[p2p-research] Fwd: Where does the "lost" money go ? can we find it and get it back ?

[Kevin Carson]

> On Tue, Jan 6, 2009 at 3:04 PM, Stan Rhodes <stanleyrhodes at gmail.com> wrote:

 > In case Thomas' reply about credit and monetization wasn't understood,
 > I'll explain that briefly too. "Monetizing debt" means the government
 > borrows money from the Fed and spends it as money.  Essentially, the
 > government is credited Federal Reserve Notes (USDs), with the promise
 > to repay that debt to the Fed Reserve in the future.  The government
 > then puts this money into circulation by spending it.

Even more broadly, the entire money supply is monetized debt, because
any increase in the money supply is lent into existence by the banks.
The government increases reserve requirements, or deposits more
reserves, which increases the total amount of loans banks are able to
issue.

I'm no social crediter.  I'd much prefer a free market money system
organized around LETS and the kinds of mutual credit that William
Greene and Benjamin Tucker described.  But social credit is certainly
no more statist than the present system, and would be far less
oppressive.  If I have to choose between kinds of statism, I prefer
the kind that weighs less heavily on my neck.

What we have is a fiat money system that creates money out of thin
air.  The government increases the money supply by increasing the
amount of money banks are permitted to lend from existing reserves; as
such, the increased lending does not come at the cost of any sacrifice
on their part.  For them, it's free money that they pick off the tree
and then lend out at interest.

So if we're going to create money out of thin air, why not do it either through
1) the Greenback system, where the government simply spends the money
into existence interest-free; or
2) the social credit system, where the money is deposited into
existence interest-free in citizen bank accounts?

 > The concept of money created from credit is simple enough in concept.
 > Think of 3 people on an island that use IOUs with each other.  One
 > harvests coconuts, another fishes, and another makes sandals.  Let's
 > assume they value fishes and coconuts the same, but sandals are worth
 > about 10 fishes or coconuts.  We can see how credit (IOUs which are
 > money) flows:
 > 1. The coconut gal needs sandals, so she "buys" a pair from the sandal
 > guy by writing him a 10-coconut IOU.
 > 2. The sandal guy needs some fish, so he gives the fish dude the IOU
 > for 10 coconuts in exchange for 10 fish.
 > 3. Later that day, the fish dude brings the IOU to the coconut gal and
 > gets 10 coconuts.  The gal destroys the IOU.
 > The cycle of credit has come full-circle.

 > You may be asking "why do we need the Fed Reserve to create money and
 > lend it to us?"  Good question, but that's another very long
 > discussion, one that I think begins with "In theory, we really don't
 > need them to, because we could do it ourselves..."

The classical political economists' old "wage fund" idea of capital,
which heavily influenced Jevons' and Bohm-Bawerk's pro-interest and
pro-profit apologetic, was that the capitalist performs a service by
allowing the worker to transform his future into purchasing power,
paying him before the work is done.

But Thomas Hodgskin (a free market liberal classed among the Ricardian
socialists) argued that this function could be carried out directly by
the workers themselves, for each other.  He argued that there is, in
fact, no accumulation of capital from past "abstention," no pile of
previously produced goods out of which the workers are fed until they
complete the new cycle of production.  Rather, the capitalist's money
pays wages with which they can purchase the *current* food, clothing,
and other output of other workers.  The "wage fund" is actually a
claim on current production.  As Thomas Hodgskin argued (and I think
Alfred Marshall made the same point somewhere in Principles of
Economics), the same function could be performed by a mutual credit or
barter system organized by the workers directly for themselves,
advancing their current product to each other against the other's
future product.  The capitalist, Hodgskin argued, has preempted the
process so that the workers are no longer able to deal with each other
directly, but must rely on him as an intermediary--a service for which
he charges a monopoly price.

-- 
Kevin Carson
Mutualist Blog:  Free Market Anti-Capitalism
http://mutualist.blogspot.com
Studies in Mutualist Political Economy
http://www.mutualist.org/id47.html
Anarchist Organization Theory Project
http://mutualist.blogspot.com/2005/12/studies-in-anarchist-theory-of.html