The first thing you may be wondering is why I called this blog "The Vanishing Dollar." It almost smacks of some Austrian goldbug kind of thing, which I assure you is not what I'm driving at here.
I actually was an Austrian economics devotee, or at least what passes for one nowadays, a decade or so ago when I was in my early twenties. Like many libertarian/Austrian types I grew out of it once I started learning about how the economy actually works and developed my own ideas about the operation of financial markets and the banking system.
I started my in-depth thinking about money and its role in a modern economy several years ago at Lucky Bar in Washington, DC where I got into an argument with an Englishman in which I espoused a certain theory of monetary economics that I believed, wrongly, was the mainstream view.
The guy made a disgusted face and said "You're one of those 'chartalists.'"
I didn't know what this meant because it had never occurred to me that there was any other way of thinking about modern money than the Austrian commodity-focused approach or the chartalist approach. But when I went home to research it, I found that the world was apparently in the grips of something called "M-form" monetary theory, a nonsensical mishmash of blather which no one seems to be able to completely explain.
Unfortunately I must report that we remain in the grips of this mass hysteria even today. The men who run the economy, even now that we kicked the old bums out, believe in a form of financial voodoo which is expressed in no coherent form, anywhere, because it makes absolutely no sense.
I aim to change that by blogging to no one. Should be quite a ride.
Oh, but the title! Yes, the title. Well, when you get right down to asking the economic question of "What is a dollar" the answer winds up being really unsatisfying. Defined most simply, a dollar is a voucher that entitles the bearer to cancel any liability valued at one dollar.
That doesn't tell us a whole lot, in economic terms. In fact, it's wandering out of economics altogether, and into politics. Because the dollar, foundation though it is of all modern economies (really!) has no economic basis whatsoever. Economically, a dollar is worthless.
A dollar is a political entity. It is "backed," in the impoverished parlance of the gold-standard days, not by "faith" or even "credit" but by the power of the US government to take your shit away from you if you don't pay your taxes.
To many people, this sounds like the foundation for anti-tax hysteria. But in fact it's perfectly normal and correct, and lays the foundation for all the marvels of the modern economy in all developed countries and most undeveloped ones as well.
How can the dollar be almighty and yet not exist in any real sense at all? Can both of those things really be true at once? That, ladies and gentlemen, is the question I aim to explore on this blog.