[Marxism] The Global Economy in Transition September 6. 2003 article

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Most monetary economists view government-issued money as a sovereign debt  
instrument with zero maturity, historically derived from the bill of 
exchange in  free banking. This view is valid for specie money, which is a 
certificate that  can claim on demand a prescribed amount of gold or other 
specie of 
value.  Government-issued fiat money, on the other hand, is not a sovereign 
debt but a  sovereign credit instrument. Sovereign government bonds are 
sovereign debt while  local government bonds are institutional debt, but not 
sovereign debt because  local governments cannot print money. When money buys 
bonds, the transaction  represents credit canceling debt. The relationship 
is rather straightforward,  but of fundamental importance. 
 
If fiat money is not sovereign debt, then the entire conceptual structure  
of capitalism is subject to reordering, just as physics was subject to  
reordering when man's worldview changed with the realization that the earth is  
not stationary nor is it the center of the universe. For one thing, capital  
formation for socially useful development will be exposed as a cruel hoax. 
With  sovereign credit, there is no need for capital formation for socially 
useful  development. For another, private savings are not necessary to 
finance  development, since private savings are not required for the supply of 
sovereign  credit. With sovereign credit, labor should be in perpetual 
shortage, and the  price of labor should constantly rise. A vibrant economy is 
one 
in which there  is labor shortage. Private savings are needed only for 
private investment that  has no social purpose or value. Savings are 
deflationary 
without full  employment, as savings reduces current consumption to provide 
investment to  increase future supply. Say's Law of supply creating its own 
demand is a very  special situation that is operative only under full 
employment. Say's Law  ignores a critical time lag between supply and demand 
that 
can be fatal to a  fast moving modern economy. Savings require interest 
payments, the compounding  of which will regressively make any financial system 
unsustainable. The  religions forbade usury for very practical reasons.
 
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