Forum Post: hard money and inflation - the fed works for???

if we (at ows) do not understand the economy there is no hope for real change. the forces of wealth have controlled our thoughts from grade school through university. we need to "free our minds" and rethink money and debt - here is alan watts (obviously he was off by a few years at least - too bad we did not get our heads straight) - "if we get our heads straight about money; I predict that by AD 2000, or sooner; no one will pay taxes, no one will carry cash; utilities will be free, and everyone will carry a general credit card. This card will be valid up to each individual's share in a guaranteed basic income or national dividend, issued free; beyond which he may still earn anything more that he desires by an art or craft; profession or trade that has not been displaced by automation. (For detailed information on the mechanics of such an economy, the reader should refer to Robert Theobald's Challenge of Abundance and Free Men and Free Markets, and also to a series of essays that he has edited; The Guaranteed Income. Theobald is an avant-garde economist on the faculty of Columbia University.) Naturally; such outrageous proposals will raise the old cries, "But where's the money going to come from?" or "Who pays the bills?" But the point is that money doesn't and never did come from anywhere, as if it were something like lumber or iron or hydroelectric power. Again: money is a measure of wealth; and we invent money as we invent the Fahrenheit scale of temperature or the avoirdupois measure of weight. When you discover and mine a load of iron ore; you don't have to borrow or ask someone for "a thousand tons" before you can do anything with it. By contrast with money, true wealth is the sum of energy&y, technical intelligence; and raw materials. Gold itself is wealth only when used for such practical purposes as filling teeth. As soon as it is used for money; kept locked ill vaults or fortresses, it becomes useless for anything else and thus goes out of circulation as a form of raw material: i.e., real wealth. If money must be gold or silver or nickel, the expansion and distribution of vast wealth in the form of wheat, poultry; cotton; vegetables, butter; wine, fish, or coffee must wait upon the discovery of new gold mines before it can proceed. This obviously ludicrous predicament has, heretofore, been circumvented by increasing the national debt a roundabout piece of semantic obscurantism by which a nation issues itself credit or purchasing power based; not on holdings in precious metals; but on real wealth in the form of products and materials and mechanical energy. Because national debts far exceed anyone's reserves of gold or silver; it is generally supposed that a country with a large national debt is spending beyond its income and is well on the road to poverty and ruin no matter how enormous its supplies of energy and material resources. This is the basic confusion between symbol and reality, here involving the bad magic of the word "debt," which is understood as in the phrase "going into debt." But national debt should properly be called national credit. By issuing national (or general) credit; a given population gives itself purchasing power, a method of distribution for its actual goods and services, which are far more valuable than any amount of precious metal. Mind you, I write of these things as a simple philosopher and not as a financial or economic expert bristling with facts and figures. But the role of the philosopher is to look at such matters from the standpoint of the child in Hans Andersen's tale of The Emperor's New: Clothes. The philosopher tries to get down to the most basic, simple principles. He sees people wasting material wealth, or just letting it rot, or hoarding it uselessly for lack of purely abstract counters called dollars or pounds or francs. From this very basic or, if you will, childish point of view; I see that we have created a marvelous technology for the supply of goods and services with a minimum of human drudgery. Isn't it obvious that the whole purpose of machines is to get rid of work? When you get rid of the work required for producing basic necessities, you have leisure time for fun or for new and creative explorations and adventures, But with the characteristic blindness of those who cannot distinguish symbol from reality, we allow our machine/y to put people out of work not in the sense of being at leisure but in the sense of having no money and of having shamefacedly to accept the miserable charity of public welfare. Thus as the rationalization or automation of industry extends we increasingly abolish human slavery; but in penalizing the displaced slaves, in depriving them of purchasing power, the manufacturers in turn deprive themselves of outlets and markets for their products. The machines produce more and more, humans produce less and less, but the products pile up undistributed and unconsumed, because too few can earn enough money and because even the hungriest, greediest, and most ruthless capitalist cannot consume ten pounds of butter per day. Any child should understand that money is a convenience for eliminating barter, so that you don't have to go to market with baskets of eggs or firkins of beer to swap them for meat and vegetables. But if all you had to barter with was your physical or mental energy in work that is now done by machines, the problem would then be: What will you do for a living and how will the manufacturer find customers for his tons of butter and sausages? The sole rational solution would be for the community as a whole to issue itself credit money for the work done by the machines. This would enable their products to be fairly distributed and their owners and managers to be fairly paid, so that they could invest in bigger and better machines, And all the while, the increasing wealth would be coming from the energy of the machines and not from ritualistic manipulations with gold. In some ways, we are doing this already, but by the self-destructive expedient of issuing ourselves credit (now called debt) for engines of war, What the nations of the world have spent on war since 1914 could, with our technology, have supplied every person on earth with a comfortable independent income. But because we confuse wealth with money, we confuse issuing ourselves credit with going into debt. No one goes into debt except in emergency; and therefore, prosperity depends on maintaining the perpetual emergency of war. We are reduced, then, to the suicidal expedient of inventing wars when, instead, we could simply have invented money provided that the amount invented was always proportionate to the real wealth being produced, I've should replace the gold standard by the wealth standard. The difficulty is that, with our present superstitions about money, the issue of a guaranteed basic income of, say,100,000 per annum per person would result in wild inflation. Prices would go sky-high to "catch" the vast amounts of new money in circulation and, in short order, everyone would be a pauper on 100,000 a year. The hapless, dollar-hypnotized sellers do not realize that whenever they raise prices, the money so gained has less and less purchasing power, which is the reason that as material wealth grows and grows, the value of the monetary unit (dollar or pound) goes down and down so that you have to run faster and faster to stay where you are, instead of letting the machines run for you. If we shift from the gold standard to the wealth standard, prices must stay more or less where they are at the time of the shift and miraculously everyone will discover that he has enough or more than enough to wear, eat, drink, and otherwise survive with affluence and merriment. It is not going to be at all easy to explain this to the world at large....