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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Natural Money

Currencies / Fiat Currency Apr 24, 2012 - 05:40 PM GMT

By: Christopher_Quigley

Currencies Best Financial Markets Analysis ArticleThe Story of Robinson Crusoe and guest:

"If there were a monetary system on this island and I, as a shipwrecked traveller needed a
loan, I should have to apply to a money-lender for money to buy the things which you have
just lent me without interest. But a money-lender has not to worry about rats moths, rust
and roof-repairing, so I could not have taken up the position towards him that I have taken
up towards you. The loss inseparable from the ownership of goods is born, not by money-lenders, but by those who have to store the goods. The money-lender is free from such cares and is unmoved by the ingenious arguments that found the joints in your armour. You did not nail up your chest of buckskins when I refused to pay interest; the nature of your
capital made you willing to continue the negotiations. Not so the money-capitalist; he would
bang the door of his strong room before my face if I announced that I would pay no
interest. Yet I do not need the money itself, I need it only to buy buckskins."



In his classic economic treatise "The Natural Economic Order", written in 1929, Silvio Gisell
attempted to explain to his audience that many of the economic ills that were befalling the world
at the time were not due to problems with demand and supply, as such, but with an erroneous
understanding of money. He used the simple Robinson Crusoe anecdote above to show that a
society which insists on "interest money to "allow" exchange" was operating on an erroneous
paradigm.

In his view society had allowed banking dynasties to obtain control of not only the money supply
but also the mental understanding of what money actually was. He, like the American economist
E. C. Riegel, believed money was perhaps the greatest social invention of all time. However,
misunderstanding had allowed an elite take over this invention for their selfish gain. Thus Gisell
observed that in the midst of plenty society was starving. (We must remember that the book was
written during the "great depression").

Gisell tried to educate his peers into the inner workings of money. He spent his life explaining
that money was in essence an agreement of mutual reciprocity. He understood that the only
entities who could naturally issue money were those that gave value in exchange. Thus
governments could never issue money; they could only exploit its natural bounty. To him money
was goods and goods exchanged was money. He believed that the best money reflected the true
nature of goods. He was therefore against "interest money". He explained that if the money used
by a society was "better" than the goods exchanged in that society the holders of money would
be in a stronger position than those who worked and slaved to create the goods and services that
gave money value. Thus he saw through to the essential failure within general financial
comprehension in vogue at that time. Unfortunately this misunderstanding continues in
contemporary society and is at the heart of the current financial crisis that is bringing the
European Union to its knees.

Natural Free Money:



To explain his ideas on natural money Gisell promoted the idea for the issuance of "free money"
by governments. By "free" he meant that the money was owned by the people and not banking
elites. An example of this money is set out above and can be referenced from the link below.

To him efficient money was all about active circulation. To motivate circulation, and prevent
hoarding, Gisell propounded that for money to be valid it should require attachment of a stamp,
payable by the holder (be it the citizen or a banking institution), each week, at the rate of 5% per
annum. This system meant that money "depreciated" by one twentieth each year. This "negative
cost" thus ensured that the holders of money were not is a more powerful position than that of
the holders of goods. Thus he explained that; "as the grain merchant suffered time loss due to
wastage, so too should the holder of money suffer loss through natural depreciation".

We all know that money, in addition to being a medium of exchange, should also be a store of
value. Gisell pointed out that at any point the holder of the free money could opt to buy gold or
silver. However, this commodity holder he argued, would soon find out this "store" of wealth is
not really a store at all. The owner would have to pay to insure and guard his gold and silver.
Thus he brilliantly argued that even the classical "store of wealth" concept of money had a time
wastage cost element. In one fell swoop Gisell had cut through the "store of value" fallacy of
money. Namely he outlined that the only true store of value in money was "potential reciprocity
of exchange" and this reciprocity was contingent on an efficiently functioning market system
within a stable society. The "system" was not the money; the system was the functioning
exchange. This was the truth then. This is the truth now. However, this truth regarding money
has been blinded from the general public. The money power has conditioned the academic
fraternity into accepting an "interest" paradigm of money which places the holders and owners of
money at a distinct advantage over those who work to provide true value. Thus capital (the
earning of interest) has supplanted labour in modern exchange relationships.

Gisell powerfully articulated all through his life that once this "essence of money value", i.e.
reciprocity of value in exchange was compromised society, which was built on such exchange,
would begin to fail. This failure he believed was at the core of the financial crisis of 1929. It is
my contention that it is also central to the economic collapse that we are experiencing in 2012.

Only when the lessons and insights of economic pioneers like Silvio Giselle, E. C. Riegel and
Clifford Douglas are fully comprehended and acted upon will our current money crisis be well
and truly solved. Until then the true cause of our problem will never be successfully
comprehended. Without such comprehension all solutions will only be temporary, ill conceived
and doomed to failure.

Money is to society as a ticket is to a rail network. The issue is not to own all the tickets and live
on the speculation of their value but to have a fully operating rail system available for the use of
society, be it citizens or businesses therein. It was Gisell's view that if banking corporations and
institutions were corrupting money, to the detriment of the greater society, then it was the moral
duty of good government to legally and administratively modify the operation of money to so
prevent this state of affairs continuing in perpetuity. He believed that if such action was not taken
society itself would continue to fail.

Today we are at this juncture. Our options are simple. Do we rectify money or wreck society
through complicity with InstBars (Institutional Barbarians) who know exactly what they are
doing but thrive on general ignorance and conditioning. It is time to make money natural again.

Reference:
The Natural Economic Order by Silvio Gesell, 1929.
http://wikilivres.info/wiki/The_Natural_Economic_Order

By Christopher M. Quigley

B.Sc., M.M.I.I. Grad., M.A.

http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin and holds a Batchelor Degree in Accounting and Management from Trinity College/College of Commerce, Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the Stock Market in 1989. in Belmont, California where he lived for 6 years. He developed the Wealthbuilder investment and trading course over the last decade as a result of research, study, experience and successful application. This course marries Fundamental Analysis with Technical Analysis and focuses on 3 specific approaches. Namely: Momentum, Value and Pension Strategies.

Mr. Quigley is now based in Dublin, Ireland and Tampa Bay, Florida.

© 2012 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

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