Super factor money E-Book

Hartmut Michael Möltgen

• Herausgeber: novum pro Verlag
• Kategorie: Gesellschafts- und Liebesromane
• Sprache: Deutsch
• Veröffentlichungsjahr: 2022

Seitenzahl: 508

Beschreibung

Studies on inequality in modern society and criticism of the euro are leading us to think about the true value of money. A new monetary system is needed. One that belongs to the people: money from the hands of the citizen. A "safe" money and a corresponding financial system. Plus the stability that comes with the introduction of a basic salary. The guarantee that no citizen has to live in inhumane conditions helps to achieve prosperity for all. Without such a social approach, democracy cannot survive in the long run. A free market in the long run, sustainable economic activity and constant growth impulses are not possible. But does the utopia of a new reality with more justice and more humane coexistence have a chance?

Leseprobe

CONTENTS

IMPRINT 5

PROLOG 6

Introduction 11

A. New versus old monetary systems 16

I. Money and monetary systems 16

II. A new classification 19

1. Asset and liability order 21

1.1 The Asset “active” Money Order 23

1.2 The liability “passive” Money Order 23

III. Money creation, in the now and yesterday! 26

IV. Modern Money Creation 28

1. Asset money 30

2. Passive money 36

3. Cryptocurrency, an alternative? 39

V. The role of central banks 41

VI. Safe money, is that possible? 46

1. Credit and savings accounts without interest? 51

2. A financial control system that provides security 57

VII. Safe Money and the Banks 60

1. The free bank as a target project 64

2. How will the new currency be used? 67

3. Concretely, the new Safe Currency 73

4. Savings agreement (Ansparkreditvertrag) and overdraft more exactly regarded! 77

5. Credit as the basis and promise 79

VIII. Currency and Financial Capital 81

1. Capital and assets 83

2. Capital and Money 86

3. Capital and investment 87

B. Management and Control of Markets 90

IX. The Control of Markets and Finance 90

1. Financial control over the means of production 95

2. The tool in the hands of the workers 97

3. Are payments processed efficiently and in a controlled manner? 98

4. Interest rates, price formation and the labour market 98

5. Making a welfare society with the consciousness to respect human right- 100

6. How are services to society rightfully remunerated? 106

7. Common currency and national currencies 106

8. Is performance-related pay being paid? 109

9. Can the financial market be controlled at all? 110

X. Social control 114

1. Inequalities and imbalances! 118

2. Monetary policy, control or enrichment? 123

3. Welfare state and basic income 132

4. Prosperity in old age for all citizens 135

5. Socialisation and state planning 137

6. Monetary and sovereign communities 141

7. Global Markets and Regional Interests (The Globally Acting Corporation) 142

8. Communities and their assets 144

9. Tax assessment: substantial or functional? 149

XI. Community control 157

1. Legal forms of communitarisation 159

2. Sports club and religious community 161

3. Local markets and the new money economy 162

4. Employment for all citizens? 165

XII. Private control 168

1. Private capital and tax justice 172

2. Basic income for all citizens! 176

3. Money in private hands 180

XIII. Investments with and without capital! 182

C. Legal certainty – mainstay of the system 183

XIV. Security and equitable distribution 183

1. Growth in freedom and security 186

2. Gamblers, gamblers, fraudsters and the grey money market 187

XV. Money Creation, Distribution and Safekeeping! 192

1. Private money creation versus central bank money 192

2. The fair distribution of the proceeds! 194

3. Tax justice and tax simplification 196

XVI. Identity and money, activators in the space of action 200

1. The rational (physical) time space 202

2. The relational time space 204

3. The emotional time space 208

4. The space of action in the structure of time 210

D. The growth-promoting interrelationships 214

XVII. The Interaction of the Factors 214

1. Regulated growth, with and without money 215

2. Decay – Destruction – Growth 217

3. Disturbances in the concert of factors 221

4. Profit tax, a tax that does not prevent growth 225

5. Growth at the different levels 229

6. Models of economic management 233

XVIII. The digital future? 239

1. Full employment as a goal! 241

2. Investment today and tomorrow 245

3. Growth factors in the digital age! 248

4. Statistics as a planning aid? 251

5. AI research and Industry 4! 253

6. Model and paradigm 254

XIX. Sustainability in Finance 257

1. Financial cycle and humanity 260

2. The cycle, the basis for sustainable economic activity 262

3. Disruptive influences on sustainable financial cycles 267

4. Sustainability and justice! 270

SUMMARY 274

EPILOGUE 277

BIBLIOGRAPHY 290

IMPRINT

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© 2022 novum publishing

ISBN print edition: 978-3-99131-530-8

ISBN e-book: 978-3-99131-531-5

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PROLOG

“Money must be something divine. Or is it rather something demonic?”

(Oberhuber 2018)

For the Romans it must have been something divine, otherwise they would not have minted their money in the temple, in the temple of Juno, also called Moneta. The newly emerging monotheistic religions at the time of the Romans were more reserved about money. Nevertheless, the trade with money in as well as with these religions has spread more and more and determines meanwhile all large national economy.

The managers in the large and small companies strive for growth, the company has to come up each year with a higher profit than in the previous year, the balance sheets are to expand, the funds that flow reflect ever higher totals.

Regarding growth, the question is not only what percentage of growth, expressed in monetary terms, we can expect, strive for or describe as real. We must also ask ourselves how growth is measured if we want to scale it quantitatively so that the results can be used for valid forecasts and planning.

In my book “Sustained Growth,” I have already pointed out that the general indication as an increase in GDP expressed in percent is not sufficient and, moreover, can lead to false associations. Proposed for my part therefore in the alternative to it a reference to the work performance!

Growth as productivity increase generated by money, work and knowledge can lead with a certain work performance to definable measurement numbers, which can also help to understand the problems arising again and again with the distribution of the economically brought in profits of an economy and to distribute the profit fairly. Those who continue to search for new measures can also refer, for example, to the work of Samans. Samans contrasts GDP with the alternative measure IDI.

The IDI (Inclusive Development Index) does not only include pecuniary data in the index, which makes it a better representation of reality, but it is also not as easy to determine.

Apart from the problem of how to measure growth, we must also keep in mind the problem of relative growth. When growth mania and even growth in principle are attacked by various authors, this usually refers to growth measured in GDP, not to growth through increased productivity.

If productivity per person is increased, this may well lead to a sensitive loss in GDP if there is a simultaneous decline in population growth, even though everyone has to work less to fulfill their desires. In addition, growth is generally to be regarded as punctual, since growth and decay always take place next to each other punctually assigned in certain limitable areas.

Money and financial capital, that can help to generate and secure economic growth. Money is for example in the field area of the finance capital as growth factor in the position to finance the energy necessary for a project and to build up with it ordered structures, order capital. One could also see in this the transformation of the factor of money into that of energy, and thus the possession of energy reserves obtained through money. How this happens, could happen, or should happen, is to be discussed here and in the planned subsequent volumes with the correspondingly assigned factors, in the present 1st volume with money and financial capital, in the 2nd volume with knowledge and educational capital, in the 3rd volume with labor and human capital, in the 4th volume with the always necessary resources and the corresponding physical capital, as well as in the 5th volume with energy and order capital, also representable as negative enthalpy. In the 6th volume then the growth is to be regarded in the interaction of the different factors as in the tension field of the relational cycles developing, reflecting itself in the economic cycles.

Regarding the concept clarification still a few words to the growth! We know growth first of all also from the biology, even though growth phenomena can be observed in crystallography. For growth processes in biology, it is also typical that different substances can initiate and promote growth, the so-called growth hormones. Here, of course, the economic growth phenomena should be the topic. Nevertheless, the question should be allowed what growth is from the basic point of view in the different scientific disciplines and by what it is stimulated. Growth is not simply multiplication, which we indeed also observe in growth, it is always also information-controlled, moreover we need energy and resources, whereby this all takes place in a temporal development process, which builds up new order structures. The information control also requires the possibility that external factors can have an influence on it. This is only possible if sensors and mediators like receptors intervene in a mediating and interpreting way. In this context, money is something like a mediator that is almost indispensable in our economic systems today, even if it is not the sole factor for growth and prosperity in our society and even not a necessary factor. Even if money is neither necessary nor sufficient for lasting growth, it is extremely useful and helpful in maintaining our current economic systems and it is hard to imagine life without it. In contrast, knowledge and information are to be classified as essentially necessary, since without knowledge content and information no growth is possible. Growth in economy is generally determined by 5 factors, of which money is only one. Information, energy, resources and the input of a work performance must be necessarily present. If we consider for the explanation of economic growth first the factor money more near, then the other factors are to be assumed as in sufficient measure present. This volume is the first volume of a planned series, so one or two important pieces of background knowledge are touched on but not elaborated in detail. Much can only be adequately presented in subsequent volumes, the interrelationships only in the last volume, in which the emergence of cycles is also to be discussed. What part the 5 factors of growth have in the observable cycles, to know, becomes perhaps important to arrive at a new model for economic growth. Each factor forms a basic approach for causal and correlative considerations and, moreover, for the study of interconnected relations such as the feedback loop (also known as the control loop). In each case, new equilibrium platforms are to be considered in macroeconomic terms. The equilibria are stabilized by accumulated factorial forces. In the 1st volume now the factor money with the associated finance capital is to be taken into the focus, even if this is exactly the factor which is not essentially necessary and in certain respects even arbitrary! Money can compensate the absence of other factorial forces to a limited extent, nevertheless, it is to be assumed with the consideration of the individual factors that the remaining 4 factors can act in sufficient measure! The interfactorial interactions, always also considered, are to be worked off only later sufficiently justifiable. Thereby only the temporal course can be considered fully in its own dynamics, evident in the upswing and in the downswing, they are thereby the counterparts to the growth and the decay of a special form of construction and destruction of ordered structures. Due to which conditions the cycles in the temporal sequence and in the deflections change, must change, this cannot be discussed here.

Just as the downturn with decay and destruction increases the entropy, so an upturn with growth and building of new orders decreases the entropy. In all of this, information is of central importance, as innovation, in the construction plan, in the business plan and, in the tendency, also in random patterns, which in ordered structures can be built in. In the last volume, there will also be space to examine growth as an all-encompassing phenomenon, starting from the growth phenomena in nature up to the economic growth phenomena, for comparability, perhaps also to take nature as a model in individual cases, as this is generally the goal of bionics, so far unfortunately only used as an application in technology.

Money is the factor that plays only a marginal role in natural growth processes, if at all, because it itself owes its existence only to social agreement. In addition, the commercialization of the economy through the factor of money entails a shift from life-value to money-value interactions, and in this respect, it cannot be equated with the tendency towards higher qualities of life. Higher prosperity may be due to higher diversification and the support of this by the accelerator money in the exchange of goods or in the provision of services. In this respect, one can say that if money did not yet exist, it would have to be invented as soon as possible, would then also have the chance to exclude from the beginning all the mistakes in the construction of money which still burden it.

Since money is versatile and variable, even if not by itself, but because of convention, it can easily be accumulated in hoarded form. Accumulated money is also known as capital, more specifically here as financial capital.

Capital can take very different forms of existence as assets, which is why we don’t just talk about the capital, it can be transformed, comparable to the different forms of energy, which can, after all, be transformed into each other. Just as one can transform electrical energy into kinetic energy, one can also transform financial capital into real capital, educational capital, human capital or order capital, if suitable interactable structures and energies meet. Interactable structures like hormones in organic systems may not only exist in biology. In the economic contexts to be addressed here, the corresponding controllable development process is co-determined above all by labor and money. Whether in the economic contexts to be dealt with here interacting structures are to be found which are comparable with those in biology, this may be put here only as a question. The focus should first be on the interaction between the single factor in our economies, in this case money, and growth in a definable economic structure. First of all it is important to distinguish clearly between natural factors and arbitrary factors. Money, as said, is not a natural factor because, unlike other factors, it plays no role in growth phenomena in nature not controlled by humans, phenomena over which humans exert no influence. This is precisely why it is the first factor to be examined for its importance in economic growth phenomena!

Introduction

“Permanently it is about money: in such trivial processes as paying at the supermarket checkout, looking at the bank account or planning.”

(Kremer, 2018)

Money, as we know it today, has 3 fundamentally different functions according to M. Miller:

1. the value storage function

2. the value measurement function and

3. the means of payment function.

In the discussion, these functions are already in the focus of economists of the Austrian school. Miller now also points out that the store-of-value function is probably the most important function and is in acute danger. He is correct in also noting that it does not matter whether money is stored and held as cash or in bits. At the same time, capital created by the accumulation of money is nothing other than accumulated cash and digitally stored money, i.e. money collected and then stored. Therefore, credit cards and debit cards that draw on stored money can also be used like money. The storage of money in banks suffers, of course, when interest and expense accounts devalue the money and thus the money itself loses value faster than rust destroys iron. The storage function is now also a kind of exchange insofar as it is not the current exchange of value that plays a role, but the time-delayed exchange of values. The value measurement function, on the other hand, represents an exchange value in non-real space, which, however, can become a real exchange value in the exchange between real and unreal world. The unreal world is also, on closer examination, not quite as unreal as at first sight. As unreal we would like to list here all those phenomena which influence the physical time space but are superficially not real scalable in it.

Now capital as a real usable medium of exchange seems to exert a special attraction not only for the actors at the market places especially the financial market places, but also for economists and social philosophers like Marx and Piketty. Without money, however, the financial capital addressed here would not exist at all, which is why money must be addressed first after all. Is it possible to explain capital and even to work out the laws of capitalism without knowing and understanding the origin and function of money? Probably not! Therefore, here the attempt to work up this as compactly as possible!

If thegermaneconomist Thomas Mayer in his book “The new order of the money” in the introduction assumes that in panel discussions, in which he participated, among so-called experts … “hopeless confusion about the simplest terms prevailed”, then it is truly necessary to consider these terms here more exactly, particularly since this book addresses itself not so much to the experts as rather to the normal citizen. The latter finally wants to know how money and capital can be used to stimulate growth processes in the economy in order to increase prosperity.

What is money? That would be the first question to be answered. According to Mayer, the two sources from which the answer can be derived are manifested in the following views: For some, money is a special commodity that has become a means of exchanging economic goods through social convention. For others, money is merely a measure of the debt we owe to fellow human beings who have left us an economic good. Perhaps, in sacred-legal terms, the compensation of a debt is even the origin of money in the first place. Money as a commodity or money as a debt, this puts two contrary views in mind to what money usually seems to be for people. I would like to counter this with a third, a mediating definition: Money has become an equivalent for work performed in the form of goods or services. This expresses the appreciation for these labor services, so that this money itself can pay off debts. This always creates a creditor-debtor relationship, even when goods and money are exchanged at the same time. If the seller gives a good, for example a box of chocolates, to the buyer, he expects money from the buyer in return. The seller is the creditor and the buyer the debtor. The settlement is achieved with money, in any case a kind of promissory bill, which is then passed on as money, for example to buy cocoa powder or even a newspaper. As a transferable promissory bill, this bill can in principle remain in circulation forever, unless it contains an imprinted mark for cancellation. This can be a fixed date or just the registration code, to which a corresponding date has been added, on which the bill becomes invalid as a promissory bill, perhaps because the loan then becomes due, or the debt that still exists has to be readjusted. With the nowadays very widespread creation of money by means of a loan, the date for invalidation is also fixed, whereby as a rule not exactly the bill is returned which was paid out when the loan was granted. Generalizing, therefore, only money not tied to a loan can remain in circulation forever, so to speak, without an official expiration date.

Subsequently, the question arises as to what capital is and, connected with this, what the interest is that one may expect for money and capital.

If we first assume that capital is created by the accumulation of money, the idea that saving is the basis for capital formation and lending is obvious. In many cases, the interest on capital made available has now been as a reward for the associated renunciation of consumption. But this interest can only be measured by the scarcity of the capital available, as Keynes already points out. “The owner of capital can receive interest because capital is scarce, just as the owner of land can receive rent because land is scarce” (Keynes, 1974).

Here, artificially created scarcity by producers and traders must be distinguished from the natural scarcity of resources and all other commodities, which derive their value not from the scarcity of a labor input but from a scarcity beyond labor inputs. Keynes does not address this essential distinction, which was not really an issue at the time of the 1st Industrial Revolution and before, and this was because natural scarcity was not general, but rather marginal in limited areas. This has already changed in the course of the 2nd Industrial Revolution and will only change fundamentally in the age of the Internet of Things. The more capital-intensive production becomes and the more this capital also yields corresponding returns, the more capital will accumulate, and the scarcity will dissolve.

We can now also regard capital as an accumulation of promissory bills, promissory bills that have not yet been redeemed, or as a promissory bill that has been created by the owner of capital via a loan at his expense by receiving money from a loan contract. Accordingly, capital does not have to arise from a savings behaviour, with which an essential obstacle in the form of scarcity is not fundamentally eliminated but is nevertheless no longer present in the exclusivity assumed so far. The loss of the previous scarcity in the “safe money system”, which will be explained in more detail, means that capital can be made available more easily and growth can thus be triggered more readily by the factor money.

Both high savings and cheap loans can reduce the scarcity of capital. If capital is no longer scarce, the willingness to pay high interest rates for it decreases to the point where loans can only be accommodated with zero interest rates. However, the willingness to give away capital without interest income can only be encouraged with appropriate hedges. A lack of inflation, for example, is an indication of the secure return of funds provided over the long term. Likewise, deposit insurance can help create confidence, confidence that the money borrowed will be repaid. But trust and security are also created by private-law protection through contracts that secure a work performance, as in the case of “safe money,” which will be discussed in more detail later.

As a rule, there should be no money stored and kept anywhere in a money system based on credit, since money in circulation always represents a debt relationship. Stored money that is in the piggy bank is comparable to the promissory bill in the chest of drawers that has not been redeemed. There is always, even if only virtually, a creditor and a debtor. If I receive 100 euros as payment for a good in a business transaction, I am the creditor of the good and my counterpart, who gave me money for it, acts as debtor until the exchange of the good for the money received dissolves this debt relationship. The money stands for a promissory bill that is triggered with labor services or goods. If money is withdrawn from circulation, the debt relationship nevertheless continues to exist unless the debt value shown on a banknote is declared void by declaration or by law. It is precisely this invalidation of money by declaration or law that should be ruled out in the case of secured money.

A. New versus old monetary systems

I. Money and monetary systems

“It is an old and tempting trap the believe that only the strong arm and single mind of ‘”Despotic Power”’ can really generate loyalty in politics and credibility in finance.”’

(Felix Martin: Money, p. 182, 2015)

Whether we conceive of money as a pure medium of exchange or as credit money, a monetary system always emerges that is to be characterised by the use and creation of money. Eucken differentiates the classical view that money is either pure medium of exchange or credit money by taking the money paid for a commodity as a promissory bill with the delivery of the commodity and contrasting this with the exchange, whereby money becomes a commodity or also the money created by credit. Accordingly, Mayer summarises Eucken’s monetary order into three points: 1. money becomes a commodity upon exchange, 2. money is created as a promissory bill upon delivery, and 3. money is created by the lender. This points out essentials of a monetary system: 1. there must be a defined process of creation for money, and 2. there must be a generally accepted use of money.

Regardless of this systematic division, one can ask how money came into being, whether as a medium of exchange or as an acknowledgment of debt.

This does not yet capture the poles of power from which the system-determining forces radiate. One of the centres of power that form a pole of force is state power, which can put appropriate money into circulation. Other centres of power are formed by private economic forces, which were initially reluctant to enter the market, but are now increasingly doing so with their own money creations. The question arises whether the citizen can thus take back his money, a money which, after all, ultimately represents his labor power.

Let us return to the question of what money is: According to Eucken, from whom Mayer derives his classification, all existing money systems are mixed systems of commodity money, state debt money and some kind of private credit money.

Mayer simplifies the whole thing even further by distinguishing only between systems of asset money and systems of liability money, following the accounting rules. According to this, one can then distinguish between asset money systems and liability money systems in the different money systems.

Historically, money first saw the light of day as asset money. Just as lands were given as fiefs for merits earned in previous campaigns, money was given for services rendered at court and also for goods delivered by citizens, thus creating active money for the citizen’s hand. Passive money, on the other hand, entered the scene mainly with the creation of exchange offices and banks, especially central banks. Thereby, in the last historical phase, money is issued by the central banks to the licensed commercial banks as credit. Thus, we have also already highlighted 2 of the 4 positions in the asset-liability money system. In addition to asset money and central bank money, Mayer’s table also shows commodity money and giro money.

Commodity money is clearly of a private nature, and a closer look will show that giro money is also of a private nature. Pure asset money and central bank money, on the other hand, are government money. If we now view the historical development in the money market systems as an evolutionary development, we can record a sequence which begins with commodity money in simple barter societies and, in the second stage, via the active money of the rulers as a means of payment, then sees the light of day in the following third stage as central bank money, in order to arrive in the fourth stage at the conclusion as Giralgeld, a privately created money, to dominate the market. Even if the trade with money was once such with commodity money, this is not a proof that the barter trade is the beginning of the trade and the money in itself. Money can also be an offering as a substitute for goods and be used to pay off a debt, and was used in exactly the same way, among other things.

If Thomas Mayer now demands a pure asset money system as the New Money System, this is a step backwards from the point of view of evolution, even if the analyses of Mayer himself are very brilliant and bring to light new findings in detail which make his preference for the asset money system quite understandable. The current state of affairs, with a mixed system of primarily state and private passive orders, is certainly not the best of all conceivable orders, but neither is the regression to the active money order; rather, we should follow evolution all the way to the last step and provide the assistance needed to reach the final stage of a pure private passive money order. To avoid misunderstandings, it should be noted that even if the private passive money system is at the end of an evolutionary development, other systems will still persist alongside it. Private credit certainly existed in Babylonian times, but there was no banking system in the modern sense. Even the exchange offices, which existed up to the time of the Roman empire partly only as table in the temple district, were not yet banks in the today’s sense, although as precursors to be classified. The foundation of the Bank of England in the 17th century represents a quantum leap with regard to the conception of money, in which John Locke, according to Martin, played a considerable role. The next step to be hoped for in the 21st and in the 22nd century could be a kind of paradigm shift towards a denationalisation of the previous money creation by the new money creation of free banks and private financial institutions as private internationally operating financial institutions with contractual security of the customers money!

II. A new classification

“Asset money is endowed with the confidence of users that it will be accepted by other users as a medium of exchange. Passive money, on the other hand, is a financial instrument that can take on the character of a debt or equity instrument.”

(Thomas Mayer: The New Order of Money, pp. 25-26, 2014)

As already mentioned, Thomas Mayer distinguishes between the asset money order and the liability money order. Here, the asset money order (active money order) includes commodity money and asset money. In contrast, under the liability money order (passive money order), Mayer lists giro money and government central bank money.

Let us take the table drawn up by Mayer and look at the whole thing in terms of the four fields listed in it: He assigns two fields to the asset money order in the first column: 1. commodity money and 2. asset money. In the 2nd column, he assigns 2 further fields under the liability money order: 3. the giro money and 4. the government central bank money. Thus, position 1. and 3. are in one row, i.e. commodity money and giro money. Asset money and central bank money are in the row below. Commodity money and scriptural money emphasize the private origin of money creation, while asset money (2) and central bank money (4) emphasise the government’s role in money creation. As already mentioned, the following sequence can be used to describe the phylogenetic stages in the development towards a modern monetary economy:

A: Goods were exchanged even before money existed, with which, however, exchange then became easier. Before the introduction of money, gold, among other things, was used as an exchange equivalent, Gold as weighable precious metal, and then derived from is money introduced as intermediate step in the barter trade and/or replacement for the commodity for the redemption of debt and expiation.

B: Afterwards we come to the asset money, in that a ruler formed countable coins from the medium of exchange gold, which was still traded as commodity, by means of a coinage and thus the asset money was created.

C: It was not until much later, that central banks were founded, which initiated the transition from asset money to state central bank money as credit money. In the course of the 17th century, the Bank of England felt compelled to introduce paper money in order to prevent the melting down of coins, because many times the metal value was higher than the coin value.

D: Only in the last century the detachment of the credit money from the state institutions developed, without ever having fully detached itself from it until today, the Giralgeld developed.

E: Therefore, the last step the total detachment of the private credit money creation from state defaults within a legally regulated money system should be implemented as immediately as possible, with which the four fields are dissolved then lastingly, by dipping into a growth spiral. The optical clarification is to be represented here by a tabular listing of the development series as a graphic substitute. The fields follow each other in a spiral, beginning with field 1 in the primeval time and ending with field 4 in the present time.

Field 1: The commodity for the settlement of debts!

Field 2: The coin to the settlement of the debt!

Field 3: Paper money for the dissolution of debt!

Field 4: The credit card (the cell phone) to the settlement of debts!

In the today’s system the 4 fields still exist side by side, the commodity as exchange object and object for the settlement of debts, the coin as part of an outdated asset money system and the paper money as part of an asset money system and as convertible credit bill in the passive money system, as well as credit card and cell phone in the transition to the purely credit-oriented passive money system!

If one follows the historical expiry in the way explained before, then at the end of the historical development the legally secured passive money system in private administration should stand. Now it is not to be assumed that the other money systems disappear, it concerns only an evolutionary final state, which does not exist without the predecessors, these also does not have to eliminate completely. The very fact that a commodity money still exists, starting from the “primitive culture” to the most sophisticated forms of modern civilization in the private exchange among friends. Nor is the emergence of passive money to be equated with the emergence of debt. The debt in the civil-legal sense and before also already in the sacral sense probably exists, since Homo sapiens entered the world stage. The passive money system arises only with the banks and the central bank credit, which holds the commercial banks in the harness of the regulated money creation at the reins. The reins, which were initially held tightly with the money reserves, were loosened considerably with the withdrawal of a gold backing. For the complete unblocking of money creation by commercial banks, there is still a lack of rules that can prevent the limitless creation of new money. Only appropriate rules can guarantee the necessary limitation of borrowing. If, in the absence of interest rates, hedging requirements are also inadequate, it will be difficult to limit borrowing.

1. Asset and liability order

If we take the barter trade in gold, this is an asset-liability exchange, since one commodity is exchanged for another on the asset side. commodity exchanged from the assets. This is still true after the minting of coins turned the weighable commodity “gold” into a countable commodity “money”. Even in the purely gold-backed paper currency, one could still speak of a commodity currency insofar as one could exchange these banknotes for gold at any time. How the currencies are to be classified in the times of the partial cover, that becomes then already somewhat more complex and thus more difficult in the right classification.

In any case, the asset money system is based on existing values and not on the creation of these values. In addition to existing tangible assets, however, money that is not based on tangible assets but purely on conventions and secured by commitments can also be booked as an asset. If money is provided by a state institution without securing this with a credit agreement, this can work if every citizen is granted the same amount of money or if services for the state are remunerated with money created for this purpose without a credit agreement. But attention, even if everyone receives the same money quantity with a money reform, the starting conditions are nevertheless by far not the same for all, rather already with same payment for comparable achievement. Existing tangible assets and generally nonpecuniary capital can easily be converted into financial capital, so that the equilibriums can already shift considerably within a few days in the case of a monetary reform and the new millionaires can also be quickly identified in the new currencies. Asset money is also the gold or generally precious metal, if it is used as means of payment and for the storage of claims from any kind of legal transactions.

All money created by means of credit, on the other hand, is passive money and gives rise to the passive money order, but let us first take a closer look at the asset money order in general.

1.1 The Asset “active” Money Order

If we go back in history to the beginnings of monetary systems, to the first money creations, we dive into a cosmos of barter transactions and commodity currencies. The simple barter trade moved at first certainly fully in the private responsibility of private persons, this also still, after it became naturalised to exchange the goods no longer directly, but to use valuable precious metals as intermediate stage with the exchange. The commodity gold was finally transformed into easily countable gold pieces with coinage for better handling. Money, however, is not in itself a commodity, but a social convention, and thus a social achievement.

The social convention can be enforced by a ruler for his sphere of influence, but it can also be enforced on a smaller scale by active groups, as in the case of free money in the “Wörgl” model experiment. A brief but essential description is given by Kennedy, who also describes other comparable experiments and approaches.

Kennedy’s different approaches to a new monetary order can all be attributed to an asset-based money order, which is also where the historical tragedy is hidden. Kennedy probably considered the credit-based passive money order to be indefensible only because it was irrevocably associated with interest and compound interest. However, if it were possible to keep interest transactions out of the liability money order, I could well imagine a change of mind in Kennedy as well, so that she might welcome a liability money order based on interest-free credit. The First Experiments cited by Kennedy, however, clearly fit into the asset money order. Nevertheless, the possible turn to a passive money order should not be ruled out here in these approaches.

1.2 The liability “passive” Money Order

Active money always involves institutions which, according to their position of power, are able to put into circulation a kind of free money in the language of Gesell, or in the diction of the 21st century a helicopter money, or to supply a bureaucratic apparatus with the necessary money. Only because of the special position of power of the financiers can this money be sure of acceptance by the citizens in their region. Passive money, on the other hand, gains its acceptance primarily through the underlying loan contract and is created today by the commercial banks, in private loans without or with the most diverse hedges contractually create a money that is given a limited life by the term of the loans. However, the partial linkage back to the central banks and the fractional reserve holding in the conclusion of private loans disrupts and dilutes the purely private character of this private lending business. On the one hand, private character is diluted via the central bank’s hedging, and on the other hand, the splitting off of 1 % of the loan amount causes the money thus generated to lose value with each round of lending. This loss must be added to the loss due to inflation, so that a loss of at least 2.5 % per year must be expected, assuming inflation of up to 2 %. If we want a stable monetary system, these losses should be excluded. But how can these losses be minimized or eliminated? Fractional reserves can be prohibited by law, as was the case under Roman law. Inflation, on the other hand, cannot be prevented in principle neither by law nor by the activities of the central bank. However, it is possible to think of price formation limits in relation to the actual labor time spent or to use the labor time spent as an equivalent for the value of money.

One problem with passive money is correctly worked out by Mayer. Passive money always requires collateral or guarantors, with the state often being brought into play as the ultimate guarantor. This puts forward and reinforces the view that a passive money system can only work if it relies on state guarantees. Thomas Mayer, however, rightly rejects this state guarantee. If we now replace state protection by equivalent private protection, the passive money system appears in a different light. In this way, too, only total decoupling from the state system is possible. A private institution can indeed bring money onto the market, but as asset money always only in a limited range of validity or in dependence on other currencies, to the extent that these are not freely convertible currencies or so-called cryptocurrencies. If, on the other hand, the asset money is issued by state institutions, this leads to a clear dependence on these institutions; after all, gifts can also create undesirable dependencies.

In a nutshell, helicopter money from the state side can satisfy the money needs of an economic region, but never the money needs of the world economy as a whole, it will always remain linked to a specific region and its power structure of a state nature. Thus, the money is not really safe, currency reforms due to value losses are already pre-programmed and thus the money is by no means stable and sustainably secured.

III. Money creation, in the now and yesterday!

“For in every country of the world, I believe, the avarice and injustice of princes and sovereign states, abusing the confidence of their subjects, have gradually diminished the actual quantity of metal originally contained in their coins.”

(Adam Smith, 1776)

Money exists today as cashless money in bank computers, but also as coinage and as paper money. Predecessors were sometimes giant stones, shells and other rare and less rare natural products.

From history, coins are known from almost every era of recorded history. Not in all cultures were precious metals used as a means of payment; ethnological studies show that even stones and shells were used like our money today. This shows that it is not the value of the medium of exchange that is decisive, but the exchange value attributed to it. Whether stone, precious metal, shell, or specially prepared paper with an official imprint, there must always be a social agreement that assigns a value to the medium of exchange. Croesus was the first to mint gold coins, thus establishing his immense wealth. With the gold coin one had an exchange value in the hand, which could be used fast by counting for the acquisition of the different goods with different value measurements. This money was created virtually out of nothing, even if the content of precious metal carried a certain material value. Simplified one could say that here active money, out of the nothing was created, quasi due to the authority of the ruler. Only due to a trust basis between the creator of the money and the customer, who uses the money, this money receives its value. A second strand from which money emerges is the debt, which had to be recorded in history so that repayment could be guaranteed. Money in this context is rather an object that is there to keep the memory alive, a mark in the accounting. Since this money is not actively presented, but stands only in the books, thus passively only present, and as not activated book money, one speaks here also of passive money.

Passive money gets its value from the confidence in the enforceable contractual text of a loan. Money does not grow and is not found in the ground; it is the product of a social convention. The corresponding conventions are primarily handed down and are usually renegotiated from time to time behind closed doors. Even in our Western democracies, the financial industry is reluctant to show its cards, and the responsible protagonists can at best show good academic degrees, but no democratic legitimacy. This is the central problem of our current monetary economy, which is neither a pure asset money system nor a pure liability money system, nor does it have any legitimacy. Since money creation has to reckon with both state and private influences and, moreover, bears the features of both an active money order and a passive money order, the complexly interwoven strands are difficult to distinguish. Both a clear active money system and a clear passive money system would be preferable to the current system in terms of transparency close to the citizen.

IV. Modern Money Creation

“The growing unease about the state of the existing monetary order is reflected in fundamental criticism. It is directed not only against the monetary policy of the European Central Bank, which is accused of self-empowerment with covert government financing and the creeping expansion of its competence, but also in general against money and our current financial system!”

(Kowalski, 2018)

We live in the 21st century in a time in which money, rightly or wrongly, threatens to lose all reference to substance values. Digitization has already largely displaced cash, but how is money created in the first place and is purely digital currency the future? Perhaps the purely digital currency is only the future because it is easier to produce, since there is no longer any need for money presses or mints. Regardless of the new possibilities of digitization, we should first take a closer look at the money creation processes inherited from the era of gold-backed currencies. For many years, the student book “Geld und Geldpolitik” (Money and Monetary Policy) published by the Bundesbank conveyed the image of controlled money creation by means of a multiplier, which can limit it and thus ensure a stable currency! The reserve maintenance of 2% was to control according to it with the multiplier 50 the credit creation by the commercial banks and to limit it to the 50-fold of the reserve maintenance. In the meantime, experience has led to the realization that this is no guarantee of limiting lending. Even the current minus 4% interest rate on central bank deposits has no real restraining effect on lending. The lifetime working time available to everyone is more of a serious limitation on borrowing in the case of the safe money NIM or Moneta envisaged here. The granting of credit in the current traditional lending business is more likely to be restricted by ever-increasing requirements for the banks’ equity capitalisation, although the sense of such measures is only superficially apparent. If one takes a look at the high stakes of borrowed capital at the banks, the level of equity capitalisation will only be of marginal relevance. In this respect, a multiplier is of no help at all. Braun now writes about the new edition of the Schülerbuch after the last financial crisis in 2008: “Under the new monetary policy regime of quantitative easing, the multiplier myth of the old Schülerbuch had had its day.” It is interesting that this new independence of central banks from the myth has now been celebrated by one of the representatives, indeed by the “Bank of England”, with a photo in the basement of the bank, with a photo in which the picture sideways depicts the storage of gold reserves. Does this perhaps mean that one would prefer to return to the old gold currency? Moreover, the Bundesbank’s new Money Museum even provides a gold bar to touch, perhaps so that the value of money can also be tactilely grasped by touching the gold bar. Of course, the process of today’s money creation is also explained in the student book and in the museum, but whether it is comprehensible for students, where it is used and at what place in the school canon the museum and student book find their place, that is just a question. Whether the desire for a new edition of a gold-backed currency was buried with the retrieval of gold reserves from abroad is also a question that cannot be answered.

Since the money supply is now largely determined by commercial bank loans, the central bank is also increasingly losing control over the money creation process as a whole. In addition, cryptocurrencies, which are springing up like mushrooms, are taking over more and more shares of the banking business without thus becoming fully valid currencies. Since cryptocurrencies can only take over partial tasks of a currency, they do not endanger national currencies in principle, unless they are granted the status of a fully recognized and accepted currency by the state, in which case the question of value stability must be raised anew in any case.

Central bank money, which does not originate from reserve holdings, will recently contribute to long-term devaluations by means of inflation, for example, through actions such as QE. One could now understand the devaluation of money, regardless of how it comes about, as a counterpart to the wear and tear of commodities. In the case of money, however, this is by no means a natural process and, moreover the regulated devaluation, which is actually to be expected is then missing. Since the regulated devaluation would be attainable only with a pure central bank currency, which could guarantee a hundred percent active currency, a possible alternative is the full currency. In a fully valid and solely authorised full currency, the asset money can be controlled by the national central bank without any problems; the only question is whether one wants it that way?

1. Asset money

If the central bank prints money and makes it available to the government in office, for example through the treasury, all civil servants and employees in government service could be paid with it. In this way, money can be put into circulation for everyday payment transactions in a very simple way. The general use is then guaranteed by the fact that this money put into circulation and only this money is accepted to pay the debts of the citizens to the state. Whether the money thus created by the state is sufficient to cover the money needs for all the transactions of the citizens may not be so easy to grasp and to control. In such an asset-based money system, central banks and governments would be called upon to monitor money flows and to maintain a balanced money supply with sufficient replenishment, if necessary, by expanding the bureaucratic apparatus. Such an asset-based money system thus presupposes an extensive state apparatus and runs counter to the demand for a lean state. In principle, a currency fully backed by gold can also be regarded as a currency with asset money, since money is issued 1 : 1 against gold without, ideally, creating money via loans. Since the creation of money in Bitcoin is comparable in process terms with the fully backed gold currency, the money is ultimately created via an exchange process, albeit not based on tangible assets, but directed by algorithms, the “mining”, comparable vocabulary is used here in reference to the gold mining in the gold mine. In this mining, however, no tangible assets are created, not even real debt instruments. A major disadvantage of “mining” is the high energy consumption and the fact that with the expansion of the decentralised Bitcoin network ever higher computer capacities are required, in this respect hardly suitable for building sustainable financial systems.

Another of many ways to establish money as asset money in an economy could be to give money away as paper money, coin money or letter money. Such a procedure then makes money available to every citizen without imposing credit on him, a kind of helicopter money that is not credit-based.

Now, if this is a certain pre-determined amount of money that is made available to each citizen, it is quite possible, with the right calculation, to put enough money into circulation so that there is sufficient liquidity for the various activities. In order not to pump too much money into circulation, there must be rules on how the money issued can flow back again. If the amount of money per capita is to be kept equal, then the money issued must be retrieved at the latest after death.

One possibility that suggests itself is to retrieve this from the inheritance. Realistically, however, one will have to assume that not everyone will still have so much money on hand at the end of their lives, that it will still be possible to repay the sums of money received in the course of their lifetimes, even partial sums. Of course, inheritance tax can recoup some of the money assessed per capita. In principle, the state will have to recoup the active money put into circulation through other taxes, and inheritance taxes offer only one of these possibilities. If the bulk of the taxes is melted down in favour of a profit tax, an accounting can also be made with acquired licenses as well as lease and rental income. This makes the calculation more transparent, fairer and easier to perform. If we now assume for the sake of better calculability that there is only one profit tax and that all asset money that has been issued is to be recouped via it, then we only have to calculate how much money has to be regularly siphoned off by taxes so that the money pumped into the market comes back again. If we simplify our basic conditions to the effect that every citizen receives 600,000 euros from the state over the course of his or her lifetime free of charge for free disposal and must likewise pay off 600,000 euros via taxes, then this could close the money cycle. We could go on calculating here and certainly get a reasonably satisfactory result, but who controls all this? Even for a self-regulating control loop, it seems to me that there is still not enough controlling here. Banking supervision and the ECB are already assuming more and more control functions within the European framework in the euro zone, but unfortunately not to the extent and with the objectives that would be desirable and necessary in a pure asset money system. Moreover, democratic feedback is lacking; mandatory reporting to parliament would be a good first approach.

Another option is to rely more on self-regulation but appeals alone are certainly not enough. It would also be possible to use all recognised tangible assets as the basis for a currency, which would at least provide a hedge that would already offer more security than is currently the case. Gold, for example, in a custody account can also be this security. Payment cards on credit basis can appear then likewise as part of an asset money order.

The methods presented here are only some suggestions to bring money into circulation among the many possibilities that present themselves.

However, this can work well in the asset money system only at the national level, and even there, problems will arise because such a system, even in variations, is not flexible enough to be able to react quickly to all eventualities. However, in this way or by other methods, it is possible to create a pure full money of the central bank, which is not created by a loan, that is for sure, but not much more.

In the same way as before the free money, a suggestion of Gesell is bound to a socially legitimated institution, and can therefore hardly lead to a free financial economy, fits rather to a state-directed economy, but not to a market economy. This probably also led to the misunderstanding according to which many of the contemporary economists assumed that a socialist theory was presented here, which shows only marginal deviations from the Marxist doctrine. In fact, there is no socialist-communist theory here. For example, another of Gesell’s proposals, that the land be understood as a kind of commons, a “free land,” is not conceived as the socialisation of a means of production, as in Marxism, but as a common good of the local community and necessary to keep the market functioning. Gesell already recognized that commodities and goods that cannot be multiplied and cannot be worn out cannot achieve a fair market price. Accordingly, land as a commodity does not have the quality of a normal commodity; just as air and water it is not really a depreciable commodity, and neither is money itself.

The last of the suggested possibilities to generate active money seems to be established just in a small scale, so far still hardly noticed, over precious metal and special metal funds. Gold-Money offers a credit card as a Master Card with coverage via a precious metal deposit. By the fact that with this card completely normal purchases, even cash withdrawals are possible, the precious metal in the depot becomes quasi an everyday usable money. Withdrawals and deposits are possible in euros or U.S. dollars via a bank account, and within future times it should also be possible to process them via a Bitcoin account, as well as via other credit cards. Settlement takes place in euros or dollars, in the future perhaps also in bitcoin, which should have purely pragmatic reasons. The direct exchange of gold is also possible, which underlines the active money status. It is therefore possible to pay directly with gold here and settle any invoice in the future, although a conversion then becomes unavoidable depending on the currency in which the payment is to be made, insofar as no gold quantities are specified. The basis is the amount of stored precious metal in the respective account. Since the credit card allows subordinate settlement, it is also possible to transfer precious metals from one account to another without transporting the physical values. The computer makes it possible to trade and purchase here without weighing or transport even a gram of gold, yet in a pure gold currency. This has solved the problems of the past with gold backing of banknotes, in that the physically available precious metal stored in Zurich or Singapore is no longer weighed out immediately in each individual case but is first recorded as a claim in the IT system and then the total gold holdings are either expanded or also reduced, depending on how much gold has been ordered or sold by the customers.