An economy without cash

When I was taking the Macro 1 class I was convinced that monetary policy was a joke. How can these bankers really think they have any impact whatsoever on the real economy? My suggestion was then to keep the money supply fixed. “No!” I was told by my classmate, “money supply growth must equal GDP growth”.

So what would happen under a fixed money supply? Well, a 5% GDP growth should be accompanied by a 5% decrease in prices, automatically. In other words, shifting prices would ensure market clearing. Now imagine an oil price shock. As an oil importer, you let your currency depreciate (no inflation targeting whatsoever, which would make your currency appreciate instead). So the oil shock is offset by your exports boom.

So with this fixed money supply and shifting prices, you can say bye bye to the inflation monster, as you don’t care about prices that change constantly. Now the question is how can people adapt to this? My solution is to drop cash altogether. Only debit cards and mobile phones and voice signatures. Then prices can become any fraction of nay amount. With sustained GDP growth, a beer could become as cheap as 20 cents, while a phone call could be 0.0001 cent.

The Economist had already predicted the end of the cash era, but not the end of monetary policy.

Luxury lifestyle seekers

I was at this conference on the role of the WTO Secretariat and one of the panellists noted that the quality of the staff there was higher than ever, as PhDs were required for most jobs. Then a deputy to the director general made the comment that him and his work buddies had been selected by him among 80 other candidates, in a clear and transparent contest, and not by political appointment. Then it was mentioned that there was only 8 researchers at the WTO, and still it was able to produce high quality research (no puppets).

I don’t know if all of this is true. Living in Geneva for the last 3 years, almost not a day goes by without hearing someone complaining about the corruption and incompetence of the UN organizations staff, but also about the inefficiency and the uselessness of these offices. Crazy insider stories of the manipulation, the sexual abuse, the appointment of friends, the fake ads in The Economist etc… come out every day. Not so much about the WTO, but especially about the ILO, UNCTAD, WIPO and, worst of all, the Human Rights Council.

I am an internationalist. I don’t want to get rid of these organizations, but I would like them to be less of a waste. Many people talk about reform, but it is most of the time about very general things, like the mission an organization should have, how the security council should be enlarged, how a UN small army should be created. And what’s so funny about these articles is that they always mention how impossible it will be because of China and Russia, or because of conflicting neighbours. One very disappointing report of this kind is the one that came out this week in The Economist, “Who runs the world?”

But what about the inner workings of these organizations, like employment policies or employee benefits? Why don’t diplomats have to pay parking tickets? Get rid of that rule, right now. Isn’t it all about hiring the right employees and then getting their incentives right?

It is such a golden ticket to land a job at the UN in Geneva as you get a relatively higher salary then in the private sector with no taxes, an incredible retirement plan and a standard of living way above the local population. Just look at the jewels the UNCTAD ladies are wearing or the cars the ILO gangsters are driving. But who gets attracted by these organizations? Candid, educated and honest idealists, yes, but also these gangsters (or snakes), because they are interested in the lifestyle, and not in saving the world. And who ends up spending their career there? The snakes, because the good ones have either been fed up by this rotten system or have not gotten the job, which was instead given to a friend by a corrupt boss.

So, yes, first things first, abolish the privileges, abolish the tax free shop. Many snakes will opt for other careers. And no more life time contracts, just simple 4 year contracts, renewable twice. So snakes won’t eternalise there either and won’t be attracted that much anymore. One other way to get rid of the luxury lifestyle seekers was to move the UN Geneva office to Nigeria, as only idealists would move there. But then again, this may be the most corrupt country in the world, so corruption could infest the offices there too. But does the local level of corruption affect the level of corruption inside the office? Is the UN in New York less corrupt then the UN in Geneva? This is an interesting paper idea.

Coming back to the WTO, is the Doha round dead because countries can’t agree or because the WTO twists the incentives of the negotiators? Are the countries’ representatives at the WTO lifestyle seekers snakes completely disconnected with their country’s government trade objective? One panellist was saying that they were representatives of the WTO to their own country, like promoting the free trade global public good to your own national government. If only he wasn’t lying.