Belmont Club

The Competence Deficit

The Washington Post reports that Virginia is seriously studying the prospect of issuing its own money. The idea of a state currency, unthinkable only a few years ago, has now become eminently thinkable.

Virginia Del. Robert G. Marshall fears that a financial apocalypse is coming and only one thing can save the Commonwealth: its own currency.

The idea that Virginia should consider issuing its own money was dismissed as just another quixotic quest by one of the most conservative members of the state legislature when Marshall introduced it three years ago. But it has since gained traction not only in Virginia, but also in states across the country as Americans have grown increasingly suspicious of the institutions entrusted with safeguarding the economy.

What has changed is faith in the federal government, not just in Virginia but in a growing number of places. The lack of faith in the competence of government — and the soundness of the dollar — has been growing leading some states to create contingency plans in case the currency goes bust.

So far, only Utah has approved a law recognizing nontraditional currency. Four other states have bills pending this year. Marshall said he is unsure of his proposal’s prospects in the Virginia Senate. One Democrat derided it as a descent into “la-la land.”

But the fact that the debate is happening at all reflects a deep-seated distrust in the very foundation of the country’s economic system — the dollar.

Marshall’s proposal would create a 10-member commission to study “the need, means, and schedule for establishing a metallic-based monetary unit to serve as a contingency currency for the Commonwealth.” This mirrors a rising trend in the availability of quasi-money. Economist Bernard Lietaer points out that there are already various forms this available. “For example, he said, there are 50 trillion airline frequent-flier miles in circulation, far surpassing the number of dollar bills.” FTAlphaville at the Financial Times describes the emergence of parallel money in Kenya.

While this may leave the system exposed to the corporate fortunes and bankruptcy risk of its owner, we’d argue that doesn’t need to be a bad thing. Who says money has to be centralised at all? Looking to history, central bank money is actually a relatively new phenomenon, pre-dated by private money systems.

People want it as a hedge or insurance in case the major currency system goes down. One way to think about a parallel money system is by imagining that the dollar became worthless tomorrow.  But even without a dollar if you could obtain airline flights or get a case of beans, flour or ammunition by participating in an points system you could survive for a while — as long as the institution that issued the points kept functioning. Today Amazon announced that it was launching a kind of “virtual currency”.

Amazon, the world’s largest online retailer, plans to introduce virtual currency that can be used for purchases on the Kindle Fire tablet to entice more developers to create programs for the device.

Starting in May, consumers in the US will be able to use Amazon Coins to buy applications and virtual merchandise sold within games, the Seattle-based company said today in a statement. The company will give customers “tens of millions of dollars” worth of the currency, which will be accepted in the Amazon Appstore.

Anyone receiving payment in Amazon coins would theoretically be able to live entirely within the economy of the retail giant. Presumably the Amazon coins would entitle him to purchase MRES, canned bacon and anti-radiation pills and whatever else is on offer at Amazon. If the rate of inflation within the Amazon world was lower than that in the bricks and mortar universe you might hold rather more Amazon coins than dollars.

Of course the reason for the sudden interest in quasi-money, parallel money, virtual currency, guns and all the rest of it is fear. That fear springs from the perceived incompetence of the political class. An administration which seems increasingly unable to control the borders, defend its diplomatic missions, defeat al-Qaeda, checkmate the Muslim Brotherhood, balance the budget, raise sufficient revenues or do anything much, except demand more power, can pretend to be omnipotent. But people notice it has feet of clay when even North Korea is laughing at it.

Under those circumstances people naturally wondering whether they can keep relying on it for their essential safety and well-being. Recently the Chicago Police Department announced that it would no longer respond “in person” to 911 calls, allegedly in order to free up policemen to fight crime.

Officers will be dispatched if a suspect is still at the scene or is expected to return immediately, the victim is not considered safe or needs medical attention, an officer could make an immediate arrest or an officer is needed for an immediate investigation, McCaffrey added.

Otherwise the cops will take the 911 report by phone. This is as close as any major city’s police department has come to saying no mas, no mas. They’re not coming out for the bell, preferring to concentrate on the vital job of tracking down those “high powered magazines” that are threatening the fabric of American society.

The administration is no longer making an effort to hide its competence deficit. Brett Stevens at the Wall Street Journal notes with amazement that Chuck Hagel’s backers are justifying his lack of aptitude by saying that other people will tell him what to do. “It says something about the political state of play that Mr. Hagel’s defenders are now whispering that he just won’t matter all that much. Serious defense policy will be run by the grown-ups in the White House, people like Ben Rhodes, Valerie Jarrett, Denis McDonough and, of course, the president.”

Michelle Rhee has actually come out and declared “My Break With the Democrats” in the Daily Beast because she can longer oppose school vouchers with a clear conscience. For years she had been trying to convince herself that public education was perfect on all counts but for the sole defect that it didn’t work.

Here’s the question we Democrats need to ask ourselves: Are we beholden to the public school system at any cost, or are we beholden to the public school child at any cost? My loyalty and my duty will always be to the children.

Not everyone bought it. In fact, most of my Democrat friends remained adamantly opposed to vouchers. It was interesting, though: they were always opposed to the broad policy, but they could never reconcile their logic when thinking at the individual-kid level.

She had also discovered the competence deficit. The Democratic support system was still handing out its brownie points but they were worth less and less. Sooner or later the system becomes incapable of rewarding its own supporters. Rhee may have reached that point where she’s starting to feel the Titanic head down.

How deep does the incompetence go? As far as the dipstick will reach. Reuters has just reported that Anonymous has hacked the Federal Reserve. “Though no critical functions of the U.S. central bank were affected by the intrusion,” anonymous did manage to access the “personal information of more than 4,000 U.S. bank executives, which it published on the Web.”

When the Central Bankers can’t even defend their own personal information one has got to wonder what they can defend.

The fundamental problem with the Chicago school of “we won” politics is that it so disproportionately rewards the hacks, scoundrels, mediocrities, pitchmen, liars and swindlers who have a talent for conning low-information voters that it eventually delegitimizes itself.  It turns itself into a big shambling joke. The final result of this style of power-grabbing is total corruption and total incompetence. “We won” is inevitably followed by “now what?”

The Three Conjectures at Amazon Kindle for $1.99

Storming the Castle at Amazon Kindle for $3.99

No Way In at Amazon Kindle $8.95, print $9.99

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