Keynesian, Edisonian, Fordian, Gellesian Money

["John Gelles" <indexed-savings@xxxxxxxxxxxxx>]

In recent days much progress has been made in this
very small PKT forum in thinking about:

      "Where will the MONEY come from to pay
        for a progressive agenda  (whether you are
        a Democrat, Republican, Green or Indepen-
        dent) ?"

Gelles suggests it should come from radical reform
of money creation, and radical reform of financing
government payment for national needs, to reduce
taxes to where counter-productive effects of taxation
are avoided as much as possible.

Thomas Edison wrote on this subject -- it is worth
re-reading his thoughts.  Of course the history of
such reform efforts goes back to the beginning of
money and credit -- in pre-biblical times, and it is
nicely identified with Abraham Lincoln in modern
times.

===================================

Edison speaks in the New York Times in 1921:


Thomas Edison made it plain in the following excerpt
from The New York Times, December 6, 1921 issue
("Ford Sees Wealth In Muscle Shoals").

Here, the reporter is quoting Edison:

"That is to say, under the old way any time we wish to
add to the national wealth we are compelled to add to
the national debt.

"Now, that is what Henry Ford wants to prevent.
He thinks it is stupid, and so do I, that for the loan
of $30,000,000 of their own money the people
of the United States should be compelled to
pay $66,000,000 -- that is what it amounts to, with
interest.

"People who will not turn a shovelful of dirt nor
contribute a pound of material will collect more
money from the United States than will the people
who supply the material and do the work. That is
the terrible thing about interest. In all our great
bond issues the interest is always greater than the
principal. All of the great public works cost more
than twice the actual cost, on that account.

"Under the present system of doing business we
simply add 120 to 150 per cent, to the stated cost.

"But here is the point:

            If our nation can issue a dollar bond,
            it can issue a dollar bill.

    The element that makes the bond good makes the
    bill good. The difference between the bond and
    the bill is that the bond lets the money brokers
    collect twice the amount of the bond and an
    additional 20 per cent, whereas the currency pays
    nobody but those who directly contribute to
    Muscle Shoals in some useful way.

" ... if the Government issues currency, it provides
itself with enough money to increase the national
wealth at Muscles Shoals without disturbing the
business of the rest of the country. And in doing
this it increases its income without adding a penny
to its debt.

"It is absurd to say that our country can issue
    $30,000,000 in bonds and not $30,000,000
    in currency.

    Both are promises to pay; but one promise
    fattens the usurer, and the other helps the
    people.

"If the currency issued by the Government were no
good, then the bonds issued would be no good either.
It is a terrible situation when the Government, to
increase the national wealth, must go into debt and
submit to ruinous interest charges at the hands of
men who control the fictitious values of gold.

"Look at it another way. If the Government issues
bonds, the brokers will sell them. The bonds will be
negotiable; they will be considered as gilt edged
paper.
        Why? Because the government is behind them,
        but who is behind the Government? The people.
        Therefore it is the people who constitute the basis
        of Government credit.

"Why then cannot the people have the benefit of their
own gilt-edged credit by receiving non-interest bearing
currency on Muscle Shoals, instead of the bankers
receiving the benefit of the people's credit in interest-
bearing bonds?"
------------------------------------------------------
    The above NY Times article is from:
    PROSPERITY: Freedom from Debt Slavery
    A 4 page journal which examines these issues
    every month. PROSPERITY is edited and
    published by Alistair McConnachie
    admcc@xxxxxxxxxxxxxxxxxxxxx
    www.ProsperityUK.com

=======  End Edison =================

Now Gelles knows there is a line between money
crankery and legitimate reform of political economy.

But scholars must be careful.  Bill Mitchell pursues
price coordinate patterns to create modern models
to simulate and predict simulated scenarios and
future outcomes. Yet he knows prices do not reflect
reliable measures of physical logistical facts. He
knows the risk of garbage in and garbage out when
we want to put real food on real tables everywhere.

I do not dismiss econometrics. Neither do I dismiss
capitalists in 1921 who made electricity and built
cars using vast organizations and thousands of
working minds and hands. They and Lincoln were
on to something when they imagined (and acted
in Lincoln's case) that nations desperate for money
could do as Ben Bernanke says we can do today:

        use zero-interest or low-interest money to
        prevent deflation and, by implication, fight
        terrorism, fascism, want, unemployment,
        and all things we must and can fight with
        money for as long as money works.

The issue is will money work when there are
more jobs than people to fill them? Will people
work with mind and body as hard as they do today
without the stick of poverty to drive them?

If we assume the worst -- that people will loaf
and we will have no more doctors or police --
that still will not mean Edison is wrong.

        It will only mean that AFTER WE  add
        debt-free money to a mix of  commercial
        banknotes and  debt-free Government Issue
        (GI) money, we will have to add carrots,
        like honors, and sticks, like shaming,
        to change loafers into players.

In time the workaholic inventors will create so
many robots and automated systems that work will
become a privilege, not a burden, as it is to me in
retirement.

In looking at other potential errors in these matters
I refer to William Hummel's recent post:

========= Hummel follows below =========

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.

       [INTERJECT: Coin carries no promise, implied
        or direct, to hold its value in things that money
        can buy.  DFTF money is indexed for inflation
        and carries the promise of government to manage
        the money system to work all the time. The
        promise is as good as the Bill of Rights. Not
        absolutely perfect -- but good enough for the
        likes of we ordinary people.]
...

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.

       [INTERJECT:  Ben Franklin's TF money in the
        colony of Pennsylvania before the Revolution
        worked perfectly as IOU's.   Moreover, my
        DFTF money reserves the power to tax
        whenever necessary -- which will be from
        time to time.   While taxes are not necessary,
        it will facilitate growth like we've had in
        high tech industries, agriculture and medicine.]

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.

       [INTERJECT:  My DFTF money would only
         add to said base -- bank credit would not
         change, nor would it be restricted. Banks
         would still use a partial reserve system and
         would still create Central Bank controlled
         money out of nothing.  DFTF money would
         be used only by government when it ended the
         national debt, perhaps slowly, and ended tax
         collection fast.

        The model for DFTF money is more or
        less the same as Edison describes and as
        is used in the Channel Islands (albeit they
        most likely use a controller of the currency
        instead of a central bank to monitor
        commercial banks and their license to
        create more money.)]

William F Hummel