Letter from Lhasa, number 381. Our currency?! Their currency!
by Roberto Abraham Scaruffi
Saba, M., Moneta Nostra, Centro Studi Monetari, Milan, Italy, 2009.
firstname.lastname@example.org, Frottole e illusioni sul tema del signoraggio, http://www.econoliberal.it, December 2010.
(email@example.com December 2009)
(Saba 2009) is an impressionist and intentionally deceitful book using non-understood historical events, and just mixing them for simulating some theoretical base for its claims, as well as non-understood monetary, and other technical, mechanisms for political or para-political propaganda. There are government-sponsored currents disinforming factions of self-defining not-conformist people, claiming that money be just an illusion so it could and should be freely spent, while it be not freely spent for keeping people in poverty.
Of course, money is variously manipulated for power reasons, although the problems be not those claimed from these agitprops of the Public Super-Expenditure Party.
If a Prince coins currency founded on gold, first he takes gold from people and later he coins and prints currency. If a Prince imposes fiat money, which does not need any more to be fully covered from gold or other precious metal or material, he uses the coined or printed currency for his and his government’s expenditure.
Is there any real difference? No there is not. Since it is not possible just printing currency for covering the Prince’s and government’s expenditure, there is anyway taxation. Finally, it is always people paying with goods and services. People, current people and government people [the Prince] do not eat and consumes coins and banknotes. It eats and consumes goods and services. The only function of the money is that of intermediary. A barter economy would be excessively complicated.
The author is a banal chap full of opportunistic stereotypes. He does not understand how government [what in continental Europe is called “State”] work, how society work, and even less how economy work. He pretends to be an iconoclastic chap, a debunker, while he is actually subjected to current propagandist frames. He is an admirer of Di Pietro [one of the Carabinieri-NATO secret agents activated for the 1992-93 Great Purge in Italy, indispensable for promoting super-corrupted Statesmen/women and realizing the Privatizations’ Great Fraud, and so for finally destructuring the Italian economic system] and other servile and corrupted clowns at power service. What a debunker! Allow us to avoid discussing about such rubbish here! Secret Police disservices, alias government/power, activate their covert agents, as well as whatever other bureaucracy, private companies too, when real power needs that for its insanities and crimes. What a great debunker is the author of (Saba 2009)! Secret Police disservices and magistracy just obey government, and specifically real government alias powers and power. Cheaters, or naive people, claim State/government apparatuses have any autonomy from power and so they could be tools of an imaginary ‘people’. Secret Police disservices and magistracy are just at Prince [State/government/power] service. It pays, and even a lot, them, and it also covers the personal corruption of its own members. They have just to obey. When they seem not to obey, or to be against, it is only because either they are leading clandestine operations cannot publicly be confessed or they take orders from higher, more powerful, powers. Government has a hierarchical structure with command chains. Cheaters deceive about that. Ignorant [even only about these matters] people simply do not understand that.
Seigniorage is the rent of the Prince. The author suggests a general monetary reform where seigniorage ...go on being taken from the Prince!!! What a reform!!! A real gattopardo “revolution”! With a ‘public’ expenditure taking even more than 50% GNP, seigniorage just contributes to it. Taxpayers pay anyway for this Prince expenditure for itself and its clients. Seigniorage is the difference between the material cost the money, in its various forms [coins and banknotes, while electronic money is nearly without costs], and its nominal value. Of course when and if fractions of money are withdrawn from circulation, there is negative segniorage, a segniorage with a negative sign relatively to the quantity of withdrawn money.
1. For the author, since there is, in Italy, a 2% of reserve requirement ratio, as a consequence of that, banks would create new money for 48 times the amount of each deposit. For him, fractional-reserve is a fraud and it is subversive. Of course! He claims that money can be freely created! He claims that credit could be infinitely created and so whatever enterprise financed. Actually, economy does not work in this way. People do not eat money. They need food. The author even claims that money is really infinitely created and that, when it be not, that be just for some evil purpose of power. Actually, it is everything different and more complex.
2. For the author, there would be no real public debt if seigniorage were taken from the Treasury Ministry. In practice, for the author, public debt consists of funds in some way expropriated for the benefit of mysterious private owners or controllers, or de facto controllers, of the Bank of Italy. For the author, even taxation would be a fraud. For him, if government needed money, it might just emit it. While he claims that money be a free good and taxation useless, he’d pretend taxation on credits. In such a case, creditor should pay a higher interest rate. Ah, no, for him it is not necessary to reimburse a debt, so not even to pay interests, because money is freely generated. He moves constantly from a level to another and just he is contradicted he explodes is nervous breakdowns. Observe him in debates. He is not even good as a demagogue. The absence of any ground for his claims makes him easily panic.
The Italian government frequently spends more than 50% GNP for its wastes and its clients. Taxation and seigniorage, plus public debt of course, and government debts de facto not paid to creditors, and various expropriations as pension funds variously stolen from government and its clients, finance government expenditure. Public debt [the official one] is about 133% GNP. Monetary circulation [part of which is seigniorage - government needs also to coin, print and replace coins and banknotes; from the other side coins and banknotes variously destroyed are, deducted their material cost, additional government seigniorage because they do not need to be ‘reimbursed’] is a continuously changing quantity, according to the economy’s needs. Only part of this quantity is seigniorage, although already spent for government expenditures.
The author suggest that since banks create money from nothing, and this money created from nothing be immediately a profit, whatever interest on credits be usury. This oddness is connected to his theory that money come from nothing. He constantly claims that, just one deposit money into a bank account, the bank get both the material money and its accounting registration so, for him, a double quantity of money. He does not understand basic accounting principles, evidently. If I lend a car to a company renting cars, it gets one car, not two. He equally “theorizes” that just bank accord a credit, that be money creation. In part, it is such, in part it is not. If it were so easy, a bank could accord infinite credit to itself so producing infinite quantities of money. However, if a bank is systematically not solvable, it may rapidly incur in bankruptcy. It is not sufficient to have that 2%, or x%, in fractional reserves by the Central Bank. When you go to your cash dispenser, you need to find the money you need. Of course that will change with a 100% electronic money system, although also in that case there would be compensations among banks. Even electronic money obeys to rules. It cannot be freely created by a bank just free putting numbers in its databases.
The author preaches about crimes of imperialist powers and interests. What a novelty! That does not change the fact that he do not understand monetary mechanisms.
Whatever the world power hierarchies, actually those who have created prosperous and competitive economies have been the so-called Developmental States. These are governments having accepted current parameters, alias constraints, and, exploiting them, have created competition relatively to the same world powers and hierarchies they have accepted. While all the governments having simulated opposition to the world powers and hierarchies have done and are doing that only for masking their ineptitude. Not casually, they are still plunging into growing non-competitiveness and poverty. That is certainly too difficult to understand for the stereotyped reasoning and arguing of the author. Monetary trick are inside the dependency spiral illogical logic.
Complaining is a propagandist technique for preserving and justifying underdevelopment, or dependent or limited development. There are centres creating a climate of complaint about “imperialist oppression and exploitation” instead of looking for solutions which inevitably are inside the actual world context. The so-called Developmental States have exploited imperialist and inter-imperialist contradictions and contingencies for successfully promoting projects of real development, while the States/governments of, for instance, the Third World ‘movement’ just denounced ...their incapability to promote some real development and prosperity. Governments/States as Italy and Greece, a lot of others too, are not different. The ones built and build, while the others complained and preserved their corrupted and predatory governments and oligarchies. Compare the starting points of Korea and Brazil. The first became an economic and technological power. The second (a country of inept, ignorant, corrupted and arrogant chaps and oligarchies) is plunging into underdevelopment.
(Saba 2009) deceptively claims that just a bank concedes a credit it creates money from nothing and that it [the same credit], just detracted what deposited as central bank reserves, be a bank’s profit. For (Saba 2009), the taxation of these for-him-enormous profits would permit to reimburse the greatest public debt and even to finance enormous public expenditures.
Not only. For (Saba 2009), a government currency would permit to suppress taxation. Now he would like to increase it, now he would like to suppress it. These are the pathologies of bank-phobia.
For him, lying, now government borrows money from private banks. They print it, and they borrow it to government, he claims. Actually, even when central banks are not formally government property, their profits, overall seigniorage, goes to government/State. Clearly, cheaters refuse to report to their epigones what is written in central banks’ budgets and in legislation on these matters. If he refers to the fact that, in contexts of public super-debt, banks buy public debt bonds, this is a pathology deriving from public debt. Banks find more profitable to buy public debt bonds than lending money to companies. When public debt depresses the economy, the therapy is reimbursing it. Excessive spending is the problem, not the solution!
On the contrary, in practice, for him, government should finance public expenditure just printing money, waste-paper-currency/money!, and creating money from nothing according credits to everybody. This is the cheaters’ ‘theory’ that credit creates real money (which can actually be created only from central banks), instead of just a flexible and additional ventilation for the circulation needs at bank risk, if the central bank do not later cover these risks if there are bottlenecks. A bank cannot find the money for its daily needs incurs in bankruptcy. In addition, this bank-creation of monetary base verifies under Central Bank control. Banks are risk-avoiding institutions.
Coherently with these deliria, for (Saba 2009) whatever bank interest rate on its credits is usury, as well as it would be abusive to refuse a credit requested from a subject to a bank. If a customer does not reimburse his/her debts to a bank [credit accorded to him/her], for (Saba 2009) the bank has no losses because the bank previously created this money from nothing. (Saba 2009) claims that a bank according a credit gives imaginary money to its customer, imaginary money which becomes real when the received credit, the debt, is reimbursed from the client. In practise for him, the customers receives no money while he/she’ll reimburse it. Some hundred people believe such stupidities.
(Saba 2009) is clearly in bad faith. He is a professional cheater at the service of the Public Super-Expenditure Party [government bureaucracies wanting infinitely expand expenditure and taxation]. The few people believing him, and other professional cheaters as him, simply are ignorant subjects not understanding basic accounting principles.
(Saba 2009) never explains and discusses the technical mechanism for justifying its deliria. Typical propagandistic technique, just (Saba 2009) proposes one of its deceptions it ‘justifies’ them talking about something else. (Saba 2009) is just deceptive propaganda and clearly identifiable as such.
The banking system is generally affluent and powerful?! There are other reasons, not surely “the money created from nothing”. This [“the money created from nothing”] is just para-fascist/communist propaganda, at predatory interests’ and predatory powers’ service, for deceiving fanatic and idiotic subjects. There are also banks and banking systems frequently collapsing or in need to be subsidized with public money, so with other people money. That would not happen if money could be infinitely created from nothing. Money is a commodity as whatever other one.
For the author, capital is not made of goods/merchandises, but it is magically generated only when these goods/merchandises are transformed, and also multiplied, using pieces of paper. His misunderstandings and cheatings are going on.
(Saba 2009) constantly does digressions for trying masking the absence of whatever technical basis for its claims. Adding new nonsense does not change that all these claims about money, confused with wealth [so to be submitted to taxation, according to (Saba 2009)], magically created from each bank be without any ground.
When a bank grants a credit, it puts in its budget more credits and more debts, for the same identical amount. Differences go into interests’ accounts. So that finally there be not any difference in the accounting books or software. Credits [in the active side] are what the bank needs to recover from its clients. Debs [in the passive side] are what the bank puts on accounts at disposal of its clients. The former ones are active and the latter ones passive. When the client withdraws the sums at his/her disposal, the debts of the bank decrease as well as the active side of its cash account decreases. In the double entry system, what there is in the active side there is in the passive one. Differences, about debts and credits, are relative to what is put in interests’ accounts [or eventually in losses accounts]. Roughly, the difference between revenues and expenses finally produces profits or losses. However, whatever recording on one side of the double entry accounting sees identical amount on the opposite side.
When a bank grants a credit, it may have not the physical amount of money. However, when the clients or the clearing houses claim their money, the bank needs to provide it. If it cannot, it becomes insolvent. Eventually, it goes in bankruptcy, if it cannot rapidly solve its lack of cash.
Where be the money created from nothing, and so becoming a profit [enormous profits, since, for (Saba 2009), the amount of the granted credits minus what deposited in reserves by the Central Bank is automatically a profit], there is only in the deceptive purposes of (Saba 2009). Credits are not profits. Profits are interests minus banking costs and looses. There is no other profit from the lending money activities of a bank.
Of course, in the bank’s ‘machine’, if a client disappears and nobody claims his/her money, this money is finally transformed in profits. At the same time, if there are credits cannot be finally cashed, they’ll be transformed in looses.
The money/profits created from nothing are just deception for naive and ignorant subjects. If one wanted to unmask the misdeeds of a bank, or of the banks, or of the banks system, they are not here.
The ‘authorities’ in this field?!
Giacinto Auriti had no competence on this field and he finally cheated those who bought his SIMEC and saw them confiscated from the fiscal police. If you sell 1 SIMEC for 1 and you buy it for 2, that is possible only until all the issued SIMEC are not converted back. Central bank seigniorage [finally given to State/government] is possible because there is a fiat currency. Seigniorage is a rent. A credit granted because the bank is convinced it will be able to face the compensations of the clearing houses is a risk. The mechanism of the money multiplier is not anyway that the bank can grant credits for the reciprocal of the percentage of fractional reserve. This is only the theoretical maximum although, in practice, the bank need avoiding going short of cash. In addition, there are the real needs of the economic system and the concrete possibility of not suffering looses. For instance, if all the banks invest all their disposable funds, minus what they need as cash, in treasury or other bonds, the deposit and money multipliers are negative.
Counterinsurgency manuals [quoted from (Saba 2009), which follow currents stereotypes and idiosyncrasies] are not sources of truth. In addition, (Saba 2009) understands what it can understand, nearly nothing about what he quotes, what is anyway irrelevant about the official goal of this work [(Saba 2009)]. To quote them is the usual propaganda/deception technique of trying impressing the reader (even more the non-reader referring to this kind of works as sure evidence that great intellectuals and experts confirm this stack of stupidities and deception!) that the author be a reliable expert.
(Saba 2009) simulates to be against State/government, and power and powers, while it actually claims more taxation and so a further expanded government, what concretely is more power for the forces, financial included, controlling government. He is doing only a dirty game.
In his rhetorical style, the author glides and scratches about over details, and mixes irrelevant facts or supposed facts. That gives the impression of a sounding and convincing arguing, while he himself does not even understand what he is writing about.
From the point of view of government and of the people, there is no difference that currency be a gold coin of a banknote. Actually, for the people it is decidedly cheaper that government issue banknotes and coins without gold backing.
The author constantly uses the populist deliria, confusing people and government, and government and people, while reality is different. Government is the Prince. The author constantly claims about recovering sovereignty, sovereignty for the Prince, because no people can have any sovereignty, nowhere, ever.
Of course, the author would like to see issued and Italian currency for better allowing government wasting additional resources and freely increasing public debt, so further deteriorating an economy already deeply and irreversibly deconstructed and annihilated, overall by and since the 1992-93 coup d’état, and connected judicial terrorism and open British Embassy-Quirinale dictatorship.
At the same time, the author is so against an issuing bank and a fiat currency that he constantly hopes for new issuing banks for and a proliferation of new currencies while technology is actually overcoming how banks and currencies are and will be. He is just a partisan of government, and local governments, free spending and free predations. He is mystifying the matter only for this goal. If a free currency is not accepted, it is useless. If it is accepted, somebody has to pay for it. Only a government-backed and -enforced fiat currency must be accepted. The author pretends to claim that wealth come from nothing and that it be just an illusion. If you do not produce anything, there is no wealth and no currency representing it! The author pretends to claim that, if you spend more, wealth, alias commodities and services, creates by itself. If you just print currency, you just create inflation.
One does not accept a currency one cannot spend. The author may also spend money, real money, his own money [no, he pretends yours!], for printing his imaginary ITN equal to one euro, if he wishes that. Personally, I’d prefer euro and I would not accept his ITNs! Why should I?!
Public debt is created spending what government has not from taxation and seigniorage. This is the source of public debt. The author just mystifies this matter too.
Cut 90% of public expenditure, and public debt will rapidly disappear and economy would be revitalised! Public debts annihilate personal and collective entrepreneurship! It is a delirium that companies be not annihilated since high taxation and public corruption, but only because they cannot get free and unlimited credit.
Saba, M., Moneta Nostra, Centro Studi Monetari, Milan, Italy, 2009.