Productive Monetarism is offered as an alternative to the monetary policies that are traditionally called economic monetarism. However, as the reader could anticipate by this chapter's title and by the volumes content, a more appropriate description would be "necronomic" monetarism. The rising inflation, unemployment, taxation, and violence--necrosis of civil existence--is unavoidably associated with traditional monetarism. The name of an person most frequently associated with traditional monetarism is Milton Friedman.
In this offering, the reader can see how solutions to inflation are quite simple. The solutions can be executed by undoing past mistakes rather than compounding them with more flip-flops of interest rates or unemployment rates. Part of this offering are insights for eliminating necronomics. Another part of the offering is an introduction to how not only inflation can be eliminated but most taxation be reduced. Inflation is, in a most general sense, the cost of unsolved problems; someone has to pay the cost of unsolved problems; invariably, the someone passes on the inflationary cost as higher charges for their goods or services. Taxes are the cost of problems that people cannot or will not solve themselves. Elimination of necronomic monetarism will reduce, in part, the number of problems and their general inflationary costs. In addition, a reduction in the specific tax cost of unsolved problems can be expected.
Monetarism refers--on one level--to the understanding and manipulation of a system of production through its money supply. Expansion and contraction of the money supply is supposed to stimulate or depress economic activity with an overall consistent growth pattern. Necronomic monetary policies fail to promote consistent growth because it looks solely at the quantity of money rather than the quality.
Necronomic monetarism analyses total economic activity in aggregates of only one product (money) with insufficient concern for the what production (goods and services) is thriving or diving. In others words, the measurements are merely quantitative of one product rather than indicative of the quality of total production, i.e., the quality and quantity of all products. No regard is given to whether the quantities of monies stimulate essential or non-essential production relative to the needs of the populace. When so recognized, it is easy to understand why traditional monetarism deserves the qualification of being necronomic.
Ignoring qualitative assessments of production increases the chance of recession and depression essential for basic survival. Lop-sided production is less if policy makers recognize qualitative measurements of monetary circulation and makes prescriptions based on more than mere quantitative measurements of money.
Traditional monetarism not only ignores but catalyzes a shift in production from the essential to the non-essential. This shift results in a fatal reduction of essential production for those at the base of the economic pyramid. Unfortunately, traditional monetarism makes things worse for the other levels of the economic pyramid. Necronomic monetarism increases suffering from inflation, unemployment, taxation, and violence to increase. Monetarism fatal dynamics are not stable-state. More people suffer at faster rates. Thus traditional monetarism is worthy of the entitlement
Necronomic monetarism, in expanding and contracting the money supply oblivious to production, takes a general shot-gun approach to stimulating or depressing economic activity. This unspecific alteration of the money supply is through the private banking institutions. Private banking is part and parcel to the necrosis of monetarism, both victim and perpetrator. Bankers carry out monetary policies that are necrotic because there is no productive monetarism that provides a qualitative index of the use of money. Currency management is poorly qualified and counterproductive.
Assumptions on Currency for Productive Usage
Before listing the inflationary procedures of necronomic monetarism, a number of basic assumptions will be provided for the reader's acceptance or rejection. If the reader rejects the assumptions, then productive monetarism will be anathema to the reader. These assumptions represent the ground rules for productively managing the currency of a nation and of a people.
1. The money supply or currency of a system of production should expand quantitatively so as to facilitate production and productivity on a permanent basis.
2. Any variation of the money supply should not imbalance a system of production. Usage of a nation's money should not recess essential production because the money over-stimulates non-essential production.
3. The variation of the money supply within a system of production should benefit the most productive people rather than the least productive. This is true morally, and, more importantly, pragmatically. If the producers suffer as a result of poor handling of the money supply, production will suffer to the detriment of all people: producer and non-producer.
4. The currency of a system of production should expand at a rate so that the individual units remain constant or "current" in their product value. This constancy eliminates the wasteful shift of human resources into the pursuit of inflationary or deflationary income. The shift is wasteful because the actual amount of useful goods and services decreases as people shift their busytime away from producing these products. Since consumption per capita cannot be greater than production per capita, an overall reduction in the standard of living must occur. Of course, those busy chasing inflationary or deflationary returns will have an elevated standard of living ... for a while.
5. The money supply can be expanded within the system of production in one of two ways:
A. Necronomic monetarism: No qualitative restraints as to who gets the money, nor any quantitative restraints chaining the rate of money expansion to the actual expansion of production: a prescription of inflation, unemployment, taxation and violence.
The money supply expands in a multiflationary manner through the private banking system. By multiflation, it is meant that banking practices cause inflation in a multitude of ways in how currency is managed. The money supply is also expanded through the purchase of Treasury Securities by the Federal Reserve System to finance political deficits in spending and/or taxation.
At first impression, the most desirable of the two money expansions would be the private banking method. However, banks exact a multiflationary cost on how they handle and expand the money supply. Furthermore, the use of the Fed to print money so as to buy Treasury notes--monetizing the National Debt--is an example of the philosophical comparison of whether a glass of water is half-full or half-empty. Presently, the monetization of the National Debt is in a pell-mell manner by which the Fed has to buy the Treasury issues when no private source will so do. Presently, the money supply is expanded to help politicians avoid the unpopular action of raising taxes.
Roots of Necronomic Monetarism: 1913
Necronomic monetarism has its origins in 1913 ... the same year that the Federal Income Tax came into existence. In 1913 the Federal Reserve System was established as a means by which the currency supply could be expanded or contracted. The instrument of expansion would be a Federal Reserve Note, a scribbled-on paper product. Unlike gold or silver certificates, Reserve notes have no specific, non-soppy backing. Behind a gold or silver certificate is a requirement for a specific amount of human time into a specific type of production. Less restrictively and diverting of human resources is the general backing of Reserve notes. Behind the Reserve Notes is the quality and quantity of products in general, is the state of the economy, and is the actions of the top policy makers.
The rationale behind the Reserve System and the Reserve Note is applaudable. The implementation, however, is appalling. Prior to the establishment of the Fed, there were times when people fearfully hoarded money, with detrimental anemic or constipating effects on production. With the printing of money tied to the amount of gold or silver, the money supply could not be expanded to provide needed lubrication unless the production of gold and silver also expanded. The solution was to create a form of currency that was backed up by nothing except the good-will of the U.S. Government. More correctly, the competence and ethics of the politicians determines the backing of Reserve Notes. Thus if people started to hoard money, the injection of Reserve Notes would prevent the development of a full-scale panic. An acceptable rationale behind the Federal Reserve System is to prevent the recession of production due to a lack of insufficient gold or silver.
The rationale of the Reserve Note is an extension of the principle behind gold and silver certificates. The latter came out as promissory notes to be used in place of gold and silver for one simple reason. With actual gold and silver in circulation, the wear and tear constantly is reducing the amount of currency in circulation. The effect on production is analogous to someone having a slow but unstoppable wound bleeding away the lifeblood. Currency, as noted before, is the economic blood of a system of production which should be neither inflated or deflated so that the body of the nation will not suffer the pangs of high-blood or low-blood pressure.
By printing precious metal certificates, the government was able to call in the precious metals so that they would not be subject to daily wear and tear. The promissory notes served as a common intermediate product between the government-held metals and the actual owner who held the IOU promissory note. It took less human time to replace the worn out certificates than it would have been to stimulate the mining and refining of precious metals due to wear and tear losses.
Federal Reserve Notes ARE Promissory Notes
Contrary to what legal definitions, Federal Reserve Notes are for all practical purposes promissory notes just like the gold and silver certificates. Directly or indirectly, one can use Reserve Notes to buy gold and silver ... or any other product. Their promissory nature is basically one of the holder knowing that there is a "promise" between all producers to accept these Federal Reserve Notes for their time at production, at providing either a service or a good. The key relationship is that of time at production, which is no different than what was true of gold and silver certificates. The number of precious metal certificates in circulation was roughly tied to how much production time had been spent at mining gold and silver. The certificates came in to existence, in effect, to preserve the time content of the gold and silver rather than allow it to be worn away by daily use. The actual use of precious metals would require a greater amount of time to maintain or replace than to simply print up an inexpensive, symbolic substitutes.
Promissory Notes and Political Promises
An interesting, amusing, and enlightening parallel can be drawn between the
the official common intermediate product (Reserve Notes), and the common medium of interchange for elected politicians (the Speech).
Both are some form of promises that are not kept. Voters are over-familiar with the political promises that never come through, that never solve the problems as promised. Similarly, Federal Reserve Notes are de facto promissory notes that increasingly fail to deliver as much as they did at some point in the past; inflation cheapens the product worth of Reserve Notes so that one cannot buy as much as he expected. Like the political promise, the acceptor of promissory notes is left with less and less. Like the political promise, the Federal Reserve Notes are controlled and issued by the modern politicians.
Timistically, an inflated Reserve Note and an inflated promise by the politicians are no different.* Both waste the time of productive person. At the time of acceptance, the acceptor anticipates that each will save or buy him some time. In its functional role as a promissory note, the Federal Reserve Note represents a certain amount of production time. For example, if the average wage in America is $7 an hour, then a dollar bill represents about 12 minutes of production time. With one's money, one expects to buy someone else's time to solve problems that he cannot or will not solve himself, e.g., plumbing, mechanic or doctor. The inflation of money represents a loss of the production time content, a loss of the number of problems that one could have paid someone else--a professional--to efficiently and effectively solve.
Similarly, a political promise is basically a product of human activity that is issued to represent expected time-savings. When a politician says "Elect me and I will solve this problem and that problem," he is saying that he will save you the time that the problem is presently costing you in terms of inflation, unemployment, taxation, and violence. All these problems are human time-wasting phenomena that the politician promises to solve. However, the promises are increasingly unfilled. Both political promises and official promissory notes are worth less and less each day that the modern politicians and the necronomists are allowed to issue and control them. Said another way, the legal system and the legal tender are cheapened by people who are corrupt and/or incompetent in managing the nation's money supply. Necronomic monetarism rationalizes the inflationary actions.
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