Modern Monetary Theory and Addiction

I was in a debate this morning on twitter about the validity of Modern Monetary Theory (MMT – not to be confused with Methadone Maintenance Therapy in this post), but ran into problems with the 140 character limit. For those of you who don’t know, MMT is a theory based on government’s monopoly of excreting fiat currency as a basis for an economy. Basically MMT says that money is what the government says it is. If the government wanted us to pay our taxes in chocolate, we’d use chocolate for money. But the government wants Federal Reserve Notes (or their bank deposit equivalents) and so that’s what we use as money. It’s a compelling theory that fits the facts of our lives today and has gotten a lot of followers lately. The point I was trying to make in my twitter debate was that the flaw of MMT, the thing that makes it not something to base long term predictions on, is its original assumption. That assumption, that money is money because the government says it is, might be true today in America, but it isn’t always true. In fact, it isn’t even true most of the time in most places in our history. The word money comes from Jupiter Moneta, a temple at the center of Rome which was used as a mint. The ancients saw money as part of the natural world. It was a gift of the gods like trees, rivers, and thunder. You could use it, you could modify it, but you could not have total dominion over it. And you certainly could never forget its natural power. Greek myths are replete with examples of mortals who, in their hubris, denied the power of nature. Man can control nature to an extent, but as soon as he thinks he has it licked it’s game over. Money is money because several billion interdependent economic actors all making decisions about what is best for them bring about its emergence. Money is an emergent property of a complex natural system. There have been many forms of money over many thousands of years, many governments that went along with them, and many governments that tried to deny money’s emergent nature. So my point about MMT was that money isn’t money because the government says it is, at least not always and in all circumstances, and when governments forget money’s natural force, it’s game over. So what does this have to do with addiction? Addiction is an illness, a natural phenomenon. It emerges from nature because of forces that aren’t in our control as individuals or as a professional field....

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The Big Short
Jun06

The Big Short

By now, most American’s have heard of the book, The Big Short by Michael Lewis, and the movie of the same name. (To short is to sell something you don’t own because you believe it will go down in price or value a great deal) Most people know that the book is about people who saw the collapse in the housing market before it happened and made money from it. That’s not really what the book’s about. The book is about how hubris and cluelessness of government officials and establishment organizations allowed imbalances to get so great that when they finally balanced (as imbalances always do) the entire financial system was at risk. The fact that individual traders saw the imbalances and acted on them should be no surprise. What is a surprise is that those very traders tried to tell people something was wrong. They went to the rating agencies and told them they were wrong; they went to the big banks and told them they were wrong; they went to the government and told them they were wrong. The reaction of all these people was that the traders didn’t know what they were talking about. “How could they know?” the establishment seemed to say. “The system had worked just fine all these years. Who are they to tell us that there are hidden costs that we don’t see?” Well history has decided who was right and who was wrong on that score, and it was an expensive lesson for all of us. The problem behind the Big Short was the assumption that housing in America could never go down across the country at the same time. It hadn’t happened for over 70 years, so it couldn’t happen, right? As long as it didn’t happen, even the crappiest sub-prime mortgage bond would be good. Turns out the assumption wasn’t true, the bonds were worthless, and the pyramid of derivatives built on them were as well. Is there a “big short” in addiction today? Is there a situation in which entrenched establishment groups or regulators are so sure they are right that they can’t see the hidden costs of their system? Is there a situation based on an assumption so old that no one today can question it? I think there is, and it’s also about 70 years old, but that’s long enough for generations of academics and clinicians to have been trained by people who were trained by people who were trained by people who assumed that this was the truth. The Big Short was a best selling book with hundreds of thousands of copies in print. There’s another bestseller that is...

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Leverage
Sep27

Leverage

Again, this may seem too much like an economics blog, but I’ll get back to addiction by the end, I promise. I said I’d write more about leverage, the process that seems to pave the way to loss of integrity so I’ll do that. It may seem a bit of a winding road to get where I’m going, but stick with me. To start I have to start at the beginning. Economics (and recovery) start with the individual. The individual we’re going to think about is named Sam. Sam lives alone on a island and spends his days hunting and gathering to get enough food to live. That’s it; that’s all he does. It gets kind of boring, but it does keep him alive. Being human, Sam gets an idea. What if he builds a trap that will catch animals to eat while he’s out gathering? That will give him some free time and he’s always wanted some free time. So Sam decides to build a trap and he thinks about what he’ll need. He figures it will take him two days to gather the materials and build, two days while he won’t be able to gather or hunt for food. For two days he won’t be able to eat. Sam would really rather eat during those two days as hunger will actually make his work harder and endanger the whole project. He decides to set some food aside every day to build up a stockpile, enough to last him two days. During the time he will build the stockpile he eats a little less than usual, making a SACRIFICE today so that he can have some set aside. That’s called SAVING, an important idea. Well, you pretty much know what happens then. He successfully saves enough food to eat while he’s working on the trap, builds the trap and saves himself half the day. So Sam used his savings to purchase an INVESTMENT, something that will pay him in the future. That’s the way it works, you use less sacrificing something you want today, save for the future and use the savings to invest in something that makes things easier, better, faster, or cheaper. Skipping ahead several millenia, Sam found a Samantha, they had lots of little children, learned to build boats and colonized the world. They’ve repeated Sam’s formula over and over millions of times until what they have is a flowering civilization that’s so complex that the savings and investment now include things such as buying other people’s time so they can build you something. Some people become very successful at this SACRIFICING, SAVING, and INVESTING that their...

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What Do Addiction and Economics Have in Common?
Jun01

What Do Addiction and Economics Have in Common?

People who follow me on Twitter get confused, I’ll bet. Half the tweets are about addiction and half are about the state of the economy or something related. “What do addiction and economics have in common,” you might ask. “Not much,” you might answer, at least not on the surface. I see a lot in common, but even if you don’t, they still have one thing in common: they aren’t the same as they were in our grandparents’ time. In the case of addiction, there were no legal connotations at all until the Harrison Tax Act of 1905. Doctors saw it as an illness evidenced by lack of control rather than loss of control. People who had addiction weren’t considered normal people who chose wrongly, but rather ill people who had a problem. The general upswing in moral issues in America in the early 1900’s that lead us to Prohibition had earlier effects on medical care for addiction. The Harrison Tax Act forbade doctors from treating patients with addiction unless they had special licenses and registrations, and those were cut back year after year until they were pulled all together. Between 1905 and 1920 over 20,000 American physicians were fined or jailed for treating people with addiction. In the case of economics, what’s changed is the loss of an actual standard. When my grandfather saved a dollar he was saving 1/20th of an ounce of gold, and if he needed it in five years, that $1 was still worth 1/20th an ounce of gold. He could actually save his purchasing power. Because saved money, money held back from consumption, is the basis of all investment, there was much economic growth in America from the end of the greenback regime to 1933. This was the period when the US dollar was freely convertible with gold. Since 1933 the dollar has, to a lesser and lesser degree, been backed by anything until in the last 40 years or so, it has been backed by nothing. This has led to a constant inflation that decreases the purchasing power of any saver’s money. So people save less. This means less money for actual investment, the normal fuel for an economy, so to keep the economy going more money has to be printed and given to banks to lend. This “free money” leads to more speculation and greater instability.   We can see both addiction and economics only within the social construct of our own culture. That gives us a very distorted view of what these things actually are. To see the reality in their natures we need another perspective. We could look back...

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