It’s us against the Whirl

There is no “they” in charge.  That would be nice.  Then we could find “them” and do something to solve the “problem”.  But there is no “they” in charge.  There are people making decisions that have a greater impact than the decisions of other people, but they are not in charge, they are just doing what everyone else is doing but on a larger scale.

There is a process, properly described as a whirl: “To revolve rapidly around a center or axis.”  A tornado is a whirlwind.  The whirl that we are up against has a precise mathematical form, but before I tell you what it is, let me use an analogy. 

Suppose you start driving around in a circle increasing your speed ten percent with each circle.  You do the first circle at 10 miles an hour, the second circle at 11 miles an hour, the third circle at 12.1 miles an hour, etc.  How fast would you be going by the 100th circle? 

By the tenth circle you would be going 26 miles an hour, by the 20th circle you would be going 67 miles an hour, by the 30th, 174 miles an hour, by the 40th, 452 miles an hour… by the 100th circle, you would be going 138,000 miles an hour.  On the 105th circle you would be going 221,938 miles an hour, fast enough to reach the moon in one hour!  You would have created a whirl just by increasing your speed 10 percent per circle from 10 miles an hour.

Now apply the same math to money.  If a job paid $10 an hour to start and was increased 10 percent per year, in 10 years it would pay $26 an hour, in 20 years, $67 an hour, in 30 years, $174 an hour, … in 100 years, $138,000 an hour.  That’s the whirl we are up against.

Money numbers, what we call prices, income, wages, salaries, profits, and dividends, have risen by what seem like little, a few percentage points year after year after year to produce astronomical differences from person to person,   Not only does the top 1 percent have more money than the remaining 99 percent; there is enormous inequality among the 99 percent.

What can we do about it?

The first step is to convert all money numbers to Hours.  You can do it by dividing them by your wage per hour.  This will tell you how much things are costing you per hour of work.  We can do it together by dividing all money numbers by $20, which is about the median wage in the United States.  This step is like pilots being given altimeters for the first time so they can tell their altitude.  Before they could decide corrective action, they would need to know their correct altitude.  In the same way, we must first know how much money we are actually talking about before we can decide what policies to adopt.

The mathematical principle in the above description is: Any two numbers increased by the same percent become more unequal by the same percent.

Algebraically: AC – BC = C (A - B).

The whirl that we are up against is money numbers becoming increasingly unequal percent at a time.  That whirl has been growing for generations.  That’s why it is so visible today.  It’s a tornado tearing us up by more and more, faster and faster. 

I cannot overemphasize the critical importance of converting those numbers to hours, so we can begin to see what needs to be done.  We can stop the whirl right now by reducing interest rates to zero.  Lower interest rates are better; zero interest rates are best. 

What if cars did not have speedometers?

Imagine cars without speedometers.  How would you judge how safely you were driving?  There would be no speedometer on your instrument panel and no speed limit signs along the sides of the road.  One way you could estimate your speed would be how fast things are passing by.  That could work for a while at least.  But you know your sense of speed changes as you travel along.  At first, especially on a long trip, Your first few miles feel like you are driving fast but after a while, you find yourself driving a bit faster, even feeling like you are going slow when you are actually going a lot faster than when you started out.

Another way you could estimate how fast you were going is to watch other cars.  It would be reasonable to suppose that going as fast or as slow as they are is a safe speed.  That could work for a while, but remember how you sometimes feel that you are going too slow when you follow a car for a long distance.

With all drivers having no speedometers, instead feeling their speed by the seat of their pants, by watching the sidelines and other cars, that there would be a lot of accidents from going too slow or too fast.  We can imagine an industry evolving to build better cars, cars that would withstand the crashes better.  We have such devices even with speedometers and speed limit signs.  Without them, people would misjudge speeds more often across a wider range of speeds and have more and worse accidents.  The there would be calls for more crash resistant cars.

So it is with money.  It has no “speedometer,” only a word, in our case, “dollar.”  The word has us feeling like we have a measure of “speed” but we judge the value of our money by watching many prices and wages and salaries of as many people as we can.  It’s not easy because stores don’t mark prices like they used to because they now use barcodes and people rarely tell one another their wage or salary.  Variations in prices, wages, and salaries would grow wider and we would hear calls to limit them, but no one would know how or by how much.

Time money denominated in Hours would give us all the “priceometer” that we need.  Wages and salaries would still vary just like roads and speed limits vary, but the range of variation would be more reasonable because when people talked money they would talk time.  Hours on money would empower everyone to judge the fairness of prices and wages on their own, just like you can judge your speed simply by looking at your speedometer.  Think about this the next time you are driving your car.  Of course, keep your eyes on the road except for an occasional glance at your instrument panel.  Remember, Safety first.  Speed kills and so does money without a proper denominator.

Why is war what we say we need?

We get what we prepare for.  We are preparing for war all the time. President Eisenhower called it the “military industrial complex.”  With weapons being built every day, when a problem arises, there are powerful voices that call for war.  We are hearing it again about Iran. 

Mohammad Mosaddegh was the democratically elected Prime Minister of Iran from 1951 to 1953 when he was overthrown by the British MI5 and the United States CIA.  Why? Because he nationalized the Iranian oil industry.  He introduced many other progressive reforms including unemployment compensation, employer payment benefits to sick and injured workers, peasants freed from forced labor on landlords’ estates, and 20 percent of landlord rent money put in a fund for public baths, rural housing, and pest control.  Mosaddegh was imprisoned for three years, then put under house arrest until his death in 1967.  (Source: Wikipedia)

In his place our CIA supported the Shah of Iran, a dictator with a brutal police force.

Imagine all the goods things that would happen if we prepared for peace.  Today, Afghanistan, Iraq and many other countries would be living well and be our friends if we had helped them with tools instead of bombing them to hell on earth. 

In this season of Jesus’ birth, we should remind ourselves that he was the Prince of Peace.  He taught that we should love not only ourselves and our families and our countries but we should love our enemies.  Why? Because in loving our enemies we would soon make them our friends.  President Abraham Lincoln was confronted by a woman who complained that he wanted to treat the losers of the Civil War like friends – “With malice toward none and charity toward all …”  He responded, “If I make my enemies my friends, have I not defeated my enemies?”  So it should be with us. 

No one ever made friends by bombing them.  Make peace with Iran.  We are the country with thousands of nuclear weapons.  Why are we not dismantling those weapons instead of upgrading them?  Israel, Pakistan, India, Russia – all have nuclear weapons.  Iran has none – but lots of oil.  Sound familiar? 

Peace on earth will come only by preparing for peace.  You can read The Peace Agenda on my website: http://www.siue.edu/~rblain  Congressman Dennis Kucinich wants a Department of Peace.  I think that is an excellent idea.  How about you?

Peace on Earth

Peace we wish to all on our little planet - too small for war, too bountiful for poverty.

In the spirit of the season from Kahlil Gibran, The Prophet, 1923:

“To you the earth yields her fruit and you shall not want if you but know how to fill your hands.

“It is in exchanging the gifts of the earth that you shall find abundance and be satisfied.

“Yet unless the exchange be in love and kindly justice, it will but lead some to greed and others to hunger.'”

Economics as it should be.

Hour Economics

Hour Economics follows three principles;

1) Judge value by use time,  Time is not the only factor to use in judging value but it is the universal one.

2) Judge price by work time.  Time is not the only factor to use in judging price but it is the universal one.

3) Judge money by Hours.  Again, time is not the only factor to use in judging money, but it is the universal one.

The goal is more free time to do all the other things that make life worth living besides working for money. While occasional and temporary variations will occur, domestic and international exchanges will be more accurate, efficient, equitable and amicable than now. The World will be at peace and there will still be work to be done, but all will share the work and share the wealth.

Local Currencies

Local currencies have used the Hour money denominator for years:

http://www.paulglover.org/hours.html

A Global Currency Unit

The Provisional World Parliament in 2004, in Lucknow, India, adopted the Hour as the world money unit and urges its adoption by all Nations. More at: http://www.worldproblems.net/english/legislation/full_texts_en_htm/wla_22_world_equity_act.html

Socialism’s Obituary

It is my sad duty to report that Socialism died of exhaustion. Trying to do everything collectively, Socialism developed an enlarged heart, swelling everywhere, and brain overload culminating in congestive heart failure.

Some insist it isn’t so, others are angry, some are glad saying it proves that Capitalism is better if not the best system we can hope for.

Everyone is asking, what now?

Capitalism’s Obituary” “Everyone is asking, what now?”

We go to Hour Economics.

Here is how it happens.

The Marriage of Time and Money

After years of living together, Time and Money have married. Their families, Socialism and Capitalism (if the truth be known, each suspicious of the other) wished them the best.

In attendance on the Time family side were Clocks and Calendars, Scales and Measuring Sticks, Thermometers and Barometers, Micrometers and Odometers. On the Money family side were Dollars and Euros, Dinars and Yuan, Baht and Ringgit and more than 100 others.

More information about the wedding is available at http://www.siue.edu/~rblain/

Some time later:

Birth Announcement

Time Money gave birth to Hour Money. The birth was easy, hardly more than adding the word “Hour” to the plates used to print money. This small change corrected the genetic defect in money, no named denominator, that had caused unequal trade and the lifelong illness and ultimate demise of Capitalism.

Hour Money lives by the principles of Hour Economics; judge value by use time, price by work time, and money by Hours. Since then, though occasional and temporary variations occur, domestic and international exchanges are accurate, efficient, equitable and amicable.

Many local currencies have used the Hour money denominator for years:

http://www.paulglover.org/hours.html

In 2004, the Provisional World Parliament, meeting in Lucknow, India, adopted the Hour as the world money unit and urges its adoption by all nations. Read more at: http://wcpa.biz

Capitalism’s Obituary: “The formerly rich and ever poor have now found common ground.”

The rich were shocked to find that their claims were based on debt rather than actual wealth.  Perhaps, had they been in the same room with debtors, they would have known that Capitalism was on debt life support. Now with their claims reduced to zero, the formerly rich have rediscovered their common fate with those they once disdained as lower than themselves.  They both know now that they share a common fate on the same common ground – beautiful Planet Earth.

“It is a well provisioned ship on which we sail through space.”  Henry George, 1898.

“From up there, the world looked too small for all those divisions.”  William A. Anders, 1968, commenting on his view of earth from halfway to the moon.

And a merchant said, Speak to us of Buying and Selling.
And he answered and said:
To you the earth yields her fruit and you shall not want if you but know
how to fill your hands.
It is exchanging the gifts of the earth that you shall find abundance and
be satisfied.
Yet unless the exchange be in love and kindly justice, it will but lead some
to greed and others to hunger (Khalil Gibran, The Prophet.1923).

Capitalism’s Obituary: “Trillions in claims to debt known as wealth were wiped out.”

Claims to debt were thought to be claims to actual wealth rather than claims to debtors’ future incomes.  When debtors could no longer pay, the claims became worthless.

The Federal Reserve Bank of Chicago in 1963 explained the complete identity between claims to wealth and debt as the two faces of debt.

“While debt is a claim on the assets and earnings of those in debt, it is simultaneously a part of the wealth, or assets, of their creditors. Just as for every buyer there must be a seller, so for every debt incurred by any person or institution, someone acquires a financial asset of equal amount” (The Two Faces of Debt, Federal Reserve Bank of Chicago, 1963, p. 6).

When debtors could no longer pay, the claims became worthless.

Capitalism’s Obituary: “… an autopsy failed to find any sign of a heart.”

Does it make money, that’s the only question that Capitalism cared about.  Not, does it help or hurt people?  Is it good for the environment?  Is it sustainable?

Capitalism asks, Is GDP growing fast enough?  Is the Stock Market going up?  It does not ask, What is in GDP?  Is it good or bad?  What does it mean for the well-being of people when the Stock Market goes up?

Here is an example from a very successful economics textbook.  The author, Paul Samuelson, used this example in the many editions of his textbook from 1949 to 1980 and “educated” millions of students with it.

“Goods go where there are the most votes or dollars.  A rich man’s dog may receive the milk that a poor child needs to avoid rickets.  Why? Because supply and demand are working badly? No. Because auction markets are doing what they are designed to do – putting goods in the hands of those who can pay the most, who have the most money votes.  Defenders and critics of the price mechanism should recognize this fact” (Economics, 1964, page 42).

With sentiments like, “Crippled children?  Oh. Too bad.  They just didn’t have enough money.”  is why an autopsy of Capitalism failed to find any sign of a heart.

Capitalism’s Obituary: “… commodity saturation caused circulatory clots…

Capitalism theory knows only growth.  It is silent on when enough is enough.  It has no brakes, no way to stop requiring more growth.  So it produced commodity saturation, more stuff than people could reasonably want or use.  Mountains of trash, misnamed “landfills,” mushroomed.  Storage units abounded – so much so that we had people bidding to buy what’s in them because the owners left them behind.  People’s homes were jammed with stuff including rooms, closets and garages.  People gave away valuable stuff at yard sales and flea markets just to make room for more stuff.  Still, we were expected to keep shopping.  Many people could no longer buy, buy, buy. 

So the capitalist economy suffered multiple and worsening circulatory clots.  Money could no longer flow in many places.  That is what we saw in capitalism’s last days.

Capitalism’s Obituary: “Debt saturation …”

The United States economy was put on debt life-support almost immediately.  During the Revolutionary War and under the Articles of Confederation, the Continental Congress issued paper money.  However, the British counterfeited huge amounts of that currency as an act of war, causing inflation and leading to the expression, “not worth a Continental.”  Some people opposed ratification of the Constitution because it did not give Congress the power to issue paper money, only coin. 

Why bother with having the government issue money, then go through the Capitalist process of unequal exchange to absorb that money when the First Congress had the votes to go straight to debt as the way to “fund” the economy.  So they passed the Funding Act on August 4, 1790 to base the money supply entirely on borrowed money, which it has been since then except for greenbacks issued by President Lincoln to fund the Union army for the Civil War.  Greenbacks are still legal currency but they have been taken out of circulation because they support equal exchange which goes against Capitalist unequal exchange.

Since 1790 when the Federal debt was $70 million, total public and private debt has grown at about six percent per year because of interest until now, 2011, to about $70 trillion.  That’s 70 million times $70 million.  Every year it grows by ever more.  When it doesn’t grow enough, we have slumps, by one count about 50, variously called slumps, recessions, depressions, and Panics.  As recently as 1976, total debt, not just Federal debt, was $3,800 billion, just under $4 trillion.  In the 45 years since, it has grown to $70 trillion.  Debt life-support, because of interest, requires ever more and larger new debt.

We passed the point of debt saturation, debt to the limit of our ability to pay it, long ago.  But the debt life-support infusion continues as you read this.  Federal debt alone has just surpassed $15 trillion.  That’s 15 million million dollars.  Debt in the rest of the economy is more than $55 trillion.  New debt must be taken on at multiple trillions of dollars this year and more next year, yet the focus at the moment is Federal debt – which is debt of the fire department.  Republicans think they can put out the debt fire by cutting the fire department.  What are they thinking!  They are blaming the fire department for the fire!!!

Someone said that it is very difficult for a person to understand something when their paycheck depends on their not understanding it. 

Capitalism’s Obituary: “Repeated resuscitations left it brain dead.”

Capitalism’s brain is the theory you will find in any standard economics textbook.  Like any theory, it tells the body what to do.  That theory says, “There is never enough.  Let every person compete for what there is.  Supply and demand will set prices and everything will work out for the best for everyone (at least for everyone who deserves it).”

Resuscitations are interventions from the outside when the system breaks down.  For Capitalism, there have been many.  To mention a few: anti-trust laws to break up corporations whose large size is reducing competition; progressive income taxes to restore money circulation to parts where it has been drained away; deficit government spending to restart a stalled economy; massive new spending for war; tax cuts for the wealthy as incentives to invest in new products; free trade agreements to remove tariffs and any other obstacles to the freely competitive international flows of money, material, labor, and finished products; neoliberal austerity programs including cuts in education, health care, and public services generally to reduce government interference with the free market; the sale of government owned land, water, forests, and airways to pay interest on debts; bank and corporate bail outs; bankruptcies and lower interest rates; and more and faster growth.

We know that Capitalism’s brain is dead because these resuscitations have helped only temporarily if at all and the theory is silent, no more brain activity, on what to try next.

Capitalism’s Obituary: “Close relatives remain in denial.”

When someone hears of a person’s death, the first reaction is usually denial. “No, that can’t be.”  Then a turn to the past for hope.  “I just saw them the other day and they were fine.”  “I knew they were sick, but I heard they were getting better.”  Similar things are being said about Capitalism.

“Capitalism dead? That’s absurd.  It’s just a slump, a recession.”  “This has happened before.”  “It’s the business cycle.” “We have always recovered.”  “We just need to kick start the economy.”  “We just need to bail out the banks to get credit flowing again.”  “The Stock Market has been going up.  Oh, you say it just went down. That’s temporary.  Wait until tomorrow, or next week, or a year or two. It will go back up.”  “There will be pain and suffering for a while, but if we just tighten our belts, things will get better.” “Austerity will lead to prosperity.”

“Government is the problem.  If we just get government out of the way, capitalism will recover.”  “We just need to cut taxes and entitlements and regulations.”  “Balance the government’s budget and Capitalism will recover.”

The clearest sign of denial is the call for more growth.  “We need to grow the economy more.” “The rate of growth is too slow.”  “People need to spend more.”  “There is not enough demand.” “We can grow our way out of this slump.”

Capitalism’s Obituary “…capitalism has died.*

When a person dies, it is over all at once, like turning out a light.  Capitalism describes an economy of hundreds of millions, even billions, of people.  Capitalism lives and dies person by person, one by one, day after day, year after year.  We receive news of a death as that of a person, but it is at the same time news of the death of that part of what we call our society, our civilization, our way of life.  John Donne (1572-1631) expressed it so beautifully in 1623.

“No man is an island, entire of itself; every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friends or of thine own were; any man’s death diminishes me, because I am involved in mankind; and therefore never send to know for whom the bell tolls; it tolls for thee.”

Capitalism’s Obituary: “…years on debt life-support…”

Continuing my explanation of the elements of Capitalism’s obituary, unequal exchange, the birth defect of capitalism, sooner or later transfers all wealth from one party to the other.  For example, if each party had $100 and one gained $5 in each transaction, it would take only 20 transactions for one party to have the entire $200.  It did not take long for capitalism to own every real thing of value.  For capitalism to continue, it had to have the losing party go into debt.  The debtor had to pledge to pay future income to the creditor.  It did not solve the unequal exchange problem; it just kept capitalism artificially alive on debt life-support.

Capitalism’s Obituary: “After a long illness caused by a birth defect …”

Just as we cannot say when capitalism died because the dying process is continuous, we cannot say when capitalism was born.  However, we do have the effect that plagued it throughout its lifetime, namely, unequal exchange.  That unequal exchange showed itself as phenomenal growth in capital simultaneously with phenomenal growth in poverty.  Henry George developed this aspect of Capitalism’s biography in his 1879 classic, Progress and Poverty.  Elizabeth Magie Kuhn Phillips invented The Landlord’s Game in 1904 to simulate the problem and Henry George’s solution.  The first part of that game, the problem, was the basis for the game MONOPOLY.  People have played MONOPOLY without realizing that they were re-creating the fatal defect in Capitalism.

The DNA for unequal exchange was a missing component of the money gene, namely, a definition of money’s worth.  The gene only carried a name, not a definition of money’s worth.  Without a definition, money facilitated unequal exchange without it being noticed as such.  Calling it “profit” completed the disguise and did nothing to correct the defect.  The growth in capital was seen as progress and not a cause of growing poverty, which it was as well.  That is what unequal exchange does; makes some rich and others poor.

Capitalism’s Obituary

After a long illness caused by a birth defect and years on debt life-support, capitalism has died. Close relatives remain in denial.

Repeated resuscitations beyond the advice of attending doctors left it brain dead.

Debt and commodity saturation caused circulatory clots and finally cardiac arrest, although an autopsy could not find any signs of a heart. 

Trillions in claims to debt known as wealth were wiped out.

The formerly rich and poor have now found common ground.

Everyone is asking, what now?

From Capitalism to Cooperation

Capitalism is biased in favor of capital.  That’s why it is called Capitalism.  Those who support it avoid using that word because it makes the bias obvious.  They prefer instead to call it “free enterprise.”  Everyone favors freedom, so the use of that word throws anyone who would object to it back on their heels.  Observers easily think, “Oh, that person must be a socialist!”  Socialism is not an advance, it is a step backward – although in the absence of an alternative sometimes a necessary one.

The eighteenth century German philosopher Friedrich Hegel made the point that we need words to communicate but those words become barriers to our own understanding.  The substitution of free enterprise for capitalism is an example of a barrier to our own understanding erected by capitalists to subdue criticism of them.

Another way to make the point is that capitalism is all about hoarding, hoard money, hoard ownership of everything, factories, newspapers, water, land, etc..  Government is the obstacle when it taxes the rich to help the poor.  Government is great when it takes taxes from the middle class to pay exorbitant amounts of money to private companies for weapons, drugs, and borrowed money.

At first, capitalism promotes expansion of production because the private capitalist does not need permission to start a new business.  Government would require getting a lot of people to agree to a new project.  However, the hoarding by capitalists leaves more and more people in poverty.  We see that today with the protests against it that are occurring all over the world.

The question those protests are raising is, what do we do next?  Many hope and others fear that socialism, that is, government take-over of everything, is the only option.  The better option is cooperation.

We know cooperation today as cooperatives.  They are an example of trying to adjust for a defect in money that allows capitalists to hoard, namely, the lack of a definition for “dollar.”  A basic rule of a cooperative is that profits are returned to customers based on patronage.  That is, cooperatives keep records of how much customers spend at their stores.  Then, at the end of a year, the profits are returned to them based on how much they spent.  The theory is that profits represent overcharges, which they are.

Profit exists only after everything is paid for.  This includes wages and salaries of all people who work there, and whatever equipment and supplies the company bought.  If everything is paid for, any charge above that is an overcharge.  A capitalist would never agree; a capitalist prefers to call it profit.  Profit is a good word because it implies that the capitalist deserves it.  Overcharge is a bad word from the capitalist’s point of view because it implies that it belongs to the customer, not the capitalist.

Cooperatives are a step in the right direction – that is, toward cooperation, but only a step.  The problem with cooperatives is record-keeping and deciding who should get the refund.  Customers and the cooperatives must keep records of purchases and who made them in order to return the overcharges.  Only a relatively small store can do that.  I cannot imagine a store like Walmart being able and willing to do that.  There is also the problem of what is due to suppliers.  What looks like an overcharge to customers may be too little paid to suppliers.  In short, cooperatives run up against a huge bookkeeping and judgment problem, tracking purchases and deciding who should get the overcharges returned to them.

The kind of cooperation that can correct the hoarding of capitalists with the least paperwork is cooperation using Hour Money.  Hour money promotes accurate pricing at the point of sale and purchase.  Both seller and buyer have the “yardstick” in time to decide more accurately than with dollars what is a fair price.  That is why I link Time Money to peace.  Peace happens locally when both seller and buyer believe that they have made a fair and equitable exchange.  Unrest begins when one of the other believes that they have been treated unfairly.  War happens when unrest if widespread.  People everywhere are screaming that they are mad as hell and will not take it anymore. 

You can help bring us local and world peace by promoting the use of an hour of work as the base unit of money everywhere so that we can each make fair exchanges with each other right at the time we sell or buy.  Send me your address and I will send you Hour Money examples to give to your family and friends.  Help plant the seeds of economic justice, democracy, and world peace.

How did the 1% get it all?

Answer: percent by percent year after year.  Big amounts of money cannot be earned.  They are the result of contracts otherwise called investments.  Once a person has made a contract that results in the addition of more money year after year, that person can receive far more money than they could possibly ever earn.  To change $100 into $106 takes work; to change $100 million into $106 million is inevitable.

Once these contracts are in place, money keeps accumulating.  A person need not be greedy for this to happen.  It is important that we recognize the automatic nature of this accumulation because that is how we can get to a solution.  There must be limits put on how much money any one person can accumulate.  Life is limited.  Few people live 100 years or more.  That is nature’s way of making room for new people.  We need to limit income to make room for other people to have decent incomes. 

You have heard of the “death tax.”  That makes it sound as if people who die should no longer be taxed.  That is very misleading as it is intended to be.  The phrase in effect gives heirs the money.  Heirs didn’t earn it.  Perhaps it would be fine if letting some people accumulate money did not hurt anyone else.  But it does.  We have millions of people in poverty because we have billionaires.   No one earns one billion, $1,000,000,000.  No one needs one billion.  That single billion would give 1,000 people $1 million – more than most people will earn in a lifetime.

Bottom line: money is not corn.  What one person gets another person does not get.  We need to focus on fair wages, fair prices, and reasonable limits to income.  That’s why I promote the Hour as the world money unit.  Time marks our path in its beginning, throughout its length, and at its end.  Nature is setting the example for us to follow.

The Quantity Theory of Money

I just read a pamphlet by Friedrich Hayek published in 1976 titled, “Choice in Currency: A Way to Stop Inflation.”  It is relevant today because Ron Paul, who is running for US President, is advocating the same thing. Hayek argues that governments should not have a monopoly on the issue of money.  Instead, everyone should be able to use whatever they want for their money.  

His argument is shown to be absurd by Douglas Jay in the same pamphlet with a simple example.  “But suppose I offer one paper rouble in payment of a bus fare, and the conductor refuses to accept it; what happens?  Is the bus stopped while the conductor and I seek a ruling which nobody can give?  And imagine the controversies in the bus over the latest exchange rate between one currency and any other.  Professor Hayek’s new scheme would produce chaos and slow down the whole business of production and exchange in a welter of disputation.  That is why history has forced governments to legislate on legal tender” p. 27.

Hayek bases his argument on the quantity theory of money.  It says that an increase in the money supply will cause a general rise in prices, while a decrease in the money supply will cause a general decline in prices.  If we want price stability, then we need the money supply to be stable.

The quantity theory of money assumes that there is already enough money.  It says nothing about the quantity of money that would be neither too little nor too much.  That is, it says nothing about the amount that would be enough money.  If there is not enough money, an increase in the money supply would be good and not inflationary.  Only where there is already enough money, is a further increase not necessary.

Let me use an analogy.  Suppose an accident victim shows up in the Emergency Room bleeding profusely.  Imagine that the doctors there are using the quantity theory of blood as economists use the quantity theory of money.  They would say to each other, we must not give the patient a transfusion because that would increase the general amount of blood that the patient needs.  Let the body’s own “free market” decide how to distribute the remaining blood.  That patient would surely die. Our bodies need enough blood, neither too much nor too little.

Hayek sees inflation and concludes that the only cause of inflation is too much money.  He never considers that the problem is that there is no quantity on money.  Imagine that every note about length was followed by the word “meter” but there were no meter sticks.  What would the statement, “This room is 10 meters,” mean?  Would we have a quantity theory of length that said the more notes in circulation, the shorter the meter would become ?  That would be nonsense.  Given what we do when we measure length, we would say, we need meter sticks so that everyone can measure length accurately.  The same is true of money.

We need to wed time and money.  We need Hour Money.  We can then judge price with clocks.  That is the proper way to stop inflation and deflation.  That is how we move all wages and prices to their actual price, namely, the work time it took to produce goods and provide services.  People can always negotiate variations if they think such variations are justifiable.  That’s a free market that can be a fair market.

When government is good

We usually think of government as people.  That immediately has us thinking of all the uncertainties that come when some people make decisions for other people.  We much prefer to make decisions for ourselves.  This, I think, is the great appeal that a “free” market has to us.  However, good government is not people; good government is good standards.  Let me give you two examples that are beyond dispute, clocks and calendars.

Clocks govern us constantly, that is, all the time.  It is difficult to imagine living without time.  We could not do it.  The earth has a natural time clock because it rotates.  We say the sun rises, but it is the earth rotating to the east that makes the sun appear to rise.  The sun courses across the sky as the earth continues to rotate to the east then sets for night fall.  Clocks are simply devices that we have invented and calibrated to follow the sun.  That’s good government.

The same is true of calendars.  They follow the earth’s orbit around the sun.  We know when spring, summer, fall, and winter start and end,  Farmers plant by the calendar, we work and have holidays and vacations by the calendar,  That’s good government.

Where we are failing to govern well is with money.  Money is floating around in ambiguity, uncertainty.  We defend ourselves by wanting more money.  No matter how much money a person has, whether it is a little or a lot, people want more.  This causes other people to have less, so we expect a “government” of the people and by the people to make corrections for the people.  It just isn’t working.  Why not?  Too many decisions to make.  Every decision made makes more decisions necessary.  The evidence is a tax code that is thousands of pages. 

We are hearing proposals from candidates for office for a “flat” tax, for a tax of 999, to tax the rich, to give tax breaks to “small business,” to employers, the list goes on and on.  We do not need more and more rules.  We need a standard.  That standard is the one we already use – time. 

Let us make an Hour of work our standard of money and of a fair wage.  People can always negotiate more or less – just like we negotiate when to have meetings, when to start and stop work, and when to have holidays and vacations.  Time Money will govern well and make more government “of the people, by the people, and for the people” less necessary!  Time money will guide each and every one of us to make good wage and price decisions.

If you like the idea of timing money, send me your mailing address and I will send you examples of what that money could look like so you can pass it out among your family and friends.

What money does not say that it used to say.

An 1896 $2 note said, “This certifies that there have been deposited in the Treasury of the United States Two silver dollars payable to the bearer on demand.”  That was when money was a warehouse receipt.  Some thing was in a warehouse, in this case the Treasury of the United States, and the bearer could get that thing, in this case two silver dollars, by presenting the note at a bank. 

We do not need nor should we want silver backing our money.  The actual backing of our money is what workers produce in goods and services.  Our money now says nothing about this actual backing.  It should.  So we need money to say the equivalent of what it said in 1896 but in correct terms, something like this:

“This note certifies that One hour’s worth of goods or services have been produced for which the bearer is entitled to be paid the equivalent on demand.” 

That statement would make it clear that money is how we share the work and share the wealth.

What money should say but does not.

The clue to what money should say but does not is that it has on it both “Federal Reserve Note” and “The United States of America.” 

It should say, “This noted is printed by the U.S. Bureau of Printing and Engraving in Washington, D. C., is then sold to the privately owned Federal Reserve System of banks for the cost of printing, then borrowed back by the United States Federal government and its citizens who will then pay interest on the loan forever.”

Why does it not say this on the money?  If it did, we would know how wrong is that arrangement and we would demand it be changed immediately.  If the government can borrow money that it prints, it can pay it into circulation and have it be debt-free and interest-free forever.  Selling the money for the cost of printing, about 6 cents per bill whether it is one dollar or 100 dollars, makes the banks ever richer and the rest of us burdened by an ever larger total public and private debt. We bailed out the banks when we should have bailed ourselves out. 

More on what money should say but does not in my next blog.

What does money say when money talks?

I see three things that money says printed on it. 

1) It says “This note is legal tender for all debts, public and private.”  This means that anyone who puts something up for sale must accept the money.  If the seller refuses to accept the money, a court of law would find the item as belonging to the buyer.  The seller would forfeit the item for refusing to accept the money.  This statement also says implicitly that the government has the sovereign right to make the money legal tender. You see this power implied by most of the other words on the U.S. dollar bill which constitutes the second thing I see money saying.

2) The dollar bill says that the money is issued by the United States of America.  It repeats this authority with the picture of George Washington, signatures by the Treasurer and Secretary of the Treasury of the United States, pictures of the Great Seal of the United States on the back of the dollar bill.

3) It also says when and where it was issued (The dollar I have says it was issued by the Federal Reserve Bank of Boston as part of the 2006 series) and it says that this particular bill is number A 82297357D.

These three things all together say that this particular dollar bill is a genuine one and must be accepted because the United States government requires it to be accepted.

The legal nature of the dollar is pretty much ignored by economists as far as I know.  They like to say that money is accepted because people have confidence in it.  This neglect reflects a general anti-government bias.  Free market neo-liberal economists like to think that the economy would run fine if government just stayed out of the way.  Not so.  Government sanction is essential to the acceptance of money.

Perhaps more interesting is what the dollar bill does not say.  That will be my next blog.

The Next Great Revolution

Great Revolutions are those that increase our ability to communicate and cooperate.  They include the invention of writing, the printing press, the metric system, the telephone, television, and the Internet. 

The next Great Revolution will be the adoption of an Hour of Work as the money unit.  Already it is spreading among local currencies, for example, Ithaca Hours, the Portland, Maine Hour Exchange and similar Time exchanges. 

I met a young woman last night in St. Louis who told me she had worked successfully in getting such an exchange in Madison, Wisconsin.

It is spreading and with your help it will spread more. 

Wedding Time and Money is a natural next step in the evolution of democracy.  What we have now is political democracy, which we know is cumbersome and frustrating.  Rules passed by a majority are not necessarily good rules.

Hour Money will decentralize decisions by empowering each of us to make wise economic decisions on our own just like the metric system does with all other measurements. 

I would love to send you Hour Money examples to pass out where you are.  It’s planting seeds – you never know where they will take root and blossom – we know they will never blossom if they are never planted.  All I need is your mailing address.  I usually send out packets of 60.  They are a little smaller than a dollar bill.

Share the work, share the wealth.

There is a basic human truth in this simple statement; share the work, share the wealth.  It is a truth that needs repeating as often as we can appropriately say it.  We have today a system that has made the opposite the disorder of the day; get others to do the work and hoard the wealth.  For this reason, I have made “Share the work, share the work” a highlight of the 'Hour Money’ I pass out.  This past Sunday I did so in St. Louis and a friend is doing it in New York at the Occupy Wall Street protests.  I would love to send you copies to pass out wherever you can, particularly at protests near you.  Just email your address and the number you want. rblain@siue.edu

A Small Change

Gross Domestic Product (GDP) is defined in an economics textbook as:

“A measure of the value of all the goods and services newly produced in an economy during a specified period of time” John Taylor, 2007, Economics. Fifth Edition, Houghton Mifflin, New York.

The small change, see if you notice it.

“A measure of the price of all the goods and services newly produced in an economy during a specified period of time” John Taylor, 2007, Economics. Fifth Edition, Houghton Mifflin, New York.

The best way to tell what something is is how it is measured.  GDP is measured by adding the prices of all goods and services.  It is in fact the total price.   GDP measures the price of what we produce, not its value.  Don’t let anyone tell you it represents value.  That is one of the misconceptions we are having to deal with these days.

The U.S. Gross Domestic Price this year is $14,000,000,000,000.  That is a huge price we are paying.  When we think it means value, it sounds great to want it to grow.  We hear people on TV saying we need to increase GDP.  That is the last thing we should want.  $14 trillion produced in one year!  That has to be enough,  It’s not the size of GDP that we need to focus on; it is the content of what we are producing.  What is included in that $14 trillion?  That’s what I would like to know.

Would Time Money reduce efficiency?

Mike responded to A-B-C Economics with this question and comment:

What effect does a system like this have on efficiency? In the of case Henry Ford, he brought the time to produce a car from months to hours. Lets say in simple terms 10 hours to produce a model T where previous methods took 100 hours. Under the capitalist system one could charge 50% less and society as a whole would benefit from cheaper transportation provided in a shorter time frame at a reduced cost. Just as the historic model points out. Under a pure time hour system would efficiency suffer where there would be little incentive to decrease your labor hours as that would be your only means of income?

The incentive to be efficient is to sell at a lower price than a competitor. Henry Ford could have done exactly the same thing with Time Money that he did with dollars. The difference would have been that the prices would have been expressed in Hours. So he might have advertised his car by stating the price as, for example, 10 Hours, compared to other cars priced at 100 Hours. He could have stated his price higher than its actual price. However, his competitors would have known how much more efficient they would have to be to beat his price.

The last sentence of Mike’s comment could also refer to a worker slowing down their work in order to receive a larger income.  That is a problem with dollars as well as Time Money.  The remedy is supervision.  An employer would continue to be responsible as now for checking an employee’s work every now and then to be sure they are actually working for their pay.  That supervision would probably decrease as the employer saw that the employee was doing a good job during their time at work. 

An employer could also pay a new employee less than an Hour for an hour of work, say 1/2 Hour, telling the employee that they will be paid full time when they have learned the job.  An employer could pay more and an employee could ask for more than full time based on productivity or other factors like overtime, say, time and a half or double time. 

The difference with Time Money is that the greater amounts would be more likely to stay within more reasonable boundaries than now.  CEOs would not be able to argue that they deserve 100 Hours per hour of work like they do now with dollars.  A CEO taking $1,000,000 per year is receiving $500 an hour.  One taking $100 million a year is receiving $50,000 per hour.  Put those numbers in Hours and we would see a big drop in how much people at the top can take and an increase in what everyone else can then be paid.

Thanks, Mike, for your question and comment.

How Rulers Rule

When you see the word “rulers” do you think it refers to people?  That is what most people probably think.  The same is true when we see the words “regulator” and “governor.”

People as rulers pose a serious problem; we can never be sure how they will interpret and apply the rules.  We can never even know what the rules will turn out to be as when we elect representatives to Congress or other governing bodies.  There is another meaning of “rulers” that works better.

That little stick we use to measure length is also a “ruler.”  We draw lines with it, but we do not call it a liner.  We call it a ruler because it decides the length of things wisely, efficiently and amicably.  We know the “rule” with certainty because we can see the ruler.  We can also watch or do the measuring ourselves to be sure of something’s length.

Another “ruler” we use every day is a clock.  When we want to know the time, we look at our watch.  It also rules accurately, efficiently and amicably to everyone’s satisfaction.  Not that we are always on time, but we know when we are early or late.

Time Money would rule like rulers and clocks because wages and prices would be governed by clocks.  As an employee, you would have much more accurate knowledge of how much you are being paid.  As a buyer, including as an employer, you would have much more accurate knowledge of how much you paying for something. 

A-B-C Economics

Person A gives person B money for work that B for A.      A –$$-> B

B passes the money on to person C for something that C is selling that B wants.  B –$$-> C

That’s A-B-C economics.

We say that B is paid when A gives B money, but B is not actually paid until B gives C the money for the product C gives B.  The product B gets from C is the pay for the work B did for A.

The problem with money today is that it does not state on it the value of the money, so A is not told how much money to give B, and C is not told how much money to charge B.  So they all must guestimate.

Everything is regulated by time, except money. People are paid by the hour but it does not say so on the money. ‘Hour’ on money will tell A, B and C (who represent all of us) the actual value of our money.

My time for your time is fair trade. It’s that simple.

What do you think?

The Value of Time Money

There are two ways to understand the value of time money.  First, its value is printed on it; an hour of work.  No national money today has its value printed on it, only its name such as “dollar” “euro” and “dinar.”  People find out what those monies are worth only when they spend them.

The second meaning of value is how Time Money can improve how economies work.  Economies are not working well now because money is flowing in ever larger amounts to people at the top.  That is as unhealthy as having all the blood in your body flowing to only your brain.  To do the most good, money needs to flow to all parts of society just as blood must flow to all parts of your body for it to be healthy.  Everyone understands time.  With prices expressed in the time it took to produce something, money is more likely to flow to everyone who works equally.

Capitalism

Capitalism causes conflict and war because it requires unequal exchange.  What is called profit is overcharge.  There is only profit after everything has been paid for including pay to the capitalist for his or her labor.  Capitalism tells us by its name that it is biased toward capital.  We need unbiased exchange.

Fair trade is equal trade.  Making time the denominator of money will encourage fair trade because it will encourage equal trade, my time for your time.

We do not need to switch to socialism, which is collective ownership.  We can keep a money economy which gives each of us freedom to buy and sell whatever we want.  We just need to make exchange equal rather than unequal.

Lifetime Economics

Lifetime economics is simple: value in use time; price in work time; use time minus work time equals real profit, free time.  What I would like to do here is collect examples from people like you who visit this blog.

Here is one example.  Suppose that you are earning $10 an hour and you buy a shirt for $20.  The work time cost of that shirt for you is 2 hours.  That’s pretty easy.  What about use time?

There are several ways that you could figure the use time of the shirt.  Here is one way.  Suppose that you wore the shirt 12 hours on the first day.  Your real profit by buying that shirt would be 12 hours minus 2 hours = 10 hours.  And that is profit for only the first day that you wore the shirt.  Every day that you wore the shirt thereafter would give you a real profit of 12 hours.  There are many complications you could add to the calculation, like the cost of washing the shirt periodically, but let’s keep it simple.  The point here is that you made a very profitable purchase by buying that shirt.

Here is an example of what I would like to receive from you.  How much work time does it cost you to live where you are living?  To answer, just divide your monthly rent or mortgage payment plus utilities by your hourly wage.  Say that your rent and utilities cost $600 a month and you are paid $20 per hour.  $600 / $20 = 30 hours of work time.  What is your use time?

Again, there are several ways you could figure the use time of where you live.  Keeping it simple, the place is available for your use for a month.  A month is 24 hours for 30 days for a total of 720 hours.  Your real profit is 720 hours minus 30 hours = 690 hours.  Do the math for your place at your wage and post it here.  That way, we can practice the method and identify issues that need to be resolved.

Time Money for World Peace

We use clocks and calendars to organize all our personal and social relationships and they do a very good job.  We are not always on time for our appointments, but we know when we are early and when we are late. 
The same cannot be said about money.  We need money for most of the things we need to live, but we can never be sure how much our money is worth.  To make matters much more complicated, there are over 100 national currencies being used in the world today and none of them, zero, state on the money itself what the money is worth.  The name of the money tells us its nationality but not its value. 
By denominating money in Hours of work and by trading an hour of my time for an hour of your time world wide, we can trade fair to everyone's benefit.  That is how we can get to world peace.