Introduction:
Although having virtually disappeared from the majority of economic and financial publications for over 50 years, money is now at the centre of the social, political and economic debates livening the world up since the 2007 financial crisis, from which we have never fully recovered... the gradual decline of the American dollar as the global reserve currency, the setbacks of the European single currency, the increased value of the Yuan and its place within the Special Drawing Rights (SDR) all continue to be at the heart of numerous political and economic concerns, as is the potential role of gold as collateral and the development of digital currencies.
The globalisation of trade, which started at the end of the 19th century, as well as the welfare state, has revealed an important fact... currencies have become weapons of mass destruction for certain countries, and we observed this bitterly in the 20th century... introducing funds into a country's banking system, and then withdrawing them without notice leads to the social and economic collapse of the targeted country (this was the case in Germany after 1929 in particular) or indeed to subjugation if a relationship of interdependency is built between two countries. Currency speculation has also become a common strategy.... buying currencies with large interest rates can lead to substantial profits. Consequently, we think that John Locke was right to see the issuing of currency as having a sovereign dimension.... certain philosophers of the 16th and 17th centuries, including Thomas Hobbes, thought of currency as being a component of sovereignty, a public and fiscal tool, at the time the "Nations States" was being built in Europe, and in fact wished for the demise of the local and particularly diverse minting that had been taking place since the origin. The Greeks and the Romans had issued an extremely wide-ranging metallic currency, just as the Merovingians and Carolingians did, and this was also the case in feudal times. This custom gradually came to an end with the emergence of the Nations States. The constant search for the procurement of precious metals has incidentally dictated the policies of the majority of kingdoms and empires throughout history. But currency in the 21st century is above all else a weapon in the relationships between countries.
Since the successive devaluations at the turn of the 20th century, the pegging of all currencies to the American dollar (still linked to gold) in 1944, and the definitive break from metallic benchmarks since 1971, currency is now nothing more than an intangible measure becoming more and more digitalised. Thus, it is gradually disappearing from the topics studied in finance and economics.
However, economic development in the West since the 17th century, and then the Industrial Revolution in Europe, would have been impossible without the emergence of both complex financial engineering and the transition from a metallic currency to one of paper... a credit, in other words a trust in the future.
At the time that western countries had a comfortable technological advantage and a control on the whole world and its natural resources, it was relatively easy to increase the middle classes' standard of living (having access to this credit), then gradually, through an increase in the State's wealth, the redistribution of wealth happened through the qualitative expansion of public services, which contributed to lifting the standard of living. The transition in Europe from an agricultural economy to an industrial economy could never have taken place without an intricate command of monetary problems, a command which became all the more easy as restrictions were gradually abandoned (devaluation, withdrawal of the gold benchmark, leverage). This situation could also be seen during the American Civil war, the more agricultural south being quickly defeated by the more industrial north.
Central Banks are still considered by economists as money-lenders as a last resort.... since currency is nothing more than a debt, and because a central bank tied to a State has a lot of leeway before 'going bankrupt'. The printing of money by central banks is potentially no longer subject to limits.... the digitalisation of currency will enable central banks to be protected since more than 90 percent of the money supply does not originate from these institutions. These are debt which fall onto private banks and not onto the central bank. In an economic system functioning on growth, on the production of goods and services, financial liquidity must be continually injected into it.... inflation 'under control' enabling not just the growth of asset prices but also a decrease in the debt burden.
An economy based on production inevitably leads to a need for labour.... in the 19th century, a lot of farm workers found work in factories in appalling living conditions.
Earnings derived from capital (financial assets or means of production) could therefore only increase faster than earnings derived from labour....
Salaries paid at the beginning of an industrial activity could only have been low. It then became possible to dock these salaries by selling a bed and shelter to workers, or indeed by allowing them to buy what they were producing (as was the case with the first cars produced in the Ford factories). That led to the development of socialist and communist ideas.
Currency is therefore a major political weapon, but is it an economic weapon, is it a social asset in the fight against inequality? Is a currency tied to a State an asset for a region's economic development? The Triffin Dilemma invites us to consider that a national currency can t be a world currency.
Although having virtually disappeared from the majority of economic and financial publications for over 50 years, money is now at the centre of the social, political and economic debates livening the world up since the 2007 financial crisis, from which we have never fully recovered... the gradual decline of the American dollar as the global reserve currency, the setbacks of the European single currency, the increased value of the Yuan and its place within the Special Drawing Rights (SDR) all continue to be at the heart of numerous political and economic concerns, as is the potential role of gold as collateral and the development of digital currencies.
The globalisation of trade, which started at the end of the 19th century, as well as the welfare state, has revealed an important fact... currencies have become weapons of mass destruction for certain countries, and we observed this bitterly in the 20th century... introducing funds into a country's banking system, and then withdrawing them without notice leads to the social and economic collapse of the targeted country (this was the case in Germany after 1929 in particular) or indeed to subjugation if a relationship of interdependency is built between two countries. Currency speculation has also become a common strategy.... buying currencies with large interest rates can lead to substantial profits. Consequently, we think that John Locke was right to see the issuing of currency as having a sovereign dimension.... certain philosophers of the 16th and 17th centuries, including Thomas Hobbes, thought of currency as being a component of sovereignty, a public and fiscal tool, at the time the "Nations States" was being built in Europe, and in fact wished for the demise of the local and particularly diverse minting that had been taking place since the origin. The Greeks and the Romans had issued an extremely wide-ranging metallic currency, just as the Merovingians and Carolingians did, and this was also the case in feudal times. This custom gradually came to an end with the emergence of the Nations States. The constant search for the procurement of precious metals has incidentally dictated the policies of the majority of kingdoms and empires throughout history. But currency in the 21st century is above all else a weapon in the relationships between countries.
Since the successive devaluations at the turn of the 20th century, the pegging of all currencies to the American dollar (still linked to gold) in 1944, and the definitive break from metallic benchmarks since 1971, currency is now nothing more than an intangible measure becoming more and more digitalised. Thus, it is gradually disappearing from the topics studied in finance and economics.
However, economic development in the West since the 17th century, and then the Industrial Revolution in Europe, would have been impossible without the emergence of both complex financial engineering and the transition from a metallic currency to one of paper... a credit, in other words a trust in the future.
At the time that western countries had a comfortable technological advantage and a control on the whole world and its natural resources, it was relatively easy to increase the middle classes' standard of living (having access to this credit), then gradually, through an increase in the State's wealth, the redistribution of wealth happened through the qualitative expansion of public services, which contributed to lifting the standard of living. The transition in Europe from an agricultural economy to an industrial economy could never have taken place without an intricate command of monetary problems, a command which became all the more easy as restrictions were gradually abandoned (devaluation, withdrawal of the gold benchmark, leverage). This situation could also be seen during the American Civil war, the more agricultural south being quickly defeated by the more industrial north.
Central Banks are still considered by economists as money-lenders as a last resort.... since currency is nothing more than a debt, and because a central bank tied to a State has a lot of leeway before 'going bankrupt'. The printing of money by central banks is potentially no longer subject to limits.... the digitalisation of currency will enable central banks to be protected since more than 90 percent of the money supply does not originate from these institutions. These are debt which fall onto private banks and not onto the central bank. In an economic system functioning on growth, on the production of goods and services, financial liquidity must be continually injected into it.... inflation 'under control' enabling not just the growth of asset prices but also a decrease in the debt burden.
An economy based on production inevitably leads to a need for labour.... in the 19th century, a lot of farm workers found work in factories in appalling living conditions.
Earnings derived from capital (financial assets or means of production) could therefore only increase faster than earnings derived from labour....
Salaries paid at the beginning of an industrial activity could only have been low. It then became possible to dock these salaries by selling a bed and shelter to workers, or indeed by allowing them to buy what they were producing (as was the case with the first cars produced in the Ford factories). That led to the development of socialist and communist ideas.
Currency is therefore a major political weapon, but is it an economic weapon, is it a social asset in the fight against inequality? Is a currency tied to a State an asset for a region's economic development? The Triffin Dilemma invites us to consider that a national currency can t be a world currency.
DEVELOPMENT
The
Nation State is not a sociopolitical concept adapted to fit all of
the world’s cultures, but it spread through the influence of the
Western model. The State is a legal and administrative institution,
the Nation is above all else a social and cultural convergence. If
the Nation is able to preoccupy itself with differences in the name
of a higher ideal, the State classifies and categorises in the name
of an established order of which it sees itself as the protector. It
is in this sense that very large businesses are now getting the upper
hand over Nation States, good at controlling large sums of capital,
providing livelihoods for lots of people and making certain patterns
of behaviour a necessity, the very large businesses are able to
reconcile the established order and the higher ideal… especially in
a globalised world.
The
expansion of credit, as a trust in the future has indisputably led to
amazing technological advances that enriched the 19th
and 20th
centuries, it is also astonishing to observe that the remarkable
growth of the world’s population over the last 200 years is not
unrelated to the growth of available liquidity, the growth of
potential resources and the fall in the death rate linked to advances
in medicine. From 1850 until now, each generations in the West has been richer than the previous one.
However,
at the start of this 21st
century, very large levels of social inequality remain in the world,
most of the world’s countries only took the path of globalisation
25 years ago at the fall of the communist bloc, whereas a lot of
western countries have reached the end of the cycle with regard to
the advantages of a production economy.
Western
financial engineering was and still is based on debts and their
securitisation. A financial system based on debt assumes a political
power and a socioeconomic framework able to pay down the debt. That
was the case for Europe at the end of the 19th
century, but this is not the case for the majority of the world’s
countries which have adopted this system. Countries that export
commodities or who live off tourism are thus forced to keep interest
rates high to keep the value of their currency, which ironically
slows down the circulation of money in fact preventing an increase in
different social classes’ wealth. This accentuates inequality
because those who own cash deposits in banks quickly become rich,
whereas others sink deeper into poverty. Almost all of the world’s
central banks support their currency issues with stocks of US
dollars, a currency which has for a long time relied on Saudi Arabian
oil (sale of oil in dollars in exchange for military protection), but
which, over the last few years, is losing credibility. Thus, the
world financial structure, at the beck and call of governments,
indeed appears to us to be fragile.
Monetary
and financial engineering tested to its absolute limits, the
development of an "electoral market" (vote buying by false promises) and an increase in Western countries’
wealth led to the emergence of social programs in Europe at the end
of the nineteenth century, the State guaranteeing the bare minimum
for the poorest people. At the start of the twenty first century,
people are currently alluding to the idea of a ‘universal income’
in some Western countries. The service-based economy has taken over,
because a lot of manufacturing jobs have been transferred over the
last 25 years to countries that have small labour costs.
The
idea of the ‘right to own’ has replaced the ‘right to exist’,
the State seems to have irreversibly created a hierarchical
relationship between the people in our societies.
Capitalism
is by definition deflationary, since it involves producing ever more
with less resources or cost by increasing productivity. An ever
growing proportion of the world’s proportion of the world’s
population will in fact end up without sustainable or full time
employment, through a lack of opportunities but also a lack of
skills, because requirements are becoming ever greater in the labour
market, which requires specialists. This search for productivity and
for results is mainly to pay cash deposits. If banks lend at
interest, the reason is to pay deposits, and therefore insure a
State’s social programs, including pensions. The massive
digitalisation of the money supply will allow the monetary and
financial systems to control transactions and allow States to ensure
more tax receipts, the gradual phasing out of cash will only protect
central banks since money in paper form is money owed to the central
bank.
Wealth,
which can be acquired through a family inheritance, can also be
acquired through working. I would like to quote a sentence from the
famous American entrepreneur Jim Rohn “To become financially independent,
you must turn part of your income into capital, turn capital into
enterprise, turn enterprise into profit, turn profit into investment
and turn investment into financial independence.” But the
disappearance of work for many will lead to the absence of this
opportunity. Taxation and frequent purchases by credit will also be
able to reduce part of any capital acquired through an inheritance.
The growth of part time work, of self employment, in a nutshell the
‘Uberisation’ of western economies are a major change in our
collective perception of employment. In certain developing countries,
impoverishment is so widespread that ideas of ‘wealth’, of
‘pensions’ or of ‘salaries’ can seem abstract. The
organisation OXFAM is supplying us with really frightening statistics
on the levels of poverty in the world.
Modern
countries have assigned themselves an important role on the issue of
redistribution of wealth in the name of equality among citizens, thus
breaking away from the ‘Absolutism of Divine Right’ concept.
Except, this imposition seems to us to be in itself a major cause of
inequality. Armed with its sovereign money and its established order,
considering production as the only criterion of development,
governments have favoured the emergence of a large number of
competing social classes, communities and corporations, all with very
different interests.
The fact that the US dollar is still the world's reserve currency and the main asset of the central banks in the world to support their monetary emissions shows us how fragile and virtual the system is .... We believe that the emergence of SDRs (Special Drawing Rights) by the IMF as a global unit of account (with the inclusion of the Yuan) and President Trump's concern to fight the American deficits that Mr. Triffin had anticipated decades ago is both a threat and a chance for the world economy. A threat because Mr. Trump, drying up dollars to the central banks will condemn the American exports by sinking the economies of the world .... An opportunity, because its action, as well as the evident failure of the single European currency, illustrate that it is necessary Rethinking the financial crisis by the monetary question
The fact that the US dollar is still the world's reserve currency and the main asset of the central banks in the world to support their monetary emissions shows us how fragile and virtual the system is .... We believe that the emergence of SDRs (Special Drawing Rights) by the IMF as a global unit of account (with the inclusion of the Yuan) and President Trump's concern to fight the American deficits that Mr. Triffin had anticipated decades ago is both a threat and a chance for the world economy. A threat because Mr. Trump, drying up dollars to the central banks will condemn the American exports by sinking the economies of the world .... An opportunity, because its action, as well as the evident failure of the single European currency, illustrate that it is necessary Rethinking the financial crisis by the monetary question
Work
as a crucial factor in the spread of wealth is a relatively new
concept, because one should not forget that slavery was a part of
history for the majority of the world’s countries. The abolition of
serfdom in Europe was able to be recognised as the end of degrading
circumstances for people... but a peasant tied in to land had a
livelihood, cut off from the land, he was often confined to extreme
poverty. The concept of a livelihood is therefore a key element in
reducing social inequalities. When money was invented, a number of
people were given small pieces of metal to ensure their livelihoods
in societies where they were excluded from bartering. We think that the Exter 's Pyramid can be modified in the current financial system.
The Kingdom of Lydia, 2600 years ago provided a new means of subsistence
that was not land.
Money,
through its function as a stock of value and its social and economic
role, thus appears to us to be a major tool in the fight against
inequality.
Therefore,
we see the fundamental reason behind social inequality as being the
restricted access to financial liquidity. Throughout history, money
has been able to take a wide variety of forms, not just metallic, but
the ultra vast antique coinage used in Feudal times emphasises the
idea that a different type of money was necessary for each type of
exchange. Making monetary exchanges always faster and wider has transformed the initial concept run by money : a tool of payment.
And
the fundamental idea forming the basis of our theory. Only through
diversifying the money supply will the fight against social
inequality be effective. The idea of global taxation, on capital
seems counterproductive to us to the extent that capital is basically
just credit, those having access to it should certainly not be
deprived of it, and it should only enable a temporary means of
purchasing for the poorest and not a long-term subsistence.
Therefore, to the extent that lots of social and economic challenges
are now global in their nature, we think that a co-existence is
necessary between worldwide currencies, financial engineering, and
the development of a financial sector responsible for encouraging
enterprise at all levels… through personalised financial planning
for innovative proposals, either through sectoral currencies (such as
the fureai kippu in Japan) or through the collateralisation of real
assets, thus leading to a creation of wealth, not generated by the
means of production, but by innovation and tailoring finance to
individual projects… thereby paving the way for open money-market
liquidity, once the new assets have been established.
THE CURRENT MOMENTUM FOR A WORLD CURRENCY IS, FROM OUR VIEW, A WRONG WAY TO REDUCE THE SOCIAL INEGALITY !!!
It
is consequently, we would suggest, financial markets which can bring
about a decrease in inequality, not governments, under the assumption
that wealth should always go hand in hand with a responsible attitude
regarding assets under management.
If
metallic coins produced an exchange value, paper currency produces a
measure, the measure of a ‘purchasing power’, the root of our
consumer societies, unsustainable in social and environmental terms.
Current
real asset bubbles are particularly linked to the loss of confidence
in paper money, but all real assets are sound guarantees and certain
currencies used to be propped up by assets other than gold. In a
digital monetary system and in a service-based economy, it will no
longer be the means of production forming the basis of the economy,
but it is real assets, the latter will enable meetings and
sustainable trade relations between people. The price of an asset is
not only linked to supply and demand, but also to the social ratio of
power between buyers and sellers. We think that the price is thus an
easy variable to alter according to financial needs.
We
think that the quality of a tangible asset should be considered in
terms of its IMMEDIATE AVAILABILITY and in terms of the geographical
stretch of its acceptance as having value. With enormous amounts of
bad debts, and low interest rates, the financial industry is no
longer able to offer solid returns on investment, and is thus an
industry in crisis. If the financial industry distinguished itself in
the management of debt that it still considers as being solid assets,
can it be qualified in the management of real, tangible assets????
Financial engineering created money or “artificial money” in
exchange for real assets, but if we have a relatively liquid real
asset and whose value is established at 12000 euros for example, we
could regard this amount as guaranteeing transactions up to 12000
euros, that is to say 100 euros exchanged 120 times. This mechanism
would be adequate for the fulfilment of an entrepreneurial business
plan, within the scope of a financial company, covered by the
collateral of a real asset. If the plan leads to the creation of a
tangible innovation, then it would be valued in cash terms. There
would therefore potentially be the promise of money against real
assets. The monetary base in some countries is backed by tangible assets, we consider the fact that tangible assets could back exchanges ....
To
the extent that we are contemplating a future in which capital will
not really come out of the banking system’s computers, we think it
is inevitable to think about the potential financial uses of real
assets. If, in Islamic finance, the banking institution avoids
interest by acquiring the sought-after item itself, and by re-selling
it, making a profit through monthly payments. We suggest that
tangible assets, as relatively liquid universal values (gold,
diamonds, art, property) support the move from initial interactions
to the creation of wealth.
CONCLUSION
The
fight against inequality involves giving people several ways of
earning a livelihood. If paid work is a way of earning money, the
wage system is only one form of subsistence. A means of subsistence
can only be tangible. Diversifying the money supply and the creation
of financial tools enabling the development of real assets appear to
us to be practical factors when faced with inequality in the
spreading of wealth. USD has a world currency is tricked by the Triffin dillema and Euro is only a political currency ..... Too Easy actions by bankers has created big troubles !!
Governments
are not able to guarantee equality between citizens, because equality
among human beings is above all a myth, we are all different but also
because equality can only be achieved to the detriment of freedom.
The Russian writer Alexander Soljenitsyne is the person behind this
splendid quote:
“Human
beings are born with different capacities, if they are free, they are
not equal. And if they are equal, they are not free.” Governments
must ensure the quality of the currency they are issuing, because in
a global world, currency is the ultimate domestic advantage. The
failure of the European single currency to generate growth and
employment is down to two main reasons:
- Greater
disparity in the rates of interest compared to those which appeared
in 2008. Before, Greece was able to borrow at the same rate as
Germany!
- Differences
in levels of taxation and productivity between countries made the
situation untenable. France will never have Germany’s fiscal
discipline, and the economy of Cyprus will always be less productive
than the Dutch economy. The creation of a federal European state
seems an illusion to us, and if this does materialise it won’t be
without social and political suffering. The examples of America and
the Soviet Union are proof of this.
By
creating a currency with an enormous borrowing capability, European
governments thought of profit above all else, and profit is often
linked to dishonesty.
“Money
is a good servant but a bad master”, goes the saying. Neither a
value, nor a debt, money must be a guarantee of the economic and
social equity. The exponential increase in world population, but also
the aging of social classes in the West must bring us to innovate in
order to maintain a reasonable standard of living. The continued production
of precious metal ensured the wealth of Kingdoms above all else.
Consequently,
we are able to learn from ancient societies’ understanding of
monetary diversity in the quality of transactions, by retaining the
social interest of wealth inherited from the 18th
century, so that the financial industry is able to offer a new money
supply adapted to the challenges of the 21st
century.
Michael J.P. LAURENT
michael.jp.laurent@protonmail.com
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HARARI Yuval Noah - Homo Deus : a brief history of tomorrow.
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LA CROIX David . - A theory of economic growth : dynamics and
policy in overlapping generations. - Cambridge University Press,
2002, 373 pages.
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KEYNES John Maynard – Theorie Generale de l Emploi, de l intérêt
et de la monnaie. - Payot, 1988, 388 pages
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