D. Rational money system and market strategy.

Chapter 10. A hypothesis on the domestic market strategy.

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 total 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:

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:

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 hypothesis.

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 goods.

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 be controlled.

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 the market.

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.

C. Calculation.

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 possible 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:

The simple introduction of a telematic money system allows to amend all these problems. The telematic cheque-invoice is the basis for:

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 socialization 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:

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.