The Wages Of Sin/The Sin Of Wages- Be Sure Your Sins Will Find You Out Part 1

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Cash- One Piece @ a Time

Here at the United States of Everywhere I have argued that we are transitioning into an economic system where private institutions are able to issue their own money. I have argued that this Democratisation of Money will increase in scope and depth until it has transformed property rights and the fundamentals of Capitalism, as we have known them. It will be an enlightening thought experiment to imagine a world where this process is taken to its logical conclusion- a world where everyone issues and uses their own individual currency.

 

In this world everybody would be trading, (that is exchanging whatever they had to offer for goods and services), on entirely individual terms. Since most people only have their individual labour to sell, this would mean people exchanging work for goods and services completely outside any collective social context. This would be a neo Liberal dream. This would by Ayn Rand’s idea of Heaven.

Of course it would never be possible for everyone to actually issue his or her own currency would it? You probably have a vague feeling that such an economic system would be far too complicated and open to fraud. Except of course that if you think about it for all intents and purposes fraud would be impossible because all the mechanisms that make fraud possible would be absent…

 

Ok that might be too far to go in one leap; lets take a step back for a moment. What would living by your very own currency mean in the simplest instance?

Since this is Ayn Rands dream I will put one of her ‘characters’ to some use as an illustration. John Galt is our protagonist with the GALTHALER as a personal currency to trade with. Now John Galt will buy and sell stuff based on… the value of John Galt, or more precisely the value of Johns ability to create wealth. This value is formalised in the individual currency that John issues. It is important to note that this, or any other currency is NOT A GUARANTEE THAT THE ISSUER WILL PAY DEBTS. It is a formal description of the ability to pay debts SHOULD THE ISSUER SO CHOOSE.

 

This is what the Federal Reserve, the Bank of England and every central bank does. Capitalist central banks are formally independent- they have no wealth creating value of their own (or at least they didn’t used to have…) But backing central banks like these is the force and authority of the respective governments that created them. Modern governmental authority based on Germanic Land Democracy is precisely the authority to create wealth.

 

Back to our prospective trading partner deciding whether or not to deal with John. This partner will need some criteria on which to do so. In the remote past there were considerations of culture, family, religion etc that all operated as bona fides for any prospective trade partner. But in a modern culture that isn’t going to work, at least in the practical short term, so we are going to need something else. That something else would be the business history of the person we are dealing with.

 

Is this starting to ring any bells yet? Let me elaborate:

  • The business history of John Galt is not just a collection of anecdotes about what this or that person did or did not do. It is a record of whether they kept to the terms of previous contractual arrangements they entered into.
  • It is also a record of what commitments they have presently that might prevent them fulfilling any future contract
  • In essence, it is a record of whether it likely to be profitable to do business with them as compared to the risk of doing business with them.
  • As you might have already guessed, it is essentially a credit history,

 

If John Galt wants to exchange his GALTAHLER for a weeks groceries from the corner shop, he would effectively be asking the shopkeeper for CREDIT; this is exactly what happens in international trade between sovereign nations. John and the shop owner are acting as sovereign entities. After the transaction in our example the shopkeeper has a debit on his book for the value of a weeks groceries but he has the GALTHALER to redeem against John Galts labour at a future date (or alternatively to exchange with anyone that will take them).

 

Is the note that the shopkeeper received from John Galt the same as a credit note? No, because a credit note is denominated in another, usually a national currency. There is no sovereign freedom implied in a credit note.

 

Clearly there is risk for the shopkeeper in this agreement and that risk implies a premium. That premium is the additional incentive the shop owner requires to be incentivised to do business with John. It is the effective exchange rate between GALTHALER and SHOPPOUNDS (the shopkeepers own currency).

 

If John Galt has a bad credit history, the corner shop will either refuse to do business with him, (not accept GALTHALER in payment), or will charge John extra over an above the cost of the groceries in SHOPOUNDS to make it worth the shopkeepers while to take the risk.. The difference, or ratio of difference is the exchange rate between GALTHALER and SHOPPOUNDS.

 

It is important to remember that since this is a credit agreement, its value changes over time, in the same way that a credit agreement is serviced by making payments over time. The value of these payments is a function of time and a function of risk. To simplify, the longer a borrower makes the payments on time, the less risky (and therefore more valuable), those payments are.

 

We have clarified the relationship between trade, currency, credit and risk. In the light of this we can look at state money again

 

First of all the term state money is somewhat misleading. Modern capitalist economies don’t have a currency issued by the government. That would be a COMMON CURRENCY, which we are given to understand that would cause all kinds of problems..(And so it would, but not for us!) We have a currency issued and controlled by private entities under the supervision of the state.

 

But that is not to say that state money does not have real benefits. I have explained how issuing and dealing with your personalised currency would require an additional premium to be paid. State issued money pools the individual risks that each individual has and at the same time collateralises their collective wealth creating ability. It is this pooling of risk that precisely defines money in relation to credit. This in turn allows the development of collective capital, which accrues to the value of state money.

 

Put simply in the same way that collective bargaining allows a group discount on buying goods and services, collective – national buying allows a group discount to be obtained on credit. But not just on nation to nation trade; on every single transaction within a nation state.

 

Where does this discount go? It goes to the user of a state currency individually. But more importantly some of it goes to the currency itself. The currency appreciates in value. This is a virtuous circle. The more the currency appreciates in value the more useful it is to an individual to use it. And when the individual uses it more, it appreciates in value. VOILA!

 

Once you understand this, you start to appreciate that every specific credit agreement effectively steals a portion of this collective wealth. Every time a financial institution signs a credit agreement with a person in Alabama they are effectively stealing a portion of the value of a dollar spent in New York. This is private institutions given the legal right to tax the labour of the nation!

 

‘But no nation would willingly agree to this!’ I hear you cry.

 

And you are right, no nation ever would. So the nation will never be collectively approached with this iniquitous proposition.

 

INSTEAD THEY WILL SIGN THE NATION UP FOR THIS TAXATION, ONE PERSON AT A TIME THROUGH CREDIT AGREEMENTS!

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