Blog 42 Do We Really Need Governments?

Blog 42  Do We Really Need Governments? - Some Tricky Musings

Let's just start with some background by establishing that there are different forms of government.

In alphabetical order. Asterisk* indicates a form of government defined by Aristotle about 2500 years ago. Nothing new there.

Anarchy*, aristocracy*, autocracy*, democracy 1 (mob rule)*, democracy 2 (representative government), dictatorship, "kleptocracy", monarchy*. oligarchy*, plutocracy, tyranny.* Wow, is that all?

Anarchy means "no government". Aristotle thought of it as "mob rule" He called it "democracy." (Literally, in Greek, "rule by the common people").

Aristocracy - means "rule of the best." Two perverted forms of it are are Oligarchy, which means "rule of the few" and Plutocracy - rule of the rich"  from Plutus, Roman god of riches, (Now we're getting warm. )

Autocracy, Aristotle's "tyranny" (modern "dictatorship"). Means "myself-rule" a ruler who rules for his/her own benefit, by force, usually.

Democracy 2, representative government, of, by, and for the people - to quote Abe Lincoln.

Kleptocracy. modern rhetorical term based on the Greek word for thief. So government by thieves.

Monarchy - Rule by a king or queen. Can be autocratic or constitutional.

Note: At the present time, all these forms of government call themselves democratic.



Back to our question. Do we need governments?

Let's talk about modern "democracy".

We all know what the word means. It means rule by the people. So the theory is that the ultimate power lies with the people. But in a population of several million (or billion), different people have different views. So, in  practice elections are held, and a candidate with the most votes becomes the people's representative for a defined period.

However, in theory and, especially, in practice democracy works better in small states than in large ones.

So, fundamentally, what does a government do. Two main things, tax and spend.
In the process, money is taken from individuals and corporations, and spent to provide public goods and services, notably for people who can't provide for themselves. It's a kind of charity, but what else could you do? Keep 'em quiet, the Roman emperors said, and they won't revolt. It is a good thing. Really.

If you consider the return on investment, much of it is very good. Public health care keeps workers healthy, and reduces absenteeism in the work force. Education provides better workers, but, the flip side, also smarter voters. Roads, railways, canals, a justice system, benefit almost all classes.

Something else governments are spending large amounts of their tax money on today is paying the interest on government debt. Not much attention to paying down the debt itself, for some strange reason.

(So one way to get some of your taxes back is to save your money and buy your government's bonds.)

The fourth big expenditure - the military. Can't say much about the social value of that, but it does provide employment, and when the weapons are put to use, population reduction.

But - new point - governments all over the world are on the ropes. High debt levels mean higher taxes and/or lower public expenditure. So if you are against taxes, but not against privates banks creating all money, you can advocate that at least some of the big four expenditures be cut. If you could choose only one, which would it be? Health care, education,  transportation infrastructure, or military spending?

Why?

Think, now.

My choice would be debt repayment, just because I don't like interest payments. Debt reduction would be really hard on our banks, which have lent most of that money to governments. And some recent governments have tried paying it off  - by borrowing more money bank-created money. (????) Can't be done.
 But if governments were to resurrect their old sovereign practice of creating their own national interest-free money...

That, would be a real showdown between national states and banking corporations. On which side would you lay your bet - if you had any money left for betting, after your taxes and your mortgage payments?

Banks or governments?

 Couldn't we just maintain a beneficial balance between them?

Blog 41 The Money Scene (review)

41 The Money Scene (reprise) Where does money come from?

First, there are two distinct kinds of money. There is cash, actually printed or minted by governments . And there is credit money, created by banks and rented to us.

You probably use the rented money for almost all of your transactions if you pay by cheque, debit/credit card, or electronic transfers. Credit money does not come from a printing press. But you do have to rent it. (Hey, Doc, you mean pay interest. You can say it out loud.)

Okay. Now for the big mystery, the real secret. How do banks create the money we use>

It has been said by wiser accountants than me, "It is so simple it's hard to believe." 

The Money Scene

You may have seen those TV ads where a young couple smile at each other, and a bank officer - well-dressed, good-looking and devoted to the young couple's best interests - has just told 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. Finally comes the critical moment. After you have signed the documents, the bank agent tells you that $25,000 has just been transferred to your account.

At that moment, at that very moment,  $25,000 in new money has entered into the world's economy.

It is certainly real money. You write the cheque and get your car. Or your daughter gets her school uniform.

The process is so simple: a bank willing to lend makes an agreement with a client willing to borrow. And it is same process, exactly, if General Motors or Exxon wants to borrow a billion dollars. It's not cash, but it is money, ready to be spent.

And it is new money. The bank does not take it from a stack of cash in its vault nor shave it from an ingot of gold in the basement. It just pops into existence! Really!

So, remembering the law: Money goes where money is, let's follow the trail. What was the key question you asked before signing (and signing, and signing) the papers to get the loan?  Of course, "What is the interest rate on the loan?"

The key word in the global monetary system has to be "interest". Sometimes called "rent".

So the couple, or you, can live in this $25,000 Loan Street dwelling as long as you pay the rent. Correct? But, no, you say. We have to pay back the principal of the loan.

No, no, and no!

Now this may be a little difficult to grasp, too. The bank really does not want you to pay back the principal, ever*  So long as you pay the rent they will rejoice to let you keep the credit money. (After all, they created it out of thin air.) For you, on the other hand, if you no longer had to pay the rent, that would be great. Right?

And for the bank? Well not so good. It would be a bad thing for the bank. When you pay back the principal of a loan, they have to write a profitable asset off their books. No loans on the books, no rent/interest coming in. No rent, no profit. No profit, no salaries for bank execs, and no dividends for shareholders. Not good.

You see how the system works? The expectation that you will pay off the principal is just window dressing.

Let me finish with a mind-expanding question. What if you had no government-created non-debt cash money? For the world's banks that is the great and glorious ultimate profitable goal. And they are getting closer to it! Just think, if banks controlled interest rates and fees, and you had no cash available to escape to...

*Next blog will face-off governments and banks. Tune in, I hope you may learn something else new.