[R-G] [BillTottenWeblog] Money Reform is Not Inflationary

[Bill Totten]

Prosperity (April 2009)


Following the press coverage this year about "quantitative easing",
it is clear that the major obstacle against our Reform is fear that
new money created by the State is always "inflationary".

Certainly, new money can be inflationary. This is so when it is
spent on the wrong thing - that is, when it is spent on short-term
consumption, rather than long-term investment (education, training,
research) and production, and when it is spent without regard to
the six policy considerations listed here:

1. Control of Capital

If we pump in billions, but billions are taken out the country by
individuals, corporations or financial institutions, then the
economy is not benefiting in the long-term!

2. Control of Imports

On what is the new money in the economy being spent? If it's on
consumption, instead of investment and production, then all it may
be doing is making the importers of cheap foreign goods wealthy! We
will be giving people money to undermine the industry of their own
country! Money will be leaving the country and doing nothing for
the long-term health of the economy.

3. Control of Borders

If we allow the newly-created jobs to be filled by imported migrant
workers, or even illegal immigrants, then there is no long-term
benefit to the economy. There has been no long-term national
investment in education, training and research. No new traineeships
or jobs for the nation's citizens have been created to ensure
long-term productivity, and any wealth generated will eventually be
taken out the country.

4. Control of Welfare

Money pumped into the economy via the Benefits system - say a
"Citizens Income" - can backfire if you allow these benefits to be
given to people who are not national citizens and who will take the
money out the country. Similarly, unless conditions are in place to
limit the Benefits to national citizens, then such a generous
programme will simply encourage welfare immigration, making the
matter worse.

5. Lower Taxes

Lower taxes enable people to keep more of their own money and - we
trust - invest it for their long-term interests (children's
education, enterprise, pension) which will also benefit the economy.

6. Encourage Savings

This enables people to have a cushion to see themselves - and the
economy - through the bad times. This also ensures the nation's
banks have long-term healthy balance sheets. Savings can be
encouraged by not penalising them via the tax system.

Spent Properly, Investment Will Lower Costs!

The following was circulated by Stephen Zarlenga of the American
Monetary Institute - www.monetary.org - on 4 March 2009:



    Whether new money spent into circulation is inflationary or not
will depend in large part on where and how it is spent. Direct it
into warfare or pushing up asset prices as in a real estate or a
stock market bubble, and it will be inflationary, at least in the
areas into which it is directed, without production.

    But direct it into creating goods and services, and it's not
necessarily inflationary because you are left with the goods and
services, and they will tend to keep prices down.

    Directed into infrastructure, it makes everyone in the society
more efficient and effective, again putting pressure to keep any
inflation down.

    The classic example is the Erie Canal which lowered the cost of
shipping goods from the East Coast to Buffalo (then the midwest)
from over $100 per ton down to $9 or $11 per ton.

    Look what good infrastructure would have saved in New Orleans!
Or in Minneapolis, where people who had used that bridge before it
fell down probably lost two hours a day getting back and forth to
work. Even directed largely into research and it's not necessarily
inflationary when you consider that investing in NASA Space Agency
has given us all the modern computerization and communications our
lives have come to depend on. That just took a decade and a half.

    In our American Monetary Act, the task of guarding against
inflation is closely monitored and in the hands of the monetary
authority. It doesn't have the taxing authority, as it is presently
written - that would require tremendous political alteration; but
it does have the power to withhold substantial amounts of the money
already created, out of circulation and to stop creating more if
necessary.



http://prosperityuk.com/2009/04/money-reform-is-not-inflationary/


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