Monday, June 17, 2013

Private Sector Money, V: A Final Question


We had one more question come in on this brief series.  This involved the duty of a private issuer of money to disclose how much he or she was issuing and in what form.  As our correspondent asked,


"Thank you for you reply.  I am ever in the learning mode and thus do appreciate all your efforts toward helping us learn more about the history and economics of our world.

"Were such a group of superprofit companies unite to create their own money, do you think that they would have any legal requirement to inform the rest of the world?

"Your mention of the railroads brought to mind that it was not uncommon for railroad bonds to be created a period of life much longer than normal human years."

Under current law in the U.S. and, as far as we know, in the rest of the world except, possibly, the communist and socialist countries, the government has no say-so in the creation of private money.  This is because all money is a contract, just as in a sense, all contracts are money.

A contract consists of offer, acceptance, and consideration.  Assuming that the “matter” of the contract is not illegal and the parties to the contract are competent, a contract can be made for any purpose whatsoever, as long as the three elements are present, i.e., someone makes an offer involving something of value, and someone else accepts the offer.  Money has been created.  When the contract is fulfilled, money has been cancelled.

The government only gets involved legitimately when a contract involves something illegal, or one of the parties has breached, i.e., not fulfilled his or her part of the bargain.  Contract is based on humanity's natural right of free association and private property.  It is the chief means by which, within a social order, people participate in the politikos bios, the “life of the citizen in the State.”

Keynes thought differently.  In the work he considered his magnum opus before von Hayek shredded it (and missed the biggest mistake Keynes made in the process), A Treatise on Money, on page 2 he asserted that the State has the right to change the terms of any "money contract" (redundant), and to "re-edit the dictionary."  This effectively would abolish the natural law and make the State even greater than Thomas Hobbes's "Mortall God."

So, no, under ordinary circumstances, no one is obliged to inform the State or other people what contracts he or she enters into.  All companies including multinationals can and do create massive amounts of their own money every day in the ordinary course of business, or they couldn't operate.

If the government or some other authority required that all such transactions be made public, this would be a clear violation of privacy, not to mention giving competitors an unfair advantage if one company obeyed the law and another did not.  It would also be impossible to enforce — and in today's legal climate, it's often not that you broke the law, but to what degree.

A systems check, by which we mean a change from a few owners of capital to many, would increase the level of accountability by giving more people a direct, enforceable interest in keeping things above-board based on their restored rights of private property, which includes control.

We have to get away from thinking that the State, which should be our servant, is really our all-powerful master.  We need internal controls based on private property that everyone has an interest in enforcing, not increased external controls based on political expedience.

As for the railroad bonds, that is not really unusual to enter into contracts for very long periods of time.  Up until a few centuries ago when land began giving way to other forms of capital, a leasehold could be as long as 999 years.  These days, 99 years is the limit.  A number of those old leases are still in effect in the U.K., where a real estate listing might state, "428 years left on lease."  We have no idea what happens to the land if the original owner's heirs cannot be located, but we have a hunch it reverts to the Crown.  They'd do better setting up a CLB to take over the leases.

#30#

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