Three Articles came out recently that show that John Turmel'sand other ideas previously considered "moonbat" are becoming mainstream. I guess that is why one of the articles ["A maverick currency scheme from the 1930s could save the Greek economy" ] is by George Monbiot (;-)) All of them involve the growing realization that our cycle of booms and busts, bubbles and swindles, is a design flaw, a worldwide constitutional flaw. This has to be fixed. And even the wealthy are starting to see that.
After describing the mess created by Austerity and an upside down European Confederation constitution. Monbiot notes a number of "radical" seeming ideas:
"One of these radical ideas was proposed a few months ago by Martin Wolf in the Financial Times. He suggests stripping private banks of their remarkable power to create money out of thin air. Simply by issuing credit, they spawn between 95% and 97% of the money supply. If the state were to assert a monopoly on money creation, governments could increase their supply without increasing debt. Seigniorage (the difference between the cost of producing money and its value) would accrue to the state, adding billions of pounds to national coffers. The banks would be reduced to the servants, not the masters, of the economy." [http://www.theguardian.com/commentisfree/2015/feb/17/currency-scheme-1930s-save-greek-economy-eurozone-crisis]
Of course this only makes sense due to the fact that our banks are constituted as privateers. They have a letter of marquee to make money and no restrictions on who they levy broadsides at in the process. And they do it with printed money ostensibly based on deposits from customers. However, on the other hand, Monbiot also notes that as Ann Pettifor notes:
"governments have failed to understand what money is. It should not be seen as a commodity, she says, but as a social relationship based on trust."
And of course because Banks create money taking away that power simply threatens to collapse the system even faster than banks do when the input of the "money multiplier" becomes negative. The problem is that money also is a token of wealth and a measure of wealth. If there isn't enough money in circulation for everyone to pay employees and buy stuff, the economy collapses. So while she's right that banks have been an improvement over the old usurous money lenders and over loan sharks. They do engage in usury by the mere fact of charging interest on money that really should be the property of the Governments. Martin Wolf is right and Ann Pettifor is only partly right. She should read John Turmel he nailed what is wrong with the system. Still Monbiot quotes her and notes:
"The supply of money is, in effect, unlimited: as long as there is sufficient productive activity to absorb it there is no obvious restraint on the amount of money that can be issued. So when governments and central bankers tell you that the money has run out, Pettifor argues, they are either deceiving us or deceiving themselves. What holds back economic activity is an unnecessary and artificial restriction of the medium of exchange." [Monbiot continued]
Silvio Gesell and Stamp Scripts
This is practically John Turmel verbatum. But Ann Pettifor claims "Banking’s great civilisational advance has been all but destroyed through deregulation" which is like blaming the cops for a bank robbery. But while Monbiot references both these writers. The heart of this subject is in a book, The Future of Money and in some real life applications of the ideas of Silvio Gesell. People driven by a shortage of valid money started creating their own money locally. Monbiot explains:
"In its original form, stamp scrip was a piece of paper on which a number of boxes were printed. The note would lose its validity unless a stamp costing 1% of its value was stuck in one of the boxes every month. In other words, the currency lost value over time, so there was no incentive to hoard it. Stamp scrip projects took off across Germany and Austria after national currencies collapsed in the early 1930s. In 1932, for example, the Austrian town of Wörgl was almost broke, unable to finance public works or to support its destitute population, until the mayor heard of Gesell’s proposal." [Monbiot continued]
This little pot of money kept circulating, enabling Wörgl to repave the streets, rebuild the water system He put up the town’s tiny remaining fund as collateral against the same value of stamp scrip, and used it to pay for a building project. The workers then passed on the currency as quickly as they could. Like the magic pudding, this little pot of money kept circulating, enabling Wörgl to repave the streets, rebuild the water system, construct houses, a bridge and even a ski jump. In the 13 months of the experiment, the 5,500 scrip schillings in circulation were spent 416 times, creating between 12 and 14 times as much employment as the standard currency would have done. Unemployment vanished, and the stamp fees paid for a soup kitchen feeding 220 families. [Monbiot continued]
So local money worked so well that where it was allowed it put people back to work and "cured" depression. Very encouraging. Sadly the Banksters were more important than the people and owned the government enough to nix this idea. Monbiot continues:
The governments of Germany and Austria, profoundly threatened by the success of these projects, shut them down and employment collapsed once more. When the US economist Irving Fisher examined these experiments he concluded that “the correct application of stamp scrip would solve the depression crisis in the US in three weeks!”. Roosevelt’s government, aware that such currencies could invoke a massive loss of federal power, promptly banned it.
Irving Fisher pushed this plan in the USA but couldn't get it accepted. But the Austrians? You'd think ole Ludwig Von Mises would have been an enthusiast for the idea. And after all he was:
“Engelbert Dollfuss [sc. was] ... the Austrian Chancellor who tried to prevent the Nazis from taking over Austria. During this period Mises was chief economist for the Austrian Chamber of Commerce. Before Dollfuss was murdered for his politics, Mises was one of his closest advisers.”
[Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997 http://socialdemocracy21stcentury.blogspot.com/2014/05/mises-and-great-depression-in-austria.html]
So not to belabor the point. Von Mises wasn't really interested in Local Money and in squashed Wörgl's stamp script idea like a bug. I've quoted Von MIses and his history directly from books before. I'm quoting a blog for convenience. He, like EVERY SINGLE AUSTRIAN SCHOOL ECONOMIST preferred:
"“In tackling the economic crisis the Dollfuss-Schuschnigg dictatorship pursued harsh deflationary policies designed to balance the budget and stabilize the currency. The government’s program featured severe spending cuts, high interest rates, and frozen wages. …. In a sense the Christian Corporative regime demonstrated the viability of the Austrian state, but it did so at the cost of alienating a majority of the Austrian people. On the eve of Anschluss a third of the population was still out of work, while those fortunate enough to have jobs were bringing home paychecks considerably smaller than before the Great War” http://socialdemocracy21stcentury.blogspot.com/2014/05/mises-and-great-depression-in-austria.html
Von Mises later gives Gesell's ideas lip service, but the reality is that their solution to economy is banker rule and all the talk about doing away with Central Banks is aimed at getting them out of the way of privatizing money. Now Austria may have done better than the United States. But Von Mises' alienation of Austrian working people (and pretty much everyone else) is probably what put him so easily in German sapper targets. Von Mises fled Austria to move to Switzerland in the wake of Dolfuss' assassination. And contributing to that was that, instead of looking out for everyone, he imposed austerity. Van Hayek would later give the exact same economic and political policy advice to the Chilean Dictator Pinochet. So much for smaller government - but they will make it part of their propaganda.
"Linked to an exhausted determination of the Austrian government to resist the pressures from Germany, the economic crisis of the 1930s should be seen as an additional reason why the Austrian society was receptive to the annexation by Germany in March 1938” (Gerlich and Campbell 2000: 55)." http://socialdemocracy21stcentury.blogspot.com/2014/05/mises-and-great-depression-in-austria.html
As to why the United States failed to apply Fisher's ideas. That is part of the narrative I'm driving at. If we want to fix our economy permanently we have to fix our banking system and money system. Not just in the USA but worldwide. And the reason that Roosevelt and Fisher couldn't implement Gesell's ideas is one reason that we are facing similar problems again. The good news is that Fisher never shut up, and Gesell's ideas are making a come back as folks like Monbiot and others start to listen to Chomsky and those who picked up the standard. Gesell's ideas were tried both during the Great Depression and also in the middle 2004-2008 period when Argentina's economy collapsed after the IMF and World Banking community attacked their currency and forced them off of 1:1 exchange with the dollar. I experienced this first hand while visiting the country, seeing local articles about how ordinary entrepreneurial Argentines homesteaded factories abandoned by the economic elites and failed companies.
- Next Article
- Irving Fisher and Stamp Script [http://holtesthoughts.blogspot.com/2015/02/irving-fisher-and-stamp-script.html]
- Hard to read/poor translation: http://www.slideshare.net/LocalMoney/silvio-gesell-the-natural-economic-order-11957639?related=1
- More on Stamp Scripts:
- A Biography of Gesell:
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