TURMEL: The value of money
>Article #94955 (94993 is last):
>From: "Jay Hanson" <j@qmail.com>
>Newsgroups: sci.econ
>Subject: Re: The Value of Money
>Date: Tue Oct  6 15:19:48 1998
>The economy "economizes" money it tends to reinforce social 
>hierarchy: the rich get richer and the poor get poorer.[2] 
     JCT: Money doesn't do that. Usury does. 
>Moreover, the accumulation of wealth invariably corrupts 
>political systems and is inherently "unsustainable". [3] 
     JCT: Accumulation is not unsustainable, usury is.
>At some point, the wealthy will be able to bribe the last honest 
>politician and then chop down the last tree, catch the last fish, 
>shoot the last tiger, eat the last whale, and so on until our 
>complex society spirals into "chaos and cannibalism". [4]  
>In his Second Treatise of Government (1690), John Locke blamed 
>money for scarcity. 
     JCT: And of course, he was wrong too. It's usury on money which 
keeps accounting units short, not the accounting units themselves. 
>Prior to money, it was solely the usefulness of things that 
>counted, so a man had only what he needed. But money enabled a 
>man "to enlarge his possessions" more than he needed and caused 
     JCT: If you refer to a casino money system, there's nothing wrong 
with man enlarging his possessions more than he needs and it doesn't 
cause scarcity. It is the demand by the banks for the repayment of 11 
for every 10 they create that is the cause of the scarcity. And the 
proper word is not scarcity, which is natural, but poverty which 
is unnatural. See http://turmelpress.com/bankmath.htm 
>Although Locke saw money as the source of the problem, 
     JCT: Of course, a unsafe engineering design of the money system 
is the source ofthe problem. 
>In 1970, M. King Hubbert reached the same conclusion. Hubbert noted 
>the fundamental difference between the properties of money and those 
>of matter and energy upon which the operation of the physical 
>world depends. Money is essentially an abstraction and not 
>constrained by the laws within which material and energy systems 
>must operate. In fact money grows exponentially by the rule of 
>compound interest. 
>     JCT: Money doesn't grow. The debt for the money grows beyond the 
available money. 
>Hubbert suggested we do away with money and distribute "energy 
>certificates" instead:
     JCT: The good old Technocracy solution. Absolutely correct. Have 
the casino bank issue money when energy is scored, whether in the form 
of service energy or collateral energy. 
>"On this basis our distribution then becomes foolproof and 
>incredibly simple. We keep our records of the physical costs of 
>production in terms of the amount of extraneous energy degraded. 
>We set industrial production arbitrarily at a rate equal to the 
>saturation of the physical capacity of our public to consume. We 
>distribute purchasing power in the form of energy certificates to 
>the public, the amount issued to each being equivalent to his pro 
>rata share of the energy-cost of the consumer goods and services 
>to be produced during the balanced-load period for which the 
>certificates are issued. 
     JCT: I would rather the energy certificates be distributed to 
those who created the work though I have no objection to the robot 
production being distributed as suggested. 
>These certificates bear the 
>identification of the person to whom issued and are non 
>negotiable. They resemble a bank check in that they bear no face 
>denomination, this being entered at the time of spending. They 
>are surrendered upon the purchase of goods or services at any 
>center of distribution and are permanently canceled, becoming 
>entries in a uniform accounting system. Being non negotiable they 
>cannot be lost, stolen, gambled, or given away because they are 
>invalid in the hands of any person other than the one to whom 
>issued. If lost, like a bank checkbook, new ones may be had for 
>the asking. Neither can they be saved because they become void at 
>the termination of the two-year period for which they are issued. 
>They can only be spent." 
     JCT: I don't think this is necessary and I wouldn't be able to 
win energy certificates at the gambling tables like I now do. 
>[5] Hubbert concluded that under his proposed system individuals 
>would not have to work longer than about 4 hours per day, 164 days 
>per year, from the ages of 25 to 45, but would still receive 
>lifelong income. "Insecurity of old age is abolished and both 
>saving and insurance become unnecessary and impossible."  
>The start of the new millenium is an ideal time to dump economics 
>in the trash and invent something new. 
     JCT: Yes, a stable energy-based money system would provide for a 
wonderful world. 
>Hubbert's proposal for a new society goes a long ways towards 
>addressing problems that have stumped economists for the last 200 
>years: "work", "redistribution", "social security", "social 
>justice", and "sustainability".
     JCT: How true.
>Hubbert's ideas should be studied carefully by everyone working 
>for a better future. It's the only realistic proposal on the 
>table. Jay www.dieoff.com
     JCT: Great suggestion and I'd recommend you look into how many 
people are creating their own energy based money systems with LETS 
software and the wonderful reports about it. See
>From: Charles Anderson <chasna@pacbell.net>
>Date: Tue Oct  6 17:37:30 1998
>But, demand? There is endless demand for money. Greed, desire 
>for things, never enough..... what is the demand for money?
     JCT: So go borrow a couple of suitcases full of money and after 
you've carried them around for awhile and realize you have to 
eventually pay it back anyway, you might not have such a great demand 
for more money than you really need.
>One word of caution. College texts are completely confused on the
>neo-classical approach and have let Keynesians screw up the theory
>of money, credit and prices bigtime. Chas
     JCT: I agree that Economics texts are completely confused. My 
point is that it has been done on purpose. 
>From: wfhummel@mediaone.net (William F. Hummel)
>Date: Tue Oct  6 19:02:35 1998
>>what is the demand for money?
>You are confusing the word "demand" which is economic jargon with
>the word "desire".  You also need to recognize that money is more
>than just currency (coins and billfold stuff).  "Money" has had
>so many different meanings over the years, that it is difficult
>for people to understand each other when they talk about it.  For
>this purpose, let's consider money to be whatever is acceptable
>in payment for goods, services, or debts.  Obviously that
>includes a bank account against which you can write checks to
>transfer your funds to someone else.  Note that the bank deposit
>could have been created by your taking currency to the bank, or
>it could have been created by a loan from the bank. In the bank
>account it all looks the same.
     JCT: Of course, he is correct that money is created by a loan 
from the bank. Yet most economists also believe that it is someone's 
old savings at the same time. Flaherty does. 
>From: gchand4059@aol.com (GChand4059)
>Date: Wed Oct  7 15:53:22 1998
>Jay Hanson wrote:
>>The start of the new millenium is an ideal time to dump 
>>economics in the trash and invent something new.
>Wow, Jay, I'm impressed. I too believe we can do better. Current 
>events say we must. Also,
     JCT: It's already been invented and it's called the Local 
Emploment-Trading interest-free banking System LETS. 
>>Hubbert's ideas should be studied carefully by everyone working 
>>for a better future. It's the only realistic proposal on the table.
>Naw, Jay, it is not the only realisitc proposal on the table. 
>For instance, there is local exchange currency and more screwball, 
>wild ass schemes than you can shake a stick at.
     JCT: Well at least he's heard about LETS though I wonder if he's 
counting it as one of the screwball systems. Just remember that it was 
created by two engineers so it's a pretty good bet that it's a lot 
better than anything created by bankers and economists. 
>From: gchand4059@aol.com (GChand4059)
>Date: Wed Oct  7 16:02:34 1998
>I think when it comes to economics, there is a demonstration that 
>we really don't know what we're saying. Can I use this quote in 
>my signature signoff some day?
     JCT: I'd recommend such a disclaimer.
>From: gchand4059@aol.com (GChand4059)
>Date: Wed Oct  7 16:13:58 1998
>Michael wrote:
>>Now I'm pretty sure that what I have described is NOT exactly 
>>how things are. But my stuff makes a lot more sense to me than 
>>your stuff.  Try to fix mine or yours to where we can have some 
>>kind of mutual understanding of what it is we are saying
>Excellent communicating. Also, excellent idea - try to fix this 
>stuff so a joe sixpack type can understand it.
     JCT: How can Joe Sixpack understand guys who don't understand 
what they're saying themselves. 
>From: wfhummel@mediaone.net (William F. Hummel)
>Date: Wed Oct  7 16:44:46 1998
>On Wed, 07 Oct 1998 13:07:01 -0700, Charles Anderson wrote:
>>In economics, it's also consistency that is important. I always 
>>use Fed stats or banking statistics as the "best" numbers.
>I take it then that you don't have an answer to my question as to
>how you would unambiguously define a measurable thing called
>money that would have meaning in the Fisher exchange equation.
>The essential vagueness of what really comprises M is at the
>heart of the monetarists' dilemma.  Because it cannot be
>adequately defined, it can't really be measured.  
     JCT: Measuring the value of LETS currency seems to be no problem 
since it is pegged to an Hour of labour. 
>From: "Michael L. Coburn" <mikcob@gte.net>
>Date: Thu Oct  8 15:11:24 1998
>The value or purchasing power of money depends, in the first 
>instance, on demand and supply . . .  
     JCT: In a LETS-style casino banking system, the value is an Hour 
of time and doesn't depend on anything that varies. 
>one could include credit in one's definition of "money".  
     JCT: Who would forget to include the bulk of the money supply?
>But the viability of Mr. Mills' discussion of money remains so 
>long as "in circulation" is correctly employed:  If we increase 
>credit (which is a form of money as shown above in the example of 
>the anticipated wheat delivery) faster than the supply of goods 
     JCT: Of course, if any of my casino cashiers ever increased 
credit money (chips) faster than the supply of collateral, he'd be 
fired if not charged with fraud.
     Isn't it amazing how confused economist are over the value of 
their tokens when they don't have it pegged to a standard unit as a 
casino bank or LETS bank does? 
Subject: TURMEL: The Value of Money #2
From: johnturmel@yahoo.com (John Turmel)
Date: 10 Oct 1998 06:40:22 GMT
William F. Hummel (wfhummel@mediaone.net) writes:
>>     JCT: Measuring the value of LETS currency seems to be no problem
>>since it is pegged to an Hour of labour.
> Which hour, the hour I pay my gardener or my lawyer?
     JCT: In the Ithaca Hours system, I'm sure that the gardener 
probably asks for 1 or 2 Hour notes per hour while the doctor probably 
asks for 5 or 6 Hour notes per hour.
     In most US Hour systems, an Hour note is worth $10. The free 
market operates just like it would if it were a cash note.
     Not that hard to figure out. I wonder why you failed to.
     But note that in most US Timedollar systems, the lawyer does 
accept the same Timedollar per hour as the gardener.
     Personally, I like the free market model.
     Morally, I approve of the fixed value model.
     Morally, I also find the free market model fair though it has 
been noted that the wide discrepancy between pay scales is often much 
Subject: TURMEL: The Value of Money #3
Date: Sat Oct 10 05:13:01 1998
From: davewilliams@vossnet.co.uk ("David Williams")
>Dear John & everyone,
>I came across a LETS where people were asked to put their own value 
>on the currency. What happened was that nobody traded. I think the 
>fear was that the person asking for a baby sitter may treat the 
>currency like Lire while the baby sitter may treat is as Sterling.
>This would end up with one night's baby sitting producing enough 
>currency for the babysitter to sit back and not work for the rest of 
>the year! While the mother/father of the child perhaps having to work 
>for the rest of the year to get enough currency back to pay for their 
>one night out.  
     JCT: I also found it puzzling when people said that they had no 
fixed value on their currency. I cannot conceive of a currency not 
linked to work since everyone has to consider how much work they are 
willing to offer to receive some of it. 
     Of course, David has, as the first government-hired LETS 
organizer in the UK, much experience and can be credited with one of 
the best ideas I've ever seen. In his Hounslow LETS, his notes state 
that they are worth "6 Cranes = 6 Pounds" or "1 Hour." It was the 
first time I've ever seen a currency designed with the prescience to 
realize that the link to time made it automatically compatible with 
any of the world's other LETS currencies. I can only hope others copy 
your example.
>It's very important for everyone to be clear about the value of the
>currency - hour, product, or national currency equivalents.
>Some schemes have duplicate valuing - such as Ithaca hours where my 
>guess is that people think of $10 rather than an hour for most 
>transactions. One of the difficulties we face is that the system we 
>live in is capitalist and those with capitalwill benefit over those 
>offering only labour.  
>Let me give you a simple example: Imagine you have a concrete yard 
>you want dug up so that you can plant a garden.
>Person A has a hammer and chisel and reckons it is 3 days work to 
>clear it (3 x 8 hours @$10 per hour = $240)
>Person B has a jack hammer which he has paid out a lot of cash for. 
>He can do the job in 3 hours but will not accept $30. He wants $100. 
>You would have shorter disturbance and save money.
>Who do you choose to get the job done?
     JCT: Capitalism lets the better deal survive and well he should 
if he chose to invest in the better tools. Of course, if the other did 
not have the credit to also obtain such tools, therein lies in 
inequity, not in his being disadvantaged by not having the tools but 
in his being disadvantaged by not having the credit for the tools. 
     It would seem that the fellow without the tools would be 
relegated to jobs that the other has no time for. In a fair credit 
game, I would see no problem with this. Again, I don't decry a system 
where the guy who can do the job cheaper is at an advantage. I decry 
the system where the other can who can't do it cheaper can't even try 
to do it cheaper. 
>Whether the payment is Ithaca Hours, LETS points or sacks of corn the
>capitalist will get a higher hourly rate than the person offering 
>labour only.
     JCT: It depends on the cost of depreciation for the tools, the 
cost of replacing parts, insurance and interest on the loan. I might 
say that some people might hire the three-day laborer if they heard 
that the one-day guy had missed a few payments at the bank and might 
be foreclosed on before he finishes the job. That's one thing about 
the guy with only labor. No one can foreclose on his employment.
>Can we use LETS to help the non-capital owning people?
     JCT: Of course, that the would be purpose of a municipal or 
national LETS. There would be the wherewithal to make must larger 
capital purchases than there are now. Especially if LETS went beyond 
simply recognizing manpower as collateral for a LETS loan and accepted 
capital for loans just like banks. Without the usury of course. 
From: "Michael L. Coburn" <mikcob@gte.net>
Date: Sat Oct 10 13:21:03 1998
>It all gets down to whether you believe that labor and natural 
>resource is the root of all commerce or whether you believe that 
>money itself is the root of commerce. Those who have money, of 
>course, take the latter view. When money is placed solidly in its 
>proper role of facilitating commerce then money is not capital 
>(i.e. saved dollars, rupels, or gold coins do not represent capital 
>but are merely claims against future production which, in and of 
>themselves, do nothing to aid production). The development of a 
>claim against future production need not be based on pre-existing 
>claims on future production and that is EXACTLY what saved up dollars 
>or saved up gold or saved up ANYTHING is. 
     JCT: That is why the fractional reserve requirement that claims 
against future production be based on pre-existing claims is so silly. 
I pointed out in the Rubles article that no casino would limit the 
issuance of its chip currency to the number of already-issued chips 
that must be first deposited in the safety deposit section. It has no 
real purpose other than to allow bankers to say "We can't lend until 
someone deposits" thereby fooling people into believing that they are 
borrowing someone else's deposits just like a piggy bank which a 
fractional reserve bank is not. 
>Money represents a claim on production. Money is accepted as the 
>medium of exchange because the receiver of the money recognizes that 
>others will deliver goods or services unto him in exchange for such 
>money, and NOT because he can trade it for more money.  
     JCT: That's exactly how LETS local currency works. But if they 
were to charge interest on Greendollars owed, it would cause the same 
imbalance that we see exhibited with orthodox currency. 
>From: flpalmer@ripco.com (Frank Palmer)
>Date: Mon Oct 12 01:51:21 1998
>M>(i.e. the collection of interest on newly created money and the 
>M>distribution of this money to those who already have money and 
>M>to those that do the creating of money). This is the cause of the 
>M>deterioration in the value of money (the lack of "faith" in money).  
>M>The current purported cure is to raise interest rates. If this 
>M>makes sense to you then you need a brain transplant.
     JCT: That interest rates fights inflation is what I call the 
Big Lie of Economics. It is virtually a mantra repeated by all 
economists and journalists though most are willing to admit that they 
see it creates inflation at the same time. Another economic double-
>Here you seem to conflate several things.
>1) Interest in general, maybe unearned income in general.
>2)  "Newly created money."
>I repeat what I said above:
>"Money is an asset which passes current."A bank's IOU will pass 
>current (it's called a checking account); mine will not. 
     JCT: If you have a LETS checking account, yours will. Actually, 
all the bank is really doing is stamping your IOU with an official 
seal because the new money created by the loan happens to be based on 
your collateral or promissory note just like with LETS. Again, the 
only difference between regular banking and LETS banking is that there 
is no interest on LETS loan. 
>A bank creates money when it accepts my IOU and gives me one of their 
>IOUs in return. 
     JCT: It is not a bank chip. It is your chip turned into money 
after authorization by the bank.  
>*BUT* It is not creating wealth. It is trading one asset for another. 
     JCT: It is not trading one asset for another. It is simply 
liquifying the asset with receipts. If the asset were brought to a 
warehouse which issued denominated receipts for collateral, it would 
be more obvious. Yet, the sum total of the tokens in circulation has 
gone up and every economist will tell you that the volume of assets 
has gone up even though actual real collateral assets did not, as you 
pointed out, change at all.
>3)Inflation... the growth in the money supply...
     JCT: Remember that not only is there Shift A, the growth in money 
supply, but there is Shift B, the decrease in goods purchasable by the 
Subject: TURMEL: The Value of Money #4
Article #95998 (96096 is last):
From: wfhummel@mediaone.net (William F. Hummel)
Newsgroups: sci.econ
Date: Wed Oct 21 13:44:27 1998
>On Tue, 20 Oct 1998, chasna@pacbell.net (Chas Anderson) wrote:
>>You cannot talk intelligently about economics without a model,
>>it can't be done. Case in point: W.F. Hummel.
>Anderson is the quintessential example of one who has become so
>enamored with formal modeling that he has lost the ability to
>think outside of formal modeling.  When that happens the models
>become ends in themselves rather than tools of analysis.
>An engineer who must solve real problems would be laughed out of
>the room if he presented to his colleagues the kinds of models
>that sometimes appear in economics.  For a model to have a useful
>purpose, its variables must be well-defined and measurable. 
     JCT: And of course, it's units of measurement can't be variable 
or they'd also be laughed out of the room. 
>The variable M, meaning money, in the Equation of Exchange is a good
>example of one that is so ill-defined and unmeasurable as to be
>virtually meaningless, other than to poets, and philosophers.
     JCT: The whole point of using a variable as a measuring unit 
would account for its meaninglessness. 
>The E.o.E. has become a bible for the monetarists.  It is
>accepted as a matter of faith because it is so clearly true. Who
>could argue with such an obvious identity? But the E.o.E. has no
>function other than to titillate the theorists, and make them
>believe that they have some deeper understanding. 
     JCT: Well, he certainly put the boots to Economics. 
From: wfhummel@mediaone.net (William F. Hummel)
Subject: Coburn on the Value of Money
Date: Thu Oct 22 14:45:10 1998
>Sorry.  Mr. Coburn hasn't yet explained what he meant by the
>"value of money", including what units he would use to measure
>the value of money.
>In a monetary economy (as distinct from a barter economy) we
>usually think of the value of a commodity like wheat in terms of
>how many dollars a bushel will trade for in the market, e.g. 2.95
>dollars per bushel.
>Let's apply that logic to money -- the dollar.  It might seem a
>bit odd to trade a dollar for a dollar in the market, but I'm
>sure someone would oblige, even up, if you smiled and had a
>fresher bill.  So it's fair to say the value of a dollar is 1.00
>dollar per dollar.  But this implies that the value of a dollar
>is a constant, namely 1.00 (dimensionless), a bit absurd to be
>sure.  Of course the value of the dollar is neither dimensionless
>nor constant.  It is the market price of some standard basket of
>goods, with dimensions baskets per dollar.
     JCT: Say an erg of energy or an hour of casual labor. 
>Now what about "inflation"?  We'll refer specifically to "price
>inflation" so as not to stir up the monetarists. Apparently
>Coburn believes that inflation is always caused by the government
>"printing" more dollars than needed. Of course, how one
>determines the quantity of dollars needed is an interesting
>question in itself, especially if the "value" of the dollar is
     JCT: A casino bank never prints more chips than needed and do 
not have to determine the quantity of dollars needed because it's a 
function of the collateral produced for pledging at the cage. And the 
value of the chips always remains constant. All the problems just 
cited cannot exist when the token cashier knows what he is doing. 
>But let's look at why the government would print more
>dollars than needed.
>First, we know that the government prints only as many dollars,
>i.e. FRNs, as the public wants to hold as street money, no more,
>no less.  So that can't be the answer.
>Looking at the other forms of money, we find that it consists of
>bank reserves created by the Fed and credit money created by bank
>lending. The latter amount far exceeds the former in our
>fractional reserve banking system. Who decides how much banks
>lend? Of course the answer is again the public. 
     JCT: Actually, it's the bankers who have the final say if people 
will get the loan of newly created money, not the borrowers. 
>Banks can't force their loans on the public. Loans come with 
>obligations -- interest payments and return of principal on a 
>date-certain.  So we haven't yet discovered any evidence of the 
>government printing more dollars than needed.
     JCT: And remember that more dollars than is needed is not the 
cause of inflation in the first place so this discussion is rather 
>Obviously, it's a little more complex than that.  Reserves are
>required to back the credit money that banks issue.  
     JCT: Actually, reserves may be insisted upon but they arenot 
required. The Canadian banking system works on zero reserves as does 
the Local Employment-Trading System LETS. 
>Only the Fed can create bank reserves, so the Fed does have a degree 
>of control over bank lending.  
     JCT: Only the FED can create reserves without first having 
old reserves to back up the new ones. Banks regularly create and lend 
out new reserves when they have old reserves on deposit. 
>It is illegal for the government to simply print money and spend it 
>into circulation.
     JCT: Actually, it's silly to say that it's illegal for government 
to simply print money and spend it into circulation. Even if 
government did make illegal for them to do what the banks have been 
given permission by government to do, they can make it legal at any 
time to also do what the banks have been given permission to do, 
manufacture new money. 
>Since the government has no power to directly control the
>quantity of money, there must be something amiss with the idea
>that inflation is simply "too much money chasing too few goods".
     JCT: Actually, economists do not consider the question of "too 
few goods." They really consider only "too much money" chasing the 
goods when it's actually the same money chasing "less goods." 
>How did the money get there in the first place? There have been
>occasions in the past when this simple concept properly explained
>an inflationary episode. But short of war or other real
>emergencies, "printing" money does not cause inflation. 
     JCT: And the Argentinian Provinces have shown that not only does 
printing money not cause inflation, it reduces inflation when 
inflation is actually shift B, the same money chasing less goods.  
>Money is simply the caboose that follows the inflationary engine.  
>And the inflationary engine comes in many different versions.
     JCT: But the current version is Inflation Shift B. 
     I really don't understand how Hummel can get all this right and 
then get other things wrong. If there were any economist out there who 
would have a chance to beat the brain-damage, it should be him and 
yet, he hasn't yet evinced an understanding of the only other kind of 
inflation shift available once he has disproven the increase in money. 

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