I sent the following message
           From: "John Gelles"
                To: "Talking Economics" <te-exchange@yahoogroups.com>
               Cc: "Cyberspace Society" <cyber-soc@topica.com>
             Sent: Thursday, March 10, 2005 3:12 PM
         Subject: Roots of economics: Reply to C.H. Budd

Dear Members (TE exchange. CS discussion),

Since my last message, (mentioning TE and Associative
Economics (AE), I received comment from C.H. Budd.
(Dr Christopher Houghton Budd is an English economic
historian with a doctorate in banking from John Cass
Business School in London. He is associated with
www.ae-institute.com )

This message replies to Budd's comment (reprinted below
the dotted line.)

WHAT BACKS MODERN MONEY?

 1. The simple answer is "demand" for the money. This
     has always been the backing for money. It defines money.

     Money speaks for itself and "demand" for it is all it has
     to say IN THE END.

     [ The "demand" for money creates the "price" in money
     for commodities, labor, land, or capital facilities and
     equipment, etc.; just as the "demand" for these non-
     money assets creates (with their supply) the price
     in NM assets for any particular "money" -- (or, in some
     cases, the "inflation" and "hyper-inflation" all of us fear
     who would avoid their ultimate consequence.) ]

 2. But we do not live "IN THE END".  Before the end, we
     know that modern money is a magical miracle drug that
     speaks a language and has a force of its own. Money asks
     people to work AND THEY DO -- no matter that they're
     illiterate in all other languages. Money has the force of
     swords and guns, no matter that its made of paper --
     often not even that, just a string of numbers. It is this
     magic power that allows money to be created by Kings
     out of gold, paper or numbers, and thereafter build a
     nations military and commercial infrastructure and
     defend its very existence.

 3. Now in the current period we have come rely on bank
     credit -- even when we are a King -- in spite of the fact
     that the Federal Reserve does not even create its own
     money, but buys it from its sovereign's mint (at cost)
     and relies on government fiat to make it acceptable to
     every creditor under law.

     We do this to avoid the hyperinflation we fear if parlia-
     ment spends money into circulation that was not first
     lent into circulation and then borrowed back or collected
     in taxes.

    This current system maintains a trail of debt and taxes
     behind all public effort to promote the general welfare
     provide for the common defense.

    Communists had no such necessary trail of debt. But
     they did leave a trail of blood because they had nothing
     to motivate men as effective as the lure of money except
     the fear of death and torture police states spread among
     men and families in the perpetual civil war at home.

     So the question of what is money is both simple and
     complex. For me, money is what we must improve on--
     to fuel the complex economic system we call free and
     democratic enterprise and corporate governance.

     In my blogs I append the following short description of
     an improved money that worked in WWII:

            There is a current need for monetary reform,
         in particular, a return to wartime monetary
         financing as implemented in the Second World
         War. We authorized government checks to be
         honored in advance of  (a) bond sales in the open
         market and (b) tax receipts high enough to pay
         our bills.
            The bonds issued (but not sold) were still
         owned by the Treasury but held by the central
         bank as tokens of government's intention to avoid
         ruinous inflation. (See  www.tiea.us  for more)


WHAT ABOUT DEBT-BASED MONEY?

    Budd says at the end of his message "debt-based
    money is too general a concept and it has within
    it a piece of false economics."

    This is true.

    I asked for his view on "debt-free money", as a
    supplement to "credit money (made legal tender by
    fiat)", as was done by Lincoln's "greenbacks", WW II's
    "green (unsold) bonds", and Jersey and Guernsey's
    debt-free money. These supplements to debt-based
    money stretch money out to cover future production
    as well as assets now being produced for sale.

    We are really back to 'what backs money'. Money can
    easily work its magic on some spending that will
    be offset by private saving -- to allow the King to
    protect the nation and the national political
    economy -- as the constitution says he must.

    The problem appears to be with the metaphor of
    "King".

    Budd and AE/TE advocates, and CS members too,
    all fear the lust for empire will be wetted by the
    parliamentary power of the purse. Therefore they
    prefer to see a crippled parliament with a purse
    large enough for the rich but not for the poor in need.

    These gentle folk believe the poor and decent among
    us will be helped by community currencies and the
    golden rule. They do not remember how Lincoln,
    Roosevelt and Churchill saved the decency of the
    human race while Hitler and Stalin had other ends
    in mind.

    I am at the end of my tether.

    John Gelles

----------------------------------------------------

Re. John Gelles's contributions:

I think the main question is to ask what backs modern
money?

        In the case of means of exchange money, this should
        be goods and the subjects of exchange.

        In the case of investment, the initiatives thus funded.
. . .

For me, debt-based money is too general a concept and it
has within it a piece of false economics.
. . .
Signed:  C. Houghton Budd
.
.

John Gelles

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