how #capitalism destroys itself: #Inequality as a structural feature: Wealth concentration has returned to #GildedAge levels in many countries. The top 1% owns roughly 45% of global #wealth ( = #assets such as #houses #land #water #energy #minerals )

Demand erosion: Extreme #inequality hollows out the #consumer base that #capitalism depends on.

The #seigniorage problem. When a private institution (or semi-private, as the #Fed is) has the power to create #money, it captures enormous #wealth (#assets) simply through the act of creation — before that money has even done anything productive

most powerful and least visible form of wealth extraction ever invented

The harder truth: If #moneyprinting and #asset #ownership have become so divorced from productive #economic #activity that only destruction and conflict #war seem to #reset the system, that suggests the #system itself is #fundamentallybroken—not that war solves anything.

I've been kicking around thoughts on the relationship between the concepts of seigniorage (for currency) and goodwill (for stocks). There may also be similar notions in bonds (interest rates) especially relating to bond ratings.

Seigniorage is the premium commanded in money value over the value of the base metal of coinage itself. Whilst it's rare to talk of seigniorage for fiat currency, this can be considered in terms of whether or not banknotes are backed by some reserves (gold or silver certificates), or stand on their own authority.

My view is that seigniorage is a measure of the trust in the currency issuer and financial system as a whole. In this context, viable fiat currencies are an indicator of extreme trust in a financial system. They're also a relatively recent phenomenon, with the US going entirely freestanding only in 1971 (a fact which is catnip to conspiracy theorists and goldbugs).

Goodwill seems an equivalent concept in stocks. When a business's assets and liabilities are added up and compared to the market capitalisation of its stock (shares outstanding * price), the difference is called goodwill. Effectively, this is also a premium in value. I'm trying to think through just what this means, and don't have even vaguely coherent thoughts yet, but it seems significant.

The corresponding terms in bonds are less clear, though interest and ratings both operate similarly. The relationship is typically negative, where the higher an interest rate is, the lower the trust in an institution, and the higher the risk. Bond ratings generally indicate the level of trust or faith, with sovereign government bonds typically having the highest ratings. (Political subdivisions such as cities and provinces are not sovereign, nor are countries under a monetary union as with the ECU and Euro.)

The most interesting element of this is that I'm finding very little in the literature that seems to address this, and nothing which ties links between valuation of currencies, stocks, bonds, and perhaps other asset classes. Reich's chapter, in the toot above, seems to be among the few, and ... isn't really exploring the same concepts so far as I can tell, though I need to take a hard look at it, and probably its references.

Putting this out there for whatever interest and suggestions it might generate.

#money #seigniorage #goodwill #stocks #bonds #assets #risk #trust #reputation #economics

Seigniorage is a really odd notion, another I'd long failed to grasp. The definition only helps somewhat:

"Seigniorage is the difference between the face value of money, such as a $10 bill or a quarter coin, and the cost to produce it."

https://www.investopedia.com/terms/s/seigniorage.asp

Though standard, I don't. much like this. Wikipedia does slightly better:

"the difference between the value of money and the cost to produce and distribute it."

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

But why?

Trust.

#seigniorage #trust