Will Demise of Dollar Usher in Free Money?
The imminent demise of the US dollar as the kingpin of economic transactions world wide is predicted by several commentators. Johnny 'Silver Bear' comments that the Federal Reserve has kept the printing presses rolling too liberally for too long and he continues:
"The Fed has lost control of the dollar. Their mindless creation of credit has insured a mind-boggling meltdown of the entire financial system. This is not a good thing for anyone, anywhere. The dollar is the world's reserve currency. Seventy-five percent of all dollars in existence are in foreign hands. Whatever their value was when those foreigners got them, that value is evaporating right before their eyes. It's like buying ice by the pound and watching it melt away before you have time to use it."
Like Silver Bear, others say the dollar is doomed and they advocate a return to the time before 1971, when Nixon was forced by the French, who insisted on being paid in gold for dollars, to end the direct convertibility of the dollar at a fixed price. The advocates of precious metal as currency say that a return to the old gold standard would prevent the Fed from creating "funny money", the cause of runaway inflation. What they overlook is that their cure might be worse than the disease.
Liberty Dollar
Linking a currency to gold or silver or any other precious metal would not only be unnecessary as shown by the many currencies that work quite well without having that link - it would make the economy of the country that attempted such a link depend on the amount of gold available, rather than on the willingness of people to work and produce.
The mining of all that gold to be used as "money" - or rather as the idea behind money - is by no means of benefit to our environment. Those mines are connected with serious problems.
The real problem is not even the Fed's printing of money but the facility the Fed and other central banks afford private commercial banks - to "create money" and loan it out for interest. This has made control over the amount of money in circulation and thereby control of inflation very difficult and the cumulative interest to be paid for practically all money in use has been a substantial drain on modern economies.
There are means of 'taming' money to suit economic activity. One of them would be for Congress or any legislative assembly or even for the people themselves to take back their right to issue money. The banks today create money for their private interest and that is the worst of all conceivable scenarios.
But back to the dollar and its predicted demise. The reason may not be so much the overprinting, but the fact that other countries are increasingly unwilling to support the American economy by buying and using dollars for transactions. Almost two years ago, I asked "Will Oil End the War Economy?" What had propped up the dollar for all the years before then was the fact that it had become an international exchange currency, necessary for countries who wanted to buy oil - and who doesn't these days.
But the Iraq war changed all that. America is seen as an aggressor. OPEC mooted the possibility of passing from dollar to euro, and some countries actually did the change, Iraq first, then Venezuela, and now Iran is considering opening its own oil bourse denominating black gold in euro instead of dollars. Russia just started to sell its own oil and gas for rubles. You may have noticed that all these countries are "in bad" with the US.
So what will the future bring?
Some say that the world economy might well collapse. Silvano Borruso is more optimistic. He says the American economy might adjust in a short time. But he also sees a chance that our present monetary system could be in for a big change. Mammon, meaning the money powers behind the throne, the banksters who have sold us into a modern day slavery, is seen as the dark force. According to Borruso that force might fall, together with its favored creation, the US dollar...
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ADIEU, MAMMON?
The demise of the dollar
The announcement by Venezuela’s Chavez and Iran’s Ahmadinejad that they will accept euros instead of dollars for their oil is sending shockwaves throughout the world. Frequently asked questions are:
• How will the world economy be affected by a switch from the dollar to the euro as a reserve currency, given that the economies of all countries are closely interlinked?• How will America manage its economy, the stability of which depends on the stability of the dollar?
• America has become addicted to the dollar’s hegemony as a reserve currency. Wouldn’t she consider it as a hostile action, any attempt by another country to end that privileged status?
• Can we expect anything other than chaos, pain and hardship?
Let’s us answer the last question first. Chaos, pain and hardship need not hit those who earn their bread by the sweat of their brow, provided they understand the basics. The situation has come to a head in the
“secular war between usurers and peasants, between the usurocracy and whoever does an honest day’s work with his own brain or hands.”
A not-too-short historical analysis is in order if we want to understand.
This is the second collapse of the dollar, for exactly the same reason as the first, i.e. a glut of the stuff. The forces behind the double collapse I will refer to with the time-honoured nickname of “Mammon.” The only difference is that this time Mammon is at the receiving end of his own misdemeanours. Let’s go back to the 1770s.
The hyperinflation of the Continental dollar was the result of the financial policies of the Patriot governments.
The above sentence, with a few cosmetic touches, can be read virtually in all standard works of reference. The truth is that
• The Continental dollar supported the American war of independence to within four months of victory;• Continental Congress decided to print up to 200 million worth of Continentals, and they did;
• The hyperinflation, which caused the collapse, was due to the printing presses of British General William Howe (1729-1814), who from warships anchored in the New York harbour counterfeited Continentals by the cartload to the extent of an estimated billion units. Hence the saying, “it isn’t worth a Continental.”
This was the first historical collapse of the dollar. Before tackling the second, let me remark that Mammon has prospered for 3000-odd years thanks to the superstition (there is no other word for it) that money must have a magic ingredient known as “intrinsic value.” Therefore he has tried, and succeeded, by all means fair and foul to hide the truth, which is exactly the opposite, i.e. that a medium of exchange functions the better, the less intrinsic value it has. Of course the other function, money used as a store of value, is what Mammon is after, for by it he exercises usury. Usury is the tribute that those who use money as means of exchange must pay to those who hoard it as store of value. The sooner this point is understood, the clearer all subsequent issues will become.
The first issue is that Mammon has always been deadly afraid of paper money, i.e. paper unabashedly declaring to be money, and not a “promise to pay” anything.
The second is that paper money has proved unstoppable, despite, or perhaps because of, its unattractiveness. Monetized gold is much more likely to be hoarded than spent, thus strengthening the practice of usury. The history of the struggle can be roughly divided into four periods.
• The Store of Intrinsic Value period, from Croesus of Lydia (d.546 B.C.) to the foundation of the Bank of England (1694). The “intrinsic value” superstition held the whole of mankind in thrall for more than two millennia. It still does, for a vast majority of people.• The widespread Store of Extrinsic Value period, 1694-1931. Paper notes were “promises to pay” gold stored in bank vaults. Mammon was by now forced to acknowledge the usefulness of paper, but continued to bamboozle the public into believing that the pieces of paper functioning for all intents and purposes as money were not really money, but tokens “backed” by a yellow metal gathering dust in the vaults of his temples (banks) instead of being turned into gorgeous jewellery, false teeth and (now) electrical contacts in silicon chips. Mammon succeeded in keeping under wraps two successful attempts at monetizing paper, thus preventing paper money properly so-called from spreading beyond the reach of his clutches. This period lasted 237 years, roughly one tenth the previous one.
• The restricted Store of Extrinsic Value period, 1931-1971. Paper dollars printed in excess of the requirements of the U.S. economy were supposedly “backed” by tons of gold ingots stored at Fort Knox and available “to governments” on demand. This period merely continued the previous one, except that Fort Knox was the sole location of the gold and governments the sole entities authorized to demand it. Note the duration: 40 years.
• The gold-less pure Paper Store of Value period, 1971-2006, the demise of which is imminent. It has lasted 35 years.
The step-by-step history of the struggle is outlined below. Mammon’s hostility against paper money is a most interesting mix of counterfeiting, mystification, exercise of raw military power, political assassination, etc. His strategy was first, to remove monarchs and guilds, which used to act as checks and balances against the power of usury; second, to govern by the proxy of puppet governments that impoverish their citizenry to his exclusive advantage.
A brief history of paper money
1227: The first ever paper money is issued by Kublai Khan in Mongolia, but comes to an end with the Ming dynasty.
1685, French Canada during Louis XIV’s reign: 30 000 livres of King’s money for military wages were on the way. Soldiers could not buy anything and merchants could not sell. The commanding officer cut up decks of playing cards into four and distributed the pieces as money. The economy revived, because the economic operators accepted the quarter cards as payment for their wares. Had the coins failed to arrive, the arrangement could have continued and acceptance spread.
1690: Massachusetts, followed by the other twelve colonies, issues the first colonial currency, causing a debt-free economy to take off independent of British control.
1694: Mammon founds the Bank of England, designed to issue paper money as credit to the State, and therefore for his own private gain. B.O.E. notes bear the inscription “The B.O.E. promises to pay…” to this day. The Bank of Scotland follows the same policy.
1720s: Mammon sinks John Law’s paper money experiment in France. The economy was doing fine, but the “intrinsic value” superstition led the Prince of Conti to send to the Banque a sizable bunch of notes with three wagons to be filled with gold. There was no gold, and the superstition carried the day. Whether the Prince was consciously acting as Mammon’s agent is a moot point.
1750: Mammon prohibits the American colonies to issue their own currency. Rebellion takes off. The 342 cases of tea thrown into Boston harbour still decorate school textbooks as a diversionary caper from the real issue.
1770s: Mammon sinks the Continental dollars as seen above.
1774-88: Mammon’s lackeys: the Assemblies, the high clergy and Freemasonry block all attempts by Turgot, D’Ormesson and Calonne to issue paper currency and thus save France’s finances. Mammon’s chief operator Necker indebts King Louis to a point of no return, thus encompassing the ruin of the French monarchy and of the Ancien Régime.
1790s: Mammon sinks the French Assignat by repeating General Howe’s feat. France printed 45.5 billion units (livres and francs) worth of Assignats. Divided by 26 million citizens it would have meant 1750 units per head. But the purchasing power sank to less than 1%, indicating prodigious counterfeiting. 17 printing presses, located in London, were responsible for “hyperinflation.” The Assignat died in 1796.
1793-1815: Mammon finances the Napoleonic wars with “promises to pay” issued by the Bank of England. The British are still paying off the interest on that “loan.”
1815: The Channel Islands manage to escape Mammon’s clutches by issuing debt-free State currency. Ten years later Mammon counterattacks by flooding the islands with “promises to pay.” The States of Jersey protest. Mammon compromises by forcing on them a yearly limit of £40 000 of States paper money. The arrangement will last until 1914.
1830-40: The spectacular development of the American Mid West east of the Mississippi is fuelled by a myriad (literally: 10 000+) small banks issuing paper money in unorthodox denominations ($10.25, $3, $13 etc.), with discount rates of up to 68%. Mammon is anxious to suppress these and found a Central Bank, but runs into the determined opposition of Presidents Jackson (who survives an assassination attempt) and Van Buren. But Van Buren, a gold buff, causes a severe depression.
1848: The 5th plank of Marx’s Communist Manifesto proposes “Centralisation of wealth in the hands of the State by means of a national bank with an exclusive monopoly.” Mammon spreads the institution of the central bank from England to the rest of Europe.
1861-65: Amidst severe opposition by the banking interests, Lincoln finances the war effort with a State issue of 450 million debt-free Greenbacks. Greenbacks were not “promises to pay.” They were money. Lincoln is assassinated. The Confederacy’s money, in “promises to pay,” manages to contract debts for $826 million by 1864. It failed.
1865-79: Mammon re-establishes the gold standard (Resumption Act 1879) after a 14-year long tug-of-war against the supporters of Lincoln’s Greenbacks. Booms and busts reappear. Financial panics destroy hundreds of small banks.
1860-90: Mammon diverts attention from paper to silver, his main aim being to wrest the control of the issue of paper money from Congress, empowered by the Constitution to issue currency.
1893: General Coxey marches on Washington with a 4 000-strong army of unemployed, demanding $500 million of debt-free Greenbacks so as to employ four million men in road construction. Mammon has him arrested for trespassing on the gardens of the Capitol. Coxey’s policy: print money and spend it into productive public works, is one that Mammon continues to oppose to this day, as it exposes the fallacy on which his rule stands. Only China is defying him on this issue.
1906: Gesell publishes the first edition of Natural Economic Order, unmasking the gold standard and lucidly explaining how paper money can be not only debt-free but also interest-free, by separating the monetary unit from the object representing it. While one country after another adopts paper money pretending it to be “backed” by gold, Mammon’s high priests (read: economists) continue to talk about the merits of the “intrinsic value” of gold. 100 years later Gesell is still taboo in all faculties of Economics.
1907: Banks refuse to honour deposits. Financial panic ensues: J.P.Morgan withdraws $300 million from circulation, and “saves the situation” by lending them back to the U.S. government.
1913: By a glorious sleight of hand Mammon gets Congress into ceding its Constitution-granted right to issue money to a newly created private outfit called Federal Reserve System. From now on every dollar issued in the U.S. is loaded with debt, thus duplicating Bank of England methods in the U.S. The FRS is neither Federal, nor has reserves of any kind, nor is a “system” judging by its effects.
1914: The war puts an end to the 50 year-old Latin Currency Union between France, Italy, Switzerland, Belgium and Greece. The union functioned with a single denomination 5-franc silver coin freely circulating as legal tender side by side with the national currencies of the five countries. It was also used for foreign transactions. Whenever a country experienced either a glut or a dearth of five-franc pieces it adjusted its internal prices accordingly to restore equilibrium. The union would have worked even with a 5-franc paper note. This feat can be duplicated today, between any number of agreeing countries.
1914-18: As had happened with the Napoleonic wars, the wholesale slaughter called World War was financed with “promises to pay.” The Channel Islands make use of the chaos to wrest financial independence from Mammon. Their spectacular development since can be verified by paying them a visit on the Net.
1922: Italy issues debt-free, but not interest-free, lire, thus taking up the policy suggested by General Coxey and practiced by the Channel Islands. Unemployment rapidly disappears and prosperity increases visibly.
1923: Mammon attacks the savings of the German people with the Weimar inflation.
1925: Mammon demands a return to the gold standard, and hence to the salary levels of 1913. The British workers reply with the General Strike of 1926.
1927: Mammon convenes an “ecumenical council” of central bankers allegedly to an “informal luncheon” in Washington D.C. Agenda: to coordinate the imminent Great Depression.
1927-29: President Coolidge encourages American citizens to purchase overpriced securities. The Great Crash wipes out $180 billion of ordinary people’s savings. Central bank-concerted deflationary policy causes the worldwide hardship known as the Great Depression.
1930: First experiment with Gesell’s Free Money: Herr Hebecker of Schwanenkirchen, Germany, keeps his coalmine open during the Great Depression by issuing Wära, a private currency redeemable in coal. Mammon’s agent Chancellor Brüning quashes the experiment.
1931: To Mammon’s great irritation, British Prime Minister MacDonald announces that Britain is off the gold standard. All countries follow suit except the United States.
1932-33: Second experiment with Gesell’s Free Money: Mayor Unterguggenberger of Wörgl in the Tyrol issues debt-free and interest-free municipal certificates for work done. 5 300 units of Wörgl certificates circulating some 450 times move goods and services for about 2.5 million Schillings. Wörgl built a bridge over the River Inn, tarmacked four roads, renewed the sewers and took electricity to new areas. It even built a ski jump. Economists flocked to the shrine, but were not converted. Irving Fisher tried to repeat the experiment in America, but with a demurrage rate of 2% per week (250% per year) which nipped the idea in the bud. Mammon’s High Temple (Austrian National Bank) orders the experiment scotched after 14 months. Hunger and unemployment return.
1933-38: Germany follows in the footsteps of Italy, the Channel Islands and Coxey: debt-free (but not interest-free) paper money pays for an unprecedented economic development: 6 000km of Autobahns, 1.5 million housing units for workers, the Volkswagen, scholarships for university students, and even three cruise ships for workers’ families holidays. Foreign trade is organised on the basis of straight barter. In 1938 unemployment is no more than a memory.
1939-45: Like the first, the Second World War is also financed by “promises to pay.” The debt-free Reichsmark loses no more than 12.5% purchasing power in six years of war.
1940-47: The Dominican Republic becomes solvent under Trujillo, following intense negotiations with the U.S.
1944: Bretton Woods. The U.S. dollar, as the only currency “backed” by gold, is imposed on the rest of the world as “reserve” currency. The meaning is that it cannot be used for anything other than matching the issue of domestic currency to the quantity of dollars in “reserve.” Economists accept with enthusiasm Keynes’ plan of “deficit spending” to make up for hoards. Deflation is avoided but inflation takes its place. The “stagflation” of the 1970s proves that the economy of production and that of money are two independent realms.
1961: Trujillo is assassinated.
1963, June: President Kennedy (Executive Order 11110) authorizes an issue of four billion debt-free (but not interest-free) dollars directly from the Treasury, effectively duplicating Lincoln’s Greenbacks and bypassing the Federal Reserve System. In November he is assassinated.
1971: De Gaulle plays the same role in regard of President Nixon as Prince de Conti had played in regard of John Law 250 years earlier: he demands gold for the heap of Eurodollars in France’s possession. There is no gold. President Nixon throws the sponge. The U.S. is off the gold standard.
1971: The rest of the world is on a paper dollar standard, working to exactly the same rules as the gold standard: an inflow of dollars permits the printing of domestic currency; an outflow of dollars forces its withdrawal. Inflation and deflation occur regardless of what happens to the economy of production and exchange.
1973: The oil “crisis” begets the petrodollar. The London and New York oil bourses force all countries to use dollars to buy and sell oil world wide. The gate is wide open for the U.S. economy to rely on printing dollars with which to buy things produced by other countries. Coupled with the concomitant destruction of the American economy of production, the situation is clearly unsustainable. It is coming to a head now (2006).
1978: China fuels a spectacular development with debt-free but not interest-free Yuan according to the Channel Islands-Coxey-Italy-Germany model of 1815-1930s.
1979: Paul Volcker, Chairman of the Fed, inaugurates an era of speculative, but not productive, growth. A financial bubble of immense size grows unrelated to production and exchange.
1982: First experiment with a social (people-issued) currency in British Columbia, Canada. Community currencies take off in a variety of countries, each community being more or less independent of official control.
1987: Mammon’s gold-mining companies found the World Gold Council, with the view of stimulating demand for the yellow metal. WGC ads extol the virtues of gold-backed currency, allegedly “strong,” whereas purely paper currencies are deemed “weak.” Mining companies go on extracting gold from the ground to rebury it, smelted and refined into ingots, in bank vaults.
2000: Mammon gambles. With the euro he takes away the sovereignty of the European states, but the euro begins to challenge the supremacy of the dollar as “reserve currency.” Saddam Hussein is the first to accept euros for oil. There is no way to continue imposing the dollar other than war.
2001: The Red de trueque (barter network) cushions Argentina’s financial collapse with people-issued paper currency. When the municipalities took to it, the IMF vigorously intervened to “rescue” the country.
2005: Some 30 000 communities round the world issue their own paper currencies, some on Gesellian principles.
2006: Iran threatens to follow Saddam by opening a petro-euro oil bourse. Fear is in the air that the collapse of the dollar is imminent. Gold shoots to $700 per ounce.
A post-dollar world
Perusing the foregoing rather long list of events, it is possible to spot an interesting trend:
• Debt-free (but not interest-free) paper money increasingly disrupted Mammon’s attempts at forcing the world into clinging to gold; and• Debt and interest-free paper money made a brief, successful appearance at the beginning of the “Fort Knox Store of Value period.” Only general lack of awareness prevents the world from taking the last, irreversible step towards delivering the death blow to usury, and the world from the clutches of Mammon.
The opportunity is in the offing. It will depend on how people and non-puppet governments will react at the collapse of the dollar. From now on the scenario becomes speculative, but not (I hope) unreal.
Let us answer the first three questions posed at the beginning.
Question One: How will the world economy be affected by a switch from the dollar to the euro as a reserve currency, given that the economies of all countries are closely interlinked?
Now that Putin has begun to demand roubles for his oil, it is not at all clear that the euro will act as “reserve currency.” But let us suppose it does. The financial “bubble” denominated in dollars will disappear. Dollar-denominated cheques, bonds, bills of exchange, credit cards, futures, etc., in a word all dollar-credit instruments, will become worthless. The $100 bills now cluttering the treasuries of most countries could however be made to circulate together with the national currency, much like the silver coins in the erstwhile Latin Currency Union. Dollar bills of lesser denomination could continue to circulate as before, especially in the U.S., which would have to restore its economy of production. Given American adaptivity and spirit of enterprise, this turnaround could happen in less than a year.
Countries that have euros would purchase oil with them. Those who do not would have to start trading with Europe for euros and with Russia for roubles. In other words, a real economy of production and exchange would quite rapidly replace the economy of speculation, fraud, bullying, and war that has plagued the world for the whole of the 20th century.
Another welcome disappearance would be that of “export-led” economies. Perhaps the most grotesque example of such is the export of some 100 000 hectolitres of milk from England to Holland, compensated by a somewhat equal quantity (of milk, yes) from Holland to England. Only parasites can possibly profit from such an arrangement. Others are no less nonsensical. Countries would develop their economies (or return them) towards their natural end, which is to look after the domestic market first and export any surplus if available. Thus the “interlinking” of the economies would attain a reasonable level, free from artificial distortion.
Question two: How will America manage its economy, the stability of which depends on the stability of the dollar?
An economy does not “depend” on the stability of its currency. A currency will have a stable purchasing power if and only if
a) prices are kept stable by sound economic policy, and
b) the currency is not a “commodity” to be bought and sold like any ordinary good.
The first has not happened ever since the checks and balances provided by the guilds of traders and workmen with their “just price” policy and the social security provided for their workers were abolished together with the right of association (by the 1791 Chapelier Law in France). For the past 200-odd years speculation has dominated the field, and speculation is not interested in either stable prices or a stable value of the currency. The second has been a feature of money ever since Croesus of Lydia.
The American economy can recover its production first by returning to Congress its constitutional currency-issuing power, abolishing the Fed and using dollar bills up to $50 as domestic currency and $100 bills as currency for foreign trade. How long this will take is anybody’s guess, but given the American spirit of enterprise I would guess one year or so.
Question three: America has become addicted to the dollar’s hegemony as a reserve currency. Wouldn’t she consider it as a hostile action, any attempt by another country to end that privileged status?
Of course she would. That’s why she restored the dollar as the purchasing currency of Iraq’s oil immediately after the invasion of 2003, and why she intends to move war on Iran now. But Venezuela has already declared its switch from petrodollars to petro-euros, and Russia from petrodollars to petro-roubles. Let another country dump its reserve dollars and America’s addiction will come to an end.
Countries with huge dollar reserves will be well advised to get rid of every worthless scrap of paper except 100-dollar bills, for the reason spelled out above.
Communities that are already using local currencies need worry the least. Not only will they continue producing and exchanging as they have done up to now, but businesses would see the sense of accepting these currencies (which they have not so far) thus reviving the local economies.
Has the time for Free Money arrived?
The three questions above have been answered with the present form of money in mind. But what is needed now is to take the fifth and final, irreversible step, leaving behind the pure Paper Store of Value period to enter the liberating domain of Free Money for good.
By “Free Money” here is meant money stripped of its function as store of value, and therefore free not only from debt but also from USURY, as Gesell recommended 100 years ago. Free Money made its appearance twice in the 1930s, both times successfully, and both times squashed by Mammon’s raw power. This happened in a low-tech world. It is not possible for Mammon to crush it now. The collapse of the dollar will upset Mammon’s power to the point of no return, unless the world is foolish enough to let him regroup and “save the day” with his incantations about “intrinsic value” and the like.
Who, or what, is in a position to deliver the first blow to USURY? Ideally it should be a State brave enough to take the brunt of Mammon’s retaliation top such an act of aggression. But it is not necessary. If Herr Hebecker could issue Wära redeemable in coal back in 1930,
• A consortium of schools could issue its own currency denominated in school teaching periods and redeemable in the same;• Ditto a utility company with a currency denominated and redeemable in kilowatt-hour;
• Ditto a transport company or consortium of companies, with a currency denominated and redeemable in passenger/km or ton/km.
Were a State to do it, it could begin by overprinting its existing currency with a date of issue and another of expiry twelve months apart, plus twelve boxes to be punched/stamped/embossed at the rate of one per month. The bill would circulate fast for a whole year, become worthless at the end of it and ready to be exchanged for a new one with the first box stamped/punched/embossed.
Before considering how dramatic and instantaneous the results of such an action would be, please re-read the historical review of events in the preceding pages, and try to imagine what would have happened had Free Money been in existence at the time. Not ONE of the events listed would have taken place as it did. What happened did happen that way because of the power of USURY. To spell this out case by case would take an entire volume.
The advent of Free Money would entail a fundamental paradigm shift, from the rule of money to that of work. Production would be organized for the sake of human needs, not for the sake of paying interest on debt. Money would thus be dethroned from its secular pedestal to become the servant of the economy. The scandal of poverty in the midst of abundance, of artificial, chronic scarcity, of the wanton destruction of food to keep prices artificially high, of economic crises and of the ills that have been plaguing mankind from time immemorial, would come to an end, first in that happy country and then in the rest of the world. Current economic terms like “dear” “cheap” “money laundering” “credit line” “cost-benefit analysis” “financial budget” and so on and so forth, would become obsolete. A not exhaustive, but telling, list of benefits follows.
• Money would no longer be a limiting factor to development. “Funds,” “deadlines,” “capital” etc. would no longer be necessary for beginning anything. Hours of work would replace money as a standard of work done. Any enterprise, private or public, could be launched with as little as 1/100 of the sum needed for completion, simply waiting for it to circulate 100 times. The time needed for completion would become the true limiting factor.• Unemployment would disappear for good. Fast-circulating Free Money would absorb the entire workforce of any country in next to no time, shortage of labour becoming now the main economic problem.
• Physical development would know no limits. Double or triple deck roads, railways, airports, underground parking lots, amenities, etc. would mushroom everywhere.
• Credit would no longer be required, as would hire purchase and all other gimmicks devised along the centuries to face the chronic dearth of means of exchange.
• Salaries would not be paid “at the end of the month” or of the week or of any other period necessary to finish a given job. Any work done would be paid “cash on the nail.” Money would be what it has always been meant to be had it not been prevented by usury: a certificate for work done.
• “Having money” would no longer be synonymous with “being rich.” Having more money than one needed would be a recipe for disaster, not one for well-being. Savings would exceed present-day amounts, but not in one’s pockets or strongbox. Savings would be lent out to banks or to individuals with projects in hand, and returned on agreed upon terms.
• Counterproductive immigration laws would be revised towards attracting human capital, not punishing it by imprisoning it within “national” borders or the barbed wire of refugee camps.
• Free trade would be truly free, i.e. taking place between free people, not as now between free trans-national corporations enslaving local populations and exploiting the environment to destruction. There would be no need to criminalise people’s innate trading instinct with hordes of officials at the borders extorting tariffs, duties, excise etc.
• Tax avoidance/evasion would be not only unnecessary, but downright harmful for the evaders. Taxes would be paid in advance, in a continuous stream and not in fits and starts as now, without the need for an army of semi-military revenue-collecting officials. Public revenue would be invested as soon as received, without need for the farce called “Budget Day.” The State would receive its revenue from the municipalities, which in turn would receive theirs from the citizens.
• The movements to the cities would be reversed. Slums would first shrink and then disappear. Cities would have to vie with the countryside to attract well-paid workers.
• Embezzlement, graft, corruption private and public, counterfeiting, speculation, money manipulation, stock exchanges, confidence tricksters and all the practices that now enrich a few at the expense of many would become either too difficult or counterproductive or both. It would become more expensive to craft a criminal scheme than to earn one’s keep by honest work.
• People unable to work would be very easily distinguished from those unwilling to do so. The first could be helped without difficulty; the second would be arrested and sent to development projects as forced labour, unless they somehow got the ravens to feed them.
• The civil service would slim to a well-paid, indispensable force necessary for services, not a parasitic plethora of idlers sitting behind desks to disguise unemployment.
• So would the army and the forces of law and order. The State would have to pay very high wages to entice people away from paid work into outfits meant to destroy wealth.
• And the destruction of human capital by such anti-economic practices as abortion would be stigmatised as it deserves, not promoted as a “social conquest.” Women raising children, who today are the worst exploited members of society, would be paid and allowed to enjoy not only the fruits of their labour but also the positive contribution they do to society with a physically, intellectually and morally healthy offspring.
All of the above is possible. Will enough people be willing to start driving in the right direction? Only time will tell.
Silvano Borruso
silbor@strathmore.ac.ke
30th May 2006
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See also some earlier articles of mine giving more background on Gesell and the dangers of the interest mechanism:
What is wrong with our Economy?
INTEREST SUFFOCATING THE WORLD
and a recent press article:
Our "Strong Economy": A Powder Keg Waiting To Blow
Great article Sepp.
Like the free energy field the history of money is littered with assasinations and dirty tricks.
I am a little confused by the difference between debt-free money, interest-free money and debt & interest free money. Could you point me somewhere which clears this up?
For anybody reading who is interested in alternative currencies may I reccommend taking a look at ripplepay.com.
Great artcile. I like the "money that expires on some date"-scheme. Banks wouldn't like it though... they would actually have to work for their money. Got a long way to go for a free society.
I'm still amazed by the ease with which the few rule upon the many. And how dumb the "many" are.
Usury banking is the corner stone for the few getting entitlement to the many's work, abolish that and the rest crumble.
Steve,
debt-free money is money issued in a way that either the state or the people become the owners of it without having to "buy" it from the banks and thus incur a debt. It would be any new money issue that is either given to the state to spend or - hypothetically - to the people to spend, by being distributed.
interest-free money is money that has some mechanism built into it which forces it to circulate. Gesell made such a proposal in his "Natural Economic Order" - he said money should be temporary, losing somewhere between 4 and 6 % of its value per year. This arrangement would replace interest as the "necessary reward" for people to take [some of] their savings and loan them out so the rest of the economy can benefit from its use. People would prefer to lend out money without interest, rather than incur the constant drain of the loss of value, thus interest-free money.
debt-free and interest-free money would be a currency that has both these features, i.e. issue as a credit (not as a debt as the bankers' money) and constant drain on value as proposed by Gesell to eliminate interest.
It was my understanding that the US Constitution prohibits the government from 'emitting bills' ie issuing paper money.
How would this square with your idea?
Chris,
as far as I understand, the US constitution is not very clear on the issue of money.
Section 8 gives Congress the power ... To borrow money on the credit of the United States; and ... To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
Section 10 says ... No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;
It does not seem that these provisions are actually being observed in the present day and age. The Liberty Dollar site mentions a 2003 bill in Nevada where the situation is acknowledged and adduced as a justification for proposing issue of a Nevada silver dollar of 20 dollars face value.
Congress has given the money-issuing-authority to a consortium of private banks called the "Federal Reserve" and practically all money in circulation in the US is credit-based, i.e. has been brought into existence by either the Fed or by its owners, the commercial banks, and then loaned to either the US government or to corporations and individuals.
So the current situation would seem to be far removed from what little prescriptions the constitution makes. The issue of money either by the government or by a co-operative effort of individuals would certainly be preferable to the current situation, where practically all money is issued by banks and thus at issue is already a debt by definition, its use subject to payment of interest for the entire period of its existence.
Thanks for clearing up the interest-free/debt-free thing Sepp.
Do you envisage a currency with demurrage being implemented by governments or privately/mutually by people? I fear that any plan that relies on govts (and the vested interests behind them) is unlikely to succeed.
Have you read Robert Anton Wilson's Illuminatus books? His hempscript idea is a currency with demurrage which does not rely on the coercion of the state.
Steve,
I certainly see demurrage as an option for a future currency system, especially if the currency is to be issued by government or some institution under government control. Yes, the likelihood of such a thing happening appears to be slim at the moment.
For a currency without government involvement, I think that ripplepay.com is one of the close contenders.
No, I have not read RA Wilson's Illuminatus trilogy, neither have I read about his hempscript idea.
Ripplepay seems unavailable, if you don't know it yet, have a look at Hans site.
http://www.sunshinecable.com/~eisehan/
The recomended pdf file with links and articles from Hans written in german is here:
http://esnips.com/web/helfer
The Ripplepay site seems to be up and well. Latest update was on 5 May 2006.
ripplepay.com/
The system itself is in beta testing mode, meaning you can play with it, even with a circle of friends, but it is not (yet) open for business. Right now the goal is ironing out bugs and getting some experience with how the program holds up. To start using it, you have to sign up (there is a link for that).
Thank you for the link to Hans Eisenkolb's site.
Hmm, then it may be something with my browser that makes it not display ripplepay.com
Thanks, I'll have to try from an other location then.
I've read in the Hans pdf file today. As you already know the topic and theory, the file really tops his webpage.
http://esnips.com/web/helfer has very good articles about the practical way to start the change without the need of government involvement.
I have downloaded the file. It seems more like a book from the size of it. Pity it's in German, while most of the readers of this site are - if I'm not mistaken - English speaking.
Going back to the Constitution, Sepp, my research shows that the Constitution clearly does not give Congress the power to 'emit bills'. It cannot therefore delegate this power to the Federal Reserve System. Having said that, we face an uphill battle to change the status quo. Your reference to the Nevada Bill was interesting. Here is another more recent development: goldmoneybill.org - an attempt in New Hampshire to introduce a parallel gold/silver monetary system.
Well - since the US Constitution seems to be quite vague on the subject of money, perhaps it is not the only instrument that can determine how to best arrange a monetary system so that it promotes economic activity and individual economic security.
The assumption seems to be that only gold and silver could be valid incorporations of what we call money. That is not necessarily the case. There can be other systems, for instance the one discussed in this article, proposed by Silvio Gesell, which are equally valid and in some respects definitely superior to the "heavy money" paradigm.
When the rest of the world decides they have had enough, the race to get out of US Dollars will make the things so plentiful as to be worthless, and America may undergo a Cuban style shock to its economy, with resulting disruption to services/oil supply etc.
Ripple is a step in the right direction, but it's a transfer mechanism, not a unit of currency, so is not much protection against dollar collapse. Better would be an independent standard of value such as self-issued currency of Altruistic Economics.
Actually, Risi, as far as I understand Ripple is not only a transfer mechanism but a credit creation mechanism as well. You give credit to who you trust, and that constitutes the "currency" that ripple is eventually exchanging among its participants.
Sepp,
Your article is quite interesting. I have two points I'd like to offer for comment;
A corollary that might help to get people to change their assumptions about money is to compare it to a public highway system as a form of public commons, for the purpose of economic transfer. This way, it would make sense to regulate it as such, for the greater good of the greatest number, not as something to be monopolized. The problem with treating the economy as a game of Monopoly is that when one person controls everything, the game is over and you have to start over again. In real life, this is usually called revolution. Viewing it as public property in this individual obsessed world might get people to invest in every aspect of their personal community and environment, rather then storing these lowest common denominators of wealth.
The other point has to do with the idea that Volcker cured inflation by raising interest rates. How do you solve an oversupply by raising prices? Obviously it was government debt, as well as spending in ways to increase the private sector, that brought the money supply in line with demand. The Fed increases the money supply by buying government debt, so logically selling debt would decrease the supply.
The irony here is that the rich are destroying the money, the conservatives are destroying the government , the neo-cons are destroying the military and the monotheists are destroying institutional religion. Linear thinking in a relative reality can only go so far before the consequences become unmanagable.
Good idea Brodix, not a bad analogy to liken money to the system of highways that connects different cities in a country. Both are public utilities that are necessary for economic activity and interchange.
About Volcker raising interest rates, the idea behind that is that with higher interest rates less people are likely to take out loans. Since 95 % of the money supply is created by economic players taking out loans, higher interest dampens the enthusiasm for creating more money, as well as leading to foreclosures of existing loans. Any time a loan gets extinguished, money is "uncreated" and the money supply diminishes a bit. This is true for both government and private debt. It's extinguishing a debt that decreases the money supply.
Let's hope we get some lateral thinkers to examine these problems and find solutions.
Sepp,
I'm wouldn't completely argue that raising interest rates doesn't reduce money supply, but given it reduces demand as well, wouldn't that counteract the effect? Also, government debt was being created on a massive scale, not extinguished, at this point in history.
The problem was that excess money was in the hands of those with excess money, not those seeking to borrow it. By raising interest rates and breaking inflationary expectations by breaking the unions and slowing the economy, inflation was effectively blamed on those wanting more money, not those who already had it. Meanwhile this real surplus was borrowed up by the government and spent in ways to support private investment. (?) Meanwhile the parimutual wagering system of the derivatives market can theoretically hold infinite amounts of money, as opposed to the practical limits of conventional investment.
(Also, could something similar have happened with the depression, in that Roosevelt borrowed up unemployed money to put unemployed people back to work?)
Here is my own effort at lateral thinking
Yes, reducing demand while trying to reduce the money supply is one of the big problems with today's economic set-up.
If money was issued as a credit or gift instead of as a bank debt as is the case now, it would be comparatively much easier to reduce the supply.
Gesell made such a proposal in his "Natural Economic Order".
Excess money always seems to be in the hands of those with excess money. The mechanism that causes that is interest, which tends to take from those who have little and accumulate money with those that already possess more than they can use.
I have put down my view on these issues in some articles in the economy section of my 'historical' site.
Employment and in general economic activity suffers when there is not enough money to facilitate the exchange. So probably what happened with Roosevelt is that he put more money in circulation making economic activity once more possible.
I like your effort at lateral thinking. You express many thoughts similar to my own.
I've been of the opinion that the advantage of the current administration is that it's bringing the current world order to a close well before it would have otherwise expired and discrediting all those who put their eggs in its basket. Remember that had Gore or Kerry won, they would still have had to deal with a rabidly partisian, Republican controlled legislature. One which they would have only succeeded on taking the rougher edges off of and thus prolonging its control. As it is, IF the forces of better judgement can re-assert themselves, there is much work to be done, but you might say that the table has been somewhat cleared. That is if this impending clash of civilizations, or rather religious absolutists, can be averted
My personal effort is that piece I linked to. While it might be a little too complex for general consumption, it's still not incomprehensable. The point of intention being that the spiritual absolute is bottom up and not top down. Obviously the odds of any number of people taking this seriously is very small, but it's worth my time to make the effort. Besides which, when the dust finally settles and the various monotheisms have pounded each other to dust, some alternative needs to be available.
I originally got your name and address off the Natural Philosophy Alliance site, as I usually prefer discussing the physics aspects of time as a property of motion, rather then basis for it, so I'll mention reading a short article about a paper recently published in Science magazine in which an astronomer is arguing that based on very precise measurements of one star, that the universe is 16, rather then 13.7 billion years old. What this suggested to me is that when they start precisely measuring a lot of stars, they are going to come up with a broad range of ages for the universe and it's going to further complicate the current adherence to Big Bang Theory.
Of course, given the cosmological community's belief in BBT, I have to ask myself why I think the various monotheistic traditions are going to doubt the importance of their particular narrative fables, just by pointing out that a bottom up spirit makes more sense then a top down one. Of course, that's where the two directions of time comes in. If the people who actually think can be shocked that something so obvious could have been overlooked, maybe the one who don't, might have their slumber disturbed.
Sorry if I'm rambling here, but it organizes my brain and I hope I'm entertaining yours.
regards,
jbmjr.
Thanks jbmjr,
well, you're going in the right direction, certainly with your view of time.
Why make a counterposition though of the top down versus the bottom-up spirit. Might not both be able to exist simultaneously, with no one of them being "superior" or being the only one?
I could very well imagine that spirit may be top-down in the sense of the monotheists, as well as bottom-up as in lots of individuals. Both manifestations of the same "substance"...
Sepp,
In a very real sense, they are two sides of the same coin, but it is a complicated relationship.
The bottom up process is an ecosystem and the top down structures are the organisms which are created and define this process. These organisms and their social structures function internally as cooperative units and they compete against other such units in a Darwinian process that creates ever more efficient and resourceful individuals and cooperative structures.
The situation has become that humanity has far surpassed its competition and now dominates the ecosystem. Having spent eons evolving within this social and civic organism, we have a very limited ability to see outside it and understand the reactive consequences our actions have on the larger ecosystem. Not only in terms of what we might be doing to the earth, but how different groups of humanity interact. We get into this elemental binary thought process of us vs. them and frequently end up at war with one another. Up until recently, this really didn't matter at the level of the earth as a whole, or even for humanity, as a whole. Now it is beginning to seriously matter because we do have the potential to do massive damage.
The concept of theism originally developed as a symbol for the larger group and it was eventually expanded to encompass virtually everything, with the concept of monotheism. The problem here is that it gives the authority of the absolute to the group structure, since those at the top of the civil order can claim to represent a higher power. Divine right of kings and all that.
The reality is that there is no absolute frame. The absolute is basis, as in zero, not a particular unit, as in mono. So while this basis is featureless and so needs structure to give it form, no one structure can claim more then its due. The base is source and the top is focus. 0/1. The monotheistic assumption of the top as the source AND the focus has become a very powerful weapon in the hands of very mortal individuals.
We do ultimately have one unit and that is the earth itself. Like older parents, we need to start taking care of it, as it has taken care of us.
Humanity has two bubbles that are due to burst. One of paper and one of theological ego.
regards,
brodix
Words of wisdom, Brodix.
with the arrows of time and the critical thoughts on monotheism, you have your finger on two important determinants for the trouble of our times.
Yes, we do need to start taking care of the planet - the only one we as humanity have available to us, and we must do so with humility in our approach.
I will write an article to send some people to your attempt at lateral thinking.
Sepp,
Thanks for the encouragement. I tend to have lots of thoughts running through my head and not a lot of time to really sit down and string many of them together in an effective unit, so it mostly comes out piecemeal. That is why I put together the idea of time with its consequences for monotheism. As two mutually re-enforcing points, both with many unspoken corollaries, it creates a model of lateral thinking. It's also about as long as anyone will read on the internet. I've used it to start various conversations. Here is the one I've been in for the last week, or so;
http://www.urban75.net/vbulletin/showthread.php?t=177274
regards,
brodix
Folks,
pardon a late entry into this discussion, but I have some naive
questions.
If money is "free" -- i.e. cannot
store any value -- why would I ever
want to exchange it for something of
value (e.g. my labor, my mangoes, etc.)
If you suggest somehow "gold is bad"
because it's a commodity, then why
is the cited "kilowatt per hour"
any better? Things are ALL based on
commodities, whether provide by
Earth, Man, or Man's work on Earth.
They all have problems such as
mining, shortages, etc.
I agree with you that Fed-like
destruction of money via DEBT is
a massive problem. And that charging
interest on money based on the
fractional reserve banking system
is a ripoff (sorry, fancy economic
language escapes me momentarily), but
a debt-free and interest-free
money has to be *something* of value
in order to be traded for real
goods (a cup of coffee, a fruit
orchard, a gallon of gas, etc.) and
if it's not of value, I personally
would just rather barter in hard
assets of some kind, than "trust
based documents" of "no value".
This theory seems fascinating, but
irrevocably wrong. What am I missing
here?
thanks,
Ross
Ross,
when speaking about money storing value, what is meant is saving it for future use, like putting some f it away and not touching it for years until the time you find you need it.
As a function of money, that is different from the use of money for buying your groceries every day, paying for a repair of the car or going out for a drink or good meal or to the movies. In this second case, money needs to be quickly available and you need to be ready to part with it. Such money is said to circulate with ease.
Saving money for the future interferes in a way with that more immediate use of using money for everyday exchange.
Gold in that sense is fine for stashing it away for the future, but it's comparatively hard to part with your nice shiny coins so the exchange is not facilitated by having gold as money. This is because gold, as a precious metal, has value quite apart from it being used for money or not.
To base money on kilowatt per hour (not my proposal) would be to link its value to something else than gold, but still something reasonably stable, in trying to get a step away from the precious metal itself.
You say: a debt-free and interest-free money has to be *something* of value in order to be traded for real goods (a cup of coffee, a fruit orchard, a gallon of gas, etc.)
Well no, money is really just a convention, an idea based on trust. We use it to overcome the burdens of raw barter. All that is needed to use money in this way is that we all agree that whatever we use as money - be it printed papers or sea shells or sticks of iron or coins of metal or even electrons - is universally accepted by people who want to buy and sell. The important action is to buy and sell, the economic interaction, not the value of the money. Money is merely a temporary place holder for the value of what we just gave away. We trust that when we go with that money to the store, they will accept it as payment for our mangoes and the ice cream. End of story.
That's why it is important in this kind of discussion to separate the two uses of money that are kind of opposing each other: Saving and spending. Store of value and medium of exchange.
If we use something of actual value (like gold?) for our saving, we can use anything we like for our daily exchanges and as long as we don't rely on the banks to loan that money into existence, we should be doing quite well.
Sepp,
I understand what you say about facilitating and simplifying barter by using 'free money' as a lubricating medium of exchange. That works.
And I emphatically and whole-heartedly agree with not relying on banks to "loan money into existence" as a positive value to a market.
I understand, too, about this free money (whether it be paper, mangoes, or kilowarbles per flapdoodle) being based on trust. So, let me ask about trust.
If this free money is counterfeitable --let's face that we do not live in a perfect world of perfect people, else this conversation would be unnecessary -- then this exchange money would eventually be counterfeited out of need or greed, and it would lose value.
If, on the other hand, this free money is NOT counterfeitable, then it would be easier to trust despite the darker impulses of certain members of an imperfect society to counterfeit.
( Gold serves this purpose, of course, but let's set that aside for a moment. )
Consider now "control". If someone -- a banker, a government, a town council -- controls the money supply, they control the market. This is the same regardless of the intrinsic value of the thing used as money. If I can print more dollars, I can move the market.
How would you create a medium for money that was not practically counterfeitable, and not controllable by fiat or group? What, specifically, would that medium be? (paper is ruled out: it's counterfeitable and supply is fiat-controllable, e.g.)
I see gold -- or some other hard asset -- as being a solution here, because it is assuredly not counterfeitable, and it's not controllable by fiat as is paper.
Thank you for this discussion, and your thoughts on this.
Best Regards,
Ross
Ross,
you bring up a very important and interesting question here.
How would you create a medium for money that was not practically counterfeitable, and not controllable by fiat or group? What, specifically, would that medium be? (paper is ruled out: it's counterfeitable and supply is fiat-controllable, e.g.)
I see gold -- or some other hard asset -- as being a solution here, because it is assuredly not counterfeitable, and it's not controllable by fiat as is paper.
So far, counterfeitability has not been an important consideration in alternative money schemes, as they were too small to make it pay to counterfeit. With a universal money system, that would of course change.
I believe the best route would be to go with the times. My idea would be to make the money system an exclusively web-based one, running on open source software where bugs aren't hidden and are quickly found and remedied. So the "coins" would be electrons. Counterfeiters would have to hack the system - extremely difficult and easily detected.
As to the control of the system, I am sure a body could be set up similar to those that have control over the internet. The remit of such a body would include regulating the amount of electrons (or whatevers) in circulation, and assuring the smooth function of the system.
Parameters would have to be set collaboratively and given to the controlling body for execution.
Electrons could be issued to all those participating in equal amounts, probably in monthly intervals.
There would have to be a mechanism to be able to retire electrons (in case the economic situation requires that kind of intervention). Such a mechanism could be an automatic debit to each account - also in monthly intervals - of a small percentage of the electrons on that particular account. That mechanism would allow not only to decrease the money supply but also to constantly re-distribute a monthly "allowance", of equal amount for each participant. The mechanism would counteract the accumulation of large hoards of electrons.
The great drawback I see in using gold is that it's a finite resource, a thing that has to actually be bought on the open market. The fact that gold has to be taken out of the ground and is relatively scarce would counteract an uncontrollable increase in money mass, but it would not be flexible enough to allow increases that, for instance, would be larger than the available amount of gold.
So I would vastly prefer the web-based electron solution to our money problems.
Kind regards
Sepp