But this time is different because now we all know that governments can issue their own debt-free money to solve the negative sum arithmetic of the bank-issued debt-money system, right? War is inflationary, because governments invest prodigious amounts of newly created money to produce war materials that are shipped abroad and blown to smithereens. That invested money is earned by contributors to war production, but no consumer or investor goods (except war bonds) are produced to absorb the earned money. So besides enabling income-earners to repay their bank debts, the additional income money inflates the price of the available supply of consumer and investor goods (unless there are prices controls). So if there's going to be inflation anyway by creating/investing money to produce things that are not going to be sold, why not invest the money in rebuilding the public infrastructure, rather than invest it in building stuff that is designed to blow up and slaughter humanity? Are our dear and glorious leaders really that evil and/or stupid?
Banks lend credit to governments against the government's future tax receipts. When governments can't pay, the creditors take ownership of the nation's public infrastructure as their "collateral". Economic hitmen deliberately design unpayable national debts for just this purpose. Ownership of the Earth is being "privatized", by bankers and plutocrats.
Banks lend credit to the private sector against collateral assets like commodities, businesses and houses. For banks to create and lend an ever-increasing total amount of credit-money into the system (to prevent the money system's Ponzi arithmetic from collapsing), evermore real assets have to be built to secure the loans. More industrial and civil infrastructure, more houses and commercial real estate, more cars, more home furnishings, more exotic vacations, all paid for with more credit-money that is freshly created by banks and spent into the monetary maw by borrowers/debtors. The perverse logic of MORE is built into the perverse arithmetic of our privately owned money-issuing system, where all the money is issued as debt that must be secured by assets and repaid (to the bank) with interest.
Effects on the Real Economy Production and Distribution System
The same perverse arithmetic applies to the money and price system that produces goods for sale and pays out incomes to contributors as the "cost price" of production*. The national income is paid out (by producers, to contributors) as the total cost price of national production. Producers then markup the cost price to sell their goods at profitable prices. But the national income is equal only to the cost price of all the goods the nation produced, so the nation has insufficient income to buy all the goods it produces at prices that enable producers to earn profits. So more bank lending of more consumer credit-money (and/or more bond-debt financed government deficit spending) is needed just to enable the nation to purchase what it produces, at prices above the cost of production.
*{This is the basic "money and price system" insight that led CH Douglas to devise, in the 1920s, his "social credit" system of government money issuance, with its National Dividends to all citizens, as an arithmetically stable alternative to the periodically collapsing Ponzi arithmetic of privately issued money: Douglas wanted to reform the money system so the for-profit production system could work sustainably}
Or, in the good old days of mercantilism, English producers tried to export their goods so French incomes would purchase England's surplus and provide English sales and profits, at the expense of the French producers who had paid out those French incomes as their costs of production of France's national output. French incomes purchased English imports, rather than purchasing French goods. Goods moved from English producers to French consumers, and money moved from French consumers to English producers. Or rather, money moved from the pockets of French capitalists (whose investments in domestic production had paid out the French national income) into the pockets of English capitalists.
On our narrow planet, mercantilism robs France to pay England, or robs the US to pay China. We can't all be "net exporters" any more than we can all be "above average," Lake Wobegone notwithstanding. For one nation to be a net exporter, some other nation must be a net importer. "Trade" implies me trading my goods for your goods. If you have no goods to trade for my goods, we don't trade, so there can be no net importers and net exporters, only balanced trade.
But in a money economy that's not how it works. Goods are bought and sold for money, not traded for other goods. Money moves from buyers to sellers; goods move from sellers to buyers. And producers do not create the money by producing food and cars. Banks create the money by making loans. So producers can't produce more "money" by producing more goods. You get more money by "selling" your goods, for money. You can build a billion cars, but unless you sell one of them, you will not earn any money for all your productive efforts.
Mercantilists are capitalists who want to get richer in money. Mercantilists do not share the interests of their workers and the unemployed masses who would like to consumer the goods that the nation produces, rather than export and sell the goods so capitalists can get richer in money.
The zero sum monetary arithmetic of international buying and selling, the beggar thy neighbor money arithmetic of mercantilism, is not difficult to understand, is it? "Our" capitalists want to get the money that was invested by "their" capitalists, so our capitalists can be richer in money. Our consumers are poorer in goods, because our capitalists exported those goods that we produced, in order to get more money for themselves. Adam Smith harshly critiqued this process in his 1776 book, "The Wealth of Nations", Book IV, Chapter XIII: Conclusion of the Mercantilist System. This is not new knowledge.
Profit is necessary to life. Profit is not inherently evil. A caveman who invests 3000 calories hunting must earn a return of 6000 calories in meat, in order to feed his family and feed himself so he can hunt again tomorrow. We all need to "profit" from our work.
Profit is not the problem. Giving private bankers an exclusive monopoly over money-issuance is the problem. Insisting that income that is "earned" by contributing to production (income that is thus part of some producer's cost price of production) is the only "legitimate" way people can get money to buy what the nation produces, is the problem.
Already by 1848 both Marx/Engels (The Communist Manifesto) and John Stuart Mill (Principles of Political Economy) recognized that in a post-agrarian industrial economy where everything is produced by paying out money, and bought and sold for money, some system to supplement "earned income" had to be implemented for getting purchasing power into the hands of consumers, so nations could "afford" to consume what they produced. Industrialism permanently replaces workers with machines*, and only pays out earned incomes to people who contribute to production. Industrial workers can produce far more than they can consume, so how will the surplus be distributed to all the people who want and need to consume, but whose work is not needed to contribute to production?
*{Even David Ricardo, that great capitalist advocate of international trade to exploit comparative advantage, admitted that the Luddites were right: capitalists' adoption of machinery harms the condition of the working class. See Chapter XXXI, On Machinery, in his 1817 book, "Principles of Political Economy and Taxation".}
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
5
2
2
