Re: Noise: Re: Those Evil Republicans

At 04:58 PM 6/24/96 -0400, hallam@Etna.ai.mit.edu wrote:
> Remember why FDR invented deposit insurance? The worst depression in modern 
> history was caused by the lack of deposit insurance. 

By an interesting coincidence the the worst depression in modern history
happened
shortly after governments around the world took control of currency issue, so
that banknotes became government notes.

Just as the worst famine in modern Russian history happened shortly after the
government collectivized the peasants.
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I'm somewhat at a loss to understand your comment "worst famine in modern
Russian history", since modern Russian history could at the earliest be
said to start with the liberation of the serfs there is remarkably little
"modern Russian history" that was not under communist rule. Indeed it is 
difficult to imagine that any worse famine did occur at any time in Russias
history, unless you were to count some of the effects of world war 2. 

Since the appologists for Stalin outside Russia number in the low thousands
I'm at a loss to understand the relevance of your point. 

Similarly your point about government control of currency is somewhat puzzling. 
Are you arguing that we are less prosperous today than we were in the 1920's?
If so that would be a somewhat curious argument which you will no doubt 
share with us. The only modern country I know of which does not control its
currency is Lichenstein which uses the Swiss Franc, I'm not sure what lessons
can be learnt from a country whose chief ecconomic activities are gambling
and facilitating tax evasion however.

Now it may be that Bob Dole is secretly planning a radical change in the
ecconomic direction of the country but somehow I doubt that the position of 
chairman of the Federal Reserve is going to be going away soon. Indeed I
have not heard any Repulicans mioving towards yor policies which to me
sound more like those of William Jennings Bryant than Bob Dole. 

	Phill

hallam@Etna.ai.mit.edu wrote:
> 
> Similarly your point about government control of currency is somewhat puzzling.
> Are you arguing that we are less prosperous today than we were in the 1920's?
> If so that would be a somewhat curious argument which you will no doubt
> share with us. The only modern country I know of which does not control its
> currency is Lichenstein which uses the Swiss Franc,

There are dozens - Jersey, Isle of Man, Andorra, ...

> I'm not sure what lessons
> can be learnt from a country whose chief ecconomic activities are gambling
> and facilitating tax evasion however.

Ever heard of Goodhearts law?  (something along the lines of
"efforts to regulate something will result in it moving somewhere
unregulated").

Gary
--
pub  1024/C001D00D 1996/01/22  Gary Howland <gary@systemics.com>
Key fingerprint =  0C FB 60 61 4D 3B 24 7D  1C 89 1D BE 1F EE 09 06

Jersey and the Isle of Man are not independent soverign nations. The
Manx parliament is subordinate to the English Privy Council and Jersey
is similarly an anachronism. Andora is ruled jointly by the French President
and a Spanish Bishop (or is it the other way round?).

Fogive my skepticism but I don't think that any ecconomist would seriously
suggest these as usefull models for modern industrial societies. The chief
industries being parasitic on those of larger nations.

There are political solutions to the problem of regulation being factored 
down to the lowest common denominator. That is the purpose of the Social
Chapter (nee charter) of the EU Maastricht agreement. The next round of
GATT is likely to contain similar requirements.

		Phill

hallam@Etna.ai.mit.edu wrote:
> 
> Jersey and the Isle of Man are not independent soverign nations. The
> Manx parliament is subordinate to the English Privy Council and Jersey
> is similarly an anachronism. Andora is ruled jointly by the French President
> and a Spanish Bishop (or is it the other way round?).

Andorra is a self governing sovereign nation - the French president and
Spanish bishop play only titular roles.

Regarding Jersey and the Isle of Man, I misunderstood the requirement for
the countries to be independant - we were after all discussing countries
which have no control over their currencies.  Still, there are many
non-independant countries that do not use the currency of the country
they are dependent on - for example Bermuda and BVI (both UK dependent)
use the US dollar.  Many of the Caribbean islands which are UK dependent
(eg. Anguilla) use East Caribbean dollars.

There are also several independent sovereign nations that have no control
over their own currency (eg. Liechtenstein (the one you mentioned), Andorra,
Monaco, Nauru, Marshall Islands, Micronesia and Pueto Rico).  One could
even argue that countries such as Cuba have relinquished control over
their own currency by tying their Peso to the US dollar (which is also
widely used in Cuba).  The same could perhaps be said of Luxembourg.

> Fogive my skepticism but I don't think that any ecconomist would seriously
> suggest these as usefull models for modern industrial societies. The chief
> industries being parasitic on those of larger nations.

First of all, "parasitic" is a very derogatory term to apply to these
nations.  They are no more parasitic than out of town supermarkets.

Second, you suggest Liechenstein as a useful model for a modern
industrial society that has no control over its currency, but then go
on to criticise Andorra as a useful model.  Why?

Third, you have missed the point I was making, that of Goodhearts law,
which loosely states that "attempts by the government to regulate or
tax one channel of banking business quickly lead to the same business
being conducted through a different channel which is untaxed or
unregulated".  Surely the fact that every large nation has its
banking tax havens (eg. UK has the Channel Islands, the US has the
Caribbean islands) is proof of this?


Gary
--
pub  1024/C001D00D 1996/01/22  Gary Howland <gary@systemics.com>
Key fingerprint =  0C FB 60 61 4D 3B 24 7D  1C 89 1D BE 1F EE 09 06

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
                          SANDY SANDFORT
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C'punks,

On Thu, 4 Jul 1996, Gary Howland wrote:

> There are also several independent sovereign nations that have no control
> over their own currency (eg. Liechtenstein (the one you mentioned), Andorra,
> Monaco, Nauru, Marshall Islands, Micronesia and Pueto Rico)...

Don't forget Panama, Liberia, Tuvalu, Turks & Caicos, etc. 
Printing one's own money does not a sovereign nation make.

> First of all, "parasitic" is a very derogatory term to apply to these
> nations.  They are no more parasitic than out of town supermarkets.

Correct.  While the US unsuccessfully tries to play policeman 
for the world, other countries are far more successful in being
the bankers, playgrounds, pharmaceutical manufacturers and
distributors, etc. for the world.


 S a n d y

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

>First of all, "parasitic" is a very derogatory term to apply to these
>nations.  They are no more parasitic than out of town supermarkets.

A parasite is omething that lives off a host to its detriment. It is
easy for a small island nation to be parasitic off larger ones. The
problem for the USA, UK, Germany etc is that there are no larger 
nations for them to be parasites of, nor are their native peoples to 
steal land from or colonies to exploit. In short someone, somewhere
has to do some work.

>Second, you suggest Liechenstein as a useful model for a modern
>industrial society that has no control over its currency, but then go
>on to criticise Andorra as a useful model.  Why?

Actually I discounted both as models. I don't consider the ecconomy of 
a country of less than a million to be particularly informative in 
considering the ecconomies of countries of fifty or a thousand times that
number for the reasons advanced above.

>Third, you have missed the point I was making, that of Goodhearts law,
>which loosely states that "attempts by the government to regulate or
>tax one channel of banking business quickly lead to the same business
>being conducted through a different channel which is untaxed or
>unregulated".  Surely the fact that every large nation has its
>banking tax havens (eg. UK has the Channel Islands, the US has the
>Caribbean islands) is proof of this?

I'm very skeptical about any idea that is referred to as a "law". The
experience of science is that natural laws are no more constant than
human ones. In the social sciences such terms tend to indicate no more
than the existence of physics envy.

The greatest danger is when the title "law" causes the importance of
an effect to be mistaken. Just because an effect can be observed and 
explained does not mean that it is the only effect. To call something
a "law" is almost guaranteed to lead to biased analysis. 

Goodhearts theorem is overbroad as stated. The banking industry will 
clearly attempt to move to the most beneficial channels. That does
not necessarily mean unregulated. A banker's main product is trust.
The fact that a bank is regulated by government increases consumer
confidence and trust. If I place my money in Midland bank UK I know
that those deposits are guaranteed by the government of the UK. Even
if the bank itself becomes illiquid I can recover my money. The cost
of this security is regulation which I am as a customer happy to take
the benefit of.

The fact that a proportion of money is diverted through tax havens
does not imply that all money will be so diverted. The major banking
centers of the world continue to be London, Geneva, New York and 
Tokyo, all of which are heavilly regulated.

The final factor you exclude is that of ecconomic imperialism. Small
countries don't have unlimited opportunities to exercise their
sovereignty as the govt. of Panama discovered. While a country has
the theoretical right to become a drug trafficing haven it faces the
risk of sanctions ranging from ecconomic pressure to invasion and 
occupation. Similarly the Swiss govt no longer offers the same
anonymity it once did.


		Phill