(Previous parts here and here plus a two-parter here and here.)
Brad Belschner's paper, Monetary Realism, Gold, Federal Reserve Notes, Credit, and Usury was a refreshing breath of cool air. Or a jolt to the system of certain forms of received wisdom. Let me start by quoting his opening provocations:
First, as my Contracts students will learn this fall, for centuries the English common law did not conceive that contractual expectations were property. Even today, it's a rare case in which an aggrieved contract party is entitled to a remedy in the form of specific property.
Nonetheless, those same "mere expectations" could be assigned, traded, and circulated in an economy as if they were property. Abstraction and reification. In this field that's called credit. And like other abstractions that we treat as real, credit can be good. Or bad.
Second, I've long suspected that one of two things would happen were we to try to limit "money" to some particular commodity. Either most of us would be eating dirt for without much more money than a commodity like gold could support, there wouldn't be enough to go around and much of what's come into being by virtue of credit would disappear in short order. Or--and much more likely--we'd simply create new forms of reified credit to support the system to which we've become accustomed. New forms of credit could work but it would take some time to sort our which of the issuing debtors was must trustworthy (creditable). Might as well stick with what we have.
Third: of course, even the most creditable debtor--the government of the United States of America--can grant too much credit. In which case no one will want any more of it. In which case we'll be back to my second amble above.
Brad Belschner's paper, Monetary Realism, Gold, Federal Reserve Notes, Credit, and Usury was a refreshing breath of cool air. Or a jolt to the system of certain forms of received wisdom. Let me start by quoting his opening provocations:
- Banks do not lend money. Banks create money by granting credit. And that’s a good thing.
- The US government does not print money into existence or spend it into existence, nor should it.
- We do not have fiat money today. We have credit money, which is asset-based and contract-based.
- A gold standard is harmful to households and business because it's far too unstable and too tangible.
- Fractional reserve banking is bad idea, but the basic banking structure we have today is a good idea.
- A United States Dollar is not a Federal Reserve Note. But a Federal Reserve Note is one kind of dollar.
- Debt can be very beneficial for family life.
First, as my Contracts students will learn this fall, for centuries the English common law did not conceive that contractual expectations were property. Even today, it's a rare case in which an aggrieved contract party is entitled to a remedy in the form of specific property.
Nonetheless, those same "mere expectations" could be assigned, traded, and circulated in an economy as if they were property. Abstraction and reification. In this field that's called credit. And like other abstractions that we treat as real, credit can be good. Or bad.
Second, I've long suspected that one of two things would happen were we to try to limit "money" to some particular commodity. Either most of us would be eating dirt for without much more money than a commodity like gold could support, there wouldn't be enough to go around and much of what's come into being by virtue of credit would disappear in short order. Or--and much more likely--we'd simply create new forms of reified credit to support the system to which we've become accustomed. New forms of credit could work but it would take some time to sort our which of the issuing debtors was must trustworthy (creditable). Might as well stick with what we have.
Third: of course, even the most creditable debtor--the government of the United States of America--can grant too much credit. In which case no one will want any more of it. In which case we'll be back to my second amble above.
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