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Sunday, October 17, 2010

Value of Government and it's Currency

The purpose of any government is four broad areas in my view is:

1) Provide a method where the citizens under the government can agree upon laws to ensure the public discourse. (Legislative Branch)
2) To provide a central authority to enforce the laws agreed upon evenly across all citizens. (Judicial Branch)
3) T represent the citizens as an entity or as a single person talking on behalf of the citizens (Executive Branch)
4) To provide services common to the citizens.

Notice, I do not have an equivalent federal entity to manage number 4. The services exist under each of the three branches, in some fashion. It could be argued that number 4 has no place in government and should be provided by the private sector. It could also be argued that an additional branch representing "bureaucracy services" should be created, and treated more like a corporation, with goal of maintaining efficiency.

In any event, those 4 areas are the purpose of the government as I see it, with item 4 as debatable.

With that said, the VALUE of the government isn't merely having people in positions to provide the vehicle for the services described above. It is actually executing and applying rigorous enforcement for their areas of responsibility.

Countries that do not rigorous enforce the laws, but treat their positions as a privilege class that may operate without any oversight are often described as "banana republics". Such governments exist by the direct support of money interests (corporations), funding the government to do their bidding. The law is arbitrary, applied to the individual or corporation as the government sees fit, typically not enforcing for those companies that are on the "right" side of the political landscape.

Referring back to my post , "what is money" series, these countries often run into problems with their currency valuation over time. For countries that regard the concept of law with respect and rigorous enforcement, the promise of future repayment for services rendered today (money, debt notes) has a higher expectancy to retain value than those that rely on a few politically powerful corporations.

The problem with banana republic currencies is, the citizens willingness to honor the status quote or the corporations relative power change over time, destabilizing the status quote. The realization that the existing structure can be swift, resulting in a stable currency experiencing a collapse due to the broader citizens losing faith in the future of the of the political landscape. In summary the true value of currency is derived from is perceived capacity of the government to provide work on demand in the future.

A rigorous framework where people voluntarily submit themselves rather than relying on a few corporations to generate the capital to maintain a stable government, provides a long term stable currency.

And this, is the heart of my view about why the US currency may have a valuation problem in its future. The value of the currency will be reasonably maintained as long as those accepting the debt notes believe the power structure is such that the currency will maintain the power to demand future work.

For more on money, and the concept it is a tool to capture work done today, to be repaid in work in the future, please read my what is money, post and subsequent related links.

Below is a video of Elliot Spitzer talking about the rampant, blatant lack of law enforcement across the entire US related to the banks, and mortgage secularization.

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