By Daniele Pace*
In dealing with this topic we
must first do a premise of clarification on the current conception of
the Fiat System by those who hold power: the banking system.
Despite the Fiat System is
based on a trust structure by the nominal value, the banking system
continues to think this kind of money, in relation to inflation, as
if it was a commodity money of medieval style, based on the intrinsic
value, thus fuelling among economists, the belief that the currency
might inflate itself depending on its quantity. The intrinsic value
of gold from centuries past is now replaced by the trust, according
to the governor Draghi[1],
and it hold up the value
of money. In this specific the problem is still different from what
is discussed in the previous chapter.[2]
Until recently, you could read
on the website of the Bank of Italy as in the past the erosion of the
precious metal in the coins in order to profit affected inflation,
decreasing the value of each individual issue. Today this
misinterpretation of inflation due to the erosion of the metal is
less and less "publicized", as to be gone from the websites
of many official banks.
This example of the erosion of
the metal in relation to inflation, very popular before the crisis,
certainly tended to the confusion between the value of one currency
and the index of consumer prices, and to justify the existence of a
central body predisposed to a strong control on inflation as the
Deutsche Bundesbank style.
In fact, in historical
reconstructions reported in several texts, including my The
Utopian Money, is revealed as the currency in the past it
had been issued in its value in two separate criteria, the one that
had a nominal value, and another that had an intrinsic value.
The first currency was the
Aristotelian numisma, in which the value was determined by law
and made many times more that intrinsic, so that was not the metal to
determine it, but the law of the state.
The second currency was
instead the commodity-money largely used when the concept of
numisma was forgotten and the value of the coins was determined by
the weight of the metal. These were the first currencies of the
Eastern concept, used in the West until the various reforms based on
the Aristotelian concept of the measure of value, adopted in Rome for
a long time and abandoned with the fall of the Empire. In this
regard, much has been said about the responsibility that had the
emperors in decreasing the metal content of their money, but in
reality, being these of value established by law, the reduction in
the quantity of the metal had no impact on the coinage, and as well
on inflation that has no ties to the money supply. The real monetary
problem of the late empire was the monetary crunch and not the
reduction of the metal content.
Economists today have not yet
been able to give a definition of money but only to determine the
characteristics. Definitions however are very different from each
other depending on the economic current of reference, although the
introduction of the Euro would have to provide valid information to
define the real nature of money. Economists instead seem stuck on
concepts that do not consider the social and legal aspects that
modern money brings, aspects very well detailed instead by Professor
Auriti at the University of Teramo.
The introduction of the Euro,
by means of a law, in no way encouraged the academics of the Faculty
of Economics, closed in their economic principles influenced by
Anglo-Saxon literature that by its nature can not, in the case of the
economy, to include social concepts and legal in these studies.
So the understanding of modern
money, that currency which economists would able to inflate with
increasing the money supply, remained at concepts conceived during
the regimes of Gold Standard and commodity money, thus excluding the
conventional currency established by law, the same law that, with a
stroke of the pen, has seen the birth of the Euro. The jurisprudence
has established, but in this case it is more appropriate to say
“imposed”, the Convention-Euro currency.
The question is: may a
convention inflate itself?
What is the difference between
numisma-money in antiquity, the gold of the following centuries, and
today's currency Fiat trust, and what its relationship with
inflation?
We can say that the
numisma-money and the modern Fiat money are created by law, without
any relation to the material that depicts the symbol, while the
commodity-money gold had a behaviour absolutely equal to any goods
with fluctuating value.
While in the numisma-money
the metal was only the media to represent the value, as is the paper
and the digital number of the computer in the modern Fiat money,
in that golden the metal was the intrinsic value of the coin. So this
can only be regarded as a commodity, while the other two currencies
are laid down in the value of the law that creates a convention. The
legal agreement can not be subject to inflation and the fundamental
error of the economists, past and current, was to define money as a
commodity, as well as today continues to discuss the banking system.
This is in the case of inflation than in the loan interest.
But as now revealed with the
introduction of the Fiat system, and how exposed two millennia ago by
Aristotle, the currency can not be a commodity, but only a convention
to be set by law, the Aristotelian nomos completed in thought
by Giacinto Auriti.[3]
Here then is the fundamental
error in the approach to money is still perpetrated in using
primarily economic models designed during the Gold Standard, now
superseded by a new monetary model, and secondly by treating money as
if it was a commodity and not a social convention whose value and the
creation of which are established by law.
Money can not be a commodity
even if there are similarities of form. As to the substance, but
particularly his creation, there are mechanisms and processes not
only different, but also belong to fields which have nothing to do
with each other.
The similarities of form are
in the possibility of exchange, in the measurement of a value and
use-value, but the creation of the goods and the money come in and
follow processes, one material, the other spiritual, which between
they are not associated.
The commodity is an economic
good, natural or processed, exchangeable for other goods, which has
need of an economic business-cycle related to a time and a real
working production and use value.
Even natural goods need time
and resources. The wood for example needs the growth of the tree and
the assimilation of nutrients, that is labour and natural energy. The
oil needs of chemical processes and times geologically large. Any
material good produced by man needs a production cycle equally to the
natural cycles of the earth.
The modern money on the
contrary, is yes exchangeable for goods and has a use-value being a
medium of exchange, but it does not need of economic business-cycles
that employ time and work because it is time, spirit and Convention,
that is jurisprudence. It has no value as a primary human need and
not as an expression of human work, but as an expression of social
convention, which does not require "labour" but legal rule.
Money can not be a commodity as it lacks to capture the specific
use-value that characterise a good. It has a purchasing power, which
is its use-value, the expected timing of its use as a medium of
exchange and measure of the value in the exchange. But it is
convention as it is not the material element to confer it, but the
social convention, the agreement between the parties, now imposed by
law, that it has that value. To exist today, as it was in the times
of numisma, only it needs the social convention, sets, or
consensual. Paper and ink, then spirit and law. The material that
represents the value does not matter, and therefore the economic
business-cycle from which is made, when there is a convention, as
such as today the money is created for 90 percent, by computerized
records intangible.
It is therefore a social
creation of value over time, stable and shared, which has an
instrumental function, created by the human spirit, the creative
mind, thus made simply the law. There is not an economic
business-cycle, there is not material or work.
The difference with the goods
in the process of money creation is evident. This despite having a
utilitarian use in the exchange, it has not the consumption /
enjoyment "classic" proper of goods. A social convention
imposed or consensual, created by the mind and / or the law can not
inflate itself in any way, and its value is determined arbitrarily
and not according to the alleged "natural laws".
In fact its behaviour in the
circulation is completely different from any other commodity.[4]
The modern economy would like
a relationship between money supply and inflation, apparently as in
the case of an erosion of the metal, not coincidentally making
reference time ago on the website of the Bank of Italy. Today this
reference has disappeared but it remains a kind of track when you try
to tie the modern conventional currency to inflation.
A note or a digital writing
however, can not diminish their value as this is conventionally
written. They can certainly buy less goods than in the past, but as a
result of higher prices and not to the reduction of their value,
which remains fixed.
This fixed value will be
highlighted in the continuation of this work with the dissertation on
the Fisher equation in which you would like to demonstrate a
relationship between inflation and money supply[5].
For now it is sufficient to break the causal and direct link between
the increase in the money supply and inflation that the equation
would like to demonstrate and that the agreement imposed by the state
already denies it being invariable.
The money in fact in the past
it was accepted as customary, defined then as legal induced value by
Professor Auriti[3], that the state converts in
Convention through law. Once granted that a single banknote, and
today a digital number, has a determined value X, this can not be
modified because the sum of the banknotes, or of digital numbers,
varies. This will necessarily be the sum of the values of X, which
remain constant as the value of a banknote, which remains a legal
certificate for all purposes, not variable, as well as the digital
number of computer with which it dispenses bank credit, that is the
promise to request monetary liquidity in the same species from the
bank.
Extract from: The Fruiterer Conspiracy
Extract from: The Fruiterer Conspiracy
*Daniele Pace - Writer and independent researcher - Author of The Fruiterer Conspiracy and The Utopian Money
[1] Archive of the Bank
of Italy, The culture of monetary stability Unit today. Speech by
Mario Draghi, April 4, 2001
(http://www.bancaditalia.it/interventi/integov/2011/draghi-040411/Inaugurazione_Mostra_04_04_2001.pdf
)
[2] Price inflation and currency devaluation,
pag. 14
[3] The utopian country,
Giacinto Auriti, free PDF,
(http://www.signoraggio.com/auriti/ilpaesedellutopia_auriti.pdf)
[4] Pre-existence of V and T in the exchange: Store of Value and circulation,
pag. 61
[5] PART THREE, pag. 39
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