Perhaps a real solution would be to fire all state employees ?
I suppose that state employees quitting in protest of being paid in scrip would be a side benefit for the taxpayers.
There are ONLY 2 things government can do to help its citizens in their efforts to be successful economically:
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Reduce taxes.
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Reduce regulations and the level of interference in the lives of citizens.
Doing 1 and 2 above allows citizens to behave efficiently and optimize their own situations.
You plan increases taxes albeit indirectly and increases regulations. You are forcing citizens to provide a loan to someone who they do not wish to deal with. The citizenry is WORSE off. The fact that the loan is paid back with or without interest is not material because lenders do not want to participate in the transaction. If the car companies could pay back their loans or pay the interest commensurate with the risk then there would be plenty of people to loan them money.
As for the stealing of the money and what happens. The unseen effects are terrible. People have less wealth to exchange for things they want. For example someone may want a Toyota manufactured in Tennesse over one manufactured in Michigan but will not be able to afford it. Or worse that person may not want the car but a new home and won’t be able to afford it.
Again, the ENTIRE auto supply chain needs to be a Michigan-based economy because no one outside of Michigan will accept the scrip.
And what are the state employees to do with their pockets full of scrip? Spend it only within the state of Michigan? Again, local vendors who accept the scrip will find themselves unable to purchase supplies, because ultimately supplies must be acquired outside state lines.
The scrip scheme, thus, is impossible.
It’s not as though the productive assets of these companies will simply evaporate away if the companies themselves go out of business. No, they need to fail and their assets sold to entrepreneurs who will create new, and different jobs. This is the best long-run solution for the people of Michigan, as opposed to throwing good money after bad trying to prop up these failed enterprises.
I could barely listen to this. Was it just me or was the moderator extremely annoying? She seemed to feel the need to shout everything and her voice bothered me.
Also, as a Michigan resident in particular and human being in general, I am embarassed by the Mayor of Lansing.
Printing and spending scrip does reduce taxes. Scrip is printed out of thin air. The interest on scrip loans goes into the
state treasury.
Why do you assume that? Collapse of the car companies and their Michigan suppliers would be a disaster for
a businessman like me (I own a winery/tasting room). And I don’t think any Michigander would like our 9%
unemployment to increase.
What money is being stolen and from whom?
Yes, yes yes - No Chinese crap
Yes, at first. But the boom will draw new industry and ultimately Michigan will be self supplying in everything.
You must admit, scrip will foster local economic activity.
Warren, if the private sector won’t bailout the auto companies, why do you insist the public sector should?
The Austrian school, generally is for monetary freedom, not more fiat state counterfeit.
People prefer chinese crap to paying union wages.
So by undoing the division of labour, you hope to create more prosperity?
That was the Soviet plan you know.
In a credit crisis, with monolithic failed businesses, the issue isn’t constructing new credit gimmicks. It’s generating actual capital. Real savings.
You will probably foster more local economic activity. The bread lines will be enormous.
For what reason will all of these new businesses come to Michigan, fueling this “boom” you speak of? Because the automakers are suddenly profitable? If this were the case, these businesses would already BE in Michigan due to the fact that the automakers were profitable once upon a time.
Or, instead, do you imagine that suddenly the automakers will be hyper-profitable, fueling a boom akin to the California Gold Rush?
First, I did not listen to the interview, or to what the mayor of said, but how foolish can you be to advocate a subsidy because someone else is being subsidized (are not there enough misallocation of resources).
Anyways, a foreign government stealing from its citizenry and misallocating resources by subsidizing a business, has the same economic consequences as a firm selling below cost, at least in the eyes of the domestic consumer. That is, a foreign subsidy is, in effect, a subsidy of the consumer (higher standard of living). Shouldn’t we rejoice at their stupidity?
Suppose even, that domestic firms go out of business, due to this “unfair competition”. Prices would be driven down even further, since domestic entrepreneurs will be able to enjoy far lower capital costs than their foreign competition.
Also, there is a change (although artificial) in the allocation of resources in the economy. Since there is a fall in profits in one industry there will be a focus on other industries that provide a higher rate of profit and a greater supply of that good will come about. This leads to a fall in prices in other industries as well, which means a higher standard of living for everyone in the domestic country. Labor would move into industries that provide a greater profit, and everyone one is better off.
The power to regulate credit is inherent in sovereignty. The US Constitution assigns to Congress the power to coin money and regulate the value thereof.
However, in 1913 Congress ceded those powers to the private bank Federal Reserve. Since then, the credit has been regulated for
the benefit of elite insiders at the expense of the common good. Furthermore, the current practice of borrowing money into existence
has led to a situation where the aggregate debt overwhelms the circulation. There are looming credit crunches.
Since Congress has defaulted its credit responsibility , I posit the state of Michigan as the next best democratic credit regulator via
the issuance of scrip. Since Michigan faces a credit crunch, why should it not take actions to relieve the problem?
You are seriously arguing that the ability of the state of Michigan to counterfeit money is less harmful than the fed’s ability to do the same thing ?
The power to regulate credit is inherent in the market. Only in the market is their sovereignty.
The entire world is facing a credit crunch. Look out your window sometime.
Do you prefer globalization? Michigan money goes to China and stays there. Your unemployed neighbor
shoots himself in credit starved Michigan. Is that what you want? Your perfect economy?
There is plenty of technical talent in Michigan. I don’t think the division of labor would be greatly degraded.
In case the plan should succeed, new cars would be produced and sold - new capital.
Scrip has worked everywhere, from Franklin’s Pennsylvania colony to Worgl where it worked so well that the
Austrian central bank was panicked and had it quashed.
It’s not entirely foreseeable whether the automakers would recover. If they did, and only offered state scrip to suppliers, I would expect new
supplier would come into existence to get the business, creating a boom. If the automakers don’t recover then the state of Michigan would acquire
valuable assets for the printing cost of the scrip. I would much rather see the people of Michigan own the assets than see them go to banking
thieves at auction.
Yes, I prefer globalization. Trade = prosperity. More trade, more efficiency, the better the economy is.
The reason why Michigan is credit starved, is because the credit shenanigans of American financial chicanery has come to an end. The world sees that the emperor has no clothes. How long has China been lending America the money to buy GM and Ford? 2 decades?
Credit is accounting. Capital is savings. Michiganders need savings to recapitalize, not more accounting hijinks. Get your asses back to work, and slash your spending. Compete, don’t cry!
I don’t think you understand the concept of the division of labour.
Where is the savings? Where are you going to cut costs, and increase productivity? You’re just papering it over by creating new debt out of thin air.
Fiat money has always failed throughout history, because people use it to substitute credit for capital. And eventually you go from a producing economy, to a consumptive economy. Then when eating more than you grow is no longer sustainable, the system collapses.
It’s just a gimmick Warren. Might it work in the short term? Yeah, maybe for a couple years. The material facts are, Michiganders eat more than they produce. That is only possible by buying cheap stuff from China with money saved by the Chinese and loaned to Americans in the first place.
Your unions are bloated, and create labour market distortions, your corporations are inefficient and cannot compete in a global marketplace. Scrip won’t solve those problems.
The plan to bury your head in the sand and light your asses on fire is not a very good one.
What do you mean by efficiency? Is high unemployment good? Is bigger better? Isn’t small beautiful?
Are you a corporation liberty student? Is there a human scale here? Are you a student whose only consideration is
getting the latest electronic gizmo as cheaply as possible? Have you ever run a business? I suppose from that narrow
point of view, Michigan loaning carmakers scrip is ‘inefficient’, but nonetheless the common good of Michigan would be served.
American industry is subject to regulations the Chinese aren’t, or are you suggesting that Michiganders are lazy?
The material facts are that the credit flow is manipulated by the banking elite, not Congress, and that the tax code grants
exemptions to investments in China. Creating zillionaire insiders here and armies of unemployed is idiotic.
Please clue me in as to what I’m not understanding.
Debt money systems always fail because debt grows exponentially. A fiat system where the money is printed debt free does not have that limitation.
True enough but scrip is democratically regulated credit.
If another country subsidizes their exports, doesn’t that mean they’re transferring more wealth to our country? So is it better for Japan to make cars and sell them to us for $1 or we stick w/ domestic auto makers and buy them for $20,000? If the cheaper price is better in this instance, then why not in every instance?