturally concerned with the expectations for the
value trend of a national currency cannot be wisely assumed to be
entirely naive and unable to form "rational expectations" regarding
the currency. So the (possibly) "Keynesian" players in this game have
natural opponents (or co-players, beyond zero-sum perspectives) who
are interested in not being themselves "outsmarted" by those who
control the options that determine, say, the quantity supplied of
the national currency.


        A Symptom of Current Attitudes Towards Inflation

     In relatively quite recent times a scheme, or perhaps a "line"
(analogous to a "political line"), has emerged which is called
"inflation targeting". This, although of course it naturally tends, if
honestly used as a program, to comparatively restrain the inflationary
tendencies of central bankers operating with effective freedom to "print" money. 
This "line" seems to have originated in New Zealand where it is observable that 
their dollar is the most depreciated of
all national dollar-named currencies.
To me it seems a striking paradox that central bankers can think in terms 
of having a "targeted" rate for inflation without realizing that that rate
should be zero!
This paradox, or my perception of it, was what led me to the concept of 
"Asymptotically Ideal Money". If there were, formerly, "free Keynesians" 
and then, later, there came to be "restrained Keynesians" whose freedom to 
freely issue additional money and credits however they might please to do 
so would have become a bit restrained by the need to support a doctrine of 
targeted inflation.

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       Signs of Attitudes (Among Central Banking Authorities)

    On the web page of the Swedish State Bank there appears a sort 
Of speedometer measuring the rate of inflation. The fact that this appears 
indicates several things about the psychology of the responsible authorities there. 
One of these is that they have the concept that the government can choose policies
to control the rate indicated and that varying consequent results (as regards the value 
of that rate of depreciation (of the value of the currency)) may be achieved as a 
result of various conceivable choices of policy. (In the case of a poorer nation 
it might seem more likely that the authorities would not usually seem to have any
 ability to control the rate of inflation, as measured modulo the domestic currency
  of that poorer nation.)
    Now the possible area for evolution is that if, say, an inflation
rate of between 1% and 3% is now considered desirable and appropriate
in Sweden, then, if it is really controllable, why shouldn't a rate
between 1/2 % and 3/2 % be even more desirable? (The rate measured by
the Swedish speedometer is determined in relation to a domestic CPI
calculated for Sweden.)


       Signs of the Times (Among National Currency Authorities)

    Comparatively very recently a few countries in South America and
Central America have adopted schemes that put them in positions
analogous to those of Luxembourg and Liechtenstein with regard to the
provisions for their domestic currency. Here Argentina and El Salvador
can be mentioned. They are adopting (at least temporarily) expedients
that put the value of their domestic money on a fixed relation to the
U. S. dollar. And of course Panama has had such a situation for a long
time previously.
    This is not "ideal money" because the U. S. dollar is not an ideal 
standard for money value. But the countries adopting such expedients
thus offer their citizens, at least for as long as they manage to or
choose to continue it, a deliverance from a typical past tradition 
of national currencies of even less stable value than that of the 
(historically observed) U. S. dollar.
    But if, for example, all of the countries of the world would base
the value for their national currencies on the value of the British
currency then this situation would appear singular and unstable, while
it was not so singular for a lot of countries to base their currency
value on gold.
    So the United Nations building can be in New York and the IMF and
the IBRD institutions in Washington, DC, USA, but these historical
facts do not make the U. S. dollar a good standard of value which the
managers of currency systems in other countries could justifiably
exploit to permanently fix the relative values of their national
currencies.
    The metric system does not work because French chefs de cuisine
are constantly cooking up new and delicious culinary creations which
the rest of the world then follows imitatively. Rather, it works 
because it is something invented on a scientific basis and in fact, 
after Waterloo, it was not first accepted in France but rather in 
The Netherlands.
  

                Price Indexes in General

     Various states calculate some sort of a CPI or measure of the
"cost of living" for inhabitants of their territory. It is possible
that "globalization" and in general trends leading to more non-local
sources for basic needs like food and clothing will have the effect 
of making CPI indices calculated in different states tend to become
concordant. Of course the effects of taxes can be very complicating
in relation to comparisons of distinct national CPI indices.
    It seems possible and not unlikely, however, that if two states
evolve towards having currencies or more stable value as measured
locally by national CPI indices that then also these distinct
currencies would tend to evolve towards more stable comparative
relations of value.
    Then the limiting or "asymptotic" result of such an evolutionary
trend would be in effect "ideal money" but this as a result achieved
without the adoption of anything like an ICPI index as a basis for
the standard of value.


           Tax Revenues Complications

    It is very well known among economists who study "macroeconomics"
(or the large scale picture of a national economy) that inflation, of
itself, produces the effect of varieties of taxation.
    On the one hand owners of state obligation securities (bonds, 
notes, etc.) find that the value of their holdings are reduced as the 
"true" value of a unit of the domestic money is reduced by inflation. 
So they are as if taxed on their holdings. And on the other hand, 
if the state has established a form of "capital gains tax" then 
the effect of inflation is to add an amount to whatever would be calculated
 as the "capital gain" on property held for a time and 
then sold. A nominal gain can even be created by inflation where 
a "true value" measure would have fairly determined a loss.
    Then these considerations make clear, for example, that if, say,
the state finances of Xland operated stably with a capital gains tax
and with stable "targeted inflation" of 2.5 % annually than that there
would be a loss of state revenues if the inflation rate were reduced
to zero. That is, there would be a loss that could be expected in the 
area of the capital gains tax revenues.
So we can see that for the government of a state, acting on its own 
independently of other states, to rationally contemplate the evolution 
of the inflation rate for its currency towards zero there are clearly 
some very relevant considerations relating to tax revenue expectations.


                     Psychological Considerations

    A truly "Machiavellian" regime can rationally scheme to make the
citizenry of the state FEEL well served (at least for a relatively
short time period) independently of whatever might be most truly best
for them (as seen from an "Olympian" viewpoint). Here it can be noted
that if there is gradual inflation then there should tend to be more
and more "millionaires" as a fraction of the population. If instead 
there were fewer and fewer of these then that might conceivably impact
negatively on the psychology of the citizenry. 
    It is also notable that there has been an overall sense of always 
increasing human per capita wealth, globally, as technological advances 
continue to modify the nature of the global economy. But consider 
the effect of measuring wealth purely in terms of square miles owned 
per capita of the earth's land surface. If each Hopi tribesman owns x by this 
measure and each Navaho tribesman owns y by the measure then, with global 
population steadily increasing, should they feel happy or sad?
    Perhaps humanity will REALLY arrive at increased wealth if we can 
successfully colonize lands beyond Terra, like the surfaces of Mars,
the Moon, and some asteroids. (But of course we could not illogically
claim ALREADY to own the whole Solar System at least, so it is clear
that psychological alternatives enter here also with regard to the
issue of the "true" evaluation of per capita wealth.)
    Possibly the full psychological effect of human "ownership" of the
surface of Mars would not be realized until that area had been divided
into plots regarded as the private property of specific corporate or
personal owners!
 
   
                     Social Welfare Economics

     Much of the persuasiveness of the arguments of Keynesians has 
been linked to ideas of “welfare economics”. There has been the 
argument that governmental policies that might have been regarded as
irrational according to the lines of “classical” or 19th century
economics should be accepted and favored because of benefits that are
expected from a socialist or “left-wing” political viewpoint.
     And in order to logically and fairly consider this side of things
relating to money and economic policies we perhaps need to begin with
a rational understanding of socialism and “social welfare”. We can
rationally begin with the analogy of a family. It is very natural in
human or animal populations for there to be some “sharing of the
wealth” among the members of a family. WITHIN a family it is easy for
the rich to see that they have a benefit from sharing part of their
wealth with poorer members of their family.
     When we start to extend the concept of a family to the totality
of all the citizens or residents of a state we encounter difficulties
in human psychology. It was not easy for all of the residents of the
FSU or former Soviet Union to emotionally feel a special kinship with
specifically the other residents of that state. The same problem is
apparent in the USA and probably explains the absence of “socialized
medicine” in the USA.
     Social welfare considerations can also be justified on the basis
of pragmatic arguments in terms of political stability of the order
mechanism of the state. Procedures of a “democratic” type allow the
less prosperous classes, typically more numerous, an alternative to
a revolutionary uprising.
     Therefore if we suppose that we have a recognition in the actual 
society of a national state of a need for some governmentally 
sponsored efforts to “share the wealth” and thus “enhance social
welfare” then what should be done? The questions can be asked, 
relating to all proposed means for attaining such objectives, that
concern the comparative values or efficiencies of the various stratagems or means.
     Cycles of times of low unemployment and high unemployment can
be dealt with, as a problem like disease, by alternative strategies.
What is best? On the one hand a very big governmentally sponsored
program of “unemployment compensation” can automatically begin a
process of “sharing the wealth” as soon as unemployment rises. And
conversely an simplified version of a “Keynesian” therapy for a
society with an increased level of unemployment would be that there
should be a general pardoning of a fractional part of all debts that
are defined in terms of the state’s currency. This will clearly help
some of the unemployed who might be burdened with debts acquired at
an earlier time of employment and god credit. But it is also clearly 
a “shotgun” type of means which would also benefit dukes and barons
who would own land and have debts defined in terms of money. And the
victimized category would be (hopefully) “the moneylenders”.