Blog 19 Making Money: Making Change

Blog 19  Making Money: Making Change. Three Option

Option 1

Reorganizing some old files recently, I came on this argument for debt-free money (Italics mine.):

"Governments possessing the power to create and issue currency and credit as money and enjoying the right to withdraw both currency and credit from circulation by taxation and otherwise, need not and should not, borrow capital at interest as a means of financing governmental work and public enterprise. The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme prerogative of government, but is the government's greatest opportunity.

"By the adoption of these principles, the long-felt want for a uniform medium will be satisfied The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power."

There has been a lot of scummy water under the bridge since these words from an essay on monetary policy were penned in 1865 by a not unknown American - by the name of Abraham Lincoln. 

I would note two things:  

First, Lincoln not only gave us what deserves to be called the clearest, simplest definition of democracy on record - "government of the people, by the people, for the people," but he left us also with this classic explanation of a critical truth:  that democracy depends on the government supplying non-debt money.

Second: we know, however, what happened on April 14, 1865. A President shot by a lone gunman who was soon shot down himself.  

Odd, that happened again on Nov 22, 1963!

But, on to 

Option 2 The Cashless Society, in which all transactions of any account are made using money created by and borrowed from private banks. We have almost reached this bankers'  dream in 2015.

Unsustainable, of course. Since banks do not create any money to pay the rent on the money they create as loans, the first source of rent money is more borrowing!  (Take another peek at Blog 5, on the growth imperative".)

Option 3

A calculated mixture of government money creation and bank money creation. 

Banks are great when the economy is booming. They fuel the boom with easy loans to keep it going.

But when the economy goes into a downturn, banks are counter-productive. 

They get edgy about making new loans in a slowing economy and they also call in doubtful loans. Both moves reduce the money supply available for the healthy operation of the economy. Anxious borrowers, too, pay back existing loans and borrow less. So everybody is geared up to gear down. The  result: a"credit crunch" (that means "shortage of money") which makes the economy slow further. You have heard of the vicious cycle.

 

                Dad, Why does the government bail out banks?

                   Because they ask.

                  That doesn't sound like a good reason.

                    No.  

So how to thwart a shrinking economy?. What is needed is new money - non-debt money - injected by government into projects or subsidies that maintain people's incomes. With an income, people are likely to keep spending, which keeps the economy active. Virtuous cycle, yes?)

Unfortunately, governments usually listen to the banks, who insist that the only solution is for government to borrow from them, pay them the interest, and wait for them to lend more money into the economy. 

How can governments be so stupid? There are several reasons. One is that governments are not as smart as banks when it comes to monetary policies. And, perhaps too, there might be some more specific means to bully, bribe or bamboozle politicians. 

A credible mechanism for governments to maintain the equilibrium between government-created and bank-created money is worked out in Michael Rowbotham’s The Grip of Death: A Study of Modern Money, Debt Slavery, and Destructive Economics, 1998. The mechanism is based on the British economy, but is applicable to any government which is not controlled by its private banks.

Perhaps more of that in the next blog.

                        

Blog 18 Crisis / Opportunity

In Blog 7, I introduced the four means of subverting the law of money within a nation.

1 Noblesse oblige (the charity of the rich);

2, Government redistribution; by taxing the richer and spending the tax receipts on the poorer.

3, Workers unions - with freedom to act collectively to level up the power balance between wage receivers and dividend receivers.

4 Finally, when 1 to 3 have failed to function sufficiently, revolution, which I symbolized with an image of a guillotine. That is a humane device for separating heads from bodies. It was used extensively on the French royalty in the 1790's,

I noted that 1. noblesse oblige, while laudable, is not a big contender for gold medals in wealth equalization.

And 2, government equalization gets strangled by the power of of the debt-based money system. The rent payment on the debt (national/state/municipal) don't leave much for public picnic baskets.

Ditto 3, collective bargaining, suppressed by debt-stressed governments on the insistence of their bankers and big-money supporters.

So,prepare for the guillotine.

The French Revolution was just one of many revolutions brought on by the operation of the law of money. A list of examples would include the Communist revolutions beginning in Russia in 1917, and, more recently, the Occupy Wall Street movement, and the current ISIL and other 21st century Arab revolutions. They were and are brought on by a recurring crisis point in the distribution of wealth, when too much money has been accumulated by too few people, leaving too little for the majority.

And how much is too much,  and too little? Number-crunchers, despair. That balance may be quantifiable only after the revolution has decided it. But give it a try. And then notify the 1%. It could just save us from a nasty revolution.

It deserves to be said on that point that revolutions are almost never initiated by the poor, who are too occupied just keeping breath in their bodies. Revolutions are birthed in a deprived or de-privileged middle class, but once launched, the middle class seldom retains control.of the outcome.

So we seem to be due for one, it it hasn't started already. It is hard to predict the outcome because this revolution, unlike those previous national uprisings, is going to be global. That makes the stakes huge, and the predictions dubious.

But they all start with a small beginning somewhere.

That could be Iceland, and Greece, or ISIL.  ISIL? A theocracy? With human beings assuming the "voice of God/Allah" and telling everyone else what to do/think/be?  That could be worse than the cancer stage of capitalism!

Well,let's leave that thought to another blog. How a bout an upbeat quotation from Robert Frost, who, when asked what he thought about the fate of man, said, roughly quoted, "Men are like cockroaches, ineradicable."

Yeah, and by the way, I'm not inventing this stuff. I'm just quoting history.

Interesting verbal note:  the word "crisis" came from the old Greek word for "decide". 
And the English word "decide" came from Latin. In Latin it meant, "cut, with a downward stroke".