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The Swiss referendum on sovereign money

from Asad Zaman and the WEA Pedagogy Blog

 

swissrefvollgeldWhile money and banking plays an extremely important role in the economy, economics textbooks teach the opposite. According to the quantity theory of money (QTM), money plays no role in the economy at all; it is a veil which covers the workings of the real economy. An increase or decrease in the money supply will cause an increase or decrease in the prices, and will have no long run real effects on the economy. According to QTM money is neutral: we must look beyond the veil of money to understand how the economy functions.   read more

  1. December 8, 2015 at 3:03 pm

    Bravo , Assad! We work on this issue a lot with our friends at the American Monetary Institute headed by Steven Zarlenga and the Public Banking Institute on which Advisory Board I serve , founded by lawyer Ellen Brown author of Web of Debt.
    Also watch our TV special “THE MONEY FIX” seen in the USA nationally on PBS stations and globally at http://www.films.com

  2. anmayhew
    December 8, 2015 at 7:25 pm

    Money is so extraordinarily important and so misunderstood in most economic analysis. As I have argued before on this blog, analysis would be much improved if we adopted the analysis first suggested by Morris Copeland when he created the flow of funds analysis. Copeland did not try to preserve the antiquated and now totally nonsensical distinction between “money” and “credit.” Rather he understood money/credit to be the widely acceptable promises of settlement issued by governments, banks, and non-financial sector businesses. Thus understood, money is best thought of as being like electricity rather than the liquid that it is usually assumed to resemble in most metaphorically-based analyses. Understood as electricity, money/credit is called forth by spending, subject to the capacity of the distribution system. If there is overload, defaults serve as circuit breakers do in real electrical systems and if not isolated may have system wide effect. If we adopt the electricity metaphor it is not the quantity of money in existence that makes a difference for aggregate economic activity, but the capacity of the system to support spending. Or, in the case of recession, it is failure of spending units (whether governments, businesses, or households) to draw upon the spending power available to them. To continue the metaphor, the spending units do not flip on the light switch and the call upon the grid is reduced. Or, if you want to think in terms of money/credit/spending, if I use a credit card for the full amount available on that card that has a very different effect than if I keep the card tucked away and unused. Some reasoning for lines-of-credit and other forms of available borrowing.

    This is a very brief summary of an ignored but powerful approach. For more see my RWER blog on Copeland and Money or, better yet, get a copy of Morris Copeland’s A STUDY OF MONEYFLOWS IN THE UNITED STATES (NBER, 1952).

    • December 8, 2015 at 8:06 pm

      I have read this and it is a line of thought worth developing.

      The point I feel particularly needs developing is how a battery system keeps working until it is almost exhausted, and then goes flat with little warning. Likewise, in a mains system the point of overload is not just determined by the load when inadequate power is being supplied to the generators. With the world’s harvests declining as its human load is increasing, the proverbial straw breaking a camel’s back has caused a global economic slump and is now causing ecological shut-down. Recharging the earth’s batteries is just as important as minimising human foot-prints. We should be investing in massive replanting of trees, not just to “fix” carbon dioxide but to cool the atmosphere directly: using up the sun’s energy globally and providing shade locally.

    • December 9, 2015 at 10:56 pm

      Quote,”Money is so extraordinarily important and so misunderstood in most economic analysis.”

      Why do you deny Frederick Soddy his due?

      “There never was an idea stated
      that woke men out of their stupid indifference
      but its originator was spoken of as a crank.”
      — Oliver Wendell Holmes, Sr.
      (1809-1894) American Poet

      .*** BUT, why not read and challenge a Noble Laureate for Physics and challenge ? ******Excerpt from http://en.wikipedia.org/wiki/Frederick_Soddy
      “In four books written from 1921 to 1934, Soddy carried on a “quixotic campaign for a radical restructuring of global monetary relationships”[this quote needs a citation], offering a perspective on economics rooted in physics—the laws of thermodynamics, in particular—and was “roundly dismissed as a crank”[this quote needs a citation]. While most of his proposals – “to abandon the gold standard, let international exchange rates float, use federal surpluses and deficits as macroeconomic policy tools that could counter cyclical trends, and establish bureaus of economic statistics (including a consumer price index) in order to facilitate this effort” – are now conventional practice, his critique of fractional-reserve banking still “remains outside the bounds of conventional wisdom”[this quote needs a citation]. Soddy wrote that financial debts grew exponentially at compound interest…”
      http://archive.org/stream/roleofmoney032861mbp/roleofmoney032861mbp_djvu.txt

      Why do you deny?
      “So elaborately has the real nature of
      this ridiculous proceeding been surrounded with
      confusion by some of the cleverest and most
      skillful advocates the world has ever known, that
      it still is something of a mystery to ordinary
      people, who hold their heads and confess they
      are ” unable to understand finance “. It is not
      intended that they should.” Frederick Soddy (The Role Of Money)

      Why do you deny ?
      Frederick Soddy has in one book answered….all concerns.
      Why do you not challenge ?
      PREFACE …
      “This book attempts to clear up the mystery of money in its social aspect. With the monetary
      system of the whole world in chaos, this mystery has never been so carefully fostered as it is to-day.
      And this is all the more curious inasmuch as there is not the slightest reason for this mystery.
      This book will show what money now is, what it does, and what it should do. From this will
      emerge the recognition of what has always been the true role of money.”
      http://archive.org/stream/roleofmoney032861mbp/roleofmoney032861mbp_djvu.txt

  3. December 10, 2015 at 1:23 am

    I quoted Frederick Soddy extensively in my The Politics of the Solar age ,Doubleday, NY 1981, particularly because he also understood that humans needed to shift to using solar energy and that economists did not understand the laws of thermodynamics ! This book is out of print, but I made the same quotes in my Mapping the Global Transition to the Solar Age( ICAEW,London, 2014 , downloadable 56-page e-book, free at http://www.ethicalmarkets.com )

    • December 10, 2015 at 11:28 pm

      Thank you, thank you, for any memtion of Frederick Soddy is a gain for the betterment of all.
      “Role of Money” is available on Amazon.com Also is available as a free download:
      Frederick Soddy at Amazon – Millions of titles, new & used
      http://www.amazon.com/books

      The Role Of Money : Soddy,Frederick. : Free Download & …
      https://archive.org/details/roleofmoney032861mbp – Similarto The Role Of Money : Soddy,Frederick. : Free Download & …

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