March 16, 2015

Collective Faith In An Abstract Symbol

Inflatable Uncle Sam seen on 
Third Avenue in New York City
Photograph courtesy Pak So and Anna Tan

... I remember a professor of the history of religion once saying that global confidence in the dollar is the greatest example of collective faith in an abstract symbol in human history. The dollar, under the Fed, has achieved something no god, no prophet, no messiah has been able to do.

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... Paradoxically, this universal confidence in the dollar is not necessarily good for our economy. Since 1977, the leader of the Fed has had two legal mandates: to keep the dollar's value stable and to maximize employment.  Yellen is doing the first part of her job so well - so much better, in fact, than anyone could have expected - that she's hampering the second part, the one about more of us having decent jobs. Corporations, as a group, are now net savers, with an estimated $659 billion in the bank, an enormous shift from historic norms. Entrepreneurship is flat; the percentage of Americans starting new businesses is near a 20-year low. Venture capital, often seen as the most vibrant part of our economy, collapsed in 2000 and has barely budged upward since. In the language of finance, the world's money is crammed at the safest part of the risk curve. This is bad, because further out on the curve, in the riskier precincts, is where new ideas and new businesses are created.

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