answering JAG's question re: debt-free money

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answering JAG's question re: debt-free money

I haven't been on in a while, but somebody notified me that I might want to answer a question that was posted on a thread that has since had like 50 posts so I don't want to post it there. JAG asked the following in that thread, and Farmer followed with "+zillions!!!!"....

JAG wrote:

OK, I've asked this question at least 20 times, and no one pushing the debt-free monetary system has replied to it. 

How does the physical printing of debt-free money (currency inflation) with no means to extinguish it not lead to hyperinflation down the road, especially if growth in the economy and growth in the money supply diverge for some unknown reason or circumstance?

At least with a credit-money system, the money supply is extinguished by repayment of the debt or by default. What piece of the puzzle am I missing here? And if you can't explain it to me, then how are you going to explain it to the masses? And the fear of the masses is not something that should be marginalized with theoretical constructs, btw.

Strabes and/or Larry, please respond.

I've answered this before, but I agree with JAG, I apparently haven't done a good job because most people still cling to the model of being debt servants.  Here's another try...

First, an acknowledgement of cycles:  yes, any and all money systems, ESPECIALLY the one we have today, are capable of cycles.  In a debt system we call those cycles inflation/deflation, and they are governed by a few Ivy Leaguers accountable to the most senior creditors of the world operating in a monopolistic cartel.  In a system with asset money I'd call them appreciation/depreciation, and they would be governed by a mechanism under Treasury accountable to the commonwealth, and then I would have state banks running smaller scale debt systems at their level which would generate inflation/deflation cycles based on more local conditions (though the publicly-owned ND bank that serves the commonwealth shows that it will avoid extreme cycles as opposed to privately-owned banks controlled by the global capital holders).  These cycles will need to be monitored regardless of which system, so would you rather have one where you and your commonwealth have assets (sovereignty), or would you rather have the one we have today which requires you and your governments to sign your assets over to the cartel as collateral and replace them with debt and mega taxation in order to have money (slavery)?  Either way, you'll have cycles.

Second, to provide a precise answer, the question needs to be more precise.  Rather than using a term like hyperinflation as if it's a defined, given condition of the world like gravity, the question might better be phrased "how does it not lead to attack by the people who control the most senior global capital pools and the primary banking institutions around the world?"  That's what hyperinflation is.  If a country tries to serve the people with money that's an asset to them, those who currently have a claim on all assets in the country will indeed transfer their capital elsewhere and crank up the banking vacuum machine by running interest rates to the triple digits to vacuum up purchasing power and try to keep the people from saving themselves from a servitude relationship where the only way for them to have money is to sign their hard assets as collateral over to the global capital holders.  (by the way this is precisely what the cartel has done to the US at this point...capital is ready to be transferred offshore in a moment's notice and a crapload of people are under the threat of ARMs which gives the banks total vacuum power if the government tries to serve the people...we are certainly facing the threat of hyperinflation if my plan is enacted...but deadly deflation if it's not).

So the key is to defend against that attack --> Usury laws and nationalization/breakup of the primary predators, esp. JPM Chase.  Will there still be pain?  Absolutely.  Either way the exponential engine is being shutdown...there will be pain regardless.  And if we enact my plan, we can't stop global capital flight...but that's a painful adjustment I want to go through because I don't want to see so many millions living as slaves as the debt machine has run its course and brought us to the point where most people have absolutely NOTHING.

Why people continue to prefer slavery to sovereignty just because it keeps the global capital pools happy, i.e. the "markets,"  is beyond me.

Thomas Jefferson's brilliance continues to amaze...

Jefferson wrote:

"Certainly no nation ever before abandoned to the avarice and jugglings of private individuals to regulate according to their own interests, the quantum of circulating medium for the nation — to inflate, by deluges of paper, the nominal prices of property, and then to buy up that property at 1s. in the pound, having first withdrawn the floating medium which might endanger a competition in purchase. Yet this is what has been done, and will be done, unless stayed by the protecting hand of the legislature. The evil has been produced by the error of their sanction of this ruinous machinery of banks; and justice, wisdom, duty, all require that they should interpose and arrest it before the schemes of plunder and spoliation desolate the country." Letter to William C. Rives (1819)

 

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Re: answering JAG's question re: debt-free money

Hey strabes,

Thanks for the personal response to my question.

Unfortunately, I have to say that your answer bewildered me a bit.

Let me back-up and ask a more basic question: Is there any means of removing debt-free money from the economy in such a system?

Also you might want to reference this related post in the original thread for context.

Thanks for your time...Jeff

 

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Re: answering JAG's question re: debt-free money
Quote:

Is there any means of removing debt-free money from the economy in such a system?

Taxation.  But why would you want to? 

I'm just talking about M0, base currency, being debt-free.  Then the banking system primarily governed by state level public banks like ND would inflate/deflate on top of that base to serve most productive activity.  So most money in the system would still be debt-based.  But it wouldn't be run by mega banks in the hands of private capital controllers who drive exponential growth and operate outside the country's governance system. 

I don't see any reason to ever remove base currency.  Bubbles may arise locally where private banks would still be able to operate, but that's dramatically different from the Wall St cartel driving a macro bubble based on the debt-based currency. 

 

And thanks for pointing me to that followup post in that thread.  I don't advocate 100% debt-free money funding all production...I think you're correct that would indeed cause a problem, at least given the situation we're in today.  If we could redesign everything from scratch, I think a system of 100% debt-free could be designed to work, but it can't work right now.  I advocate debt-free, sovereign, base currency that would fund systemic, trans-state infrastructure, then production projects that happen within that infrastructure would be governed by the state banking systems.  For example, the feds right now could fund a mega solar/wind/thermo project designed to replace a portion of the oil/coal grid (it's absurd that we as a community, a commonwealth, can't do that...the reason we can't is because the same interests that control oil/coal also control money and therefore the government).  That project would be funded by debt-free base currency of the sovereign United States.  Then all the multitude of businesses that would spring up as a result of that new infrastructure would be funded by the banks, i.e. self-extinguishing money, that themselves operate within the national infrastructure (has the added benefit of keeping financial institutions within the purview of the national government rather than allowing them to transcend it in terms of power as they have today).

Now, perhaps you might say I should be advocating a national bank similar to the state banks so that zero interest debt money would be used to fund infrastructure rather than debt-free money.  That would be better than what we have today. But I prefer some sovereign money being issued to the people (ala JFK) because that pushes power down...it's like a monetary 2nd amendment...it's money some people can have which cannot be vacuumed by the banking system. 

 

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Re: answering JAG's question re: debt-free money

Damon,

Thanks for taking a stab at this tough question.  With that being said, I have to admit I am with Jeff on this one because I really don't understand your answer.  I think the problem lies in this paragraph....

strabes wrote:

Second, to provide a precise answer, the question needs to be more precise.  Rather than using a term like hyperinflation as if it's a defined, given condition of the world like gravity, the question might better be phrased "how does it not lead to attack by the people who control the most senior global capital pools and the primary banking institutions around the world?"  That's what hyperinflation is.  If a country tries to serve the people with money that's an asset to them, those who currently have a claim on all assets in the country will indeed transfer their capital elsewhere and crank up the banking vacuum machine by running interest rates to the triple digits to vacuum up purchasing power and try to keep the people from saving themselves from a servitude relationship where the only way for them to have money is to sign their hard assets as collateral over to the global capital holders.  (by the way this is precisely what the cartel has done to the US at this point...capital is ready to be transferred offshore in a moment's notice and a crapload of people are under the threat of ARMs which gives the banks total vacuum power if the government tries to serve the people...we are certainly facing the threat of hyperinflation if my plan is enacted...but deadly deflation if it's not).

I think you are saying that high/hyper inflation is caused by capital flight and high interest rates, which are an intentional strategy by TPTB against what they perceive as a threat to their bread and butter by sovereign money.  I guess what I question is if this really has to be such a conspiracy? 

Imagine you own a home and you find out that they are going to be building a sewer treatment plant upwind of your neighborhood.  If you hear this first and can sell your home before everyone else tries to do the same, you will clearly do much better than if you wait.  Now maybe if you are close to all your neighbors and could come to some sort of agreement so that you all did not flood the market at the same time, you would all do better.  However it only takes a few that are out for themselves to cause a panic and when that happens, you don't want to be the one left behind.  Same thing when a crowded theater catches fire.  If everyone remains calm, most likely far fewer people will get hurt.  However if a panic ensues, you really want to be out that door as quick as possible.  I guess what I am driving at is why frame it as a conspiracy, when it can be explained equally by psychology?

What do I like about your opinions of sovereign money is that they seem far more realistic than some others.  You admit that there will be pain and I completely agree.  At least to me, it seems that anyone that believes we can get out of the current situation without pain must clearly believe the current system has worked very well for everyone.  After all it allowed millions of people to live lifestyles far above where they had any right too, and now we can just painlessly move to another system.  What could have been better?  This seems silly to me because I have to believe that there must be a day of reckoning for our past follies.

Another thing I don't understand is the faith in government.  To believe that some entities ( banks / financial firms / ... ) have control over us because they have the power to create money, and think that the solution to this is to give that power to the one entity that already claims sovereign right to use FORCE against us seems like trouble to me.  We already have people that are in congress for 40+ years, handing out goodies like they are Santa Claus, getting reelected for bringing home the bacon.  What happens when they have complete control over the purse?  How many political fiefdom's (public employee unions, defense contractors, ...) will defend their benefactors in congress?  I shudder to think of the tyranny that would result.

Whatever the solution to our problems is, I don't see how centralization is the answer.  Centralization of monetary powers is certainly convenient, but I think it is just to easy for corruption.  We will be better off with more local or competing solutions than a single monolithic solution.  I am not sure completely agree with it but I think something like the digital coin proposal is a far more innovative place to start thinking about solutions than belief in sovereign money.  At least that is my opinion.

Edit: I posted this before your reponse to Jeff.  I think I may disagree less with your new response.

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Re: answering JAG's question re: debt-free money

Thanks for the clarification strabes, I understand your position much more clearly now and tend to agree with it. I have another question based on your response if you have the time. Would there be a floating exchange rate between FRNs and sovereign debt-free money in circulation? 

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Re: answering JAG's question re: debt-free money

Hello strabes,

Enjoyed and as usual, learned from your post in response to JAG's question.  Both JAG and goes211 posed a similar questions in another thread (Why the U.S. Need Not Fear a Sovereign Debt Crisis: Unlike Greece, It Is Actually Sovereign).

My attempted response may be found at the following link.

BTW, you probably missed it but you were quoted in the Ellen Brown article:

Damon Vrabel, of the Council on Renewal in Seattle, concludes:

“[T]he sovereign debt crisis . . . is a fabrication of the Ivy League, Wall Street, and erudite periodicals like the Financial Times of London. . . . It seems ridiculous to point this out, but sovereign debt implies sovereignty.  Right?  Well, if countries are sovereign, then how could they be required to be in debt to private banking institutions?  How could they be so easily attacked by the likes of George Soros, JP Morgan Chase, and Goldman Sachs? Why would they be subjugated to the whims of auctions and traders?  A true sovereign is in debt to nobody . . . .”

Fantastic stuff!

Larry

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Re: answering JAG's question re: debt-free money

goes, I'm not framing it as conspiracy.  I'm describing how the banking system works...the plumbing of the banking system is what facilitates inflation, deflation, hyperinflation.  it's a fact that our money system is based on signing over all property, assets, capital over to creditors.  and the senior creditors have the senior claim on all of it.  I know it's hard to believe but those are actual people...that's not conspiracy.  that IS our monetary system.  and if the government were to suddenly say "no more will we be hostage to that debt system which forces us into increasing indebtedness to you creditors for capital" then it's an axiomatic reaction that the bond market breaks down, i.e. senior capital flees (or in non-conspiracy lingo, Treasuries skyrocket), and as the senior capital flees, just like when the music stops in musical chairs, lower level capital has to chase it up the pyramid, i.e. banks competitively race interest rates upward and the masses lose everything...exactly the psychology you're talking about.  only it's not the psychology of the masses that drives this...it's the psychology of the senior creditors that control every other dollar via the hierarchical nature of the banking system.  the psychology of the masses at that point will simply be "uh, wtf just happened, why are my neighbors starving and shooting each other?"  then some historian will write a book about how mass psychology drove the end of the dollar because they don't understand the facts of the banking system and its foundation, the bond market.

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Re: answering JAG's question re: debt-free money

goes, I agree with your concerns about government at this point.  but I don't see another solution besides taking the government back and making it serve the republic.  perhaps that would have to start at the state level first. 

JAG, FRNs would eventually disappear in my system.  so we would be left with the sovereign US money and then some form of US bank notes controlled/distributed by the state banks much like the regional Feds today.  I'll have to think about the exchange mechanism.

thanks Larry, I didn't see her article yet.

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Power corrupts and absolute power...?

Strabes,

I'm sorry, but I'm not buying any of this.  It's not that I'm not buying the behavior you describe of our banking system - I agree it produces cycles, and I also agree the current system is set up to benefit those who control it.

What I do not buy is the notion of creating any kind of system, which, if controllable, won't be abused by whoever holds the reigns.

The Roman Empire experienced the same kind of devaluation of currency we are.  Other systems have experienced hyperinflation, deflation, and counterfeiting-by-the-entrusted.  It does not seem to matter what kind of system is used.  What matters is whether it can be manipulated.  History seems to show that if it can be manipulated, it will be manipulated.

Your choice of whether one should prefer private bankers (or Ivy elites, if you prefer) controlling our money or "sovereigns"/"the commonwealth" does not resonate with me.

We have "the commonwealth" currently in charge of national legislation.  For decades, and especially in the past year, they have ignored the people and passed whatever laws are dictated to them by their handlers - special interests, lobbying groups, etc.  If we cannot even count on elected representatives passing laws people want (or refraining from passing laws people don't want),  what hope is there of having them run something even more prone to corruption - our money itself?

All these reasons and more are why I continue to believe that the only money that could ever be trusted is private-issued, commodity-based coin.  Private issued currencies competing with one another, under the scrutiny of other private parties who would routinely assay coins for purity and audit bank reserves, is the only way to go in my book.  If someone cheats, the repercussions will be limited in scope to those who utilize the coin in question.  A monopolistic system, such as we have now and such as those proposed by you and many others, will only work completely until it doesn't, and then everything breaks lose. 

For-profit, private systems work in every other facet of society, why not also allow for-profit monetary systems to exist? 

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Re: Power corrupts and absolute power...?
Farmer Brown wrote:

All these reasons and more are why I continue to believe that the only money that could ever be trusted is private-issued, commodity-based coin.  Private issued currencies competing with one another, under the scrutiny of other private parties who would routinely assay coins for purity and audit bank reserves, is the only way to go in my book.  If someone cheats, the repercussions will be limited in scope to those who utilize the coin in question.  A monopolistic system, such as we have now and such as those proposed by you and many others, will only work completely until it doesn't, and then everything breaks lose. 

For-profit, private systems work in every other facet of society, why not also allow for-profit monetary systems to exist? 

FB,

I totally agree with you about monolithic system's only work until they don't.  I used to also believe that money needed to be backed by a commodity but I no longer believe that MUST be the case.  I think commodity based systems seem to work best in times of uncertainty, because the underlying commodity acts like collateral.  The reciever of money has something tangible, for the good or service that was exchanged.  However I believe fiat systems can work but they either require FORCE ( which I find offensive ) or trust.  Force via legal tender laws, effectively legalizes government plunder.  Trust however must be earned and maintained.  I agree that the key is competition because as soon as only a few ( or one ) has the money power, corruption is only a matter of time.

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Re: answering JAG's question re: debt-free money

I hear ya FB.  The US govt is a disaster (and why they recently moved massive military assets to your country intrigues me), but I'd suggest that's because it's controlled by the people who control money and put it in debt.  I used to be a huge fan of private sector control of everything, but now that the US has come to the point of restructuring/foreclosure, I've come to my conclusions (I know most would disagree with me) about what the top capital holders have been doing and how they operate.  I am now amazed that I never saw it before, that I never listened to 3rd world leaders who warned us, and that I never really paid attention to what the founders and several presidents warned about.  I now see why JFK suggested that Jefferson was one of the smartest guys to ever live.

I don't agree money should be a private for-profit product.  To me it's an issue of sovereignty vs. servitude.  Money is a mechanism to facilitate community interaction.  We should not have to pay rent for it.  That was a cause of the American revolution.  A community declaring itself free to make its own money is the only way I see to resist the attempts by the richest most powerful people in the world to control everything.  Many countries in the lesser-developed world have intimately experienced this as Anglo-American financial institutions/funds have destroyed their community currencies and forced them under the debt dollar system.

Plus at this point, how would an entrepreneur in a "free market" in coins go up against JPM Chase?  The scale of such institutions is colossal...barely comprehendable.  I'd even endorse your idea of competitive coin systems as better than what we have now, but the primary cartel institutions would have to be completely broken up first.

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Re: answering JAG's question re: debt-free money
strabes wrote:

I hear ya FB.  The US govt is a disaster (and why they recently moved massive military assets to your country intrigues me), but I'd suggest that's because it's controlled by the people who control money and put it in debt.  I used to be a huge fan of private sector control of everything, but now that the US has come to the point of restructuring/foreclosure, I've come to my conclusions (I know most would disagree with me) about what the top capital holders have been doing and how they operate.  I am now amazed that I never saw it before, that I never listened to 3rd world leaders who warned us, and that I never really paid attention to what the founders and several presidents warned about.  I now see why JFK suggested that Jefferson was one of the smartest guys to ever live.

I don't agree money should be a private for-profit product.  To me it's an issue of sovereignty vs. servitude.  Money is a mechanism to facilitate community interaction.  We should not have to pay rent for it.  That was a cause of the American revolution.  A community declaring itself free to make its own money is the only way I see to resist the attempts by the richest most powerful people in the world to control everything.  Many countries in the lesser-developed world have intimately experienced this as Anglo-American financial institutions/funds have destroyed their community currencies and forced them under the debt dollar system.

Plus at this point, how would an entrepreneur in a "free market" in coins go up against JPM Chase?  The scale of such institutions is colossal...barely comprehendable.  I'd even endorse your idea of competitive coin systems as better than what we have now, but the primary cartel institutions would have to be completely broken up first.

Strabes,

I guess the difference between our views is that you believe the wrong people have come to control our money and I believe money that is controllable always winds up in the hands of the wrong people.

The problem with money isn't who controls it.  The problem is that money that is controllable is no longer money but rather a tool to render those who do not control it into servitude to those that do.

If you want to solve the money problem, you need to invent a system that is not subject to control, or that is subject to the least amount of control possible.

Privately issued money automatically accomplishes the lion's share of the task by eliminating the monopolistic nature of our current monetary system and that of all monetary systems I know of in history (which by the way have all failed).  It prevents any one person or group from having total control over the entire money supply.  It limits the damaging effects of cheating to a subset of the whole and is caught more quickly by other private parties than in a system where the rulers are also the inspectors, jurors, and executioners.

I do not understand what you mean by some of your statements.  Knowing which third world leaders' quotes you are referring to would help.  

For the record, I welcome the announced increased US military presence in Costa Rica, although nothing has actually happened yet.  I'd rather have some marines floating around the streets and ports here than the regular batch of drug traffickers, rapists, extortionists and murderers.  I really don't see what the big deal is and quite frankly I've received all sorts of "gee, I'm sorry my gov is doing that to you guys" from friends back in the US while most people here welcome the development.  There is certainly little opposition to it here in any case.

 

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Re: answering JAG's question re: debt-free money

FB, the story of Indira Gandhi's bank nationalization 40 years ago is the best example of what I'm talking about.  The Anglo financiers were attacking, moving in to establish control.  The Indian people's only defense from such an attack was for the government to nationalize the banks.  Yeah, something like that depends on the benevolence of the leader...a BIG risk given the types of leaders we have today.  But that was their only defense...individual people and small free market institutions are no match against the biggest financial powers in the world operating together with debt to takeover monetary systems.

Others from SE Asia, Argentina, Russia, etc have discussed what their financial crises were really all about...Anglo-American financial powers attacking their monetary systems and putting their governments and people in debt.

I think we'll eventually see the US didn't move the military to CR to be drug police.  I suspect Chavez has another take on what's happening.

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Re: answering JAG's question re: debt-free money
strabes wrote:

I think we'll eventually see the US didn't move the military to CR to be drug police.  I suspect Chavez has another take on what's happening.

I agree with that 100%, and I hope exactly that defending against or attacking Chavez is exactly what it's all about. 

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Re: answering JAG's question re: debt-free money

Guys, thanks for sharing this great conversation!  It's been a pleasure to read everyone's opinions and thoughts!  Thank you!

BTW:  Strabes, I didn't know you were in Seattle now!?  If so, I have quite a few contacts in the area that may be useful.

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Re: Power corrupts and absolute power...?
Farmer Brown wrote:

ll these reasons and more are why I continue to believe that the only money that could ever be trusted is private-issued, commodity-based coin.  Private issued currencies competing with one another, under the scrutiny of other private parties who would routinely assay coins for purity and audit bank reserves, is the only way to go in my book.  If someone cheats, the repercussions will be limited in scope to those who utilize the coin in question.  A monopolistic system, such as we have now and such as those proposed by you and many others, will only work completely until it doesn't, and then everything breaks lose. 

For-profit, private systems work in every other facet of society, why not also allow for-profit monetary systems to exist? 

This is a new and interesting idea to me, but I'm having real difficulty in wrapping my brain around the inherent complexities of a multiple currency system within a taxing nation state (gringo disease). Please excuse the following brain dump on corporate coinage.

  • Can I pay my Federal income taxes with my Walmart coins? What about with my Exxon-Mobile oil coins? Or how about with my Monsanto genetically-modified corn coins?
  • If I can pay my taxes with a Walmart coin but not an Exxon coin, does that mean gasoline would be really cheap in early April?
  • Post-oil spill, how many BP coins does it take to equal 1 Exxon coin?
  • What would the Goldman Sachs Derivative Coin be made out of? Dark Matter?
  • Would a Walmart coin be useless at Target? If so, how do I become the local money-changer?

I need a vacation....best, Jeff

 

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Re: Power corrupts and absolute power...?

Yes, I think JAG sums up the problems of multiple private monies pretty well!

I responded to strabes' post on the exponential growth thread, in which he analysed the money problem, with pretty much complete agreement. I wouldn't however agree with his debt-free money solution - assuming I've understood it correctly.

I'm just talking about M0, base currency, being debt-free.  Then the banking system primarily governed by state level public banks like ND would inflate/deflate on top of that base to serve most productive activity...I don't see any reason to ever remove base currency.

I may be misunderstanding what you mean here - but all govt spending involves the transfer of base money into the banking system - something over $6 trillion for the US in 2009! Given that US M2 at the end of 2009 was $8.5 trillion, if there isn't some mechanism for its removal it won't take long for base money alone to exceed this figure. Inflation is inevitable, and almost certain to be significantly damaging.

Yet again, this is a stock and flow issue. Money enables value by flowing. So it always has to have somewhere to flow to!

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Re: answering JAG's question re: debt-free money

I think the agreement here is there will probably be some kind of default.   We did it when Nixon flatly refused to convert US Dollars held by foreign central banks for gold bullion, as per Bretton Woods agreement.  

   The reason for the collapse of Bretton Woods is the same reason the US federal government  currently have $13 Trillion in public debt and more than $59 Trillion in unfunded liabilities:    The Federal government's out-of-control spending.

Absent legal tender laws,  commerce would quickly find a medium to facilitate trade.    Large international transactions would probably be done in gold bullion,  again.   FRN,  debt free dollars, gold coins etc will quickly find its place in transactions if allowed to compete.

If other types of money is allowed to compete with FRNs,  banks would offer deposit and other services for them also..     If customers prefer to do business with banks that do not engage in fractional reserve banking,  those banks no matter how large,  will eventually fail.     And if the most widely used money happened to be gold,  both fractional reserve banking and the mighty federal reserve system will be no more.  

This is what the politician/banker cabal and all their apologists truly fear:   peoples choice.

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Re: answering JAG's question re: debt-free money

Jeff, you're correct.  Eliminating standardization and creating a free market in currencies only causes the breakdown of capital formation.  Capital formation happens at the level of the currency.  That's why capital used to form at local/tribal levels.  Then states in the US had capital formation because they established state banking systems.  Then capital formed at the national level whenever national banks were put in place.  And ever since WWII and then Bretton Woods, we've increasingly had a global currency around which capital formed.  So now we have mega multinationals. Creating higher levels of capital formation can be useful because the scale of our economic systems get bigger and more efficient.  But of course that also causes tradeoffs, and my view is the capital formation system is now WAY too large.

Diarmidw, I'm talking very specifically about M0.  A debt-free version of M0 would be coins, notes, whatever, that enter the system as an asset tied to some form of value creation (mined metals or infrastructure).  You're talking about current debt-based M0.  So you're using an example of the exact opposite of what I'm saying to suggest what I'm saying is inflationary.  Smile

 

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Re: answering JAG's question re: debt-free money
carl wrote:

The reason for the collapse of Bretton Woods is the same reason the US federal government  currently have $13 Trillion in public debt and more than $59 Trillion in unfunded liabilities:    The Federal government's out-of-control spending.

No.  It's out-of-control borrowing that creates trillions in debt and liabilities.  Only when governments are held hostage by bank cartels does their spending need to be preceded by borrowing.  For example, when JFK spent silver certificates into the system, how much did the US debt go up?

Quote:

Absent legal tender laws,  commerce would quickly find a medium to facilitate trade

While I agree we might have been better off long ago if we never allowed any "standard" or legal tender laws, we'd basically be back a couple centuries in terms of economic development.  So at this point, I disagree that eliminating the standards would allow commerce to flourish since our current form of commerce depends entirely on currency standards and legal tender laws.  It would result in extreme capital flight, hoarding, and massive collapse of our current capital formation system.  That's what will happen with a breakdown of the dollar standard, then the international folks will bring in the new standard under the BIS...I agree it will probably be gold-backed, which means it will have far less leverage (liquidity) than we have today, which means far less economic activity than we have today. 

Quote:

If other types of money is allowed to compete with FRNs,  banks would offer deposit and other services for them also.

Only if it serves the bank's capital holders to do so.  And even if they did, it would be at far greater transaction costs because the lack of liquidity for all these other currencies would be far less useful for the banks.

Quote:

If customers prefer to do business with banks that do not engage in fractional reserve banking,  those banks no matter how large,  will eventually fail.     And if the most widely used money happened to be gold,  both fractional reserve banking and the mighty federal reserve system will be no more.

A free-market in lunch restaurants is fine, but a free-market in currencies and banking is chaos as rich predators use their banks to rape the masses (just as they did over the last 20 years with regulation breakdown).  This is why the founders wrote the regulation of money in Article 1 Section 8.  If you allow banks to do whatever they want, some fractional, some not, we would have disaster and the most leveraged fractional ones would win every single time in the short-run until their capital holders sucked as much wealth from the customers as possible and then fled the country and the bank collapsed (this is what used to happen).  Unlimited fractional banks can offer unlimited liquidity to customers...until gravity regulates them, which means the customers go broke.  The fractional ones would attract all the poor people who want what they think is free money only to realize later they're destitute once the bank hyper-leverages and disappears, and the less-fractional ones would put huge account minimums on customers so they'd only be available to the rich...precisely what the few good Swiss banks have always done.  The less-fractional would be used more as stores of wealth than liquidity/transaction machines.  This system is preferred by the rich.  But I say that the lower classes deserve some stability as well and should not be hostage to Crazy Eddie loan sharks (fractional banks with no regulation) for money.

 

 

 

 

Carl Veritas's picture
Carl Veritas
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Posts: 294
Re: answering JAG's question re: debt-free money

 

       It is the government that stole what people were using as money (gold coins) and installed the current system and its consequences.    Proposing a new and improved  "government" solution to protect the public again will be a hard sell at this juncture.

The bottom line is if the money is good,  the public will use it.        What is there to be afraid of,  peoples choice?

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diarmidw
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Re: answering JAG's question re: debt-free money

strabes

Diarmidw, I'm talking very specifically about M0.  A debt-free version of M0 would be coins, notes, whatever, that enter the system as an asset tied to some form of value creation (mined metals or infrastructure).  You're talking about current debt-based M0.  So you're using an example of the exact opposite of what I'm saying to suggest what I'm saying is inflationary.

Let's forget about M0 - we don't use the term in the UK now anyway and it doesn't appear in the US statistics.

So you have to define specifically to whom and in exchange for what (if anything) your debt-free money is being issued. Is this money the only money that will form the monetary base (ie reserves and the medium by which the government transacts with the commercial banking sector and by which the commercial banks transact with each other)?

strabes's picture
strabes
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Re: answering JAG's question re: debt-free money
carl wrote:

The bottom line is if the money is good,  the public will use it.

That's just not true.  The public has always demonstrated they will use whatever money is most available, i.e. bank IOUs and bank digits that come with the most freebies even if they're from banks with 100x leverage that can't come close to meeting their obligations.  And those IOU/digits are specifically designed to benefit the capital holders behind the banks (predators) to gain control over hard assets and people (prey).

Quote:

What is there to be afraid of,  peoples choice?

The people's choice was to establish a republic with regulated money to take it out of the hands of the predators and minimize the predator/prey model.  That system had a good run, constantly trying to fight off the foreign financiers, but it permanently broke down with the Fed and the predators have total control again. 

If you really want the "people's choice" you must restrain the choice of those who control most of the world's wealth from choosing to enslave the people.

Carl Veritas's picture
Carl Veritas
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Posts: 294
Re: answering JAG's question re: debt-free money

"They will use what money is most readily available"

This is a true statement.     After their money was stolen by politicians.   

Farmer Brown's picture
Farmer Brown
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Re: Power corrupts and absolute power...?
JAG wrote:
Farmer Brown wrote:

ll these reasons and more are why I continue to believe that the only money that could ever be trusted is private-issued, commodity-based coin.  Private issued currencies competing with one another, under the scrutiny of other private parties who would routinely assay coins for purity and audit bank reserves, is the only way to go in my book.  If someone cheats, the repercussions will be limited in scope to those who utilize the coin in question.  A monopolistic system, such as we have now and such as those proposed by you and many others, will only work completely until it doesn't, and then everything breaks lose. 

For-profit, private systems work in every other facet of society, why not also allow for-profit monetary systems to exist? 

This is a new and interesting idea to me, but I'm having real difficulty in wrapping my brain around the inherent complexities of a multiple currency system within a taxing nation state (gringo disease). Please excuse the following brain dump on corporate coinage.

  • Can I pay my Federal income taxes with my Walmart coins? What about with my Exxon-Mobile oil coins? Or how about with my Monsanto genetically-modified corn coins?
  • If I can pay my taxes with a Walmart coin but not an Exxon coin, does that mean gasoline would be really cheap in early April?
  • Post-oil spill, how many BP coins does it take to equal 1 Exxon coin?
  • What would the Goldman Sachs Derivative Coin be made out of? Dark Matter?
  • Would a Walmart coin be useless at Target? If so, how do I become the local money-changer?

I need a vacation....best, Jeff

Hi JAG,

Sorry for my very late response.  I should have been more clear with what I mean by private-issue coin.  

Examples of what I mean are BullionVault,com and GoldMoney.com, which you are probably familiar with.  Both are privately owned and controlled gold bullion banks, but they are not the traditional kind of gold bullion banks.  

At either of these banks, you can deposit your FRNs (or any other major CB notes) electronically and upon your orders, they will purchase physical gold bullion and hold it in your account.  So far, that's pretty similar to other bullion banks.  The following are the differences:

First, opening account is accessible to almost anyone.  At GoldMoney, you can start with as little as a gram of gold, which is somewhere around $30.

Second, these "banks" do not conduct any other traditional banking activities.  They do not lend money commercially; they do not have an investment arm; and they cannot and will not lend your money or your bullion to anyone else.  They are audited by third-party independent bullion auditors and insured privately.  They charge commissions on all transactions, and that is the sole source of their revenue.  

Third, and this is where it gets real interesting:  they facilitate trading among account holders.  For example, if you and I each have a BullionVault account, and I owe you $2,000, I could pay you by transferring the gold equivalent directly to your account, just as easily as I could pay an online merchant via a traditional online bank.  It is not difficult to imagine, in the electronic age we live in, how such a system could be used globally using an electronically linked global exchange system based on privately held bullion banks.  

The obstacles to this are very large, but are all based on the current system's artificial blockades to something like this becoming a reality.  Both BV and GM are located in jurisdictions outside the traditional banking system (I think both are in the British Channel Isles) because restrictions, regulations, and past practices by governments elsewhere make bullion banks seek havens such as the BCIs for protection.  However, as long as we're talking about a new monetary system, I would hope anything is possible.  If that is so, then private bullion banks such as these should be considered.  

As for Walmart "coins" or other privately-issued money, I do not have a problem with the concept, but I doubt it would catch on much.  Gold's success as money is time tested and extensive.  While there should be no laws prohibiting the use of "Walmart coins", their success will rest solely on the laws of supply and demand and the acceptance they receive by the public.  I would consider them to be along the same lines of a store gift certificate as that is the only place guaranteed to accept them.  Walmart is probably one of the few that could be positioned to try such a thing and I suppose if someone wanted to pay me in Walmart gift certificates (for lack of a better term) I would probably be willing to accept some.  I guess it would depend on how many miles are left on my car tires!  

There would have to be clarity provided by each government as to what specie it will accept as payment for taxes.  I do not see any problem with it being declared that only gold and silver will be accepted for payment but to stay out of the coinage, minting and banking businesses altogether.  

 

goes211's picture
goes211
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Re: Power corrupts and absolute power...?
Farmer Brown wrote:

As for Walmart "coins" or other privately-issued money, I do not have a problem with the concept, but I doubt it would catch on much.  Gold's success as money is time tested and extensive.  While there should be no laws prohibiting the use of "Walmart coins", their success will rest solely on the laws of supply and demand and the acceptance they receive by the public.  I would consider them to be along the same lines of a store gift certificate as that is the only place guaranteed to accept them.  Walmart is probably one of the few that could be positioned to try such a thing and I suppose if someone wanted to pay me in Walmart gift certificates (for lack of a better term) I would probably be willing to accept some.  I guess it would depend on how many miles are left on my car tires!  

This sounds a lot like Paul Grignon's Digital Coin proposal.  I know FB and others have a strong preference to PM's, and I used to agree but I am no longer convinced that PM's will work unless we have a systematic breakdown and have to start again from scratch.  Although I am not sure that Digital Coins would work exactly as planned, I do like the outside the box thinking of this proposal.  One of the things I am not a fan of is the single centralized clearing house but maybe that could be fixed by having a few different competing clearing houses run by different cartels.  I know that I personally would find this sort of solution much more appealing than a centrally run state system that requires legal tender laws.

plato1965's picture
plato1965
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Posts: 615
Re: answering JAG's question re: debt-free money

goes: Centralised = common= universal..  now.. that can be great or bad....

 

 I think the compulsion aspect is most important..

 

 A choice of centralised voluntary systems....  caveat emptor of course... but no force.. = good thing(tm)

goes211's picture
goes211
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Posts: 1114
Re: answering JAG's question re: debt-free money

plato,

I completely agree.  I have no problems with centralized as long as there is no FORCE required to keep it running and people are FREE to choose alternatives.  My fear of centralized in this case is that it is very convenient to having a single currency, and the economies of scale effectively creates a barier of entry to competing systems. 

I understand that often times monopolies are convenient.  For example look at computer operating systems.  For programmers it is very convenient to write one program and gain access to the whole software marketplace.  It also seems good to the customer if every piece of software they might want to buy runs on their machine.  The problem is a complete lack of incentive to innovate under these conditions.  How would computers work now if Microsoft could have killed Macs, Netscape, Google, Linux,... years ago?   My guess is that we would be living with a lot less technological innovation.

I think for any private system to work, especially a monetary one, their need to be some sort of competition or the people will all get hosed.  What I think makes Digital Coin worth discussing is the way it effectively allows businesses to create and manage their own money for their own products.  It could be quite liberating if it actually worked.  If you can not tell, I am a bit skeptical but I think the idea is a least worth consideration.

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Re: answering JAG's question re: debt-free money

FB, thanks for the reply. I've been a big fan of the Goldmoney.com business model (especially their iPhone commerce app), though I closed my account with them to avoid foreign account tax hassles. I should have realized that this is what you were referring to in your post, my bad.

Jeff

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