Re: Affordable Consumer Price. Affordable National Programs

[William F Hummel <wfhummel@xxxxxxxxxxx>]

In trying to understand John's views on a debt-free money system, the
closest example I can think of is one in which money consists only of
full-bodied coin.  That means the purchasing power of the metal itself
equals the face value of the coin, in which case the coin is an asset
for the holder and a liability for no one - pure Gellesian money.  I
will not attempt to explain how such a state of affairs would come
about or how it could be sustained.

Now if a nation operated solely on such full-bodied coins or the
certificates representing them, no one would be in debt.  If that is
the goal, then the fractional reserve banking would have to be
outlawed because it creates "debt money".  As for the government, it
would have to acquire money through the services it performs for the
private sector, essentially competing with private enterprise.  There
would be no government debt.

Note that this is not a fiat money system, or a naked fiat money
system.  There is simply no way that fiat money can be made "debt
free."  When someone accepts intrinsically worthless fiat money in
exchange for goods and services, he willy-nilly becomes a creditor.
The issuer of the fiat money is the debtor.  That raises the question
of why anyone would accept intrinsically worthless fiat money.  The
answer of course is that the public needs that money for some reason,
and that points directly at the power of government to levy taxes in
its own fiat money.

Credit and its counterpart, debt, is the lifeblood of a modern day
economy.  The amount and quality of credit market debt is a measure of
the size and vitality of a nation's economy.  All credit rests like an
inverted pyramid on a small foundation of fiat money known as the
monetary base.  The implicit assumption is that credit market debt is
convertible at maturity into base money.  However base money is only
the foundation, and not what the private sector economy runs on.

William F Hummel