THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Tuesday, May 17, 2016

Reforming the System

We do get the most interesting comments on occasion, especially from people who have only skimmed through what we’ve written or just glanced at the title or the conclusion.  That seems to be the source . . . excuse me, sourse, of the following comment we got a week or so ago in response to a piece on the role of the central bank in economic development (spelling and punctuation unchanged):
“The stock market wallstreet will have to be heavily reformed so it can be a benifit to business and not a sourse of destabilization. Of course abolishing the federal reserve and having a debt free govt created money will also be necessary for a healthy economy.”
Stock market "investing" is a rich man's game.
This was actually something of a softball pitch . . . metaphorically speaking.  If you’ve ever seen a real softball game, there’s nothing soft about it.  Those players are out for blood.
Anyway, it’s a bit ironic that somebody thinks the solution to the problems of the financial system can be solved by reforming Wall Street and abolishing the central bank.  Both moves would be of great benefit to the current power structure and ensure that financial and economic power remain right where they are.
To begin, the stock market is of benefit only to those businesses engaged in buying and selling existing debt and equity, that is, of existing owners, people who are in the main already rich or they wouldn’t have the wherewithal to buy and sell on Wall Street.  The stock market is, essentially, a “second hand shop.”  It is a great convenience in transferring ownership among people with money and ownership, but does nothing to create new ownership and money.
That’s the job of the central bank.  A central bank can and must play a key role in a program geared toward creating new ownership.  This is because a central bank (if properly used) has the task of providing an elastic, uniform, and stable reserve currency into which all other forms of money can be converted.  This ensures an adequate money supply and, if properly done by monetizing existing and future marketable goods and services, creates an asset-backed currency with a stable and uniform value.
Charles I circumventing parliament.
Frankly, money creation is not something you want government involved in, although government has an essential role in setting standards.  Giving government the power to create money (“emit bills of credit”) is the same as giving politicians a blank check, and freeing them from dependence on the citizens.  This is such a key issue that when parliament caught Charles I, one of the reasons they cut off his head was that he had figured out a way to govern the country without relying on the taxes raised by parliament — borrow money from his supporters or other countries . . . thereby putting himself in the lenders’ power.
According to Henry C. Adams in his book Public Debts: An Essay in the Science of Finance (1898), the surest way for a country or government to lose its sovereignty is to get into debt.  The best that can happen is that the financial powers of a country will end up running the country; as Baron Rothschild is alleged to have said, “Give me power over money and credit and I care not who makes the laws.”
"Dude, I totally remember paying you."
And make no mistake: there is no such thing as “debt free money” in the sense some people demand it.  Money is not, and can never be (except in a purely socialist State) a “non-repayable debt the nation owes itself.”  Even if money were a “non-repayable debt” that a country owes itself (a concept completely demolished by Dr. Harold G. Moulton in his 1943 pamphlet, The New Philosophy of Public Debt (Washington, DC: The Brookings Institution), what about the debt that is held by other countries and non-citizens?  How long do you think a creditor is going to be put off by, “Hey, Dude, we don’t have to make good on that debt because it’s non-repayable, and we don’t owe it to you, but to ourselves!”  “The check’s in the mail” would go over better.
As for a government not paying debts owed to its own citizens, how long before people realize what’s going on and either vote the current crop of politicians out of office, or start decorating the town lampposts?  All money is a contract, a promise — a “debt.”  If a government intentionally makes promises on which it has no intention of making good, how long is that government going to last?  And how long will people try to carry out transactions by negotiating worthless promises?
“Hey, Dude, gimmie a couple of loaves of bread and a gallon of milk in exchange for these worthless promises.”  Chances are nobody in his or her right mind would take that deal.
No, having the government take over money creation and back its promises with meaningless promises to deliver is not a good idea — unless you’re trying to cause total chaos.