Re: The Citizens' Guide to Money

monetaryscience@xxxxxxxxx wrote:
On Jan 6, 8:15 pm, monetaryscie...@xxxxxxxxx wrote:
A relatively short and somewhat opinionated guide to Monetary Science,
targeted towards all interested citizens, is posted at
monetaryscience.blogspot.com . Welcome to come take a look.

I am also posting it here.

Thank you.

(Visit the website to see original version
with hyperlinks)
------------------------------------------------------------------------
THE CITIZENS' GUIDE TO MONEY
by Monetary Science (monetaryscience@xxxxxxxxx)
Posted at monetaryscience.blogspot.com

"I care not what puppet is placed upon the throne of England to rule
the Empire on which the sun never sets. The man who controls Britain's
money supply controls the British Empire, and I control the British
money supply." - attributed to Nathan Mayer Rothschild [1]

This is (mostly) correct, because where to place investment money
determines what exists as companies and who controls them, which is
already the bulk of the entire society. Secondly the law giving
powers have to live up to public expectations, and these can be
shattered by mishandling the economy through making bad investments,
manipulating interest rates, and heavy selling of money to foreign
currencies making foreign trade jump up and down. In the end the
law givers have to keep the money controllers happy, or the money
controllers can make the People unhappy, who will blame the law
giver and not the money power, because the People don't understand
how it works. There is only one danger to the money controllers:
a law that nationalizes all banking, and institutes a non-profit
investment regime in the interest of the economy and People. That
ends the private money power. Rothschild said the truth, but what
was said isn't enough to solve the problem.

[...]
Yet few understand what money actually is. Those pieces of
paper which we call money are intrinsically worthless.

This is effectively incorrect: these pieces of paper have intrinsic
value because the Law is such that these pieces of paper/coins end
up having real value, like "getting out of jail for not paying your
taxes" cards. Because they have value for some, they have value for
many, and if they have value for many they have value for everyone.
With "intrinsic" you no doubt mean the paper/ink itself, but it is
"intrinsic" in money that it is set up to have value in a trade
economy. The whole "money is essentially worthless" seems incorrect
or without real interest. The point of interest is: the production of
money is cheap, who controls that production is rich. Who should
control the production of money for its own benefit: the Government,
if it exists for the public interest (is highly democratic). This
has to extend into the business of investment, so that all investment
becomes a political tool. At that point the whole problem is already
solved and further discussion is only relevant as to how to shape
such a system in law and how to get it up and running as quickly
as possible, and without too much problems.

Once the "correct" interpretation of money is found, all the rest
of modern law around "money," which is tremendously complicated
and obfuscated and wrong, really falls through as an elaborate
financial fraud. It is common practice in financial fraud to make
a deal so extremely complicated, make the chain between initiator
and final signatory entity so long that it can no longer be researched
and understood. This is a trick you also see elsewhere: make a
story so ultra extremely long, that just to understand all the
details of the ridiculous flawed laws, systems, agreements alone
takes more then a lifetime. Most people don't have time for that,
and hence fall off and think "I hope they know what they are doing."

The best medicine for this is ignoring the knot altogether (at first),
and initiating a correct system. From there the problem becomes how
to make real the new system, and which point the knot is confronted
again, but this time with an axe: if we don't understand it, who
cares, we cut it out and replace it with the new system.

That is how this problem has to be solved, IMHO.

This does of course not mean that the given analysis of money isn't
correct, but the way to go about this issue is with initiating a correct
system based directly on the premise of trade and swap-trade, and
what that is and should be, and what the role of money in such a
system should be.

Simply: trade is about effort, money is not effort but a political
tool, and natural resources are "potentials" and "chances" which
when distributed equally to all give everyone the same kind of power
and continuing platform to sell his/her labor.

At that point you have a giant axe in your hand, and a new set of
ropes for an economy, and all you need it to remove the old whatever
it happened to be fro kind of impossibly complicated knot of whatever,
and replace it altogether. Historians can then muse about what the
knot really was, in a period of time when nobody has inherent interests
in keeping the knot/fraud going. Hence even the knot itself would clear
up by ignoring it.

Sometimes you need a little more of an active approach in solving
a problem, instead of the long way around through all the hoops and
bends, which will lead nowhere anyway.

[...]
THE "PERSONALITY" OF AN ECONOMY
Now we can see how subtle and powerful a tool monetary policy is.
Monetary policy can influence the very "personality" of an economy: An
inflationary policy will reward borrowing and profligate business
investment, while penalizing savers and fixed income investors. A
deflationary monetary policy will reward miserliness, while punishing
those who borrow and invest in businesses.

I think the focus on the money supply is not very useful, it is in the end
a side issue. The main issue is whether investments are for profit
or non-profit, an issue which is probably off the radar for most people.
Changing the money supply is a source of manipulation for private
groups if they have it, and a source of power for Governments if they
have it. But the really important issue is: what businesses are being funded,
and that is determined by the kind of investment system in the economy,
either for-profit and private, or non-profit (private and/or Government).

Now comes a crucial question: How is this new money to be introduced
into the economy?

Indeed !

Remember that the new money gets its value by making
the dollar in your wallet a little less valuable. So we had better be
careful about how it is used. Should the new money be distributed
equally amongst all the people?

No.

Should it be handed over to the
Government to use on pork-barrel projects?

Democratic Government: yes. As loans to useful enterprises, who will
pay back, at which point the money can simply be destroyed causing
the money to become more valuable again - zero sum.

Pork-barrel: of course not, why do you say that ? Why do you immediately
need to put a negative marker on "the Government" ? Because maybe you
really know that it is the Job of Government to *spend* it, and not
only regulate the total supply !

The Pork-barrel is only useful to deal with emergencies and special
circumstances like the crippled and old.

It is all so obvious, it is all so obvious ... why can't you all see it.

How do we make sure that
the new money is used in the most worthwhile way?

Democratic control over Government, the inescapable way
- binding referendums
- bottom-up state representative democracy
- state investments are public knowledge
- the Government the slave/servant of the People, tied hand and foot
http://www.jhwh.be/~joshb/constitution-short.html#3
Inescapable public power over all of Government including money
supply in total and all investments in particular, by Constitutional law.

A reasonable answer to this quandary is that the Central Bank should
not simply hand out the money, but loan it. The interest rate on the
loans should be market determined. This will ensure that the money
will go to only those who can use it most productively.

"Most productively" ? Give me 500 people, a whip an AK-47 and
ammunition: I'll starve them first, and then work them to the
breaking point at gun point. You'll see I'll make a hell of a return
on that investment. But is that useful for an economy ? Do the people
exist for their own sake, or for the games of the money markets ?

Your answer is wrong. There should not be money markets to whoever
takes the funds at highest return. Why would that bother anyone
that the return is highest, it only needs to be zero sum in the
end, thus maintaining the money supply as a stable entity.

Bzzzt, wrong, no cigar. Good writing style though. Once you
understand/agree how it should work you should write a book about
it, no doubt it would be as legible as this was.

[...]
BUILDING A SOUND MONETARY SYSTEM
We need a monetary system that maintains price stability, that
prevents immoral transfers of wealth, and that encourages both savings
and prudent investment.

Correct, price stability is a good thing in principle, keep the money
stable over centuries and even forever, though that means you should
put a maximum on wealth because some people may start hoard cash
over generations and this could have weird consequences, like them
becoming more powerful then the Government itself, without there
being a democratic control.

This can be achieved by linking monetary policy to the price of a
diversified basket of labour and commodities. The basket would include
the income of people in various job categories: supermarket workers,
dentists, machinists, bus drivers, managers, engineers and so on. It
would also include the prices of a large number of commodities. The
commodities selected should be domestically produced, and should be
commodities for which there is a competitive market - i.e., a market
with a large number of independent buyers and sellers. Commodities
which are monopolized should not be used.

The price of this diversified basket would be a weighted average of
its many items. The Central bank should continuously monitor this
price using scientific surveying methods, and should set a target
value for this price. Then, the Central Bank should increase the rate
of growth of the money supply when the price falls below the target,
and decrease it when price rises above the target. This monetary
policy will result in the money supply growing at a rate that is
roughly equal to the real rate of growth of the economy.

This system is all well and good, except that the investments should
be directed by the Public itself so that it can grow up the kinds
of businesses it wants to live in. Those are not the maximum return
kind, that's the problem you've missed. Investment in businesses is
massively important for the economy. The economy is like a garden,
it matters everything which plants you water. For profit maximum-return
investment is like watering prickly bushes, thorns and weeds, while
leaving the businesses that put fair wages in workers hands under
good working conditions to fade away. Non-profit democratically
controlled finance does just the opposite: zero-sum (of course) loans
go to friendly businesses, while the thorns and weeds receive a
healthy dose of financial warfare from the democratic state, just
as now the reverse is happening: for profit finance is at war with
friendly businesses, because it is a threat on return on capital.

As we described earlier, a good way for the Central Bank to introduce
new money into the economy is by loaning it out at market-determined
rates of interest.

This leads to investment in bad bosses who abuse workers, which is
the central problem is just about the entire world society, and
leads to global wars, dictatorships and the rule of countries by
criminal elites. It is that bad, it is that important.

This ensures that the money is used in the most
productive possible way.

Which is a fake and erroneous goal. Some productivity is necessary,
excessive productivity is otherwise known as slavery, misery and
opression. The markets themselves seek low prices and therefore
more efficient production, this issue is already solved by the system.
No need to do it twice over with a predatory for-profit investment
system private banks, stock exchanges, speculator parasites who
only consume yet deliver no service at all. Talk about cost and
loss of production.

The money supply is reduced if necessary by
simply loaning out less money than is being repaid.

True, that should work. Another way is levy some tax on whatever, and
destroy that money, which means nothing to the Government in public
service (except achieving a stable currency, which is good).

There is nothing
inherently wrong in using a debt-based fiat currency.

Agreed, at the same rate there's nothing wrong with a Government-spend
currency either, because that can be recovered through taxation.
Both ways of putting money into the economy can exist side by side,
and both have their own zero-sum control (interest/taxes), which
can complement each other.

However, it is
necessary that everything should be done in a completely transparent
manner. The items in the basket, the weights used to calculate the
average, and the money supply growth rate should all be disclosed to
the public.
[...]

I'm afraid you missed the real problem. Please look into the mechanisms
and effects of the motive with which investments are made, and compute
that through. Not just for one or two, but for near infinite amount of
investments over centuries, given the current human psychological condition:
there are criminals, there are good people who will work honestly,
there is some of everything. Do the simulation/computation, you'll see
what happens: total disaster with for profit money selling (as we now
have, war and rockets with nukes everywhere, people in dead end jobs,
homelessness and suffering, worse in the USA with its more dedicated
for-profit investment law system then in Europe. Heaven on Earth for
non-profit and/or democratic controlled investment. Take your pick,
but one of the two will (probably) be the reality you come to live in
(already do). These are important issues, think about them.
--
http://www.jhwh.be/book/buy <- In book form how it can work, E 39,- ex-ship.
Gratis on site. #69 http://www.xs4all.nl/~joshb/no-id-theft.html
.

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