Document length 650 lines
The Mystery of Money
In a topic as obtuse as money it seems best that we start with a few definitions of the terms to be used so that there need be no misunderstanding about their meanings later on.
The term exchange includes buying, selling, trading, bartering, exchanging, or transferring the property rights in any goods or services at any given time or place. Such transactions as are only completed at a later date will be referred to as delayed exchanges.
Value is a difficult word to define. The meaning used herein is that given in the Encyclopedia Britannica, in which value is described as `the measurement of the force of human desire.' Value in any Price System is the result of human desire impinging on the relative abundance or scarcity of any article. Price is a synonym for value and is merely another way of describing it. Price is value in terms of money. Value is not used herein as referring to the "value of human labor" or effort.
Wealth has two forms. "Monetary wealth," which is really aggregate prices and is therefore another term still for value, and "physical wealth," which is the use of goods and services.
Money should not be confused with the commodity used to make the token or certificate of money. A commodity may have a totally different `value' as a commodity than it has as money. Witness the different `value' of a quarter and the `values' of silver and alloy of which it's composed when it is melted down. Compare the `value' of a dollar bill and the `value' of the paper it is printed on. In order to avoid confusion, we will ignore the business of dealing in money as a commodity until later and in the meantime view it solely in its capacity as a medium of exchange.
Money is principally used to enable delayed exchanges to be carried out. When you sell your services to an employer, you would not expect him to give you in return your board, room, clothes, amusements and all the myriad little things you personally prefer. In order that the delayed exchanges involved in providing all the manifold necessities of life may be carried out with a minimum of delay, a medium for simplifying these transactions is essential. Since such delayed exchanges are only deferred debts, the ideal medium in any Price System is a debt certificate or token, that will be freely accepted by everybody in the community. This then is the money with which, you are all familiar. The use of money, then, is as a medium of exchange in the Price System in which we live.
Professor Soddy of Oxford University in England in his recent book The Role of Money describes money in a neat epigram. He says, `Money is the Nothing, you get for Something, before you can get Anything.' Study this statement carefully and you will note that it accurately describes the money you use. :-o
How can that be since money is a very real thing to most people and everyone will claim that they can see and touch it? Because you can only see and touch the debt certificate that represents money and not money itself. You confuse the token with that which the token represents. You never see or touch money itself. To understand this, read the wording of a dollar bill. The words on a Canadian bill, `will pay to the bearer on demand,' mean `we promise to pay to bearer on demand.' The words on a United States bill are: `This certifies that there is on deposit in the Treasury of the United States of America (x) dollars in silver payable to the bearer on demand.' In short, it is a promise to pay; and that is what money is-a promise. Any person who says he can touch or see a promise needs a mental examination. It just shows you how you can be fooled by mistaking the token for what the token represents.
Max Planck is one of the world's greatest scientists. His dictum accepted by all genuine scientists as the basis of physical science. It is as follows:
`Only that which is measurable is real.'
By means of this we differentiate between the tangible and the intangible, between the touchable and the untouchable, between the real that is apparent to our physical senses and the unreal which is a product of our imagination alone. As you cannot measure a promise by physical means, you cannot measure money. Money has reality only to the extent that you believe the promise to pay will be respected.
You can have in your possession tokens issued by the Emperor Hadrian at Rome but it is money no longer as the promisor is long dead and his promise worthless. The German Reichsmark and the confederate dollar were real money as long as the promise to pay held good but today they are merely pretty pieces of printed paper.
Perhaps you still do not understand that money is nothing and unreal. Consider the gold, silver, copper or paper token that you call money. It is not yours but the property of the issuer. To clip it, melt it down, or destroy it is an offense, since it is only lent to you for use in effecting transactions. If by chance it should be destroyed and you can prove the complete destruction, the issuer is bound to replace it. This is even true of a paper dollar bill. If you doubt this statement, ask your bank manager. The tangible thing you handle is only a token and nothing physical. It is a promise and a promise can only be destroyed by the imagination that created that promise. To obtain money, one must give up goods or services. Such goods and services are real, tangible, and measurable things. They are the `Somethings' you have to give in order to get the `Nothing' that is money. You cannot normally obtain money, without giving up something in exchange for it. This is not a hard and fast rule and the exceptions will be taken up later.
Having obtained money, one becomes a creditor. The issuer of money is conversely a debtor. As Ruskin said: `For every creditor there is a debtor.' One cannot exist without the other. This truism should be inscribed on the walls of our legislative chambers and our schoolrooms. It is amazing that the exponents of the various theories relating to social credit never appear to have beard of social debits.
The possessor of money is a creditor because he has given up goods or services in order to obtain it. The issuer of money is a debtor because he has received goods and services and given nothing in return. The debtor owes for these goods and services until such time as the circle of delayed exchanges is completed and the transaction closed. When this happens the money ceases to exist, for the debtor has paid an equivalent of goods and services for those he has received. The books are in balance and the system is in equilibrium.
In the case of currency money, this delayed exchange is never completed and the circle remains open in perpetuity. Buying, selling, investing, borrowing, or lending have no effect on the quantity since what one person gives up, another gets. The only way in which the quantity of money is increased is by issuing fresh money.
How Money is Issued:
The issuing of more, new or fresh money is normally done when the people in general are willing to dispense with goods and services in order to have a greater supply of the medium of exchange. The possession of any money means that that individual is `out' certain goods and services. When you obtain goods and services you give up possession of the money and someone else goes without goods or services in order to possess it. If no one gave up goods and services in exchange for new money, the issuing of such money would be equivalent to the `watering of stock.' Such action is called inflation.
Legal tender or currency money is a perpetual debt owed to the public by the governments and the issuing banks. This debt is non-interest bearing and _will never be repaid._ It is owed to no individual as a whole, but to the holders of that currency at any given time.
`Currency money is a legal claim to wealth over that which is in existence, since in an individualistic society all wealth has a positive and independent ownership.' Remember that this speaks of monetary wealth alone.
Legal tender money will remain a perpetual debt to the community because the governments and the issuing banks that originally obtained goods and services in return for these debt certificates have disposed of these goods and services as if they were their own and not held in trust for the holders of currency money.
Velocity Money -- circulation
Silvio Gessel's Theory of Velocity Money is one of the many strange money theories which have been put before the ordinary man. This idea of velocity money is founded on an erroneous assumption. This assumption is that the exchange value of money varies directly with the velocity of circulation. If the Gesselian assumption were correct, money could fairly bear taxation if such taxation increased its Velocity and therefore its value.
Let us analyze this assumption. The first question is, what is the exchange-value of money? Remembering that money is nothing in itself, but is merely the medium for facilitating delayed exchanges, one must conclude that its only value lies in _what was given up for it._ If this is true, then the inflated or printing press money, for which nothing was given up, will tend rapidly to become valueless despite its velocity of circulation. This is borne out by the factual evidence of the Reichsmark and the confederate money.
The value of money is fixed by human desire impacting on the relative scarcity or abundance of money. This is the reason why the value of money is a variable. The value of money, then, depends on how much the people want the medium of exchange in preference to physical wealth. The total value of money will depend on how much physical wealth the community is willing to do without.
Money is not what you can get for it, but how much you have to go without in order to possess it. You do not buy goods to get financially rich, you sell them. True, if you are not the original producer you will have to buy first, but then you must remember the Price System adage: `Buy cheap and sell dear.' If you do not do so, you will reach the relief lines very quickly. To possess money you must sell and go without goods. You cannot spend and have your money at the same time.
Remember that when you possess money, you are `out' some goods and services. If the value of money depended on velocity, this would not be true, since you would be `out' more or less goods and services depending on the relative velocity of the money. Thus if the velocity was only great enough you would be `out' no goods or services at all. In connection with this it is well to note that the Reichsmark had a terrific velocity at a time when it was comparatively valueless.
If the value of money is fixed by human desire, then it must follow that the quantity of money must vary inversely with it. If a greater quantity of money were issued than the people desire, then the value of money would automatically decline. In every-day language, prices would rise. Goods and services would be worth more in terms of money. This is inflation.
If the value of money were geared to velocity then inflation would have no effect on the value, provided the velocity were sufficiently increased. In Germany, during the period of inflation, the speed of transactions was enormous, but despite this the value of the Reich mark fell, till it vanished out of sight.
If the value of money depends on human desire, and if the quantity of money is reduced, money becomes more valuable and prices fall. This is deflation. In Canada, during the deflation practiced from 1930 to 1934, this fact was too notorious to be ignored. This again demonstrates the fallacy of the velocity -- circulation theory of money.
Velocity has a certain relation to value, since if the quantity is fixed and the volume of trade is enlarged, the velocity of money will be increased proportionately as the time interval of transactions is shortened. During this process, however, the value and the quantity of money need not alter one iota.
It is admitted that if you increase the quantity of money, either the volume of trade must increase or the velocity of money will decrease. Vice versa, if you decrease the quantity of money, the volume of trade must decrease or the velocity of money will increase. Nevertheless, the changing of the value or the quantity of money need have no effect on the velocity, provided the volume of trade changes relatively to the change in quantity. It is a sad example of how futile a learned argument can be when the basic facts are not known.
As the merchant can include taxes in the selling price, the consumer is the only man in this or any other country that has ever paid a tax or ever will under any form of Price System.
Why not give up repeating parrot fashion, the shibboleths, which you use under the erroneous impression that you are thinking. Why not clear from your attics the mental rubbish your `superiors' and `betters' have put into them. If you do, you will soon proceed to measurement, so that you will know and ascertain the realities. Then you will find how easily the showmen and grifters of the Price System have been fooling you. The full significance of Barnum's words will strike you: `There a sucker born every minute.'
In the meantime you will find that statistical evidence proves conclusively that if any person or persons assert that they can raise the standard of living on this Continent to one or more times the standard of living in 1929 or 1969, and still stay within the bounds of the Price System, they are either grossly ignorant of our social mechanism they are willfully misleading you for their own ends.
The Price System is a game and is played according to certain clear and well defined rules. One of the strictest of these rules is that no player must `welsh.' In common parlance you must pay your debts and obligations however they may have been incurred. Your promise must be kept as good as your bond. If you `welsh' on your debts, the professional gamblers (and in the Price System we are all professional gamblers) cannot afford to deal with you. In the game of the Price System, as in all other gambling games, there are `losers' and `winners.' In the Price System game, those who have lost their stakes are spoken of as being on welfare.
As in any gambling game, there are a number of persons, who cannot at moment pay for their chips, so in the Price System game there are individuals, who are in the same position. In both cases such individuals give I.O.U.s to cover their indebtedness, and as any of you that indulge in gambling games know, the game stops when the losers can no longer redeem their I.O.U.s either out of winnings or out of their savings.
It is as true of the Price System game as of any other game. The game may be prolonged by the payment of interest but this is only possible for a short time and when the interest cannot be paid, the game must be declared closed. The great game of the Price System played on the North American tables is drawing steadily closer to that sticky and unpleasant finish. 1998 debt being over 24 trillions!
Two Kinds of Money:
Up to now, we have been looking mainly at currency money. There are, however, two kinds of money -- currency money and private credit money. Most delayed exchanges today are made with the latter form while the former, which has been explained already, is used as `chicken feed' for the minor transactions of the individual consumer.
Private credit money is money issued by the individual. Not, as is so often erroneously supposed, by the banker. The banker only issues currency money, though he may issue a small amount of private credit money as a `corporate' individual. A `corporate' individual is another legal abstraction which your lawyer can explain to you. The banker is far too wise to attempt to issue any other money than currency money. He prefers to sell you his services as a book-keeper and pawnbroker.
Private credit money is issued principally in the form of sight drafts called cheques or checks. In commercial circles these may take the form of time or date drafts and other varied shapes.
The issuance of private credit money came about as the result of the growth of the cotton trade between America and England. It was inaugurated by the Philadelphia Quakers and taken up by their associates in England. This occurred owing to the refusal of the Bank of England to issue enough currency money to enable the Quakers to handle satisfactorily the enormous volume of trade they were developing between Philadelphia and Lancashire. When started they had a monopoly and were not disposed to lightly let it go. They did not realize that they themselves forced it into existence by attempting to maintain a forced scarcity of money. The Quakers won the contest, and the right to issue private credit money was granted to everyone.
The private banker was not responsible for this. It was a struggle between the merchants and the currency money monopolists, the Bank of England and the Rothschild’s who controlled it. The private banker merely helped to establish the custom of dealing in this private credit money. He had to, or he would have gone out of business. All he did was to sell his services as a public accountant and bookkeeper. This custom of issuing one's own private credit money through a bank has become such a fixation today that few people if any realize that they can draw a check on themselves just as easily as they can draw a check on a bank and that it is just as legal and valid. It is curious how quickly customs and habits become ingrained.
This private credit money is usually issued against bankers' I.O.U.s or backed credits. It is a common fallacy to say: `I have money in the bank.' You have no money in the bank nor has anyone else except the banker. When you make a deposit, you sell your currency or private credit money to the banker, who in return gives you his I.O.U. by making an entry in your pass-book.
As an inducement to do this, the banker guarantees to keep your account and promises to redeem your private credit money with currency as and when it is required. The banker would rather purchase such private credit money of yours with an I.O.U. than give currency for it but he will keep his bargain. If you doubt this, ask your bank manager.
`Backed credit' is the result of a separate transaction. In this case you have nothing to deposit or sell to the banker for his I.O.U. The banker, being a pawnbroker as well as a public accountant, arranges to take a lien or a chattel mortgage on your goods and in return places at your disposal certain amounts in the form of I.O.U.s. If you fail to make good what you have borrowed, he can then reimburse himself and if he has judged correctly the saleable value of your goods and chattels, he will not be the loser. In this he generally errs on the side of caution.
When you issue your private credit money it becomes a forced charge on the community, by increasing the quantity of money. As a general rule, the community is willing to accept this, and they will signify their acceptance by giving you goods and services in return for your check. When the delayed exchanges in which you are interested have been completed, you will have to give up goods and services, or such bankers' I.O.U.s as you have been able to obtain with your profits, and your private credit money will be canceled. It then ceases to exist. This is why the quantity of money is in a constant state of fluctuation. The columns of your daily paper regarding bank clearances will give you statistical evidence of this.
If you issue private credit money without such `backing' or without bankers' I.O.U.s, that is if you issue an `N.S.F.' or `No Account' check, you are issuing money just the same. In this case you must either take it up on presentation with goods or services, or with currency money. If you fail to do so, you will find yourself in danger of being jailed for having obtained goods, or services by false pretenses. Your crime will be having `welshed' on your contract with the people in general, which is why that is regarded as a criminal offense.
Money is rarely hoarded. There are only a few ignorant folk who hide their money in mattresses or under the floor. Most people pass it on to someone else at once, that is, by spending it; or if they have more than they need for consumption, they try to thrust the onus of spending it on someone else, by, investing it. Saving is a custom resultant of the ever prevalent scarcity in any Price System. One must save, for every individual is dependent on his earning capacity -- that is, on the opportunity to exchange his goods and services with others -- to obtain other goods and services of which the individual may be in need. Without such savings the ordinary person could not tide himself over periods when his earnings were insufficient or during sickness or old age.
Such savings must be in the form of money, since one cannot store goods or services for indefinite periods because of natural decay. But money stored away in a hole in the ground would soon cause a shortage of itself, if the practice became universal. This would force an ever increasing issuance of fresh money and would disrupt any Price System. For this reason such savings must be returned into the Price System to carry out their proper function of facilitating delayed exchanges. To induce people to do this is the function of interest. That interest may develop into usury does not affect this. Some premium must be given to the individual to induce him to turn over his savings to strangers for use as money.
The greater the interest rate, the lower may be the security for the return of the principal. But cancel all interest, and savings will go back under the floor, and the whole glittering edifice of the Price System will crash in ruins about you. If you live in a Price System, interest is essential to it. As interest rates approach zero, the Price System you operate will come to an end.
Interest is the wages of money. High interest means that money is of value and therefore scarce. Low interest rates mean that money is abundant. The present low rates should be assurance to those who complain that we have an insufficient supply of the medium of exchange. They would be correct only if interest rates were as high as they are in the villages of India -- somewhere between thirty to fifty percent, instead of being down to three or three and a half percent.
The excessive liquidity of the banks as evidenced in every bank report in Canada over the last two years should be a clear indication that money is abundant. It is hardly the fault of the banker that the supply of competent debtors is so small. That is a factor that neither the banker nor the politicians have yet devised a way of controlling. If any Price-System-minded person can invent a way of producing competent debtors so that the banks can lend them money, he will have earned the undying gratitude of big financiers.
You will remember that money is the medium of exchange; that the tangible form of such a medium is usually a debt certificate or token. You will note that bankers are dealers in such debt certificates and are book-keepers to the public, and that they carry on a sideline business as pawn-brokers or money-lenders. You will not forget that bankers are issuers of currency money, and are not as a general rule issuers of private credit money. Yet you will have remarked that the banker has come in for a great deal of opprobrium both from certain types of politicians, the left wing radicals, and the man-in-the-street. Such a strong dislike must have a cause even if the individuals place the blame on the each other and not on the system. The banker has been guilty of using his reputation to issue inflated money, but then, so has the politician, while many people have been guilty of issuing `rubber' checks.
The banking system, however, has been guilty of a more venal offense than this. It, in conjunction with politics has been guilty of defrauding the public by means of the gold standard. By this means the big financiers and their associates have been able to depreciate the standard and then force it back again, thus depriving the holder of money of some of its value.
The depreciation has never been very large but the amount of money in circulation was so tremendous that the profit was immense. This practice, which is quite as ethical as deliberately altering weights and measures, was regarded until lately as the height of business acumen.
`Never give the sucker an even break' has always been considered a sound rule of gambling dens, but even the habitués of the toughest joint would revolt at such a raw deal as the manipulation of the gold standard had become. The details of how this was done are too complicated for a short discussion of this nature but the fortunes amassed by international bankers are prima-facie evidence of the results to be obtained by such a process. This may well be described as the banker's crime, and should give him a good start for the title of the world's meanest man.
Certificates of Property:
Certificates of debt must not be confused with certificates of Property. That is why banks have as stooges, trust companies and investment houses. These deal in certificates of property such as bonds, stocks, mortgages, land titles, and numerous other instruments that are expressed in terms of money but are not negotiable except by transfer and cannot properly be considered under the heading of money s a medium of exchange.
It was early recognized, however, that certificates of debt readily lent themselves to being bought and sold as commodities. This dealing in money as a commodity is only a side-line and has no appreciable effect on the quantity or value of money, since it is solely a matter of gambling on the relative rise or fall in money values. The Money Exchange, like the Stock, Mining, and Wheat Exchange, is merely a legalized and large scale poker game. `Bet-you-a-million' Gates, Bill Durant, and the others of like kidney are dignified by the name of operators' and figure in the front pages and society columns of the papers. John Doe and Richard Roe who never bet more than a five spot, figure in the police court news and are regarded as petty criminals.
Professor Soddy states that any government by issuing new money can declare a national dividend. This would seem to support the social credit theory. Far be it from this discussion to dispute the statement but it seems to be as true as saying that if one has a drink of scotch one will feel exhilarated. And it is equally true that if one goes on and drinks a bottle or more of whisky one will eventually get drunk and become in-incapable.
Major Douglas, the amateur financier and follower of Marx, amplifies the Marxian theories of unearned increment to arrive at his idea of a large and permanent dividend. Unfortunately Douglas has never followed out the ramifications of his own theory. His evidence before the New Zealand and the Albertan legislatures, as well as his writings on the subject, show this clearly. The direct effect of his control over the Albertan cabinet has shown that he had no conception of the problem and that his theory is very similar to the ideas of all other inflationist’s.
Professor Soddy pointed out that such a dividend might be as high as $8.00 or $10.00 per head for the first year of issue. He points out, however, that to state such a dividend could be increased so as to be worth while without a corresponding rise in prices, or could be issued, supported by legal enactments to prevent such a rise in prices, is mere demagogic absurdity. Any such enactments would have an effect similar to that of the prohibition laws in the United States.
Why is such a promise of national dividends an academic absurdity? Because all such dividends must be gifts not loans. All such gifts are claims against the community. They become monetary wealth, and such claims cannot be destroyed without taxation or expropriation. If this dividend is used as a medium of exchange, it becomes money, regardless of what name is given to it. If it is money it is a claim on the general physical wealth of the community, and goods or services must be given up for it or the value of money will drop.
To complete the circle of exchange, the individual receiving the gift must give up equivalent goods or services. If he cannot, then someone else in the community must give them up for him. Money, whether one calls it prosperity bonds, social dividends or social credit is still the `Nothing' for which you must first give up `Something' before you get `Anything.' Renaming something does not alter it.
Here we come back to an earlier statement. We pointed out that you must give up something to get money but that it was not a hard and fast rule. There are two ways of evading it one by inflation, the other by gift, expropriation, or just plain theft. The first can be used to get crosses on a ballot paper because the ordinary man-in-the-street will fall for it easily, but eventually it will produce the same result as the other-crosses on graves instead of on ballot papers. This, of course, is done by governments and on a large scale. In the case of individuals and in small quantities, the gift idea has been worked quite well. Al Capone could have explained the best methods of carrying this out on a fairly large scale.
All this fol-de-rol about `dividends' such as some of our politicians are handing us is but another Price System panacea. It ranks with the wild-cat schemes of Huey Long, Townsend, Father Coughlan and $30 Every Thursday.
The suckers of this Continental area have almost reached the limits of taxation and cannot stand much more. (Workers total real tax rate is about 70% and a nom-worker is about 30%) The debt structure may also be approaching its limit of growth and even such a mouth-pieces of the debt barons of Wall Street and St. James Street are beginning to admit that it cannot continue.
Continual and perennial growth of the debt structure is, however, ESSENTIAL to the maintenance of the Price System. When it ceases to grow, that is, when interest approaches zero rates, and technological unemployment destroys with ever increasing rapidity the flow of wages and salaries upon which the whole Price System structure depends. This is a dynamic world and nothing in it remains static.
November 8, 2007 update U.S. of A. the Treasury Department, which issues a daily accounting of debt, said Wednesday that the debt, subject to limit, was at $9 trillion ($9,000,000,000,000.) on Tuesday. It was $8,996 trillion on Monday. Last month, President Bush signed into law an increase in the government’s borrowing ceiling to $9.815 trillion. It was the fifth debt-limit increase since Bush took office in January 2001. These hikes totaled $3.865 trillion (plus interest?)
Prior to 1930 it was shown with mathematics, that the limits of tolerance beyond which the Price System on this Continent could no longer be maintained would be reached around 1942. The fact that it still exists today is strictly due to the large amount of `blind faith' which the ignorant -- well conditioned public has in the Capitalist Price System.
The Soviet Price System stopped first as there were fewer people who placed their faith in it. At some point (by 2030?) our Price System will stop and nothing you nor any other man will do, will set it in motion again. It will pass as the various geologic eras have passed. It will never happen again.
The history of the Price System is a history of scarcity. The introduction of the means of using vast quantities of extraneous energy on the North American Continent has introduced an era of abundance. Mankind here must either adapt itself to these new conditions or make way for a new race that can.
If it is not beyond your ability to believe that the combined intelligence of mankind might be able to come up with something to replace money with, then read on.
The Mene, Mene, Tekel,Upharsin
Science has written these words across the walls of the Price System. That System has been weighed in the balance and found wanting. Value is an intangible, and its weight can change without any physical reason. As exchange-value is the basis of all Price Systems, the whole structure is metrically unsound (cannot be measured). Neither value, price, nor money, may be measured physically; and so science has relegated all three to their proper place, as parts of history.
There is only one science and it is founded on human observation by means of the physical senses. Science sets up arbitrary systems of measurement and these systems cannot and do not change. Science is a methodology whereby one can determine the most probable. A scientist is not someone in a long white coat explaining things, :-) a scientist is a person who uses the scientific method! (Science cannot deal with intangibles such as values and price as they are variable and therefore cannot be measured.)
Distribution, Not Exchange:
The need of a metrical system by which goods and services could be measured so that they could be distributed to the people was met by the promulgation of Howard Scott's `Theory of Energy Determinants.' At first, like all other scientific theories from Newton's Laws of Gravitation to Max Planck's Quantum Theory, it was untried and uncertain. Set to the task of measuring physical production and consumption, some 65 years ago. it has proven itself no longer a theory but an accurate and certain mathematical process by which the trends and results of Price System operations can be studied and predicted. It is also a definite and unchangeable (even if arbitrary) system by which all goods and services can be accurately measured.
Why energy units?
Every schoolboy knows that to add and subtract fractions it is necessary to reduce them to a common factor. Every school boy knows that you cannot add heterogeneous things such as coal, flour, iron and oil together, and produce anything but a mixture. Yet the wise men who head our economic schools do this every day in their articles, statistics, and learned treatises. They have the pious conviction that money is a common factor to all these things and if one reduces them to terms of money, one should be able to add, multiply, subtract, and divide them. Lately, schools of economics have arisen which have further complicated this process by adding so-called weighting statistics -- computer models.
Energy--The Common Factor:
Howard Scott showed the economists that all such articles such as coal, flour, iron and oil had the common factor of energy being degraded during production -- usage and that this common factor enabled them to be reduced to its terms and added, multiplied, subtracted, and divided freely and mathematically.
Every embryonic student of physics knows that work is a word used to describe the effects of a force acting on a mass so as to cause it to move. He knows that this work can be, and is, measured accurately by certain arbitrary standards called ergs, joules, and foot-pounds. He knows further that coal, iron, flour, and oil, or for that matter, any other definite good or service, taken from the earth, processed and distributed by any individual must be accompanied by the application of work. Since such work done in so delivering any article of goods or in performing any service can be accurately and precisely measured he knows that such measurements are real. Do not confuse the word work with human labor.
Man has long ceased to use such measurements as the span of the hand, as far as the eye can see, a pace, a bowshot or even a gunshot, for lineal distances. He no longer uses knots on a line to measure speed though he keeps the word. Still he retains the primitive method of measuring goods and services by values just as they were measured when a distance was spoken of as a day's journey. In order to control the gigantic energy consuming devices of our North American civilization man must change his outworn habits.
There may still be carpenters who measure off a length by pacing it; there may still be farmers who put their wheat in a basket called a bushel; one can find a primitive individual who will judge the strength and speed of the wind by the eye; but if a construction engineer on a skyscraper job were to use the methods of that carpenter; if an elevator man were to purchase wheat by the bushel basket; if an airman were to judge his wind speeds by appearances; how long would our high-energy civilization run! Old-fashioned methods may suit a few conservatives, but we can be sure of but one thing and that is change, and the change has been towards greater and greater accuracy of measurement.
The amount of work done on the basic matter comprising any goods or services from the time the basic matter is unearthed, through the various processes necessary to convert that matter to use forms and to distribute the final product to the point of consumption will comprise the energy cost of the goods or services. The energy cost is fixed except where the improved use of mechanical devices will from time to time lower them. Such energy costs can be accurately measured and cannot be manipulated. As every type of goods and services can be so measured, it would seem emblematical of the larger lunacy to persist in pretending that it better to measure such goods and services in such unmeasurable terms as values, price or money.
Abundance Is Here
This North American Continent is the one great continental area where scarcity conditions no longer prevail. Asia, Africa, Australia, and even Europe are areas of scarcity. North America has reached the stage of abundance, despite the frenzied efforts of the politicians and financiers to disguise, restrict, and curtail it. No matter whether drought, grasshoppers, floods, storms, and other natural causes are supplemented by crop destruction, curtailment of acreage, the killing of stock or the paying of `danegeld' to the producer, the inevitable result will be the same.
Abundance has come to the North American Continent and the only question at issue is whether we will take advantage of the bounty, or continue to mindlessly accept the Price System's necessity of contrived scarcity?
Since the year 1930, the quantity of extraneous energy, that is energy outside of man's muscles, used on this North American Continent has been greater than all the extraneous energy used by all the peoples of the world since the dawn of man down to the year 1930. Is this fact not evidence of changes greater than have occurred in the world before? Is this fact alone not proof that our methods of distribution must be changed?
Exchange Is Archaic:
Just as the Egyptian fellaheen clings to his traditional habit of raising water from the Nile with a sweep to which is attached a bucket, ignoring the possibilities of such structures as the Assuan Dam or the Delta Barrage, so do we also cling futilely to the primitive custom of trade. just as the peasant cultivator is being forced into greater and greater poverty by the big irrigation projects of the Upper Nile, so are we being forced under a Price System into greater and greater poverty by the steady advance of extraneous energy devices.
The Price System necessitates that each shall have something to exchange. Throughout the past centuries this product has been human labor. Well might Marx say that all goods were made by human labor since human labor was the basis of the Price System in which he lived. In the sweat of their brows men made goods and performed services for which they received in remuneration a medium of exchange so that they might obtain the necessities of life.
Scarcity was the keynote, scarcity of human labor so that every man might be employed to the full extent of the daylight hours; scarcity of labor so that the fellaheen, endlessly lifting buckets of water from the river to irrigate his scanty crop might at least earn sufficient medium of exchange to eat; scarcity of product so that man labored to produce sufficient to enable him to consume enough energy so that he might labor for another day. The machine was yet crude and though, even in the days of Marx, it was causing distress by displacing human beings from manual labor, it had not yet destroyed their livelihood. Human labor was as yet the main source of all goods and services.
Our most pressing social problem from which most others stem is how we can have an acceptable amount of purchasing power when we can no longer work, as computerized machines have eliminated our jobs.
By 1997 the percentage of unionized workers had fallen back to less than 11% of workers.
The destroyer of trade unions is not the employer but such men as Benjamin Franklin, Faraday, and the electrical wizard, Steinmetz. They displaced brawn by brains. They lengthened the daylight hours till the whole twenty-four are as one. They destroyed the source of most peoples income and opened the way for the metallurgist and the chemist, the technician and the scientist to destroy the scarcity :-o and to take from mankind the necessity of earning their daily bread by the sweat of their brows. :-) But in so doing they destroyed also the sole source of exchange among the great majority of those on this Continent. We can no longer sell our muscle power here in the open markets.
Today on this North American Continent the machine is triumphant. The long lines of food bank recipients and those that gather at the city welfare offices, even in primitive agricultural communities, prove this. The railway brotherhoods may pass resolutions, but the streamlined train is here to stay. The old time stocker and harvester may complain, but his job is going-going-gone.
The farmer may have been the backbone of the community but no longer. We may still use human labor to build our roads but the machine is moving in. The coal miner is passing out of the picture, the steel worker is going with him; and the textile worker is fading like the glassblower into the limbo of forgotten men. The machine is here to stay. It is emancipating the wage slaves who in ever increasing numbers are becoming like the lilies of the field: they toil not, neither do they spin. The machine does not strike nor talk back and it requires no welfare when unemployed.
Human labor means wages. Wages means purchasing power. Purchasing power means profits and profits means savings. Savings mean more and more means of production. And so round and round the endless chain of the "Price System." Men work so that they may consume, and consume so that they may have strength to work some more, so that they may continue to consume, while close behind comes the grim specter of job loss and scarcity. To protect themselves they saved themselves into the `jaws of' unemployment. It was the workers savings that built the machines!
Any industrialist that does not modernize his equipment (and that means mechanize) must shut up shop. When electric power came, human labor lost. Electric power works twenty-four hours and it draws no wages, but the owners pile up savings. More savings, more machines, more production, more machines, less wages, less purchasing power, less employment, larger welfare rolls, over production. Still more dividends are being paid and still more savings are being added to the debt structure. A considerable part of the population have become paupers but they have to be clothed and fed that the "Price System" might still be operated and savings steadily increased and interest paid.
With an ever increasing velocity the Price System approaches it's inevitable end. The Price System is a gigantic debt system and the cancellation of debt is but the beginning of that System crumbling into dust. It is wisdom to make your choice now, before you come to the parting of the ways for then it may-be too late. Which will you have? Chaos or Science? Scarcity or abundance? Disorder or order? Death or life? The choice to begin is yours; but the necessity for the choice cannot long be delayed.
Science vs Chaos
energy accounting vs. money
Go to Educator web site home page
Go to Educator web site table of contents
Back to prepaid debit cards
Back to energy accounting
2008 update: Derivative trading and what it has done to the financial system
End of document
A Price System is any social system whatsoever that effects its distribution of goods and services by a system of trade or commerce based on commodity evaluation effected by means of debt tokens, or money, debit cards, et cetera.
The term Price System must not be confused with such terms as profit system, or capitalist system. The factor of ownership does NOT alter the mechanics of operating a Price System, and it may be added in passing, that unless it be in some remote and primitive community, none other than Price Systems exist at the present time.
The meaning used herein is that given in the Encyclopedia Britannica, in which value is described as `the measurement of the force of human desire.' Value in any Price System is the result of human desire impinging on the relative abundance or scarcity of any article. Price is a synonym for value and is merely another way of describing it. Price is value in terms of money. Value is not used herein as referring to the "value of human labor" or effort.
"In the Bible (Dan.v.1-28) the mysterious riddle written by a hand on the wall at Belshazzar's feast. These Aramaic words may be translated as, 'It has been counted and counted, weighed and divided.' Daniel interpreted this to mean that the king's deeds had been weighed and found deficient and that his kingdom would therefore be divided." (To the Medes and Persians?). It suggests an end time and a new order replacing the old.