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The New Greenback

July 6, 2011July 20, 2017 Joseph Dewey

This entry is part 28 of 31 in the series 2011B

There are a lot of different economic theories and ideas for an improved currency but one thing most thinkers have in common is this. The current system has a lot of flaws, is unstable and needs an overhaul.

So, what is wrong with the current system? Let us list a few items.

(1) Money creation is delegated to private banks instead of “We the people” through our elected representatives.

(2) The government borrows money adding to the public debt when it could create its own with no debt.

(3) The government borrows money at interest from private enterprise and other nations when it could create it’s own money with no interest.

(4) The interest rate on borrowed money, public and private, is determined by private interests.

(5) There are no effective restraints to prevent the Powers-That-Be from adding too much currency to the system causing inflation. They also have power to withdraw money from the system to create deflation which could lead to a depression.

The only current restraint is a debt ceiling that is supposed to limit government borrowing, but it may as well not be there. Congress routinely overrides it whenever it decides to borrow extra money placing citizens in greater debt.

A gold or silver standard is also ineffective for government has always found ways around their restraints and when a big crises comes along the whole metallic standard is trashed and becomes as if it never was.

So, are we doomed to a flawed money system no matter what we do?

I do not think so and here is why. We as a human race are always moving forward, making progress and perfecting that which was once flawed.

I remember when I bought my first Mac, a Mac Plus. I also bought with it the most sophisticated word processing program at the time – it was Microsoft Word, version 1.0. My new fangled computer with Word was a lot better than the typewriter I had before but it was far from perfect.

Then later they came out with version two, three, four etc. Each had improvements until we now have a program that does everything but polish your shoes. I still may not call the latest version perfect but I have to admit it does a lot more than version 1.0, and if I read the manual or Google information I can figure out how to get it to do any task within its parameters.

We have to look at the evolution of currency with the same perspective as a computer program. It may have had kind of a rough start and some versions are not as good as others, but overall we are progressing toward something that is stable and will serve us well.

Ancient Greece and Babylon had money version 1.0. Rome had version 2.0. After the fall of Rome we had version 2.5. The Tally stick was version 3.0. Creating fractional banking based on gold was Version 4.0. We experimented with several fiat systems and paper money in version 5.0 and then moved back to a gold standard in version 6.0. Finally with the creation of the Federal Reserve under gold we have version 7.0. Then when Nixon dropped the gold standard completely we moved to version 8.0 – and that is where we remain to this day.

Now some people may look at this progression and say that they think that some of these steps were not progress but this is also the case with various versions of computer programs. My favorite version of Microsoft Word is version 5 from 1992. Even so, I keep updating to newer versions to keep up and do find some things in them which are useful while others are annoying and distracting.

Unfortunately, we have not yet arrived at the equivalent of Word 5 as far as money goes, but improvements have been made that the public likes and I am sure will be retained and refined. Most of these are centered around the idea of convenience.

The impetus for the beginning of money itself was for convenience sake. Instead of trading cows for wheat it became much more convenient to trade coins. Later, paper became accepted because it was much more convenient to exchange a piece of paper than 20 pounds of silver.

The next stage in convenience is electronic money. It is much easier to buy something from a shop 1000 miles away with some type of electronic transfer than to send cash, check or money order.

Now some are experimenting with various forms of virtual money. Time will tell if this adds to convenience.

The point is this. If an innovation adds to convenience, whether it is an improvement in a car, a washing machine, a computer or money, then that improvement is here to stay.

Yes it is true there are always exceptions. Maybe the Amish would rather have a horse than a car and a pencil rather than a computer, but as a whole civilization will embrace that which adds convenience and will refuse to go backwards.

There are those who want to go back to coined money and gold backed currency but the inconvenience of doing this will make the crucial support for going backwards well nigh impossible. We might as well try and talk people into going back to the horse and buggy to save gas.

People will resist inconvenience like the plague and though this quality in the human race is an irritant to some it is overall a benevolent force that impels progress.

The results of new conveniences are rarely 100% positive. Perhaps the greatest convenience of our age is the automobile but this comes with the drawback of causing over 40,000 deaths per year in the United States alone. Does this make us want to return to the horse and buggy? Never.

How about air travel? The time savings is very convenient. But do stories of hijacks, terrorism and plane crashes discourage us? No. Convenience still prevails. Convenience always prevails.

Civilization has been shown that the transfer of money can be much more convenient than the exchanging of hard money of the old days and will demand that convenience continue or be expanded in any new version of the money system.

Has any new version of Microsoft Word dropped the spell checker? No. That will never go and neither will the ease of transferring money at the click of a button as long as there are buttons to click.

Now we arrive at the prime criteria for any new and successful money system on the horizon. It must not drop, but continue (and improve if possible) the convenience achieved with current money. One can argue the benefits of revisions of other aspects of the system but history tells us that the people do not want to drop any convenience even if there is significant risk. Any developer of a new money system needs to accept the conveniences established and work with them, not against them – include them, not exclude.

To create a new and improved money system we need to keep the conveniences attained and add two improvements.

Improvement One
Instead of giving the Federal Reserve power to create money and loan it to us at interest the government needs to take back the power to create its own debt free money given to it by the Constitution.

This money would have several advantages over the Greenback money created by Abraham Lincoln. The Greenbacks did not have universal legal acceptance. The banks were exempted from receiving them as payment for their huge government loans. They also could not be used for customs duties and imports. All these had to be paid in gold.

An advantage we have now over Honest Abe is the dollar is the reserve currency of the world and we now have the opportunity to create a universal Greenback that could have worldwide acceptance giving it power to revitalize not only the economy of the United States but be a benefit to the world.

The second advantage is our nation is not involved in a life and death struggle like the Civil War when the Greenback was created. During any such great crises the stability of currency always suffers and is sometimes destroyed. For the first time we have an opportunity to create a modern Greenback when we are not in a war of survival. Because of worldwide economic chaos the times are far from optimal but the situation just pushes the need for a solution to the forefront more than ever.

Improvement Two
The solution to a stable Greenback money system is a simple one. The State must not add more money to the system than will be supported by the value or increase in value of the goods and services in circulation. The simple rule is this. If there is too much money of any kind (including gold and silver) is added to circulation then we will have inflation. If there is too little money then we will have deflation, which is a much greater problem.

For instance, the housing crisis, which started in 2006 deflated the value of homes creating a domino effect leading to all kinds of economic woes. Imagine how bad things would have been if deflation was more universal.

So, to create stable Greenback money all we have to do each year is calculate the amount of money that needs to be released and added to the system. The next year we assess a new amount and repeat the process.

That’s a pretty simple process isn’t it? It is so simple a formula for proceeding could be programmed into the cheapest computer. The problem with making a new Greenback work then deals not with the problem of how much money to issue, but as always with the people who have the power to create it in the first place.

The solution to stable money is ever so simple a child can understand it. The State should not create or borrow too much money. The hard part is keeping these guys in line. Once a person gets a taste of spending money that seems to have an unlimited source, an addiction seems to take hold and nothing, even impending doom, seems to hold some of them back. These guys would continue to run up a tab on the Titanic even as it begins its descent into the great deep.

Are we doomed forever to have money systems that are held hostage to such human weakness?

I do not think so. For every problem there is a solution. Let us look at some.

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Spiritual Work and Money

February 19, 2011 Joseph Dewey

This entry is part 39 of 50 in the series 2011A

Larry Woods asked a while back about what is right and wrong as to the disciple’s approach to charging money for various types of service.

Jesus himself is responsible for some of the ambiguity on this subject for on one hand he said:

“Freely ye have received, freely give,” Matt 10:7 but then he also said “the labourer is worthy of his hire.” Luke 10:7 & Matt 10:9

Spiritual workers through the ages have interpreted this a number of ways. Those with a paid ministry say that receiving a wage is fine because the laborer is worthy of his hire yet they still assist and preach freely to the poor. They teach for free but work on voluntary donations.

Unpaid ministries say we should teach and perform service yet the workers receive no wage at all except what is necessary for administration.

Still others believe it is fine to have an actual mandatory charge for people should pay for what they receive.

This is one of those dilemmas that will not be solved by looking at black and white detail. Instead the servant must understand the underlying principle governing the material recompense of servants in the world.

When speaking of giving freely and receiving payment Jesus was talking to disciples that he sent out into the world who traveled from place to place and town to town. To understand the scriptures on this one must understand how people in that age related to such travelers.

At that time in history we have to realize that they had no entertainment available as we do now. Also if a person wanted to learn something he couldn’t just order a DVD, check out a book or turn on educational TV.

Some of the large population areas had theaters and gathering centers which provided entertainment but for the general population avenues of entertainment, as we understand it, were sparse.

So instead of watching TV, reading books or attending a Tony Robbins seminar what did the people do to entertain or educate themselves?

This vacuum was filled by traveling teachers and entertainers and many people in that day made a living by traveling from town to town and presenting themselves as living books.

Here’s how it worked. Since most people could not read or have access to the great works, this need was filled by individuals who specialized in memorizing certain books, stories, plays, philosophies or whatever there was a demand to hear. If a certain book was popular an entertainer may memorize the whole story pretty close to word for word. He would then practice his delivery to make the story as interesting as possible and then travel from town to town.

Various communities had a network so word circulated as to new travelers showing up and what their subject was. Because people were hungry for entertainment and not too much was available each new traveler usually was able to gather a pretty good audience, especially if his delivery was good.

Many of the travelers gathered around themselves whoever would listen and then accept donations. Others with a good reputation would only entertain a paid audience. Both groups had the same goal – to make a good living – but approached it from two different angles.

By today’s standards someone standing at the center of a crowd reciting a Tom Clancy novel would not seem like good entertainment, but for that age it was a real treat to hear stories and teachings from afar.

The disciples of Jesus had the advantage of having a unique message and since Jesus was becoming well known it was probably easy for them to gather a crowd wherever they went. Jesus instructed them to not charge a set fee but to freely give as this would bring the largest audience wherever they went. But then he told them “the labourer is worthy of his hire” meaning that it was fine to go along with the custom and accept donations so they would have the funding necessary to continue their work.

In other words, the disciples of Jesus handled fundraising after the manner of the customs of the traveling entertainers of that era.

If Jesus were here today would he handle raising funds the same way?

Probably not because the situation is much different.

The Key to correct thinking on this is not to try and exactly duplicate the past but to ask what is the fairest and best way to proceed.

Here is what I have concluded.

If you have a product or service that you have created by the sweat of your brow you can sell it for whatever the market will bear. There is no negative karma in doing this for you are doing your part in making the machinery of society work. If you provide discounts or give donations to those in need then positive karma will be the result.

If you have spiritual teachings and desire yourself and the participants to get as close to the Spirit as possible then you will want to place as little emphasis as possible on money. Energy follows thought, so if fees involved are as high as the market will bear then thought and energy from the teacher and audience will be diverted to the material side.

It thus helps the teacher to keep thought and energy directed to Spirit and give service freely when possible and charge minimum or reasonable fees when needed.

I know of people who see themselves as spiritual servants who charge $1500 for an hour of their time. Others go the other extreme and insist there never be a charge. These are usually ineffective and never have the money available to do the work.

Most will agree that accepting free will donations applied to the work is normally a harmless approach.

Conclusion: For work in the material world charging what the market will bear is fine. But if the goal is to center consciousness on the spirit then do whatever it takes to keep attention on the spirit by either relying on donations or charging a fee that all can afford.

Take our yearly gathering, for example. We have expenses involved so we charge a reasonable fee. When we become aware that someone is hurting financially we will offer a discount or free admission. No one I know of has ever been turned away because of lack of money.

In about two thirds of the gatherings we have come out almost exactly even and about a third of them we have come about a little ahead. I don’t recall any of them losing money.

Not charging at all can place too much attention on money because of the lack of it and charging too much can do the same. The key is a common sense middle way.
Copyright 2011 by J J Dewey

The Gold Standard, Part 1

January 19, 2011July 19, 2017 Joseph Dewey

This entry is part 14 of 50 in the series 2011A

As noted, the gold standard has appeared in three different incarnations in our history and many conservatives are advocating a return to it in some form. Are any of them practical? Let’s take a look.

We will call the first of these “the purist gold standard with no fiat money.”

One could say that this system is a refined form of bartering, for before there was any standardized money system people exchanged goods through this system of exchange. In our early history individuals had to garner some type of product that was in demand so they could trade for other essentials. If a family raised cattle they may trade a cow, meat or milk for grain, tools, gold, or even a wife for the kid.

This system proved awkward, for many of the products exchanged had a low shelf life. If you had an expensive chariot to sell you just couldn’t exchange it for a silo full of grain for several reasons. First, you had no means of storing a large quantity and secondly it would rot before you could use even half of it.

What to do… You could find ten other people who need grain, but then five out of the ten may not have anything you want so you may wind up with materials worthless to you that you have to spend days bartering away rather than spending time making more chariots.

In parts of the ancient world precious metals, particular gold and silver, became very useful in making the bartering process work. They had the advantage in that they did not decay, did not take up much space and were recognized as having value. This meant that our chariot maker could trade his vehicle for an agreed upon amount of gold and then divide it up and trade it to ten different individuals who had items he actually needed.

Some believe that gold was universally used as a medium of exchange since the beginning of civilization, but such has not been the case. Some parts of the ancient world had very little gold so its use was not practical. Other parts had gold but did not assign that much value to it.

The Aztecs are a prime example of this. Gold didn’t have much value to them until it was made into something beautiful and even then only those of high rank could use it making it fairly useless to the common citizen. In its raw form jade was more valuable. Other items used in exchange were corn, amaranth, beans, cotton armor, obsidian knives, copper bells, sandals, shields, feathered capes, cacao, shells and feathers. They just couldn’t understand why the Spaniards were so obsessed with gold and considered cheap glass beads to be just as valuable unless the gold were made into something beautiful. ¹

The Mayans used gold less than the Aztecs and the closest thing they had to money was cocoa beans.

The Incas had a lot of gold but didn’t use it for money. Most of these ancient American civilizations relied on trade and barter and had no standardized money.

In our past then gold has fallen into three categories.

(1) An interesting yellow metal that is useful for art and jewelry.

(2) A valuable metal useful in barter.

(3) Money.

So, what’s the difference between 1 and 2?

To understand this we must ask another question. Exactly what is money?

The simplest answer to this is that it is a medium of exchange. This is a simplistic definition that is not complete. For instance, most items used in barter and mediums of exchange are not considered money. A plumber can exchange his labor for potatoes, but the potato farmer will not state he received money from the plumber. He will merely say he received his services.

Similarly, there have been many times in our history, such as the British Isles after the fall of Rome, that gold was considered valuable, but used for barter instead of money.

So what makes pieces of metal, paper, shells or tally sticks money?

Now some argue that gold has always been money because it has intrinsic recognized value but so does food, shelter, fuel and tools. What is the difference?

In a barter system there is none for they are all mediums of exchange.

So then a substance is not seen by society as money merely because it is can be used for exchange, but because of something else. What is that something else?

Perhaps Aristotle was the first to identify this:

“All goods must therefore be measured by some one thing…now this unit is in truth, demand, which holds all things together…but money has become by convention a sort of representative of demand; and this is why it has the name nomisma – because it exists not by nature, but by law (nomos) and it is in our power to change it and make it useless.”

And he continues: “Now the same thing happens to money itself as to goods – it is not always worth the same; yet it tends to be steadier…money then acting as a measure makes goods commensurate and equates them… There must then be a unit, and that fixed by agreement” ²

Many years later Abraham Lincoln said it with greater simplicity: “Money is the creature of law.” ³

Gold did not just magically appear as money but some decree of law has always made it so. For instance, the Coinage Act of 1792 decreed that gold as money would have its value based on the Spanish silver dollar, or 27 grams of silver. This made an ounce of gold valued at $19.44 at the time. ⁴

Then in 1834 a new coinage act set the value of an ounce of gold at $20.67 and it stayed there until it was again changed again by law. Through The Gold Reserve Act of 1934 FDR decreed the new value to be $35 an ounce.

So one day $20.67 was worth an ounce of gold and the next it was worth only worth .59 ounces, a loss of 41 cents on the dollar.

By law then gold remained at $35 an ounce until world demand forced changes in the Seventies. Then in 1973 the value was rest to $44 and the following year it was decreed by law that the dollar would no longer be tied to gold at all.

Since that time gold has had a floating value established by the free market and has fluctuated greatly. It can still be used as a medium of exchange. Mt neighbor would sell me his car if I gave him enough gold, but it is not considered money for it is not currently defined as such by law.

So, during the 142 years that gold was valued at about $20 an ounce was it’s value consistent just because the law said it was?

No. During this period one ounce of gold or the $20 fluctuated in value and the amount of goods and services it could buy varied considerably. California during the gold rush was a prime example.

Then from 1934-1970 when the value of an ounce of gold was decreed to be $35, was the value of that ounce always the same during this period? No. The amount of goods and services you could buy for $35 again varied considerably, especially during World War II.

Conclusion: Money is a medium of exchange which is established by law. Law forces acceptance but the value of that medium will vary according to its supply, velocity of circulation, stability of the government, supply and demand for products and services and other factors.

Notes

1. The History of Money; Crown Publishers, Inc., 1997 by Jack Weatherford, Page 18

2. From Aristoltle (Ethics 1133), Quoted in The Lost Science of Money By Stephen Zarlenga; Page 34

3. Abraham Lincoln, Senate document 23, p. 91, 1865

4. http://en.wikipedia.org/wiki/Spanish_dollar

Read This entire series. Here are the links.

Index for Older Archives in the Process of Updating

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Money Masters

March 1, 2010December 29, 2010 Joseph Dewey

This entry is part 21 of 62 in the series 2010

Posted Aug 7-9, 2010

Blayne:
The links I posted on mining in my last post before this one show otherwise However lets look at the idea this conveys.

JJ
The link mention adds about 2 billion dollars worth of gold. $2 billion is peanuts in today’s economy.

Blayne
When it is said “$300 worth of gold” I am assuming you mean at the current exchange rate to FRN’s? If so then at around $1200 an ounce your looking at about a quarter ounce of gold. Little bit more then a grain of sand.

JJ
If the whole world went on the gold standard the price would skyrocket and a piece of gold about the size of a grain of sand would be worth about $20 making it impractical as exchange without some type of fiat or fractional money.

Blayne
Second this evokes the idea that everyone would be poor.

JJ
I didn’t say anything to indicate that.

Blayne
Again based on the myth of credit expansion being necessary for a healthy economy. This is based on the current Keynesian model which is failing miserably.

JJ
I didn’t say anything about this, but expansion of production as well as the money supply is essential for a growing economy.

Blayne:
It also does not take into account silver and other monetary metals that could
and would be used and appears to be coming from a strict gold standard
standpoint of government fixing the amount. . When you say not very practical
certainly not in an “inflated” economy such as ours where $300 is a pittance in
terms of purchasing power and trade where all prices are based on this massive
inflation.

JJ
If gold is practical then whether it works should not depend on whether the economy is inflated or not.

Blayne
If we look at it from a different angle where gold is currently at about $1200
on ounce then 300 ounces of gold or 15 $20 gold pieces (what fiat money tries to
mimic) would be equal to $3,600,000 current FRN’s.

JJ
No argument there, but I don’t see this fact making a case for the gold standard.

Blayne
Indeed economy expansion would be much slower but would be stable and there
would be less poor as people would be more likely to have sufficient for their. needs. More on this later.

JJ
Yes, it would be slower, but a stifling of the economy and production is not a necessary thing.

It doesn’t matter what standard we use for corrupt people will try to take advantage of it of it. The gold standard was abused just as the fiat one is. The new financial system needs to be transparent as well as understood by the people for it to operate successfully.

Did you check out that video series that Susan posted? Did you find anything you disagreed with?

***

Blayne:
The links I posted on mining in my last post before this one show otherwise However lets look at the idea this conveys.

JJ
The link mention adds about 2 billion dollars worth of gold. $2 billion is peanuts in today’s economy.

Blayne
Second this evokes the idea that everyone would be poor.

JJ
I didn’t say anything to indicate that.

Blayne
Again based on the myth of credit expansion being necessary for a healthy economy. This is based on the current Keynesian model which is failing miserably.

JJ
I didn’t say anything about this, but expansion of production as well as the money supply is essential for a growing economy.

JJ
If gold is practical then whether it works should not depend on whether the economy is inflated or not.

JJ
No argument there, but I don’t see this fact making a case for the gold standard.

Blayne
Indeed economy expansion would be much slower but would be stable and there
would be less poor as people would be more likely to have sufficient for their. needs. More on this later.

JJ
Yes, it would be slower, but a stifling of the economy and production is not a necessary thing.

Good comments on money from both sides. There is a lot I could say on the subject, but we tackled this once before through general posting and nothing got resolved. What i’ve decided to do is to write a treatise on the subject giving a step by step approach to substantiate my views. I may make this a section in my book since it is an important subject.

I figure that those who provide criticism can only help to make the final treatise more sound.

***
Larry W writes:
I questioned whether JJ actually did use the spiritual connection he claims. But, again, as I got into it the gravity of
that program it confirmed JJ’s process validity and probably confirms his spiritual Internet access.

JJ
Thanks for your faith in my Larry but I want to make it clear that no one should have faith in my writings because they see me as having a connection beyond that which they have themselves. The most I expect is to be respected as an earned authority. This means that if they disagree they will look twice at my reasoning and ask themselves if they missed something – that perhaps i knew what I was talking about. If, after doing this the person cannot accept what i say then they can either reject it or put it on the shelf. It matters not to me.
***

Larry Woods says, Blayne, let me spell it out very simple. The total amount of monetary gold today in the whole world is about 3.4 trillion dollars worth in today’s inflated dollars. Compared to annual world economy of about 60 trillion dollars (inflated exaclty the same) there is NO POSSIBLE WAY 3.4T can directly cover 60T. That is 17 to 1 even if China had not already horded 80% of the world’s monetary gold supply. GET REAL!

Blayne Why would it have to cover 60 trillion? This has been explained several times. Perhaps you can explain why it must cover the inflationary bubble of credit in light of the fact and fundamental law of economics that prices are relative to the amount of currency in circulation regardless of production? Prices would simply adjust to the amount of currency in circulation.

JJ
You’re overlooking something important here that is not even disputed by the Austrian school as far as I know.

We have 3.4 trillion dollars worth of gold. This value is by the standard of dollars as they exist today. In other words, all the gold available can buy 3.4 trillion dollars worth of real estate, oil or whatever.

On the other hand, the amount of money in dollars can buy $60 trillion worth of assets.

If we went on the pure gold standard tomorrow then the people would only have the purchasing power of 3.4 trillion or about 6% of what we have today. This means that if you are making $40,000 a year now in purchasing power that you would only be making $2400 if we suddenly switched to a pure gold standard. Just imagine if the average person had to live on $2400 a year in purchasing power. Not too desirable.

Then if China corned the market on gold, things could be even worse than this.

Let me add one more thing. For there to be a adjustment in prices that you mention then the whole world would have to go on the gold standard. If just the United States did then there would be little adjustment except to lower purchasing power.

If a true adjustment was made then the price of gold would be so high that a $20 gold piece might be as small as a grain of sand like I said.

If we somehow decreed that a $20 gold piece would be equal to one ounce of gold then in the adjusted world you could buy a car for $20. How would you go about buying an ice cream cone in such a system?
Copyright 2010 by J J Dewey