UNEMPLOYMENT AS A PROBLEM OF TURNOVER CREDITS
AND
THE SUPPLY OF MEANS OF PAYMENT
The Clearing Principle And The "Vier Gesetzentwuerfe" (Four Law Drafts) To Re-Integrate The Unemployed In The Economic Process
I. FROM PAYMENT TO CLEARING (18)
1. Our analysis has clarified what mistakes have to be avoided in the construction of a well functioning system of turnover credit. But the guiding principle is still absent with whose help this construction can be achieved. To find this principle, a further analytical step is necessary:
For the question is whether the agreement that all contracts expressed in money should be fulfilled by PAYMENT (in cash or real money), can be retained at all. If it can NOT be continued, then one will have to discard the thought of a NOTE ISSUING BANK and of the banknote, which stood so far in the foreground, or one will have to DEVELOP THEM MUCH FURTHER to achieve an ideal EXCHANGE ORGANISATION.
Thus, with the clearing banks, institutions are established which avoid the four scourges of modern economic life:
DEFLATION - because the monopoly is abolished,
INFLATION - as there is no legal tender,
FORWARD RISK with bank balances and bank debts - as there is no redemption obligation and
UNEMPLOYMENT, as a result of a shortage of means of payment - as the establishment and cancellation of credit exactly corresponds to the production and consumption of goods so that, from that side, the employment of labour is no longer limited.
In a credit system built according to the principle of the clearing banks, the goods themselves create their own purchasing power (the means by which they are purchased).
(Alas, the goods etc. do not and cannot print clearing cheques themselves, and their owners are usually neither legally free to do so nor do they appreciate this kind of monetary freedom. - Compare Say's Law, which does not operate as he and others imagined it would, in the absence of full monetary and clearing freedom and the sufficient use of these liberties. - If, for instance, gold or silver coins are the exclusive means of exchange, then their value or purchasing power will not automatically, instantly and fast enough rise to make up for any increase in the goods, labour and services offered for sale. Thus sales difficulties will arise for producers, shopkeepers, workers and providers of other services. Even the population might grow faster than the total rare metal stocks. When goods, services and labour are competitively supplied, then exchange media and clearing options for them must likewise be competitively supplied - to keep the balance between the goods side and the money side. Furthermore, alternative value standards must also be competitively offered and subject to free choice. Neither exchange media nor value standards must be monopolised and compulsorily integrated and unified via central banking privileges and legal tender laws. - J.Z., 27.12.02.)
The goods turnover thus becomes INDEPENDENT of the availability of gold or of monopolised paper means of payment and of the current situation of gold mines and of the central bank of issue.
C/ III) DRAFT OF A "LAW" ON THE ISSUE OF REICH TREASURY NOTES
1. In the above the principle for private trading between producers, merchants and workers, i.e., for a PRIVATE payment community, was given and carried out in a draft. But with this only A PART of the economy would be freed of the shortage in means of payment. For, aside the private circuit of the economy there stands, so to speak, a second and PUBLIC CIRCUIT which suffers equally from deflationary effects. This is the money circuit between the taxpayers, the pay offices of the State and the municipalities, the public servants, the public bodies and the suppliers of the State.
Whilst the State paper money with legal tender is an UNCOVERED floating DEBT of the State, the State paper money subject to a free market rate represents the mobilisation of matured TAX CLAIMS and thus a debt that is fully covered by due claims. Such certificates do also rest on the principle of clearing. They are, so to speak, liquidified taxation claims or typified taxation cheques, similar to the typified clearing cheques which are covered by commercial goods claims: The population has, continuously, to pay large amounts of taxes. The treasury and its public servants pay, continuously, large amounts to the population. Between these claims and debts a clearing is as practicable as between the claims and debts of the private economy through the cheque and giro system. It is arranged through treasury notes, which are really clearing certificates. They do not contain a promise to pay but merely the assurance that the State will ACCEPT them at all its pay offices in payment of taxes and custom duties, at any time and at their nominal value, like gold (tax foundation). (23)
3. At a time when one quarter to one third of the national income is claimed by the State, one has to provide special means of payment for the movement of these enormous quantities of goods - if the whole economy is not to suffer.
C /Iv.) Draft Of A "Law" On Raising The Price Of Securities And Lowering The Effective Interest Rate By The Introduction Of Clearing In The Sphere Of Loans
1. The principle of clearing is useful also for a third sphere, where a shortage of means of payment is felt: the long-term State credits. Since 1931 the Reich, its component States and the municipalities could no longer pay their due debts or only with the greatest difficulties. The same applied soon to many of the issuers of private loan certificates, since the very large enterprises, as main users of the capital market, fell as first victims of the crisis.
2. The solution suggested by the clearing principle for the here occurring PROBLEM OF MEANS OF PAYMENT, consisted in removing the difficulties, as far as they were caused by the impossibility to obtain monopolised means of payment, by the USAGE OF THE LOAN CERTIFICATES THEMSELVES AS SOLUTION MEANS.
4. The strong rate increases of loans and the revival of the confidence of loan holders, were later the starting point for the "organic lowering of the interest rate", which was systematically begun by the Reich Government and the Reichsbank, i.e. for an interest reduction not by a renewed legal robbery of the creditors, as had been conducted by Bruening, but by a rise in the market rates.
C / V.) Draft Of A "Law" On Stable Value Reckoning
The general realisation of the clearing principle, the abolition of the money monopoly, of inflation, of deflation and of legal tender, call for a return to principles in currency legislation which prevailed in most countries up to the end of the previous century. THE CONCEPTS OF THE VALUE STANDARD AND THE MEANS OF PAYMENT MUST BE SEPARATED ONCE MORE.
Thus concepts of inflation penetrated the population, which were disastrous from the viewpoint of re-integrating the unemployed in the economic process:
Any kind of increase of the circulating media was supposed to endanger the stability of the currency. According to the theoreticians of legal tender, one had ONLY THE CHOICE BETWEEN MASS UNEMPLOYMENT AND INFLATION. It was left to politics to choose between these two forms of economic disasters.
ACCORDING TO THE HERE REPRESENTED VIEW, THESE DISASTROUS ALTERNATIVES APPLY ONLY TO THE REGIME OF LEGAL TENDER.
Here is the text of this Draft Law:
Par. 1
In all payment and credit transactions, regardless of the market rate of the means of exchange, calculations are to be made in stable value units.
Par. 2
(1) Gold is the standard of value.
(2) The reckoning unit is the mark which is divided into 100 pfennigs.
(3) The value of the mark is equal to 1/2790 kilogram of fine gold.
(4) By agreement other value standards than gold may be determined.
Par. 3 a
The creditor, whenever the debtor offers them, has to accept in settlement and at their nominal value his own due bonds and goods warrants which are expressed in marks, and also those of his creditors.
We have reprinted this "law draft" because it represents the most conclusive refutation of the argument of inflationism and because it attempts to outline in a short and radical form, the pure gold currency without its previous mistake: the obligation to tender physical means of payment.
At the same time it attempts to clarify the clearing principle.
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