An Engineer’s Mind on Economic’s Textbooks

I was at a twenty-four-year-old party and one young man said to me: “Andy. We despair at the thought that we may never be able to buy a house.” My reply was: “But that is ridiculous.” I added my usual explanation: “God or nature created land for all living things to share. As an Australian, you should have access to a house — even if you have to pay a little for it.” And so my engineering mind set about solving the problem. I realized that my children will have problems buying a house. I determined that, if children cannot buy houses, we have ‘fake affluence’. We cannot claim that we live in an affluent nation if the young cannot buy houses. A group of ten men can build a house in ten weeks, why does it take a young couple a lifetime to pay off the debt? I bought my first house in 1980 for $43 000. Within a few years, it was worth $200 000. However, it was still a home suited to one family. To a family, a home is valued as a home, irrespective of its dollar value. I could not buy my house at current prices which hover around one million dollars — but it is still a home. I never paid any tax on this accumulation of wealth, yet I paid around one-third of my income as tax. There is no way to get rich on wages, so I recognized that I was living amongst mushrooms — not ‘much room’ for common sense in economics nor politics. Quite clearly, land should not be an item that only the well-off can afford.

A dive into economics books brought me to the rapid realization that the solution did not lie there. At the very start of economics-learning is the definition of money: — that which enables transactions — and — that which can be used as a store of value. My engineering mind simply would not accept that because it falls apart when I ask “How can it do both?” In a mathematical attack, one might think: “In the limit — as all money is used as a store of value — there is no money to use in transactions.” To my mind, economics was flawed to the floor — like my opinion on psychology — which is only marginally better than my opinion on gender studies. I took my mind back to the origins of money to realize that money was designed to enable trade — but in particular — between people that have never met. So what is the most important need for money? It is essential for civilization. It is essential as a means of moving food from farms to cities. So the most beneficial flow of money is citizen to shop to farmer and somehow back to citizen. The missing link was farmer to citizen. The farmer has to have some reason to give the money back to the city-folk. Perhaps it is for the purchase of coffins for the suiciding farmers. Debt is a useful tool and so is demand for city-produced goods. Any other use of money goes beyond immediate need. Neither do I accept the definition of gravity — “the force that attracts a body towards any other physical body that has mass.” It does not explain what gravity is and there are other forces at play such as magnetism. But, people yell and scream if I point out errors in popular thought patterns. Let them yell and scream. My Speedway coach had trained me: “Don’t follow the leader… You will come second.” A thought is not correct simply because it is popular. Truth is independent of popularity.

So my thinking brain imagined a remote village. The onion-man grew onions, the egg-man supplied eggs, and the apple-man made apples. They would swap at equal value. Trade was problematic, even though they swapped at par. Mr. Money created tokens — initially equal in value to an apple, an onion, or an egg. Thus, the backing for the money-token was the goods they would purchase. Mr. Money stated that his tokens were equal in value to an apple, egg, or onion. No gold was needed and thus the backing for money is the GDP — not gold as the textbooks hint. Gold is not needed. The IMF-generated STD — sorry — SDR piggybacks off other currencies and is thus a ‘rip-off’ of other currencies. The SDR is deemed equal to another currency and thus gets its backing from the GDP of subservient nation’s GDP. Create SDRs out of thin air and buy GDP with it! How do they get away with this stuff? And who owns the IMF? It is not the nations of the peoples and it is not the peoples of the nations. And where does it get the money that it lends? It manufactures it out of thin air as instant credit. “Here is 30 billion. And by the way, you already owe us 33 billion.” They manufacture in any currency you want. I puzzled on how they could be allowed to lend something that doesn’t exist?

Trade in our remote village flourished. Mr. Money got a windfall from his money-creation that economists called Seigniorage. But everyone was happy because trade flourished. Mr. Money got rich to the tune of the money he created out of thin air, but he got away with it because society flourished. Eggs became the food of fashion and, unlike the others, Mr. Egg doubled his business. One of his nasty habits was to hide increasing numbers of tokens under his mattress. He acquired half the tokens. Business slowed for everyone and others also started to hoard tokens ‘for a rainy day’. Mr. Money recognized a problem. He realized that the tokens that are not hoarded must move faster or that hoarding should be discouraged or he must increase the number of tokens. A local prophet said: “Do not hoard tokens”. The Quran says similar. “If you heard money, when you die, it will be heated and burned onto your forehead.” The hoarding of money may be the biggest financial challenge on the planet. Lack of velocity kills economies dead, dead, dead.

My questioning mind posed another question: “How much of our Money Supply is actually circulating?” Or the alternative: “How much of our Money Supply is hoarded?” During the GFC, the Fed said, to the effect: “The people are hoarding money!” This official twaddle regularly made my blood boil. It was a red rag to my unaccepting mind. ‘The People’ have no money left at the end of the week! They are spending weekly which gives them an effective velocity of fifty-two. It is the ‘effluent’ hoarders that kill velocity.

It took me a year to determine that it is impossible to calculate the proportion of money that is hoarded. However, a simple executive decision allows a calculation. Money that is held for more than one month is deemed to be hoarded. This gives me a fascinating insight into the working of the economy. My mother always said that I was inventive. At the age of four, I invented something to keep her warm — an electric chair.

GDP falls when velocity falls or when the volume of ‘Circulating Money’ falls. ‘Circulating Money’ is a very small portion of the Money Supply mostly around 8% to 16% of the Money Supply. Mr. Money was smarter than an economist and realized that he could take any or all of three steps:

1. Force tokens to move by any means.
2. Take hoarded tokens off people — by force.
3. Create more tokens (so that people could hoard them).

Management of the Money Supply requires management of Velocity, Hoarding, and — last of all — the Volume of Money. Any traveller can see that Hoarding, Velocity, and Money Supply vary regionally — without even reading an economics book. The crude reliance on national statistics does not encourage regional adjustment. Money Supply and GDP are down in Scotland — spend money in Wales. Even national inflation figures do not reflect the differing inflation in various sectors of the economy which are significantly influenced by bank lending policy. If they lend, we have money. If they don’t lend we don’t have money. If they lend for houses and we have more houses or overblown prices in housing politely called housing inflation. Cutback on lending to business and we allow corporate chains to destroy the backbone of employment — small business. The Central Bank appears to maintain institutionalized collusion whilst giving the illusion of control all relying on a simplistic assumption that there is a consistent demand for credit and a willingness of the punters to take on more debt. Such is the endemic idiocy, the Bundesbank writes: “a conventional monetary policy implemented by manipulating the policy rate…” [1] The same article points out that the ‘reserves’ to cover for inter bank movements of bank-created deposit money are covered by the central bank and not the deposits taken by banks. And just to make the situation clear, the same article states: “This means that banks can create book money just by making an accounting entry.” [1] This completely blows the myth: “that banks can only grant credit using funds placed with them previously as deposits by other customers.” [1] The Bank of England let the truth slip out. “The amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or ‘quantitative easing’.” [2] Nowhere do they mention maintenance of velocity. How frustrating is it to read the following: “there have been no more major innovations in the Bundesbank’s arsenal of instruments.” [3] It is an incomplete arsenal if they only use interest rates to make flimsy attempts to modify bank lending to affect the Money Supply. When they get mega-desperate, they become mega-stupid and purchase government debt and then wonder why the GDP doesn’t rise. It will clearly decrease the Velocity as the money so generated becomes a dead-duck in the finance industry. It is like the drunk pressing random buttons on the radio hoping something might happen. It is as pathetic as my sister shouting: “You don’t understand!”. ‘Money-Supply-increase’ must at least occur where it has some chance of lifting the economic activity rather than boosting the hoarding in financial sector. The Bundesbank almost admits its ineffectiveness with the following: “however, it is unable to limit the credit creation process in quantitative terms (credit ceilings) or to fix market interest rates administratively.” [1] That sounds like a clever little voice inside the Bundesbank shouting for some common-sense from economists.

Mr. Money could physically threaten persons not to hold his tokens. He could number them and remove those that became stagnant or time-charge the stagnant tokens or he could create more tokens. Unfortunately, current stupidity only looks at the last item — the magnitude of the Money Supply. As engineers, we like to look at flows to watch the strange antics of moving objects. Cars travel at 60kph on a two-lane highway reduce to 30kph when the road narrows to one lane. Thus the flow is reduced to 25%. This is 50% lower than cars traveling at 60kph on a normal single lane highway. It is better to have a single lane highway than a double lane highway that reduces to a single lane. The greatest problem with each national Money Supply is lack of movement — not lack of volume. The problem in Greece is lack of velocity, not lack of money. Double the velocity in Greece will double the GDP. Adjust the tax system of Greece to reduce hoarding to fix Greek woes. Cease the silly habit of removing money when it is acting as money and remove it when it is not acting as money. Greece borrowed more, not from the ECB, the money dictator of Europe, but by the IMF who, to my mind, lent something that did not exist. Almost all national Velocities have fallen or are falling to a staggeringly slow value of one.

So, what is money? It has to be what ‘People accept as money’. In other words what they will accept as payment — that is payment in transactions. Thus, the value of money is defined by its ‘transactional value’. My Thai Baht are useless as soon as I get on a plane. For fear of being laughed at, I don’t try to exchange them. But they bring magic in Thailand. In a life raft in the middle of the doldrums, a block of gold will not buy the last sandwich. In a rapidly collapsing society, give me a gun, not gold. But gold and silver have a history of use as money and are thus useful for kick-starting a failed money system and useful for international trade between untrusting nations and for ‘trading with the enemy’. After the establishment of a money system, who wants gold? You cannot eat it and exchange is tedious. When it is used as money, it is stamped into small identical lumps (Why bother — just use paper!). I asked an old Italian how should I pay him for his Volkswagen and he answered: “Money.”, which to him meant folding notes. So what do we accept as money and where does it come from? The Reserve Bank of Australia lists the Cash Currency as $76B. So the RBA has issued $76B in cash currency folding notes. This works out at $3000A per person! I’m well off and I don’t carry that much, so someone has an awful lot of the stuff somewhere. However, the RBA lists the M3 Money Supply as $2100B. ($85 000 per person!) Something is wrong when this is an inadequate Money Supply. But the $2100B did not come from the Central Bank. So I tried to puzzle: “Where did it come from?” The secret lay in the lending procedures of banks which I explain as a story:

“Mr Buyer wishes to buy a house from Mr Seller. He goes to the bank and asks to borrow one million dollars. The bank looks at him and says: “Yes”. On the appointed day, the bank writes one million dollars with a plus sign in Mr Seller’s bank account. In Mr Buyer’s account, they write one million dollars with a minus sign. They did not need to look in the vault to see if there was enough money. They did not need to call the Central Bank, they simply wrote numbers in a book. From that moment, there is one million dollars more money in the nation and one million dollars dollars more debt.”

No funds are required to create a loan — only bookkeeping skills — and a method of enforcement. Previously, this involved broken legs and sexual servitude of daughters. This is now replaced by government. The process has an unfortunate side effect never envisaged by our ancestral inventors of money. I continue my story:

“After one year, Mr Buyer owes one million dollars plus ten percent. After two years, he owes one million dollars plus ten, plus ten. After three years, he owes one million plus ten, plus ten, plus ten. Bingo! We have now have more debt than money.”

We have created unpayable debt. The topic is in the bible and other religious books but not in the ‘approved’ books of the ‘nation-state’. The bibles were looking after the people but I wonder who the textbooks serve? Might it be those that control those that control the nation-state? Has the topic of ‘more debt than money’ become an unmentionable truth?

We are in the stage of civilization where we are learning to live with unpayable debt. We have discovered a very clever solution — — — ‘never pay it off’. This is a milestone discovery in the history of money. Unpayable debt is not a problem if you never pay it off. A bailout loan is not a bailout of a country, but a bailout of the banks. If the banks had not bailed out Greece, the banking system may have collapsed. Nations do not need to repay fictitious money — partially encompassed in the shout: “Fuck Austerity”. There is a lesson to be learned from King Edward’s refusal to repay the Venetian bankers in 1343. The sovereign debt default of King Edward’s England was enough to burst the speculative debt lending binge created by the usury of the Venetian bankers which led to the breakdown of civilization in Europe. Around one-third of the population died through lack of circulating medium. Today, we have an even larger speculative financial bubble. How many ‘bail-out’ loans can be given. One thing is for sure — the debts cannot be repaid. Should King Edward III have been given a ‘bailout-loan’?

We have learned how to live with debt — by not paying it off and by obtaining ‘bailout’ loans, but we are not learning how to recover from a collapse. The question should be in the texts — but not the answer — as the answer is unknown. A read of Hjalmar Schacht gives an insight. But remember — he was on the losing side so one must read ‘between the lines’. Insurance cannot bailout money that has collapsed in value. The death of a person of any colour sends a city into a riot. Imagine the ATMs failing!

To pay off debt with existing money is to destroy the vital circulating medium — the very lifeblood of civilized commerce. Thus, Jubilee cannot work. To forgive the debt destroys the method by which most money is currently created — created as credit. It destroys the balance sheet of the deposit creating institutions. Debt is treated as an asset. Previous rule-makers, who were often known as ‘prophets’, said that usury should be banned because it was seen as the cause of the social ruin of families and nations. Usury does create paupership and a whole series of sordid problems — but if no attempt is made to repay the debt — at the national level, great human advancement can occur. Witness the last three centuries. The Jubilists are correct on logic but wrong on practice. The activist’s shout of: “Fuck Austerity” — is wrong on logic — but correct in practice. We are currently learning how to overcome the endemic flaws of money.

Quite clearly, the debts of nations both internally and externally are greater than the money available to pay those debts. All nations (bar three non-entities) are massively in debt to the IMF/World Bank. Common-sense would dictate that half should be in credit and half in debt. But no — they are all in debt — big-time. Man’s greatest invention has a nasty little flaw. The only people discussing it are not economists and they have no voice. This failing of money is not a new discovery. Moses knew of it as did his people. Jesus was a money reformer and Mohamed was a businessman who knew that businesses need money before they could make money. He created a wonderful set of rules to control riba (interest) — since ignored or circumvented because Muslims live in regions where Usury dominates. The sum of public debt and private debt in Australia is $7700B [Australian Debt Clock], which is more than three times the volume of money listed as M3. My calculation give figures around 2.5 for most Western nations. Australia could pay off one-third of its debt leaving it with an M3 of zilch — zero — nothing. In reality, any attempt to pay down the debt causes the ability to repay to vanish. We call it a recession. Any attempt to pay off debt simply creates a recession whence more debt is created to extricate the nation out of the recession. Anything which causes the debt to fall causes a recession leading to increased debt. But that is incomplete thinking. There is a missing component from the logic. Increase the velocity. Stop the hoarding.

The economists define a recession as a period of falling GDP whilst popularising the thought that this is that this completely related to a lack of increase in the Money Supply. But a fall in velocity can cause the identical recession. In fact, we actively describe the GDP as equal to Money Supply times Velocity. So to increase the GDP, one needs to increase the Money Supply or increase the Velocity. One might as well say: “to increase the GDP we need to increase the GDP”. Which is about a daft as the definition of Gravity. Gravity is Gravity. Money is that which is accepted as money. Money is Money! To force an increase in the Money Supply is like turning the hands on a clock and expecting the sun to go down. It is like pushing the donkey with a rope. Increase in Money Supply is more likely to cause a decrease in the Velocity. Although it might cause inflation — more money doing the same real economic activity as before. The measured GDP might increase whilst there is no increase in real economic activity. The lunatics are in charge of the asylum. Such was the idiocy of ‘Quantitative Easing’. “Increase the Money Supply by any means possible.” was the battle cry. They spectacularly increased the Money Supply by giving it to institutions that have a nasty little habit of hoarding money. The equally spectacular effect was a fall in the velocity with no rise in GDP — well except for an increase in jail cost and bullets for the police. Such is the lunacy of the GDP including bombs for the army, bullets for the police, fees for divorce lawyers, and coffins for the farmers. GDP is not a measure of the wellbeing of the people and does not come near to measuring the happiness of the people as enshrined in the American constitution. We are sorely missing a happiness index. A GDP increase needs to be aimed at the people, not the elite whose chess game directs our politicians to give billions to favoured countries and bomb the others. As soon as we have one lobbyist in a nation, that lobbyist has more power than all the voters put together. Who funds the lobbyists? To increase the GDP, it is necessary to improve the conditions for business and to stop pulling money out of circulation just when it is doing its work of money which is to enable transactions. Some call it the ‘Real Economy’. Hoarding should not be part of the definition of money and should not be tolerated in society. I was given a voucher to a flight simulator valid for one year. I used it in the last week before expiry and flew a 747 into the old Hong Kong airport. Utter magic as I lined up on landing lights on top of skyscrapers making a steady curve to a landing between residential high-rise and stopping before the runway disappeared into the sea. Unforgettable! But neither do I forget that the ticket languished in my drawer for fifty-one weeks. To increase the GDP, we have to increase the GDP. Stupid as that may seem, we need to override those that have learned from textbooks commonly deemed out-of-date. These textbooks will, of course, be replaced with textbooks that are also out-of-date to give the illusion of progress. The illusion will be administered by those that were brought up on out-of-date textbooks where every text seems to quote passages from other out-of-date textbooks. Fiddling with the Money Supply, when there is $85 000 per person, is beyond my comprehension. When money only changes hands at an incredibly sluggish once per year, the answer is poking us in the eyes. Just get the money to move. How? Stop stifling its movement and stop hoarding it.

Mindful of my starting assumption that everything in economics was wrong, I needed to find out why the young man said: “We despair at the thought that we may never be able to buy a house.” Some statistic I read, but cannot locate, stated that there were more loans issued for seventh houses than for first houses. Correct or not, we have an institutionalized problem if rentiers can outbid young couples. Political power has fallen into the hands of the well-off — something that Jefferson tried to avoid. Houses are for people to use as homes – not items for profit. Yet, residential investment represents 35% of all housing finance in Australia. This 35% gets a tax-payer subsidy not available to owner-occupiers. Amazingly, these rentiers get preferential tax treatment — the same one that made me well off. I claimed the mortgage interest on my factory as a tax deduction against my annual income but not against my annual increase in wealth. I never sold the building, so I gained a massive increase in wealth with no taxation. Some years, my factory increased by more than my income — which gave me a tax-free windfall. I will not be required to pay tax on this increase in wealth until I sell the factory whence I get a clever discount disguised as a tax — deceivingly called ‘Capital Gains Tax’. This clever so-called tax would be 50% of the tax rate on earned income.

As a high school teacher, I was disgusted to be associated with a system that produced youth that left school barely able to write their name clearly, nor speak clearly, nor possess employable skills, just as I would be embarrassed to call myself an economist that cannot see that the system is collapse-prone, favours the well-off, and unequally apportions land use. The value of a farm depends on its ability to produce, yet a fall in productivity is to the benefit of the coffin makers. The bank makes the money out of the land rather than the farmer. I give my example of a land purchase as a story:

“Mr Outback purchased a square kilometre of land in the middle of the desert for one dollar. There were no roads nor facilities within one hundred kilometres. He was diddled, as the land was not worth the one dollar. He could not sell it at any price and nor could he give it away. Yet, next year, someone found some useful rocks and persuaded the government to build roads, schools, and hospitals. His land became valuable — but not through any effort on his part. He became wealthy with no money because other people’s effort and government money that put facilities in proximity to ‘his’ land. He sold to someone who borrowed $10 000 000 from a bank. The bank loaned money ‘that did not exist’ to purchase land previously worth $1 and earns $1000 000 in interest on the loan annually. The credit is conveniently called “Deposit Money” to give it an air of realness and is conveniently defined as being equal in value to Central Bank issued cash currency. The government demonstrates acceptability of the ‘unofficial’ invisible money creation by accepting it as payment for tax due. In fact, it only accepts invisible money as payment of tax. The value of his land lies not in the land but in the proximity to facilities. Or more precisely in its desirability due to its proximity to facilities created by others. Thus Mr Outback should not receive any benefit from appreciation that was not of his personal effort. The bank is making $1000 000 each year as a benefit from government built infrastructure.”

Land should never become a vehicle for financial speculation. It should not provide ‘unearned income’, or ‘illegitimate self-enrichment’ for ‘evil men’, as the Bible describes it. It is called Australian land for a reason. The Australian Money Supply should also be the property of the nation and should not be used to make money from money. The bank is not lending against the land but against the demand for land which depends upon things external to the land rather than the intrinsic value of the land. Even a farm requires a transport infrastructure to have value. A farm with no transport route has no value. Thus, it is in the bank’s interest to maintain the demand for land and property by encouraging population increase — currently by immigration causing a demonization of anyone that objects to what they see as population replacement. Without Land Tax, popular demand for land causes rents to benefit rentiers rather than the government on behalf of the people. After three years of study, I determine that children cannot purchase houses due to bank lending wherever there is a competitive demand for land and because the well-off encourage favoured tax treatment. On the way, I discovered that the well-off and corporations, with their lobbyists and legions of lawyers hold sway over parliament whilst the voters become ‘useful idiots’. The rentiers drain the nation of its vitality.

Mr. Money recognized a need to increase the Token Supply to adjust for an increase in population, increased productive capacity, and to cover for hoarded tokens. He recognized that there is no magic formula to calculate the increase rate and that in most cases it was a self-fulfilling prophecy. Yet, the Bundesbank claims that a steady 5% increase is appropriate. The fools do not consider potential velocity falls of greater than 5%.

Mr. Money realized that small entrepreneurs did not have the money to expand their businesses. So he said he would take ownership in the form of shares in exchange for fresh tokens that he created out of thin air. This was very clever because Mr. Money got all the profits from people’s efforts and they got the satisfaction of giving lots of unearned income to those that never work. We have a company share system that ensures that the rentier class owns the means of production without the stress of company management nor physical toil. Some even have the audacity to state that a company exists to benefit the shareholders. Companies are not set up for this reason. They become shareholder-owned entities because that is wonderful for the rentier class.

In the village, Mr. Money realized that there was a demand for tokens by persons that had insufficient. He simply gave them tokens at an interest rate of ten percent. Demand was intense and the society became very industrious. A strange thing happened. After eight years, the people owed him more than twice the amount that he had loaned. [1.10**8] After sixteen years, they owed him four times the amount that he had loaned. After twenty-three years, they owed him eight times the amount that he had loaned. The people started running around in yellow vests and Mr. Money was buried in a pit and they threw rocks at him. In the resulting turmoil, everybody went around hitting each other over the head with clubs leaving the streets full of dead bodies that no-one would clear up. Mayhem and starvation occurred. The population fell to one third because they did not realize that living with debt is better than living with a collapse. In reality, the people, nor economists, had no real inkling of how to live without debt-based credit. Economists certainly were not going to teach them for fear of being condemned by peers. Three hundred years later, a young man by the name Mr. Funny-Money invented money tokens that he deemed to be equal in value to an egg, an apple, or an onion. He was so generous, he even lent them out! Mr. Token changed his name to Mr. IMF and set about dominating the world as if he had invented usury.

I was in a government department as a computer consultant and a lovely lady of Italian decent said: “When we got our first mortgage, the bank would only take my husband’s income into account.” Mmmm! Equality readily made pleasant conversation. I puzzled for a while and answered: “I bet that the price of houses doubled when they took two incomes into account.” Her eyes changed to a puzzled look and she answered: “Andy. You are right. They did double.” So the value of a house is not its value as a ‘home for a family’, its value depends on incomes from employment. When traveling, I can tell the income range in a locality by looking in a real-estate window. I also noticed, when I bought my house in 1980, that the interest rates rose and rose and topped at 17.5%. I filled the house with tenants whilst I slept in the back bedroom with draughty windows. I took on weekend and evening work to boost my teaching income, but I survived. When the interest rate started to fall, the house prices rose. The house was still a home of identical value to me but its monetary value had risen. House prices depend on interest rates. How silly can we get? A visit to East Berlin is a financial wake-up call as is a stay at Detroit Hostel. In Detroit, a house price can be less than the annual rates to the council. They destroy houses to maintain some semblance of value. House prices depend on employment incomes and interest rates — not the value as a home. It occurred to me that economists were an academic front to cover for the money lending practices of the private banks. I have yet to dispel this thought. Even the politicians participate with: “Keep the central bank free from political interference.” Who then ‘interferes’ in matters central bank? Is it the banks that they supposedly ‘regulate’ in a collusive manner?

Textbooks appear to support the status quo. James Steuart said that the market would self-regulate and thus needed management, but eight years later someone came along and said that markets would self-regulate by an ‘invisible hand’ — and thus did not need regulation. Classic illogic. It is more correct to say that markets will self regulate — in favour of manipulators — and thus need regulation. Prostitution transactions are regulated (but not ‘free-promiscuous-sex’). Sex is ok, provided that you do not pay! Smoking transactions are regulated. Harmful speculation needs to be regulated. They are probably correct that markets self-regulate, but they also self-regulate in favour of the manipulators. Thus James Steuart was correct in the first place. Unfortunately, he spoke ‘unpopular’ truth not favoured by the well-off so they lauded Adam Smith’s version of the ‘truth’ still willingly worshiped by economists.

No negative gearing should be allowed without an evaluation of wealth increase. Speculative trade in currencies should be banned for the same reason that Jesus threw out the money manipulators from the temple. How much misery has Adam Smith caused? Adam Smith’s version of the truth was much more advantageous to the well-to-do and got promotion. Both political parties in a democracy that is described as “stable” support the ‘debt banking system’, set up at the end of the Second World War. You can smell the propaganda when reading a 1938 copy of War Illustrated. The ‘democratic’ parties still support every war advertised by the international news agencies whose reports look remarkably like the reports made up by the Council on Foreign Relations. After eight years, we throw out a political party and replace it with the one we threw out for incompetence eight years earlier. We have a surprising situation where people actually believe that we have a democracy. When one lobbyist exists, we no longer have a democracy.

Money is magic. It is one of the important components of ‘Civilized Life’ along with the ‘Family Unit’ and the ‘Rule of Law’. The family unit is under pressure and the Rule of Law has reverted back to the Mosaic Law rather than the philosophy taught by Jesus of being good to others, respecting women, standing up against wrongdoing, and watching out for trickery from other individuals and groups. Jesus worded it as: “Put on the full armor of God, so that you will be able to stand firm against the schemes of the devil.” [Ephesians 6:11] and “do not lead us into temptation” [Matthew 6:13] and “Be sure to guard against the dishonest teaching of the Pharisees! It is their way of fooling people.” [Luke 12:1] Our civilized society relies on cooperation and trade. Yet the justice system is not a justice system when people use the justice system for personal gain. The philosophy of Jesus needs to be brought into the Justice system along with a dose of common-sense.

The very concept of money is being distorted. Money was invented to enable efficient trade for the benefit of the whole of society. If the justified young cannot buy houses, we are supporting a broken system. By ‘justified’, I mean an ancestral linkage to the region. When I travel, I ask the young: “Could you buy a house in the town where you were born?” The answer is invariably: “No.” If money only changes hands once a year, we are taking a broken system. If money is taxed when it moves but not when it is hoarded, we are taking a broken system. If people cannot buy apples, onions or eggs, we are taking a broken system. If people choose welfare over work, we are taking a broken system. If welfare becomes the norm, we are taking a broken system. If people move from ancestral regions to welfare nations, we are taking a broken system. If we try to integrate groups that clearly don’t integrate and then invent verbal abuse when they don’t, we are taking a broken system. It is not that economics needs an adjustment — it needs a clean-out and restart. Money is a freely-created commodity. Even gold was free. It was dug out of the ground. Money oversupply is a problem. Under-supply is a problem. Failure to move is a problem. We cannot say how many money tokens are required per capita, but $85 000 per capita is too much. Nor can we say how long it is reasonable to hold tokens, but a year is too long. For my ‘Hoarded Money’ and ‘Circulating Money’ calculations, I use a figure of one month. Money held for more than one month needs to be mildly taxed — perhaps one percent for each month. Money is only useful when it changes hands. Each time a ten dollar note changes hands, ten dollars of economic activity occurs. If our note changes hands ten times in a day, it creates $100 of economic activity which is quite a few haircuts. It amounts to $36 500 of economic activity out of a ten dollar note in a year. Currently, we get $10 of economic activity out of a ten dollar note. Cash Currency costs zero to produce but the figures for bank money are frightening. For each $1000 of credit in circulation, there is up to $3000 of debt. At ten percent interest, this means there is $300 of interest for each $1000 in circulation. This simplistic calculation suggests that our Money Supply costs us around 30% per annum. The government does not even use the money that it creates. It uses money that does not exist.

How can economics be an education when it misses the tally stick system, Silvio Gesell’s script money, James Steuart, and Feder’s economics? Why is the Australian Public Bank miracle not studied? Why is the German ‘Economic Miracle’ not studied? How can history be studied without studying who supplies the funds for the war? There is a clear tactic to control a country by financing, or threatening to finance, that country’s enemy. Why was Switzerland’s declaration of ‘neutrality’ accepted by both sides? How much trading was done with the enemy? Why is only the Central Bank model studied? How much influence do bankers have over the government? Does a young economist study why we have a central bank and debt rather than a debt-free-system as under the tally-stick system? As far back as 1991, an official investigation wrote a conclusion: [4]: “The Commission’s fear is that graduate programs may be turning out a generation with too many idiots savants, skilled in technique but innocent of real economic issues” [5].

Even measuring economic activity by the GDP is flawed. The GDP can be increased by inflation with no increase in economic activity. So the ridiculous situation can occur where a technical recession can be ended by inflation with no increase in economic activity. False positives occur. The definition of recession is incorrect as it should be related to economic activity. Is this a problem with economics students, economics lecturers, economics textbooks or all three?

I often ask people: “Who has the authority to create the money in a nation?” The reply is: “The Government.” I continue: “Why then would the government be in debt?” My mind poses another question. “During the ‘General’ Financial Crisis, why did Greece have the indignity of paying 29% interest on bonds whilst the ECB was lending at 0% to private banks?” Why would anyone borrow something at 29% that cost nothing to create? The ECB acts for the interests of private banks and not the nations of Europe.

Surely, we should encourage money to do what it was designed to do — move. Stop making employer’s lives so tedious. Stop making employment a paper and legal nightmare. Remove all money-movement taxes in the real economy. Tax anything that is designed to ‘make money from money’ or anything that produces ‘Unearned Income’. Tax wealth in life and death. “Take my money when I die — not when I am living.” Tax land — that limited resource on which we all rely. What is a nation? — its land and its people. Tread lightly on both. Keep both intact. Tax that which damages either. I love foreigners, but not foreigners that harm our nation or its people or our customs or our way of life. We will listen to foreign interests but not be dictated to by foreign interests.

• Does the lobbyist controlled government provide stability?
• Do we have a financial oligarchy?
• Are we served by global financial institutions such as the International Monetary Fund and the World Bank, or are we controlled by them?
• Do we have a debt-based speculative bubble?
• Can we survive a collapse of the banking system?
• How collapse-prone is our banking system?
• How can we protect ourselves from a banking system collapse?
• Who owns the IMF?
• Who owns and controls the World Bank?
• Are we facing a revival of Crusades and the Inquisition where we have a clash of religions, nations, and financial classes?
• Are we creating a new ruling financial oligarchy by dumbing-down the major portion of the population?
• Do we tolerate financial terrorists who are portrayed as ‘successful’ currency speculators whilst decimating national economies for personal gain?
• Is a system where the volume of Derivatives exceeds the volume of money in a complex web of ownership prone to collapse?
• Do we allow supra-national corporations hiding behind names such as The International Monetary Fund to interfere with national sovereignty?
• Do we tolerate the absence of natural law, common-sense, the ‘Philosophy of Jesus’ of goodness towards others to be overridden for personal gain in a so-called ‘justice system’ that tolerates ‘legalism’ and not common decency?
• Are we entering a usurious world order?
• Why does eighty percent of Forex trade have nothing to do with trade between countries?
• Do we have a debt bubble?
• Should we dismantle tax havens?
• In an era of automated mechanization, why can’t people with a job make a living?
• Do we tolerate people making money from money?
• Do we tolerate people damaging the ‘real economy’?
• What are the consequences of having more debt than money?
• Who really rules?
• Should financial speculators be able to force the devaluation of a currency?
• Is it impossible to end usury?
• Is land reform possible so that people have access to land for living and working?
• Is prosperity for all a possibility?

I was sitting at the breakfast table in a family run hostel when the young Russian man of the house asked: “Did Armstrong walk on moon.” I replied: “A difficult question. I have doubts myself. What do you think?” Under the circumstances, in his hostel in his country, I could not call him a ‘Conspiracy Theorist’ to shut him down. He said: “I not think Armstrong walk on moon.” So what is truth. Is truth truth? — or is truth a product of popularity. Next breakfast, in a conversation on Russian history, he blurted: “And Trotsky was a Jew.” Under the circumstances, I didn’t call him a “racist bigot” to shut him down. And in economics, money cannot be used as a store of value without compromising its ability to enable transactions. Which then puts into the spotlight the method by which we control the economy by making feeble attempts to control the magnitude of the Money Supply. Our present method of allows a non-government controlled organization to scream “Keep the central bank free from political interference.” whilst it makes ineffective adjustments to the magnitude of the Money Supply by adjusting interest rates. This supposedly adjusts the volume of credit creation. But this credit createing falls into favoured sectors causing patchy changes to local Money Supplies.

Let us not change the textbooks, let us burn them. Book salad! Let us (lettuce!) burn them — for they serve the wrong masters.

Santa:- “What do you want for Christmas?”

Child:- “A unicorn.”

Santa:- “That might be a bit difficult, is there something else you want?”

Child:- “A French government that wants to serve the people, won’t buckle to UN oppression, can manage taxpayer money responsibly, and rewards work not property.”

Santa:- “So, what colour unicorn did you want?”

Can we apply the same to economics?

[1] www.bundesbank.de/en/tasks/topics/how-money-is-created-667392

[2] www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf?la=en&hash=9A8788FD44A62D8BB927123544205CE476E01654

[3] www.bis.org/publ/confp03d.pdf

[4] Report of the Commission on Graduate Education in Economics, 1991.

[5] Krueger, 1991, 1044-5.