D. Rational money system and market strategy.
Chapter 10. A hypothesis on the domestic market strategy.
- This chapter's goals.
- General enunciation of the hypothesis.
- Approximation to an algebraic hypothesis formulation and
- Actual strategy of the domestic market.
- Socialization of mercantile common good.
1. This chapter's goals.
In chapter 2 we said that the money system
is the instrument of a very important function: the strategy which sets
the market balance.
The market balance under consideration is that obtained when to the
volume of goods-price (produced goods mentioned by their prices) corresponds
a monetary mass of active operations (real purchases of the mentioned
goods) exactly the same. This means simply that all the goods produced
have been sold, that there is no production surplus or deficit.
This balance is not automatically obtained, but in general, owing to
the market dynamics, the available purchasing power is less than the operating
capacity of the market. This imbalance must be corrected through a strategy
known as «invention of money».
In this chapter we will submit a suggestion for the rationalization
of this strategy, being the starting point the introduction of the telematic
cheque-invoice as a sole legal monetary instrument: this sort of instrument
is the only one which can provide the necessary information for this rationalization.
The project will be presented as a work hypothesis on the market.
This hypothesis will have to be tried experimentally, which will be done
through the introduction of the telematic cheque-invoice.
2. General enunciation of the hypothesis.
The hypothesis used as a basis for the suggested strategy will be called
«hypothesis of the political invention of communal money, based on
the production surpluses», or, in short, «hypothesis of
the mercantile common good».
Its function is to postulate in the market:
A permanent lack of buying power;
The active presence of communal production forces not paid by the
As a consequence, the possibility to invent communal buying power
to compensate the above and to balance the market.
As a matter of fact, verifying a permanent lack of buying power in the
market, more than a hypothesis is a fact which any objective observer can
see. It is sub-consumption and sub-investment, i.e.: unsold surpluses of
consumers' goods and investment goods, actually produced and of a technological
quality which makes them saleable.
This practical verification guides banks in their daily activity: granting
of credits is a clever way of taking advantage of a productive excess
which is lost because of the lack of buying power. The enormous profits
of the banks are a good demonstration that the invention of money is absolutely
necessary to the market.
This permanent lack of buying power also explains the public debt of
all present day states. Public debt is the invention of money by the state,
in order to face budgetary needs: this invention in principle must be based
on the production capacity of all the geo-political society; if it were
not so, states would have been a long time in total bankrupt.
A phenomenon which is a consequence of the lack of buying power, is
the presence of very important productive forces not paid for by
the historical and present day market. This phenomenon has been recently
studied under the name of residual factor. Some economists realized that
the total production of a technologically developed geo-political society
could not be completely explained by taking into account classical production
factors: work and capital. The unexplained part was then attributed
to a production «residual factor», more or less unknown and
unqualified, but generally consubstantial to technological and cultural
progress and accumulation of every society.
The novelty shown here, with respect to the explanation of this residual
factor, rests on two main principles:
The possibility, thanks to the telematic cheque-invoice, to reach an exact
measurement of the residual factor, thanks to the analytic-statistical
data continuously provided by the telematic monetary network.
The intensification of the communal nature of this residual factor,
which we call here common good. Under a wide imaginative contemplation
-and, of course, experimentally tried as soon as the telematic cheque-invoice
is introduced- the residual factor can be identified with the many communal
dimensions of any productive process: liberty, peace, accrued knowledge,
liberty of information, technological innovation, inventions come to maturity
which become public, etc. All these communal issues increase the effectiveness
of the production acts in a natural, self-acting and growing way. From
this fundamental identification proceeds a very important political consequence:
the possibility to create buying power to compensate these communal
productive forces will become also a common wealth.
We will forget for the time being the political implication of this setting, and
will exclusively consider its technical side.
3. Approximation to an algebraic hypothesis formulation
and subsequent strategy.
A. Subsidiary market strategy.
There is a condition prior to the formulation of any strategic market
equilibrium: it is a purely logistic matter, necessary if we want to control
the effectiveness of the chosen strategy and the validity of the submitted
This condition is called subsidiary market strategy, and it consists
simply in establishing a total equilibrium between the circulating abstract
monetary mass and the mass measuring the value of all the exchanged
In a monetary regime based on the cheque-invoice this equilibrium is
automatically established, while in the present money system it is not
fulfilled in any way.
As a matter of fact, in every elemental cheque-invoice the involved
money units are perfectly equivalent to the mercantile values of the exchanged
goods. If this happens in every cheque-invoice, it will also be true in
the overall market, when every operation is done through cheque-invoices.
In present day money system on the contrary it is never known which
is the equivalent of the monetary units in circulation, as it is possible
to effect void monetary movements, that is without a corresponding movement
of goods; and besides in a completely undocumented way.
Only if the circulating monetary mass corresponds exactly to the value
of the exchanged goods, uttered in prices (price-mercantile values)
and salaries (salary-mercantile values), it is possible to consider
other market equilibriums. This first equilibrium, however formal, is necessary,
as it is a guaranty that the mirror of the money system produces images
which correspond to the market reality. Without exact and trustworthy images
no effective strategy can be produced for the market and no result can
B. The outgoing channels of the domestic productive market.
Before going on, we must stop to consider which are the sectors where
it is strategically more suitable to place the invention of money to equilibrate
We must recall here the analysis of the previous
chapter, where two main market cycles are fixed: production cycle and
consumption cycle. In the production cycle three sub-cycles were
fixed, called: current production sub-cycle, investment production sub-cycle,
and sub-cycle of retail trade and industries.
Of all these cycles and sub-cycles, the current production sub-cycle
is basic and fundamental, the motor of all the market, as it feeds all
the others, that is it both feeds the other two production sub-cycles and
the consumption cycle (the last one in a roundabout way through the sub-cycle
of retail trade and industries).
On the other hand all the price-mercantile values, produced in the sub-cycle
of current production and wholesale trade, lead into the sub-cycle of investment
production (in a direct way) or to the consumption cycle (indirectly).
For this reason we say that the sub-cycle of investment production and
the consumption cycle are the outgoing channels of the domestic production
market, that is the places where all the current production and all the
wholesale trade flows and from where it goes out.
When these two outgoing channels are working and if they can absorb
all the production of the sub-cycle of current production, this will also
be strong and will grow and develop. Therefore, the strength of the outgoing
channels is fundamental in order to allow all the market to work properly.
The object of these considerations was to circumscribe the market cycles
and sub-cycles where it might be more convenient to supply the money strategically
created. The conclusion of what we have said is that the supply must be
made in the investment production sub-cycle and in the consumption
cycle, the two outgoing channels of the domestic market: here
the created buying power can be the most dynamistic of the market.
This does not mean that in other market sectors it is not necessary
or that buying power cannot be invented. It simply means that the buying
power invention in the other sector is not so important and therefore it
is not necessary to apply a common monetary strategy, but it can be done
privately through the bank system as up to now.
The calculation of the buying power which must be invented in order
to strategically re-equilibrate the market of its lack of buying, investment
and consumption power, is based on the mere consideration of the investment
and consumption production surpluses which are on the market at any given
time, which are a clear demonstration of a lost production capacity owing
to a lack of buying power, and easy to find out through the introduction
of the telematic cheque-invoice.
In the subcycle of the investment production we would then have:
The investment buying power to be created is equal to the investment
sales less the investment real purchases.
The possible sales can be known through declaration of the companies
producing investment goods. The actual purchases are obtained by simply
adding the investment cheque-invoices which correspond to the period
under consideration (active private investment money).
Where the consumption cycle is concerned we will have: the consumption
buying power to be invented is equal to the possible consumptions sales
minus the actual consumption purchases.
The possible sales are obtained by adding all the cheque-invoices
of retail trade and industries to their suppliers, plus the low commercial
margin of these shops and industries. Actual purchases are obtained, as
in the previous case, by simply adding the consumption cheque-invoices
(consumption active money).
4. Actual strategy of the domestic market.
In short the suggested market strategy consists in inventing,
in an exactly quantified way, a buying power which with respect to the
production surpluses on the market will be introduced in two key sectors,
that of investment production and that of consumption.
This invention will correct the permanent lack of buying power of the
market, giving it a new equilibrium and vitality.
Up to now money invention has been brought about by banks and by states.
However, the fact that there is no informative money system means that
neither banks nor states can work out their strategy according to an exact
knowledge of mercantile reality.
As a consequence, strategy is often disestablishing, because:
It is not global nor integrated in all the geopolitical society;
It is not exact, but most of the time it is excessive or deficient, and
therefore it produces the well known crises of monetary inflation or deflation;
The created buying power does not reach those social and mercantile sectors
where it would be necessary to equilibrate the market.
The simple introduction of a telematic money system allows to amend all
these problems. The telematic cheque-invoice is the basis for:
The confirmation or experimental invalidation of the hypotheis of the possibility
of inventing money according to production surpluses;
And, in case of confirmation, for the exact knowledge of the importance
of this possibility.
In this way the strategy of money invention can become, for the first time,
rational and scientific.
Now, the purely metric-monetary technique of the invention of money,
which is completed by simply recording figures in a current account, is
at the same time a very powerful instrument of economical policy. For this
reason it produces a great number of questions.
As a matter of fact this invention of money must be included consistently
within the frame of a political option to establish the subjects and limitations
of the monetary action; and it must be endowed with the technical means
to grant that the political goals will be reached.
As we have already said in other opportunities, we will not detail here
the political principles at the basis of the suggested money system. But
we will give some hints, and, above all, we will mention some of the technical
steps which, in order to reach the proposed goals, must be followed directly
or indirectly in the organization of the money system.
Next chapter will explain these steps.
5. Socialization of mercantile common good.
According to the submitted hypothesis, the ability of inventing money
depends from the existence in the market of production forces of a communal
nature, communal forces which are not properly paid and which become
unsaleable production surpluses.
These communal production forces hold no secret, and can be explained
in several ways.
A reasonable explanation considers the production effort of past generations.
For example, nobody pays royalties to build or use a wheel.
Another explanation keeps in mind the global cultural level of a community:
wisdom, peace, culture, education, technical development, social, psychological,
material wellbeing... are factors which indirectly but indeniably contribute
greatly to raise the productivity of every human society.
Another important factor to consider is mercantile freedom. The more
freely can a market be organized, with the help of all the statistical
information, exact and exhaustive, the greater is it vitality, and therefore
the greater is its ability to produce mercantile surpluses.
We are not going to give here a rigorous and complete explanation on
the working of the communal production agents; we simply wish to point
out that all these active production factors cannot be considered as a
private property of anybody, as they are the property of the whole community.
For this reason we defend the socialization of this common good.
Socialization of the common good does not imply by any means
the socialization of production surpluses, which belong to every
free producer. When we say socialization of mercantile common goods we
mean that the ability to invent money with respect to investment
production surpluses and of the retail industries and shops surpluses is
the property of the geo-political society: this, through its administrator
-the state- is the only one with the constitutional ability to invent money
according to investment and consumption production surpluses.
This socialized invention however must be clearly separated from
the bank invention of money, which will still exist on a parallel
level with it. The key to this fundamental distinction is in the many monetary
guarantees which support the different sorts of money invention.
Traditionally the banks have made an indiscriminating use of other peoples
resources as a guarantee for their credits. What we suggest on the contrary
is to limit the operating field of these private bodies to their own resources,
or to resources contractually released to them to this end.
The abstract-monetary guarantee of communal invention of money will
be made up by all the positive daily balances of all the current
accounts «at sight» (non spent money or passive money).
These balances will not be used by the banks, as they will be considered
a communal saving which only the geo-political society will be able to
use through the state as an adminsitrator. This situation can be called
of all the free daily positive balances of all the current accounts at
sight. «Total private savings are a communal good».
The accounting firms will manage current accounts but they will not
grant loans nor effect any operation by using these positive balances.
As a conclusion we may say that with respect to money invention
two very different systems and techniques must be considered:
The so called bank loan, privately effected by trading banks according
to very ancient techniques but with a guarantee limited to their own capitals
and reserves, or specifically let to them to this end (term deposits).
Any bank loan has a pay back clause of the fixed term capital.
Communal money invention, as follows:
Communal credits for investment, according to the investment production
Communal finance for consumption, according to production surpluses of
retail industry and trade.
Both systems will have the subsidiary guarantee of the free positive
balances of current accounts at sight. The result of socialization
of these balances, which allows the invention of communal money, will be
the allocation of a «communal interest» (for example, 6%),
to every positive balance, always at the free disposal of its private owner.