Two Curses of Cash: On Rogoff

Rogoff argues that we should eliminate big bills like US $100 and its big economy equivalents. Doing so will have two benefits.

The first benefit is that most people do not use large bill. These are in the financial system in the gray and black economy where having dense stores of value that are also a medium of exchange facilitates crime like drug dealing and human trafficking. There is profit to the issuing countries of these bills, a seignorage income that would be lost if these bills were pulled from the economy, but the ills caused and made easier by their presence are worse than the loss.

The other benefit is that by not having cash around, it gives the central banks more space to move interest rates if necessary. Right now, there is an effective floor at zero percent that the Federal Reserve and its sister institutions can’t go much lower because once you impose significant costs to keeping money in reserves, then the option is to hold cash. There is some cost to holding large quantities of cash so Japan and some European banks have gone a bit below zero, but not that far. 

This space is important because even conservative Taylor rules of setting the interest rates would have been significantly negative in the aftermath of 2008. The zero-bound kept the Fed from going lower and it may have significantly increased the duration of the downturn in the aftermath of the crisis (especially since in the US and Europe where there was little help from fiscal policy because austerian parties bought into the fallacious idea of the family analogy for governments).

I’m on Rogoff’s side here, especially since it isn’t new to me as I have seen the idea at length in the work of Miles Kimball (ex-Michigan, now at CU) as he has made the argument on his blog. I’m more a supporter because of the second reason, which I am sure is the more controversial part of his argument – many people are suspicious of central bank activity, and they feel that giving the banks more leeway would encourage the activist central banks. I am of the opinion that independent monetary policy needs all possible weapons in its quiver as we have seen inaction at the exchequer cause real damage in the

The Bond Issue Lost, but the Need for Brookfield Remains

Democracy in Action

Hello Neighbors:

In the past few months I have been trying to make the case to all of you why I think we need a new library. I have made the case on line and face to face. It was a cause I was passionate about, where in my opinion it was a good investment in the community whose time had come.

The referendum for that library bond issue was defeated this Tuesday.

I was disappointed, but what impressed me was the engagement of the community. I can’t say if there were other things on the ballot that might have driven it, but turnout far exceeded expectations. Over seventy-five percent of registered voters cast ballots one way or the other for the library, finding their way to it through all the top of the ticket choices and the judge retention elections.

This shows how engaged as a community that we all are, and despite the election not going the way I hoped I am heartened by all the involvement. Government at the local level is about individual choices we are all empowered to make – in fact to be successful it demands action of the citizens.

That said, I volunteered my time as a citizen because I feel that the library is still an important part of our community’s infrastructure that needs improvement. The building is aging and there is not enough space for the programs the community already engages in, let alone will demand in the future.

The need for space was real and still is real. The library as a community center cannot be replaced by a better home Wi-Fi connection or networked e-books. The library is the beating heart of the community. I thank so much those who believe in that vision. The need means that we will be asked again what our vision for the community is, and in what shape. It will be an ongoing conversation with the citizens of Brookfield. I look forward to being part of this conversation.

Don't mourn too long, then organize.

The senate, and by extension the electoral college are fundamentally anti-democratic bodies that exist because our founding fathers were not all-knowing deities who agreed on everything but instead were men with quarrels and grudges who disagreed on much.

Part of that was how to yoke together two pieces of a new country that was failing in light of the looser articles of confederation. These two parts were a mercantile north and an agrarian south, both of which were dependent on slave labor in the homes and in the fields. Small and rural states are over represented in both the prior mentioned bodies.

That said, Hillary didn't make the positive case for her or the negative case against Trump strong enough that enough people in the right places could look into their hearts and minds to make the choice for her. As much as I hate the electoral college, those are the rules of the game. I went to bed hoping that I would be disappointed by the status quo being carried forward when there was a more left opponent in the primaries who seemed to generate more enthusiasm.

But I'm still in shock. Donald Trump was elected president, and as much as I wish this was some clever fiction like Man in the High Castle, it seems to be our reality. Going forward there will be much complaining, since we as always are alienated from so much of what goes on at a federal level. Even with gross dissatisfaction of the congress, incumbency is a huge advantage so the same people get sent back.

The bright sport for me is that so many of the nations youth voted overwhelming lefter than the general populace both in the primary and in the general. We can be sad, but we have to learn from the reality. Knock on doors, run for office, write your representatives. Don't mourn too long, then organize.

Population Bombs

There have been two big blips in panic about population. In the Early 1800s, Maltus looked at a chart of growth of population which was curved because it was cubic against a graph of growth which was linear. There is a point where such a graph intersects and population grows beyond the resources we can get at easily. Malthus (in his first edition, toned down in subsequent editions) that aid to the poor was immoral because it pushed the world towards that point. The industrial revolution saved that from happening, as mechanization made resource use more efficient.

Then in about the 1960s, there was further panic, basically looking at the same kind of graph. This one was based on the idea that food production globally was peaking, and population growth was still going on. Thinkers like Paul Ehrlich and consortia like The Club of Rome put out books with titles like "The Population Bomb" arguing that famine was neigh. Of course that didn't come to pass because of the Green Revolution.

The problem is that we can't count on technology to save us all the time. The current "revolution" in information is more about contentedness and less about access to resources (Though there are things that will be able to help the so called "bottom billion" since they're connected through mobile phones and missed the desktop era). The one thing that saves us is that as countries develop, birth rates go down. So population growth slows. As more countries develop, the global growth slows. This is good in terms of resource depletion. It is also problematic because capitalism as we know it depends on growth. There are two parts of growth in a capitalist economy. The first is technological growth, something called by economist as Total Factor Productivity. We get better at making things. The other is population growth. So if a country isn't growing, it feels like a recession. Japan has had this problem for decades, and now it looks like the west is facing the same problem. One solution is immigration, but a lot of immigration dilutes a homogeneous culture, and you get lots of backlash over it.

Ultimately, I'm not sure at what level we can say that population growth and levels are a problem. Especially because if you look at potential solutions, there's nothing good. There is a lot of push back against the One Child policy in China, and it has shaped demographic trends that will echo for decades. New entrants into the Chinese workforce are due to peak pretty soon, and now they have a bunch of old people to support. It's not a pretty picture. If it is a problem, it would take a large coordinated effort to solve. And that assuming the climate at stasis.

What's probably going to happen is a crisis point pushed by climate change that kills a mass of the poorest people on earth, and that might get the ball rolling in the rich countries.

A Personal Financial Case for the New Library in Brookfield, Illinois

Hi. My name’s Edgar Mihelic. I live and work in Brookfield. I support the library.

I am also a member of “Residents Championing a New Library” the PAC advocating for a yes vote in the referendum.

What I want to talk about today is independent of the PAC and my employer and is in my role as a private citizen. I want to hit two points that important to me because of my educational and professional background. I have an MBA and am the Director of Finance at my organization. This not part of the PAC communication in part because it is a bit wonkish, and not necessarily universally applicable.

This first bit is about your personal cost. People don’t like the idea that the library will cost them X amount of dollars. What is easy to forget about an increase in local taxes is that anyone who pays more in taxes and mortgage interest than the standard deduction will be able to deduct the increase from their federal taxes. This means that any extra local tax lowers your federal taxable income. So if you’re in the 35% bracket, any extra local taxes is not a dollar for dollar increase, but will be decreased by that amount. My taxes will go up, and I’m ok with that from an investing in the community standpoint, but it won’t be one for one. It will be less than X.

The second bit is about the cost of money. I don’t have the exact bond details in front of me, but what is important here is the timing. The interest rate has never been lower. If you are looking at the idea that eventually the building will have to be replaced, and you need to borrow for that (and borrowing makes total sense because you won’t draw from current funds because a new building is a large capital expense), then there literally has been no time like the present to invest in any infrastructure projects - Ever. At issue is that the Federal Reserve wants to increase rates. And they want to keep doing it. We’re at the bottom, and borrowing will never be cheaper.

I understand that this is a contentious issue in the community, and there are many angles to look at it from. I just haven’t seen either of these points fleshed out in conversation here and I think they’re important to raise. I hope everyone enjoys the debate where your preferred candidate will do well.

When I run for office, show me this

Here's the thing about politics for me that's a problem. It's the money. And it's not a right or left thing, or that one side has more money than the other. The problem is that the necessity to get elected and to stay in office is so expensive that you have to spend gobs of time just raising money. I hear that legislators spend as much time on the phone asking for money as they do shaping policy. Overall, that's wrong, but there's no good answer constitutionally at this point on how to fix it. You can't really pull yourself from the game unless you have your own money. 

What this means is that there is a certain type that is drawn towards politics,. There may be the guy or gal who really wants to make a difference, but then they get elected and they have to justify whatever committee appointments they want, and they have to immediately begin planning for reelection. That takes a certain type of narcissist to keep dialing for dollars at the expense of making the government (at whatever level) work for the people who voted you in. Then you have to run for reelection, convinced that you are the best choice for the people you serve.

God, what a shit show.

Build It Now: For the New Brookfield Library

I pay thousands, every year, for things I will never use. I pay these dollars out of my account every month. Every six months, I see the breakdown: Schools; Parks; the village; community colleges. I’ll never use these. I don’t use the schools. I don’t go to the community colleges. I use the parks but not all of them.

Why do I pay those thousands?

Am I a fool?

Someone is pulling the wool over my eyes as I sleep and mix metaphors in my dreams?
No!

I am making an investment in my community. I am making sure that all our kids are educated. I am making sure that we all have the parks we need when we need to go stretch our legs. I am making sure that the police are there when I need them because someone thought it was smart to dump their trash in my alley.

Each dollar is an investment in the community that I have chosen to call home. I live here and I work here, and it is in my best interest to make this the best place we can make it be. We’re not Oak Park or Naperville, but we have this nice small town vibe in the shadow of the big city and I want to make it the best small town in the shadow of the big city as possible.

That’s why I’m investing my time and energy trying to build a new library. The one we have doesn’t fit our needs, and we need a new one. I get the concern about raising taxes. Paychecks aren’t going up fast enough. But for my family, my home doesn’t end at my fences. My home is all the houses I walk by – the cape cods and the Tudors and the colonials. My home is all the businesses I spend my money at – Galloping Ghost and Burger Antics and Tony’s and Tischlers. My home is the parks and the schools and the libraries even if I never see the inside of the parks and schools and libraries.

The Library. And the roads. And the schools. And the Parks. They are all about more than your individual tax bill. It’s about asking yourself what kind of community you want to live in. I want to live in a community where we all want to invest in the community. I hope you feel the same.