Last Thursday we
looked at the reason why Keynesian economics divides the science into “micro”
and “macro”: to justify crazy stuff that no one with any common sense would
accept if it wasn’t presented to him or her by people hiding their pointy heads
behind Ph.D.s . . . which could easily stand for, “Pointy-headed Dunces.”
 |
| "I'm a politician. It's what I do." |
Why, specifically? So that politicians have a good, “scientific”
reason for spending as much as they can get away with, and going into
astronomical amounts of debt that they keep chanting they don’t have to repay
or we wouldn’t have a money supply.
None of this nuttiness
could be reconciled if the micro level and the macro level weren’t artificially
separated. Nor does Keynesian economics
allow for any reconciliation; the Keynesian system absolutely requires
acceptance of fundamental contradictions if it is to be maintained.
. . . which, of
course, violates the first principle of reason, the “law of contradiction”:
nothing can both be and not be at the same time under the same
conditions. (Unless you’re a Keynesian
economist, evidently. . . .)
There is good
news, however. Binary economics is not based
on the Currency Principle, but on the Banking Principle. And what is the Banking Principle?
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| Henry Thornton, Banking Principle |
Most simply put,
the Banking Principle is that the velocity of money, the price level, and the number
of transactions determine the amount of money in the economy, not the other way
around, as the Currency Principle has it.
That’s because under the Banking Principle, money is anything — anything — that can be used in
settlement of a debt, that is, to carry out a transaction.
That means that
under the Banking Principle there is never anything like a shortage of
money. Or a surplus. Everything else being equal, there should
always be exactly enough money in the economy to carry out all
transactions. Given that every consumer
is a producer, and every producer is a consumer, supply will equal demand, and
demand will equal supply.
If something can
be put into a contract, it can be money.
If one form of money isn’t satisfactory or acceptable in a particularly
transaction, well, take your money (called a mortgage or bill of exchange) to a
commercial bank, and have it converted into currency or a currency substitute
that is acceptable, and use that in the transaction.
 |
| "Ditch the beef. I'll have kitty kebob." |
That is, in fact,
why commercial banking was invented. I
have chickens, and you have hogs. I want
hogs, but you don’t want chickens.
Instead, you want cows, but the guy with cows doesn’t want hogs but
apples . . . but the apple guy doesn’t want cows. . . .
What do we do? Easy.
We go down to the commercial bank and trade a contract for future
delivery of chickens, hogs, cows, apples, . . . whatever . . . for the bank’s
promissory note denominated in “dollars,” an arbitrary unit with a fixed value
that we have all agreed upon as a measure of value. The bank issues banknotes or creates demand
deposits backed by the promissory note (which is backed by our promises to
deliver chickens, hogs, cows, and apples — or cats), and we carry out our transactions
using “dollars” instead of actual chickens, hogs, cows, or apples (or cats). When our contracts are due and payable, we
either hand over the chickens, hogs, cows, or apples that the contract
obligates us for, or (if the contract so provides) other “dollars” that equal
the value of what we were to deliver.
If it’s that
easy, then why would governments insist that there is a difference between the
micro and macro levels? Why do you
think? It gives the politicians all the
excuse they need to spend money, and go into debt without limit. If it weren’t for Keynesian economics,
governments might actually have to limit their spending to what they could
collect in taxes or borrow from other people’s savings, not to the amount of
debt they could force on the economy before people caught on to the scam.
The bottom line
here — and to bring it full circle back to legitimate sausage making (not the
unpalatable hash that Keynesian economics has made of virtually everything) —
there is no real difference between micro and macro economics, any more than
there is between micro and macro production.
Small is not beautiful any more than big is bodacious. It’s whatever fits the circumstances best in
the most optimal fashion.
Do you want
sausage customized to your particular taste that you don’t have to spend an arm
and a leg getting? Do you want
production and consumption to be in balance with all of the guesswork
removed? Do you want to be in control of
your own life?
Try looking into
the Just Third Way. You might be
pleasantly surprised.
#30#
