NATURAL MONEY

If our Money System was reformed to only create and work with natural money then we would eliminate

any need for government to control the money supply
Money System induced inflation
the exclusion of anybody at all from the cash economy.

These are, I am sure, undoubtedly things that we would all like to see.

REALISING IT

Natural money can be realised through the reform of our money system. There are two good reasons for undertaking this reform

a) to get rid of inflation
b) to enable everybody, employed or unemployed, to start participating in the cash economy.

Getting rid of inflation

Inflation gnaws away at individual wealth and as a result undermines the health of our total economy. It is quite possible for us to rid ourselves of inflation as I will explain.

There are two sources of price inflation. The first is quite natural and it happens when the demand for a particular item exceeds the supply of it. There is no problem with that kind of inflation. It is healthy and will hopefully motivate people to take action to fill the gap in supply.

The second kind of inflation is man made and happens when the face value of all the money in circulation exceeds the value of the goods and/or non-financial services available within the economy. This latter kind of inflation is the unhealthy one. It is nothing other than the continuous theft of value, but from whom, all those who hold money. Who gains from this theft?

There are two categories of gainers

‘first users’ of the new money because the excess of money in circulation will not have had enough time to effect the prices of what they purchase
the producers of the new money because they will have had to expended no effort whatsoever to obtain the money.

Just as this kind of inflation is man made its removal is also our responsibility.

All that we have to do, in order to eliminate it, is to decide that from now on new money will only ever be issued as debt in order to fund purchases of goods and/or non-financial services. This happens already when people use their credit cards to purchase goods and non-financial services.
There is a problem however in the issuing of new money and that is that banks are also allowed to issue new money for other purposes like long term loans. So all that is necessary is that this authorisation should be revoked.

Opening the cash economy to every citizen

Right now anybody who wants to participate in the cash economy has to be able to supply a good or non-financial service to somebody who already has the money to pay for it. They might however reside in a community that has little or no cash which makes any exchange involving cash an impossibility. The consequence of this is no exchanges happen. This naturally causes the community to be impoverished.

To change this will be a bit more physically complicated than the getting rid of the inflation caused by the Money System. It is however quite simple in concept. All that it would require is that credit card facilities are extended to, not only the customers of banks, but to everybody. This would automatically enable every citizen to participate in the cash economy.

THE BACKGROUND THINKING BEHIND THESE SUGGESTIONS

Being able to make voluntary exchanges of, goods and/or non-financial services, is one of the absolutely essential capabilities that we all need both for our individual and collective survival. Each such completed exchange generates an atom of wealth because both parties are more satisfied than they were before the exchange was satisfactorily completed.

But there is a problem. It is that completing such exchanges successfully is very difficult because of the need for the coincidence of wants between the exchanging parties. This problem would be eliminated if one of the exchanging parties had available in their possession a Universally Exchangeable Item [UEI] that could be exchanged with the other party whose wants would then be guaranteed the possibility of being satisfied as the party receiving the UEI could then use it to exchange for an item that they wanted.

UEIs are a great idea but they do not occur naturally so if we want to use them in exchanges then we have to create them.

As the variety of different, successfully completed, voluntary exchanges that are possible is limitless and as UEIs are to be universally exchangeable what UEIs need to reflect is at least one characteristic that is universally present in every successfully completed exchange. What is this characteristic?

There is one such characteristic and it lies outside of the completed exchanges themselves. It resides in the satisfied wants of the exchanging parties. These wants need to be measured, i.e. quantified, to be useful but there is a problem here, these wants are only resident in the exchanging parties’ heads and are thus not visible in the external world and if they are to become useful as UEIs then they have to be made visible.

The quantification of wants is reflected in the values represented by money. So the simplest and most natural way to externalise the wants involved in a successful exchange is to issue, as debt, new money to a person who is short of enough money to complete a purchase of goods and/or non-financial services. It is issued as debt in order to ensure that the person who spends it completes their side of the exchange by supplying a good or non-financial service. They will clearly have done so once settle their new money debt. Credit cards, which form a component of our current Money System, provide this facility exactly as needed.

Early attempts to create UEIs

These attempts used precious metals as the material on which to record value and they were successful because precious metals:

have unquestionable value, which guarantees the money’s value
are divisible into parts
the parts are fungible, i.e. parts of the same size care interchangeable

That such UEIs always have built-in value is an advantage as their value is not in any way dependent on the system which produces them. That they have value from the beginning creates a problem however. They will have an owner before they are used as UEIs and this disables the exchange making abilities of all those who do not own any precious metals. Historically this condition was recognised as poverty.

If the UEIs consist of records of value written on paper, rather than imprinted on a precious metal, then nobody will be excluded from using UEIs because they lack any precious metals. However a record written on paper is totally reliant for its authenticity on the system, the Money System in our case, which creates and maintains the UEIs. The credit card facility, when used for the purchase of goods and/or non-financial services, adequately guarantees the value of the new money involved in the transactions.

The only problem is that credit cards are restricted to those who are already banked. So to include everybody in the cash economy all that is necessary is to develop ways for every citizen to have access to a credit card facility even the beggar on the street corner. Because of the existence of mobile phones and the Internet the way to do so technically already exists all that is necessary is for the State to ensure that the indigent have individual access to mobile phones capable of hosting E-wallet Apps.

In this way everybody would be supported by the Money System to continuously work to provide goods and/or non-financial services to settle their new money debt. This debt would have to have a Money System enforced limit on it to prevent inflation. This limit would logically be that of the social grant. For those whose new money debt could not be automatically settled by a social grant their access to new money would be dependent on them settling their new money debt through earning money in other ways otherwise they would remain permanently locked out of the system.