Certain trends mark the evolution of currency. These trends have been in each successive generation of the common intermediate product by which the producers have exchanged their goods and services. The trend, as always, has been toward a common intermediate product that was durable in its production time content and less expensive to produce and use.

Costs of Currencies

Cost is one of the factors determining what products are used as the common intermediate products. The cost of a currency can be broken down into

the production cost,
the direct usage cost, and
the indirect usage cost.

The official and unofficial currency, which the producers end up using as the common intermediate product, is the one that cost them the least. The cost is the vector sum of the previous three costs. The cost is measured in time, as the following shows.

Production Costs

The analysis of the production cost of a currency should not be measured in terms of the common intermediate product itself. This is analogous to defining something in terms of itself. Sadly, that is how the politicians define the cost of producing coinage or paper currency.

Rather, the production cost of should be measured in the amount of human resources that the production process consumes. Clearly, a currency that requires 5 percent of the population's total production time is more expensive than a currency that requires only .001 percent of the population's time, energy, and matter. As will be repeated further on, the arguments for returning to a gold standard to back our currency will be counter-productive. Increased amount of human resources will be diverted from other goods and services to mine the gold.

In reality, we never left the gold standard. Gold may have been removed from the list of official U.S. currencies. However, the inflxationary obsession of people to own and hoard gold in the early eighties indicate that it was never removed as a common intermediate product to save some of their production time. The obsession was inflationary because currency was used less and less to fund production in more useful goods and services.

Why Produce Currency In the First Place?

When discussing the production cost of a currency, it must be kept in mind why a system of production needs currency. Currency facilitates production by providing a medium through which producers apart in distance and in time can trade their time at production. An absence of a common intermediate product burdens the system of production with a barter-based economy, an economy lacking the benefits of the penultimate time-saving innovation of humanity.

For a system to have the benefits of currency, the common intermediate product must be kept constant or current in its production time content. It must be neither deflated or inflated. If the currency suffers inflation, the producers avoid it like the plague and the system therefore does not have the benefits of a common intermediate product. A currency suffers inflation when its quantity increases relative to the amount of the other products (goods and services.) As noted before, currency inflation can also result without the actual quantity of currency increasing, e.g., if the other products or production decreases.

On the other hand, a system of production does not have the production-lubricating benefits of a common intermediate product if the currency suffers from deflation. Deflation occurs when the amount of the common intermediate product does not correspondingly increase with the rest of production. Consequently, the increased value of the currency prompts people to withhold it from the production system thereby constipating production. A de factor barter system again occurs.

Blood Pressure and Destructive Monetarism

To avoid the evils of either inflation or deflation, the production of the common intermediate product must be kept parallel with the growth of the total system of production. In other words, the currency must be kept constant or current in its production time content. Not only as a whole but as individual units, the maintaining of time content is a must.

A system of production requires an expansion of its currency supply which parallels the growth of the production system itself. Insufficient currency growth will cause the anemic production illness that is referred to as the evils of deflation, e.g., the Great Depression of the 1930s. Retrospectively, many necronomists believe that there was insufficient currency in circulation, that the Federal Reserve did not maintain sufficient currency liquidity to lubricate production.

A system of production is like a human body which requires the bloody current of life to expand in proportion to normal bodily growth. If parallel expansion of currency doesn't occur then bodily growth will be stunted. Similarly, if a body is suddenly drained of its currency, the bodily activities will be curtailed. Low-blood pressure corresponds to the deflation within a system of production due to insufficient currency.

Inflation is high blood pressure within a system of production. This analogy agrees in principle with necronomic monetarism who argue that the money supply should be finely tuned for maximum business activity. However, necronomic monetarists attempt to change the money aggregate ahead of the rise of production rather than concurrently with the growth of production. Consequently, an economy plagued with the present form of monetarism--the Chicago School, Friedmanism--suffers chronic high blood pressure. Rather than having productive monetarism, destructive monetarism is the effect. More on this later.

If productive individuals are to avoid a stunted system of production, they need to have a common intermediate product kept constant in production time content. This requires that the quantity of currency parallel the amount of lifehours* of production time.

Producers should do more than choose a common intermediate product by which to expand the currency supply and prevent anemia. Clearly, they should choose a currency that is inexpensive to produce. The least expensive currency is one that consumes a the least amount of human time, energy, or matter. Thus, paper currency is better than gold, but not as good as electronic transfers of funds.

Direct Usage Costs

Before choosing a product to serve as a currency, the direct usage costs should be considered. Again, the cost should be determined in human resources. The relative usage costs of different currencies can be rapidly understood by comparing the human time, energy, and matter involved in paying a $100,000 debt in California from New York using gold, money, or ETF. Obviously, the latter has the least expensive direct usage cost.

Unfortunately, as the history of currency shows, low cost of productions or direct usage costs are the basis for counterfeiting the currency. The counterfeiting constitutes alteration in the product worth of the currency. The counterfeiting of currency so as to lower its product worth is not anything new, privately or publicly. The modern politicians prone to fiscal deficits are as guilty of counterfeiting the national currency as the kings of old, the kings who debased the producers' coinage with alloys to finance royal pageantry or foreign adventures.

Today, there are many public and private ways of counterfeiting the public currency. These legally recognized or unrecognized forms of counterfeiting constitute destructive usage of currency. The cost to the productive individual, disenfranchised of his production time, constitutes the indirect usage cost of a currency.

If currency is used in destructive, counter-productive busyness transactions, then the indirect costs are great. The future worth of the currency is destined to fall with the recessing production.

Indirect Usage Cost

The future worth of a currency--its indirect usage cost--is based on how it is used in a system of production. Is the common intermediate product used to promote or retard production? In terms of human costs, the inexpensive production and direct-usage cost of dollars or ETF is negated if the currencies are used to affect inflation and unemployment. Any initial savings of human resources are wasted if the producers tolerate misusage of the common intermediate products that are destructive of future production, of future product worth.

Savers, Seagrams and Steel Workers

One of the saddest thing about the 1980 recession was the how the small person was bullied into destructively using his savings. Necronomists and politicians cheerleadered the placement of savings into the hands of counter-productive bankers and financiers. As will be shown, many of these money-changers channeled the pooled capital into loans that were destructive of production. Because bankers do not distinguish between capitalizing new production and buying old, existing production, bankers destructively lend the small persons' monies. The best recent example is the $3 billion loan to Seagrams of Canada.

This loan is not to capitalize new production, but to "acquire" loan. Think of all the small people whose savings were pooled together to make a loan which will put some of them out of work. Out of work? Yes, Seagrams will streamline any acquisition to fit into its foreign profit picture, a streamlining which will necessitate unemployment. Is this an exaggeration? Is the loan going be used for capitalizing production, especially essential production? Consider the following quotation from one of the heads of Seagrams.

Mr. Bronfman has said the company is prepared to consider just about anything "except for atomic energy and steel business."

How many of those $3 billion dollars, the biggest private acquisition loan ever, came from steelworkers' savings? How many of the steelworkers will suffer because capital investment for productivity gains will not occur; acquisition loans "crowd-out" production loans. Acquisition loans drove up the prime. Acquisition loans caused steel-dependent businesses to be cash-starved and unable to purchase steel. Who's to blame? Ultimately the steelworkers are who didn't keep track of the counter-productive channels into which the bankers put the steelworkers' savings.

Many examples exist today in which various common intermediate products are destructive of future production, that is, they have an extremely high indirect usage costs. Speculating on the changing values of stocks for an inflationary return instead of investing in production is an example of a destructive misuse of currency. Speculation or gambling exacts a high indirect cost, e.g., cash-flow starved production is recessed with a concomitant rise in unemployment and in product shortages. Ultimately, the productive elements of a civilization have only themselves to blame. Naively, ignorantly, or deceitfully, the producers tolerate the destructive use of the common intermediate product. Whether the usage of any currency is regulated to be productive or allowed to be destructive is a result of insufficient education on the part of the producers.

A Note to the Gold Standard Yakkers

Segments of America cry for a return to the gold standard. They should read the "A New Cry: Bring Back Gold". The cry is not new, for historical precedents are noted. These precedents were not without arguable, dire consequences, e.g., England returning to the gold standard in the mid-1920s may have played an important role in the onset of the depression of the 1930s, domestically and internationally.

A return to the gold standard will not solve our production problems. Actually, our problems will be compounded. First of all, gold has a higher production cost than less-expensively produced currencies. Secondly, increased gold production for currency usage, in addition to industrial usage, will divert human resources away from the production of more useful goods and services. These products, most likely essential goods and services, could reduce inflationary shortages (sinflation). Thirdly, the production of gold could not keep pace with expansion of the economic system. Anemia or constipation of production would result, leading to more sinflation. Fourthly, additional production imbalances would result from people putting their busytime into pursuit of golden returns from gold's fluctuating value, from speculating for returns from the deflation/inflation of gold relative to the other products.

Gold Destabilizing Production

Proof of this sequence is not only in the past, but in the present. The sequence also shows how a product can be designated the official common intermediate product (dollars) but will be ignored in preference for a private product that seems to hold its production time value or content better than the officially-designated product. In other words, governments can designate a particular product of human production, e.g., dollars, as the official currency; however, in practical and economic reality, it is the people who determine what human product, e.g., gold, will be the functional common intermediate product by which producers exchange their goods and services. If a mismanaging government allows inflation of the official currency, then the people will seek to conserve their wealth--their accumulated production time--in some other product, thus causing deflation of the other product relative to the official currency of economic transactions.

In 1980, the American economy was not only suffering from the inflation of money in 1980, but from the deflation of gold. Gold rose in dollar value due to an insufficient amount of production; production was insufficient relative to the demand from speculators and worried people. The latter were seeking a product which would keep its production time value more constant and current than that of the politicized official currency.

Think of all the goods and services that would have been produced if people had not lost faith in the official common intermediate product. Think of the individuals and industries that took off for the gold fields as the price of gold was pushed up by speculation and fear. The price up gold was not pushed up by production demands. Think of the lost production and lost productivity elsewhere.

There is one more reason for why we should not return to a gold-standard. It is a reason more important the first four reasons. This last reason has to do with why we have inflation of the common intermediate product in the first place. It has to do with how the same corrupt and incompetent clowns will still be making policies in both politics and economics. The confederacy of dunces will not have changed. If you think the politicians and necronomists can do a better job of stabilizing gold than they have done with dollars, you are wrong. As an example of a popular necronomist's simultaneous defense of the gold standard and inability to keep gold constant and current, consider the following the following quotation of Arthur Laffer, the flower child of the supply-siders: "You would also need some mechanism for temporarily going off the system if there were a run on the currency or if there were massive gold discoveries."

Any productive person who thinks he can retain his buying power or product worth by pursuing a gold standard is foolish. History shows that gold has not protected the productive person from the manipulation of precious metals by policy makers. Changing economic and political climates, specifically, the Hunt Silver Pyramid, show that precious metal is no real refuge as a common intermediate product by which to retain product worth.

As argued more fully in the chapter "Producers' Choice: What Currency, What Product", if the productive individuals want to stop the erosion of the their buying power due to currency instability, the producers must organize so as to establish and maintain a human product as the common intermediate product. If the productive individuals do not do it, they should not be affronted when the less productive self-servingly proceed to police and manipulate the official currency. Furthermore, if currency stability is to be achieved, it must be on a standard of time, not gold or political IOU's. Just as commerce benefitted when the measurement of goods was standardized to one particular "foot" and one particular "pound" so will commerce benefit when currency is standardized to that which it represents: time, particularly the immutable lifehour*.

The Need for Lifehours*

The only real refuge for the productive persons is the organization of a policy making process, within or without Congress, that will establish a common intermediate product kept constant and current in value. Any product, official or unofficial, can be a currency, that is, can be the common intermediate product by which to maintain production time content. In fact, that is the way it has always been.

Well-educated and well-organized producers do not need corrupt and incompetent politicians to establish a common intermediate product to serve as a currency kept constant in time content. Through NUSA, originated at AESOP, and its Lifehour shares, the producer can have a product whose time content is maintained. Maintaining time content is, in part, why the stock or share of AESOP is called

a lifehour.

A lifehour will have its product worth maintained better than dollars, treasury bills, stocks, bonds, or any of the other official or unofficial currencies within our system of production. The only refuge for the producers is a set of private or public laws that outlaw the destructive use of the common intermediate product. Productive laws prevent currency from fueling the destruction of production, production on which the producer's employment is not only dependent but also the lives of the producer and his family.

If the producers will not organize so as to maintain a stable currency, who will? The politicians in government and the non-producers in private busyness will not. Why should they? They derive their income from inflationary returns or currency destabilization, e.g., Donald T. Regan, Treasury Secretary under Ronald Reagan and former head of Merrill Lynch. It is up to the productive individuals, rich and poor, to organize a for a New United States of America with the Lifehour as the universal currency.

Warning: Anyone found stealing lifehours will be forever banned from participation in and rewards of Better Democracy and Capitalism.


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