Shooting down Helicopters

Money is the lubricant that permits the economic system to work. Goods and wealth that are produced, distributed, circulated, used and owned do so because of money.

It is a commodity but it has an important difference. As goods and services trickle their way around the different economic bases (in the baseball sense) of extraction/production and through the commercial system to eventual user or owner, at each stage a corresponding sum of money goes in the opposite direction. The merchandise, raw materials, partly produced goods, finished goods and services at every step, go from seller to buyer. The money goes from buyer to seller and this is the objective of a money orientated system.

The banks create this money, theoretically, in the face of demand from the economy. The private banks claim they have been doing this for centuries. They like us to believe they are the only responsible creators of money.

Over the last half century at least, the proportion of money going directly into the financial markets to the detriment of the real economy has had a negative effect on the wellbeing of the world’s populations, putting pressure on wages, social services and the environment. When we see schools, hospitals, roads, parks and the countryside lacking repair and maintenance, this is the direct cause of money not going where it is needed. The same for the people in need: the underpaid, single mothers, the indebted, exploited immigrants. All these needs and people lack money because those who create it do not permit them access to it.

Many, close to most, of these problems would be resolved by doing otherwise. It is scandalous. Money should be a common good like air, water, land, the sea, the beaches between high and low tide, freedom of speech and many more common rights.

For a motor to work efficiently, all the parts must be correctly lubricated before it is set into motion. It must continue to be correctly lubricated to continue running without seizing up. What our eminent economists of all tendencies tells us is that money, our lubricating agent, must be directed towards the production part of the economic cycle and will, eventually, work its way down to the rest of the system in due course. This is not happening.

Money should be put, as it is created, directly where it needs to be and where it will be immediately spent and made to circulate. Starting by substantial increases in wages and benefits. The “needy” are so called because they are in “need” of commodities. Put more money in their pockets and they will immediately seek to satisfy their needs and desires. Money will then circulate in one direction and the merchandise will circulate in the opposite direction. If capitalist propaganda is true (i.e. that when people meet they naturally negotiate and exchange thus creating the market), then those who have the products the “needy” require will, to satisfy a market and make a profit, seek to satisfy their needs.

This is not a new idea, nor an absurd one. Many names have been given to these kind of propositions, one of which is helicopter money. This is a demeaning dismissal giving the image of a helicopter flying over a town throwing money down for the people to collect and put into circulation.

The economists, among others, scorn the idea of different ways of distributing money, but what are the shoot downs for helicopter money? If this vision really is flawed it must be discarded but convincing contradictory arguments from a credible source are difficult to come across so it may not be more absurd than the capitalist system.

When capital flees, production stops and lay-offs are not only imminent but may be backdated meaning some workers do not even get paid wages they have earned. Capital may flee rapidly in time of crisis, it may leave slowly, or it may simply not show up where it is needed. Whatever the reason, activity slows without the necessary capital. So money is the oil that lubricates the whole production, distribution and consumption system, on condition that it gets into the whole system.

Since money creation began the creators have always asked themselves “what is the right amount”? Theoreticians agree that the ideal amount of money in circulation is very close to the value of the goods to be distributed, or naturally becomes so. A wisely regulated increase in the money supply can stimulate production. If taking money out of the economy stops production and causes redundancies it is worth examining whether the opposite stimulates production and creates employment. In fact this is what investment, savings and FDI is supposed to be all about.

Evidently the right amount and method is that which permits the most goods to get to the eventual users. Working that out can be a series of trials and errors. Capitalism works like that so the capitalists would be badly placed to criticise the method.

Today there is no limit to the amount of money that is created but most of it goes to the financial markets thus starving (literally) the real economy. The problem is not to decide and eventually restrict the amount of money that is created. The problem is what to do with that money, where does it go, who gets the use of it? That is not an economic or financial question, it is a political one.

The democratically elected authorities must grab back the right to create money, and they know that, but this is not the prevailing political will ruling the world at this moment. The people must force this change and one of the essential elements of this movement is to have an understanding of the banking system.

“If the people understood the banking system they would revolt” (Henry Ford).

Great! Let’s try it then.

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This post was written by Mike