Today's post is inspired by a recent one from Nick Rowe, "Collateral and the Money Supply". Limits as to what banks accept as collateral, continue to affect the quantities of money printed by central banks, in spite of income and spending realities. For the most part, that constraint had not been overly problematic since the days of the Great Depression. Unfortunately, it does present a growing degree of difficulty since the Great Recession ended. As a result, time use liquidity in an aggregate sense has become low indeed - since neither time use nor skills sets provide an adequate source of collateral.
Significantly, governments have tried to make up for a lack of skills collateral through redistribution - a strategy which was successful for a long time. In the U.S., many services remain defined and compensated at the national level. However, more responsibility for services is being transferred to the state level, in that "...federal debt held by the public will equal 74 percent of GDP at the end of this year and 79 percent in 2024" according to a CBO estimate. While such estimates may be far from accurate, they nonetheless indicate the importance of restructuring services before they become more problematic than they already are.
Of course, one noteworthy aspect of the ongoing national to state services shift, is that the states which appear most healthy economically, are those such as Texas which do not place a high emphasis on services provision in the first place. Fortunately, Texas has a fair amount of "breathing room", with a reasonably good job market in the present. Just the same, that does not mean that Texas - or any other state for that matter - would not benefit from a more direct association of skills provision in compensation and collateral based terms.
We need for skills use to become real collateral for multiple reasons. Consider for a moment, how the main way people maintain respect, is to not become a burden on their community...wait, what? In present day terms, the individual who takes care of one's own needs out of necessity or desire, is also an unknown economic element in the social fabric. That is, there's little significance in the fact they are part of the environment they exist in. Especially in that they have either limited resources or incentive to contribute to the social fabric or take from it.
Low income areas in particular have become extremely and unnecessarily services deficient, save the occasional patronizing government service "intervention". While DIY services provisioning is a way to preserve one's integrity and self worth, it can nonetheless exist as a profoundly anti-economic and also anti-social mechanism. When economies are structured so that the best anyone can do is avoid becoming a burden to others, vital economic elements are missing.
Sometimes DIY provisioning is a reasonable solution or option: certainly it works out great for companies which save costs when customers take on part of the workload for free. DIY provisioning can also be suitable for most who have resources to take care of problems, if they so desire. But does DIY provisioning continue to work well when people are paying the bills, yet no longer have family or friends nearby? Sure, someone may be close who can help out to a degree. Just the same, far too many circumstance find people cash "rich", yet "skills poor" in liquidity terms. And these are the ones who have adequate monetary means.
As people get older, they tend to have increasing sets of needs which appear as though non-market related. Immediate friends and family may also be overwhelmed by skills needs which are not necessarily their forte. Understandably, time spent with family and friends is time when people need to be able to unwind. A fully functioning skills marketplace means not having to feel either helpless or overly dependent, for that matter.
Often we hear that future economic growth needs to be considered in non-market goals and terms. I would suggest that the reasoning in this Project Syndicate link is backwards: we need to bring multiple skills sets into the economy that were previously considered non economic. What's more, we certainly don't need to be struggling to pay for services costs with pollution control incentives and the like. It's already become difficult enough to pay for services with the redistribution that still applies. In other words, skills use possibilities need to become a fully represented component of the marketplace, in their own right.
Such a measure would also go a long way to address the recent drop in the labor force participation rate - let alone give people renewed incentive to leave one's abode for the more stimulating realm of economic life. The LFPR has especially been hit hard, by the rationale that many skills no longer matter in the workplace. How do we know for certain, that a vast multitude of skills sets are supposedly not necessary or desirable? Are we going to take the word of a handful of company representatives, over the unvoiced concerns of populations? Are we going to assume that a few among the elite can actually give voice to skills related supply and demand needs, for millions? Why not take a chance on finding out for ourselves what people might find useful at individual levels, instead of depending on economic intermediaries who have gotten such economic cold feet since the Great Recession.
However, I need to consider the problem which was giving Nick Rowe a "headache" in the above mentioned post (First commenter "louis" sums up the gist of Nick's efforts fairly well). What to do about much needed public collateral, which banks don't really have a way to accept? There are of course constitutional issues with the way labor provisioning became defined, which stemmed from the end of slavery in the U.S. However, there are missing components for skills use collateral in the marketplace, which can still leave people vulnerable to circumstance not unlike the past.
Since most of us (at any rate) are not "slaves" in the earlier sense of the word, we're not the kind of collateral that the bank can take back, whenever financial obligations go unmet...hence the problem. But unfortunately, that contributes to the fact that our skills sets have a lower liquidity (or economic velocity) than they need in the marketplace to fulfill responsibilities - quite the conundrum. What's more, people who could benefit from our service offerings do not have a recognizable marketplace in which to negotiate for them.
Thus the task for us is to tweak the marketplace so as to provide greater liquidity or economic possibility, for more than a subset of skills we can utilize in any given moment. Yep, easier said than done. But the biggest task of all is simply one of providing context. That's where ongoing services calendars for skills arbitrage come in, alongside compensation which is capable of matching up with resource use that fits basic living needs.
Until we do this, some have considerable incentive to hoard all the assets and money they can, to provide for an eventual unknown quantity of skills needs. That's just the thing. On government terms, skills sets for services remain out of reach of many who actually need them the most. And making certain that skills become collateral which others find valuable, means getting the permission of government in order to do so. That means opening the marketplace to more than just the money "hoarders".
Consider services for the direct product formations they actually represent. It's not easy to think this way - granted - because we are used to supporting or hiring the services time of others when other tangible assets are already in the picture. That is, we are conditioned to believe something has to be brought up from the ground or built first - which someone in turn then benefits from - before services creation becomes an option. Except for limited government services provisioning of course, which is even further down the resource line of transference. But all this indirect effort misses the true product capacity, which actually exists in services formations. Because direct coordination for services was factored out by monetary exchange, the liquidity of skills capacity - in many instances - gradually diminished over time.
Presently there are a number of reasons, why our skills sets don't provide the kind of liquidity that is possible through fixed assets collateral. Even though we are capable of many things, the workplace tends to hone in on a subset of those skills options on our part. Thus, we may indeed end up with a marketplace "mismatch", for a skill set which demanded a major part of our quality time commitment.
And therein lies the problem. Chances are our relatively scarce quality time commitment was a single investment, in a world that requires multiple investments for sustainable continuity. After all, the most common advice in other forms of investment is to diversity. Yet, we need the ability to regularly arbitrage our time use, in order to make skills investment diversity work for us at a personal level.
Another issue is that the marketplace does not always ask us for skills diversity in economic terms. To be sure, we are expected to have multiple skills sets to get through the day but not for reasons that accrue to us financially. We need to create a skills marketplace capable of growth due to skills diversity, rather than struggle with a marketplace which cannot use skills. Local skills coordination expands the definition of acceptable collateral.
Even at a decentralized level, stills arbitrage compensation still has what could be considered both fiscal and "financial" characteristics. How so? Think of the two loan components. Skills match coordination works like a time loan, in the sense of two components becoming one component of measured wealth. The first part of the match is the "loan" which is then "paid" with the other coordinated time hour - which cancels to the single hour base of newly measured services wealth. The fiscal resemblance is reminiscent of the government debt obligation which requires payment. The main commitment on everyone's part is time, but unlike government fiscal obligation, becomes a completed transaction in short order - no "juggling" necessary.
These comparative aspects of debt/ fiscal and skills arbitrage stand in contrast, to the monetary activity representing new commodities and product separate from the use of our time. Also, skills arbitrage becomes an economic fiscal component which is arrived at directly. That also makes a considerable amount of taxation - let alone special interest subsidizing - unnecessary.
Think how it feels, to have multiple skill sets and yet still be expected to have "all the others" as well just to get things done. No matter what skills we have: we're told they're the "wrong" ones! Essentially we now have to be ready for all contingencies - personal and business related - even though it is not possible for anyone to do so. Stop and think for a moment how profoundly uneconomic that reality actually is. The whole idea of the marketplace was supposed to provide voluntary divisions of labor which meant we shouldn't have to do every single thing on our own. It is up to us to regain the kind of marketplace that once was capable of allowing us to pick and choose from meaningful skills sets. It is up to us to regain the missing collateral, of our own abilities.
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