Don’t hoard the Means of Exchange! (part 2)
Part 1 of this (short) series generated a major discussion and proved to be amazingly controversial. So before moving on to the intended next part, I’ll first clarify a number of items.
In the first place, there is a clear distinction to be made between wealth and money. People tend to mix these two, often subconsciously. They are not the same. So when an article is called ‘don’t hoard the means of exchange!’ it is not saying one is not entitled to generate and/or store wealth. Later we will see I’m not too impressed with wealth accumulation either, but still this is a very important distinction.
Secondly, people clearly have very strong feelings about their ‘rights’ when it comes to money. They focus solely on their individual ‘rights’, but they don’t understand that the money they hold is valuable because it is used by the other people in the community as a means of exchange. They have difficulty accepting that holding on the money (‘saving’) is damaging the interests of the other users of the means of exchange, which can’t use the money as long as it is held by the saver. By saving they are basically deflating the effective money supply, with all the problematic consequences that deflation entails.
Money basically is a public utility. Even when it is provided by market players. A part of the Common Wealth. It is provided to facilitate exchanges. When we make use of public space it is quite normal to expect responsible behavior, in line with the needs of other users of the space. We can expect a similar attitude when it comes to money.
Third, people joining the discussion ignored a key premise of the article: that money is primarily a means of exchange and not a store of value. The value of the money is result of the agreement to use it for trade, not for storing wealth. This shows how strongly held the prejudice is that money is necessary for savings, but still it is a wrong premise.
Fourth, I didn’t include alternatives to hoarding cash, but they are plenty. As I said previously, anybody fearing inflation has a very simple solution: buy some Gold. Or invest in your business, education, pay your suppliers up front, invest in cost cutting measures, things making you more independent from Transnational suppliers.
Fifth, another key issue is that of course in a sound monetary system nobody is going to send in the SQUAT teams to traumatize you and your loved ones if you hoard cash. The system must be designed in such a way it rewards ‘positive’ behavior. So saving will never be outlawed, it will just be made unattractive. Either by a demurrage, inflating the money supply or just by providing interest free credit based units: without interest on one’s holdings and with interest free credit available for all who need cash (as long as they have assets as collateral) saving money will not be a very attractive proposition anyway.
Conclusion
Many assumptions about money need a closer look. Strong emotions are involved when discussing these matters. But future non banker currencies will NOT be stores of value, but depreciating, rapidly circulating and cheap fiat units. Their success will not be measured by the mistaken notion of ‘price stability’, but by economic growth and wealth creation as opposed to wealth preservation. Preserving wealth can be done in many, much superior ways than hoarding the means of exchange.
Since there is no historical example where high savings account levels of the general population correlated with or caused economic depression in a non-debt based fiat money system which is the sort of currency system you are promoting in a general sense, then at least give one historical example where a high savings account level of the general population correlated with or caused an economic depression in our current debt based money system.
Without any historical examples of financial collapse that can be proven to be directly attributed to high average personal savings account levels your theory about “hoarding” (saving) the “means of exchange” is not evidenced by any real world scenarios.
As I lightly alluded to earlier, depressions over the last century have been attributed to a scarcity of the “means of exchange” but that scarcity was not due to high average personal savings account levels but due to a private monopoly control of a debt based money system that they could expand or contract at will and for their own advantage.
Now if the “means of exchange” were not controlled by a private monopoly and debt-free money was issued by a responsible and transparent body then the general public on average would grow to be prosperous through their own needs, creativity and aspirations. As a result the “means of exchange” would naturally flow according to that prosperity. Thus there would be no need to be concerned about how much of it is in private savings accounts because the overall prosperity would be the evidence needed to show that personal savings account levels, no matter what they would be, are a non issue and nobody’s business.
I don’t know that there is evidence of saving causing scarcity, though I’m sure there must be some. Our whole economic system now is based on scarcity. It’s like the fish asking, “where is this water you speak of?” But there is plenty of evidence that spending creates wealth. that currencies circulating create more abundance than currencies stagnating. So why not encourage spending money and saving something else?
I think the idea that money is a public commodity that should be treated as any public space is an important one.
Thanks Anthony for a good post and an opportunity for open dialogue. Looking forward to part 2.
I believe you just read “part 2.” Anyway, there is no evidence of high savings account levels causing scarcity. “Currencies stagnating”… what is that? That doesn’t even exist. It amazes me how people don’t know people when they are people themselves. Why don’t people just open up their eyes, get off the computer and take a closer look out into the real world…. Start by looking at the people they know personally. How many of them need to be “encouraged” to spend money? How many of them are one or two paychecks away from the street if they’re not out on the street already.
What about the countless stories of people who win the lottery? Almost all of them, if not all of them, spend themselves into oblivion… a situation of poverty that’s worse than where they were before they won the jackpot. The more money people get the more they spend. They don’t need to be “encouraged” to spend. Give them money… they will spend it.
Forget about the spending problem… there is none… focus on the creation and issuance problem…. The spending aspect of the equation will take care of itself… it always has.
Ah yes, it is part 3 I’m eagerly awaiting, which would have been part 2 if not for this lengthy digression.
As Anthony has rightly pointed out, it is large corporations and the wealthy elite who are largely able to manipulate the system (any system) by hoarding, not the average person. But the focus of this article I believe is using money as a means of exchange and something other than money as a store of wealth. That would then be beneficial for everyone except those who are currently able to manipulate the system because money is now both.
As more and more currencies manifest into the world this will become a moot argument. And once that happens I couldn’t agree more: there will be no need to “encourage” spending. We will all be living very abundant lives.
Lord Jesus Christ have mercy on me.
The elite do not manipulate the system by “hoarding”. If this is what you are being taught then you are being misled. They manipulate the system through usury… period. And the focus of this article is as its title, “Don’t Hoard The Means of Exchange.” And if money were used purely as a means of exchange and not a store of wealth then it would require not just a manipulation of the monetary system but also of the judicial system and the expansion of police powers to systemically enforce it.
And if money were used purely as a means of exchange and not a store of wealth then it would require not just a manipulation of the monetary system but also of the judicial system and the expansion of police powers to systemically enforce it.
This is simply not true Tammuz. A demurrage or inflating the money supply will create the desired behavior. Systems simply must be designed to promote the behavior we want. No coercion is necessary.
Or simply promote interest-free credit. Without interest, one of the main incentives for hoarding the means of exchange disappears. And borrowers will surely prefer to borrow in an interest-free currency rather than in one that charges interest, so there is no need for coercion.
This solution may be preferable to a demurrage-based system which still involves some kind of complex administration.
Controlling people’s savings by charging them in any form for holding their savings, which represents their toil and sacrifice, is theft therefore it’s criminal. Expansion of the money supply in accordance with national progress is the sacred responsibility of an incorruptible body subservient to the public interests. Yes … it’s a required skill… even an art form… but with practice it can be achieved through trial and error, adjusted and fine tuned when necessary to the point of near perfection sustaining price stability, increased national wealth and prosperity.
Clearly the middle classes consider the saving of money a virtue Tammuz. And yes, the middle classes are in trouble, so we see them living from pay check to pay check, but would they with a booming economy?
Also, individuals are not the only players. Far from it. We have Government and Corporations to consider.
the simple fact is that interest bearing money supplies circulate slower, because people have a clear incentive to postpone paying their bills. Especially during a depression with scarce working capital Big Business usually demands quick payment of its customers, while paying as late as possible itself. This in order to create a strong liquidity position.
The State is typically very slow with paying. Here in Holland it easily takes two months.
The ‘payment term’ (I’m literally translating her, I’m not sure what the right term in English is, but I’m referring to the time it takes before a bill is settled) in Holland is about 48 days at the moment and it is getting worse every year. It takes billions in extra working capital (all interest bearing loans!) to finance this. Economists have calculated that would the Dutch Government start paying its bills asap instead of as late as possible, the economy could grow 1 or 2%.
But the main issue is, and that is the aim of the article, is to make way for the modern distinction in monetary theory between the Means of Exchange and Store of Value. The idea that the success of a unit can be measured by it’s price stability is antiquated. The future will see different units for both functions.
So what if they save some cash during a booming economy? It’s a non-issue. It has never been proven to be a detriment to a nation’s economy. You can’t develop sound economic and monetary ideas on something that you think may happen especially when you have no evidence that it has happened because it never has happened..
This is the problem with you economists, whether Keynesian, Austrian, or whatever label you want to put on your classification of theories, … each of you all have a finite group of interdependent theories set in stone that you must support and defend at all cost and by all means necessary, even including deception, otherwise your whole house of cards comes tumbling down.
It’s as if a higher central power hands down different schools of economics, each school consists of a set of immovable pillars (theories) that hold up each school with specific orders to the priests of each school not to add a pillar or to remove a pillar at all cost, and if necessary, defend each pillar with as much confusing rhetoric as possible.
Now you mix in government spending and corporate spending with individual spending and now we have a jumbled mess of confusion that the butcher, the baker, the plumber, the farmer, the artisans and all those of such who are the real drivers of the economy and have to live with the ramifications of these theories have absolutely no clue what you are talking about. Then here come the opposing priests with their immovable set of pillars to multiply that confusion a hundred fold.
The bottom line is one of the main pillars of your school, the “hoarding the means of exchange”, just like the Austrian main pillar of their school, the “free market”, is based on something that doesn’t exist and never has existed therefore, like the Austrian priests, you have to defend this pillar at all cost by fabricating scenarios “out of thin air”.
“How long, Sovereign Lord, holy and true, until you judge the inhabitants of the earth and avenge our blood?”
you’re a little harsh on me tammuz!
Anthony, you take criticism gracefully… I’ll do my best to be less harsh.
Anthony Migchels says: “people joining the discussion ignored a key premise of the article: that money is primarily a means of exchange and not a store of value. The value of the money is result of the agreement to use it for trade, not for storing wealth. This shows how strongly held the prejudice is that money is necessary for savings, but still it is a wrong premise.”
Abu Aardvark says: Well, maybe the people who joined the discussion don’t agree with your premise in the first place.
And why should they? Think history. Think 4, 5, 6,000 years. Think gold:
“The U.S. adopted a true gold standard in 1879, and it lasted until 1914 (…) Prices during that 25-year period were the most stable of any sustained period in U.S. history and the U.S. prospered. Far from being a restriction on real economic growth, the gold standard was a boon. Confidence in the future value of money spurs long-term investment.”
http://spectator.org/archives/2012/02/13/lets-return-to-the-gold-standa/print
Why don’t you just come out and say it? You support commodity-backed currency under the control of private interests (“free market”). “Free” meaning everything will eventually be free for those who control the “market” by owning the largest share of that commodity (gold) that backs the currency thus they can lend it out at interest to national governments who do not posses much of that commodity (gold). Therefore the citizens of these nations will continue to be in debt to these private interests and those private interests will continue to buy out politicians, instigate wars all for the purpose of inducing those nations to borrow more money putting their citizenry into perpetual slavery.
I think that fairly represents Abu’s position. He’ll keep regurgitating Austrian Dogma as if it is scripture, never budging, even in the face of the blatantly obvious facts. And believe me, these facts have been presented to him by both me and memehunter ad nauseam at the Daily Bell’s.
We were so successful in thrashing their reasoning, they closed their comments section (losing half of their readership). But Abu is just……….well……..incurable?
Anthony Migchels says: “I think that fairly represents Abu’s position. He’ll keep regurgitating Austrian Dogma as if it is scripture, never budging, even in the face of the blatantly obvious facts. And believe me, these facts have been presented to him by both me and memehunter ad nauseam at the Daily Bell’s.
We were so successful in thrashing their reasoning, they closed their comments section (losing half of their readership). But Abu is just……….well……..incurable?”
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Abu Aardvark says: What ‘blatantly obvious facts’, Anthony?
That one can create wealth with (‘interest free’) money printed out of thin air? That interest itself – even when voluntarily agreed upon – is the main root of elite/monetary evil? That Austrian Economics has a ‘Satanic Core’? That Government and money can be ‘reformed’ and turned into good account if only the ‘right people’ are put in charge? And so on ad nauseam.
Don’t make me laugh!
You have a point, however, when characterizing me as ‘incurable’. Indeed, I will not deviate from my conviction that we are born free to do as we please as long as we don’t harm others in the process and that – in this context – Murray Rothbard was right all along:
“Man is born naked into the world, and needing to use his mind to learn how to take the resources given him by nature, and to transform them (for example, by investment in “capital”) into shapes and forms and places where the resources can be used for the satisfaction of his wants and the advancement of his standard of living. The only way by which man can do this is by the use of his mind and energy to transform resources (“production”) and to exchange these products for products created by others. Man has found that, through the process of voluntary, mutual exchange, the productivity and hence, the living standards of all participants in exchange may increase enormously. The only “natural” course for man to survive and to attain wealth, therefore, is by using his mind and energy to engage in the production-and-exchange process. He does this, first, by finding natural resources, and then by transforming them (by “mixing his labor” with them, as Locke puts it), to make them his individual property, and then by exchanging this property for the similarly obtained property of others. The social path dictated by the requirements of man’s nature, therefore, is the path of “property rights” and the “free market” of gift or exchange of such rights. Through this path, men have learned how to avoid the “jungle” methods of fighting over scarce resources so that A can only acquire them at the expense of B and, instead, to multiply those resources enormously in peaceful and harmonious production and exchange.
The great German sociologist Franz Oppenheimer pointed out that there are two mutually exclusive ways of acquiring wealth; one, the above way of production and exchange, he called the “economic means.” The other way is simpler in that it does not require productivity; it is the way of seizure of another’s goods or services by the use of force and violence. This is the method of one-sided confiscation, of theft of the property of others. This is the method which Oppenheimer termed “the political means” to wealth. It should be clear that the peaceful use of reason and energy in production is the “natural” path for man: the means for his survival and prosperity on this earth. It should be equally clear that the coercive, exploitative means is contrary to natural law; it is parasitic, for instead of adding to production, it subtracts from it. The “political means” siphons production off to a parasitic and destructive individual or group; and this siphoning not only subtracts from the number producing, but also lowers the producer’s incentive to produce beyond his own subsistence. In the long run, the robber destroys his own subsistence by dwindling or eliminating the source of his own supply. But not only that; even in the short-run, the predator is acting contrary to his own true nature as a man.
We are now in a position to answer more fully the question: what is the State? The State, in the words of Oppenheimer, is the “organization of the political means”; it is the systematization of the predatory process over a given territory. For crime, at best, is sporadic and uncertain; the parasitism is ephemeral, and the coercive, parasitic lifeline may be cut off at any time by the resistance of the victims. The State provides a legal, orderly, systematic channel for the predation of private property; it renders certain, secure, and relatively “peaceful” the lifeline of the parasitic caste in society. Since production must always precede predation, the free market is anterior to the State. The State has never been created by a “social contract”; it has always been born in conquest and exploitation.”
http://mises.org/easaran/chap3.asp
I think he’s just doing his job Anthony. If your rebuttals don’t do it, which are the best I’ve seen and can easily cure that particular disease, then it’s a different type of disease that requires different medicine that he believes to be of no value or benefit.
I believe you’re right Tammuz, and thanks for the compliment, well appreciated!
Tammuz said: “Why don’t you just come out and say it? You support commodity-backed currency under the control of private interests (“free market”). “Free” meaning everything will eventually be free for those who control the “market” by owning the largest share of that commodity (gold) that backs the currency thus they can lend it out at interest to national governments who do not posses much of that commodity (gold)”
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Abu Aardvark says: I support freedom. That includes, of course, the freedom to choose the means of exchange as people see fit. History shows that people very often chose silver and gold as money – for very obvious reasons. History also shows that statists and elite-apoligists hate and fight gold for the very same reasons.
As for your point of lending to “national governments”: When you have a government you are not free. Due to the unalterable nature of men governments and the power that comes with it will always corrupt the people who do the governing and turn them into tools of the wannabe-elite of the day.
Remove the most essential tool to rule – the state, that is, and the statist monopoly of printing money from nothing with it, and there are no power levers to pull.
Indeed the more currencies the better, gold included. We need to recognise the unity and oneness of all things while at the same time recognising and respecting the differences.
History shows that people used not only gold or silver for money, they used many things for money and for “very obvious reasons.”
History has shown that the powerful elite financiers invented the term “The Gold Standard” and they invented their gold and money monopoly through fractional reserve lending of other people’s gold through which they seized control of the world’s gold.
The doctrine of “no government” is a doctrine of antichrist. God is Government. The teachings of Christ are founded upon government, the good news of the government of the Kingdom of God which will be permanently established and will rule the nations with “a rod of iron.”. There has always been government and there always will be government. Man was created to govern and to be governed. They idea of human existence without government is beyond bizarre and is a deception for the simple-minded. Even Satan believes in government as he said, “All these [kingdoms] I will give You if You will fall down and worship me.”
History shows that people used not only gold or silver for money, they used many things for money and for “very obvious reasons.”
I’ve great difficulty understanding how the austrian crowd can continue their ‘gold for 5000 years’ story in the face of this TRUTH.
Tammuz said: “History has shown that the powerful elite financiers invented the term “The Gold Standard” and they invented their gold and money monopoly through fractional reserve lending of other people’s gold through which they seized control of the world’s gold.
The doctrine of “no government” is a doctrine of antichrist. God is Government. The teachings of Christ are founded upon government, the good news of the government of the Kingdom of God which will be permanently established and will rule the nations with “a rod of iron.”. There has always been government and there always will be government. Man was created to govern and to be governed. They idea of human existence without government is beyond bizarre and is a deception for the simple-minded. Even Satan believes in government as he said, “All these [kingdoms] I will give You if You will fall down and worship me.”
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Abu Aardvark says:
1) There is no such thing as a ‘gold monopoly’. Never was. Never will. Gold can be dug up on every continent – as it has been for thousands of years – and will be in the future. Fiat-money printed out of thin air, however, IS subject of a state-licensed monopoly.
2) The worlds gold cannot be controlled. Think China, India or Turkey, for example – massive private holdings of gold all over the place.
3) Concerning your statement: “The doctrine of “no government” is a doctrine of antichrist. God is Government.”
Huh? Says who, exactly? How about getting a life, dude?
4) Concerning your statement: “There has always been government and there always will be government.”
Really? Two hundred thousand years of human history and “there has always been government”?
Prove it!
5) Concerning your statement: “Man was created to govern and to be governed”
Says who? You? Well, I disagree.
I think that all men are born free – with the right to control their body and lives as they see fit, as long as they don’t harm others in the process. Since ‘government’ rests on coercion, theft and force, I don’t see ANY natural legitimacy in it, let alone one handed down by “god”.
6) Concerning your statement: “The idea of human existence without government is beyond bizarre and is a deception for the simple-minded”
Again, please provide evidence that mankind had ‘government’ throughout it’s two hundred thousand years of existence.
7) Concerning your statement: “Even Satan believes in government”
Ah, yes. And because you believe there is some entity named “Satan”, and because you also believe to know what this entity believes in or not, you think THIS will convince anyone to give up his freedom and bend over to be ‘governed’?
Gee, good luck with that one.
The premise of my understanding is Jesus Christ. The premise of your understanding is http://mises.org/easaran/chap3.asp
I’m not saying I disagree, but if every man is born free then why are we utterly and absolutely dependent on our parents for so many years?
What happens if I get sick and can’t work? Or a natural disaster wipes my real property which you suggest is savings? How do diversify if my savings is in my business. your solutions for savings are not liquid to say the least. What about saving for retirement? I get the feeling that you do not want anyone to have wealth. What happens when the economy is not performing to the liking of the powers that be? Does the demurrage rate increase? I want to know more.
What if you are unemployed and cannot get a job? I have to rely on my savings i.e. “hoarded money” to pay the bills.
How will the demurrage work for those who are unemployed & must rely on hoarded savings?
You can ‘save’ in other ways: buy gold, or a few hundred good bottles of single malt scotch and/or brandy, which only gets better with time.
That will go far, towards your old-age fund
Old age funds are so 2012 name789.
Nobody believes in ‘pensions’ anymore, do they?
The reason we needed ‘pensions’ is because we decided our kids were free to be hijacked by MTV, porn, welfare, and nowadays job security with the US Army. Our parents were free to go in to old age slaughterhouses and the baby-boomers are rejoicing in the wonders of the possibility to ‘choose’ for mass euthanasia.
Christ is quite clear about ‘hoarding’, cash or otherwise.
Your christ seems to be Bacchus, the god drunkards and Bacchanalia, and Spring Break
And, you are not alone thinking that Jesus is Bacchus under a different name
Ah……a spring break………the emancipation of sluttery certainly is a nice side effect of that feminist scourge. Thanks for this inspiration, name789!
But for all those acquainted with the NT, it should be quite clear that Jesus was telling us we don’t need to hoard. Our Father will provide, if we live with Him.
Look a the lilies, not even Solomon in all his splendor was clad like them! Or the birds in the sky, do they hoard? No!
And what is the key to abundance?
To kill self and its pathetic ‘desires’ and give. To give is to receive and that is the true law of abundance in the Kingdom.
True, this is a far cry from ‘economics’, but is the economics of the not-so-distant future.
Interest free currency is only a good step in the right direction.
the people in Canada never heard of the Spartacist Silvio Gesell and his illuminated currency ideas; they certainly have never heard of Migchels and his drunken-sailor economic concept; yet, they sure followed it, and then some: they not only spent every dollar they had, but they borrowed in record amount and squandered what they did not have.
Merry christmass!, happy new year!; eat and drink! (and spend and spend) because tomorrow may never come; then make the credit card payments on it until July
God, you’re such a bore. Always annoying those in Utopia.
name789, get yourself together in 2013!