The Food Pill

Back in the 1950s a group of scientists decided that they had the answer to the food storage problems as regards long journeys in spaceship flights to Mars. They had analyzed food and determined that its essence was vitamins and so their plan was to figure out the right balance needed to sustain life and make pills of this concoction. Voila! Problem solved. The main glitch they encountered was that when people ate these pills they got violent stomach cramps. Turns out that the human body cannot handle vitamins in such a concentrated state.
    Now, fifty years later, nobody has succeded in producing a food concentrate -- or any other substitute -- for food. The problem with the food-concentrate is that one needs to emulate real food, and the most efficient way to do that is ... with real food.
    What can be learned from this? Well, two things. First that it is important to study things at their roots, and also that it's equally important for a substitue to make a decent attempt at emulating the original. Our sugar substitutes today are not very good if compared to real sugar or honey but at least they resemble sugar more than, say, hydrochloric acid. Our money system today doesn't even attempt to emulate its origins. A substitute that does not emulate the original, at least in some small way, may very well turn out to be worthless, like the Food Pill.

The Money Pill

So it's good to see that Gilles Raveaud, co-founder of the French Austisme-Économie, is pushing for a more basic approach to economics. He wrote in post-autistic economics review, May 2, 2002:
    ". . . it is a shame for all economics teachers that neoclassical economics is taught in the first year. . . this particular persuasion in economics developed after many others, and so ought to be taught after them (and surely not in first year, where one should present Smith, Ricardo and Marx)."

But Gilles has already strayed from the mark. Economics did not start with Smith, Ricardo and Marx. The origin of economics is the barter system, where commodities were used as money. Barter then led to money systems such as the IOU, and to token (fiat) systems such as rocks, beads and shells.  Smith, Ricardo and Marx never examined the origin and nature of money. People like Ralph Borsodi, Silvo Gessell, E.C Harwood, Bernard Lietaer, Margrit Kennedy, and E.C. Riegel did. Why not start at the beginning?

The hierarchy of money is this:

I. BARTER (And Commodity Money Systems; i.e. tobacco, gold)
      A.    The IOU SYSTEM
              1.  COMMODITY BACKED MONEY
                   i.e. an IOU for gold (essentially a barter system)
              2.  CREDIT BACKED MONEY
                   i.e. an IOU against future production
      B.    SYMBOLIC or TOKEN MONEY (FIAT)
                   ie. sea shells, beads, rocks

We can eliminate B straight away because it only works in small communities where trust is paramount and self-interest in absent. All token money systems have been destroyed when self-interested outsiders entered the system.
    So the IOU is our only reasonable choice.
    Equally important is that, whatever the details, the money system should have as its primary goal, the attempt to remain faithful to the original, the barter system. Today's economists argue that barter is primative, archaic and imperfect and they refuse to talk about it. There is a definite problem here. I would argue that barter indeed has its limitations but to the extent that it works, it works perferctly. It is archaic only in the sense that food is archaic as regards the Food Pill.
    Barter is uncomplicated, direct, immediate, whole, secure, egalitarian and flawless. There is no middleman, no need for bankers and less need for central bankers. No need for futures contracts, hedge funds or derivatives, and no worry about "Money Supply." No inflation, no bank mergers, no $45 million CEO bonuses, no overdrafts, no minimum balances, no robot phone machines that tell you, "if you would like to speak to a half-wit, please press..." And no currency casino/exchange rates. The closest Marx ever came to analyzing money was his observation that excess profits comes from either over-charging the customers or under-paying the labor force... or both. He saw the effects of money and totally ignored the fact that this does not happen with such ease in a barter system. Barter is the only Natural money system we have.
    If there is a reason to substitute a money system for the barter system its primary focus should be an attempt to emulate the original. So, is our money today uncomplicated, direct, immediate, whole, secure, egalitarian and flawless? No, quite the contrary, it is none of these things. For an explanation of just one defect, see: Money divides Trade into Two Parts.
    The best we can say is that our money is "easier" than barter.  So we seem to have chucked out all the positive aspects of barter in exchange for one: ease. And regarding that one benefit, nobody has ever asked, "easier for whom?" After all, the Egyptians found an easy way to deal with labor problems, but it cannot be said that it was easier for everyone.
    Like the Food Pill, today's money system is concentrated and unbalanced. It is based on the IOU but only the credit-backed side of the IOU without the recognition that there is also the commodity-backed  side of the IOU, and that each has unique properties and uses. And limits.
    For example, any study of the origin of the credit-backed IOU has to turn up the fact that the IOU, in its original form, was a personal contract between two parties (no banks, no government), and while it is true that this IOU could circulate as money, it is also true that the wider the circulation, the greater the risk, and thus the lower the value -- to the extent that an IOU from Boston might have little value in New York, and no value whatsoever in China. Yet today we base our entire money system -- local, national and international -- on a model that is risky over long distances. In a well regulated system such a limitation does not apply to the commodity-backed IOU. In a well regulated system the credit-backed IOU might be more equitable, but we do not have a well regulated system; we have a de-regulated system.
 

In the end I think what we are trying to do is spin straw into gold; create the perpetual motion machine; find a benevolent god that will make everything better; create a Food Pill.
    Trying to emulate barter with paper notes is like trying to emulate real life with photographs. Barter is simple. The IOU is simple. But when one attempts to create national and international curencies, the problems and inequalities grow exponentially.
    As mentioned above, there have been many people in the last 100 years who have plenty of good ideas about how a money system might work while still maintaining some of the positive attributes of barter. One thing is certain: the solution cannot be found by a collection of businessmen, bankers, and politicians -- or economists in their employ. The problem is technical and scientific and requires technicians and scientists to resolve it.
 

The thing is that since 1971, the whole world went to a money system based on debt (credit). In the Barter system money was based on wealth. And since 1971 huge changes have taken place around the world. The evidence is in; has been for quite some time. One need not be a great throbbing economic brain to see it. Examples are everywhere. Jeff Gates cites economist Robert Frank who reports that "the top one percent captured 70 percent of all earnings growth since the mid-1970's"  When money is based on nothing more tangible than credit, that can hardly be surprising. Still, the 'economists' just dont get it. For more on the results of our new debt based system, see Jeff Gates'
Ownership Statistics - Shared Capitalism
and  Everything Changed in1971

The cause of the problems is a perversely altered money system that bears no resemblance to the original natural model. Trading off a little of the general public's security for a little ease of use, bit by bit, results in a system that is more harmful to the public and more beneficial to the bankers and credit hawkers. Bit by bit the public has lost and the bankers have gained with trade-offs such as ...

Money creation at the stroke of a pen, resulting in un-democratic government spending, unpayable debt and elimination of social programs in favor of weapons programs and unwanted social programs like school vouchers

Money creation with interest payments attached which creates a snoballing of other problems

Failed banks and bailouts

Buy-outs of failed banks at ten cents on the dollar

Questionable policies: "Too Big To Fail" "Trickle-down"  "Moral hazard" "Political" economy

"Loans" to tin-hat dictators

IMF and World Bank structural adjustments

Economic bubbles and crashes

$45 million bonuses for banking executives

Regulation by self-interested banking-industry insiders

Neo-liberalism

National currencies without intramural exchange rates

Foreign currency devaluations

Rejection of commodity backed currencies

Unredeemable currencies

Inflation

Central banks run by central bankers

Fractional reserve lending

"Nobel" prizes for economists

Massive libraries of arcane obfuscating jibberish written by overpaid, hyperactive, autistic neanderthals (terrible waste of trees, that)

Lenders of Last Resort

Speculative nonproductive currency manipulations;  derivatives, hedge funds etc.

Undemocratically, inequitably issued money: scarce money for the poor

Predatory lending, foreign and domestic

Privatization of public resources and property

Preposterous exchange rate mechanisms

But, despite these deficiencies, we are told that our money system is easier than barter.

I hope you are satisfied with that explanation. Now go and eat your food pill.
 
 

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