Mosler Bonds; a Call to Patriots or a Prudency Vampire?

There has been a great deal of speculation, amongst those inclined to agree with the financier and businessman Warren Mosler, that 'there is no problem so great that tax cuts or spending rises cannot solve it.' This speculation centres on the possibility that so-called 'Mosler bonds' could help solve the sovereign debt crisis.

The idea of such bonds is that citizens or legal persons with taxable business in a state would buy the bonds at above-savings and inflation interest rates (currently that would be around 7-8%, on a long-term basis). These bonds could be sold to other citizens or legal persons, or leveraged. Their distinctive quality would be that, in the event that the State defaulted on the bonds, the value of the bond could be set against tax liabilities. This would be such a constraint on states that the bonds, in theory, would be stable, and they would stabilise investment and confidence.

I think that this sort of thing, and the enthusiasm for it, comes very close to my earlier prediction that, as we started sinking, iterations of crisis management that happened before, in Italy and Japan, would start appearing with us. In itself, this is one of the key reasons that gold is climbing (cf. earlier posts). Gold is now functioning as an alternative international currency. This is because currencies themselves are starting to go haywire, and are surrounded by mad professors who want to make things worse. It is very difficult, however, to screw people who hold real gold unless you take over all the places they could possibly trade it in.

Yet there are more and more of these calls essentially to take peoples' assets. I can see why a company in the short term might buy Mosler bills, but given inflation, and the tendency of states to demand 'sacrifice' of their own people, why on earth would any individual saver transfer their savings into such vehicles?

Populations need a better understanding of fascism, I think, because we're down a liberal-language version of that rabbit hole right now. Mussolini it was, famously, who privatised profit and nationalised debt. What people forget is that he did this before the depression, requiring as part of his late twenties deflation that people sacrifice their bonds 'on the altar of the fatherland', where a grateful nation ceremonially burnt them.

One of the defining features of being a citizen of the West is that one is at the behest of the gangs of thieves and worse who run it like the fourth crusade--and Mosler Bills seem to forget that people know this. The idea requires of government that it do things on trust to 'rebuild' and economy when trust is long gone. What's to stop government defaulting, or inflating, and then inventing a non tax 'fee' or charge to offset Mosler liability offsets?

In the long run, what we are facing is a collapse of Keynesianism on the national scale. There is nothing much to replace it yet because I think (and I hold out no special insights myself) that people do not understand what the combination of digital monies of all sorts and globalisation have done to the world economy in general and to the West in particular.

Hoping to nationalise assets directly, with consent, as much as trusting in mad budgets or stimuli, is literally morbid, in that it reflects the mental illness consequent upon a refusal to accept the mortality of previous policy responses. At the same time, nationalising indirectly--by using taxes to subsidise and purchase banks--is doing very little other than keeping the cadaver alive.

So what gives? What, in a world where trust has broken, where governments are in denial, and where international banks and domestic policymakers are desperately filling their boots before the next great crash reifies the unemployment and desperation many already feel, are we to do? I can't help but feel when I read about magic solutions to our troubles that another undersea cliff-edge is approaching, and it worries me because I wouldn't want what I suspect is coming visited upon the people and the places I care about.


UPDATE: *smacks head*. You fool Meenagh! If a state issues paper which can be transferred between citizens, and which can be accepted as payment for taxes, that state has found a way to To reinvent its own parallel currency to the euro. And that state can then arrange default swaps with other states, on an arbitrage basis. Why not decorate the bonds with, say, national figures, and issue them in small denominations of 1, 5, 10, 20, and 50? We could call them, oh, I don't know, punts or drachmas or pesetas.

Of course, all we'd be doing is resetting a debt-based ponzi scheme, buying time desperately, and encouraging citizens to move their assets to the state in the absence of a real money gold outlet...but time might be all the near-bankrupt states need.

I like this idea now. It takes me some time to get there, sometimes, but I do in the end.