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".

Blog 17 LETS Hear It For Greece!

                  Could Greece escape the Law of Money?

To do so could be a critical poke in the eye to a world monetary system that is rigged to make the rich richer, and richer, and richer still, by keeping the rest of the human race in perpetual debt.

Let's go back to Arthur Banks (Blog 16). What would his community look like if Arthur continued to issue his generous little gift slips? Let's say they averaged 20 transactions before they got back to him, and that some of them never did come back to him. What would his neighbourhood look like?

I would say, very prosperous.

There would be more money to do more things with - like buy better food, see more movies, have more toys, repair more potholes. Now, wait a minute, you say. Repairing potholes is the town government's job. Yes, so suppose the town government accepted Arthurnotes for tax payments, and then used the Arthurnotes to pay its employees for repairing the potholes. Would that work?

 

In fact, there many such local currencies - hey are sometimes called L.E.T.S., Local Exchange Token Systems. Look up the "Hours" of Ithaca, New York, which has been a local currency operating since the early 1990's. An Ithaca "hour" was valued at ten American dollars. Or look into Argentine's monetary collapse, when the LETS carried the ball and kept the local economies functioning.

So lets cheer Greece on. When pushed to the wall, lets see it go it alone with its own internal currency. Without debt charges eating up the nation's sustenance, Greece has a lot going for it: tourism, agriculture, its strategic location between the oil of the east and the vehicles of the west. For a more exciting read on this point, check out the very compelling article by David Olive in the Toronto Star (July 10th. I think), "What does Greece need? The last thing it's getting."

Most great historic movements have started with a single impetus.

Which reminds me - am planning to visit Iceland soon. Will tell you about it.

Greece: Changing the  Channel   Blog 16   July 6 2015

What’s wrong with Greece? Depends on whose propaganda you believe. One answer (heard in the the locker room this morning): “Well, they’ve just been living beyond their means. Spending the money they don’t have.” 

Cogs Blog Comment: 

Well, Dan, that’s applying the basic, number one rule for household economics - you have to earn it in order to spend it. However, sadly, applying the basic rule for household economics to the global monetary system just ain’t relevant. IT JUST DOES NOT APPLY.  Repeat: IT DOES NOT APPLY.

Then there’s Rule Number Two for household economics (if you borrow it, you have to pay it back) That one does not apply to the global monetary system either. In fact, if everybody - folks, governments, corporations - tried to pay back their debts, there would be no money left to buy anyone’s daily bread, not even your favourite bank teller's.

Now with that introduction from the gym scene, let me address the big challenge I have set for this blog and the next one - to explain why what looks like common sense for the household does not apply to the global money system  as it now exists.

Let’s introduce a solid citizen, call him Arthur Banks. He dresses well, takes trips, pays his bills. His neighbour, Chuck Chaplin, wants to buy something, say, a poodle for his wife.  But he doesn’t have any money. Arthur, however, just over the back fence, asks “How much does the dog cost”

Chuck says, “$200 bucks.”

 Arthur says, "Just tell Peter the Pet Man that I will cover the cost of the poodle. Here, I’ll just give you a note that says I’ll pay him $200.”

Would that work? Would the wife get her pooch? The probable answer is yes. Right? And why?

Because Peter believes Arthur is good for the 200 bucks. He holds in his hand a piece of paper to prove it. 

Peter believes. Do you know the Latin  word for “he believes”? It is the word “credit”. Yep. Credit, in Latin, means “He (or she) believes.” So when the world’s big banks stopped believing that two of their big friendly competitors could meet their obligations-to-pay, they dropped. them like a pair of tarantulas.

But to get back to Art, Chuck and Pete. Let’s follow the note. Suppose that Peter persuades the farmer who supplies his bird seed to take Arthur’s little note in exchange for a load of bird feed, and the farmer explains to his hired hand that Arthur is good for the payment and pays her with the note. She lives in a flat in the village, and pays her landlord the rent with the note. Imagine this going on indefinitely until somebody takes the tattered and torn piece of paper back to Arthur and gets the two hundred. 

So far, what has Arthur bought with his $200?

1 dog $200

1 load of bird seed    200

1 week’s farm labour   200

1 month’s rent   200______

            $800

Pretty good for a hand-written note. It’s almost like a miracle. That little note is almost like money. $800 dollars dropped into the local economy, just like that. It’s certainly better than trying to barter a poodle for a month’s rent, isn't it?. 

I’ll leave you with a question. Could the Greeks do that?

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.

. 

Blog 14 Don't Vote the Money

The Cogs Blog

I regret very much to have to say it, but I do not think America will ever recover its democracy. Maybe some day, years away, the old commitment to “every man (and woman, too) a free equal citizen”, may surface in a new, better world, but…

I say this because of another law - let’s call it the law of elections. As I said in the previous blog, “Money buys elections.”  

This has been declared part of the American constitution by the Supreme Court’s “Citizens United” decision. Restrictions on campaign spending have been labelled a denial of the right to free speech. Yep. Abraham Lincoln must be spinning in his chair. All that work to preserve a great nation…  And the drafters of the Constitution, which they carefully designed to make tyranny impossible, where are they now?

Can something be done about it? Well the politicians who win after accepting big money from generous donors could just ignore their donors’ legislative preferences. They could just go right ahead legislating for the good of all the people who voted for them, or, even, for the good of all the people in their whole constituency, even those who didn’t vote for them. No, forget I said that. Mere theory or once-upon-a-time thinking. 

So what, then? I suggest we could just test that other hallowed principle, “the people are sovereign.” 

How? Well, I hate to introduce money in the same paragraph with “the people”, but if they pooled a lot of their small change, they could use the media, commercial and personal, to mount a “DON’T VOTE THE MONEY” campaign (DVMC), or a VOTE AGAINST THE MONEY campaign (VAMC), or even hire a pricey ad firm to create a really sweet slogan (ARSS). 

The aim would be to match the most lavish politicians, dollar for dollar,  and persuade voters, particularly the not-moneyed majority to vote against the biggest spender. It might take off at the presidential level, and in subsequent state and civic elections produce some interesting results, like independent or (horrors/cheers!) third party candidates! Voting against the money could even become a popular fad and be reported free on commercial television news. Hmmmnn. that idea didn’t go far. I can tell by the look on your face.

But come on now, don’t pull a long face; think positive. Every great human accomplishment began with someone thinking in a new way.

For starters, how about a contest for the best slogan, logo or cartoon for 

The Movement?

Some entries:

Don’t Vote the Dollars

      Don’t watch the political ads. Just time them.
(There must be an app for that.) 
Then vote: for the one who has spent the least.

You’re voting? Money or Merit?

They can’t buy my vote. I’m counting the money spent.

Let's all pull the rabbit our of the money hat. (cartoon?)

A candidate, in order to win, must get a majority of votes. So, voters, you really do have power. Although Mark Twain is reported to have said, sourly, “Whenever you find yourself on the side of the majority, it is time to pause and reflect.” Maybe today he would have said, “Whenever you pause and reflect, you can become part of a democratic majority.”

In the nest blog, perhaps I’ll explain why some Americans during the last two centuries have argued that the United States is not, and never has been, a democracy; they insist it is a republic. What’s the difference? Tune in if you are interested.