318 online
Most Popular Choices
Share on Facebook 24 Printer Friendly Page More Sharing
Exclusive to OpEd News:
Sci Tech    H4'ed 3/30/22

Chapter 8 Basic Money Understandings: Introducing the Importance of the Role of the Community of Users

Message Paul Krumm

The sun rises on a new day in Kansas
The sun rises on a new day in Kansas
(Image by Paul Krumm)
  Details   DMCA

Review of characteristics of top down money creation, issuance, use, and extinction

  • Top down money involves new sub-communities within the user community, which are introduced into money practice. First is a money authority community. This money authority community is further divided into a money creation community, which can be a single individual or entity, or an oligarchy, and a money manager community which is a lesser oligarchy,. Both of these groups together comprise the money authority community.

  • In short, The money creation authority has taken over the power to create and issue the money supply. It can be issued through payments or loans.

  • Money managers loan money they have accumulated, already created by the money creator.

  • Authority based fiat money introduction is a multi- step process; somewhat analogous to a mutual money transaction. In general terms:

      First money numbers are authorized by the authority.

      Second, money numbers are created by the authority. These processes are the same for private bank and government money 'creation'.

    Then the authority issues the money to members of the user community. Banks usually issue money through loans. Governments usually issue money by paying for goods or services.

    No value is traded by the authority in the 'creation' and issuance of authority money.

  • As a result of this structure users are expected to always keep positive numbers in our accounts. We have to get money created by the authority before we can spend it. Overdrafts (negative numbers) are not tolerated. They would represent individual money creation. When this occurs, it is dealt with decisively.

  • While users are not allowed to have negative money numbers, no positive balance limit is set, unlike in mutual systems.

  • Since no positive balance limit is set, circularity is not enforced by system structure. Anyone is allowed to accumulate money, taking it out of circulation.

  • The money supply consists of the money that the money authority(s) have created and issued.

  • Since the size of the money supply is not automatically regulated by system structure, it must be monitored by the money 'creation' authority in order to prevent inflation (when too much money is in circulation) or deflation (when not enough money is in circulation).

  • How the money supply is regulated has been described. The process is different for bank created money than for government created money.

  • The process of money supply regulation is complicated by users and money managers accumulating money, and taking it out of active circulation.

  • The money supply can also be manipulated by the money 'creation' authority and/or the money managers when they perceives this to be in their best interest.

  • Taxes are levied by the community's government authority, (which may or may not also be the money 'creation' authority) with little or no input from the users of money.

  • Taxing and gifting are seen as applications of money and philanthropy, not an integral part of monetary system operation, as is the case with bottom up money.

  • Borrowing/lending at interest is introduced in money practice.

  • By becoming a lender or investor one becomes a de-facto member of the money management community.

  • A portion of interest is unearned income, commonly called profit; income exceeding the value traded in a money transaction. Later we will discuss interest and profit in depth; when and where it is charged and its results for the economy.

  • A note on the use of the term 'profit' is necessary. In a sole proprietorship, where the proprietor works by themselves, profit represents the earned income of the proprietor. With little leverage on the market, the sole proprietor's prices are market driven and limited. As businesses grow and turn into a pattern where there are multiple employees, earned income is paid in the form of wages. Profit becomes a surplus of income over the earned income of the members of the business. The nature and use of profit and unearned income will be discussed later, but needs to be acknowledged as an embedded part of authority based money/economic systems.

  • The money authority may be benevolent, but there is no guarantee that this will be the case, especially through time.

  • The value of money is no longer a consistent measure of value traded. It's value is determined to a great extent by its scarcity or abundance. Scarce top down money gains in value; abundant top down money looses value. Scarce products and services gain in value, and abundant products and services are devalued.

  • For money users to have money numbers to trade with each other and pay our taxes, we must first:

      borrow or earn them from the money 'creation' authority,

      earn them from other members of our user community who have borrowed or earned them from the money creation authority,

      borrow them from a money manager who has borrowed or earned them,

      or have them gifted to us.

Again, stop and think about that.

Money Use in the Authority Money Context

Trade transactions between the users (including money creators and managers) of already created authority money, are still mediated through the user community current account under its rules. These transactions, like those of mutual money, maintain a zero balance in that account as they are again simply pass through transactions even though everyone has to maintain a positive balance in their individual accounts.

Meanwhile, the authority has privatized the money number creation process, taking it away from its users. The authority now has the power to determine what it will, and will not promote in the economy, by controlling who gets the money it creates, as well as how much it creates.

All this is made possible by ignoring the existence and pivotal importance of the user community accounts in the authority money creation process. The major differences from mutual fiat money are that no value; goods or services, are traded in money creation, that money creation decisions are made by the authority rather than the users, and that the money supply is not automatically regulated.

In our next post in this series we will introduce interest and profit; their effects on money operation and the results in its use.

Rate It | View Ratings

Paul Krumm Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

I am a semi-retired self employed business owner who designs and builds instruments and machines. Obtained a BS in Sociology (with minors in Physics and Math) in the 1960's and became interested in studying the structural violence built into (more...)

Go To Commenting
The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.
Writers Guidelines

Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
Support OpEdNews

OpEdNews depends upon can't survive without your help.

If you value this article and the work of OpEdNews, please either Donate or Purchase a premium membership.

If you've enjoyed this, sign up for our daily or weekly newsletter to get lots of great progressive content.
Daily Weekly     OpEd News Newsletter
   (Opens new browser window)

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Chapter 12 Basic Money Understandings: Introducing the Importance of the Role of the Community of Users

Chapter 10 Basic Money Understandings: Introducing the Importance of the Role of the Community of Users

Chapter 11 Basic Money Understandings: Introducing the Importance of the Role of the Community of Users

A response to "Facilitating a Disruptive Emergence To Replace the Existing Elite System Running the Planet by Rob Kall"

A rock and a hard place -- Our money system in crisis: The Greece and Cyprus credit crises as prototypes

Chapter 5 Basic Money Understandings: Introducing the Importance of the Role of the Community of Users

To View Comments or Join the Conversation:

Tell A Friend