Im figuring it out. Lets see how this new system works with a real-life example. But we need to set up some ground rules first. The sellers of products need to take their products to where customers live. The manufacturers of goods sell their products to retail chain store corporations for distribution in their franchise stores in local communities. Online retailers are the ones that are responsible for shipping their goods to customers. Sellers deliver their goods to where their buyers are. So the goods that China makes and sells to the U.S. need to be brought to the U.S. by China. China is the seller and the U.S. is the buyer. That means China brings its products over the U.S. border into the U.S.. Buyers buy products with their own nations money. This sales transaction between Chinese sellers and U.S. buyers occurs on U.S. soil so U.S. dollars are used in the transaction. Another thing needs clarification: Ive said before that the global governments money, the terra, should be used in transactions between wholesalers and retailers. In this case, China is the wholesaler and the U.S. is the retailer. But terra only needs to be used in a certain way in these transactions. Intranational sales transactions do not need to be conducted in terra. The store that I work at, Younkers, has most of its revenue in the form of U.S. dollars since its business is sales of consumer products. U.S. dollars are used for consumer spending and employee payrolls. So it would be impractical and unnecessary for the sales revenue of Younkers be converted to terra, then converted back into U.S. dollars to pay Younkers employees. It can just use the U.S. dollars it takes in from sales to pay employees. So retailers in the U.S. pay for the goods they buy from Chinese wholesalers in U.S. dollars. These Chinese wholesalers are on U.S. soil when this transaction happens, so this transaction is an intranational sales transaction and be done in U.S. dollars. But heres the snag: I established in my last post that national m0 money cannot leave its home nation. So the dollars that Chinese wholesalers collect from sales of their goods cannot be taken out of the U.S.. What? So how do these Chinese wholesalers take money back to China? They must exchange the U.S. dollars for global terra in the international clearing house. They can then take the terra back to China and convert it into continental renminbi to buy more parts to assemble more products to sell to the U.S. again, or they can convert it into yuan to pay their employees. In the real world, the U.S. has a trade deficit with China. Over time, China would accumulate more terra than it needs. Why? Because the U.S. doesnt sell as many products to China as it buys from China, so the U.S. doesnt need the same amount of terra in the international clearing house to exchange for the yuan it would be accumulating from the sale of U.S. products in China. For example, if the trade deficit between China and the U.S. is 10 terra, and China doesnt need these 10 terra to buy products made by another nation besides the U.S., then China has no use for these 10 terra. The trade deficit between the U.S. and China is based on decreasing the prices of consumer goods in the U.S. via labor that is cheaper in China than in the U.S. in exchange for increasing the wages of Chinese workers compared with their previous work as subsistence farmers. The international clearing union and a global gold standard are needed to fully achieve the benefits of this increasing wages in China/decreasing prices in the U.S. relationship. To maintain stable prices and near-zero inflation in the U.S., the U.S. needs to counterbalance the decreasing prices from cheaper labor from China by taking some U.S. dollars out of its m0 money supply. If it doesnt take this money out of the supply, the cheaper labor from China will cause price deflation. Price deflation is good for consumers but bad for debtors because deflation increases the real value of debt. If a person borrowed a U.S. dollar yesterday and this price deflation increases the value of todays dollar to $1.05, the borrower has to pay back $1.05 for every original $1 s/he borrowed. This is the reason the inflation/deflation rate needs to be kept as close to zero as possible. Yesterdays dollar needs to as close in value to todays dollar as possible. What needs to happen is that the U.S. government needs to sell 10 terra worth of its gold-standard gold to China in exchange for Chinas 10 surplus terra. China then takes this gold back to China and uses it in its own gold standard m0 money supply to create 10 yuan. These 10 yuan are then used to increase the wages of the Chinese workers who made the goods sold to the U.S.. After it sells ten dollars worth of gold to China, the U.S. takes ten dollars out of its own m0 supply because it no longer has the gold to back them. This subtraction of dollars from the money supply neutralizes the price deflation from the importation of cheaper labor from China. Prices remain constant and stable, which keeps the value of the U.S. dollar stable over time. A constant value of the U.S. dollar keeps the value of real debt constant. Lets review what is actually going on in the global economy without this global gold standard and international clearing house. The dollars that the U.S. pays China for its products leaves the U.S. and goes to China. Chinese manufacturers exchange these U.S. dollars for yuan to pay their workers, buy more parts for assembly from suppliers, or invest in expansion of the business. Chinese manufacturers exchange their dollars for yuan at Chinese banks. But the dollars that the banks take in when the yuan go out are not destroyed. So yuan are being created but the dollars that are exchanged for the yuan are not. Money is being created here that isnt associated with real value. The $10 worth of U.S. dollars that bought the products from China now coexist with the $10 worth of yuan that are used to pay workers and suppliers. The original $10 U.S. dollars are now $20 worth of dollars + yuan. $10 worth of money has been created out of nothing. Instead of keeping prices stable over time in the U.S., the U.S. has significant price inflation. This is one of the causes of it. The U.S. is not fully benefiting from the price deflation that results from replacing higher-paid U.S. workers with cheaper Chinese workers. All because U.S. dollars that should be destroyed are not being destroyed. In this new gold standard system, selling gold-standard gold to China is the process by which these U.S. dollars are taken out of the money supply. These bogus U.S. dollars end up in Chinas central bank. China either keeps these dollars as reserve currency, or it buys U.S. government debt with them. Over the past twenty years, this has resulted in a surplus of credit in the U.S.. It has been cheap credit because it is bogus surplus credit. If there is a larger supply of credit than there should be, demand increases to meet the increased supply. Americans have gobbled up this credit. So the lack of a global gold standard and international clearing house has transformed Americans from hard-working, capital-building citizens into lazy, fat, debt-heavy overconsumers. All because Schumacher & Keyness bancor & international clearing house werent included in the Bretton Woods system in 1944. While Im on the subject, this relationship between China and the U.S. is changing. Until a few years ago, the strategy of the Chinese government and manufacturers was to use the majority of revenue from sales of products to the U.S. on investment in expansion of further manufacturing capacity instead of higher wages for Chinese workers. But like all things, growth occurs in the context of life cycles and growth curves. China didnt have capacity for unlimited manufacturing growth. A healthy middle class has been created in China over the past twenty years, and they are now consuming more products inside China. The wages of Chinese workers are no longer as cheap as they once were. Perhaps U.S. corporations should now find nations that have even cheaper labor than China. An international clearing union is needed to balance the books of the trade relationships between all the nations of the globe. Mind-rich & creativity-rich nations can import cheaper labor from labor-rich nations. In exchange for the lower prices of consumer goods from nations with cheaper labor, mind-rich nations can send their gold-standard gold to labor-rich nations to increase the incomes of their workers. Decreased prices in developed nations in exchange for increased wages in developing nations. Its a good deal, methinks. But the full advantages of this relationship are not being achieved because of the lack of a global gold standard and international clearing house. I wish I could explain things better. Sorry for my gibber-jabber. Am I right about this stuff? If so, why hasnt anyone figured this out before me? Im just a janitor. Hahahahahahahaha! But I observe the common folk working in retail sales and buying consumer products in the context of a national franchise corporation. Ive had to weed through all the abstract, quantity-biased theories of college professors and the macroeconomic-biased observations of CEOs, Wall Street bankers, or U.S. government officials. They see you as numbers. I see you as actual persons. My system is civilian-centered, consumer-centered, and employee-centered. Their systems are Wall Street-centered, U.S. government-centered, and rich person-centered. Whose system do you prefer?
Posted on: Thu, 13 Mar 2014 01:11:42 +0000
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