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Re: Spring 2011 Georgist Journal

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  • Scott Baker
    Money in the form of notes is always redeemable for gold somewhere, but if by the crime of 1871, you really mean the removal of exchanagibility into silver
    Message 1 of 19 , Jun 2, 2011
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      Money in the form of notes is always redeemable for gold somewhere, but if by the crime of 1871, you really mean the removal of exchanagibility into silver with the coinage act of 1873, then that indeed was the bankers' subterfuge.  That doesn't change the fact that, as George pointed out, producing actual money is the province of the government, not the banks, and that if the quantity is fixed, as it was at $450 million (in hindsight, too fixed, as the private banks had no such limit on their money), people will accept and use it.
      From George on the possibility of overproduction of money by the Government: "('ecclesiastical expletive!') I am a Greenbacker, but I am not a fool." (Louis F. Post: The Prophet of San Francisco; (New York: Vanguard, 1930), p. 128. (as cited in Zarlenga's "The Lost Science of Money, p. 674).  Remember, George lived exactly when the Greenbacks had their greatest influence, and he was persuaded as to their efficacy.
      As we're staring at a yawning chasm of unbridgeable debt, it would make sense to reexamine whether producing U.S. Notes and putting them to work in the real economy, creating jobs and infrastructure, would make sense.  Of course, ideally, this should be done with a national system of LVT simultaneously.

      From: DanS <director@...>
      To: Scott on the Spot <ssbaker305@...>
      Sent: Thursday, June 2, 2011 8:27 AM
      Subject: Re: Spring 2011 Georgist Journal

      --- In LandCafe@yahoogroups.com, "Scott on the Spot" <ssbaker305@...> wrote:

      > As for the Greenbacks, they were never actually redeemed for gold, and
      > over a few years time, came to be treated as actual money by a public
      > that was happy to use them.  The People of the Bank were unhappy,
      > because it destroyed for a time, their monopoly on producing money, far
      > more important than their monopoly on making loans.

      Actually, they were redeemed for gold, or gold-notes, as a result of the "Crime of 1871," when the bankers persuaded Congress to sell out to them.

      -ds



    • Scott Baker
      Dan - From wikipedia (not a scholarly resource, I know, but in this case, pretty well cited): A United States Note, also known as a Legal Tender Note, is a
      Message 2 of 19 , Jun 2, 2011
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        Dan -
        From wikipedia (not a scholarly resource, I know, but in this case, pretty well cited):

        A United States Note, also known as a Legal Tender Note, is a type of paper money that was issued from 1862 to 1971 in the U.S. Having been current for over 100 years, they were issued for longer than any other form of U.S. paper money. They were known popularly as "greenbacks" in their heyday, a name inherited from the Demand Notes that they replaced in 1862. They were called United States Notes by the First Legal Tender Act, which authorized them as a form of fiat currency, but because their value derives from their status as legal tender they bear the inscription "This Note is a Legal Tender" and are often called Legal Tender Notes. They were originally issued directly into circulation by the U.S. Treasury to pay expenses incurred by the Union during the American Civil War. Over the next century, the legislation governing these notes was modified many times and numerous versions have been issued by the Treasury.
        United States Notes that were issued in the large-size format, before 1929, differ dramatically in appearance when compared to modern American currency, but those issued in the small-size format, starting in 1929, are very similar to contemporary Federal Reserve Notes with a marked distinction of having a red U.S. Treasury Seal in place of a green one.
        Whereas issuance of United States Notes ended in January 1971, existing United States Notes are still valid currency in the

        United States, though extremely rarely seen in circulation, given that paper money currently consists almost exclusively of Federal Reserve Notes.

        Note the last sentence, but please, if you find one, let me buy it off you and I'll frame it to show people what genuine U.S. money actually looks like!  I actually remember seeing these a good bit after 1971, though I think they were finally recalled and pulped for the most part in the 1990s.  Here is what one looked like:

      • roy_langston1
        ... Walter kindly sent me his copy of the journal, and I ve now read Lindy s full article. Most of it is perfectly correct, but IMO his dismissal of the fiat
        Message 3 of 19 , Jun 10, 2011
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          --- In LandCafe@yahoogroups.com, "walto" <calhorn@...>
          wrote:

          > Lindy Davies has written a fairly lengthy essay on
          > the nature of money ("Notes on Money") in which he
          > criticizes several of the monetary positions that
          > are regularly pushed here. I feel unqualified to
          > assess the merits of Lindy's arguments, and I'm
          > hoping that one or more of the local mavens would
          > be so kind as to review that article here.

          Walter kindly sent me his copy of the journal, and
          I've now read Lindy's full article. Most of it is
          perfectly correct, but IMO his dismissal of the fiat
          money advocates and their criticisms of debt money
          is unconvincing and beside the point. I don't accept
          the whole radical chartalist critique by Stephen
          Zarlenga et al, and IMO a well designed debt money
          system could function much, much better than our
          current house of mirrors/cards, but I do think the
          case for fiat money is much stronger than Lindy
          allows.

          He begins his critique by saying the radical
          chartalist repudiation of debt money is wrong on
          several key points, but signally fails to identify
          or refute any. He says money is not consumed, but
          then immediately allows that it is erased by debt
          repayments. This glosses over a fundamental problem
          with debt money systems: positive feedback. When
          people want to carry more debt, it increases the
          money supply, leading to inflation. But inflation
          makes it more attractive to be in debt, so debt
          increases again. Contrariwise, if people choose to
          pay down their debts, it contracts the money supply,
          deflation sets in, and debt becomes even less
          attractive, leading to even more deflation. The
          system must be monitored and tweaked incessantly to
          keep the act up on the high wire; and it is only a
          matter of time before something new happens, the Fed
          misreads the signals, and the high wire act comes
          crashing down.

          Lindy says, "Borrowing is not the only way we can
          get money; we can also earn it." But surely the
          point is that in a debt money system, borrowing is
          the only way to CREATE money, and earning money
          does not create any. Tying the money supply to
          net credit creation puts the economy at the mercy
          not only of bankers, but of EVERYTHING that can
          affect household and corporate confidence, from
          political scandals to earthquakes.

          He goes on to suppose that a government fiat money
          issuer would judge the quantity to issue based on
          various indicators, including the NIPA, which has
          been shown to be flawed. This criticism seems odd,
          as politically, reform of NIPA standards to better
          accord with reality would be a picnic compared to
          replacing the Fed with the Mint.

          He also notes that the exact relationship between
          money and inflation is difficult to determine,
          citing the Fed's concession that first M1 and then
          M2 had ceased to provide reliable guidance to
          financial conditions. But M1 and M2 are both debt
          money aggregates, not fiat money measures, so
          their problems are not relevant to management of
          fiat money. When the quantity of money is directly
          controlled by the Mint rather than being an indirect
          effect of the Fed funds rate, along with all the
          market factors that affect credit, the models become
          much more tractable. The Mint could simply have a
          target of 1% annual increase in the price of a basket
          of a couple dozen commonly traded commodities: some
          metals, some agricultural commodities, some fuels,
          etc. If the basket's market price is below the target
          line, the Mint delivers currency to the Treasury to
          spend into circulation. If it is above the line, the
          Mint turns off the tap until prices drop below the
          target line. All prices would freely adjust, but
          everyone would know what the long-term increase in the
          price of the whole basket was going to be.

          I do agree with Lindy that the money monopoly is not
          as basic or important a problem as the land monopoly.
          But Lindy seems not to appreciate the barrier the
          debt money system poses to land rent recovery:
          without land purchases to lend for, and land to take
          as collateral, what are the banks going to lend for
          to create the additional money needed to support the
          rapid economic growth we rightly expect to accompany
          land rent recovery? A bout of deflation and economic
          contraction following implementation of LVT would be
          a sure way to see it reversed following the next
          election. I have no confidence whatever that the
          stimulative effect of LVT would overcome the
          depressive effects of deflation. Surely we have
          already had enough of government piling on debt to
          keep deflationary collapse at bay.

          -- Roy Langston
        • walto
          Thanks, Roy, for your acute comments. That s exactly what I was hoping for! (Now if we could just get Lindy to respond....) W
          Message 4 of 19 , Jun 10, 2011
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            Thanks, Roy, for your acute comments. That's exactly what I was hoping for!

            (Now if we could just get Lindy to respond....)

            W

            --- In LandCafe@yahoogroups.com, "roy_langston1" <roy_langston1@...> wrote:
            >
            > --- In LandCafe@yahoogroups.com, "walto" <calhorn@>
            > wrote:
            >
            > > Lindy Davies has written a fairly lengthy essay on
            > > the nature of money ("Notes on Money") in which he
            > > criticizes several of the monetary positions that
            > > are regularly pushed here. I feel unqualified to
            > > assess the merits of Lindy's arguments, and I'm
            > > hoping that one or more of the local mavens would
            > > be so kind as to review that article here.
            >
            > Walter kindly sent me his copy of the journal, and
            > I've now read Lindy's full article. Most of it is
            > perfectly correct, but IMO his dismissal of the fiat
            > money advocates and their criticisms of debt money
            > is unconvincing and beside the point. I don't accept
            > the whole radical chartalist critique by Stephen
            > Zarlenga et al, and IMO a well designed debt money
            > system could function much, much better than our
            > current house of mirrors/cards, but I do think the
            > case for fiat money is much stronger than Lindy
            > allows.
            >
            > He begins his critique by saying the radical
            > chartalist repudiation of debt money is wrong on
            > several key points, but signally fails to identify
            > or refute any. He says money is not consumed, but
            > then immediately allows that it is erased by debt
            > repayments. This glosses over a fundamental problem
            > with debt money systems: positive feedback. When
            > people want to carry more debt, it increases the
            > money supply, leading to inflation. But inflation
            > makes it more attractive to be in debt, so debt
            > increases again. Contrariwise, if people choose to
            > pay down their debts, it contracts the money supply,
            > deflation sets in, and debt becomes even less
            > attractive, leading to even more deflation. The
            > system must be monitored and tweaked incessantly to
            > keep the act up on the high wire; and it is only a
            > matter of time before something new happens, the Fed
            > misreads the signals, and the high wire act comes
            > crashing down.
            >
            > Lindy says, "Borrowing is not the only way we can
            > get money; we can also earn it." But surely the
            > point is that in a debt money system, borrowing is
            > the only way to CREATE money, and earning money
            > does not create any. Tying the money supply to
            > net credit creation puts the economy at the mercy
            > not only of bankers, but of EVERYTHING that can
            > affect household and corporate confidence, from
            > political scandals to earthquakes.
            >
            > He goes on to suppose that a government fiat money
            > issuer would judge the quantity to issue based on
            > various indicators, including the NIPA, which has
            > been shown to be flawed. This criticism seems odd,
            > as politically, reform of NIPA standards to better
            > accord with reality would be a picnic compared to
            > replacing the Fed with the Mint.
            >
            > He also notes that the exact relationship between
            > money and inflation is difficult to determine,
            > citing the Fed's concession that first M1 and then
            > M2 had ceased to provide reliable guidance to
            > financial conditions. But M1 and M2 are both debt
            > money aggregates, not fiat money measures, so
            > their problems are not relevant to management of
            > fiat money. When the quantity of money is directly
            > controlled by the Mint rather than being an indirect
            > effect of the Fed funds rate, along with all the
            > market factors that affect credit, the models become
            > much more tractable. The Mint could simply have a
            > target of 1% annual increase in the price of a basket
            > of a couple dozen commonly traded commodities: some
            > metals, some agricultural commodities, some fuels,
            > etc. If the basket's market price is below the target
            > line, the Mint delivers currency to the Treasury to
            > spend into circulation. If it is above the line, the
            > Mint turns off the tap until prices drop below the
            > target line. All prices would freely adjust, but
            > everyone would know what the long-term increase in the
            > price of the whole basket was going to be.
            >
            > I do agree with Lindy that the money monopoly is not
            > as basic or important a problem as the land monopoly.
            > But Lindy seems not to appreciate the barrier the
            > debt money system poses to land rent recovery:
            > without land purchases to lend for, and land to take
            > as collateral, what are the banks going to lend for
            > to create the additional money needed to support the
            > rapid economic growth we rightly expect to accompany
            > land rent recovery? A bout of deflation and economic
            > contraction following implementation of LVT would be
            > a sure way to see it reversed following the next
            > election. I have no confidence whatever that the
            > stimulative effect of LVT would overcome the
            > depressive effects of deflation. Surely we have
            > already had enough of government piling on debt to
            > keep deflationary collapse at bay.
            >
            > -- Roy Langston
            >
          • Wyn Achenbaum
            Not all Georgists subscribe here ... sipping from the firehose is sometimes a challenge. I forwarded Lindy some of the early discussion on this thread, and
            Message 5 of 19 , Jun 10, 2011
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              Not all Georgists subscribe here ... sipping from the firehose is sometimes a challenge.  I forwarded Lindy some of the early discussion on this thread, and then got sidetracked.

              On 6/10/2011 9:27 AM, walto wrote:
               

              Thanks, Roy, for your acute comments. That's exactly what I was hoping for!

              (Now if we could just get Lindy to respond....)

              W

              --- In LandCafe@yahoogroups.com, "roy_langston1" <roy_langston1@...> wrote:
              >
              > --- In LandCafe@yahoogroups.com, "walto" <calhorn@>
              > wrote:
              >
              > > Lindy Davies has written a fairly lengthy essay on
              > > the nature of money ("Notes on Money") in which he
              > > criticizes several of the monetary positions that
              > > are regularly pushed here. I feel unqualified to
              > > assess the merits of Lindy's arguments, and I'm
              > > hoping that one or more of the local mavens would
              > > be so kind as to review that article here.
              >
              > Walter kindly sent me his copy of the journal, and
              > I've now read Lindy's full article. Most of it is
              > perfectly correct, but IMO his dismissal of the fiat
              > money advocates and their criticisms of debt money
              > is unconvincing and beside the point. I don't accept
              > the whole radical chartalist critique by Stephen
              > Zarlenga et al, and IMO a well designed debt money
              > system could function much, much better than our
              > current house of mirrors/cards, but I do think the
              > case for fiat money is much stronger than Lindy
              > allows.
              >
              > He begins his critique by saying the radical
              > chartalist repudiation of debt money is wrong on
              > several key points, but signally fails to identify
              > or refute any. He says money is not consumed, but
              > then immediately allows that it is erased by debt
              > repayments. This glosses over a fundamental problem
              > with debt money systems: positive feedback. When
              > people want to carry more debt, it increases the
              > money supply, leading to inflation. But inflation
              > makes it more attractive to be in debt, so debt
              > increases again. Contrariwise, if people choose to
              > pay down their debts, it contracts the money supply,
              > deflation sets in, and debt becomes even less
              > attractive, leading to even more deflation. The
              > system must be monitored and tweaked incessantly to
              > keep the act up on the high wire; and it is only a
              > matter of time before something new happens, the Fed
              > misreads the signals, and the high wire act comes
              > crashing down.
              >
              > Lindy says, "Borrowing is not the only way we can
              > get money; we can also earn it." But surely the
              > point is that in a debt money system, borrowing is
              > the only way to CREATE money, and earning money
              > does not create any. Tying the money supply to
              > net credit creation puts the economy at the mercy
              > not only of bankers, but of EVERYTHING that can
              > affect household and corporate confidence, from
              > political scandals to earthquakes.
              >
              > He goes on to suppose that a government fiat money
              > issuer would judge the quantity to issue based on
              > various indicators, including the NIPA, which has
              > been shown to be flawed. This criticism seems odd,
              > as politically, reform of NIPA standards to better
              > accord with reality would be a picnic compared to
              > replacing the Fed with the Mint.
              >
              > He also notes that the exact relationship between
              > money and inflation is difficult to determine,
              > citing the Fed's concession that first M1 and then
              > M2 had ceased to provide reliable guidance to
              > financial conditions. But M1 and M2 are both debt
              > money aggregates, not fiat money measures, so
              > their problems are not relevant to management of
              > fiat money. When the quantity of money is directly
              > controlled by the Mint rather than being an indirect
              > effect of the Fed funds rate, along with all the
              > market factors that affect credit, the models become
              > much more tractable. The Mint could simply have a
              > target of 1% annual increase in the price of a basket
              > of a couple dozen commonly traded commodities: some
              > metals, some agricultural commodities, some fuels,
              > etc. If the basket's market price is below the target
              > line, the Mint delivers currency to the Treasury to
              > spend into circulation. If it is above the line, the
              > Mint turns off the tap until prices drop below the
              > target line. All prices would freely adjust, but
              > everyone would know what the long-term increase in the
              > price of the whole basket was going to be.
              >
              > I do agree with Lindy that the money monopoly is not
              > as basic or important a problem as the land monopoly.
              > But Lindy seems not to appreciate the barrier the
              > debt money system poses to land rent recovery:
              > without land purchases to lend for, and land to take
              > as collateral, what are the banks going to lend for
              > to create the additional money needed to support the
              > rapid economic growth we rightly expect to accompany
              > land rent recovery? A bout of deflation and economic
              > contraction following implementation of LVT would be
              > a sure way to see it reversed following the next
              > election. I have no confidence whatever that the
              > stimulative effect of LVT would overcome the
              > depressive effects of deflation. Surely we have
              > already had enough of government piling on debt to
              > keep deflationary collapse at bay.
              >
              > -- Roy Langston
              >


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