Dated 2-28-95

Another one from my old papers:

Definitions:

Money: Money is defined by our actions. That which we generally accept or pay in exchange for goods and services, is money.

Credit: Money on deposit at a lending institution.

Available credit: Deposits which have not been lent out but can be.

Credit in Use: Deposits which have been lent out.

Debt: Deposits which have been lent out. Same as Credit in Use.

Pinpointing the Problem

The problem is in the money. The whole of the economic problem, two decades of chronic global decay, has arisen from one simple problem with the money. In the words of the Wall Street Journal's editor Robert Bartley, "It's the money, Stupid!"

The particular problem with the money that is responsible for the economic problems of our time is an imbalance between credit-money and non-credit or standard money. If you are aware of the tremendous debt in this country and if you realize that every dollar of debt is a place-marker for a dollar of credit-money in use, you will begin to understand the severity of the imbalance.

Debt, The Measure of Credit-Money in Use

Take out a dollar and hold it in your hand. That's money. Now, say you put that dollar into the bank. It's still your money, but now the bank can make it available to borrowers. You have a dollar (in the bank) and the bank has a dollar (to lend); it is almost like there are two dollars. It is almost as if you created a dollar by putting your dollar in the bank. Actually, you have created potential money; your new deposit has increased the supply of available credit.

By borrowing money, you convert available credit to credit in use. Say that you go to the loan department and borrow a dollar from the bank. That would change the standing of one dollar of bank deposits from unborrowed to borrowed status. The deposits that are loaned out are in use; money lent is credit in use. Observe that the credit is in use, and the deposit is no longer available for lending, from the moment you borrow the money. You don't even have to spend the dollar to be using the credit.

By borrowing the dollar, you create a dollar's worth of debt. The debt exists as evidence that the credit is in use. By repaying your loan, you stop using the credit and so you cancel the debt. Then the credit becomes available for new lending.

For ha-ha's, a scan of the original page.