World Order of Non-credit Money
The money that exists in a society frequently changes hands, passing from owner to owner and from account to account. It is used to sell and buy goods and services and make other transactions. It constitutes the quantity of money in circulation. The quotient of the value of national product (PQ) made in a year and the quantity of money in circulation (M) is termed average velocity of money circulation (V).
It has been noticed that with the development of a society, the ratio between national product obtained and quantity of money in circulation decreases, i.e. velocity of money circulation decreases. In order to maintain the obtained level of production, an additional quantity of money in circulation is needed, to compensate for the shortage of money caused by retarded velocity of money circulation.
It is even more clearly obvious that, with the development of a society, both production and value of national product increase, and for these to be realized, yet another additional quantity of money in circulation is needed.
If because of an increase in production it were necessary to increase the existing quantity of money in circulation for 2 %, and because of retarded velocity of money circulation only for 1 %, a total increase in quantity of money in circulation must be 3 %.
The most famous monetary expert of 20-th century, Milton Friedman, who, by studying statistical data of various countries, and primarily of USA, has found out a universal retarding of velocity of money circulation, has also found out that measures of monetary policy are most often counterproductive, primarily because of a delay in the effects of monetary-political measures.
Milton Friedman has concluded that the best environment for spontaneous development of economic activities would be the one where the quantity of money in circulation would increase at constant annual rate of 2% or 5%, by which the negative effects of alternate, expansive and restrictive monetary shocks would be avoided.
It has become obvious that the projected and emitted existing quantity of money is always insufficient, and new and new additional money emission is always needed, in order to keep the economic mechanism moving. There is always the problem of money shortage, the problem of deflation in society. This problem originates from the very nature and essence of money as it is understood today.
After men started making paper money, it became a habit to put such a kind of money into circulation in the form of credits. It was thought that backing for such money was secured in human labor. To return the debt, debtors had to produce and sell something.
However, due to retarding of velocity of money circulation, shortage of money was experienced, demand was in decrease, the unsold goods piled up, unemployment was in increase, as well as idleness of capacities. During the Great Depression, USA lacked more than 30% of the quantity of money in circulation.
Due to retarding of velocity of money circulation, credits cannot be returned from the existing quantity of money. An additional quantity of money is needed, and it too is given in the form of credits. Credit obligations increase and become more and more difficult to fulfill. A constantly increasing indebtedness exceeds by far the value of production. An endless inflation of credit money occurs, the quantity of money constantly increasing but never being sufficient to overcome the existing deflation.
If a country were to put into circulation the necessary additional amount of money as non-credit money, i.e. as gift, without the obligation to return it, the process would be stopped. The inflation would disappear. It would soon be evident how the value of that country’s currency rises in relation to foreign currencies.
The rulers of the world like to rule by managing the distribution of credits. That is why they did not look benevolently at attempts of some countries to free themselves of debtor slavery.
The management of the world’s economy by deciding how to distribute the quotas of non-credit money, arising from the development of world trade and economic rationality, will be no less interesting a job.
The share of a particular country in distribution of the world non-credit money will determine its position in the world exchange, its capability to export and import. By approving a particular quota of non-credit money, the international community will prove the level of its willingness to help a particular country and nation. The growth of world trade will be stimulated.
Within a country, non-credit money will be distributed to non-producers, which will increase demand as well as producers` profits.
The world order of non-credit money will be established when everybody realizes that it is in everyone’s interest.
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January 20, 2009
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