inflation
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Robert Poteat
Jan 6, 2015, 9:57:41 PM1/6/15
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What is inflation?
A cliché, pop-definition is too much money chasing too few goods causing prices to be driven up. The definition is absurd as much cliché pop-anything is absurd.
There is essentially no money in the United States economy. Debt called credit issued by banks as interest bearing loans is used as money in the U. S. economy. Debt and credit is the same thing. Economic theory, mere assumption, does not recognize the difference in bank issued repayable credit and permanently circulating money. The “theory,” assumption, is absurd.
Is there too little or too much credit/debt in the U. S. market place? U. S. credit market debt is $57.5389 trillion as of the 2nd quarter of 2014 according to the Federal Reserve Bulletin of 09/14/2014, L1 chart. In addition, intra-government debt of $5 trillion is not included in the above $57 trillion. Part of this total credit/debt represents consumer goods that are not paid for. The rest of it is credit/debt that has been borrowed and not paid back in all the other economic sectors including non-productive speculation. We certainly have had price increases in consumer goods. Housing was driven into boom and bust. Why?
Is there a shortage of consumer goods? Walk into any “big-box store”; it will be loaded with unsold goods. Advertising is a hundreds of billions of dollars of annual business cajoling consumers to buy more and often offering discounts or price reductions. There are trillions of dollars of unpaid debt for consumer merchandise at the same time stores are loaded with unsold stuff. Too few goods? Too few goods is absurd, but there has been price increases as if there is “too much money.”
Is there too much credit/debt used as money? It may seem that way, but the total accumulated credit market debt published by the Federal Reserve does not represent credit/debt in circulation used as money. It is unpaid credit/debt and has not created any shortage of goods. Why do we have inflation as reflected in constantly rising consumer goods while there is a glut of goods?
The amount of credit/debt in circulation is called the money stock in the Federal Reserve Bulletin. The money stock is published in segments called M1(1) and M2(2) . As of the 2nd quarter of 2014 M1 = $2,407.7 billion and M2 = $10,288.8 billion. M1 and M2 are defined in the footnotes. An historical measure M3(3) was deleted from publication in 2006. John Williams at shadowstat.com publishes a calculation of $15 trillion for M3.(4)
By any measure of money stock, there is not enough money stock in circulation to pay off existing debt. The only source of money stock is more bank credit/debt. It is not possible to eliminate debt by borrowing more to pay it. When the principle of debt is repaid to banks, it is removed from circulation until more money is lent back into the economy.
The economy is loaded with debt while there is insufficient circulating credit to clear the economy of already produced goods. There is insufficient circulating credit/debt to pay for existing goods, yet, prices rise. The cliché “too much money chasing too few goods” is falsified as an exclusive reason for current price increases. Such simple-minded clichés prove nothing.
There is empirical, historical evidence for increases in money supply affecting price increases such as in Europe while Europeans were plundering the Americas of gold and silver. Estimates range up to 400%, but the inflation occurred over time. The increases in money supply stimulated industry, invention, arts, and generally raised the standard of living. Discounting the genocidal plundering of the Americas, was the inflation in Europe a bad thing?
Technology and energy use has increased labor productivity, but prices still rise.
There are many indications of too small a money stock in the current economy. Labor participation rate is very low at 62%, 46,535,904(5) food stamp participants , bankrupt states, American Society of Civil Engineers 2013 report card on infrastructure is D+ with estimated $3.6 trillion needed in repairs by 2020, student debt is obscene, homeless estimation in the millions, largest per capita prison population, the national debt just passed $18 trillion, millions without healthcare except emergency rooms for which they cannot pay, education system inferior to other advanced and less advanced countries, extreme negative trade balance, degrading environmental ecology, child poverty is near worst in developed nations(6), repeating recessions and depressions, etc. Still, prices rise.
A conspiracy theory is that banks intentionally choke the credit/debt money supply to keep interest rates high. However, in the Federal Reserve Banking System interest rates are basically a matter of regulation by the Federal Reserve Banking System, and interest rates are at historical lows. The amount of lending that returns commercial banks the most revenue is more likely to determine their lending policy. An apparent counter-productive move by the Federal Reserve Banking System policy makers is paying interest on reserves of commercial banking. In effect, the commercial banks are paid not to lend at the same time that the nation is in depression and needing monetary stimulation.
Asset price value of total sector United States assets as published in the Federal Reserve Bulletin is, currently, $191 trillion. Hysterically imputed values (irrational exuberance) of corporate stocks are included.
The assets price value through time shows a growth from $10.5 trillion in 1980 to $191 trillion in 2014. What do we have more of that accounts for the fantastic increase? We have no more acres of land, top soil fertility has not increased. Minerals, natural gas, and petroleum have been used. Timber has been cut and fisheries depleted. All natural resources have been diminished. There has been increase in construction and infrastructure but not nearly enough to offset the diminution of resources. The assets price value merely shows an increase in the monetary prices of assets that includes the hysterically imputed prices of common stocks. An accurate graph of tangible assets may show a decrease in assets. The growth of asset prices is a better indication of inflation, or devaluation of the monetary unit, than officially published inflation numbers that are politically manipulated.
Monetary prices are determined by a complex association of measurable effects such as cost of production, seasons, weather, labor costs, and interest on loans. Prices are also affected by complex and variable human psychological attitudes as particularly shown by the hysterical values attributed to common stocks. Prices are affected by the ability of advertising to persuade people to want things they do not need. It is difficult to isolate the contribution of money stock quantity to inflation in the midst of all the other influences.
Credit market debt increased from $4.7 trillion in 1980 to $56.7 trillion in 2013. It follows a similar exponential increase as assets, and so does M2.
Population increased 1.4 times in the 1980 – 2014 time period while assets prices increased 19 times, credit market debt increased 12 times, the national debt increased 18 times, and M2 increased 7 times.
While these dramatic statistical increases occurred, the general standard of living for middle class Americans degraded. A large part of middle class degradation can be accounted for by the devaluation, called inflation, of the monetary unit.
It is irrefutable historical fact that debt has increased exponentially as shown in Figure 2. This brief period is indicative of the debt money system since the Bank of England was founded in 1694.
The power granted to private banks to issue money as credit/debt has enabled these institutions to create speculative housing, stock market, and derivative bubbles that cripple the productive capability of the nation. Particularly in the 1980 – 2014 period these institutions have gambled in derivatives to a dangerous level. The 2007-8 recession revealed the banking institutions to be national security risks. The risk was expressed by the sophistic phrase “too big to fail.”
A culture of monetary expansion and concentration has placed itself above all human values of well-being such as clean air, food, health, environment, shelter, education, art, etc. It is also a driver of the most obscene and destructive human activity, war.
The culture of monetary expansion and concentration is the result of an amoral and anti-social ethic of self-maximizing. Self-maximization is expressed in monetary price value. Monetary price value is unrelated to human life values.
The exponential increases in debt must be accompanied by exponential increases in asset prices or the system would collapse. Money stock must be increased to follow the debt and assets. Population growth is a small component of the increases. A chicken and egg argument may be raised here about which comes first or what drives the exponential growth, but the argument is mostly irrelevant. It is the debt system that creates the conditions. The debt system must be changed.
Legislation has been introduced to relieve the nation of the abusive bank credit/debt system. It is the National Emergency Employment Defense Act, NEED Act(7). This Act will end the power of banks to create credit out of nothing by making bookkeeping entries. It will the restore the money power to Congress as provided by the United States Constitution, Article I, Section 8(8). Without the power to create credit banks will not have the power to create bubbles and recessions. Congress will create the money debt and interest free for human services and infrastructure.
Congress will have the means to not only end the exponential growth of national debt; but, also, pay off the national debt as it comes due. Congress will have the means to fund needed human life supporting programs and infrastructure without borrowing money.
A common argument against such an act is that Congress will overspend creating inflation. Inflation control is addressed in the bill. Inflation is a hollow argument against the Act given the inexorable inflation of the existing system. Inflation control is actually a good argument supporting the monetary reform of the NEED
Act.
(1) M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of nonbank issuers; (3) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions. Seasonally adjusted M1 is constructed by summing currency, traveler's checks, demand deposits, and OCDs, each seasonally adjusted separately.
(2) M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000), less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market mutual funds, less IRA and Keogh balances at money market mutual funds. Seasonally adjusted M2 is constructed by summing savings deposits, small-denomination time deposits, and retail money funds, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.
(3) M3 = Savings bonds, Short-term Treasury securities, Bankers acceptances, Commercial paper.
(4) http://www.shadowstats.com/charts/monetary-base-money-supply
(5) http://www.fns.usda.gov/sites/default/files/pd/34SNAPmonthly.pdf
(6) http://www.unicef.org/media/files/ChildPovertyReport.pdf
(7) http://www.monetary.org/wp-content/uploads/2013/01/HR-2990.pdf
(8) To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
A cliché, pop-definition is too much money chasing too few goods causing prices to be driven up. The definition is absurd as much cliché pop-anything is absurd.
There is essentially no money in the United States economy. Debt called credit issued by banks as interest bearing loans is used as money in the U. S. economy. Debt and credit is the same thing. Economic theory, mere assumption, does not recognize the difference in bank issued repayable credit and permanently circulating money. The “theory,” assumption, is absurd.
Is there too little or too much credit/debt in the U. S. market place? U. S. credit market debt is $57.5389 trillion as of the 2nd quarter of 2014 according to the Federal Reserve Bulletin of 09/14/2014, L1 chart. In addition, intra-government debt of $5 trillion is not included in the above $57 trillion. Part of this total credit/debt represents consumer goods that are not paid for. The rest of it is credit/debt that has been borrowed and not paid back in all the other economic sectors including non-productive speculation. We certainly have had price increases in consumer goods. Housing was driven into boom and bust. Why?
Is there a shortage of consumer goods? Walk into any “big-box store”; it will be loaded with unsold goods. Advertising is a hundreds of billions of dollars of annual business cajoling consumers to buy more and often offering discounts or price reductions. There are trillions of dollars of unpaid debt for consumer merchandise at the same time stores are loaded with unsold stuff. Too few goods? Too few goods is absurd, but there has been price increases as if there is “too much money.”
Is there too much credit/debt used as money? It may seem that way, but the total accumulated credit market debt published by the Federal Reserve does not represent credit/debt in circulation used as money. It is unpaid credit/debt and has not created any shortage of goods. Why do we have inflation as reflected in constantly rising consumer goods while there is a glut of goods?
The amount of credit/debt in circulation is called the money stock in the Federal Reserve Bulletin. The money stock is published in segments called M1(1) and M2(2) . As of the 2nd quarter of 2014 M1 = $2,407.7 billion and M2 = $10,288.8 billion. M1 and M2 are defined in the footnotes. An historical measure M3(3) was deleted from publication in 2006. John Williams at shadowstat.com publishes a calculation of $15 trillion for M3.(4)
By any measure of money stock, there is not enough money stock in circulation to pay off existing debt. The only source of money stock is more bank credit/debt. It is not possible to eliminate debt by borrowing more to pay it. When the principle of debt is repaid to banks, it is removed from circulation until more money is lent back into the economy.
The economy is loaded with debt while there is insufficient circulating credit to clear the economy of already produced goods. There is insufficient circulating credit/debt to pay for existing goods, yet, prices rise. The cliché “too much money chasing too few goods” is falsified as an exclusive reason for current price increases. Such simple-minded clichés prove nothing.
There is empirical, historical evidence for increases in money supply affecting price increases such as in Europe while Europeans were plundering the Americas of gold and silver. Estimates range up to 400%, but the inflation occurred over time. The increases in money supply stimulated industry, invention, arts, and generally raised the standard of living. Discounting the genocidal plundering of the Americas, was the inflation in Europe a bad thing?
Technology and energy use has increased labor productivity, but prices still rise.
There are many indications of too small a money stock in the current economy. Labor participation rate is very low at 62%, 46,535,904(5) food stamp participants , bankrupt states, American Society of Civil Engineers 2013 report card on infrastructure is D+ with estimated $3.6 trillion needed in repairs by 2020, student debt is obscene, homeless estimation in the millions, largest per capita prison population, the national debt just passed $18 trillion, millions without healthcare except emergency rooms for which they cannot pay, education system inferior to other advanced and less advanced countries, extreme negative trade balance, degrading environmental ecology, child poverty is near worst in developed nations(6), repeating recessions and depressions, etc. Still, prices rise.
A conspiracy theory is that banks intentionally choke the credit/debt money supply to keep interest rates high. However, in the Federal Reserve Banking System interest rates are basically a matter of regulation by the Federal Reserve Banking System, and interest rates are at historical lows. The amount of lending that returns commercial banks the most revenue is more likely to determine their lending policy. An apparent counter-productive move by the Federal Reserve Banking System policy makers is paying interest on reserves of commercial banking. In effect, the commercial banks are paid not to lend at the same time that the nation is in depression and needing monetary stimulation.
Asset price value of total sector United States assets as published in the Federal Reserve Bulletin is, currently, $191 trillion. Hysterically imputed values (irrational exuberance) of corporate stocks are included.
The assets price value through time shows a growth from $10.5 trillion in 1980 to $191 trillion in 2014. What do we have more of that accounts for the fantastic increase? We have no more acres of land, top soil fertility has not increased. Minerals, natural gas, and petroleum have been used. Timber has been cut and fisheries depleted. All natural resources have been diminished. There has been increase in construction and infrastructure but not nearly enough to offset the diminution of resources. The assets price value merely shows an increase in the monetary prices of assets that includes the hysterically imputed prices of common stocks. An accurate graph of tangible assets may show a decrease in assets. The growth of asset prices is a better indication of inflation, or devaluation of the monetary unit, than officially published inflation numbers that are politically manipulated.
Monetary prices are determined by a complex association of measurable effects such as cost of production, seasons, weather, labor costs, and interest on loans. Prices are also affected by complex and variable human psychological attitudes as particularly shown by the hysterical values attributed to common stocks. Prices are affected by the ability of advertising to persuade people to want things they do not need. It is difficult to isolate the contribution of money stock quantity to inflation in the midst of all the other influences.
Credit market debt increased from $4.7 trillion in 1980 to $56.7 trillion in 2013. It follows a similar exponential increase as assets, and so does M2.
Population increased 1.4 times in the 1980 – 2014 time period while assets prices increased 19 times, credit market debt increased 12 times, the national debt increased 18 times, and M2 increased 7 times.
While these dramatic statistical increases occurred, the general standard of living for middle class Americans degraded. A large part of middle class degradation can be accounted for by the devaluation, called inflation, of the monetary unit.
It is irrefutable historical fact that debt has increased exponentially as shown in Figure 2. This brief period is indicative of the debt money system since the Bank of England was founded in 1694.
The power granted to private banks to issue money as credit/debt has enabled these institutions to create speculative housing, stock market, and derivative bubbles that cripple the productive capability of the nation. Particularly in the 1980 – 2014 period these institutions have gambled in derivatives to a dangerous level. The 2007-8 recession revealed the banking institutions to be national security risks. The risk was expressed by the sophistic phrase “too big to fail.”
A culture of monetary expansion and concentration has placed itself above all human values of well-being such as clean air, food, health, environment, shelter, education, art, etc. It is also a driver of the most obscene and destructive human activity, war.
The culture of monetary expansion and concentration is the result of an amoral and anti-social ethic of self-maximizing. Self-maximization is expressed in monetary price value. Monetary price value is unrelated to human life values.
The exponential increases in debt must be accompanied by exponential increases in asset prices or the system would collapse. Money stock must be increased to follow the debt and assets. Population growth is a small component of the increases. A chicken and egg argument may be raised here about which comes first or what drives the exponential growth, but the argument is mostly irrelevant. It is the debt system that creates the conditions. The debt system must be changed.
Legislation has been introduced to relieve the nation of the abusive bank credit/debt system. It is the National Emergency Employment Defense Act, NEED Act(7). This Act will end the power of banks to create credit out of nothing by making bookkeeping entries. It will the restore the money power to Congress as provided by the United States Constitution, Article I, Section 8(8). Without the power to create credit banks will not have the power to create bubbles and recessions. Congress will create the money debt and interest free for human services and infrastructure.
Congress will have the means to not only end the exponential growth of national debt; but, also, pay off the national debt as it comes due. Congress will have the means to fund needed human life supporting programs and infrastructure without borrowing money.
A common argument against such an act is that Congress will overspend creating inflation. Inflation control is addressed in the bill. Inflation is a hollow argument against the Act given the inexorable inflation of the existing system. Inflation control is actually a good argument supporting the monetary reform of the NEED
Act.
(1) M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of nonbank issuers; (3) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions. Seasonally adjusted M1 is constructed by summing currency, traveler's checks, demand deposits, and OCDs, each seasonally adjusted separately.
(2) M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000), less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market mutual funds, less IRA and Keogh balances at money market mutual funds. Seasonally adjusted M2 is constructed by summing savings deposits, small-denomination time deposits, and retail money funds, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.
(3) M3 = Savings bonds, Short-term Treasury securities, Bankers acceptances, Commercial paper.
(4) http://www.shadowstats.com/charts/monetary-base-money-supply
(5) http://www.fns.usda.gov/sites/default/files/pd/34SNAPmonthly.pdf
(6) http://www.unicef.org/media/files/ChildPovertyReport.pdf
(7) http://www.monetary.org/wp-content/uploads/2013/01/HR-2990.pdf
(8) To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
Jim Rushford
Jan 6, 2015, 11:34:54 PM1/6/15
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This is great work Robert! Can you put it on the FB group page for all to see?
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w1...@aol.com
Jan 7, 2015, 8:49:14 AM1/7/15
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Yes please post this on the AMI face book group.
Sent from my BlackBerry 10 smartphone on the Verizon Wireless 4G LTE network.
| From: Jim Rushford Sent: Tuesday, January 6, 2015 11:34 PM Reply To: the-american-mo...@googlegroups.com Subject: Re: inflation |
w1...@aol.com
Jan 7, 2015, 9:10:17 AM1/7/15
to the-american-mo...@googlegroups.com
This is a great article. One thing that most people do not realize it how much debt service or interest is a large part of the cost of goods sold.
Sent from my BlackBerry 10 smartphone on the Verizon Wireless 4G LTE network.
Original Message
From: Robert Poteat
Sent: Tuesday, January 6, 2015 9:57 PM
Subject: inflation
Sent from my BlackBerry 10 smartphone on the Verizon Wireless 4G LTE network.
From: Robert Poteat
Sent: Tuesday, January 6, 2015 9:57 PM
Subject: inflation
Jill Harrison
Jan 7, 2015, 12:42:34 PM1/7/15
to the-american-mo...@googlegroups.com
Having incorrect narratives detracts from the central message. While it seems true that:
"The economy is loaded with debt while there is insufficient circulating credit to clear the economy of already produced goods. There is insufficient circulating credit/debt to pay for existing goods, yet, prices rise."
and: "There is empirical, historical evidence for increases in money supply affecting price increases" has been shown in Steve Keen's modeling of this last asset bubble crisis, wherein the bank's money creation fed the rising speculation in the housing bubble.
I think the central point of the first quote is in the *circulating* ~ that is, too much of our debt is owed to too few 'owners' of the worlds assets.
The falsity in this post lies in this statement:
"By any measure of money stock, there is not enough money stock in circulation to pay off existing debt."
This is the problem of "confusing stocks with flows" as we discussed here about a week ago. As long as the money is circulating there is no problem with a small stock of money extinguishing a much larger debt. It wouldn't be hard to imagine a scenario in which a single dollar made a circuit among thousands of people clearing their mutual debts amongst each other in a very short period of time ~ the greater the velocity of that dollar the faster this large mutual debt is cleared. What is important about this scenario is that the debt is mutually shared across the community. I see our current problem arising from too few people laying claim to this outstanding debt, and those few 'earn' their wealth almost entirely on the return on their capital, rather than providing any significant value by their labor or ingenuity (except in their cleverness in creating speculative financial instruments).
Jim Rushford
Jan 7, 2015, 2:09:38 PM1/7/15
to the-american-mo...@googlegroups.com
Great point Jill. It is important not to confuse the conversion of the entire stock of money (in its various forms) to 100% HPM with the need to add a certain, much smaller stock of money to help the real economy, which would be largely dependent on the flow as well as multiple other factors. That said, by giving government back total sovereign control of the stock of money and returning ownership of personal bank accounts back to the individual (as the NEED Act does), much of the maldistribution and bubble problems would be solved.
Jill Harrison
Jan 7, 2015, 2:40:56 PM1/7/15
to the-american-mo...@googlegroups.com
In my opinion 'adding a smaller stock of money to help the real economy' exacerbates the problem by giving an easy way out and not solving the underlying issues of money pooling into ever fewer hands. When you have people on main street starving and a small minority hoarding large portions of the money stock waiting for better returns before they'll put it back into circulation then it's time to grapple with the proper means of getting that stagnant money back into circulation. If it becomes necessary to inject new money into the system, then I agree with Keen's idea of handing the money out equally to everyone by first applying it to any outstanding debt they have and then allowing them to increase their bank accounts by any that is left over.
I absolutely agree with "giving government back total sovereign control of the stock of money" and not allowing banks to create so much of our money supply.
The problem I see is with the root causes of the money flows leading to accumulation into ever fewer hands. I do not see that being addressed in the NEED act.
joe bongiovanni
Jan 7, 2015, 3:30:41 PM1/7/15
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Really, Jill.
Do you really think that the upward flow of funds …… fromdebt-payers to debt-creators (ninetyy-nine percent TO one percent) would not immediately change with the governmentspending all new money permanently into existence FIRST on productive enterprise(infrastructure paying wage workers) and also by making income-balancing payments to the bottom ten or twentypercent (The Restofus), the place where the velocity of money turnover is the highest?
I hope you think about that some more.
I definitely think this is a perhaps sidebar benefit ofpublic money.
Everything changes.
Nothing is the same.
The rich can still hoard all they want, but by doing so they cannotreduce the supply of money which is in public control.
Hoarding is an offsetting money factor to velocity. Bothare part of the MA’s determination of the amount of money needed to achieveGDP-potential.
Have some faith in the MA. Have some faith in ourselves.
Things will indeed get better.
Thanks.
Jill Harrison
Jan 7, 2015, 3:56:30 PM1/7/15
to the-american-mo...@googlegroups.com
I think it would be a great step forward if government would spend money into local economies on those infrastructure projects chosen by the people (voting on how money is spent into the economy is more important that voting for the folks who 'represent' us imo)
but to answer your question whether i believe the upward flow of money "would not immediately change with the governmentspending all new money permanently into existence" ~ the answer is no, i don't believe that would put a stop to the flow imbalance unless the tax structures address the underlying problems in our money flows. The way this question is framed seems to imply a more static sense of an economy that doesn't deal with the dynamics of how the system functions over time.
I absolutely agree that money creation should be more democratized than what we currently have ~ but my problem still lies in how we properly pay for this utility we call money, which needs to be reflected in the tax system.
Jim Rushford
Jan 7, 2015, 4:04:01 PM1/7/15
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Jill, your short statement as bout hoarding and the the circulation of of $ touches on so many things. I think the criticism you are making would be a good criticism of MMT. I agree that a debt jubilee would be one part of the fix along with tax and trade reforms. I think that the NEED Act addresses these issues more than you realize. Money would only be issued into the real economy...production/consumption. Wealthy people mostly own financial assets and real estate. They would no longer be able to leverage up asset prices with newly created $. Also, banks would not be able to speculate with customer deposits. This topic goes on forever, but if you collect all sorts of economic rents along with issuing money only through the real economy and disallow any private $ creation of government backed money, you mostly solve the issue s you raised. Lastly, matching the new stock of money with the flow and resulting GDP growth would be the general rule.
joe bongiovanni
Jan 7, 2015, 4:50:59 PM1/7/15
to the-american-mo...@googlegroups.com
Dear Jill,
Thanks for the reply.
About that flow………..
We live in a Creditocracy.This is a foundational and essential understanding for reform.
If you don’t understandthat, then you don’t understand the present flow of money that goes from the top of the Creditocracy ….. where moneyis created and issued by the One Percent today based on Credit-worthness and ROI….. to…………NOWHERE……. except what trickles down…… kind of by accident. There’s areason why the rich get richer, and the poor get the picture.
It is built into the designof this private money system.
Trying to solve the moneysystem problem….. a la Picketty through the fiscal (tax) process _ is toattempt to satisfy via a temporal and cyclical solution, the exact opposite ofwhat is required, a permanent systemic change to that flow.
Tax rates are not permanent.They ebb and flow. Certainly they play a role, but are not dispositive of thewealth and income imbalances that you obviously hold so close to your heart.
I’m suggesting that in orderto comprehend these wealth and income flows you have a listen to German profEmer. Dr. Bernd Senf of the Berlin School of Economics in his first ever (or since) Englishlanguage lecture on the subject of The Deeper Roots of the World FinancialCrisis…. Here .
https://www.youtube.com/watch?v=dpteU6a3L5s
I really don’t understandyour ‘static’ versus ‘dynamic over time’ perspective to these money questions.What was said that makes you think that?
“”my problemstill lies in how we properly pay for this utility we call money..””
Actually, wehave already paid for it, through the blood, sweat and tears associated withour monetary Revolution in 1776, throwing off the yoke of the British privatebankers’ attempts to limit the use by the then-Colonies of their own money incommerce and governmental business. No other payments are necessary, exceptwhat is today NEEDed to take it back,once again, from the private bankers. HR 2990 .
Thanks, Jill.
Joe B.I think it would be a great step forward if government would spend money into local economies on those infrastructure projects chosen by the people (voting on how money is spent into the economy is more important that voting for the folks who 'represent' us imo)
but to answer your question whether i believe the upward flow of money "would not immediately change with the governmentspending all new money permanently into existence" ~ the answer is no, i don't believe that would put a stop to the flow imbalance unless the tax structures address the underlying problems in our money flows. The way this question is framed seems to imply a more static sense of an economy that doesn't deal with the dynamics of how the system functions over time.
I absolutely agree that money creation should be more democratized than what we currently have ~ but my problem still lies in how we properly pay for this utility we call money, which needs to be reflected in the tax system.
Jill Harrison
Jan 7, 2015, 5:48:20 PM1/7/15
to the-american-mo...@googlegroups.com
Thank you Joe for sharing this talk on youtube ~ I've only listened to half of the first one so far, but will send a quick response as I won't get to finish them until much later.
I am in agreement with him about the problems of interest (& compound interest) ~ and I wonder if he's heading for a similar solution as was proposed by Silvio Gesell with a small holding fee on money to put an end to the usury fee commanded by those who have more money than they can reasonably put to work. I'm a huge fan of Gesell & also subscribe to his notion limiting the amount of rent (or interest) that can be commanded from possession of either land or money.
I wanted to make a brief comment about your question of static vs dynamic since your last statement gave another example of that in my mind. when you say that the maintenance of the monetary system was paid for some centuries back ~ it seems to miss the point of the ongoing care & maintenance of a living thing ~ sort of like saying i fed the baby yesterday & he's good to go for all eternity
economies are living breathing things & while there is a (relatively) 'fixed' stock of what might be called high powered money (is that what someone just referred to as HPM??) there will always be credit instruments that allow room for a living breathing economy to expand to meet real needs before clearing of these credits brings us back to this fixed stock.
I'm not on the same page with you in terms of the Picketty comment ~ his questioning of how much income comes from capital vs labor is very insightful imo & it seems to me that perhaps you put a false barrier between monetary & fiscal policy ~ which to me would be like insisting that electricity & magnetism must be viewed separately leading to problems in understanding the effects they have on each other.
Thank you for your conversation today ~ it leaves lots to think about and I hope we continue the discussion.
Warm regards, j
John Conroy
Jan 7, 2015, 7:31:00 PM1/7/15
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Hi all,
Hoping to read all of your posts. Meantime, I read Bob's. Paragraph 3, last line.
The economy was driven into a housing boom.
Why?
Why indeed? There may be several reasons..
One is that a debt based system needs debtors.
Student debtors, housing debtors, dot com bubble debtors, etc.. When money is not debt we won't have to look around for debtors du jour.
Thanks Bob!
Hoping to read all of your posts. Meantime, I read Bob's. Paragraph 3, last line.
The economy was driven into a housing boom.
Why?
Why indeed? There may be several reasons..
One is that a debt based system needs debtors.
Student debtors, housing debtors, dot com bubble debtors, etc.. When money is not debt we won't have to look around for debtors du jour.
Thanks Bob!
Stephen Zarlenga
Jan 8, 2015, 11:10:58 AM1/8/15
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Just brilliant Bob! This is why we insist that you give 2 talks at our annual AMI Monetary Reform Conference each year (Folks this year its September 10-13 - sign up now at http://www.monetary.org/2014schedule.html)
You have zeroed in on one of the reasons "economics" has become a clandestine religion - without supporting evidence and ignoring counter evidence- and an immoral religion, even anti moral one at that. Plattitudes that largely support the rich and powerful against everyone else - against society. Shame on most economists.
sergioturner
Jan 23, 2015, 5:12:38 PM1/23/15
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Robert's initiative, energy, focus, and research are constantly encouraging us to contribute more ourselves.
To expand on Robert's mention of interest as a factor in price inflation, Magrit Kennedy and Helmut Creutz have tried to estimate the price inflation due to interest costs for a variety of goods and services, ranging from 12/88 = 14% in garbage collection to 77/23 = 335% in public housing. See page 8 of
http://userpage.fu-berlin.de/~roehrigw/kennedy/english/Interest-and-inflation-free-money.pdf
An example might illuminate the interest factor in price inflation.
Say a locale issues a $10M 30-year 3% muni bond to finance a new school. According to http://www.mortgagecalculator.org/, total interest paid would be over $5M, boosting the nominal cost by 50%. This is contributing to price inflation at least 50%! ("Price" here interpreted as the future taxes that would back this bond.)
50% price inflation is just in this last bond-link. Consider that building the school involves machines, management, and contractors. The cost of machines includes an interest charge for the 7-year loan that the machine supplier took to finance its purchase; the cost of management includes an interest charge on the loan that the manager took to set up the management business; the cost of the contractor includes an interest charge on the student loan that he took to become a contractor. All this is built into the $10M price tag of the school. It would be far less had these three ingredients (next to last link) no interest costs to pass to the locale.
There are earlier links too embedding an interest markup. The machine seller is passing on the interest on the financing of his machine-producing factory from which the machine was purchased for the school. The contractor's tuition includes an interest cost from building the classrooms in which he studied to become contractor.
Every link in this chain passes to the next link a markup to cover interest costs, and the final price inflation is worse than additive in these markups - it is exponential.
These chained interest-markups are a problem quite separate from the 50% markup within the top bond-link. The latter markup is just the pernicious compounding of interest over time.
With these two cents here, I do wish to ask Robert or Stephen or anyone else about the AMI's official view on interest.
I understand that the "NEED Act will limit interest rates to 8% including all fees." Why is 7% is OK? I do understand that until recently many states capped interest rates, but this fact in itself fails to provide a rationale for 7% being OK.
I also understand that the NEED Act needs to focus its message and cannot mean to reform too much. But if the AMI's view is that 7% in fact is not OK, is 1% OK? What is the rationale? Thank you!
To expand on Robert's mention of interest as a factor in price inflation, Magrit Kennedy and Helmut Creutz have tried to estimate the price inflation due to interest costs for a variety of goods and services, ranging from 12/88 = 14% in garbage collection to 77/23 = 335% in public housing. See page 8 of
http://userpage.fu-berlin.de/~roehrigw/kennedy/english/Interest-and-inflation-free-money.pdf
An example might illuminate the interest factor in price inflation.
Say a locale issues a $10M 30-year 3% muni bond to finance a new school. According to http://www.mortgagecalculator.org/, total interest paid would be over $5M, boosting the nominal cost by 50%. This is contributing to price inflation at least 50%! ("Price" here interpreted as the future taxes that would back this bond.)
50% price inflation is just in this last bond-link. Consider that building the school involves machines, management, and contractors. The cost of machines includes an interest charge for the 7-year loan that the machine supplier took to finance its purchase; the cost of management includes an interest charge on the loan that the manager took to set up the management business; the cost of the contractor includes an interest charge on the student loan that he took to become a contractor. All this is built into the $10M price tag of the school. It would be far less had these three ingredients (next to last link) no interest costs to pass to the locale.
There are earlier links too embedding an interest markup. The machine seller is passing on the interest on the financing of his machine-producing factory from which the machine was purchased for the school. The contractor's tuition includes an interest cost from building the classrooms in which he studied to become contractor.
Every link in this chain passes to the next link a markup to cover interest costs, and the final price inflation is worse than additive in these markups - it is exponential.
These chained interest-markups are a problem quite separate from the 50% markup within the top bond-link. The latter markup is just the pernicious compounding of interest over time.
With these two cents here, I do wish to ask Robert or Stephen or anyone else about the AMI's official view on interest.
I understand that the "NEED Act will limit interest rates to 8% including all fees." Why is 7% is OK? I do understand that until recently many states capped interest rates, but this fact in itself fails to provide a rationale for 7% being OK.
I also understand that the NEED Act needs to focus its message and cannot mean to reform too much. But if the AMI's view is that 7% in fact is not OK, is 1% OK? What is the rationale? Thank you!
Allen Smith
Jan 24, 2015, 12:29:48 AM1/24/15
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Allen Smith
Jan 24, 2015, 12:31:00 AM1/24/15
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Robert Poteat
Jan 24, 2015, 7:54:49 PM1/24/15
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On the question of interest my personal ideal would be to return to the original term usury and ban it. Interest would take on the meaning as used in idealized Sharia, but that is too far out of this cultural norm. Any rate of interest in the current vernacular is arbitrary. Eight per cent is just a compromise. I would like it lower, but getting the NEED Act passed is the most important consideration. We must get debt and interest free money, then work on the refinement.
jameslbourque
Jan 26, 2015, 10:06:53 AM1/26/15
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On Saturday, January 24, 2015 at 6:54:49 PM UTC-6, Robert Poteat wrote:
> On the question of interest my personal ideal would be to return to the original term usury and ban it. Interest would take on the meaning as used in idealized Sharia, but that is too far out of this cultural norm. Any rate of interest in the current vernacular is arbitrary. Eight per cent is just a compromise. I would like it lower, but getting the NEED Act passed is the most important consideration. We must get debt and interest free money, then work on the refinement.
It might be better to coin a new word. This new word would define the rate and use of interest that you wish to ban.> On the question of interest my personal ideal would be to return to the original term usury and ban it. Interest would take on the meaning as used in idealized Sharia, but that is too far out of this cultural norm. Any rate of interest in the current vernacular is arbitrary. Eight per cent is just a compromise. I would like it lower, but getting the NEED Act passed is the most important consideration. We must get debt and interest free money, then work on the refinement.
sergioturner
Jan 26, 2015, 12:23:25 PM1/26/15
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Thank you for the sharp answer.
John Conroy
Jan 27, 2015, 10:05:48 AM1/27/15
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Yes, good idea James.
Words and slogans can be powerful. They help frame arguments! Good luck
Words and slogans can be powerful. They help frame arguments! Good luck
Stephen Zarlenga
Feb 9, 2015, 11:53:54 PM2/9/15
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On Tuesday, January 27, 2015 at 10:05:48 AM UTC-5, John Conroy wrote:
Yes, good idea James.
Words and slogans can be powerful. They help frame arguments! Good luck
Readers, Please realize that there is a section of the 32 page brochure at our homepage (www.monetary.org) which contains the 20 most often asked questions and answers about the NEED Act, and normally a lot of the questions that come up about why 8% for example, are answered there also.
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