Tuesday, August 29, 2017
Dumb thought about value creation
While feebly attempting to "think" about REAL VALUE vs FAKE VALUE in banking, I noticed a basic fact. So far I can't find any mention of this basic fact in online discussions of the subject, but the word combinations are probably not hitting the right texts or something. I'm sure it's well known.
Basic problem: When money creation happens automatically at the moment of making a LOAN, people who are attempting to run their lives and businesses by thrift, without borrowing, are completely ignored. We don't count as part of the economy.
The money supply EXPLICITLY EXCLUDES REAL VALUE.
REAL VALUE comes from REAL LABOR. Turning raw materials and components into a useful product, or cultivating crops and livestock, or arranging and advertising products for easier purchase.
Money creation at the point of lending doesn't even begin to recognize any of these activities.
A business that makes or sells things WITHOUT BORROWING FIRST is not recognized as creating value.
Every loan, whether it goes toward real production or gambling or stock manipulation, is recognized as creating value.
The current system treats DESTROYED VALUE as an increase, and completely ignores CREATED VALUE. Perfectly backwards.
This is so basic that I'm SURE somebody has spotted it. Maybe sharia economists? Maybe Marx? I don't feel like wading through Das Kapital to find out.
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Later: It appears, eg this article, that modern sharia banks don't create money differently, but do try to prohibit loans that serve speculation. Might achieve the same goal, but doesn't hit the basic problem.
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Laterer: Aha. Unsurprisingly, the Soviet system GOT IT RIGHT. From this clearly written article:
First, as explained below, [Gosbank] had no discretion over the quantity of money. Its money-creation activity like its credit activity was entirely passive, arising as a byproduct of the production plan. [Explained below:] When farm delivered its milk output, it would obtain a document from the cheese factory verifying that the latter had received its milk input. The document was then turned over to Gosbank, which credited the farm's account according to the value of the milk delivered, and debited the cheese factory's account by the same value. Likewise, after the cheese was produced and shipped to the State food store, the cheese factory obtained a document verifying its delivery of cheese. Again, the document was turned over to Gosbank, which this time credited the cheese factory's account and debited the store's account. Finally, when households purchased the cheese with cash, the State store deposited its cash receipts with Gosbank and was given a credit of equal value. With this simple example, we can see how every transfer of physical output from one location to another, and every bit of value added in production, was mirrored by an associated financial transfer through Gosbank.I still don't know if Marx designed it this way, but this was the reality. Continued and expanded here.
Labels: Natural law = Sharia law, Real World Math, scrip
¶ 10:21 AM
