Re: servant, not master

["William B. Ryan" <william_b_ryan@xxxxxxxxx>]

I have inserted some comments [comment] below.
--

Date:  	Wed, 28 Jan 2004 16:08:15 -0500
From:  	Keith Wilde <kwilde@xxxxxxxxxxxx>

This is illuminating, but I am still missing some details of
interpretation.  When you say

>A Social Credit government would print money and pay
>it out as dividends.  The problem of concentrating
>power in government through unlimited spending power
>is thereby avoided.

am I right to infer that while it is the government that would be issuing
the money, the government would not be permitted to issue money to itself
or to use its money printing power to spend on projects of its own choosing?
------------------------------------------
[comment] As a general matter the answer is yes.
There would be exception to this general principle
during times of emergency.  The government of the
United States effectively printed money and spent it
during the Second World War in prodigious quantities.
Normally, the Fed purchases securities - since the
1930s exclusively federal government securities - not
directly from government but through private dealers
in the so-called "open market."  During the war the
Fed purchased special issue low coupon (virtual zero
interest) securities directly from the government,
crediting its checking account, in whatever amounts
the government needed to fund its operations.  At the
same time the commercial banks were required to
purchase a like number of special issue securities
directly from government, mopping up the reserves
that would have otherwise fueled inflation.  The
release of those funds into the economy gradually
over the next three decades as the securities matured
set the stage for post war American prosperity and
dominance.
--

Furthermore, that it would be a responsibility of the government to make
the calculations that determine how much new money need be issued to close
the gap in spending power?
------------------------------------------
[comment] Yes, meaning the credit authority.
--

And would it be more accurate to say "non-rationality" below, to describe a
situation where the supply of money is not really coordinated in any
deliberate fashion with need?
------------------------------------------
[comment] Surely there is a subtle difference in
meaning between the prefixes "ir" and "non" that is
too subtle for me at the moment to bother with.  Free
coinage within the context of the times (the late
nineteenth century) made a great deal of sense.
Silver was and is readily available.  Much silver
remains in the ground that is easily mined.  It was a
simple way of holding down interest rates and
combating the monopoly of credit that didn't require
a great deal of sophisticated thinking or planning.
Debtors could take silver to the mint for coining
into legal tender.  It was a source of money
independent of the banks that the banks were required
to accept.
--

> Also avoided is the
>irrationality of free coinage in satisfying the needs
>of trade and commerce in a closed system of finance.
>

IN the next paragraph, when you affirm that the Fed should be formally
recognized as a fourth branch of government, I assume that means that the
central bank should be the agency charged with maintaining the national
money supply in a steady way that is in harmony with Friedman's preference
for rules over authority?  It would keep the data banks and make the
determination of how much new money should be paid out as dividends?
------------------------------------------
[comment] I wouldn't waste much political capital on
amending the Constitution in this regard.  As I said,
it already is effectively the fourth branch of
government.  The important thing is for all of us -
including the financiers - to recognize that finance
is servant, not master.  It is important that the
financial sector recognizes its responsibility in
this regard.
--

Then the other branches of government would be funded out of taxes, but
there would be no need for distributive functions?
------------------------------------------
[comment] The mandate of the credit authority is not
redistribution.  Redistribution - social programs in
general - are political matters for the politicians
to resolve through the ordinary channels available to
them in a free society.  They will not ordinarily
have an open checkbook at the credit authority.  The
credit authority must be independent in the manner
that the judiciary is independent.




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