Non Credit Money - Rescue for the World!

non credit money

Stojan Nenadović — Sat, 06 Dec 2008 16:17:59 EST

Non-credit money is necessary additional quantity of money in circulation (dM) determined as percentage (k) of existing quantity of money in circulation (M). dM=kM ; k=(offer - demand)/demand.

If non-credit money is being emitted by cited formula, inflation exists not. For amount of non-credit money, taxes are being annuled. The consumers (buyers) pay less and producers (vendors) get more than today, in the order of credit money.

Non-credit money is the way for solving the existing economic (monetary and financial) crisis in the world.

A source of non-credit money is the growth of economic rationality. Non-credit money is being distributed to pensioners.

What are, really, economic laws?

Stojan Nenadović — Fri, 05 Dec 2008 07:09:08 EST

What are, really, economic laws?

Many economic theorists tend to blame systemic policies for constraining the natural economic laws. However, in order to conceptualize and institute a system where economic laws will be able to operate freely, it is first necessary to understand these laws, and this is the very task of economic theorists. Also, theorists must supply policy makers with the economic and political instruments necessary, as well as indicate possible ways and means to achieve desired goals. Whenever goals fail to materialize, theorists are inclined to ascribe this to the policy makers’ inability to make proper use of the economic and political arsenal the theory provides them with. In addition, economic theorists usually purport that they are well-versed in economic laws, and that the system’s poor performance is due to politicians’ “wrong turns” and lack of consistency in following the opinion and advice of economic theorists.

But what will happen in case if economic theorists actually do not understand the truly-governing objective categories and laws of economy?

Then they will not only give policy makers wrong advice, but will not even have any valid criteria for evaluating the performance of the system and policy. This, in fact, is the reality in the world today.

Economic science is in crisis, because its system of categories and laws deduced from the premises its analysis rests on, is only adequate for an earlier stage of development of productive forces and relations, while the current stage of development (and particularly the pace of development) creates substantially different premises that can be theoretically articulated only by a new, revolutionary theoretical paradigm, that is, a new system of new categories and laws.

Surplus utility

The new paradigm should certainly be able to explain the existing reality, i.e. the deepest causes of the existing crisis, as well as to point out the ways to overcome it. I believe this new paradigm may be developed by first taking a look at the fundamental views of classic economists (usually deemed relevant primarily to the system of primitive barter economy):

“In a future society, in which class antagonism will have ceased, in which there will no longer be any classes, use will no longer be determined by the minimum time of production; but the time of production devoted to different articles will be determined by the degree of their social utility.”

(K. Marx: The Poverty of Philosophy).

“Various articles’ use value, weighed against each other and against quantities of labor necessary for their production, will ultimately determine economic planning.”

(F. Engels: Anti-Dühring).

If we presuppose that the mentioned fundaments of a new society could be realized within a particular (new) type of commodity production, then it is obvious that:

In such mode of production, there must exist, analogous to the category of abstract labor (as a measure of costs), a category (as an equivalent in the sphere of consumption) of abstract social utility (that would represent a measure of the quantitative aspect of use value).
Objective abstract labor and objective abstract utility (i.e. costs and utility in general) can be quantitatively compared (and expressed in money).

Thus, in such a society, money appears as a measure of objective abstract utility. Since costs and utility materialized in commodity can be quantitatively expressed (in money), market price would naturally take a level between the maximum possible price (equaling utility) and the minimum possible price (equaling costs). The difference between abstract utility and abstract labor I define as surplus utility. The level of the market price will determine how this surplus utility will be divided between buyers and sellers (into the consumer’s and manufacturer’s surplus).

According to the new paradigm, in every commodity are materialized three quantitatively different dimensions of value: cost, market price and utility. These can also be viewed on the global (national and international) level, and so:

The total amount of invested labor I define as product of the culture.
The sum total of the market prices - gross national product.
The total abstract utility obtained - product of the civilization,

and

The difference between the product of the civilization and the product of the culture - social (or national) surplus utility.

The traditional economic theory, which finds in the value of the goods, basically, only one quantitative dimension, is based, in fact, on the implicit and explicit assumption that these three dimensions are quantitatively equal. Thus, the traditional theory appears only as a borderline, special case of the new theory, i.e. the traditional theory is valid only for the case when the utility surplus equals zero (at least at the global level). In other words, economic theory does not know one of the fundamental economic laws of modern society, and it was inevitable that economic policy would ignore the legality of the existence of surplus utility, which then leads to a series of defects and irresolvable contradictions in the real economic life.

Deflation and Inflation

The usual manner of emission of money in the form of credit is consistent with the assumption of a uniquely determined value of gross social product, but in contradiction to the existence of social surplus utility.

Credit money really represents only the value of culture, i.e. invested labor, and if a society creates any amount of surplus utility (which corresponds not to invested labor, but to rationality of spending), there will lack a monetary equivalent for its realization, which will cause a deflation problem in the society (this being the deepest cause of economic crisis), proportional to the quantity of the actually created social surplus utility. Deflation problem hinders the realization of the material gross national product - leading to stock accumulation, stagnation, dormancy of capacities and unemployment - while inflation represents only an instrument for overcoming (i.e. attempt to fight against) this fundamental deflation problem.

Inflation, along with time asynchronization of incomes and expenditures, in fact represents a spontaneous mechanism for expression of surplus utility. It does so by providing a nominal balance (necessary to meet the dogma of economic science) and a real imbalance of social accounts (realized through rate of inflation and delay between income and expenditures), needed to realize at least a portion of the surplus utility, without which there is no real social progress.

The inflationary and deflationary problem can be overcome only through legalization of a monetary equivalent of the social surplus utility and inauguration of a new system of social accounts, because it is obvious that, being based on the economic theory that does not know the category of surplus utility, current systems of social accounts are valid only for the case when surplus utility equals zero, and economic systems are organized so that they can only function normally if there is no surplus utility.

It should be noted that abstract utility is a completely objective category (unrelated to the bourgeois theory of subjective utility) and just as the quantity of abstract labor is measured by length of working hours, so is abstract utility measured by length of exploitation time of a product (of course, within certain social standards of use).

If abstract labor and abstract utility were quantitatively (in money terms) equal, this would also mean that the length of the cycle of reproduction (i.e. the period after which a new production is to begin) is equal to the length of the cycle of re-consumption (i.e. the period after which a new consumption is to begin), and thus the frequency of supply and demand would also be equal. If, then, were to increase either the rationality of production (an increase in labor productivity would reduce the quantity of abstract labor invested in a commodity) or consumption (extending the use time would increase the substance of abstract utility stored in a commodity), there would appear a surplus utility. Frequency of supply would exceed frequency of demand and there would arise the problem of effectuation of this (over-) production that constitutes the material substrate of surplus utility.
This production can be effectuated only by emitting a monetary equivalent of surplus utility, which is non-credit cash money that must be allotted to the consumers who have real needs for these products. That way their needs are legitimized and money is promoted to a function of measure of abstract utility.

“According to the needs”

In the new society based on this new mode of commodity production (in which laws of value and surplus value are replaced by laws of abstract utility and surplus utility), total income must come from total amount of abstract utility (which, according to the suggested terminology, is product of civilization). This income consists of incomes generated by labor (i.e., incomes representing the product of culture) and incomes from social surplus utility, this representing the superstructure that needs not be financed by taxes that only burden the economy.

By eliminating a tax amount equivalent to social surplus utility, the contention between the business (base) and the non-business sphere (superstructure) is abolished. Nonproductive population (e.g. pensioners, children, pupils and the like), that grows with the growth of the surplus utility, gets its money (income) from the social surplus utility (a separate account of the central bank, according to the decision of the parliament), while the economy grows by selling them goods and appropriating this social surplus utility money, that then becomes the manufacturer’s surplus that adds to his cash accumulation for financing expanded self-reproduction. If exactly the required amount of money is emitted, prices cannot grow, while at the same time a new model of social accounts is established, where the total social income is, by the amount of the emitted non-credit money, greater than the labor value of the social product.

Therefore, legalization of income from social surplus utility that is divided “according to the needs” is shown to be a condition of normal reproduction of any economy and society that has reached a level and pace of development where surplus utility must exist.

If we legalize the monetary equivalent of the social surplus utility, we will provide the economy and society with the amount of money it needs (i.e. the key deflationary issue will be solved) and thus establish a condition sine qua non for the normal functioning of market mechanism.

Only then will particular system policies and socio-political decisions have an opportunity to show and prove their value, while economic policy will, equipped with a simple but adequate set of economic and political (monetary) instruments, effectively and without over-administration serve the realization of the desired goals: stable and fast development with full employment.

Stojan Nenadović, Serbia

stojan.nenadovic@gmail.com

http://non-credit-money.smirkingwhale.com/

The Surplus of utility and Non-Credit money

Stojan Nenadović — Thu, 27 Nov 2008 07:01:51 EST

From the beginning of economic thought, there were two approaches to the principal economic problem - the problem of value of goods.

According to the dominant scientific thinking: on the occasion of exchange, goods and money are being exchanged as equivalents.

According to an alternative commonsense thinking: on the occasion of exchange, one gives less to get more (both seller and buyer realize a profit).

Commenting on the latter type of reasoning, Milton Friedman argues: "The fundamental defect in all such reasoning is the failure to recognize that what is called a profit or an excess of receipts over expenditures is also a cost."

Friedman's statement is projected upon supposition that the costs and utilities, incorporated in commodities, are monetary equivalents.

This is the premise upon which today's dominant monetary theory and the policy of credit money is based. By emitting money in the form of credit, the monetary equivalence between costs and utilities is secured ex ante.

Real equilibrium between costs and utilities can exist only in a stationary society where there are no alterations in the level of economic rationality. Where economic rationality stays constant, the quantity of production, exchange and spending remains always the same, and thus the quantity of money in circulation doesn't change either. That is, there is no need for an additional quantity of money (dM = 0). One's cost is always another's profit, therefore cost and profit are by definition equal, and the above Friedman's statement holds.

Any alteration in the level of economic rationality alters relations between costs and utilities.

The growth of economic rationality in production includes both the growth of production by constant costs and the constant production by diminishing the costs.

The growth of economic rationality in consumption includes both the growth of utility from the constant quantity of goods and the constant utility from diminishing the quantity of goods.

The quantum of utility which is equivalent to costs I denote as a necessary utility (i.e. necessary for compensating the costs) and the quantum of utility over necessary utility produced by the growth (i.e. created from the growth) of economic rationality I denote as - the surplus of utility.

The total quantity of money in society is composed by the quantity of money in circulation (M1) and the quantity of money out of circulation (M2).
The quantity of money in circulation is:

P = prices level = constant
Q = quantity of products
V = velocity of circulation of money

The quantity of money out of circulation is composed by the quantity of money by the producers (accumulation = A) and the quantity of money by the consumers (saving = S).
The total quantity of money is:

By the constant level of economic rationality, the costs and utilities are equivalent, Q, V, A and S are constant, M is constant, and the value of national product (NP) is:

NP = PQ

If M is the function of Q, V, A and S, as of arguments, and of P as constant, the alteration of arguments, i.e. Q, V, A and S, as independent variables, leads to the growth of M as dependent variable.

Thus, the growth of economic rationality includes:

dQ = the growth of production by constant costs

dA = the growth of accumulation through diminishing the costs

dV = the retarded velocity of circulation of money, by the growth of utility from constant quantity of goods

dS = the growth of saving through diminishing the purchase of goods

dM = the growth of quantity of money and it is non-credit money, as an income from the surplus of utility.

This money, respectively income, results not from costs, i.e. it is not derived from necessary utility but from the growth of economic rationality, respectively from the surplus of utility as its measure.

The growth of national product (NP) is for PdQ.

New national product (NNP) is:

NNP = PQ + PdQ
The national monetary income is composed by the incomes which result both from the national costs (i.e. necessary utility) and from the national surplus of utility, i.e. from the national emission of non-credit money.

The national surplus of utility is composed by the national producer's and consumer's surplus.

is the surplus of utility which is produced by
producers = producer's surplus

is the surplus of utility which is produced by
consumers = consumer's surplus

In the monetary value of new national product, the monetary incomes from national producer's surplus end as a profit, while, the monetary incomes from national consumer's surplus compensate the costs, through purchasing the products which cannot be sold, since the incomes, earned from costs, have in part ended in saving, in part are being spent, but more slowly, or for the payments which are being not incorporated in the value of national product (thus the period of realization of national product is being prolonged, what as retarding of money circulation velocity is being denoted).

National costs (NC) are new national product minus profit:

National income (NI) is new national product plus consumer's surplus:

In equation P as the level of prices is constant.

In reality, prices get up if the emission of non-credit money is greater than the real surplus of utility. If the emission of non-credit money is lesser than the real surplus of utility, either prices depreciate or stock grows.
If the emission of non-credit money is equivalent to the real surplus of utility, the prices must be constant (stable).

Growth of economic rationality leads to diminishing costs and augmenting supply and to augmenting utilities and diminishing demand.
An excess of offer over demand is the material substratum of the surplus of utility, caused by the growth of economic rationality, which can be realized only through emitting the necessary quantity of non-credit money which is being distributed (as a donation) to producers that have needs for the surplus of unsold production's factors, and to consumers that have needs for the surplus of unsold objects of consumption.

The real growth of economic rationality which is being demonstrated through diminishing the costs of production (real dA) and consumption (real dS) is being realized both through keeping the money on special accounts of accumulation (dA) and saving (dS) in banks and through investing the savings, as an accumulation credit (dAC) and as a saving credit (dSC), in expanding of production and consumption, if it brings the interest (i.e. the greater amount of non-credit money than is the amount which would have emitted if there is no credit).

real dA + real dS = dA + dS + dAC + dSC

The growth of production (PdQ and the growth of goods in stock (PdR) unsold through retarding the money circulation velocity are together the total quantity of unsold products:

Unsold = PdQ + PdR ; PdR=-M1dV

The new velocity of circulation of money is:

If because of diminishing the economic rationality it is necessary to diminish the quantity of money in circulation, the state must impose the taxes after which the expenditures follow not. If counter to corresponding emission of non-credit money, the prices of some products are rising and of other are depreciating and even products cannot be sold, it is necessary to change the production structure.

Through trade, production is being directed to the minimum of costs and consumption is being directed to the maximum of utilities and in this way the maximum of the surplus of utility is being realized.

Through national trade the national surplus of utility is being realized and through world trade the world surplus of utility is being realized, both by aid of the emission of (national and world) non-credit money.
An income from the surplus of utility, i.e. the non-credit money is being paid from the account of emission bank (national or world), directly to the beneficiaries of non-credit money, by decree of national parliament (by national non-credit money) and by decree of the assembly of states-members in according to scientific knowledge (by world non-credit money).
Since without emitting non-credit money from the surplus of utility, there is no development in modern society, today, really, exists simultaneously nominal credit and real non-credit money, respectively, nominal equilibrium (according to theoretical dogmas) and real non-equilibrium of national accounts which is being realized, spontaneously and chaotically, through inflation of credit money, budget deficit, national and foreign debt, non-synchronism of takings and expenditures in terms of inflation, and other chaotic economic processes.
There is no solution for national and world economic crisis and the problem of national and world debt, without inaugurating both national and world system of emission of (national and world) non-credit money which can ensure a stable and rapid development, by full employment and social equity, of the world in whole and of all nations particularly.

My web sites in Serbia:
http://serbon.info/
Non - Credit Money rescue for the World!
Nekreditni novac - spas za Srbiju

The Secret of Money

Stojan Nenadović — Thu, 27 Nov 2008 04:32:10 EST

In stagnant society, with no changes in economic rationality, the value of national product (PQ), which represents offer, is equal to demand, which is the product of quantity of money in circulation (M) and velocity of money circulation (V):

PQ = MV

Quantity of money in circulation (M) is equal to:

(P = price level = const.; Q = quantity of products)

In a dynamic society, where economic rationality increases, there exist an increase in production (dQ) and offer (PO+PdQ) and a decrease in velocity of money circulation (-dV) and demand (MV+MdV), and that requires an additional quantity of money in circulation (dM), in order to preserve the equilibrium of offer and demand:

Required additional quantity of circulation money (dM) is computed by defining coefficient k:

Coefficient k represents the rate of increase of quantity of money in circulation which is needed to obtain an increased production in the circumstances of retarded velocity of money circulation.

Additional quantity of money in circulation (dM), being a percentage of quantity of money in circulation (kM), must be emitted as non-credit money, i.e. gift , in the form of pensions and children allowances.

Using a portion of this money, the amount being, an increase in production is obtained and this portion ends up as producers profit, while the amount of

, compensates the retarding in velocity of money circulation, and this portion represents consumers surplus, i.e. consumer profit.

The sum of incomes in a society is composed of incomes which are built into expenses, i.e. costs and incomes obtained from the additional quantity of money in circulation, which are then as non-credit money granted to the society, as surplus of utility obtained from the increase in economic rationality.

Sum of costs in a society (NC) is: new national product - profit:

Sum of incomes (NI) is: new national product + consumer surplus:

Today, money is put into circulation in the form of credits.

In credit money system, due to retarding of velocity of money in circulation, a shortage of money is a result, and this shortage causes crises of hyper-production or non-sufficient consumption.

As of mid 20-th century this problem is solved by an endless expansion of credit money and inflation. In the circumstances of credit money inflation at the same time we have a nominal equilibrium of social accounts, which satisfies the dogmas of traditional economic science, and real imbalance (in which the sum of incomes is greater than the sum of costs), which proves the theory of existence of surplus of utility and of non-credit money, because it is really a non-credit money that is emitted, in the form of credits, at least partially.

By establishing a system of emission of non-credit money, the equivalence of nominal and real values is realized, an endless price stability is secured without inflation and deflation, as well as maximum profits and satisfaction of needs of non-productive part of population from non-credit money emission (i.e. without burdening the production). This is a necessary condition of normal reproduction of a society where economic rationality increases. World order should be based upon this foundation.

Milton Friedman has empirically determined that velocity of money circulation is constantly in retarding, but he has not noticed that the cause to this lies in the increase in rationality of consumption. He proposed that monetary policy should be restricted to pouring money into circulation at a constant annual rate, but he did not notice that this money should be non-credit money.

My web sites in Serbia:
http://serbon.info/
Non - Credit Money rescue for the World!
Nekreditni novac - spas za Srbiju