The U.S. government “shut down” represents a serious danger to Modern Monetary Theory, or “MMT,” as it is called. MMT, based solidly on the “Chartalism” of Georg Friedrich Knapp through the virtual global hegemony of Keynesian economics, relies on government creation of all money. Chartalism is based on the “currency principle,” which in part assumes that “money” consists solely of or represents a claim on the present value of existing wealth.
In binary economics, of course, with its reliance on the “banking principle,” which (again in part) assumes that “money” consists of or represents a claim on the present value of both existing and future wealth, government money creation, while possible, is often not legitimate as government does not create or own the wealth on which it is issuing claims.
Contrary to the assertions of, e.g., Berle and Means, government does not create wealth. Government therefore can only issue claims (“create money”) based on whatever wealth it has been granted by the citizens in the form of taxes already collected. Governments are asking for serious trouble when they create money based on wealth that they hope to collect in the future, i.e., future tax collections — counting your chickens before they’re hatched on a cosmic scale.
The danger to MMT in a government shut down is clear. If, as MMT assumes, only the government can create money, then — obviously — with no medium of exchange (“money”) available, not only government, but all economic activity must eventually shut down. If, however, economic activity continues without constant infusions of new government money, the suspicion will grow that maybe all that stimulus money evidently required by MMT wasn’t so required after all.
What if, consistent with the banking principle, ordinary people have the power to engage in money creation by entering into and honoring contracts based on the wealth they reasonably expect to produce by means of their labor and capital? What if — contrary to the assumption of Keynesian economics — Say’s Law of Markets really does work if people can produce wealth with both labor and capital? What if (as Jean-Baptiste Say claimed) we don’t really purchase what others produce with this thing called “money,” but with what we ourselves produce, and “money” really is just the medium of exchanging wealth and not the wealth itself?
To get to the point where the penny drops, here’s what’s been going on this week:
• Again, the big news is that a short time ago we released Freedom Under God for printing. CESJ is now taking bulk/wholesale orders (please, no individual sales). Until December 31, 2013, the per unit price for 10-99 copies is $16.00 (20% discount), for 100-499 copies is $14.00 (30% discount), for 500-999 copies is $12.00 (40% discount), and for 1,000 or more copies is $10.00 (50% discount). Shipping is extra. Send an e-mail to “publications [at] cesj [dot] org” stating how many copies you want and the street address (no P. O. Boxes) where you want them delivered. We will get back to you with the total cost, how to pay, and estimated delivery time. All payments must be made in advance, and orders are placed only after payment clears.
• CESJ offers a 10% commission on the retail cover price on bulk sales of publications. If you broker a deal with, for example, a school or civic organization that buys a publication in bulk (i.e., ten copies or more of a single title), you receive a commission once a transaction has been completed to the satisfaction of the customer. Thus, if you get your club or school to purchase, say, ten cases of Freedom Under God (280 copies) or any other CESJ or UVM publication, the organization would pay CESJ $3,920.00 (280 copies x $20 per copy, less a 30% discount), plus shipping (the commission is calculated on the retail cost only, not the shipping). You would receive $560.00. Send an e-mail to “publications [at] cesj [dot] org” for copies of flyers of CESJ and UVM publications. (CESJ project participants and UVM shareholders are not eligible for commissions.)
• Since the U.S. government “shut down,” increasing interest has been expressed in CESJ’s counter-proposal to “Obamacare,” the reason usually given for the situation. Since it is never too late to correct a mistake, it might be useful to introduce your legislators to the Just Third Way proposal for universal healthcare that does not rely on government funding or imposing morally repugnant choices on people or institutions. A shorter summary of the proposal is here.
• On Thursday, October 3, 2013, Dr. Norman G. Kurland gave the first lecture in what could develop eventually into “Justice University.” An associate is talking with the University of Notre Dame-Perth (which has an affiliation with the University of Notre Dame in South Bend, Indiana) about possible similar events in the future employing “virtual classroom” technology to span the globe. Administration officials at Georgetown University in Washington, DC, have expressed interest in the concept. It could dramatically lower the cost of quality education everywhere.
• Norman Kurland has had some very interesting discussions with Mr. Bill Still, who has done a great deal of work in the history of money, credit, and banking. Mr. Still’s position, while based on the “currency principle” and not entirely consistent with the “banking principle” approach embodied in binary economics, does have many of the same goals. Future discussions may reveal whether or not there is sufficient common ground to achieve a workable synthesis.
• As of this morning, we have had visitors from 66 different countries and 48 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the United Kingdom, Canada, Australia, and India. The most popular postings this past week were “The Fulton Sheen ‘Guy’,” “Aristotle on Private Property,” “Thomas Hobbes on Private Property,” “Avoiding Monetary Meltdown, II: Salmon P. Chase and the Greenbacks,” and “‘Long Lost’ Book by Fulton Sheen Rediscovered.”
Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we’ll see that it gets into the next “issue.” If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we’ll see it before it goes up.