Get rid of the money system, then get rid of goverrments

Credit is not the problem; it is incorrect bookkeeping that fails to assign the seigniorage to all of the people who actually give value to the hypothecation of the credit.

Interest on the other hand has been condemned by religions and widely recognized as a serious problem.

[quote=Levi Philos]Interest bearing hypothecated debt as the model for a monetary system grows the total debt in an exponential manner until the basic economy can no longer make the interest payments much less pay off the principle. Thereafter we enter a Kondratieff write-off of debt.

Yet, it's simple to see when you have a ten dollar debt--much less a 12 trillion dollars debt--that the world's resources has nothing to do with money, gold, or anything else--it's land,freedom,security, labor, peace, and the willingness to share.

That's what the real wealth is.

Most children do though

Let's get rid of the government first.

Outside of the "money box", to me, money is an abstraction, an accounting symbol, and a medium of exchange to facilitate trade.

I do not see how a unit of human time can act as a reference to account for the different values of a Cordon Bleu meal versus MickyD burger. One hour of a great chef is not on par with one hour of a grill man, in quality or quantity.

And the human population is a finite quantity, and its total hours does not retain proportionality with the potential output, once labor is multiplied by tools, machinery, automation, and mass production.

Likewise, the use of precious metal coin, a finite and scarce commodity, cannot act as an efficient medium of exchange to facilitate trade of the world's potential output of goods and services.

I deem it evidence of mass insanity when scarce money (or scarce credit, thanks to usury), forces industries to collapse, and laborers to lose jobs. Or that a bumper crop reduces the selling price of a farmer's harvest. Unemployment, for lack of money in circulation, is absurd.

Prosperity is the creation, trade and enjoyment of surplus usable goods and services. The more one can do, make, trade, with less resources, the more prosperous we all should be. Obviously, the money token system is one of the root causes of poverty, and prevents the productive people from prospering.

There is a widespread belief that "money has to have a value" independent of the marketplace. But it would appear that the marketplace is the reality, and all money is but an illusion that empowers the thieves and scoundrels to prey upon the productive masses.

Money indoctrination leads us to believe that we can "store" future performance by collecting mediums of exchange (used to facilitate trade in the present).

If we were all prudent, and "saved" our money, the marketplace would collapse for lack of a circulating medium of exchange.

Thus using money to "store value" is a mistake and contrary to the function of money.

(Banks engage in usury, placing your "savings" into circulation, for interest. They do not hold your money in their vault. That would be counterproductive.)

In the marketplace there are real goods and services offered for sale.
Beyond simple barter, we rely upon the abstraction of money tokens to facilitate trade of different items and services.

Obviously, we cannot rely on a storehouse of money tokens to compel a marketplace to sell us that which is not available. And if all sellers are to be able to trade, there needs to be enough money tokens to purchase everything.

Classic economics (money mad), would have the price fall as money scarcity increased. In other words, the more you work, the less you'd be paid. Or the more you produce, the less you'd receive. If you were a debtor, you'd be doubly injured, being forced into default no matter how much harder you worked or produced.

There is a mathematical error in making a subset of a set into a representation (an abstraction) for the whole set's value. Making gold coin into a money token, for example. Gold is a subset of the whole set of goods and services in the marketplace. If the buying power of the gold coin was proportional to the whole set, then a subset of the gold coin equal to the value of all gold in the set, would be able to purchase all the gold coin, and thus the whole set. Ergo, no "hard money" system is sustainable. It will create booms and busts as the finite money token system is reset, and property changes hands.

It would be more equitable for producers to emit private promissory notes, denominated in that which they could do, produce or have. In essence, each producer creates the medium of exchange with which to purchase their output.

Of course, when one tenders a note back to the originator, and it is discharged, the note is destroyed, having fulfilled its function. Which means that the money token supply would grow and shrink in proportion to the offered goods and services.

It would fit well with my idea of prosperity - the creation, trade and enjoyment of surplus usable goods and services.

It would be more equitable for producers to emit private promissory notes, denominated in that which they could do, produce or have. In essence, each producer creates the medium of exchange with which to purchase their output.

Let's get rid of the government first.

The World Financial System and Credit Creation

Dear Dirk,

Food for thought.

The World Financial System comprises multiple National Sub-Systems for each of which The Washington Consensus prescribes Rules of Credit Creation which make no sense if one imagines them to be applied to the World Financial System as a whole.

Within the latter, each act of Credit Creation entails matching increases in the World Financial System's Assets and Liabilities.

In principle, each and every item on both sides of the World Financial System's Balance Sheet is fungible.

Hence, any attempt to limit World Credit Creation through "constraints" specified in terms of Balance Sheet items is readily circumvented.

At the level of National Sub-Systems, Rules of Credit Creation invariably reduce to such "constraints" in one form or another.

However, unregulated capital flows subvert such "constraints" at the level of National Sub-Systems.

In this connection, I am once again reminded of my question to James Tobin and Robert Solow thirty years ago:

Why do Mainstream Monetary Theorists reason as if all Investment is financed with Savings out of Factor Incomes and not by New Credit?

Solow found this an interesting question to which he expected Tobin to respond.

Tobin never did.

Gunnar

Re: credit creation

I knew this would draw fire from Swindon!

Yet it is important to stress that money creation occurs without inputs and has no costs *of production*. Of course loaning money bears a risk, which needs to be reckoned with and provided for. Still, no costs need to be incurred at the moment of lending. Costs may arise when things go wrong, and this may be insured against in advance. Even where this routinely occurs, as in banking, providing ex ante for ex post failure is not the same as incurring upfront costs of inputs.

This is not sophistry. It is important to make the distinction over against those who argue that savings are a necessary input into loans.

The term fiat money is used to mean any money declared by a government to be legal tender, not fixed in value in terms of any objective standard and without intrinsic value.

This applies not only to currency but also to electronic money. Isn't all our money fiat money?

Dirk

One reader has an epiphany:
{quote Correspondent} Oh, man oh man! It is so f_cking simple it is right in front of us can we can't see it!!!

Think about it.

A and B agree that C will keep the books.
A promises B
B promises A
C records the transaction.

If the transaction needs to be bonded

A and B each deposit with C something equal to the "worth" of the value of the promise.

If either A or B fails, C credits the aggrieved party.

Simple as that.