In this series of posts I detail the mistakes that I have observed within the Monetary Reform & Alternative Currency sectors. I see some intelligent, well-meaning, passionate and hard-working people but ultimately many are chasing the wind. I base much of my negative analysis here (listing the ‘mistakes’) on my positive prescription for a Perfect Traders Currency. These posts build on each other to complete the free downloadable eBook, “Mistakes of the Monetary Reformers”.
Don’t be offended if you’re condemned by these posts, because as always, I design them to be educational, even if somewhat direct! Don’t give up either saying “Impossible!” when it comes to implementation for some of the principles I share are totally contrary to mainstream teaching. I DO finish with a practical solution and practical examples to every point I make!
The US has $18.1 trillion in official debt and $42 trillion in unfunded liabilities. The USD is losing its place as the Reserve Currency of the world and every country in the world is in debt. Something is clearly wrong and the Monetary Reform movement has arisen to the challenge.
There’s a quite large and growing movement around the globe, one that seems to me to have a united ‘enemy’ (the status quo, aka The Powers That Be [TPTB]) but there are a wide variety of uncoordinated approaches to dealing with and viewing that perceived ‘enemy’.
Monetary Reformers have some shining lights but also a bunch of wannabes, talkers and hangers-on. The Alternative Currency sector has a few characters with a ‘name and a following’ and a truckload of others all doing their bit.
Quite frankly I’ve love to have this sector as an enemy for all its disjointedness, lack of cohesion, partial knowledge, and big egos easily popped, except for one thing, I too am opinionated and I’m definitely a part of it! Hopefully you will benefit from these posts.
Whatever the case, Goldbugs or Cryptos, Austrians or Keynesians, Public Money or Private Money, Community Currency advocates or Commercial Barter operations, their [our] words and messages are pretty much all along the lines that, “The system is broken!” and “A crash is inevitable” and “interest-bearing, debt-based fiat currencies are unsustainable” which are all essentially negative. Sometimes you get the, “There is a better way”, which is more of a positive angle to the problem but it’s the same message at it’s core – that change is desirable.
Some approach the subject from a technical, mathematical or financial angle and others take the moral approach using religion or philosophical arguments. At the end of the day though when boiled down, all wars are over and about money (which represents power).
Those who issue and control money (commodity money that is) of course have the power, so the monetary systems we all choose to use determines who wins and in the end pockets the gold – it’s really quite that simple!
1. The BIG Deception that Money is a Commodity
No matter what people say or do, or try to do, money is always at its core a credit (or looking at it the other way, a liability or debt). Yes, of course this credit/debt can be REPRESENTED by a commodity such as gold, a coin or a stock/bond but viewing and treating money as a thing in and of itself is a mistake.
It’s THE biggest deception within economics.
When the money is presented and packaged as a commodity (which it is by most banks, financial institutions, politicians, the media, businesses, financial advisors, economists and so on) it certainly APPEARS as a commodity, so then of course if it is PERCEIVED as a commodity, in practice it BECOMES a commodity – having a life, value and characteristics of its own – but this is a dangerous temptation and has become a widespread deception.
When viewing money as a commodity we’re only looking at half the story. We’re taking someTHING [the coin for example] totally out of context and making it someTHING that it isn’t.
All mainstream economic theory (regardless of whether it be Austrian economics or Keynesian economics) essentially treats money as if it is a commodity – something that has a “controllable”, yes incredibly, they say without even batting an eyelid, a “finite supply”. Modern economics is the study of money matters with this paradigm a ‘given’. Hearing words along the lines of “controlling the money supply” is the dead give-away that error is occurring.
This is all a total deception, because they (TPTB) are actually taking a true form of money (some form of Credit) and ‘packaging’ it as ‘money’ in and of itself to turn it into a commodity – to then be issued, valued, used, owned and controlled. This deception is only possible by totally removing one side of the (Debit/Credit) money equation . . . actually just hiding it – and they (the politicians, bankers and financial industry) do this actively.
Hiding this debt aspect of money is done deliberately for good reason, because this enables those who issue it to control it; they appear to then own it; if they appear to own it then they can manipulate it, and of course . . . profit from it!
And they do . . . printing ‘funny money’, pocketing that ‘funny money’, deriving derivitives from their ‘funny money’, making more ‘funny money’ from charging interest on their ‘funny money’, converting their ‘funny money’ into real goods and power and in the process getting the whole world into bigger and bigger debt . . .
. . . and this all through the simple deception that ‘funny money’ is something real, tangible, i.e. a commodity.
Few are those who ‘get it’, but the correct definition of money is that “true money is only ever a record of a half-completed transaction”. That’s it! Forget the classical textbooks and their confusing definitions that combine mutually exclusive concepts (logical fallacies, as I mention in my assessment of Gradido currency).
The idea that money is a store of value is false. That’s not what money IS, that’s what it DOES.
The idea that money is an enabler of trade (a means of trade) is also false. That’s a description of a FUNCTION and is what it ACHIEVES, not what it IS.
The definition I have given here (and which I have and will repeat ad infinitum) is the only correct and complete definition of true money.*
Now while Mutual Credit advocates generally understand this and get it partially right**, many others in the Monetary Reform and Alternative Currency communities make this fundamental error – they still perceive money to be a commodity, and are therefore deceived right at the outset of their endeavours.
Anything (like a currency) that is or could be “issued” BY somebody or someone is being treated like a commodity when it is subjected to a control process. Remove the perception that money is a commodity and you end up with simply . . . a MEASUREMENT of debt.
Out the other way, debt is ALWAYS generated at the point that money is issued/created and no amount of fudging, deception or obfuscation can change this self-evident reality.
The deception is that we can have something tangible (which in this case is what a commodity really means) and call it money (no matter whether it is a USD note or a physical Penny or a digital Bitcoin), without reference to or consideration of that underlying debt.
So . . . any currency that has perceived value in and of itself is simply another version of Tulips; a Ponzi scheme of some sort; a deception awaiting a rude awakening and most likely something unsustainable, immoral, ungodly or worse. Even if it is not yet in that category it is likely to eventually end up there due to human nature.
This BTW is the primary failing of all crypto-currencies that treat a digital coin as an asset AND why all participants in that massive global Ponzi scam called Legal Tender currencies with a global industry of derivatives that has reached totally inconceivable proportions will learn the hard way that money is not a commodity. It is a record of debt.
When the Central Banks and their private business interests collude with the global political powers (which they do, as many are starting to realise) they do this to protect the status quo by concealing the true nature of the global monetary system, which of course is entirely debt-based.***
More people are extracting themselves from the deception to some extent – that is true – and many are learning of the size of the debt that their governments are incurring, but few go all the way and truly understand the true nature of money. Many are learning who the private interests are behind the scenes (which is great), and more are finding the true size of that debt (even better) but rare is it for people to understand the significance of the fact that money is only simply a record of a transaction, in fact just HALF of a transaction! I have observed that those who grasp this basic understanding can have a profound breakthrough and be increasingly empowered when they then dig, think and dare to take things through to their full conclusion. The doors can really open for them!
Proponents of Mutual Credit (which is a pure form of true money) DO often ‘get it’. They understand that when I trade A for B and someone else buys B for C that there is still a debt (this is always represented as ‘money’), which is then cancelled out when C is traded for A. This is true economics, and the money (which is used in the practical sense of enabling the trade to occur in society) is totally cancelled out on clearance of that debt to the issuer.
Again this is very simple – money is simply a record of that half completed transaction. Money (the record of the debit/credit) dissolves when the transaction is completed.
I’ll say it again a different way to make the point very clear. Money is NOT a commodity that has value in and of itself. Those who think this way are deceived and miss the full picture of money. True money represents a transaction (a trade; a deal or if you like, an agreement) that has yet to be fulfilled/completed – nothing more.
I deal with the significance of this in greater detail in later posts but briefly, the world becomes a totally different place for those of us who realise that we do not need to be controlled by TPTB when we can create our own free to use debt/credit outside of the current financial and power structures.
The HOW though, is another matter but there’s your first and most important mistake explained and hopefully revealed.
2. Pegging to an inflating currency
The second mistake I address here is more of a missed opportunity and lack of awareness than an error per se. It is an error to me, for I seek a stable, equitable currency in which to trade.
Mutual Credit takes different forms but most MC systems peg their currencies to the local Legal Tender currencies. (There may be a few but I actually do not recall any currency that doesn’t). This pegging to a devaluing third-party currency immediately forces devaluation of what could otherwise have been a pure currency, potentially totally free from inflationary pressures. To me, that is a fundamental mistake.
The USD, Euro and Yen and every currency on the planet have for a century all been and are likely to continue to devalue. In the fullness of time they will no doubt all crash, then this will of course bring down any currency that is pegged to these dodgy currencies built on hot-air, deception and hidden debt!
It is far better to use a currency that is totally unpegged from something that sure, many trust in but the wise know to be ‘built on sand’.
Commercial Barter is a common alternative to the Legal Tender currencies. Apart from greedy or opportunistic management and the ethics issues relating to the operators of these exchanges, these guys all have the same problem as the devaluing mainstream currencies do because they all (certainly that I know of) peg their currency to their local currency (or an international currency or a basket of inflating currencies). By pegging to the local currency they prefer ease and simplicity (being able to say simply that “one barter dollar equals one cash dollar”) but by doing this they immediately trade away their currencies independence, stability, integrity. Again, if the USD, Euro and Yen are all devaluing, and will no doubt in the fullness of time all crash, then this will of course cause those individual Barter Dollars to crash as well.
The same thing too applies with local Community Currencies. Establishing a MC currency has social benefits of course but any Community Currency that does not float (i.e. that is pegged in value to a commodity, government controlled currency) will have ALWAYS have the same inflationary pressures as the Legal Tender currency that it is pegged to!
I know it is a big call to float a currency but this is primarily a psychological barrier.
The technology and complexity of utilising a floating currency is NO DIFFERENT to that of any international trader, or to traders moving from for example the GBP to the Euro, or the public choosing either a Franc or a Euro or a USD to buy or sell on eBay. Any international trader; any trader in the EU economic zone; any international traveler; any trader familiar with multiple barter or other payment options fully understands the principles of conversion.
What we need to realise too is that even the simple process of using one currency still involves a conversion process, for when a trader receives say $10.00 for his bunch of bananas, he mentally works out that he can use that $10.00 to buy – perhaps the five fish he may want for dinner. That’s a conversion of value. The same thing applies with using the Yen or Euros or any other currency whether it is pegged or not . . . so this raises the important issue that confuses many . . . the implementation of a currency is independent from the valuation of it.
3. Traders Alone Value a Currency
The third mistake I see in this sector is that people do not think through and get the point that it is really only the traders who determine the value of a currency. It is ONLY the two traders doing the trade who actually determine the value of a currency – and ONLY at the actual time of one specific trade.
Many err in this regard and consider that a currency value can be controlled, or determined from a third party source. Don’t be fooled. Traders ALWAYS do the valuation – no matter how much you try to convince yourself that people rely on exchange rates, analysis tools, official valuations and so on.
As a practical example in the real world, I know the value of the debt that Bartercard has, hidden, off ledger. I know the going rate for cash-conversion from a Bartercard Trade Dollar to a USD or to an AUD or a NZD. I (and anyone who is clued up) know full-well that it’s true value is ‘cents in the dollar’ no matter what line Bartercard spins us/me. Their standard marketing spin is that “One Bartercard Trade Dollar is worth one Local Dollar” but the proof of the pudding is whether or not the traders value the currency this way. They certainly don’t thus the currency is over-valued!
I can absolutely guarantee you that NOBODY ON THE PLANET, least of all any Bartercard insider and DEFINITELY NOT any Bartercard executive would trade their cash for Trade dollars on a par! And nothing like that! The last time I researched the matter they were going for something like 20c in the dollar. Why? Because the traders themselves determined that the value of that currency was only worth 20c in the dollar (of course to the horror of the Bartercard sales team who REALLY don’t want that information getting out even though they all know it very well!).
It’s the same with the USD. It too is really only worth cents in the dollar (that’s why many are trying to get out of the clutches of the USD, and why alternatives appear to be better investments), for if there was any reality to the valuation process, perceptions would change when the US bankruptcy became known and widespread. People turn a blind eye to the obvious (the US is bankrupt, like many other countries) but the point I’m making is not whether there is debt, or whether there is validity to any perception or not, it is that the traders determine the value of the currency and only at the point of the trade.
When the crash comes, the US Government, the Fed, the Central Banks will all be making big noises and doing all sorts of crazy things trying to prop the perceived value of the ‘house of cards’ up but watch the traders themselves determine the value of the currency, minute by minute, hour after hour after day after day as the perception that things are getting out of control takes hold and they buy and sell at lesser and lesser valuations!
Look, you can try and sell me that a Piece of Eight is worth the same or more than my bunch of bananas as much as you want but I can assure you that if my fellow traders only recognise shells, or Tally Sticks for trading, then you can stick all your gold nuggets, coins and gold-backed paper right back into the ground for all I care! I want REAL money please, like a stick with notches or a certain shell with certain marks on it. And you know what? Get off my deserted island with all your ‘damned’ lies and tricks while you are at it and don’t bother coming back!
People who think they can value a currency ‘from above’ are like King Kanutty who tried to stop the tide.
It is crucial for Monetary Reformers to understand that money is NOT a commodity. No matter how it is later packaged it is at its core simply a record of debt, in essence a ‘mutual’ credit system.
Understanding that it is traders themselves who ultimately value a currency means that having a floating currency is actually perfectly natural and therefore is the best solution to any currency woes.
In my next post in this series I continue dealing with more Mistakes that Monetary Reformers make, touching upon the method by which wealth (and power) is consolidated, [compounding] interest and what that really means to Monetary Reformers. It’s a biggie. Some get it . . . many don’t.
Thanks for joining me!
* As an aside, I have a friend highly experienced in this sector who agreed with and liked this definition but he recently took issue with me on my supreme confidence in defining it saying:
we need to be wary of proclaiming what ‘true’ money is any more than we would proclaim what what ‘true’ love is – no-one has the authority to do that.
He’s wrong. If there is such a thing as absolute truth, right and wrong (which logically there must be) anyone has the authority to identify it. As commentators though, we only have credibility as far as we have done the research, identified the issues, made an intelligent assessment and spoken the truth for what it is. I’ll be sure to alter my assessment if I’ve missed something or got something wrong but at this point, I’m totally convinced this is THE correct definition of money. BTW, I’m not the first or only one to define money this way by any means!
** Mutual Credit systems are a form of pure money that recognises the true nature of it, but in their implementation most try to manage the money supply through super-imposed credit restrictions and thus push their economic solutions back closer to the mainstream Bankers’ one. Developing a currency is working on a continuum with multiples of issues – it’s not a right/wrong, black/white matter.
There is no easily or clearly defined point at which MC becomes non-MC on this continuum from say, a small group of Greenies in the back-blocks of rural Samoa to the government sponsored, Central Bank issued credit currency of the USA, so in a sense all credit systems are ‘Mutual’ even if, as the pig says, “Some of us are more equal that others!” The key point though is the DEBT/CREDIT aspect of money.
*** Establishing who the global debt is owed to is revealing but threatening. It’s one thing to work out that we are all in debt but it’s quite another to establish who we are indebted to. It’s even more sobering to establish their nature and intent, which according to your belief systems touches on the spiritual. My take on it is . . . it’s all evil – pure evil, and it doesn’t matter two hoots what their individual names are or who they are.
The Mistakes in a Nutshell:
- Money is NOT and can never be a commodity. It is simply a record of debt.
- Pegging to a mainstream, manipulated, inflating currency dooms any alternative currency to the same destruction as the one its pegged to.
- It is traders alone who value a currency, at the point of each trade.
- Interest may compound, de-stabilise, be immoral etc but it works, consolidating wealth and power.
- Failing to adequately address the "WIIFM factor" cripples a currency from the outset.
- Ego [self-interest] kills goodwill.
- The backing of a currency is always TRUST, not a commodity itself.
- It is impossible to manage a pure currency.
- Usage doesn't determine the function of a true currency.
- Creating networks solves a non-existent problem.
- Networking currencies introduces more problems than it solves.
- Open Source thinking will only replace current systems when they implode.
- Everyone thinks they're right.
- The seller should be the one determining credit terms.
- Credit management from the top will always fail.
- Confidentiality is conditional - it's not a binary issue.
- Zero-cost money is a pipedream.
- Shallow and partial thinking limits our vision.
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