For over 2500 years, and possibly more, the world has been debating personal, social and economic conditions, from a less than ideal perspective of inter-tribal differences. Can we possibly transcend our tribal allegiances of special interests, whether labor and workers, of the egalitarian vein, on the left, or business and corporations, of the competition and profit vein, on the right, and find a higher road? I think we can, with, “A transcendent theory of responsible semi-philanthropic government”. I mention semi-philanthropic government, in no small sense, as when we truly address our global condition over the last thirty years, we’ve actually evolved from a system of capitalist free-markets, to a more integrated system of Marxist/socialist/capitalism, with all our socialization of global finance and trade, to the tune of trillions of dollars of national debts, and especially now, with the massive socialist bail-out packages being put on the table, which will further socialize the already over-socialized system.
All we have do is ask, “Have we acted responsibly?” My answer is, “Absolutely not!” From Nixon, through Reagan, Bush I, Clinton and Bush II, we’ve seen and been nothing but irresponsible, to our fundamental ideals, of sound government and finance. How could we have lost our way so badly? My answer is, we spent so much time fighting and warding off Marxism, socialism and communism, our simple fears of, we actually forgot to build further on our fundamental ideals, and instead, adopted financial evolution by accident, and hap-hazard in-attention. Both political parties allowed the policies and philosophies of the moment, to control our destinies down roads any sane nation, would have never traveled, with irrational de-regulations of other-wise sound markets and trade, to massive profligate increases of finally un-repayable debts. So, now we arrive at the grid-locked arguments of two special interest groups, with their un-resolvable differences.
Whether we look at this enigma from the perspective of social responsibility, or economic survival, we must develop a new and transcended philosophy of government, economics and politics, capable of bridging these diverse differences. When I mention “A transcendent theory of responsible semi-philanthropic government”, it no longer looks utopian, as it once did, as it’s actually the forms of governments, many nations of the OECD capitalist world, have now adopted, so it allows us to discuss such a topic, with a new sense of responsibility, as opposed to our present profligate irresponsibility. Now, what would such a transcendent vision look like? I’ll state it bluntly first and explain later, “Governments should use money, to reduce prices, and increase wages and profits”. Now, at this moment, all educated people would yell and scream, “This is impossible”, yet I say, “No, it is not.”, and I have more than one proof of its full possibility. Let me here enter just one of the transcended ideas of responsibility, first offered by Plato, some 2400 years ago:
“The citizen of the ideal state will require a currency for the purpose of every day expenses; This is practically indispensable for workers of all kinds and for such purposes as the payment of wages to wage earners. To meet these requirements, the citizen will possess a currency which will pass for value among themselves, but will not be accepted outside their own boundaries. But a stock of some currency common to the Hellenic world generally i.e., of international currency, will at all times be kept by the state for military expenditures or official missions abroad such as embassies and for any other necessary purposes of state. If a private citizen has occasion to go abroad, he will make his application to the government and go; and upon his return if he has any foreign currency left over in his possession, he will hand it over to the state receiving in exchange the equivalent in local currency”.
Also, if you go back to one of my earlier posts at:
http://theawakeningoftheamericamind.blogspot.com/2008/07/essay-on-paper-currencyproposing-new.html where you will see a similar transcendent idea put forward by our very own Benjamin Franklin. And here again is the same transcendent idea of Paul Einzig and J.M. Keynes, put forward by Paul Davidson:
“Elsewhere(Davidson) I have developed in detail
a proposal for reforming the entire international payments system via an international clearing union that provides for capital controls and other necessary and sufficient conditions to permit the establishment of a golden age in the 21st century. The main proviso of my proposal are:
1. The unit of account and ultimate reserve asset for international liquidity is the International Money Clearing Unit (IMCU). All IMCU's are held only by central banks, not by the public.
2. Each nation's central bank is committed to guarantee one way convertibility from IMCU deposits at the clearing union to its domestic money. Each central bank will set its own rules regarding making available foreign monies (through IMCU clearing transactions) to its own bankers and private sector residents(21). Ultimately, all major private international transactions clear between central banks' accounts in the books of the international clearing institution.
3. The exchange rate between the domestic currency and the IMCU is set initially by each nation -- just as it would be if one instituted an international gold standard.
4. Contracts between private individuals will continue to be denominated into what ever domestic currency permitted by local laws and agreed upon by the contracting parties.
5. An overdraft system to make available short-term unused creditor balances at the Clearing House to finance the productive international transactions of others who need short-term credit. The terms will be determined by the pro bono clearing managers.
6. A trigger mechanism to encourage a creditor nation to spend what is deemed (in advance) by agreement of the international community to be "excessive" credit balances accumulated by running current account surpluses. These excessive credits can be spent in three ways: (1) on the products of any other member of the clearing union, (2) on new direct foreign investment projects, and/or (3) to provide unilateral transfers (foreign aid) to deficit members.
7. A system to stabilize the long-term purchasing power of the IMCU (in terms of each member nation's domestically produced market basket of goods) can be developed. This requires a system of fixed exchange rates between the local currency and the IMCU that changes only to reflect permanent increases in efficiency wages.(22) This assures each central bank that its holdings of IMCUs as the nation's foreign reserves will never lose purchasing power in terms of foreign produced goods, even if a foreign government permits wage-price inflation to occur within its borders.
8. If a country is at full employment and still has a tendency towards persistent international deficits on its current account, then this is prima facie evidence that it does not possess the productive capacity to maintain its current standard of living. If the deficit nation is a poor one, then surely there is a case for the richer nations who are in surplus to transfer some of their excess credit balances to support the poor nation.(23) If it is a relatively rich country, then the deficit nation must alter its standard of living by reducing the relative terms of trade with major trading partners. If the payment deficit persists despite a continuous positive balance of trade in goods and services, then there is evidence that the deficit nation might be carrying too heavy an international debt service obligation. The pro bono officials of the clearing union should bring the debtor and creditors into negotiations to reduce annual debt service payments by [1] lengthening the payments period, [2] reducing the interest charges, and/or [3] debt forgiveness.(24)”
So, you see, transcendent ideas of social, economic and political conditions are nothing new. It’s just the wise sages of the world have never been listened too. Don’t you think it’s about time? Now, can you see why my statement, “Governments should use money, to reduce prices, and increase wages and profits”, is thoroughly true? The clearest representation of this new transcendent possibility of responsibility is best represented by the words of all these great sages of transcendent ideals, by realizing they all offered, at differing times in history, a chance for all citizens of planet earth, a way out of the great conflagrations of tribal arguments, through realizing money, and money itself, as an autonomous tool of governments, can be used far beyond its present irrational status. Money can function as a fundamental transcendent ideal of social, market, trade and political actions, when organized through thorough exchange clearing mechanisms, having the ability to reduce global debt structures, i.e., self-liquidating national debts, as per Keynes Bancor System, or Paul Davidson’s ICB(international clearing bank), among all the others. These exchange clearing mechanisms can be instituted either externally or internally, according to the needs of each individual nation, but responsibly instituted, they must be, to reduce prices, and increase wages and profits, responsibly and successfully, while reducing overall global costs, achieving full and true subsidiarity and sustainability, and not their false ideological counterparts... Also, to top it off, here’s a few of my own proposals of external and internal exchange clearing:
“A Few IFA Proposals - Conventional - Unconventional by Lloyd
“Ah yes, Edward. Quite a problem we seem to be in. Since Edward asked this question, I thought I might stick my head out and see how many chop it off. Somehow, I feel they may not since we are all in such a quandry... "What this means is that the seesaw analogy fails: Europe cannot go up while the US goes down: both need to descend together. So the problem here is architectural (any suggestions Lloyd?):"
As I stated in one of my posts at: MacroMouse and in thorough agreement with you Edward, "We have never been here before." Due to the vast imbalances in global ppp's, wages, debts, trade, wealth, exchange rates, etc., which have evolved since the collapse of the Bretton Woods System in 1971-`73, we face the most serious challenge since, oh who knows when, forever. So what would I do with the international financial architecture? If enough serious minds are willing to admit something needs to be done, then there are definately several answers.
The goal, of course, is to rebalance the entire global system. How? Well, many forms of external exchange clearing have been put forth since Plato first advocated it, though none overly appeal to me or many others, as suggested - they reduce too much autonomy. Therefore, I suggest several different forms of conventional exchange clearing and several unconventional forms of internal exchange clearing - which allow a higher degree of local autonomy. I see no other way to otherwise rebalance the massively out of balance system. If we had originally, in 1971, rebuilt the then broken system by making balanced floating exchange the law of the land, we wouldn't be here, but we didn't. Just for the record, we could have made a 10% to 20% maximum balance band law the IMF would have been mandated to follow when nation's ppp's drifted out of balance, that they should have been mandated to rebalance, even though we had abandoned the pegged system. A rebalancing framework could have and should have been set up at that time, even if it meant loaning, or using a standby agreement until hostilities ended, the money needed by the U.S. to finish the war, etc. It would have been smarter than destroying the entire system as has nearly happened. There were many ways to rebuild a workable system at the time, it was just the acrimony over the war that prevented such a wise course. I mention this for background on what now must be done.
I have only recently come across enough information and empirical evolution to possibly offer a few new and different answers. I am no where near ready, but I can set the framework. At the outset, moral hazard must be guarded against most in the workings of any new system. As Alfred Marshall suggested, we could use his units of purchasing power as a solid standard of a new architecture. I suggest a very large basket[20% of GDP] of commodities, production, goods, and services as the new standard for all nations. This large 20% is required because I further suggest using many forms of derivatives contracts and bond contracts as insurance for the new system of clearing - to satisfy the large financial interests. I suggest this be a minimal financial computer controlled international clearing architecture - politics removed after implementation. To implement, all capital markets must be either closed[short term] or laws of gradual rebalance must be written into the architecture implementation and evolution. This way all nations can maintain their sovereignty and autonomy more than other already advocated systems. If the laws and computer programs are properly written, the world can evolve over a given timeframe to a new global balance of all thus mentioned markets. Rebalancing is a simple accounting trick if enough financing is forthcoming, to do so. It will take much new IMF financing, but the rebalancing will recreate so much new credit productivity, it will pay itself back over time just as the massive public financing of global WWII did.
”There is also internal exchange clearing, a non-conventional system, that I have written George Monbiot about. There are several of these variations, also, but for now I will enter my e-mail to George:”
Earlier today I came across an article of yours about a meeting, to come up with an alternative to capitalism other than the other failed system - totalitarianism. I'd like to make a suggestion that there is a way to build such an architecture. BTW, you are my favorite author. The system I am talking about is already here, almost but unrecognized, as yet. On the one side we have what I refer to as Minsky's Heinz `57 capitalisms. On the other we have the Heinz `57 totalitarianisms. None of these are satisfactory. Yet, the answer lies somewhere in the middle between the two. BushCo wants to implement an outrageously totally free [for the corporations that is] capitalism. China, on the other hand is moving from totalitarianism toward BushCo's totally free corporate capitalism. If it goes all the way this would be a big mistake, as the perfect mixed market capitalism lies in between.
What I'm talking about here is the world has a chance to help China develop the first perfectly balanced mixed economy of public and private enterprise. I use this example as the developed nations will not yet listen to common sense. Now, I know from reading your books and articles you can easily grasp this. If China were to naturally evolve to a state of 20% public enterprise markets and 80% private enterprise markets we would have a chance to witness something truly amazing in economic history, if properly organized at this % mix. As, at this total market mix the 20% public enterprise market could be used to keep inflation/deflation permanently in check throughout the 80% private enterprise market, thus allowing a fiat money system unlimited potential. I mention this about China as it is the only experiment in the world heading toward and most likely to reach this % threshold. It would be a great loss to the world if we do not recognize this once in earth's lifetime chance to grant the world a new path. E=1/5X is a formula for perfect competition capitalism.
The 20% public enterprise mix must be a total % market organization of all production, goods, and services in order to check inflation/deflation throughout the 80% totally free private enterprise side. A triple entry banking system can be set up to finance. Alfred Marshall, at the turn of the century, mentioned such a similar mix with his "units of purchasing power". This is the same thing, so to speak, at a much expanded macro level. If you can actually see this system, which I think you can, you must see the advantages a fiat system would possess when inflation/deflation can be market controlled, it frees the printing press to have free reign to build an unbelievably wealthy, healthy, strong, and viable moral capitalism.
If China were to discover this capitalism key, the rest of the world would be forced to emulate - gladly as debts and taxes would vanish or could be used productively. They most likely will cross the 1/5X threshold sometime in the near future as they are privatizing at a fast rate - almost 50% already. There is no need for them to cross it in disarray as is the case with many of Europe's social democracies and Russia's failed transition. They only need be shown the simple facts. Please dialogue with me to work out the details. The world needs us George.
I wrote three books about this system through the `80's and `90's. Trouble is they are very crude web published material - not enough free time. I am now retired and have the time to finish. My work will be rewritten and republished this winter. My first paper will be 20 to 30 pages long on global credit productivity - a totally new macroeconomic subject.”
I didn’t mean to make this post so long, but the dynamics involved in understanding how theoretical transcendental ideals of, “Governments should use money, to reduce prices, and increase wages and profits”, is very difficult for the un-initiated to wrap their heads around, as it sounds paradoxical, when in fact, it is not. If all try to figure the dynamics involved, in the above ideals, we can truly solve all the world’s problems, and successfully institute a new “Imperative of Responsibility”___A Higher Road…
