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Happy Cinco de Mayo
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Monetary Awareness Days
May 5, 2011
Cinco de Mayo
The Fifth of May is a small holiday is Mexico. It pales next to the Revolution against Spain that gained Mexico its independence and the People’s Revolution of Villa and Zapata. But I think that Cinco de Mayo has a larger significance, a worldwide significance, because this was a great victory in a struggle we are still fighting today.
In July of 1861 Mexican President Benito Juarez declared a two year moratorium on debt payments. France, Britain, and Spain took offense and sent a fleet to the Mexican Port of Veracruz. Britain and Spain negotiated a deal with Mexico and withdrew, but the French under Napoleon III invaded Mexico with an army of 8,000. It was this army that General Zaragoza defeated at Puebla on May 5, 1862.
The enemy of humanity has morphed over the years from overt military conquest to enslavement by contract, to having your pocket picked by the invisible hand. 1968 began what I will refer to here as the Bookies/Bankers rebellion. It has grown to mammoth proportions and now runs virtually the entire planet, or does it? The cognitive dissonance is deafening. Jesus is wed to Ayn Rand and they’re not joking.
Modern Money is a plague on the world. It is not a conspiracy of Jewish Bankers. Some bankers happen to be Jewish, but Modern Money has no ethnic or cultural basis, no racial component, it is simply the combined force of ego and greed set to put to the torch any human sentiment that stands in its way.
Encountering and challenging such a force as Modern Money requires that we see the field clearly. The battlefield is virtual. The weapons are of the weak path: reason, logic, human sympathy must all learn to stand out in a fog that is blinding. This fog is the intentional creation of those who wish the world to believe that things were always thus, that might always makes right, but that is not the case. That is the lesson of Cinco de Mayo. That is the message to the Don Quixote in us all. Stand up for yourselves and those less well off than yourselves, and your world can change.
The Phenomenon of Money
The modern economy is a distributed information system. The information bits of this system are composed of a phenomenon called money. Money acts as a medium of exchange and storage of value. People trade things for money (medium of exchange) in anticipation that the money can be used to buy other things (storage of value). They trade food, clothing, shelter, their labor, cars, transportation, everything for money. These trades generate ratios of money/things. These ratios are called price, wage, interest, and rent. These ratios rule our markets and markets rule our world.
- Medium of Exchange-Trading things or services for a piece of money
- Storage of Value-The Purchasing Power of Money over Time
- Information Frame of Reference
- Wage-Money/Hours of Work
- Commission-Money/Work Product
- Salary-Money/Month of Work
- Rent-Money/Use of Something
- Interest-Money/Use of Money
- Power Vehicle-The Ability to Command Resources, Buy, Bid, Bestow
- Hierarchical↑↓Position in Pecking Order
- Purchasing Power/Whole Economy
- Purchasing Power/Other People
To achieve these various functions money must exhibit, at least to some extent, the following principals:
- Reckonable– The amount of money must be countable and known to the public
- Computable– Must be predictable, a reliable, stable algorithm that is operated publicly
- Not counterfeit able– Must exclude false claims
- Indifferent– It cannot have favorites. All currency issued to the public on a per capita basis
- Uncornerable– It cannot be privately appropriated for a group of insiders
The Form of Money
Money has been many things over time. Rock, paper, gold, silver, computer bytes, leather, anything that any group of people accept as “money”. Some of these media perform the varying tasks better than others. There are a number of these competing conceptions of money vying for political support.
There have been three basic forms of money. Commodity money is one type. The issuing agent guarantees to redeem money for a specific amount of a commodity. The second is managed currency. The issuing agent controls the amount of money in circulation in order to maintain price and market stability. The third is local currency. Local currencies are instituted by individuals in order to improve trade in a given locale. A fourth appeared early in the 20th century, Stamp Scrip. The invention of Argentinean Businessman and monetary theorist Sylvio Gesell, Stamp Scrip is money that has a carrying cost attached to it. Each currency division has a place for stamps to be attached on a regular basis. Some was 1% per month, which meant that the money paid for itself in 9 years.
America’s right wing is very high on the gold standard. Presidential candidate Ron Paul has made the gold standard a centerpiece of his philosophy. Their philosophical base centers on the Austrian Economist Ludwig von Mises. I have always been a fan of von Mises, but not for his monetary theory. I admire his analysis of the market but find myself almost the mirror image of his notion that money must be based on a commodity, an “immediate” good, before it can function as a medium of exchange and thus achieve “mediate” value. I think von Mises is wrong, but his ideas will be dealt with here. I find myself closer to another favorite of the right, Friedrich von Hayek. Hayek lead the way into viewing the economy as information system and the value of an accurate and mutually acceptable medium of exchange, even to the point of allowing private “fiat” currencies, that gain their value from exchange alone. This is my take, and I hope others will weigh in.
L. Randall Wray of University of Missouri at Kansas City makes the case for the sovereign right of the government to create money. Professor Wray has written extensively on the government’s ability to use its good credit to create and spend into circulation any amount of money that is deemed necessary. The government can, and at times must, fill the breach in a monetary crisis. The University of Missouri at Kansas City must also be congratulated for having William Black on their faculty as well. Professor Black was a regulator during the S&L crisis and has opened a spotlight on what went wrong in 07-08. Professor Black has correctly identified the modus operendi as “accounting control fraud”. It is a systematic, top to bottom, criminalization of an entire company, perhaps an entire industry. This is what we face.
I think this is one of most important things to be understood by all participants. If the political system decides to challenge the money establishment, the political system must be ready to put in place an alternative to the existing system, or whatever plan that is put forward will be starved by a “Liquidity Strike” exactly as they did in the 1780s with the Continentals, and as Biddle did to Jackson in the 1830s. Lincoln ran around them with the Greenbacks but the powers that be got their revenge and sucked those dry as well. The Bankers/Bookies feel they have complete control, but they do not. We must be ready with an alternative.
Stephen Zarlenga’s American Monetary Institute is the farthest advance political movement for currency and budget reform. Zarlenga has a great website, especially strong in the monetary history of the colonies. He directly challenges the Austrians on their concepts of money and its origin. Zarlenga is the best living source on the monetary history of the United States. Zarlenga has a bill before congress sponsored by Dennis Kucinich.
Local Currencies are also very much on the playing field as well. They run the gamut from complete replacement currencies that would seek to set up a substitute or parallel economic information matrix, to complementary currencies that seek to fill niches or serve an underserved population. See the links.
And others pushing this phenomenon further:
I will introduce my own entry into the monetary sweepstakes, exCalibrator. It will be what Hayek called a private “fiat” currency. It is money based on itself, its own internal rationality and logic. Perhaps the most distinguishing factor of exCalibrator is the fact that it keeps everyone in the game. Every day, every person receives an injection of cash. This means that everyone gets to play every day.
My interests in keeping everyone in the game
- They could be my customer
- They would demand quality for their money
- Would help people maintain their physical body
- Keep people involved in the economy increasing their chances to contribute
My other interests in exCalibrator
- I could need help at times
- I get the same subsidy as everyone
Well I’ve established some criteria and now I’ll issue some evaluations. How do the following stack up? If I were the professor how would I grade these concepts?
- Gold standard
Not counterfeit able- A
- Managed Currency
Not counterfeit able- B
Not counterfeit able- B
- Stamp Scrip
Not counterfeit able- B-
- Private fiat currencies
Not counterfeit able- ?
Not counterfeit able- C
- Local Currencies
Not counterfeit able- C
We can’t trade with each other because of money. Modern money is not a medium of exchange it is the principal impediment to trade. We can change that!