Thursday, May 19, 2011

Money is tax, not debt or gold – interesting

Positive Money Podcast – Professor Mary Mellor

A very interesting podcast on the history and future of money on the basis that money is the a reflection of the ability to tax. Mary is Emeritus Professor of Sociology at Northumbria University, and is the author of “The Future of Money, From Financial Crisis to Public Resource”,

Posted by the number cruncher @ 07:45 PM (1591 views)
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3 thoughts on “Money is tax, not debt or gold – interesting

  • the number cruncher says:

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  • Money is manufactured from debt. The recipe is as follows:

    1) let there be debt. It could be tax, or could be a shared cultural delusion that some shiny thing will be accepted everywhere at which point everyone everywhere is in debt to the tune of the number of shiny things. Debt predates money, since undoubtedly scralings on a clay tablet or the side of some cave existed eons before people mined gold.
    2) take the debt of many and squeeze it through a single narrow orifice (a state or a bank would do) and lo and behold when it comes out no-one can tell from whose specific debt it was manufactured. This is the key required property of money – information insensitivity. Like a sausage machine, put in some good quality meat plus a load of mechanically recovered grot and pop it in a little skin and hey presto.
    3) rinse and repeat to create more money-derivatives. Take a bunch of money created as above, then use it to generate more debt then squeeze the new debt through a new, smaller sausage machine. Hey presto!

    This works until no new debt can be teased out.

    Also, note that the process of money creation is a lossy process – it must be because it removes information about the original debtors put into the sausage machine. Hence, one would expect money to suffer from decay, since the information lost cannot be recovered and manifests as defaults or inflation.

    That is the story of money IMO. Specifically, that it is always and everywhere a sausage manufactured from some form of collective debt despite what mises.org would have you believe.

    Kind of funny then that we started with debt, made money and have now returned to debt. No wonder it sticks in people’s craw, to think that all the wonderful economic advances since some caveman said, “here mugwump, I have a cunning plan. lets bury these nuts for later in the year when food is scarce – we’ll be laughing all the way to the wigwam”, have led us back to square one!

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  • mark wadsworth says:

    As far as government issued money – notes, coins, bonds etc – is concerned, this is quite clearly true. For every financial asset (notes, coins, bonds, other receivables, accrued public sector pension etc) there is always an equal and opposite financial liability (on the governmetn, i.e. on the taxpayer).

    So as a thought experiment, we could do Georgism by the back door using an entirely new parallel currency…

    1. The government issues every UK citizen with one thousand special tokens (whether physical or electronic does not matter), maybe 500 for kids and 2,000 for pensioners.

    2. So it has issued (say) 75 billion of these tokens.

    3. It then values each house and each building and each plot of land and demands the payment of exactly 75 billion of these tokens from the owners of all UK land and buildings, proportional to the value of the land and buildings.

    4. So half of households end up with a surplus of tokens (let’s say a mum dad two kids family gets three thousand tokens and the payment demanded for an average house is two and a half thousand tokens).

    5. A quarter of households have a small token shortfall, and a quarter have a big shortfall.

    6. All the surplus tokens are put up for auction on line, and because the surplus which some have is exactly equal to the shortfall which other people have, they will somehow end up with a market price in £-s-d for each token, that might be 1p, it might be £10, I do not know and do not particulary care.

    7. Having established a market price, let’s say it comes out at £2 per token, in the next year, the government repeats the exercise using real money instead of tokens. It can deduct the value of the tokens it hands out from people’s welfare payments or pensions; and it can deduct the value of tokens it demands from people’s income tax bill.

    8. Sorted.

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