2. Everybody Knows

Everybody Knows
Bob Komives

::

In 1990 and 1991, when the United States of America lead other countries in a war to evict the forces of Iraq from Kuwait, many advocates of balanced national budgets knew it was time to abandon that principle in order to wage war. I heard nobody ask, "If debt for war is good, can debt for peace and public welfare be bad?"

A war rages in the Middle East
—costly by measures more important than money.
We so readily
suspend our fantasy of a balanced budget
so that we may fight a harsh war,
only to again impose our fantasy,
with harsh futility,
during brief interludes of peace.

Oh, the insidious fantasy!
Never apologize for expenditures
if they do not exceed taxes.
That is, if government recalls from us
at least as much money as it spends,
it can boast:
" We ruined the country
and much of the rest of the biosphere,
but we never ran an unbalanced budget."
Let us remember
that war is the age-old medicine
to counter peacetime fantasies.
For failing to make good investments in peace
we are as likely as ever
to
fall
into
internal and external
conflict
that will lead us again to war.

from: A War Rages

Things are not as they should be. The cold-war dichotomy between communism and capitalism has blurred. It should now be easier to study the complementary relationships between socialism and marketplace, and between peace and investment. Yet, in the years since the war in Kuwait such discussions seem less frequent, or, at least, less noticed.

Also in 1991, leaders in the United States of America were in a panic over their failing banks. Those who had long advocated smaller, decentralized government were sure it was time for larger, more centralized banks. They now have them. I see irony in this past and problems in this future.

One panic replaces another. In 1996 everybody knew that the big problem in the USA was budget balancing --provided we increase military expenditures and decrease both our taxes on the wealthy and our assistance to the poor. In early 1998 the problem seemed to be what to do with a projected budget surplus if we do not wage war with Iraq. Yesterday and today everybody knows that, when convenient, national taxes must balance expenses.

Once upon a time, everybody knew
the earth is flat.
Common sense confirmed it.
Common politicians ratified it.
The best scientists of the day spoke doubts.
Since everybody knew,
nobody listened.

from: Everybody Knew

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 2. Everybody Knows ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

3. Plum Local

Plum Local
Bob Komives
  ::

I had my first course in economics in college. I forgot most of it, except for the fascinating way that banks create money as they lend out most of the money that we deposit with them, then receive most of it back again in new deposits, and then lend most of this magically expanding cash out again, and on, and on. We see that bad banks fail, and we know that even good banks make bad loans.

Why only blame
—if our banks create money—
why only blame our government for inflation?

||

I turned my studies to art and architecture. Along the way I discovered a maverick named R. Buckminster Fuller. He stood among other heroes such as Louis Sullivan and Frank Lloyd Wright in describing the unity of design and nature.

Can projects designed
following principles of our biosphere
ever be too ugly,
ever be too expensive?

||

I got married, and we went to the Peace Corps near the Pacific Coast in Guatemala. I saw discrepancy between strategies for national economic development and realities of community development.

I had to ask
" Does it make sense
—for our poverty, our sickness, our exploitation—
that our cure
cannot come
with our economic development,
but only after?"

||

We moved to Little Rock Arkansas where I tried my hand at city planning in the Model Cities program. This was 1969, a time of large investment in troubled cities. Our successes were real but modest.

Is it not strange?
Even during prosperous times
since our era of generosity,
they say,
we cannot afford to budget for success.

Since Our Era Of Generosity

I went back to school to get my professional planning degree. There I discovered economics, learning its many applications to local public policy. It was elegant; it was beautiful. The curves conveyed information to me in ways that no other medium ever had.

One weekend, I took a rest from my studies and read a book by R. Buckminster Fuller. I believe it was Operating Manual for Spaceship Earth. There, I encountered for the first time his elegant formulation of the fundamental law of economics:

Wealth is a function of energy and knowledge.

Absent was any mention of scarcity, supply, demand. This was the economics of abundance. Fuller's economics made every bit as much sense to me as the crisp logic of market economics.

Humankind developed
laws,
traditions,
and institutions
to deal with scarcity.
At any point
in time and space,
scarcity is specific.
It is real.

We live scarcity,
but we come to live
and to thrive
through abundance.

Please do not misunderstand me.
I believe in scarcity.
I have lived it and seen
both its pains
and its benefits.

Yet, abundance is as real as is scarcity
and is even more fundamental.

Without scarcity,
the economist cannot draw
supply curves
and demand curves.
But these curves cannot anticipate
mathematics,
art,
democracy,
communities,
back rubs,
interplanetary exploration,
civil rights,
the popsicle,
or the yo-yo.
Nor could they have anticipated
the brown trout,
the monarch butterfly,
or the horned toad.
Each is part of our biosphere.
Each is our wealth.
And wealth must be the stuff of economics.

Today,
if we choose to love our wealth and our biosphere
we seem unable to seek the best for one
without harming the other.
Today, also,
sages preach to us of the evils in our economy.
They tell us to be more moral,
to separate pretension from wealth.
Let us heed such sermons.

Yet, the moral sage does not free us
from the choice between two loves.
Neither sage nor economist can free us
unless we know
how wealth and biosphere are one—
how we live scarcity,
but come to live
and to thrive
through abundance.

We Come to Live and Thrive

I lay sandwiched between a straightforward explanation of supply-demand-utility and Fuller's statement that wealth is a function of knowledge and energy. I found myself in that muddled layer of confusion and witchcraft called macroeconomics —including gold flow, balance of payments, balance of trade, inflation, and the like. The economy uses the biosphere's model of abundance, while conventional economics uses a model of scarcity. Beneath scarcity lies a supportive abundance —a macro-abundance. Beneath microeconomics, which specializes in scarcity, should lie a supportive macroeconomics specializing in abundance.

Microeconomics covers those situations in which flow of wealth mimics a traditional marketplace. People buy; they sell; they trade. The demand for a product in relation to its supply sets the price. Economists do not. Buyers and sellers do so, acting upon their needs and desires. One day, two chickens are worth two yards of cloth. The next day, they may be worth three yards in the morning but only one after lunch. Marketplace economics explains well the dynamics in this true marketplace and in myriad public and private markets in which goods and services are bought and sold. It can explain how the price for cloth changes as well as how the weaver decides how much to produce. It cannot, however, go on to explain how cloth came into existence nor how chickens were domesticated.

From graduate school I launched my planning career. I went to the island of Martha's Vineyard where I worked for five years to protect its resources and foster sensitive development. I moved as a consultant to Colorado, worked for a while in the analysis of socioeconomic impact from energy development. I went on to typical land-use planning. The gulf between my professional work and my struggle with the theories of economics seemed unnecessary, but enormous.

The economics of abundance remained a closet hobby until 1980 when I pulled together some of my notes in a hand-printed, ten-page document called Plum Local. It began with my apology: "Pardon my boldness ." I wrote, "The valid world economics will show the tie between genetic and economic evolution," and "Taxes, Bah!! Let's phase them out Let's balance our budget by investing communally (politically) in the growth of knowledge for mankind." I sent one copy to R. Buckminster Fuller. When I received his encouraging one-sentence response I felt some comfort.

The four-page 2nd Plum Local of 1981 took my ideas further: "Taxation is role playing. Monetary return as we have in the national income tax system has no role to play. If there is a utopia it will be found in a humanistic management of instability."

Now, as then, I find it hard to put forth theories of economics that disagree with the teachings and preachings of intelligent people who are economists by profession. However, I would find it harder not to share ideas that help me find some sense and science among a potpourri of confusing theories and popular maxims.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 3. Plum Local ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

47. Three Siblings: Loan, Stock and Money

Three Siblings: Loan, Stock and Money
Bob Komives
::

Every time I use my credit card to buy something I issue a piece of real or symbolic paper --paper which embodies a loan secured only by my promise to pay. A bank gladly accepts my new paper. Its accountant calls my paper promise, an asset. With that new asset my lender bank can invest more than it could lend yesterday. Every time a business buys something using its line of credit it issues a piece of real or symbolic paper --paper that embodies a loan secured only by the business's promise to pay. The lender bank gladly accepts the new paper as a new asset. Today's new asset makes the bank worth more to buyer or investor than it was worth yesterday. The paper loan --floated on nothing but a promise-- is an unsecured loan. This unsecured loan is a sibling of money.

Money has another sibling --a fraternal twin adopted by corporations. Common stock floated by corporations is the fraternal twin of money floated by national governments. Both are worthless paper with an initial value in the marketplace based only on speculation that proceeds from sale of the paper will be invested wisely.

Many corporate leaders and investors, and perhaps you, believe a national government should run like a business --claiming that a government is unbusinesslike if it spends more money than it collects. This dogma makes it difficult to see the family resemblance between stock, loans and money. Please prepare to suspend your belief for several paragraphs. If you hold this dogma the most I can ask is that you consider what you are about to read to be science fiction. Try to enjoy reading of a different world. Later, over a cup of your favorite drink, please ponder the possibility that this different world is our real world.

When good-old General Motors and I had good credit ratings we were allowed (often encouraged) to not balance our budgets --to paper the world with more credit than we can pay for immediately. Lender and investor wanted to hold our paper because they believed they would be well repaid for holding it.

Good-old General Motors issued paper called stock. Each new issue reorganized the investing public so that some of us gullible people played our assigned role and gave General Motors our money in exchange for the stock. If Jane had not been so induced she might have put a California hot tub on her back porch. Part of her wealth would have flowed to a small hot-tub company in California. Instead, it flowed to a giant in Michigan. Mary got laid off in California and moved to Michigan where her cousin, Sid, had just been hired for a new General Motors' project.

When good-old General Motors invested Jane's money poorly, it experienced inflation: Sid got laid off; Mary failed to find a job; Cadillac prices went up, or profits went down; the value of General Motors' common stock went down.

Jane and other stockholders took a risk for potential reward. Her risk and potential reward parallel those of a holder of national currency. If government invests well money holders will be well repaid.

Suppose good-old General Motors had required that anyone who wants to buy one share of its stock must pay for it with one share of Ford Motor Company stock. This may seem strange because General Motors normally asks for payment in money. However, if we suppose a time when one share of GM stock was equal to one share of Ford stock the stock-for-stock policy would be reasonable. It is as reasonable as holders of USA dollars exchanging their money for Canadian dollars of equal value. If General Motors had been trying to take over Ford it would have been quite reasonable to give Ford Stockholders new shares in General Motors in exchange for old shares in Ford. The newly issued General Motors stock would have been balanced by new corporate wealth --the assets of Ford. This is an understandable transaction with real balance.

Now, suppose good-old General Motors had been asked by its investors to achieve balance in the way advocates of balanced budgets say national governments should achieve balance. That is, General Motors had to receive one of its own shares before issuing a new one? Here is balance; nothing does balance nothing. Do you not agree that it is ridiculous balance? It would have been ridiculous to require that General Motors take in one share of its common stock for every new share that it issued. Such a requirement would invalidate accepted practice in corporate finance. It is equally ridiculous to ask the national government to take in one dollar for every one it issues.

A corporate stock issue should be balanced by an increase in corporate wealth coming from responsible investment of the proceeds from the stock issue. A national money issue should balance itself in the same way --through good investment. The public and private investment enabled by the expenditure of new money must create wealth to match the increase in money supply.

To review:

Sibling one, Unsecured Loan
We borrowers must invest the wealth of our lenders in productive ways that by choice or impossibility those lenders will not invest directly. We trade unsecured, paper promissory notes for a loan of investment resources. If we do not invest those resources well, we will fail to pay off loans, our credit rating will fall, our loans will lose value (inflation), and our lenders may rise in revolt to take over our remaining assets.

Sibling two, Common Stock
Corporate directors must invest the wealth of their stockholders in productive ways that would be difficult or impossible for individual stockholders to invest. The corporation trades paper stock for investment resources. If it does not invest those resources well its stock will lose value (inflation), and its stockholders may rise in revolt to install new directors for the corporation.

Sibling three, Money
Government must invest the wealth of its citizens in productive ways that by choice or impossibility will not to be private investment. National government trades paper money for investment resources. If it does not invest those resources well its money will lose value (inflation) and its money holders may rise in revolt to take control of the nation and its government.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 47. Three Siblings: Loan, Stock And Money ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

49. Banks Add Money and Investment.

Banks Add Money and Investment.
Bob Komives
::

Would you rather have a thousand dollars worth of stock or a thousand stocks worth of dollars? You might say, "That depends." Would you rather have a thousand potatoes worth of dollars, a thousand potatoes worth of stock, or a thousand stocks worth of other people's promissory notes? I suppose, "It still depends." With some creative logistics you can use any of these assets at the stock exchange to buy stock, at the bank to secure a loan, in your will to endow a university, or, in a pinch, most anywhere to trade for most anything. Why? Because there are secondary markets for potatoes, stock, loans and money. After the first transaction that puts them into the marketplace they can be sold again and again. The secondary markets for potatoes, stock, and loans are giant-but-tiny compared to the fluid markets for money. As the principal means of exchange, money is coveted by one side in most transactions. In modern economies we need a lot of money --so much that even free-spending governments can have trouble keeping up with the demand. They need assistance. While good-old General Motors would never allow anyone else to issue its stock (traders were stuck with the number of stock General Motors chose to issue), the demand for money is so great that most national governments let banks assist them in minting. The economy needs new money as enterprise brings forth new goods and services that the public wants. By choice or by default, governments in countries that emphasize the private marketplace let the banking system issue much of their money. Within the limits imposed on them by government, banks issue new money whenever they borrow from their depositors to issue new loans. If the banking system did not print more money there is no way that most bankers could cover their growing obligations to depositors --to return the deposits, with interest, on demand. Nor could borrowers pay their obligations to the banks.

Bank-printed money is easy to see if we consider the banking system as one bank. One day a man who is known to be reliable and productive takes 100 dollars out of his pocket and deposits them in the bank. A day later he borrows 80 dollars from the bank. The morning of day three he withdraws his initial deposit plus one day of earned interest. Now he has 180-plus real dollars in his pocket and an obligation to pay back his loan. He goes out and spends those dollars at stores that quickly send someone to the bank to deposit their earnings. By close of the business day the bank has assets of more than 180 dollars in deposits and more than $80 in good loans. As the cycle goes on, the amount of money in circulation and deposited in the bank continues to rise. Someone printed money, and, oh yes, during these three days government was on a holiday.

Having once put new money into circulation by lending out money that they have guaranteed to hold for depositors, a bank cannot withdraw that money from the marketplace even when investments turn sour. Borrowers have spent the money. It disappeared into the marketplace --eventually returning to the bank, but with no tag to identify it with the initial loan. Where projects fail borrowers never get enough money back from the marketplace to return what they owe to the bank. New money spent on these bad projects stays out in the marketplace searching for goods and services. Since the projects did not produce their promised economic growth, new money competes with old money for old goods and services --forcing up prices. The value of all money declines. That is inflation. Whether bank or government issues money to finance bad projects the effect is the same: inflation. Whether bank or government issues money to finance good projects the effect is the same: economic growth.

Despite the inflation risk, a banking system can serve its country well. A diverse investment structure that includes banks of various sizes in different locations can develop diverse investment strategies. Local banks can help a nation develop the complex organization at all levels that typifies a robust ecosystem. Because government spending should reflect priorities set by the nation, national government spending is the most direct and understandable way to infuse the private investment market with the money it needs. Centralized investment, however, even if intelligently made, even if made by a giant private bank, tends to over simplify the needs and opportunities of a complex society. A complex system of local and regional banks is a complementary money pump to national investment. It fills investment niches that simpler national strategies cannot find.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 49 Banks Add Money and Investment ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

75. Deflation Is Peril.

Deflation Is Peril.
Bob Komives
::

When Economists see that the borrower will pay more for getting what she wants one month early, and the lender will let her have it provided she compensates him for the month that he will not have access to her payment, they say that time has value. The interest tacked onto the loan by the lender compensates him for that value. The interest paid by the borrower demonstrates the better-now-than later value for her. As the value of time goes up, interest rates go up. With higher interest rates, more people see value in lending, but fewer see value in borrowing. Reduced interest rates have the opposite effect. This simple description correctly portrays the dynamics of loans from the points of view of lender and borrower. Interest reflects the value of time and dynamically regulates the amount of borrowing.

From the perspective of the overall economy, interest serves a different but compatible function. To see that, we must return to the marketplace.

Imagine a simple marketplace with many participants who have businesses of equal size. The marketplace expands ten percent per year. Every participant, anticipating continuing success, borrows money at ten percent interest. Suppose that the borrowing exactly equals the total of money in circulation. Further suppose that the government did such a good job last year that it has a holiday this year. It will neither spend nor mint nor lend more money. Finally, suppose that all borrowers succeed in increasing their production ten percent as they had promised.

Everyone is happy at first; wealth has expanded ten percent. However, when it comes time to pay there is a financial crisis! Money has become scarce. People cannot find enough money to pay back their loans. Deflation sets in. Prices go down about nine percent as buyers now find much more to buy for every coin they hold. More than ten percent of the debtors lose the battle over scarce money and declare bankruptcy.

While the economy and everyone in it had done what was promised, the financial structure failed. It had not pumped in a ten percent increase in money so that monetary expansion could faithfully parallel economic expansion.

Deflation is peril to the monetary system. From the perspective of the overall monetary economy, we charge interest on loans to create financial pressure to expand the money supply --to prevent deflation. The interest attached to a loan is a purchase order from the real economy to the money economy requesting more money.

Keynesian economics recognizes the role of interest rates as seen from the perspective of borrower and lender. Raise interest rates and people will tend to borrow less. Lower interest rates and they will borrow more. Such financial manipulation works from time to time, but the practice ignores an economic current running in the opposite direction.

Higher interest rates may discourage investment, but their real purpose is to discourage only unproductive investment while accommodating a surge in production caused by a period of successful investment. This is a big difference. While the economy would charge higher interest when good investment presents a danger of deflation, economists have wanted to raise interest rates when there is a danger of inflation. Is it any wonder that national banks find their inflation-fighting and recession-fighting tasks difficult?

In my imaginary example of a simple but expanding marketplace interest fails to prevent deflation and bankruptcy because my assumptions do not allow it. That is not the real world. A national government that is not on vacation can infuse an economy with needed cash by minting and spending money. However, the public need to spend and the private ability to make productive investments do not necessarily coincide. A national government needs another way to get money directly into the private investment market. Typically, through some kind of central bank, government infuses more money by becoming a lender. In U.S. America the Federal Reserve and Treasury lend to private banks that invest in the expanding economy. Through direct investment and indirect lending the federal government avoids the peril of deflation.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 75. Deflation Is Peril.  ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

76. National Loans are as Paper as Money.

National Loans are as Paper as Money.
Bob Komives
::

Under popular balanced-budget policy the alternative to raising enough money in taxes is to borrow money. Conventional wisdom says that if a national government wishes to spend more than it has taxed, it must borrow. Otherwise it would have to print and spend worthless money. But where is the wisdom in that conventional thinking? When I lend money to the government I get a money-market certificate (or other such paper) in return. My money-market certificate is written on much less expensive paper than my money is. Both are printed on government presses and backed by the full faith and credit of the U.S. American government.
Why is one piece of paper better than the other? If the national economy goes sour and inflation soars, the certificate will be no more valuable to me than money. After all, I'm going to collect my earnings in money. If the money has no value the certificate has no value. Despite these obvious facts, the Federal Reserve System appears responsible and businesslike when it issues paper obligations backed only by paper money, yet congress and president appear irresponsible and unbusinesslike when they issue paper money backed by paper obligations of the Federal Reserve. This makes no sense.
A central bank can be an important issuer of money, but this need not be disguised as helping the national government finance its budget. The expanding marketplace needs money. A central bank, sitting at the apex of a banking system, can provide money when the government expenditures do not match growth in the marketplace. That is a deficit of a different kind. When the productivity of the economy is such that the government does not put enough new money into circulation directly through expenditures there is a monetary deficit. The central bank can give money to local banks who invest it where the marketplace needs it. We can call this gift a loan and administer it accordingly so local banks act prudently. More money is needed. If not provided, the monetary deficit in the marketplace could cripple underlying economic growth. A banking system headed by a central bank can fill that deficit.
Banks specialize in the promises-for-promises part of the marketplace. While many promises can remain in IOUs, bank books, travelers checks, and sundry paper forms, we need  real money from time to time. Local banks must be able to cash in on their pyramid of deposits and loans. For that they turn to the central bank (and, if the local bank is going broke, to the insurer of banks). If decisions of local bankers accurately reflect the economy, the central bank can safely help them turn their diverse paper fortunes into simpler fortunes by providing them the money their accounting-sheet assets would merit.

So funny.
That bank must issue
this certain paper obligation for its government
so that its government will not issue
this certain paper obligation for itself.
So certain,
so paper,
so, money!

|| 

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 76. National Loans are as Paper as Money.  ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

77. No Surprise, No Revenue

No Surprise, No Revenue
Bob Komives
::

Borrowing by a national government, like monetary recall, can have merit in limited circumstances. It can extract money from the private economy for public purpose. When a central bank surprisingly offers to raise the rate of interest it will pay to its lenders (citizens, banks, foreign interests), or when it raises the percentage of assets that banks must hold in reserve (not lend) the central bank temporarily extracts money from the private marketplace. Such a surprise can be useful in an emergency. Perhaps the real economy and monetary system are terribly out of whack, or wartime mobilization calls for reduced domestic demand. However, governments, especially in an open society, do not run on surprises. National government cannot sustain itself on revenue from surprise borrowing any more than from surprise taxes because it will run out of ways to surprise us. Even when it does surprise us, the money that surprise borrowing brings into the  national treasury is incidental by-product of a more important policy. This by-product is nothing to plan on, nothing to run a government on.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 77.  No Surprise, No Revenue  ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

82. For Local Banks

For Local Banks
Bob Komives
::

...

Local banks tend to issue money
as stock in local knowledge.
Thousands of local banks
(together and at odds)
foster diverse and robust investment.
Forsake local banks for
    fewer,
    larger,
    national
    and international banks
and you foster
    monotony,
    vulnerability,
    foot in the mud,
    butt in a rut,
    a people and nation
    of downward mobility.

|| 

Banks expand money supply when they lend out most of the money they are “holding” for depositors. Thus, local banks generate a somewhat local currency.  Given the lack of public minting powers at the local level, private local banks have an important role to play. They have built-in incentives to invest in local economic development that will return local deposits. The money that the bank introduces locally to the national economy responds to —even rewards— success of local investors. Given a centralized, national monetary system, decentralized, local, private banking is a complementary aid to local economic development.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 82.  For Local Banks  ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

88. Abolish National Borrowing.

Abolish National Borrowing.
Bob Komives
::

     This is all unfortunate, but necessary,
says the economist in his scarcity model of the world.
     We cannot provide for the welfare of the many
     because resources available to the few are scarce.
     We cannot clean up and protect our scarce resources
     because,
again, as the logic goes,
     our resources are scarce.

Where is the evidence
that this scarcity model works?
Where is the evidence
that doing the right thing costs too much,
that doing the wrong thing is affordable?
Where is the evidence
that poor countries
that follow this model
will someday become rich?

Where is the evidence?

Evidence

Monetary recall is not needed to pay for national government. National borrowing is a substitute for these pseudo taxes. Therefore, there is no need to borrow. When a country borrows foreign money from a foreign government, it shackles its own economy with unneeded obligations. When a central bank fights inflation by raising interest rates, it fights a fire with kerosene. A national government cannot enter the borrowing business, whether internal or international, without raising inflationary pressure. While local banks play a key role in financing local economic development through loans, a central bank such as the Federal Reserve System in the USA need have no role in financing national expenditures. Once this is understood, the central bank may assist a healthy flow of money into the economy through independent local banks.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 88. Abolish National Borrowing.  ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::