A debt-free money system can be one of two things: hyperinflation or a rationed money system

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kmarinas86's picture
kmarinas86
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A debt-free money system can be one of two things: hyperinflation or a rationed money system

If you create money and you only had to pay some fraction of it back, it is essentially free. If you create 1 dollar and you only have to pay a 90 cents back, you just created 10 cents. So if you had access to debt-free money creation, it would easy to abuse it. Obviously this naturally results in hyperinflation.

The only other option is to ration the money creation. But on what principle is the money to be rationed? Should one be able to create the money to for whatever investment one chooses? That is obviously not rationing.

Rationing, by definition, imposes limits on a distribution assets. So by what mechanism can rationing be achieved if it is not done by a system of debt? I believe we can only expect such rationing to occur if the law manages to set legal limits to the mathematical characteristics of money creation. This implies that some kind of regulatory system issues the money. The most vivid image of a regulatory body is government.

So does anyone one to make a stand as to what the nature of such limits on money creation would be?

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kmarinas86
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Re: A debt-free money system can be one of two things: ...

Excuse my typos.

Boy do I hate having to correct the OP.

kmarinas86 wrote:

If you create money and you only had to pay some fraction of it back, it is essentially free. If you create 1 dollar and you only have to pay 90 cents back, you just created 10 cents. So if you had access to debt-free money creation, it would be easy to abuse it. Obviously this naturally results in hyperinflation.

The only other option is to ration the money creation. But on what principle is the money to be rationed? Should one be able to create the money for whatever investment one chooses? That is obviously not rationing.

Rationing, by definition, imposes limits on a distribution assets. So by what mechanism can rationing be achieved if it is not done by a system of debt? I believe we can only expect such rationing to occur if the law manages to set legal limits to the mathematical characteristics of money creation. This implies that some kind of regulatory system issues the money. The most vivid image of a regulatory body is government.

So does anyone one to make a stand as to what the nature of such limits on money creation would be?

P.S. I believe most people on this board would be afraid to guess what such limits would be. Many assume you can have a debt-free money system without any form of rationing. Yet a gold standard is a debt-free money system is rationed by the finite existence of gold. A debt-free money system not backed by only a single specie such as gold can have a larger money supply, but then money creation becomes more complicated. The equation of the quantity theory of money would imply that we would either need to:

1) Expand the backing of our currency beyond a few precious metals.
2) Find some way to increase the money velocity by actions such as doubling or tripling the rate at which we normally pay rent.
3) Succumb to a frozen market lacking in the liquidity necessary to facilitate transactions.

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Thomas Hedin
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Re: A debt-free money system can be one of two things: ...

Obviously this naturally results in hyperinflation.

kmarinas,

Can you show me where at any point in time where spending money into circulation resulted in hyperinflation?

So does anyone one to make a stand as to what the nature of such limits on money creation would be?

Yes, I do.  Have all new money matched with production as its created.  Everything I've read says you can't have any inflation when an increase in money supply is matched with production.

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kmarinas86
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Re: A debt-free money system can be one of two things: ...
Thomas Hedin wrote:

Obviously this naturally results in hyperinflation.

kmarinas,

Can you show me where at any point in time where spending money into circulation resulted in hyperinflation?

The Weimar Republic after World War I (London ultimatum)? I mean, it wasn't debt-free money (I think) but it was certainly spent into circulation.

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Re: A debt-free money system can be one of two things: ...

I mean, it wasn't debt-free money (I think) but it was certainly spent into circulation.

Debt money = Money where someone has to go into debt in order for it to exsist.

Debt free money = Money that is not a liability to anyone.

In the Wiemar republic they used private bank notes that were not spent into circulation as a payment but bank notes that were loaned into circulation at interest.

At the height of the Wiemar's hyperinflation their interest rate was just a small meager 900%. 

 

I understand it can be tough to get the mind around that concept of debt free, wealth, final payment money that doesn't bear interest, and makes a nation prosperous.  It really matters not what we use for money but the way in which that money functions.  Debt money is only used to transfer all the wealth of the people from the many to the few and wealth money is used to make the entire nation prosperous.

SteveW's picture
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Re: A debt-free money system can be one of two things: ...

Money backed by gold is not debt free. Most of the money is still loaned into existence such as when you arrange to purchase a car over time. This was the situation in the US prior to 1971.

Wealth money can be spent into existence to pay for infrastructure. It creates a problem when wanting to finance a war since the economic effect of war is to destructive of production. Otherwise the amount of money in existence can be regulated by taxation with the aim of maintaining a zero inflation economy.

A society run on this principle of taxation being used to maintain zero inflation would readily feel the true economic costs of war.

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Re: A debt-free money system can be one of two things: ...

 

State issued fiat money not convertible to any other thing, nor fixed in value in terms of any objective standard,   works more like claim checks on goods and services produced by citizens.   Declaring it an asset does not make it so.     The issue is why would the state, which does not produce any goods  insist on being the authority to issue such claim checks and call it  their  sovereign right?

 

Explain where  the rights of the producer over his private property (his goods)  stand,  better yet you explain to them.

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Re: A debt-free money system can be one of two things: ...
Carl Veritas wrote:

The issue is why would the state, which does not produce any goods  insist on being the authority to issue such claim checks and call it  their  sovereign right?

Historically it's derived from the sovereign right of Kings to issue currency and written into the Constitution of the American Republic. Money is a human invention functioning as a necessary means of exchange. Money is not needed within tribal structures while between tribes infrequent trade can operate by exchanging dried fish for baskets, etc. However money is needed for even relatively simple societies and the state, as an aggregation of individuals who have voting rights to elect their representatives, operates to organize society. Money is one of those organizational principles and taxation is another. Any state that issues it's own sovereign fiat money to pay for the services it provides incurs no debt and therefore can run government operations while imposing less taxation on it's citizens.

I'm not sure if I answered your question but its the best I can do to explain sovereign right.

 

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Re: A debt-free money system can be one of two things: ...

Steve, 

In return,  I'll do what  I can to explain something you probably already know.

When we say national debt we are really talking about treasury bonds.    Bonds are debt instruments sold by the issuer to raise money. States and municipalities also sells bonds to the public for the same purpose.  Treasury bonds however are also used by the Federal Reserve System as a tool to implement monetary policy.     When the (FRB) federal reserve bank buys government bonds, it 'creates' the payment by crediting the government's account with the FRB.      http://en.wikipedia.org/wiki/Monetization                                                                                                                       From there the government writes checks against the account to pay its massive bills.  The federal government's debt ceiling is authorized by congress,   currently around $12.374 Trillion.   The federal government currently  have some $59 Trillion of unfunded liabilities:  Medicare, Social Security, Treasury bonds, Military benefits, Federal civil servants benefits, etc.

The FRB derives most of its income from interest on the government bonds it holds,   and remits its income back to the US Treasury annually.  Commercial bank profits goes to its shareholders.

Federal Reserve notes, coins, and bank credit all circulate in the economy as part of the nations money supply.  When the FRB buys government bonds from the banks,  it  credits the banks account with the FRB.   Commercial banks use the FRB payment as base money from which they extend loans to customers on a 9 to 1 ratio,  if my figure is accurate.   The FRB base money morphs into checking account and credit card balances via fractional reserve banking.     Bank customer deposits make up most of the nations money supply, as a result.   When you open an ccount with a US bank, you are surrendering legal title to your deposit and it becomes the asset of the bank though the bank also books it as a liability.  They can also replace physical cash as payment.   The customers checking account has no actual dollar bills, because a checking account is just a liability owed by the bank to its customers (wikipedia)

Fractional reserve banking does more than expand the nations money supply however.   When the FRB pumps bank reserves with the aim of stimulating economic activity (per JMKeynes),    customers flush with bank credit can go out and buy all sorts of goods, like homes.                This demand push up prices of goods and in our economic system,   prices serve an important function since it relays the underlying supply and demand picture in market goods.      Rising prices for goods, say homes, signals builders that now is the time to increase housing development projects and make money.     It is market prices that aligns production with consumption in other words.    Production of goods are done by  those profit-seeking loss avoiding businessmen,   employing private property  and follows the signal of the fluctuating market prices to tell them what to produce to make money.     Making a profit tells them  if they have pleased the consumer.   Hence,  it is the consumers buying choices that is obeyed in the market economy.     The central planners of the old soviet union didn't have private property, markets or entrepreneurs.    The results were  famine, gluts, or  shortages of even the basic staples.  

As  builders crank up production, employment rises and soaring profits encourage newcomers to the game.    

The bust  begins when the FRB starts tightening the money spigot ,  demand slackens putting downward pressue on prices leaving builders with a glut of unsold homes.   Losses mount, employment drops and banks fail.   The economy  cannot  respond in lockstep with the aims of  monetary policy because its made up of people, producers and consumers alike with individual reactions to losses.  Banks today are flush with reserves from the FRB, consumers are goaded with cheap credit once more but they are not responding as expected.  And  bank failures,   is where the creation of the Federal Reserve system pays off for the banks, they have a lender of last resort to bail them out.   

I mention these to point out the obvoius:     it is the government that is doing the borrowing, not the banks.   And by  legislating the Federal Reserve into existence, they gave the banks what it coveted:    fractional reserve banking and a lender of last resort, and in return the government is provided with money they do not have to collect in taxes.     

Back to private property rights.    To take away individual rights is to take away the nations rights, because how do you divorce the individual form the community and the nation in which he is a part of?

 

SteveW's picture
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Re: A debt-free money system can be one of two things: ...
Carl Veritas wrote:

Explain where  the rights of the producer over his private property (his goods)  stand,  better yet you explain to them.

Carl Veritas wrote:

Back to private property rights.    To take away individual rights is to take away the nations rights, because how do you divorce the individual form the community and the nation in which he is a part of?

Carl you gave an excellent explanation of how our money system is presently run.

I'm sorry I didn't answer you question about the rights of producers over their goods, lets say farmers over their soybeans since I didn't understand what the problem was or the issue you were addressing. 

 

 

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Re: A debt-free money system can be one of two things: ...

State issued fiat money not convertible to any other thing, nor fixed in value in terms of any objective standard,   works more like claim checks on goods and services produced by citizens.

Carl,

I understand your concern about fiat money not being convertable to any other thing, but shouldn't the very purpose of money only be used to enhance fair trade?  Fiat money is not a claim on anyones good and services because just because I show up with some fiat money does not mean you have to sell me anything.  If I were to show up and take things without the other person agreeing to the trade it would be flat theft.

Declaring it an asset does not make it so.

Everything is created as an asset.

The issue is why would the state, which does not produce any goods  insist on being the authority to issue such claim checks and call it  their  sovereign right?

I'm sorry Carl but nobody here is talking about having the state issue claim checks.  The issue is wealth vs debt money.  I OWN vs I OWE.  It's not fiat money vs commodity money.  Its the principles under which money functions.

Explain where  the rights of the producer over his private property (his goods)  stand,  better yet you explain to them.

Today producers clearly do not receive the benfit of their production because they do not own the means of the production.  Today the banking system has a mortgage on 100% of the property in the USA and is recieving a cut from nearly every transaction made.  Because the banking system has created all of this fraudulant debt they have destroyed the rights of ownership for everyone.  It's impossible to really own anything in this type of money system.  In a debt free (wealth) money system the producers OWN the means of their production (money) instead of this rediculous debt money system where the banking system owes 100% of the money and uses it as a means to steal from every producer.

 

As Jefferson said:

 "If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."

All one has to do is look around them and realize that this is what happens every single time a debt money system is not outlawed and destroyed.

Carl,

Are you opposed to having the producers own the means of their production (money)?

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Re: A debt-free money system can be one of two things: ...
kmarinas86 wrote:
Thomas Hedin wrote:

Obviously this naturally results in hyperinflation.

kmarinas,

Can you show me where at any point in time where spending money into circulation resulted in hyperinflation?

The Weimar Republic after World War I (London ultimatum)? I mean, it wasn't debt-free money (I think) but it was certainly spent into circulation.

actually, it is historical fact and now well known, that the weimer government did not cause the hyperinflation, it was the Reich bank that caused the hyper inflation as revenge because by printing their own money took control away from the central bank. creating debt free money is easy, and works extremely well in the interests of EVERYBODY except the central banks.

Guernsey did that extremely well until the bank of england stepped in and decided to take control.

if a government prints it's own money and issues it in accordance with population and production, inflation would never occur, the country would have no deficit or debts, meaning income tax would not be neccessary. if it can issue it's own bonds, then it can surely issue its own currency. the only problem with doing so, is that the small group of international and central bankers lose control and lose money. but the people and country would be a lot better off.

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I've always wondered about

I've always wondered about this...

What would happen if the government just spent the money into existance. Spending it on actaul production like for example... Food.

what are the effects of inflation? seems like if it was spent on food, then food would deflate in price, but what about other commodities and services? would they inflate since it is still increased money supply?

 

 

IronmanUK's picture
IronmanUK
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Money as Debt

http://www.moneyasdebt.net/

This web site gives great insight into what indeed money is, where it came from and possible debt-free money creation solutions.

 

abir's picture
abir
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I have an idea

The central band, which exists in our current monetery system, will still exist in this debt-free money system, and decide how much money is needed by the market

He just has to follow the same goverment guidelines for keeping the inflation which accepted given range.

The method could be temporary before a bigger change.

what do you think?

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