Thursday, January 21, 2016

#66 On Value and the Creation / Issuance of Money

Source for any and all stock market charts: here 

It's the middle of January, 2016. Pondering present market conditions, looking at the stock market, figures for the DJIA, a classic upside down M or W formation with bottoms at around 15,400 and 15,950 and a corresponding top between them in the neighbourhood of 16,800 occurred between late August and early October of 2015. It was inevitable, given that classic chart formation, that the market would surge back up to nearly 18,000. Market technicians look for these patters for buying and selling and so do their computer programs. There is an observable curve, technicians refer to it as a moving average, in the market performance over the past two years which gave the limiting potential of the market surge to no more than 18,200. It didn't make it that far, confirming the force of this natural curve. Limiting factor up for this market is around 17,750 which means right now it can't make it that far. The long term trend is down.

The present drop can be analyzed by looking at the charts of market performance for the past few trading days. So far, we have seen worse than this, as the fall in the market late last August was deeper, but we have not seen the depth of the present fall yet. The figures from market close for 16 January show a low around 15,845 confirming two recent lows in as many trading days, with the added downward pressure of the moving average.

Stocks are commodities. They trade in known quantities all the time; there is always someone, a stock specialist, who knows how much of each one of these stocks exist, who owns the lion's share of them, etc. There are other commodities that are in the categories of the consumables; they are used up, so require replenishing (these include energy from combustibles), the durables; those things that are used for their durability, metals, minerals, wood products, glass, etc. Stocks are part of those man-made commodities we call securities. There are two varieties, equities and debt instruments. Stocks are in the former category and bonds in the latter category. At any time there are at least ten times as many bonds for sale as stocks.

Some think of equities as the economic piggy bank of an economy -certainly one which is largely made up of state chartered corporate entities whose pieces are sold to the public as shares; stocks. When the market is up, the piggy bank is full, when it falls, the money in the piggy went somewhere else and the shares fell in price. The man who bought the stock high when the man who owned the stock had bought it low a few years back and sold it, is left holding an asset he can't afford to sell; he loses his money -until that stock may somehow manage to rise again to the point it was purchased for. 

Some consider this wealth exchange, but that's only because they're confused concerning that what is really wealth. Again, as we have and will consistently maintain throughout this blog, wealth is only that capable of producing an income. If it can't do that, it aint wealth. We aren't going to be fooled any longer by those parading themselves about with all their fancy stuff that they think someone out there wants for the money they paid for it, while meanwhile none of that “stuff” provides them directly with any income, or any return, upon which they could rely for basic necessities. Now presumably the people who should know about this stuff, and the best and brightest of them certainly do know, will always maximize the “return on investment” for their clients; what literally did that invested money produce in terms of itself? That is certainly income then and thus demonstrating that money invested in equities can produce income and is therefore true wealth. However, as everyone also knows, stocks can and do lose their value relative to invested dollars in other stocks and therefore equities can also diminish or even eliminate one's wealth. Where did one's wealth go when a stock deal turns bad due to market conditions?

This has always been an interesting question and can be explained using other items, not just stocks. It runs something like this: Tom buys a couch for $800 while Bill buys the identical couch for $500. As we've said all along, what really backed the money Tom and Bill used had nothing to do with gold in Ft. Knox or anything related to “money as a commodity” that some speculators in far away cities were wagering on. No, what backed the money they spent were the things they bought with it, period. It doesn't matter how much of this money was out there, as for one thing, and the most obvious giveaway that the “Austrians” and others are liars when it comes to this, is that not all the available money is ever wagered (bid) on every sale. If someone sells couches for $500 cash and $800 financed, the same couch varies in price in that store by $300 or 37.5% which means that Tom's identical couch is that much more expensive than Bill's and all the difference in price and value exchanged boils down to the differences in TIME required to settle the transactions.

Down through history, those who have advocated that money be just another scarce commodity and that this guarantees an end to price inflation have attempted to base their concept on one or other of these various commodities. But there is something missing here. Has anybody recognized it yet? Some say it would be TIME and probably they are right, and TIME has its uses concerning money matters, that's for certain, as the example above shows. The missing value gets down to something every human being has to one extent or another, the time to do something that has a profitable outcome in terms quantified by money, any money would do. This time allotted to paid labour we'll just call labour, and it is a commodity also, the most important one, for without it very little else could be said to have any value at all.

This one is obvious; look around you, go anywhere, everything you see that can be attributed to human activity was the result of labour. Most, not all, of that labour was paid for with money. Therefore everywhere it is possible to discern immediately how the cost of labour is related to everything, especially anything that has a more or less permanent basis. All our towns, cities, harbours, highways, railways, airplanes, etc. are all possible because of labour and would never have existed without it. We'll return to the importance of this understanding as a basis for honest money issuance. By “honest money” we certainly do not mean precious metals, which are commodities, that some people without pausing to consider the obvious, have rushed to the assumption that since they were used as money in the past that somehow they are uniquely fitted to perform the function as money and nothing else. There's a lot more rubbish hoisted about precious metals too, but that's all right; we intended to find a place in our monetary proposal that would make a useful place for precious metals and precious metals dealing as a wall between our money and theirs. A few, mostly foreign readers not Americans, have understood this part of our proposal and understand immediately why it was chosen; because there is no reason to trust any money that has the name of a bank or government printed on it.

Meanwhile, here's the reality: We have all, well most of us, been living under a “top down” or “trickle down” monetary system. It starts with the central banks at the top, lending all the money to governments as their “best credit risks” and getting their cut, which does not exist, out of the rest of us who use their money.

The government gets this money first and spends it into the economy by buying things. It pays for things for itself (which we don't want) and others (trading partners of the biggest private banks). The government cannot trade back into the market in exchange, so it taxes some of what it spends, not all, back to balance off at least some of what it spent. The inevitable result of not cancelling back what one buys with what one sells in comparable value must be price inflation; more money chasing fewer goods is the usual quick explanation, but it's a little more complex than that as location and other factors influence price and as we already said, not all money is available to every sale which voids the whole money as commodity idea when it comes to prices and buying decisions. You have side betters on prices of every exchangeable commodity. These are the commodities futures markets and they also include speculations on the future value of money by various currencies and the ratios between these form the basis of day to day international trade. There are various “side agreements” between trading partners attempting to keep prices for various widely traded durable and consumable commodities fair and predictable over as long a term as practicable.

What about those at the bottom economically, who form the majority of the world's population? Those with jobs work for fewer and fewer exchangeable value tokens (local money) in exchange for their labour. What of those who can find nothing to do to earn their daily bread? What of the growing percentage of homeless tent people living in our major cities that no one is talking about? If everybody around the world just stopped working, even for a week, the world would not perhaps grind to a halt, but it would be noticed.

The top down, centralized, monopolized, corporatized, federalized, economic black hole that steals wealth and shrinks income for the rest of humanity does not work, is unstable and built on the premise that some somebodies calling themselves bankers should be entitled the privilege of issuing money for the rest of us, clearly a mistaken concept. These and their supporters are the same maniacs, the promoters of bigness, who are the banker's best customers because there is more money to be made on bigger transactions, who can't even clean up after themselves; Fukushima and the Gulf of Mexico oil spill and expect to FORCE all kinds of things on us like bad air (Geo-engineering), bad water (fluoridation, etc.) and bad food (GMO's). They expect us all to just sit back and take it, dumbed down, watching shadows move on our huge TV's inside our caves (yeah Plato's cave), just ordering out what we need, never going anywhere anymore, because ... well, just because. One only goes out to go to work anymore in many places.

So what do we do? I pointed out that The Inner Track was an objective position one takes in one's life. I don't expect many to take me up on anything, otherwise the response to this blog might have been more substantial than it has been, but for those that do, taking an objective position on one's life is the result of a “sizing oneself up” process; what skills or talents do I have? What could I improve on? What would I naturally like to try to do? -to actually do? etc. This process, observation and evaluation of oneself should never end, contrary to what one may have been told. As long as one is alive, one has the opportunity to acquire new skills, discover new talents and have greater experiences; to build the capabilities to earn income into oneself, to work toward enhancing one's wealth. One takes stock of oneself and then, measured by the usual monetary yardsticks, one endeavours to keep mind and body together by finding someone else out there who will pay for our skills and talents, etc. We'll get back to the importance of having our talents, skills, etc. recognized in a moment.

In the process of taking an objective position on one's life, one becomes as much an observer as one is an activist; one watches oneself, what what one does, how one responds to others and to different situations, the easy as well as the difficult, one gets to know oneself hopefully as a best friend and then takes good care of oneself by seeking reward and avoiding trouble. One builds self confidence and assurance by the knowledge that one has successfully completed various tasks. No greater satisfaction has one than they who can look upon a nice stack of accomplishments.

Now, no one's labour stands on its own: a person with a known skill builds a reputation and the better one's reputation the more people vie for your time to do things they'd like you to do. Right now, everywhere in the world, we need more people to take stock of themselves in this way. The road to success does not consist in becoming just another chief among chiefs, but in how best to be or become an indispensable contributor to a worthwhile enterprise. What then is a worthwhile enterprise? It starts with anything that contributes to a community's stock of reliable consumables; food and energy or building materials or useful articles, many of which may not be consumable commodities in the sense that they are used up, but those things we might better consider appliances because we use them up over a longer period of time until they wear out and need replacement. We say such articles depreciate in value as they wear out.

When it comes to occupations of labour, there are certain advantages people have over others, so there can logically never be any complete equality as social justice fanatics (another bunch of idealist lunatics) may want for everybody. Likewise, just because one may be very young or even very old, may not necessarily mean one is limited by these from achieving a considerable monetary reward. Just as there are differences in compensation in terms of dollars, euros or yen, so too would there be in Valuns.

We feel the need to stress often the revolutionary aspect of our proposal; that people everywhere aught to be paid with their own money. Well, as long as we must live under the beast governments and work for their masters behind the current monetary curtain, we must use some of their money. But we have already indicated, and we are far from being a lone voice on this matter, that all present money is illegitimate based on the rules of its own issuance; that banks have usurped a fundamental human right as well as enacted a financial system (the loaning of money, not its more often widely misused sense) based on usury which is fundamentally unsound. 

E. C. Riegel's original proposal was to have everyone that is paid in dollars (or some other currency) be likewise compensated in Valuns based on one's willingness to pay in dollars any actual increase in income taxes such remuneration would represent. All matters concerning an income tax on Valuns would have to be worked out by a competently organized chartering society, the proposed International Value or Valun Exchange Society or IVES. We would need competent legal assistance here and have placed the need to attract adequate legal talent to this cause as relatively high. If the proposal is to have each worker issue Valuns as an interest free loan to the account of their employer prior to a succession of pay dates, then since the employer does not pay his employee and since the employee buys his job with money that he issues, which is not dollars or any other national currency, then it has been argued that there could be no income tax levied. We have advised that when a state decides to do whatever it does and uses FORCE to accomplish it, that taxes even on money that is not its own can certainly not be ruled out and must be anticipated. We admit that we find the idea of a state taxing labour an insane idea, but is it any more insane than deciding to grant a monopoly to a private central bank which demands interest be paid using money that was never created? THAT is what all usury is. All we allow in our proposal is for the transaction makers to pay a tiny transaction fee; Riegel's one tenth of one percent. It must always come out of money that was created elsewhere and there are only two ways to create Valuns; you work for them or your community deems you poor enough to issue your subsistence. Any extra money in a Valun system filters up through the most productive channels so that the most productive earn the most money and naturally rise to the top of their societies. Not the way it is now. The way it is now, it pays to join the corrupt hegemony that rules by fraud and trickery but pays well as every other useful occupation seems to be ground down to the least common denominator and even that will not work forever, all due to the impossibility of ever satisfying the demands of usury to pay back debt, the great cancer in the present monetary order.

We've seen the market slide more and more. The system is ultimately going to crash and there's nothing anyone can do to save it. Oh, the plunge protection team is always at it to try, but eventually it will get away from them. They aren't gods. Their system wasn't all good to begin with and there is no hope of saving it. But what would ye have to replace it? Giving the monopoly of money issue to any government is still a usurpation of a natural right. Why can't some pundits out there get that through their heads? They're idealists of one stripe or another; that's why and as usual their idealism blinds them. Too bad. The real people will eventually insist that only money they themselves issue can have any real meaning and the proposed solution accomplishes that with a monetary instrument that is impervious to being manipulated, that is capable ultimately of ridding the world of poverty and war. Since the internet has brought us all closer together, so more people are becoming aware, isn't it about time to consider another way to do things? We know who the governments answer to, not their people but their creditors. That leads to all kinds of pressure being applied simply for the profits of the capitalists, not the good of the people. We each have to begin now to take an objective position on our lives, ask ourselves what are our talents, where is our greatest wealth (that which can produce an income) to be found? Then we should be looking for a monetary system to measure that wealth. How much does it pay to do anything? Increasingly, more want to know and will want to know.

David Burton

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