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The Forum > Article Comments > What Lies behind Egypt’s Problems? How do They Affect Others? > Comments

What Lies behind Egypt’s Problems? How do They Affect Others? : Comments

By Gail Tverberg, published 4/2/2011

Peak oil in Egypt means that funds are no longer available to cross-subsidise the living standards of the population.

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Arjay
You shown that government control of the money supply is corrupt, that different political parties cannot be trusted to manage it properly, that they unjustly favour powerful vested interests, to the economic devastation of the ordinary people they feed on, and that while democracy may be the starting point, fascism is the end.

Your solution? *Governments* - of all people - should have the power to create money and control credit.

But that’s the system we’ve got now! I think the solution is the opposite – to abolish government control of the money supply.

Underlying the political issues are economic issues. You have obviously bought into the Chicago-school belief that the money supply needs to be increased in proportion to growth in productivity. But when I asked you to prove it, you went silent, and now re-appear running the same argument you were unable to defend.

Please prove it or concede it.

The argument is, that it’s unnecessary for the money supply to be increased in proportion with growth in productivity, because money is a *medium* of exchange. It is money’s *relative* value that’s important, not its absolute value.

Money is a market phenomenon. There is always enough money to perform all the functions of money. It doesn’t need government to adjust its supply.

Government control of money is a history of fraud going back centuries, from coin clipping, to illegalizing competition and charging more than the market rate for coinage services, to legalizing false measures, to fiat money, to licensing loss-making fractional reserve practices – always hand-in-glove with their enablers, the bankers. Fiat money has always ended in hyper-inflation, the destruction of the money unit, social chaos, fascism and war.

Once you concede a monopoly to governments to create money, there is no way to stop that power being exercised corruptly, and always in the direction of corruption and government intrusion into any and every field - fascism.

The irony of it is that the people most horrified by fascism have done most to bring it on by their uncritical belief in the goodness of government power.
Posted by Peter Hume, Sunday, 6 February 2011 9:07:59 AM
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Peter Hume.Who should own our increases in productivity and inflation the money which reduces our purchasing power? A private group of banks or the whole of society who produced it? Our productivity is created as debt by the private banking system when in fact it should be created as a tax credit by Govt Banks for the benefit of all.China's enormous Govt banking system creates 80% of new money for infrastructure,inflation and growth.China can grow at 10-12% pa while the West is lucky to get 2%.The reason? The more more growth we have,the more debt we must incur because our increases in productivity must be borrowed into existance.

This is why western economies are stagnating now and banks are showing enormous profits from bailouts.We borrowed from China $40 billion which caused inflation so the private banking system increased interest rates.We borrowed to pay for our own inflation when the RBA could have become the lender of first resort with no debt.

The whole basis of our economic system is based on a serious flaw.ie that inflation + increases in productivity are created as debt.
Posted by Arjay, Sunday, 6 February 2011 9:43:53 AM
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Peter Hume;I think you miss unedrstand the totality of what I'm saying.I'm saying that Govts only issue the money as a tax credit for inflation+ increases in GDP.The private banking system still operates but cannot create money from nothing.They can only loan out existing money in the real economy.

We can have safeguards in place so that Govts cannot create too much money on whimsical schemes for self gratification.The other big issue of course is making Govt more accountable to the people.Currently accountability is non-existant.The coroprate influence has made our Govts totally impotent and dyfunctional.Waste and inefficiency is encouraged so Corporates can reap the profits to the detriment of infrastucture,services and a good education system.The Corporates in the long term are destroying their own profitability.
Posted by Arjay, Sunday, 6 February 2011 11:46:58 AM
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Arjay
I agree with a lot of your analysis about the corruption of money and banking.

We are both agreed that government enables the problem. Where we differ is that you think government is the solution. I think the problem can never be solved by vesting power over money and credit in government.

“We can have safeguards in place so that Govts cannot create too much money on whimsical schemes for self gratification.”

No we can’t; the only and best safeguard is to abolish government control of the money supply.

You keep assuming “we” are the government and the government is us; as if the state is society and society is the state. This is just the standard false belief that enabled the Fed and RBA to be set up in the first place – the idea that the state represents society. If that’s true, you have no ground for changing anything, because the state presumptively represents the greater good.

Rather, the state is the subset of society who claim a legal monopoly of crime.

“Who should own our increases in productivity and inflation the money which reduces our purchasing power? A private group of banks or the whole of society who produced it?”

This continues the group-think that is causing the whole problem in the first place. Increases in productivity belong to the people whose property they are. They do not belong to the state nor to society as a whole.

“Our productivity is created as debt by the private banking system..

That is confused. *Productivity* means producing more outputs with the same inputs. It has nothing *intrinsically* to do with creating money, tax or debt.

“…when in fact it should be created as a tax credit by Govt Banks for the benefit of all.”

There you go again, assuming that government acts for the benefit of all, when the original problem is that this assumption is obviously wrong.

The only way to achieve the results you are trying to achieve is to ABOLISH GOVERNMENT CONTROL OF THE MONEY SUPPLY.

For an excellent plain-English explanation, see:
http://mises.org/books/whathasgovernmentdone.pdf
Posted by Peter Hume, Sunday, 6 February 2011 4:47:43 PM
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Peter,you cannot separate productivity ,money supply and debt.Money is the medium of exchange which enables productivity.Debt is the price of money.Increases in GDP should not be expressed as debt but as a credit for all members in society.

Another system of banking would be to allow private banks that are mutual societies to create new credit (ie no share holders).The depositors and mortage holders then become beneficeries.We could also like North Dakota have Govt banks create credit for infrastucture etc.This state has an operating surplus and a very healthy bank.Our Govts can be made accountable with a proper constitution which we do not have.

We borrow 30% of our mortgage money from Global reserve banks who just create it from nothing anyway.This is why we have such a bad balance of payments deficit.It is about sovereignity Peter and countries in the West have never had.We have been always tied to this system of bank serfdom hence never realise our true potential.
Posted by Arjay, Sunday, 6 February 2011 7:11:42 PM
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“Peter,you cannot separate productivity ,money supply and debt.”

Yes you can. They *can be*, but are *not necessarily* related.

For example, people without money, like traditional Aborigines, could increase their productivity by damming a creek to create a fish trap. Similarly, people in a money economy can still increase their productivity without reliance on money or debt, for example a farmer ploughing his field in a more efficient pattern. And people using money as a medium of exchange could increase productivity, for example by figuring out transport by road is cheaper than by rail, but with the money nevertheless not playing an enabling role other than by enabling such calculation.

So productivity has not necessarily got anything to do with money supply or debt. It’s only government that connects them; but NOT for good reasons, as you yourself argue.

“Debt is the price of money.”

No it’s not. Interest is the price of money. Debt is an amount owed.

“Increases in GDP should not be expressed as debt but as a credit for all members in society.”

If a farmer increases his productivity by ploughing his field in a more efficient pattern, or a manufacturer by making more widgets with the same inputs, why should you or I get a credit for it?

Why should it have anything to do with money and credit?

“It’s about sovereignty…”

Why should it be about the sovereignty of political institutions to exploit and rip off their subject populations? Why shouldn’t it be about the SOVEREIGNTY OF THE INDIVIDUAL PEOPLE TO CHOOSE what they will offer or accept as money or credit?

You still haven’t given any reason why money or credit should be controlled by government, and plenty of reasons why they shouldn’t.
Posted by Peter Hume, Sunday, 6 February 2011 9:09:42 PM
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