Chapter 5. Premises for a rational monetary instrument.

1. This chapter's goals.

In this chapter we will take an approach to the smallest indispensable bases to have a rational system, starting from the idea that it is a metric system.

The principles will be later applied to the set-up of a new monetary instrument, in a position to clear the monetary relations and to give new strength to the market.

2. Documentary metric systems.

As we have already seen in the previous chapter, the defining character of money systems is that of building up an abstract measuring system to measure the exchange value of the goods in a given market.

Therefore, we could talk about a rational money system as long as we have an authentic metric system, that is a system which gives faithful images, isolated from reality.

The minimal necessary elements for an effective metric system are the following three:

In the case of the money system, it is necessary to have together the three mentioned elements. We will now examine them one at a time, with respect to money systems.

3. Measuring units.

The measuring units invented to measure the dimensions of any phenomenon, are completely abstract ideas and their creation is absolutely arbitrary. The only condition to be fulfilled is that the definition of units must be very exact and rigorous.

The length unit, for example, is the meter. At the beginning it was defined as «the distance of the ten millionth part of the quadrant of the earth meridian». But at present, as we advance towards a greater accuracy and abstraction of units, there is a preference to define a meter as «the length of the journey made in empty space by flat electro-magnetic waves in 1/299,792,458 seconds».

In the market science, the dimension or value which must mainly be measured is the exchange value of real goods. The unit for measuring this value is the money unit, which, because every State produces its own, has different names in different states. Let us remember that, in ancient times, every country used to define also its own units of length, weight, volume... However, money units are very special measuring units, because they are not fixed. As a matter of fact, the exchange value of real goods is not always the same, it is not identical in different situations of time and space. The distance between Barcelona and Madrid is always the same; but the price of a liter of wine is not the same in Madrid and Barcelona, nor is it the same to-day and ten years ago, as it varies in time and space as a result of a number of very complicated causes which we are not going to analyse now.

Since the reality to be measured is variable, the money unit is also variable: there is no invariable outer constant with respect to which the value of the money unit can be defined. Therefore the definition of money unit is not fixed, as it varies according to changes in the exchange value of the real goods it measures.

As a consequence the money unit cannot be defined with respect to a given privileged merchandise, but in a given geopolitical space it must be defined according to the whole number of goods which circulate in every time period under consideration.

4. The measuring proceedings.

After accurately defining a measuring unit, a way must be found to measure in practice concrete phenomena in which a given person may have an interest.

To take a measurement is to count the number of abstract units which are conventionally attributed to any real phenomenon, in accordance with the given definition.

In the case of length units, everybody knows the «meter», the «rulers» and many other instruments and measuring techniques, which constitute the measuring proceedings.

In the case of money units, the only imaginable system to measure the exchange value of a real merchandise is the actual exchange, the free monetary exchange contract brought about by two market agents. The liberty of the market play produces the prices and salaries attributed to every real merchandise, in the very moment when the sale-purchase operation is brought about.

Prices and salaries are mixed values, concrete-abstract, which are produced by every measuring operation, every inter-comparison between the real merchandise to be measured and the abstract measuring unit.

And paradoxically it is the whole prices and salaries fixed in a given space-time which can, by an inverse operation to this fixing, define the value of the money unit -called money- in this space-time, since the value of the money unit can only be defined as its average ability of purchase in every given space-time.

5. The measuring documents.

The last requisite condition of every effective and scientific metric system is that every measuring act brought about must be well documented and personalized, both to verify its validity, and to be able to use elemental results to obtain statistics and analysis of the observed global sectorial whole or sub-whole.

Therefore, every measuring act of the exchange value of real goods -that is every elemental mercantile exchange- must also be fully documented.

As we have already seen in chapter 2, in a rational money system, this documentation is effected automatically thanks to the monetary instruments-documents. They are instruments because they are used to make exchange easy; but they are also documents because they are a record of every elemental mercantile operation effected through them.

There are two minimal conditions which can be demanded of an exact documentation: first, that every measuring act should produce its own document; and second, that this document should be complete, that is it should record all the relevant facts which occur in the measuring act under consideration.

Especially here the present money system is at fault: because there is a lack of the proper documentation.

In the money systems which are in force, instruments-documents are coins and scriptural instruments, as we know. But all these instruments are of a nature essentially anti-documentary. Rather than documenting, we might say they conceal reality, because of the following reasons:

Even if the three above-mentioned properties can be rightly applied only to paper money and coins, it must not be forgotten that scriptural bank instruments are also essentially un-documentary, even if at first sight it might not seem so.

As a matter of fact a signature on a cheque, a name, a number of account... are, to-day, identifying items. But the documentation provided is very partial, for several reasons:

Therefore, bank scriptural documents are potentially documentary; but they will not be fully such while they exist together and are subsidiary to a system of anonymous and undocumentary monetary instruments.

The money system in its whole will not be a fully documentary and informative system until an identifying instrument becomes the only legal and real monetary instrument, completed in every single elemental operation and thoroughly documentary.

6. Conclusions.

One of the minimal conclusions, necessary to any metric system, that of possessing elemental, thorough and identifying measuring documents, is not fulfilled by present day money systems.

In consequence, it cannot be a good metric system. We therefore need to create a monetary instrument in a position to be a reliable guaranty of an exact measurement, and fully documentary of the exchange value of all and each of the exchanged goods in a given market.

This new instrument will not be very different from present scriptural-bank instruments; but it will fulfill the traits which are now only potential, and will eliminate its metric-documentary imperfections.