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John G Rawson kindly replied to my original note
requesting help in getting a grip on what Social Credit people mean by very
basic expressions such as 'money', 'issuing money', 'credit' and 'issuing
credit'.
Thanks for your response John. Hoever, the
definitions of M1 - M5 merely illustrate my plight. Each of M1 - M5
defines a subset of the global zero-sum network of 'owed-wealth'. For
example, it seems to me that each item of cash/M0 reflects a debt owed by the
issuer to the bearer. However, the distinctions are
purely-administrative. I cannot see any
economically-significant characteristic to distinguish
between M1 - M5 and all of the other owed-wealth
administered in the form of gilts, bonds, payables,
receivables, bank current accounts, bank deposit accounts, bank mortgage
accounts, credit card debts, personal loans, etc., etc., etc.. In
particular:
- Banks do not 'create money' or 'create credit' 'out of
thin air' when they process a payment transaction. A typical non-cash
payment results in a closed circle of zero-sum double-entry postings:
- The bank credits the payee and debits the
payer.
- The payer credits the bank and debits the payee (in a
payables account).
- The payee credits the payer (in a receivables account)
and debits the bank
- States and other 'issuers of cash/money' do not 'create
money' or 'create credit' 'out of thin air' when they do so. A typical
cash payment by an issuer results in a closed circle of zero-sum
double-entry postings:
- The issuer credits its cash account (reflecting an
increased cash liability) and debits the new holder (in a payables
account).
- The new holder credits the issuer (in a receivables
account) and debits its cash account (reflecting an increased cash
asset).
In neither case is wealth created or destroyed 'out
of thin air'.
In addition, it seems to me that one cannot have
'debt-free' money. One cannot have an economic instrument which the
'holder' (for cash money) considers to be an asset but which the 'issuer' denies
as a liability! That is the sort of economic wishful thinking
which has brought so many third world and communist countries to the brink of
economic despair!
I therefore cannot understand what point Social Crediters
are trying to make when they appear to make great play of the distinction
between 'money' and 'non-money', 'credit' and non-credit' owed-wealth.
Surely, the only economically-significant factor here is
the net owed-wealth position of each economic agent
(i.e. assets minus liabilities). The grand total (of course) is
zero. For each debt, there is a borrower and a lender within the same
economic system (and indeed, 'within' the same currency). This argument
applies equally to states. The only
economically-significant factor here is the
net owed-wealth position of each state (i.e. the
national debt). I cannot see any economic
significance to the breakdown of how that national debt is administered (in the
form of cash issued, gilts issued, overdrafts at banks etc.).
It seems to me that the the
global zero-sum network of owed-wealth is (or ought to be)
simply a zero-sum book-keeping exercise which ‘keeps the score’ on where we are
in our non-barter trading and employment activity. Those who have sold more than they have
bought accumulate a net positive balance, and those who have bought more than
they have sold accumulate a net negative balance. The grand total (of course) is
zero.
The
zero-sum network of owed-wealth is a little bit like the matrix recording ‘goals
for’ and ‘goals against’ in a football league. Teams which score more than they concede
accumulate a positive net total, and vice versa. The grand total (of course) is
zero. One can have a legitimate
debate about the makeup of the governing body, the rules of the game, the skills
of the players, and even the eyesight of the referee. These factors are all legitimate and
fundamental parts of the game. The
score, however, is simply a matter of passive objective recording (don’t shoot
the messenger!).
Similarly, in economic matters, one can have a legitimate discussion
about market forces, economic incentives, business ethics, business law,
business practices, tax policy, and even the even-handedness of the
regulators. These factors are all
legitimate and fundamental parts of the economic game. The score however (i.e. the zero-sum
network of owed-wealth) is simply a matter of passive objective recording (don’t
shoot the messenger!).
If Social Crediters believe that there is a worthwhile
economic distinction to be made between ‘money’ and
‘non-money’, 'credit' and 'non-credit' wealth and transactions, perhaps someone
could point me to a suitable exposition of that distinction.
I have taken the liberty of attaching a
paper which provides a more coherent and substantial exposition of my own
position. Comments (maybe highlighting the errors in my thinking) would be
very welcome.
Best Wishes
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