Suncho

It can't be just a number on a computer in a bank, right?

It's two numbers in computers. It's a number in the computer of the bank that issued the money, and it's a corresponding number in the computer of whoever is holding that money as an asset.

Otherwise some Russian bank could just increase that number to whatever they like. And say "Look, we own 100 Trillion USD. Now let's go shopping."

It's not possible for a Russian bank to pretend they're holding more USD assets than they really are. The issuing bank knows how much USD is in Russian bank's deposit account. The Russian bank can issue its own USD liabilities (i.e. deposits) which are IOUs for the USD reserves that the bank holds on the asset side of its balance sheet. If the bank issues too many USD liabilities, they risk suffering a bank run that drains their USD reserves and puts them out of business.

So I guess USD needs to be recognized by the US somehow?

Not exactly. It's possible to have a USD-denominated deposit account at a bank that h deposits at banks in the US. Most of the USD-denominated instruments in the world are not directly recognized by the US. But the international monetary system is hierarchical. Every USD instrument is an IOU for another USD instrument. If you follow the chain of IOUs, eventually, you'll get to the Fed.

How does the system guarantee that nobody's creating money without notifying everyone?

This is a comment that's not related to SWIFT in particular.

Every asset (including money) is generally someone else's liability. The money that we hold as an asset is the liability of a bank. Anyone can issue their own liabilities, but you can't create money that's a liability of someone else. For example, I can't go to my bank and tell them I have a million dollars more in my deposit account than I actually do. They're keeping track on their end.

Similarly, a bank can't pretend that it has more reserve deposits at the Fed than it really does. The Fed keeps track of everybody's reserve accounts on their end.

Furthermore, does the system guarantee that the central banks of each country are correctly adjusting their books in consequence?

This isn't an issue. The books of central banks don't need to adjust when other banks issue money (i.e deposits).

each register's carry bits are independent from the ones that get carries added from the last register

No they're not. Let's say B's non-carry bits are all 1. If you carry anything from C, that will affect B's carry bits.

Could it be that there was sexual reproduction first and asexual reproduction came later?

Unlikely. You can't mate with copies of yourself unless there are already multiple copies of yourself floating around.

I like the story they present in the article. For simple organisms, it's fairly inexpensive to let defective individuals die off. As organisms get more complex, it starts to become more costly to allow defects in the genetic code to persist. Then it becomes worthwhile to perform "integrity checks" to correct errors in the data as it's being copied.

If a population of organism is put into an environment conducive to a lot of data corruption, then the ones who are want to perform these checks are the ones who end up surviving.

You could imagine that when higher complexity organisms are exposed to high-stress environments, it would help establish their population's ability to sexually reproduce. The ones who aren't doing it will tend to die off.

Then as the complexity increases further, the genetic complexity itself can be a permanent endogenous source of high stress. The organism then loses the ability to produce asexually because it's no longer needed.

Sexual reproduction promotes genetic complexity because it allows us to survive while having more complicated genes. The recombination and mixing-and-matching only helps further the process along.

You're confusing the Fed's ability to monetize assets with the Treasury's ability to spend money on whatever it wants.

They're related. There's both fiscal stimulus and monetary stimulus going on here. The monetary stimulus only makes its way to consumers indirectly. On the fiscal side, as you say, Treasury can spend money on whatever they want. And when they do, they transform some of the financial sector's money into assets (treasuries). If the Fed wants to maintain its accommodative monetary policy, they're going to want to re-monetize those assets.

your statement that our economy has the capacity to provide a decent standard of living to everyone is an article of faith

"decent standard of living" was not crucial to my point.

There's some part of our economy's productive capacity that we have consciously decided not to shut down because we've deemed "essential" to consumers. My point is that it would be a mistake for us not to provide consumers with the means (money) to access that capacity.

What matters isn't the size of the Fed's balance sheet or what it contains. The Fed's balance sheet is "invisible" to the private-sector economy. This expansion of their balance sheet is simply a reflection of the stimulus we're doing.

When the Fed expands their balance sheet, what they're doing is replacing private-sector assets with liquid cash. Given that the stimulus is appropriate for the economy, this is all fine. It's not anything that future generations have to "pay back." And it's not going to cause a collapse of the dollar.

The important thing to keep in mind is that we are intentionally shutting down parts of the economy. But some of those parts include mechanisms (jobs) that we normally rely on to supply spending money to consumers and businesses.

Due to the partial shutdown, the economy's productive capacity has taken a hit. But even so, our economy still has the capacity to provide a decent standard of living for everyone. We don't want to compound the crisis by failing to ensure that consumers have sufficient spending power to activate the remaining capacity.

It would be scary if the Fed's balance sheet weren't expanding like this right now.

http://www.greshm.org/blog/printing-money-cures-the-covid-19...

http://bit.ly/intro-to-cmt

Done.

Wow. Blast from the past. Greenspun's company ArsDigita used to run free web development boot camps. I did one of the boot camps back in 2000. It was the first time I'd ever heard of such a thing.

Apparently, there was also an ArsDigita University, which ran for a year:

https://en.wikipedia.org/wiki/ArsDigita_University

This is a great question. I would say that the "answer from economics" you describe is incorrect. There are some economists who think this way. And they have a term for it: The Quantity Theory of Money.

But the reality is that inflation isn't about the amount of money "in the economy." It's about the rate at which money is flowing through the economy. That flow is the level of spending. To keep prices stable, we have to keep spending balanced with production.

The reason why we can make this distinction is because money doesn't just perpetually circulate through the economy. It flows through the economy like a river from consumers to producers to the financial sector. It's true that money in the financial sector gets "reinvested," but in order for that money to support consumer spending, you have to be able to connect the dots and tell a story about what mechanism is getting money into the hands of consumers.

Basic income is a possible mechanism for that. If we want to, we can continue to use taxes or create jobs to force "existing" money is flowing back into the hands of consumers, but what's the point? Why not just hand them new money instead?

I've written a blog post about this.

http://www.greshm.org/blog/money-does-not-circulate/

(I'm not an economist either, but I'm also really interested in this)

What's the difference in theory and practice between UBI and changing the standard deduction/marginal rate? Like if we give out $6k a year to everyone through a $500 check, what is the difference in how that money is spent versus if we increased the standard deduction to where people would pay $6k less in taxes? (assuming that people are in fact paying at least $6k)

You've partly answered your own question. One of the big differences is that people who wouldn't have paid at least $6k in taxes wouldn't get the full benefit. It's also true that the standard deduction is a deduction of your taxable income. Depending on your tax bracket, that's going to reduce the amount you owe by a different amount.

We could instead talk about doing it as a tax credit similar to the Earned Income Tax Credit, but giving it to everyone equally regardless of whether they're working. This would be more like a basic income. If we can pay people the tax credit at finer intervals instead of in one lump sum at the end of the year, that's even better.

The disadvantage is that people would still have to file tax returns. The people who need the money the most are also the ones who are least likely to be able to navigate the system. If it's exactly the same amount of money to everyone unconditionally, then we reduce the bureaucratic burden by not tying it to the tax system.

Here's a video where I answer the question of why basic income should go to rich people. I advocate keeping the complexity separate from the cash benefit system and putting all that complexity on the taxation side.

https://youtu.be/ylm1jN9cMRQ?t=430

The interesting questions surrounding UBI are macroeconomic in nature. How does it change the economy? We know that consumers need money in order for the economy to function. The question is whether basic income is an efficient way to provide it to them. Is it even possible to give everyone free money?

These trials are just testing how individual people respond to unconditional direct cash transfers. We already know that people are better off if they have more money. Not super interesting. It's not changing the economy around them.

Not that they would, but even if everybody just spent their basic income on booze and drugs, it wouldn't really be evidence against the effectiveness of basic income.

The choices aren't UBI versus no UBI. The choices are UBI versus all the convoluted ways we currently try to push money to consumers through the labor market. To the extent that we're creating jobs to push money to workers, we're not creating those jobs because there's actually work that needs doing.

If we calibrate the amount of the basic income to the economy's productive capacity, then we can allow the labor market to be efficient. In an efficient labor market, jobs only exist because there's actually work that needs doing and the only purpose of wages is to provide an incentive for people to do that work.

http://www.greshm.org/blog/poverty-is-optional/

Teach a man to fish and he'll fish for a lifetime. But give a man fish for a lifetime and he's free to do something worthwhile.

It's not supposed to be satire, no. I'm guessing you disagree with the article?

Yes. I don't mention this in the article, but UBI also allows the Fed to raise interest rates. We'll see mortgage rates increase if we get a high enough UBI.

This is right. I'd just add that we're currently forcing most people to spend their time in ways that do not contribute to society.

By giving people the freedom to spend their time how they choose, they'll at least have the option of doing something useful.

We can probably do even better than that, but basic income can at least help us clear this low bar.

Yup. But there's no reason why we can't provide everyone the level of education that today can only be attained through an elite school.

The idea that a tax will prevent inflation is an intuition that a lot of people have, but it's not correct. If your basic income is going to cause inflation, then a tax is not going to help. What matters is the level of consumer spending and the level of production that the consumer spending is chasing.

If you're curious, I've written a few blog posts about this:

http://www.greshm.org/blog/tax-revenue-is-meaningless/

http://www.greshm.org/blog/the-wrong-thing-to-tax-is-money/

http://www.greshm.org/blog/theres-only-one-way-to-pay-for-a-...

A basic income will only cause inflation if the amount is too high.

The problem is that the economy won't produce what consumers don't have the money to buy. So we need a way of getting sufficient spending money to consumers to activate the economy's full sustainable productive potential.

A properly calibrated basic income is exactly the amount that would get us there. It allows consumers to receive the full potential benefit of what the economy can provide for them.

Inflation occurs when the level of consumer spending outstrips production. If you set your basic income too high, then you'll get inflation until the level of consumer purchasing power falls back in line with the economy's productive capacity.

But the full benefits of the basic income are still there. The fact that we underwent a period of inflation doesn't change the fact that the economy would now be producing at its full potential for consumers.

The general price level in the economy is arbitrary. In the end, any price level is just a redenomination of any other price level. What's disruptive to the markets is when the price level changes. So the challenge is to figure out the level of basic income that's consistent with our current price level. This will allow us to transition into the smoothly.

We can't know the optimal amount of basic income ahead of time. It's also true that the economy's productive potential changes over time. So the only sensible way of determining the appropriate level of basic income is to continuously calibrate it algorithmically. You can know you've reached your optimal level of basic income when you get to a point where the central bank won't be able to keep prices stable if you increased it any further. In other words, we reach the limits of monetary tightening.

Is there a way to build character and the grit to succeed without forcing people into extreme poverty?

Or a broader question is what do we want out of people? What values do we want them to have? What's the most efficient way to teach them those values? Poverty is pretty expensive. Is poverty so important to our society that it's worth paying the price?

This is a recent blog post I wrote:

http://www.greshm.org/blog/life-is-just-a-game/

"For example, sugar tastes sweet because we evolved in a world where calories were extremely scarce. Sex feels good because children are the continuation of humanity. Work seems important because, throughout much of history, we benefited from having more labor. But in modern times, we have artificial sweeteners, birth control, and hobbies."

How can we hack human society to take advantage of what we evolved to feel good about?

Basic income solves the problem of how to get spending money to consumers. This is an important problem. If consumers don't have spending money, then the economy won't function properly.

It is true that, in today's economy, we try to get spending money to consumers in other ways. Are these alternatives somehow more effective than basic income?

For example, should we be making up unnecessary work for people to do as an excuse to give them spending money? Should we be distorting the labor market by "creating jobs" or artificially boosting wages?

A big part of what a properly calibrated basic income does is that it allows the labor market to be efficient.

You're certainly right that we don't want people to become miserable blobs. That's not a happy life. But what's the best way to prevent this? Is it to withhold money from them and force them to work at unnecessary jobs? Or can we do better?

Are we sure that "jobs created" is something to be proud of? Fewer jobs is generally better.

I'd rather see how many jobs they've eliminated, but that's probably hard to calculate.

Or maybe value per employee. The fewer employees, the higher the number.

This is why Stellar probably doesn't count as a real "blockchain." It's also why Stellar is potentially a lot more useful than blockchain. You don't have to do proof of work, which is wasteful of resources by design.

Note that the cryptocurrency people use the word "decentralized" differently from the rest of the world. They use it specifically to mean that the mechanism for determining consensus is perfectly distributed among an unknown number of arbitrary nodes.

Stellar consensus is decentralized in the conventional sense. Federation is a form of decentralization.

Hey! Our business model involves just directly giving money to our users. =)

You might be right that this is true for some startups. But it's also true that there are other startups that will keep going regardless of whether they get rejected by Startup School or YC proper.

As a founder of a startup that would have been rejected, I'm looking forward to getting the most I can out of Startup School.

Yes! Alexander Stepanov is fantastic. He's the designer of the Standard Template Library (STL) for C++, which is C++'s core library of generic algorithms. It's part of the standard libary.

If you can understand how to use the STL properly, you're well on your way to becoming a profiicent C++ programmer.

His books are fantastic too.

Elements of Programming:

https://www.amazon.com/Elements-Programming-Alexander-Stepan...

and From Mathematics to Generic Programming:

https://www.amazon.com/Mathematics-Generic-Programming-Alexa...

If you prefer video lectures, his second book is based off his lecture series Four (three) Algorithmic Journeys:

https://www.youtube.com/playlist?list=PLHxtyCq_WDLV5N5zUCBCD...

https://www.youtube.com/playlist?list=PLHxtyCq_WDLW0NqZCcrrQ...

https://www.youtube.com/playlist?list=PLHxtyCq_WDLXrHwcaay14...

https://www.youtube.com/playlist?list=PLHxtyCq_WDLVQPzEm3igP...

It's a combination of history and math/algorithms and programming (using C++). If you're just looking for a straight intro to C++ course this isn't it. But it's a ton of fun and the generic programming/STL mindset is very powerful.

Programming Conversations is another great lecture series by Alexander Stepanov:

https://www.youtube.com/playlist?list=PLHxtyCq_WDLXFAEA-lYoR...

I would also recommend searching YouTube for videos by Sean Parent. This one in particular is very enlightening:

https://www.youtube.com/watch?v=qH6sSOr-yk8

Sean Parent is very good at getting you in the STL mindset and showing off the expressive power of using the standard STL algorithms in your code. Except in the simplest cases, you should try to use them instead of writing your own loops.

Here are some random tips if you're coming from C or Java:

"new" is not the way to create objects in C++. new and delete should almost never be used by serious programmers in C++. Never use new and delete (or malloc and free). If you want a dynamically-allocated array, use the standard vector.

It's much easier to write C++ than it is to read it. This is because you can always write using a simple clear subset of C++ that you understand. Try to pick a style that you think as many people as possible will understand. Programming languages are for humans to read. I try to write code that I think C programmers can read.

Edit -- Another tip:

Exception safety isn't about C++'s exception-handling language feature. Exceptions still happen in C. There's just not a language feature that directly expresses them.

Writing exception-safe code is nearly impossible in C. RAII and C++'s built-in exceptions make it possible. If you're careful to always use RAII by default, you can get the basic exception safety guarantee automatically without thinking about it. And you can get the strong exception safety guarantee whenever you need it.

Good luck!

Economics of Money and Banking, taught by Perry Mehrling on Coursera:

https://www.coursera.org/learn/money-banking

It's just fantastic. He explains what money really is from the perspective of treating everyone as a bank. Also, lots of good history here including the history of central banking, the gold standard, and war finance.

Anyone who wants to understand money should take this course. It would be nice if more cryptocurrency enthusiasts learned this kind of monetary economics.

Hmm. I'm not sure I fully understand the question. Anyone who wants a country's assets and budget spending to be transparent would be free to run a node. And there's nothing about a traditional distributed database that prevents it from using hash pointers to ensure that the history cannot be tampered with. That's not a special feature of blockchain.

The question is: how do you get a country to record all its transactions in a public ledger? Once you've figured that out, the technology to use for it probably isn't blockchain.

Most of the work that goes into running a Bitcoin node is actually just for burning electricity to find the next block. No real work is being done in proof-of-work.

The problem is that, as a technology, blockchain does almost nothing new. It's a much slower and less-efficient version of technology that already works correctly (i.e. the distributed database).

The only thing that proof-of-work (or proof-of-whatever) accomplishes is that it addresses the "double-spend" problem whereby the same person signs two mutually incompatible transactions and tries to get different nodes to respond to both of those transactions as if they were valid.

Proof-of-work addresses this issue by using a voting system whereby everybody gets votes based on how much electricity they waste. There are other, better, ways to address this issue.

Anyway, I could talk about blockchain and what's wrong with it all day, but I don't want to bore you. I could also talk about specifically what's wrong with Bitcoin and what would still be wrong with Bitcoin even if it were implemented using a sane distributed database, but again, I don't want to bore you.

The important thing to remember out of all of this is that you have a fundamentally silly technology. So it's only ever going to be used by people who don't understand it, or people who are trying to trick other people.

It is therefore not an coincidence that there are so many blockchain-based scams. And it's also not a coincidence that it's so hard to tell the difference between what's a scam and what's not. These are fundamental consequences to the nature of blockchain as a technology.

And if you think I don't know what I'm talking about, you should probably know that, for a time I was considering using blockchain as the underlying technology for my digital currency project. But the more I learned about blockchain, the more I came to realize that there's essentially nothing there.

If you think I'm wrong, prove me wrong.

When the government borrows the money, they have to pay it back, or at least pay interest on it.

Sort of. Each individual debt obligation has to be repaid as it comes due, but that's different from saying that total volume of debt ever needs to be paid down. The government can be meeting its debt obligations while at the same time increasing the total amount of debt. As long as there's a market for government debt, they can continue to roll over their debt.

They have to pay interest too, but this isn't exactly a problem. They can always borrow to pay the interest. And if treasury yields get too high, the Fed can buy up excess government debt. Then one part of the government is just paying interest to another part of the government anyway.

This puts some constraint on the government. Whereas if the government creates the money, there is no constraint - it can spend as much money as it wants.

The borrowing is creating money. You can deficit spend without the bookkeeping of issuing treasury securities etc., but the result is the similar. The ultimate constraint is still the amount of spending that the economy can productively absorb.

If you don't see why that might be a problem, let me ask you: Have you looked at Congress lately?

Sure. If Congress doesn't understand how deficits work and you can trick them into creating money without explicitly borrowing (even though you're technically still borrowing), then great. But that's politics, not economics.

But for a fair amount of it, no, it is not invested in creating things of value to society, and so no, society does not get a return from it.

Correct. If the government spends money in a way that burns resources, it takes those resources away from the productive economy. But if the government spends money in a way that doesn't help, but doesn't hurt either, they can spend unlimited amounts of it without really changing the constraints on how much additional money they can spend. For example, if they printed money and spent it by tossing it down a hole, they could do it for as long as they wanted without hurting anyone, but without helping anyone either.

And that means that it's a drain on society - the people who are in the service, or creating weapons, could be doing something else of more value to society - teaching children, or repairing roads and bridges, or building a better air traffic control system.

Yup. If labor is scarce and you're making people work on things that are not benefiting society, then you're taking a valuable resource (labor) away from the productive economy. I don't think we're particularly short on labor right now, but the same type of reasoning applies to any resource.

So if Congress can create money, it can divert as much of the actual productive ability of the economy - people and materials - to whatever Congress thinks will get more votes. Again, I say, look at Congress. Do you really want to give them the ability to steer unlimited amounts of the economy to do whatever they think should be done? I don't. It's a horrible idea.

They already have that ability. I want them to use it to provide a basic income. Maybe that means making basic income more popular so it becomes one of the things that gets them votes.

Labor is the source of all wealth, not government.

Neither labor nor government is the source of all wealth. There is no one source of all wealth. Not all wealth is produced in the economy, but for the wealth that is, the source of that wealth is all of the resources (including labor) that collectively go into the production of that wealth.

Furthermore, we wouldn't produce wealth if people weren't able to buy it. So in a sense, you could say that the source of wealth is spending. And in the sense that the government funds spending (through a basic income or otherwise), the government is the source of wealth.

Depending on your perspective, wealth can have different sources. But figuring out the source of wealth isn't really that important when we know how to maximize people's wealth regardless of its theoretical source.

There's a lecture I really like by economist Steve Keen where he describes his own theory for the source of wealth:

https://www.youtube.com/watch?v=2H1LIr2NMbE

His answer is that energy (a.k.a. the sun) is the source of all wealth. That's certainly a reasonable way of looking at it that you can't really argue with. But it doesn't tell us how to improve human prosperity.

My favorite quote from the lecture:

"The theory of production has got nothing to do with the theory of remuneration."

Basically this means that how much you get paid has very little if anything to do with how much you contribute. And that's exactly the way it's supposed to be. Markets determine the prices of various forms of labor and that's fine. Let supply meet demand and don't worry about whether wages happen to line up with individual incomes that are optimal for the economy.

Getting individual incomes to prosperity-maximizing levels what basic income is for.