Sabtu, 06 April 2013

A economic superstructure built on a foundation of gold

In my last article I talked about ‘ golden triangle ‘; How to base the economy on three-legged stable foundation of a pure Gold Standard leads to economic nirvana.

The primary ‘ leg ‘ of this Foundation is money; money from what turns off all the debt. Historically and for many good reasons, gold (and silver) have served as money for thousands of years. Without sound money, you cannot build a secure economic foundation.

Once we are clear about what the money is, we can go to the study of credit in its different forms. I showed in my last column as credit through loans must be differentiated from credit, better called terms, by offsetting; and as the Gold Standard cannot survive without the clearing mechanism, which is the real Bill circulation.

There is a very accurate, clear … the distinction between money and credit money is something of positive value, a ‘ good mind ‘ … and the credit that is a negative thing, a good future ‘ or the promise of a good mind … to be delivered sometime in the future. Similarly, there is a clear and distinctive line or ‘ tipping point ‘ between Real Bills (credit clearing) and bonds (credit through loans).

The difference between bills and bonds is clear; Real bills circulating in the free market for their own merits. bonds and all other forms of non-credit. But what exactly ‘ circular ‘ mean? Simply that real bills acquire monetary aspects that bonds never acquire.

In more detail, real bills are used to make payments directly; bonds are never so used. Bonds represent the value, but their value is variable and depends on many things … like expiration time, interest rates, perceived risk etc. In order to use the value of an obligation to make payment, the bond must first be sold, which is exchanged for money.

The money redeemed through the sale of the bond is then used to make the payment. This is not how real job bills. Invoices are not sold or bought as bonds are. Instead, the Bill is the vehicle used to clear the debt. The need to invoice not exchanged for cash before running this task.

Real bills take a monetary aspect, the chance to erase debts directly, something denied to the bonds. The very definition of real bills relies on this fact. Any card that doesn’t circulate (do not assume a monetary aspect) on its merits is not a real law.

Real bills are not sold or purchased; they are drawn (written and accepted against real estate on their way to the customer pays); are paid at maturity (acceptor) and in between, they are often re-discounted … that is assigned to another entity … but they are not ‘ sold ‘ or exchanged for cash payment; the Bill is paid.

This is not semantics, it is a key concept. Just like the money must pay off all the debt, or is not money … so real bills must circulate, or assume the role of monetary payments. If a Bill does not circulate so it’s not a real law. Only those bills circulating, which takes on a monetary role, qualify as real bills. Of course, the monetary aspect disappears together with the Bill, once the Bill matures into gold.

So, where this leave us? The triangle has three legs and they are all yours … but you can look at her legs in a linear fashion. the first stop is the money, the second stage is true, bills closer to money … and the third leg is bonds, further away from the money. Money doesn’t have to be; but the money must be something of positive value. The closest things to money bills are true … bills take a monetary role. As we move more money, then we arrive at bonds. The bonds are too far to be money to circulate as a surrogate for money.

There’s an old saying, ‘ between the lip and the Cup is there ‘; Real bills are so low risk, as the Cup is already to the lip … and drink one simply needs to slurp. The bonds are further away and ‘ leaked ‘. This is the reason that the bonds do not assume a monetary role … are seen as being too risky, both through default and possible changes in value. The fact that their market value may vary significantly prevents them from being used as money and sales forces … to determine their true current value.

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