Tuesday, February 22, 2011

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.

11 comments:

Anonymous said...

very interesting take... though I would think that risk assessment is the underlying issue... as seen through interest rates.

The Arthurian said...

Thanks, Anon. I was grinnin' all afternoon. Now, let me fall back to my "hobbyist" identity and say I'm not sure what you mean by this:

I would think that risk assessment is the underlying issue... as seen through interest rates.

I think you are saying that if we really had that much debt, then interest rates would have been higher. But obviously, we did have all that debt. So, I have to say I do not understand your evaluation of my remarks. Can ya help me out? Thanks again for the kind word.

piet said...

"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."

Apart from the gold aspect, there was also the Real Bill Doctrine thing. Nowadays uphelp by Antal Fekete (quite active little bugger .. but not a 'pure' ((gold))bugger, for said reason). He follows a correspondent and friend of Beckerath's in that, Heinrich Rittershausen, one of the writers in the (letters braiding) letter 'chain'.

Credit on deliverables (far of as yet in either time or space or both) carries, justifies and determines the price of it (risk/credit). A matter of dependability in stability (contract realism (('commitability'?)) and long 'termitude' both and/or as one)

credit as digits have got cheaper to make, store and manage .. but also to mask and disguise .. .to where the credit on credit fractality got away on a run(way). It's like the water-rights conundrum, ever more pressing under monocultural desertification.

dustpiles are the physical equivalent of credit (coin of the realm stored sky high but nobody willing and able to take and feed it into a growing season someplace. Also easier to make, also thanks to technology.

I often, very often make light of rockdust (helping rocks inner life unfold and bloom, bring it to lite and lite to it, now let me rephrase your last sentence and turn my usual advocacy around:
The credit pile up slicing and dicing the underlying value, trying to chip and chisel rivravrevenues, out of control in and as the aftershock of the dotcom cheapchipitude, functions as if it's a great big crushing weight bent on size reduction like all self respecting rock grinder is actually not conceived to fight deserts.

Imagine rockdust in such suffocating quantities that it does not fight but cause desertification, turning even green environs into a desert and you are on your way to imagine what credit without the Real Bill doctrine (that preciously life-like time-limit/runtime built in) look like. Happy mirroring.

pensievepiet said...

The credit pile up .. 'functions' ... i mean it sorta fractionates already fractional reserves .. that runaway thing again ... (bent on size reduction like all self respecting rock grinder), matter of (personal) f(in esse)act, i even doubt it was ever conceived to fight deserts. More likely is that giving credit a nice new respectable status (from real estate to national and international expanses of territory .. euro anybody?) is kinda the bait our speculator class will come fishing with, and like all too great big ballgames, it will just end up being poured into Military swallow wallow elopevelopment dontcha thunk?

piet said...

...will come fishing with....

will go fishing for and at galactic turnoveround speed come fishing with ... they want a more respectable victim this time, cause they aint cheap you know.

hope my little moniker experiment did not confuse you

piet said...

about that pile up .. it's a roll-over which the RBD cuts off at source since it sports, feature and can proudly boast of realistic term limits, so credit pile up indicates and is a measure of .. criminality, shirkage and betrayal. i credit it with incredi(tab)bility. In light of the dust analogy, how could you justify rolling over and postponing the mineral content of your produce? Vitality and nutritional value is needed now, not to be postponed.

piet said...

risk assessment in newspeak is of course threat level
and interest is directly linked to ratings and eyeballin(g/k)s caught, in turn directly correlated to ad revenue which in itself is a world wide agency raising and pro(t/j)ecting their pet prejudice. Hollywood at large. The 'A-me-rican is the jew homeopath(et)ically potentiated (on a larger scale than happened in holland and england). Fuckers gone wild, ripping and whipping through more conservative demografeelogists throughout the world.

piet said...

did not mean to sound so harsh but i am just don't see the difference between risk analyst lesbo academic Deb Frisch's and native-identied ones like Ward Churchill's hounding and harassment (both since 05 - the former into drink and jail even) by the warmongering right.

Same way i don't see the difference between statements like 'war for jews' and 'goldman sachsoid revenge for 9/11' (subtxt: eat this foodprice you bastards).

It's the age of borderless mobs for whom it is everyday religion to disrespect limits. Life is a game world, neoteny of the selfish kind instead of as i just wrote on a blackophobe's place:

you look at weak links in heavy chains, i look at smallest and most numerous
ones. They might be simple but awful friendly.

ok, rant over, i'll shut up now.

hah! wrote many a comment but never noticed you can stretch the boxes before .. until just now .. by accident. Good old Netscape browser.

The Arthurian said...

Hey P(i/o)et,
I'm still trying to extract meaning from the first of your remarks here.

I have looked at three by Antal Fekete --
# Destroying the Wage Fund
# Real Bills and Employment
# A Critique of the Quantity Theory of Money
-- and found them interesting enough to keep them handy, and planned to spend time with 'em... But didn't, yet.

"Real bills" gives me trouble. I found Mike Sproul's site --
http://www.csun.edu/~hceco008/realbills.htm
-- but what I found was so opposite to Milton Friedman's presentation of the quantity theory, that I just gave up on Sproul.

Perhaps you could help me understand Real Bills...

I first found Mike Sproul here:
http://newmonetarism.blogspot.com/2010/04/money-multiplier.html?showComment=1271603436052#c6038505125590521027

His comment at that link, it just has to be wrong...

piet said...

mid december Dirk Bezemer wrote:
Is not rolling over debt in a growing economy tantamount to reducing the debt burden (the debt-to-economy ratio) over time? Your assumption is that it is impossible to 'send the foreigners Sterling' IN ADDITION TO the normal borrowing for subsistence. That is, you assume there will be crowding out: that rolling over debt would exhaust or in any case reduce Britain's borrowing capacity needed for subsistence. But has not the US been doing this for a long time now - borrowing internationally to pay for its daily needs (cars etc.) while rolling over its debt? The reason why Britain could not do this is only because the US currency has special status as world reserve currency. As long as foreigners accept Sterling, it would work. The fear is, that would not be very long. China would never accumulate 2.4 trillion Pound Sterling! Dirk

that helps me extend the analogy yet again:
if you agree on the need for massive remineralization (a la John D Hamaker) it makes no sense to send rockdust from one side of the world to the other (only our precious titanic volcano caste can afford that). Localism is the key and solution, even Ghaddafi can lip serve that in between his tirades.

still working on the rest ..

piet said...

what fuels, in part, the credit bubble and the reserve status of the dollar is that it performs a mental version of the mineral size reduction so sorely needed for vigour and health. This good soak applies to a nearly negligable aspect of its influence on social climates though, the jigger jiggle and loosen up challenges, the invitation to cymatics and dance are mere side-effects in the margins of a push for hegemony, more might than right, more bluster than luster

from basket cases to basket cashes.

Nick Szabo has deliverd proof of the concommitant alongside my currency diversification fancies with his means of payment preference piece(s?). ... i should prolly look it up again.
He does not harp on the transparant passivity needed to make any centralization a succesful and equal partner in succesful localization enough to my taste though.

are much more and better characterized as substitute for and crowd out of said crush, that said, the to me unmistakable element in play monetizes intention (the good kind, play, neoteny).

I am learning stuff from the 35 comment thread at SW's place ... new names held up in the light of more familiar ones helps. .. ran into that tggp commenter elsewhere before.