Friday, October 20, 2017
  Reversed value, sharpened up

I feel the need to reprint and clarify this item from a couple months ago. The main point got submerged in afterthoughts and updates. It needs to be sharpened.

= = = = =

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.

In the Western system, 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.

Before 1975 the distinction didn't matter quite as much, because many loans went directly toward creating value. Building new factories, improving productivity, redecorating a store. Now that the vast majority of loans are strictly criminal, serving to MURDER real business and expand the already infinite fake "wealth" of the Tribe, the distinction matters.

The alternatives are Sharia and Soviet.

Sharia, when applied properly, should create money exactly when value increases. Unfortunately there is no proper Sharia in the current Muslim world. According to this article, 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 solve the basic problem.

Unsurprisingly, the Soviet system AS ACTUALLY APPLIED 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 don't know if Marx designed it this way, but this was the reality.


Continued and expanded here.

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Polistra was named after the original townsite of Manhattan (the one in Kansas). When I was growing up in Manhattan, I spent a lot of time exploring by foot, bike, and car. I discovered the ruins of an old mill along Wildcat Creek, and decided (inaccurately) that it was the remains of the original site of Polistra. Accurate or not, I've always liked the name, with its echoes of Poland (an under-appreciated friend of freedom) and stars. ==== The title icon is explained here. ==== Switchover: This 2007 entry marks a sharp change in worldview from neocon to pure populist. ===== The long illustrated story of Polistra's Dream is a time-travel fable, attempting to answer the dangerous revision of New Deal history propagated by Amity Shlaes. The Dream has 8 episodes, linked in a chain from the first. This entry explains the Shlaes connection.

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