Saturday, February 12, 2011

Orwell and "Quantitative Easing:" The First Step to Solving a Problem is Stating it Correctly

Correspondent Brad L. dissects the Orwellian nature of "quantitative easing" as a diversion from the reality: fiat creation.

The First Step to Solving a Problem is Stating it Correctly

By Brad L.

In "1984," George Orwell describes a totalitarian state that employs "newspeak" to enforce its aims. Rather than merely suppressing statements that endanger the ruling party, newspeak constricts the language itself, making dangerous ideas impossible to formulate. This proves to work far better than post-hoc crackdowns on radical speech, inspiring one state functionary, Syme, to exude, "It's a beautiful thing, the destruction of words."

With that in mind, I'd like to explore a problem I see in the current economic debate. The path before the nation in general, and the federal government in particular, is usually framed as a choice between "quantitative easing" and "austerity," and even those who oppose the action represented by the former phrase, and support the course represented by the latter, tend to use these terms as if they truly described the two paths that might be taken.

But of course they don't.

"Quantitative easing" is, linguistically speaking, quite new. The original Japanese expression for "quantitative easing" ryoteki kinyu kanwa was minted in the mid-1990s, and became official Japanese monetary policy after Toshihiko Fukui was appointed governor in February 2003. It did not pass into American parlance until roughly 2005, but in a mere six years, it's a linguistic bestseller - a Google search for "quantitative easing" garners over a million hits.

It's easy to see why the term was pushed vigorously by the forces that support the action it represents. Evolutionary psychology asserts that humans have two basic drives - accumulating resources and minimizing effort. Throughout human history, anyone who could gather real resources without expending much time or energy had a huge survival advantage. "Quantitative easing," has, then, a hugely positive emotional valence, as it embraces the two things humans prize most - quantity and ease.

Of course, in reality, "quantitative easing" offers no such thing. It creates no real resources whatsoever, and whatever "ease" it might provide will be more than counterbalanced by painful side- and aftereffects.

An alternative phrase that policy critics sometimes advance - "money printing" - is, ironically, almost as attractive. The reason is that "money" has multiple meanings, and in the popular mind is conflated with possessions that can be purchased with currency. In other words, at a fundamental level, "money printing" sounds like a pretty good idea - the creation of a real resource with little effort. Sign me up!

So let's be clear. The most accurate description for the action described by "quantitative easing" is actually "fiat creation." Here, the type of money being created is specified - a fiat currency, untethered to any real resource, with no more intrinsic worth than the paper (or electrons) that constitute it. And "creation" reveals the voluntary bringing-into-being of this intrinsically valueless commodity. Using these words makes it clear that there is no imaginary constraint at which the fiat strains in search of "easing," instead, human beings make choices and perform actions to create it.

The fact that the average American has no idea what fiat is, is no excuse for those who do understand it failing to employ the phrase often in writing and speaking. If it is used enough, even Americans can learn a new word.

So use it, please.

Next is the term, "austerity," which is used, in government-budget discussions, to describe spending cutbacks necessary to balance tax inflows to spending outflows. The first-listed synonyms for this term are "harshness," "strictness" and "ascetisim," all of which have a strong negative emotional valence. Absent from these synonyms are any positive results that might come from actions described as austere; the entirety of the word's meaning is unrelieved by any awareness that austerity might have a benefit.

So again, let's be clear. The most accurate description for the set of measures described as "austerity" is expressed by the phrase "living within our means." This expression aligns with the average person's understanding that he or she must personally balance revenue inflows and outflows - even people who don't do this are usually painfully aware that they should. "Living within our means" then, has a positive valence that is hard to over-state - immediately, intuitively, it just makes sense.

Reframing the choices before us from a battle between "quantitative easing" and "austerity" to one between "fiat creation" and "living within our means" is a necessary first step to making the right choices as a culture. If we can't even properly state the problem, we'll never arrive at a solution.

Thank you, Brad, for a concise analysis of the Federal Reserves' "newspeak" propaganda.

Note: I was out of town all last week and have yet to catch up on correspondence. Your patience and forebearance are much appreciated.

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