Saturday, July 22, 2006

Monetary reform

This was a talk given on one of the monetary Georgist reform proposals by Steve Zarlenga

Henry George and Monetary Reform

The American Monetary Institute was formed in 1996

Some certain themes
The fight to control the money power is a 3000 year old battle
The dividing line is always private vs. public control
The definition of money determines who wins
Public control of money has been far better than bank control.

We are living on "borrowed time"
Robert McNamara: 1962Cuban Missile Crisis: "Only one thing saved us - dumb luck".
1983 Russian Colonel Stanislav Petrov, disobeys orders. refuses to launch nuclear retaliatory strike on the united States.

What's the essential difference between:
Copper coin money
Federal Reserve money
Checkbook money
They are all fiat moneys.
Why is only one of them moral?
and the other two immoral; even evil?

How fractional reserve banking allows private creation of money.
The private creation of fiat money is the problem.
The promotion of Market as God
The economists (market priests) warn us:
Don't try to legislate on the market; it is stronger than our puny laws. It's omnipotent
Don't try to regulate outcomes, the market with input from all of its participants always knows best. It's omniscient.
Do the right things and the market will reward you. Do the wrong things and the market will punish you. It is benefiicient.

Economics has never adequately defined money. It is still argued whether it's a concrete power in a commonodity like gold or an abstract legal power that gains it's value because of its sponsorship by govenment. This is not a new development; it's a centeries old problem. Why?

Alexander Del Mar: "As a rule political economists... do not take the trouble to study the history of money; it is much easier to imagine it and to deduce the principles of this imaginary knowledge."

Aristotle: "money exists not by nature but by law."

Adam Smith holded erect a mythology of money ignoring its legal basis (1776)
Never forget that if the monetary ideas of Adam Smith, or in now the Austrian school, had been followed in our early years, there would never have been a USA.

Marx echoed Adam Smith's materialistic definition of Money as Gold

But, on the other hand Henry George made excellent monetary distinctions.

Over decades his monetary views were consistently accurate.

So the essence of money is not a comodity but an abstract social power to obtain wealth.

George distinguised between money and credit. "There is a quality attaching to money... which clearly distinguishes it from all forms of credit."

Third, George strongly distinguished privatly created credit used in place of money for private profit, and Government or publicly created money for the common good: writing on money and government, at age 44, in social problems (1884) he had an advanced concept of how a money system should operate.

Because the private money creation process is so clearly immoral. It is not rocket science. It requires mainly An Honest of purpose to evaluate the facts within a structure of fairness.

George never allowed economists to substitute a questionable utilitarianism in place of morality.

A powerful class whose incomes could not fail to be edangered by a recognition... that what makes them... wealthy is... only robbery....

We find that the modern 250 year attack on government originated largley in Adam Smith's efforts to keep the monetary pwer within the Bank of England. Smith glorified the Bank and obscured its private ownership calling it as a great engine of state. He attacked government issued money.

"A revenue of this kind has even by some people been thought not below the attention of so great an Empire as that of Great Britain... But whether such a government as that of England - which, whatever may be its virtues, has never been famous for good economy; which, in time of peace, has generally conducted itself with the slothful and negligent profusion that is perhapes natural to monarchies; and in time of war has constantly acted...."

The force of forces:
It is not selfishness thta enrihes the annals of every people with heroes and saints.. that on every page of the wrolds history bursts out in splendor.... that turned Buddhas back to his royal home or bade (Joan of Arc) lift the sword from the altar; that held the three hundred (spartans) in the pass of thermoplylae, or gathered into Winkelreid's bosom

Lets look at the four major groupings advocating reform:
The gold standard faction
They have been unable to comprehend the abstract nature of money
Anything which makes something a good investment makes it a bad source of money (IE gold)

The local currency groups

Reforms indicated by the science of money, by Henry George
1.) Nationalize the Federal Reserve System into the US treasury. Save teh knowledge. All US money to be government. A nine member monetary control board follow a stable money policy.
2.) Banks no longer allowed to create money. Eliminate fractional reserves.Full reserves are reached not by calling in loans but by lending money to the banks at interest, bringing them to full reserves. A very gentle and elegant move that converts all the previously issued bank credit money into real American money.
3.) Automatic infrastructure programs have new money spent into the circulation interest free by the government on a per capita basis throughout the nation. Health Care and Education are the most important part of the infrastructure making the rest possible.

See the draft and join the discussions of the American Monetary Act soon to be posted at THIS.