2008-2-27 03:44:00
Larry writes:
"You created a fairy tale where your ideas unsurprisingly triumphed. People who live in the real world are not required to refute every fairy tale that someone creates to be reasonable. I am interested in facts and principles that apply to the real world."
JJ:
Jesus also used these fairy tales called parables. They are powerful because they clearly reveal whether or not a principle is true. If there is a flaw in a parable it is easy to spot. So far no one has illustrated a flaw in it.
Larry:
"When I argue for the gold standard I am not really arguing that the United States can revert to the gold standard. I expect that would be very difficult."
JJ:
That's one of the reasons I have maintained the gold standard is impractical. I'm glad we are on the same page here.
Larry:
"I am specifically claiming that a gold standard would be appropriate for a new city of Zion that has the luxury of starting from scratch."
JJ:
Then we are back to the situation of the parable. Perhaps you can rewrite it to illustrate to us why the gold standard would be superior.
Larry:
"You are the one claiming to have a wonderful, new system that will work. So how about explaining it instead of asking questions about the past, or ridiculing the gold standard because it can't fix the astronomical debt we have accumulated since abandoning the gold standard?
"You claim to have a wonderful, new, and revolutionary system. Explain it clearly if it is really more than a fairy tale."
JJ:
I never said it was a wonderful new system. I do not consider my teaching on this as a major new revelation as The Molecular Relationship but a common sense application of the best we have used in the past. It works like the present fiat system with several changes.
Larry:
"Greenspan is definitely a contradiction. He wrote this article before he sold out for the job of chairman of the Federal Reserve. Regardless of that his prior writing on free markets is very highly regarded by many professional economists of the free market variety."
JJ:
As a side note are you aware he is a disciple of Ayn Rand?
Larry asks:
"1. How do you adjust demand?"
JJ:
Demand is just what it is. The money supply adjusts to it, not the demand to the money supply.
Larry asks:
"2. What methods do you use to increase or decrease demand?"
JJ:
Supply the needed money and let demand take care of itself.
Larry asks:
"3. If the value of money is too low (relative to your standard) what do you do?"
JJ:
Issue fewer dollars, but this most likely wouldn't be necessary if the dollars issued go directly to the creation of goods and services.
Larry asks:
"4. If the value of money is too high (ditto) what do you do?"
JJ:
Issue more dollars.
Larry asks:
"5. Who decides how much goods and services to project?"
JJ:
Assuming I had authority to decide I would have a committee of seven elected people assess the expansion and need for money over the next 90 days adjusted to the surplus or deficit of the previous 90 days. Then the next 90 days they assess how accurate they were and repeat the procedure. The principle of correction is at play for if they overestimate the need for goods and services in one quarter they can issue a little less in the next.
Larry asks:
"6. What principle determines question number 5 above?"
JJ:
My answer is included above.
Larry asks:
"7. How is it again that a centralized authority is better suited to make decisions about the demand for goods and services is appropriate vs. the people who are expected to buy them?"
JJ:
No authority determines the demand. The people do. Those who issue the money merely assess and accommodate the demand of the people whatever that happens to be.
Larry:
"That was the system where the Fed printed money and charged banks 3% for this new money. Again according to his scheme the banks would lend it out at 3 percent. As I asked previously, how does a bank stay in business loaning money at the price it pays for the money?"
JJ:
The way I understood Dennis' plan was the banks would add on an extra 3 percent and their profit would come from that. Perhaps he will clarify.
Larry:
"What formula would a government regulator use to determine how many TVs need to be produced this year? How many backyard grills should be built? How many cars, razors, rolls of toilet paper, and millions of other commodities should be produced and in what proportion? So you are suggesting we put some government bureau in charge of figuring this out?"
JJ:
How does Apple figure out how many Ipods they will need to make? They do not know the exact amount but make an intelligent guess and then if the guess is off they adjust to it in the months to come. The same principle applies to supplying money for all existing needs of goods and services. A committee would make an intelligent guess and make adjustments each quarter to fill the need.
Larry:
"That is always the problem with central planning."
JJ:
It's not central planning. The people determine how much they need, buy and manufacture. They make their own plans. A just government just issues money to accommodate the need. They have nothing to do with regulating production. The only central planning would be roads, parks bridges, etc., that all use.
Larry:
"Sometimes the economy needs higher interest because bad investments needs to be curtailed (and often bankrupted). The general government reaction is to figure out how to bail out the bad investor. The real problem though is that an angel of God probably doesn't have sufficient wisdom to make these decisions for an economy like ours today, and no government bureaucrat has ever demonstrated that sort of wisdom reliably where the economies involved are of the order of modern first world nations today."
JJ:
Today we have many thousands of laws and regulations but the most important part of our system is not regulated except by the spending whims of Congress and the President. Money issued needs to be controlled only by the demand for goods and services rather than the spending desires of politicians.
Larry:
"The problem is not primarily honest. The primary problem is that the answer to how much goods need to be produced properly needs to be determined by the democratic vote of purchasers who use their dollars to vote for, or against products and services."
JJ:
Agreed.
Larry quoting JJ:
"New money should be added to create useful products rather than to finance social services as has been the case."
Larry then writes:
"I do not see any reason to trust bureaucrats to control this nearly as well as free markets. Free markets are a lot harder to 'buy.'"
JJ:
The free market would control it. The committee would merely assess the free market and seek to accommodate it.
Unfortunately we will always need a certain number of public servants or bureaucrats, but if the Molecular Order were in play they would be forced to be more responsive and responsible or they would be replaced.
The need for creating a new money system for a new society is a ways off yet. I do not feel inclined to come up with all the details as to how it will play out until we approach the time when the need arises. Right now I only wanted to put forth a few basic principles concerning which the details could play out in a number of different ways.
Similarly, a lot of idealists looking forward to a new country have written new detailed constitutions. These may be good food for thought but there is no place for them in our current society. The time for such a creation with its details is when one has power to implement them.
Copyright © 2008 by JJ Dewey, All Rights Reserved