Let's End the Money Racket (Part II)

What Would a True Gold or Silver Standard Look Like?

Knowing that an institution is fundamentally flawed may seem like a good enough reason to want to eradicate it, but I would caution you to consider first how it came to be and why it still exists before you begin looking for ways to destroy it. This is especially true when so many lives depend on the continued existence of the institution. Indeed, it was in my desire to answer these questions that Cambitas - The Story of Real Money came to fruition.

In the end, it is easy to take the moral high-ground when your own livelihood does not depend on the activity that you repudiate. This, by the way, was certainly the attitude taken by many a Union supporter when Lincoln invaded the seceded South in 1861. Then too, it was not as if we were unaware that we were making a pact with the devil, so to speak, at our nation’s founding.

The Migration or Importation of such Persons as any of the States now existing shall think proper to admit, shall not be prohibited by the Congress prior to the Year one thousand eight hundred and eight, but a Tax or duty may be imposed on such Importation, not exceeding ten dollars for each Person.

The Citizenry of the United States of America. 1789.
Constitution of the United States of America. Article I, Section 9, § 1.

Alas, if We, the People, were to succeed as a unified body of States that could stand strong against the continuing tyranny of the British empire, we would be compelled to enter into a compromise with those whose livelihoods depended on the continuance of the slave trade.¹

Though slavery had existed in the North since before we seceded from Great Britain, it was not an institution vital to the existence of the North as a whole, and several States had already banned it even before our Constitution was ratified into law. Even within these States, however, the eradication was made gradual so that a minimum of economic disruption would transpire. Indeed, everyone’s situation was different, and a sudden break in the interdependency of the master-slave relationship could cause just as much economic damage on the one side as on the other.

In the end Lincoln’s goal was to prevent secession, not bring an end to plantation slavery. In contrast, the goal of the Republican Party was clearly to prevent the spread of slavery into those territories that had not yet become States. Indeed, the end of plantation slavery was, but a fortuitous outcome of a devastating war that transformed America in ways that far exceeded the elimination of plantation slavery.

And yes, there were Abolitionists in both the North and South, and there were “Black” slave masters about whom we are seemingly never told. What is more, military conscription — what went against the very principles on which our nation was founded — was introduced for the first time in America on both sides of the political and economic divide. Even more disparaging is that racial prejudice is still with us today and has since taken on a whole new dimension. And, if this were not bad enough, cross-border, human trafficking has re-emerged as a thriving black market to replace the cross-Atlantic slave trade that many of our founding fathers clearly denounced.

Still, the transformation of America was much larger.

Alas, survival and propagation lies at the foundation of all life — human and otherwise. And, we are born into a world of established social thought and behavior that we begin learning at a very early age. Our understanding of right and wrong is learned mostly through observation and interaction; only later, as we become intellectually more competent, do we begin to conceptualize what we have already internalized as habit.² And, so it is with our most basic understanding of money.

Indeed, money requires little explanation that we have not already acquired through observation and eventual interaction with our first parental allowance. Accordingly, we no more question the origin of money than we question the origin of our own language. That money is a measure of worth and store of value, and that it is used in exchange to obtain the property of others that we can then call our own, is a matter of observable fact and realizable experience that we soon take to heart. Indeed, this is all that money once was, and it is all that it ever should be with one important nuance that has developed over time and not without an important struggle of its own — the difference between money-in-exchange and money-in-use. Let us pause for a moment and make sure that this idea is clear in our minds before we move forward.

Real money is dug out of the ground. It is what Roy Sebag calls an energy embodiment.³ It takes much work to extract, refine, and mint real money, and its worth is determined just like any other good or service sold on the open market whose value is determined by the laws of supply and demand.

It is sold into the economy in exchange for real goods and services needed to sustain those who extract, refine, mint, and eventually supply it to the market. It is blood, sweat, and tears traded in exchange for blood, sweat, and tears. It is real contribution to the lives of those who sustain those who supply it so that all can benefit from its use.

It is, indeed, real property that endures even better than the land from which it is extracted. In trade, we exchange its ownership for the ownership of other goods; and in the case of services, it is exchanged for acts performed on behalf of those who relinquish their right of its ownership.

It is property without title. The one who holds it, is the one who owns it, and those who take it from the one who holds it without his permission is a thief and must be punished to help insure that his theft is not repeated.

Although its owner has the exclusive right to its use, because entire communities depend on its circulation for their economic survival, it can also be considered the collective property of the commonwealth in which it circulates. It is under this pretense that governments in the past have often assumed control of its supply. In an effort to dissuade you of such pretense consider how we use language.

The language of a people is owned by those who speak it. There is no need for government to regulate language, as there is already plenty of incentive for everyone to abide by its rules. Those with the best mastery of a language will be heard and understood by everyone. In turn, they will likely enjoy the largest audience, and become the richest among us in their eloquence. Those with little mastery of their own language will not be heard except among their closest friends and family, and likely find themselves isolated, in part, from those with much better mastery. Important in this analysis is that money-in-exchange is simultaneously the collective property of everyone, and that each of us who holds it has an exclusive right to its use. The title to money-in-exchange is intrinsic; the title of ownership is transferred automatically with the money that is exchanged.

Money-in-use, on the other hand, is money-in-exchange whose title we claim for ourselves while relinquishing its use. Money-in-use requires a contract between the lender and the borrower.

Entering into a contract with the lender has no effect on the supply of money, but it can effect its overall price by driving up the demand for goods and services that the borrower purchases, and that the lender would have otherwise foregone. Higher prices can lead to greater supply, and the more goods and services that can be purchased with the same amount of money means an increase in the value of money, and its price relative to all other goods and services in general. This, of course, is a far too complex issue to do any justice here, but I wanted to acknowledge it in passing so as to allay any fears that I have been negligent in my consideration.

Once an owner of money is recognized as a willing lender, he is likely to be approached by other interested borrowers. This induces competition for a scarce resource, and an incentive to charge a lending fee. After all, relinquishing the right-of-use of one’s money to another, means tying one’s own hands until the money borrowed is returned. Then too, there is the risk that it will never be returned, and how would the lender feel then? In order to insure that money-in-use is lent and borrowed in the best way possible, the borrower and lender agree on a time-frame and some agreed amount. Whereupon they sign a contract. The contract is necessary to account for proper title of the money, and the time to maturity of the loan (when the money must be paid back) helps the lender to keep track of his funds and the borrower to be prudent in what he borrows.

The result of many of these transactions with many different borrowers and lenders constitutes, of course, a market for lent (supply) and borrowed (demand) funds whose price is the rate of interest on what is traded across time. This resulting price is not the price (value) of money-in-exchange mind you; rather, it is the price of money-in-use — a separate market unto itself with its own supply and demand curves and another kind of market logic.

In a market with real money the time-value of money gets turned on its head.

Under the current system of statutory counterfeit interest rates are used to discount future income and expense flows, because it is believed that money in hand is worth more than anyone’s kept promise in the future. Because of the inflation that statutory counterfeit inexorably brings about, the time-value of money is difficult to refute. In a growing economy with real money, however, the quantity and quality of future goods production almost certainly rises faster than the quantity and quality of the money supply. This means that there is proportionately less money chasing after many more goods and services. As a result, the value of the money used to consummate the trade of future goods and services rises. Indeed, the incentive to discount is greatly reduced.

In contrast, the incentive to save is greatly increased, and with more real saving there can be more real investment — the kind of investment that endures as opposed to what is used to get rich quick through the transfer of real wealth from the productive many to the corrupt wealthy who would live off the blood, sweat, and tears of others.

Now, all who are wealthy are not corrupt, but the closer that you come to the corrupt — those who lend statutory counterfeit into existence (bankers), those who authorize its issue (government), and those first in line to borrow and spend it into circulation (large corporations) — the more likely you are to become corrupt.

In liberty,

Roddy A. Stegemann, First Hill, Seattle 98104
Author of Mount Cambitas - The Story of Real Money and “A Call to the Restoration of Monetary Order”.

p.s. A thorough outline of Volume I of Mount Cambitas is now available. I have set aside the Scheduling page until I can further refine its online presentation. I fear that it is too complicated for most without knowledge of how the page is constructed. All further usage of the current scheduling page will have to be achieved by special request and through private email.

1. In early March of 1807 President Thomas Jefferson signed into law the Act to Prohibit the Importation of Slaves which put an end to the cross-Atlantic slave trade. Prohibiting this trade eliminated what was probably the most egregious aspects of inhumanity associated with plantation slavery. This said, the invention and commercial sale of the cotton gin in 1793 and 1794, respectively, made the harvesting of short-grain cotton West of the Appalachian Mountains profitable, on the one hand, and made — short of secession — any prospect of legally eradicating slavery in the United States of America at the national level highly unlikely, on the other hand. This new technology so improved the profitability of plantation slavery that it was now politically impossible to eradicate it.

2. Frank Ochmann. 2008. Die gefühlte Moral: Warum wir Gut und Böse unterscheiden können. Berlin: Ullstein Buchverlage GmBH.

In translation: Felt Morality: What makes us able to distinguish between right and wrong.

3. Roy Sebag. 2022. The Natural Order of Money. Canada: Chelsea Green Publishing (2023).