A First Impression

In recent comments, Piet directs me to Thomas H. Greco, Jr.'s ReinventingMoney site, where one finds the "Documents of Ulrich von Beckerath," including Must Full Employment Cost Money?, wherein Joern Manfred Zube provides introductory remarks and the text of Beckerath's work.

Beckerath directs us to Milhaud in a statement that caught my eye --

Milhaud's system of purchasing certificates offers the possibility of resuming the full activities of State concerns which had to be curtailed because of the depression, as well as those of private concerns.

[from page 119 of the "Full Employment" file]

This chain of writers is all new to me, so we are dealing with first impressions here. Trying to pull out bits of Beckerath and understand bits of Milhaud. Here is a bit, from page 121 of the file:

With regard to Milhaud's purchasing certificates, Zander's railway money, and Treasury paper money which is irredeemable and not legal tender, and which maybe also freely discounted, the following problem still awaits solution: How much of the credits created by orders placed, by monopolies, or by taxation may be utilized for the payment of expenses, without the fractionalized parts of these assets i.e., the purchasing certificates, the railway money, the State paper money being exposed to a discount in the open market?

The theory on the subject is likely to be discussed for some time yet, although the problem is essentially no other than that of the time validity of the bills discounted by the banks of issue, a topic often dealt with in the older bank literature. The practical aspect is simple: when the market value of the certificates on three consecutive stock exchange days stands at 99% or lower, then the limit is passed and a suspension of issues should ensue.

Milhaud's goal is to assure that the economy has enough money so that money is not an obstacle to economic performance. Naturally, one of the problems with providing enough money is that inflation is a likely outcome. Beckerath suggests a way to identify the onset of inflation and prevent it by "suspension of issues."

First impression: Sure, but "suspension of issues" sounds to me like the way to create an insufficient quantity of money.

Probably when Milhaud and Beckerath were writing, we were still on a gold standard. The gold standard would have been a way to limit the quantity of money and assure insufficiency of the money supply. We don't have that trouble now. Now we have monetary policy to manage the quantity of money.

Nonetheless, we have today a condition similar to that which concerned Milhaus and Beckerath: We have a quantity of money inadequate for the needs of the economy. We don't even have enough money to keep in good standing on our debt.

People say we have too much money and the price level is evidence of it. Okay. Let's take that as true. Nonetheless, we don't have enough money to keep in good standing on our debt. If both those things are true, it must be the case that we have too much debt. But debt is nothing other than the measure of credit in use. So if we have too much debt, we must have too much credit in use.

Except for the cost of it, "credit in use" is indistinguishable from "money." Other people say we have too much money. I say we have too much credit in use. It is not "money" that has caused inflation in our lifetime, but the use of credit.

In our economy, as I see it, "suspension of issues" of money can do nothing to prevent inflation, because inflation in our time is caused by the excessive reliance on credit. Not by the printing of money. Policymakers were very careful not to print too much money. But they encouraged the use of credit.

The problem that most concerns me is the ratio or imbalance between money and debt, or between money and credit in use. I don't know how this fits in with Beckerath and Milhaud. But I know that in our time people simply sweep this problem under the rug by insisting that money and credit and the same. They are not the same. Credit is distinguished by the cost of interest.


We have (on the one hand) the problem of insufficiency, which is dealt with by a form of printing money. And we have (on the other) the problem of excess, which is dealt with by "suspension of issues."

There is in our time insufficiency and excess at once. But it cannot be that there is both too much and too little money. It can only be that there is too much of the money-substitute, credit in use, relative to the quantity of money itself.