#61.2: What We Know Now - Q & A

A reader we'll call John writes:

What is intelligence? Why should I think you's (sic) are so intelligent, that some group you's (sic) could negotiate a new city, where everyone gets their wish, to be left alone, and also, the earnings will balance to the costs, in terms of who orders who in the industries formed?

There is no fairyland advocated by this blog.

Do you's (sic) think that can just happen with little thought and planning?

We're not advocating any changes except to more economic redundancy and production to scale at every local level where any planning is done by individual businesspeople who know what needs to be planned and done rather than some state or board of overseers. We are not advocating anything like a social utopia here. We hold a particular distaste for what one of our French friends aptly described as “great useless plans.” All that inevitably fails and when it does many millions of lives are destroyed. Briefly stated, any kind of central planning is doomed to failure. It has been tried again and again and again with the same results. The only reason people like you (kid) fall for the allure of centralized planning as a solution is that YOU expect to be one of the BIGS entitled to a swell life for being so goddamned smart, which you clearly are not!

You's (sic) haven't really shown me compelling proof of your balance sought, but have only marred in your statements, haven't you's (sic)? Why should I trust that is, THE TRUTH? You's (sic) are speculating about the future; do you think it is intelligent to sprinkle in so many claims of TRUTH in a blog that is speculating of the future (sic)?

You're literally so stupid that you wouldn't know TRUTH if you fell over it tomorrow morning before breakfast! I'm only including what you wrote so the rest of us could have a good laugh.

Then there was something from someone we'll call Pete, who wrote,

I literally just last night was discussing with my friend that theory (that Keynes and the “Austrians” are two ends of the same banker preferred and predetermined dialectic), that this is two sides of a coin, but that there are plenty of coins we're not paying attention to.. can you give me an example or two of other forms of economic study that have

1. basis in reality

2. application
3. a substantial number of people who follow it 

First of all, with due respect, Economics is a closed system of indoctrination, not a legitimate science as this blog has more than adequately proved; there is really only one coin when it comes to present world trade and finance affecting all of the present forms of money -including bitcoin; the way of Keynes, which has the majority following, or that of the “Austrians,” which has a growing following, owing mostly to that this is the only other place to go, which has nonetheless enshrined in its ideas, actually taken for granted, the presence of loaning money at interest which in ALL cases is usury.

We apply a rigorous definition of usury on this blog. It apples to any and all requirements to pay a loan of money back with ANY interest. The reason being that the money that is loaned is created with which to pay it back but the interest never is. Business must endure ups and downs and planning does not help especially the bigger any enterprise gets. There are natural limits to scale which are constantly exceeded bringing eventual failure. But the interest must always be paid. Where does it come from since it was never created? This has been and always will be regarded as a fundamental and irreconcilable flaw in the monetary system which directly affects EVERY economy. Ultimately the debt cannot be repaid despite how many people are cheated or despoiled of their property in order to pay it. There are other and better methods of finance that do not require the payment of interest.

Basis in reality – that's a pejorative term, a JEER. Was that your intention? The people who devised bicycles, telephones, airplanes, etc. were likewise jeered as were those scientists who believed that rocks existed in outer space which were capable of falling into the earth. Nevertheless, these things are now widely accepted without any jeering. Jeers, cheap shots, etc. should be noticed and those doing the jeering shunned. In no other way do those with promising ideas move forward. If you honestly wish to know this blog's proposal's basis in reality, read the works of E. C. Riegel included on this site.

The basis of this blog's proposal is its definition of a Value Unit or Valun. This is to be an international standard of measurement similar to a metric unit or older statute measurement of distance. A Valun will always represent the purchasing power expressed as a relationship between an ounce of gold to dollars (or any other recognized currency) at the close of business on a specific date; our proposal is that date be November 2, 2011.

Application? This blog's proposal is an alternative to the present monetary system including finance and banking and would be applicable in any situation requiring money and finance. The role of a local bank branch is changed in a number of respects. We will call them exchanges instead of banks. These proposed Valun exchanges would all be local and PRIVATE (not just anyone off the street would even be allowed entry into these premises) and therefore membership in them is similar to joining a private club. Indeed from the beginning it will be required to have 2 sponsors in order to join). The entire system will run IN PARALLEL with the existing system and serve as the only alternative left when all the rest of the present systems are gone, which inevitably they shall be, though it may take a decade or so. We frankly believe we're close to the end of this cycle. Fool us once, shame on us, fool us again, shame on them.

We're looking for a substantial number of people to recognize the viability of these ideas which is the stated purpose of this blog. We are not offering merely another alternative that operates the same as all the other money, like bitcoin, but something entirely different; money that is NOT a commodity, but pure money, a device used to split barter.

[UPDATE 8/30/15: I was asked to explain precisely why centralized planning inevitably fails. Explaining why is frankly surprisingly simple. Everyone knows that decision making takes place at all levels simultaneously all the time, around the clock. Everyone, everywhere, is making a decision about something. As it turns out, most of those decisions prove to be correct, and usually the difference between the number of correct vs. wrong decisions remains somewhat the same as the level of the decision maker rises. The only problem is that the higher up in the decision making chain one is, any wrong decision affects far more people adversely than a wrong decision taken farther down the chain. That's why all central planning eventually fails; too many bad decisions affecting too many people adversely.

What chain? The chain of command of course. Why should there be any chain of command? In fact most things would work far better without a lengthy chain of command. Everyone knows that micromanagement is no way to go. Yet, conditions regarded as inefficient and counter-productive are allowed to continue, not due to what is done but rather who is doing it. There are special privileges allowed the very rich. The poor, though they may be individually quite talented and -were things a bit different- might be able to earn their living, nevertheless matter for close to nothing to the “special people” and their interests.

Social services as public policy; i. e. All forms or instances of socialism, are and were always intended as a means to keep “the masses” in order so that they wouldn't cause a revolt. If your view of socialism differs, perhaps you're suffering from idealism, in which case you'd best go have a good hard look in the mirror and decide to give it up and see how the world really works, right now. Socialism is a direct means of public control by the state, always was and always will be, because the state pays for it, the beneficiaries do not. Any other quibbles are quite frankly ... irrelevant.

I also would remind all my readers that with regard to the “special people,” I'm not including those who have managed to become moderately comfortable or well to do, I'm speaking of those whose power and fortunes are gargantuan, even when compared with the self made or family millionaires, who are often the leading lights of their local communities. These self made or family inherited people are in fact the real John and Jane Galts, the pillars of society, those without whose efforts, the life the rest of us lead would be far more arduous. These people deserve all the credit they get for what they do. The same cannot be said of the billionaires, the hedge fund managers, those involved in financial or legal plunder, anyone working for some government agency as a front for special interests run either by or for oligarchs.

Honestly made fortunes are usually recognizable and those who make them usually know how to recognize each other in the places where they meet. Most would be able to recognize, and a few have told me, of their run ins with oligarchs, government agents or special interests. They are usually aware of the differences.

Even if one is not in the John or Jane Galt social strata, yet aspires to it, one usually knows better who one is, how well one's business is doing, perhaps has some plans for maintaining it, expanding it or getting out of it. Most independent business people have been entrained to fear competitors and others who are not even in their line of business.

If one looks candidly at the reasons for these fears, they all boil down to money, the fundamental scarcity of it in order to maintain and grow business, etc. The reasons given for this scarcity are patently absurd, deliberately confusing and evasions of the facts, which are, that all money in the present system is created as a loan at interest, but none of the money to pay the interest was ever created. Just where is it expected to come from? There isn't enough. There never was and under this present system never can be enough.

But for the time being we have to live with it, knowing that each year, in order to sustain the growing debt burden -which can never be completely paid back EVER- a certain number of people must go broke or into foreclosure or asset seizure or bail ins, so that the money lenders can get control of those real assets -on the cheap- and reap a great profit if and when they can sell them. And all they had to do was lend the money.

This scarcity of money leads invariably to what we call the “musical chairs” business economy; that is that business failures are the deliberate result of the present monetary system; it's functionally designed to accomplish this, it can't help but do so, there is no way to fix it, it is a terminally destructive machine that has been tried for many thousands of years and carries within it one of the most significant inventions of mankind; money and the inevitable curse of humanity; the lending of money at interest.

How then should anything big be financed? People ask questions like who paves the roads? Let's look at things differently. Let's say one has to pave a stretch of road and it costs $20 million. Who has that kind of money? Well, some people who do really big projects like that might have that much money, but this is a public road and everyone is going to be using it. Typically the locality or state or country takes out a loan of $20 million for the road and gets the road done. This is important to the state or locality as someone, somewhere is collecting taxes from the people and businesses that live on or near the road. The better, more fit the road is, the more business is likely to get done and the more money transacted and more taxes paid. That's the idea anyway. The taxes are supposed to pay the interest on the loan, which could be as much as THREE TIMES $20 million, by the time it's paid off, due simply to compounding of interest, and the time it takes to pay it all back.

We have said before and reiterate that compounding of interest is usury on steroids, one of the most outstanding and popular SCAMS perpetrated on the public by the financial community. But, we'll leave it at that, because everyone must live with this right now.

The usual means of financing a road construction is through various public debt instruments, usually called bonds -sold in large denominations, transferable with an expiration date when they are considered entirely paid off and retired. The bonds are sold through a bank, an “underwriter.” The state collects taxes from the public in its jurisdiction and pays off the bondholders until all the bonds mature. They usually pay a dividend too so people can and do earn their income from collecting dividends on bond holdings.

Under a Valun system, the locality or state would bid the road contract, it would turn out to be, let's see -today a Valun is around $2.93 so $20 million is ... let's make it 6.826 million Valuns. Now we have to ask a serious question: that road is worth 6.826 million Valuns today, but how much more would we expect to be paid by the state or locality authorizing (causing the construction to proceed) if we had to wait to be paid for 3 months, 6 months, a year? You see, if they don't have the cash up front, they have to borrow it. But in a Valun system, the result is that the eventual cost of the road is definitely more to everyone, but there is no interest involved as the payment schedule merely calculates the higher cost of the road over time and all the Valuns involved would have to have already been created somewhere else. The end result would be far cheaper construction costs as usury (especially including compounding of interest) is eliminated. From a purely accounting perspective, any actual costs of any big project would actually reflect the true value of those projects, as what is paid for them is nothing but their actual cost in materials and labour, not that of the loan of money,]

[UPDATE 9/1/15: You just called John stupid. Elsewhere on this blog, you sometimes call people idiots. I understand and agree with you in most cases. Had John read this blog and really tried to get the proposal, he wouldn't be asking some of the leading questions he is. But you might have heard about or seen this:

Trey Gowdy SAVAGES Jonathan Gruber

Notice that Gruber was asked if anyone else at the academic conference he was attending bothered to call him aside and suggest that his remarks were inappropriate and not one of them did. That should tell us something about the professors at MIT and frankly every other college. Just who do these people think they are! I just want you to be more careful. You sometimes have to deal with people like John in this world. If you don't like his line of questioning, maybe it's best to ignore him from now on.  Best,  

Bill in NC

Thanks for sharing this, Bill. I actually believe John is what is commonly termed a troll. I have no idea who he works for or what causes he has committed himself to, but he clearly has not gotten this blog's proposal and he's intent on foisting his own ... pardon the expression, beside the point issues, into the discussions here. I am considering posting more of his drivel here so I can give him, and any like him, the resounding thrashing they deserve. It is one thing to attract the worthy and quite another to fend off troublemakers. John is a disrespectful, “know it all,” pushing his own agenda, who gets off on jeering other people. If he thinks his centrally planned fairyland using just another commodity as money scheme is such a good idea, let him go off somewhere and do his own blog. But he wont get anywhere with that. He's interested in trying to get other people to argue with him. This is an attention getting technique used by a lot of very sick people, and yes I've just called John sick too, because he is. Now onto something different:

Your proposal about labour contracts has many interesting implications. Anyone in the VEN selling their labour has a contact that allows them to create money with which to get paid. They do their work and the money is paid back to them on a pay date. Since the money that buys labour is not from that business, that business runs without considering any cost of labour. This reduces their risk, but what's really interesting is all that any business would need consider is their costs of materials, utilities, taxes, etc. Whatever profit the business earns is over and above the costs of these things -minus labour costs. How does one then determine what any labour costs and where then is the competition for lower wage costs? Also, no matter what it is, what's to prevent people from wanting to work doing something menial and getting paid way more than their labour is worth?

Ben, TX

Let's look at this: the labour contract was the instrument that caused the issuing of the money. The A member only has this right under the proposed system. But the first place the money shows up is in the business account of the business that is the other party to the contract, a B member in the VEN. That business must pay the A member his wages on whatever pay schedule is stated on the contract. At that point the money goes from the B member's account to the A member's account. Since the money still began as an entry on the business's asset side, it must still be figured into everything that business seeks to sell, to the costs of goods sold. Therefore the labour any business contracts is a cost affecting the eventual price of the projected good or service the business offers for sale.

The only difference is that in most usual cases a business must come up with the money, they either have it or must borrow it, while under the VEN rules, all labour is self-financing; money is issued directly through offering to provide labour for it. Each business must still keep costs down, so this does not mean that a business would be willing to hire someone to do something trivial and pay them some exorbitant amount of money, whether that be in Valuns or any other kind of money, as labour costs must still reflect the eventual price of whatever is sold.] 

[UPDATE 9/3/15: Would I be stupid for asking you to explain your view of socialism? You stated rather bluntly, “All forms or instances of socialism, are and were always intended as a means to keep 'the masses' in order so that they wouldn't cause a revolt.” Aren't the proposal's intentions toward the indigent a kind of socialism? Please explain.

Gretta in Switzerland 

Very well. Socialism, of whatever form, presupposes the existence of a state to keep law and order in the societies they profess to govern. Sometimes the people are enlightened enough to demand that any state ruling them protects their lives, liberty and property. One example of socialism has been tried, where the state becomes the owner of the people, their lives and property and relatively speaking the people have no liberty. The result is a reinstatement of serfdom. A serf is a human being that is said to “belong with the land” he lives on. If the landowner were to sell the land, the people living on it would go with the land. That's traditional serfdom and it has been one of the unstated objectives of socialism as a means of political control, because most governments would like to know where all their subjects are all of the time. The bankers behind all governments especially want to know too, as to them people are merely things; chattel (cattle) to be used and abused as the overseers deem fit. 

But what if instead one looks at every human being as someone who has within themselves wealth, of however meagre quantity, determined as skills or talents to do particular things, which could be sold to produce an income? There are two ways to issue money in the proposed system: either one works for it, in which case the money is issued as part of the contract to do work, a simple labour contract, or if one is deemed too poor or disabled to do any work, a stipend, a minimum subsistence, is determined by the local independent exchange (IE) and that indigent A member is allowed to issue so many Valuns each month until their circumstances change or for their lifetime. 

We maintain that any and all instances of “blaming the poor” for this or that economic difficulty, as Ayn Rand and her supporters have attempted to do, are not only dead wrong and irrelevant, but actually would destroy the prospects for anyone else to acquire more money and become rich. There is as we have described it in this blog a difference between being wealthy, which is potentially a universal human condition, and being rich, which means one just has a lot of money. There certainly will be rich people in the Valun system. Rich people can become and sometimes are the pillars of their communities as their riches generate opportunities for everyone else. 

What the proposal does is take the “helping the poor” side of socialism down to the local level, to the level of what someone who is poor requires to carry on a level of life the rest of the community accepts as a subsistence level. For the time being, because that's what people must live on, we would accept the current amounts of money handed out to the indigent by governments as a basis for determining what this subsistence level might be. For instance, if one is getting a grant of $1,500 per month, a parallel amount of Valuns would be allowed to each indigent A member. The number of Valuns would change each month based on the fluctuations in prices of dollars and precious metals so that each and every Valun issued preserves the purchasing power it had at inception, right now at least $2.16 per Valun on 11/2/2011 the proposed inception date. At this time each Valun would represent the current purchasing power of $2.91 and under the proposal the Valun would never fall in value lower than $2.16 ever. It's built that way, something the present system can't claim

It should be clear then that under the proposal, “helping the poor” would no longer be something that can be used as a political issue to gain advantage for this or that politician or political ideology. It would not be something determined “on high” and dictated by any state (or bank) but would be something handled locally by each neighbourhood independent exchange (IE).]