Blog 15 1 The money scene replayed 2 Democracy or Republic?

Blog 15  In two parts:

Part 1
   Replay of "The Money Scene" (from Blog 2), which explains how our money is created. All of the world's governments and economies are linked (and controlled) by this process. It deserves a review at this point

Part 2
  As promised, "America is not a democracy. It is a republic."  The originals of two concepts of government.

Part 1  The Money Scene (Replay of Blog 2)

In Blog 1 I hope I convinced you, dear reader, that there are two distinct kinds of Canadian (or American, or Chinese) money? 

There is cash, actually printed or minted by the governments, and there is what is known as credit money, created by the banks and rented to us.

You probably use the rented money for almost all of your transactions. As does General Motors or Exxon. It is not printed, except maybe as entries in your bank book. No printing press is needed for credit money. But if you want some, you have to rent it.

So, for the secret: how do the banks create our money supply? It has been said by wiser economists than me, “It is so simple, it’s hard to believe.”

You may have seen those TV ads where a young couple beams as a bank officer - often a well-groomed, well-spoken young lady with the couples’ best interests at heart - tells them what they want to hear. She will give them $25,000 for that new car, or for their daughter’s school fees, or whatever.

What follows (not shown in the ad) is a lot of document signing (and signing, and signing.) In real life one of them might want to read the documents. But he, or she, would have to be a super-fast, intelligent reader, like you, perhaps. At the critical moment, then, after you have signed the documents, the bank agent tells you that $25,000 has just been transferred to your account.

At that precise moment, $25,000 in new money pops into existence and enters the national economy.

It's certainly real money. You write the cheque, and you get your car. The process is so simple: a bank willing to lend makes an agreement with a client willing to borrow. And it is exactly the same process if General Motors or Imperial Oil wants to borrow a billion dollars. It's not cash, but it is real money, ready to be spent. 

And it is new money. The bank does not take it from a stack of cash nor shave it from an ingot of gold in the basement.

So when you repay that loan, $25,000 is taken out of existence. Really.

Of course, you have been paying the rent, the interest. Ah, interest, the wellspring of the banking business.

Part 2 DEMOCRACY or REPUBLIC?

The drafters of the American constitution were educated in the history and language of ancient Athens and ancient Rome. (Universities of the time did not carry courses in American literature or political economy.) So when the fathers of the constitution sat down to work, they had two models. one from Athens and one from Rome. They probably knew more Latin than they knew Greek. So when they came to defining a government, they tended, toward the Roman rather than the Athenian model .The Athenians had a democracy. The Romans had a republic. 

So what is the difference? According to Aristotle, who was an Athenian, democracy means ”the rule of the people”

The Romans, however, recognized two classes of citizens, They called their state “senatus populusque Romanus”,  which means “the Roman Senate and people” The idea survives to this day on ancient Roman buildings in the letters SPQR. and, perhaps we might say, in the American Senate

The Roman senatorial class were a kind of upper class, from which the chief magistrates were largely drawn. It is true that there were in addition three different popular assemblies, but the senators held all the real power.

Finally, to end this little historical rant, it must be admitted that the Athenian democracy came to a bad end by engaging in a distant, futile, foreign war. Something like Viet Nam or Afghanistan. 

The Roman republic, on the other hand, went on, to become a great empire, but no longer even remotely democratic.

How much of this history affected the constitutional congress, I can’t say. But American conservatives have often maintained that America is a republic, not a democracy. Abraham Lincoln, who was not educated in an Ivy League university, may have held different views.

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