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When I explained how money works to my younger brother after having it explained to me by actual drunk guys who work at Goldman (it’s basically impossible to ge

When I explained how money works to my younger brother after having it explained to me by actual drunk guys who work at Goldman (it’s basically impossible to get the truth any other way as far as I know), his reply was: “You mean to tell me that the IRS is a gold sink?!” “Well, actually that’s a pretty good analogy, the difference is… well… that’s a pretty good analogy!”

wodenokoto 3y ago
Maybe I don't understand what a gold sink is well enough, but I don't see how IRS can be considered a gold sink. Gold spend with NPCs are not returned to the economy. Taxes are returned to the economy.
- pests 3y ago
  > Taxes are returned to the economy. I hope we don't start dropping bombs on our own cities....
  - Doxin 3y ago
    The money isn't stuffed inside the bombs. The money is still returned to the economy for the most part even if the bombs are "spent" elsewhere.
    - pests 3y ago
      > The money isn't stuffed inside the bombs. I thought that was the only explanation for their prices.
  - wodenokoto 3y ago
    Paying for the construction of a bomb, is participating in the economy (as opposed to outright burning the money)
    - taneq 3y ago
      Kind of a broken window fallacy (the bomb isn’t necessary in the first place) but also kind of not (the tech developed for military hardware does eventually get used for good).
- benreesman 3y ago
  Tax receipts are in no sense returned to the economy unless you really overload one of those words. A modern economy works by running a printing press a little faster than a furnace, with the coefficient being (under honest and competent management) a good estimate of next year being better than this year by such and such, a self-fulfilling prophecy in a good way until you like, burn the planet via carbon emissions or some hard constraint like that. And it’s a perfectly good system… under honest and competent management. It’s just easier to corrupt than systems with much lower potential (which is the distance between gold bug and ignorant, those folks have a point, they just rarely make it). This is where all the 1971 stuff comes in: no rich person does anything but advantage their less-capable kid or lover or whatever unless someone is pointing a gun at them. (e.g. Altman has a job let alone unfettered power). The gold standard has a lower maximum potential risk to the extent you can stop there being a de Beers of gold. You likewise accept 50 years from the transistor to a computer in your house even if you’re fucking loaded. The unanswered question is: can we get competent and honest leadership (after a fashion) back without the bloodshed it has required 100% of the time before? A lot of us hope so but don’t have an answer just yet, and the clock is ticking.
  - whage 3y ago
    This post feels like recent movie trailers. The way you wrote it makes me believe you know what you are talking about but I have no idea. Care to give the curious reader pointers to the topics you mention? I mean the "printing press to furnace" analogy of the economy, or what you mean by 1971 or the gold bug or the 50 year transistor omg what?
    - benreesman 3y ago
      I’m just a nerd whose nerd hobbies came to encompass finance when I moved to Manhattan. I was also a party monster back then (please don’t read the book) which for a childless bachelor is a pretty reasonable way to get the most knowledge NYC has to give in a year. If you have particular questions about the monetary system, I know enough to either answer or know that I don’t know and refer you to someone who does.
- DeathArrow 3y ago
  Doesn't matter much when money can be printed by FED (which is owned by banks, not by stste) or just made up out of thin air by banks and financial institutions. The gold in online games is fabbed the same way. The only two reasons that makes it hold value is that is the only sanctioned way to exchange goods and services and the players trust it. Once one of the two reasons does not exist, gold will not have any value, just like money in real life.
  - benreesman 3y ago
    The Federal Reserve system is a quasi-public, quasi-private system. It’s a public/private partnership, which is actually a pretty sane default for how governments should interact with banks. Sloppy, leaky Venn diagrams are a fact of real life. Let’s try to avoid “Jews vote for Likud” or “nine eleven was an inside job” type oversimplification? It’s complicated but for a good set of reasons.
  - PeterisP 3y ago
    As you note, the Fed lending policies do act as a money source (when increasing supply) and also as a money sink (when decreasing supply). That doesn't invalidate the parent point that taxes have nothing in common with a money sink, since that mechanism (unlike Fed) doesn't affect money supply but rather simply moves it to specific purchases/institutions.
DeathArrow 3y ago
Can you share with us what you did explain to your brother?
- benreesman 3y ago
  I’ll do my best to be useful, with the caveat that “monetary policy” is like, a PhD at a good school and industry experience and stuff, it’s a big field. To address the particular point that he was replying to: the government (especially the US government) has only one money problem: does anyone lend them money (buy their bonds) when they’re picky about terms (floor on auction optionally) at an acceptable overall outcome (you still believe I can invade your country if you fuck around on USD). So it’s simpler and faster and the math is easier to just burn all the checks the IRS gets and make new ones at the Fed. Which is the same solution as all the games landed on.
  - DeathArrow 3y ago
    Well, money printing is taxation.
    - Workaccount2 3y ago
      Only if it isn't offset by raw economic growth.
      - benreesman 3y ago
        Technically incorrect in nitpick ways but substantially the best intuition: the job of politicians and regulators rounds to: “match the growth of the money supply to people using skills to generate yet another round of speculative but self-fulfilling growth projections with the least amount of dumb rich kids having important jobs”. To me at least, this sounds like a hard job in Athens with the Bundesbank pardon the ECB breathing down your neck, and a trivially easy job in Washington DC where you can physically destroy anyone who disagrees with your assertions about the value of anything. Unfortunately the actual job has become: “maximize class solidarity at any cost up to and including arbitrary bloodshed”.
Cthulhu_ 3y ago
Pretty good, but not complete because the money is gone in a game's sink, whereas in the economy it's more cyclic. In theory. That said, video game economics are pretty fascinating. I love reading writeups on Eve Online economics. I play FFXIV myself which isn't as good as Eve when it comes to economy, but interesting in its own rights. I wish it had buy orders and the ability to buy individual items instead of whole stacks, lol.
- benreesman 3y ago
  I upvoted your comment for being high-value even though I think I disagree with the first half: “Chicago” / “Fama” strong-form EMH economics have had only a few brushes with reality, so N equals “not enough”, but I’m partial to the 100% of the time it’s been a disaster, the best example of which is almost certainly Scholes’ tenure at LTCM (and “When Genius Fails” is a a drop everything, call in sick and read today book), but even that is really just an exclamation point on the whole post-Reagan world, the criminally, well, crime of the Greenspan clique. How a group of people can be wrong every time about everything in stated ambition while acting in ways completely consistent with Randian Objectivist Naziism in practical terms, and not be hounded out of public life bewilders me. There is probably no moment as simultaneously classist and misogynistic and stupid as when Brinksley Born got knee-capped for being right about everything by Summers, Greenspan, and Ruben with the Ghost of Future Reich (Ayn Rand) looming ominously in the background. The people running the show around here, the “effective altruism” crowd like SBF and Altman and shit? They still put Atlas Shrugged icons in their Mastodon chats long after everyone without an agenda realized they’re the new version of old fascism.
- ezrast 3y ago
  Not in all theory - Modern Monetary Theory[1] posits that if you control a mint, your money is effectively infinite and cannot be meaningfully increased. As such, some taxation truly does serve only as a money sink (but a necessary one that prevents runaway inflation in the face of government spending, as well as being a vehicle for incentivization). [1] https://www.investopedia.com/modern-monetary-theory-mmt-4588060 https://www.investopedia.com/modern-monetary-theory-mmt-4588...

wodenokoto 3y ago

Maybe I don't understand what a gold sink is well enough, but I don't see how IRS can be considered a gold sink. Gold spend with NPCs are not returned to the economy. Taxes are returned to the economy.

pests 3y ago
> Taxes are returned to the economy. I hope we don't start dropping bombs on our own cities....
- Doxin 3y ago
  The money isn't stuffed inside the bombs. The money is still returned to the economy for the most part even if the bombs are "spent" elsewhere.
  - pests 3y ago
    > The money isn't stuffed inside the bombs. I thought that was the only explanation for their prices.
- wodenokoto 3y ago
  Paying for the construction of a bomb, is participating in the economy (as opposed to outright burning the money)
  - taneq 3y ago
    Kind of a broken window fallacy (the bomb isn’t necessary in the first place) but also kind of not (the tech developed for military hardware does eventually get used for good).
benreesman 3y ago
Tax receipts are in no sense returned to the economy unless you really overload one of those words. A modern economy works by running a printing press a little faster than a furnace, with the coefficient being (under honest and competent management) a good estimate of next year being better than this year by such and such, a self-fulfilling prophecy in a good way until you like, burn the planet via carbon emissions or some hard constraint like that. And it’s a perfectly good system… under honest and competent management. It’s just easier to corrupt than systems with much lower potential (which is the distance between gold bug and ignorant, those folks have a point, they just rarely make it). This is where all the 1971 stuff comes in: no rich person does anything but advantage their less-capable kid or lover or whatever unless someone is pointing a gun at them. (e.g. Altman has a job let alone unfettered power). The gold standard has a lower maximum potential risk to the extent you can stop there being a de Beers of gold. You likewise accept 50 years from the transistor to a computer in your house even if you’re fucking loaded. The unanswered question is: can we get competent and honest leadership (after a fashion) back without the bloodshed it has required 100% of the time before? A lot of us hope so but don’t have an answer just yet, and the clock is ticking.
- whage 3y ago
  This post feels like recent movie trailers. The way you wrote it makes me believe you know what you are talking about but I have no idea. Care to give the curious reader pointers to the topics you mention? I mean the "printing press to furnace" analogy of the economy, or what you mean by 1971 or the gold bug or the 50 year transistor omg what?
  - benreesman 3y ago
    I’m just a nerd whose nerd hobbies came to encompass finance when I moved to Manhattan. I was also a party monster back then (please don’t read the book) which for a childless bachelor is a pretty reasonable way to get the most knowledge NYC has to give in a year. If you have particular questions about the monetary system, I know enough to either answer or know that I don’t know and refer you to someone who does.
DeathArrow 3y ago
Doesn't matter much when money can be printed by FED (which is owned by banks, not by stste) or just made up out of thin air by banks and financial institutions. The gold in online games is fabbed the same way. The only two reasons that makes it hold value is that is the only sanctioned way to exchange goods and services and the players trust it. Once one of the two reasons does not exist, gold will not have any value, just like money in real life.
- benreesman 3y ago
  The Federal Reserve system is a quasi-public, quasi-private system. It’s a public/private partnership, which is actually a pretty sane default for how governments should interact with banks. Sloppy, leaky Venn diagrams are a fact of real life. Let’s try to avoid “Jews vote for Likud” or “nine eleven was an inside job” type oversimplification? It’s complicated but for a good set of reasons.
- PeterisP 3y ago
  As you note, the Fed lending policies do act as a money source (when increasing supply) and also as a money sink (when decreasing supply). That doesn't invalidate the parent point that taxes have nothing in common with a money sink, since that mechanism (unlike Fed) doesn't affect money supply but rather simply moves it to specific purchases/institutions.

DeathArrow 3y ago

Can you share with us what you did explain to your brother?

benreesman 3y ago
I’ll do my best to be useful, with the caveat that “monetary policy” is like, a PhD at a good school and industry experience and stuff, it’s a big field. To address the particular point that he was replying to: the government (especially the US government) has only one money problem: does anyone lend them money (buy their bonds) when they’re picky about terms (floor on auction optionally) at an acceptable overall outcome (you still believe I can invade your country if you fuck around on USD). So it’s simpler and faster and the math is easier to just burn all the checks the IRS gets and make new ones at the Fed. Which is the same solution as all the games landed on.
- DeathArrow 3y ago
  Well, money printing is taxation.
  - Workaccount2 3y ago
    Only if it isn't offset by raw economic growth.
    - benreesman 3y ago
      Technically incorrect in nitpick ways but substantially the best intuition: the job of politicians and regulators rounds to: “match the growth of the money supply to people using skills to generate yet another round of speculative but self-fulfilling growth projections with the least amount of dumb rich kids having important jobs”. To me at least, this sounds like a hard job in Athens with the Bundesbank pardon the ECB breathing down your neck, and a trivially easy job in Washington DC where you can physically destroy anyone who disagrees with your assertions about the value of anything. Unfortunately the actual job has become: “maximize class solidarity at any cost up to and including arbitrary bloodshed”.

Cthulhu_ 3y ago

Pretty good, but not complete because the money is gone in a game's sink, whereas in the economy it's more cyclic. In theory. That said, video game economics are pretty fascinating. I love reading writeups on Eve Online economics. I play FFXIV myself which isn't as good as Eve when it comes to economy, but interesting in its own rights. I wish it had buy orders and the ability to buy individual items instead of whole stacks, lol.

benreesman 3y ago
I upvoted your comment for being high-value even though I think I disagree with the first half: “Chicago” / “Fama” strong-form EMH economics have had only a few brushes with reality, so N equals “not enough”, but I’m partial to the 100% of the time it’s been a disaster, the best example of which is almost certainly Scholes’ tenure at LTCM (and “When Genius Fails” is a a drop everything, call in sick and read today book), but even that is really just an exclamation point on the whole post-Reagan world, the criminally, well, crime of the Greenspan clique. How a group of people can be wrong every time about everything in stated ambition while acting in ways completely consistent with Randian Objectivist Naziism in practical terms, and not be hounded out of public life bewilders me. There is probably no moment as simultaneously classist and misogynistic and stupid as when Brinksley Born got knee-capped for being right about everything by Summers, Greenspan, and Ruben with the Ghost of Future Reich (Ayn Rand) looming ominously in the background. The people running the show around here, the “effective altruism” crowd like SBF and Altman and shit? They still put Atlas Shrugged icons in their Mastodon chats long after everyone without an agenda realized they’re the new version of old fascism.
ezrast 3y ago
Not in all theory - Modern Monetary Theory[1] posits that if you control a mint, your money is effectively infinite and cannot be meaningfully increased. As such, some taxation truly does serve only as a money sink (but a necessary one that prevents runaway inflation in the face of government spending, as well as being a vehicle for incentivization). [1] https://www.investopedia.com/modern-monetary-theory-mmt-4588060 https://www.investopedia.com/modern-monetary-theory-mmt-4588...