It was a mild, crisp California winter night when the unthinkable happened. A strong 9.5 magnitude earthquake, the expected large one, hit California. Buildings swayed and every store in the state saw its inventory crumble to the ground. The glittering pools of the Hollywood Hills had their pool water rinsed back and forth like in a churned glass of water. Many feared that the worst of an apocalyptic disaster movie was unfolding in real life.
After a few strong aftershocks, people began to come out of their hiding places to assess the damage. Oddly, no one was killed. Property damage was limited. Sure, there was an extensive cleanup to be done, but for the most part, California escaped the disaster. However, the morning after the night earthquake, people started noticing something extraordinary off the Santa Monica beach.
It looked like a mirage of a paradise island. Snow-capped mountains and rolling hills could be seen. It was the outline of a new land. As it was only about 40 miles away, some private planes set out to explore what it was. Photos began to appear in the news of this mirage – it was real. It was an island, nearly a quarter the size of California itself. It apparently arose from a deep ocean crevice during the previous day’s earthquake.
Still dripping a little from the receding waters, the island looked intact and beautiful. It had picturesque sandy beaches, mountains suitable for the best skiers, rolling hills with majestic vistas, vast lands for agriculture, sparkling lakes, and bubbling rivers that looked like wilderness had already begun to populate. There were no humans on the island, after all it just rose from the sea. The climate was a perfect Southern California climate. The US government quickly began securing its sovereignty as part of America. No other country has really contested this claim due to its proximity to the American continent. New California is born.
It didn’t take long before the politicians wanted to make it the 51st state, although California wanted to make it an extension of its state – they need the money. Businesses, real estate developers and bankers began to postulate how America could exploit New California for profit; after all, America is a capitalist country. Financial analysts began postulating its value. They came up with estimates of around $ 5 trillion, looking at all possibilities for new cities, beach hotels, beautiful hillside homes, ski resorts, and agricultural exploitation. However, others wanted to keep its unspoiled nature and make it a national park. America’s fluke of $ 5 trillion is just born. Oh!
But wait a minute. This brings us to an imperative moral and political question for America: Who owns New California anyway?
Doesn’t New California belong to the American people? There were heated debates, even protests about what to do with New California. Eventually, it was decided that no one really owned New California; it simply burst into existence. At the same time, the powers to be decided that, while preserving some areas such as national parks, yes, they should be exploited. But how? And the best way to do it fairly? A national referendum was expected, and here are the three choices in the ballot:
- Entrust the land to individuals, based on their current wealth. Since the rich in America have shown in the past that they know best how to exploit resources, we should give them the land. So, the “1%” will get 50% of the land. The next “10% will get another 20% and the upper middle class will get most of the rest (you already know the wealth curve in America). The poor who had no wealth will get practically none. However, they were the unproductive of the company.
- The government will auction each plot of land to the highest bidder. The proceeds from this auction would then go to the national treasury for general expenses. In order to bid, it would take a certain amount of means to participate in the auction as well. The wealthiest bidders could easily squeeze out those who have no money, giving them the edge in the bidding process. Most financial analysts indicated that this would only allow the top “10%” of the company to effectively participate in the auction.
- Divide the land equally and rent a plot of land to each American citizen. Assuming that they could divide the land into parcels of equal land value, each citizen could sell, rent or keep their parcel of land, according to their choice.
Sure there would be some tactical problems and variations for each plan choice, but let’s assume for now that all three basic choices are possible. Which referendum choice would you choose? Perhaps you would have preferred a modern Oklahoma land rush – let the people rush to New California. Is one choice more moral than the other?
Yes, this could be a funny fantasy story and most likely it will never happen. But are this history or principles less valid today? Today, public and private debts are around 50 trillion dollars. Remember, debt is money. Adding other debts (states, municipalities, SDRs and a number of other debt instruments for example) and the actual money supply, the total money is roughly around $ 80 trillion in the United States. It would be difficult to determine, but close enough for our purposes and in prudential terms, this total money is growing at least 5 to 10% per year (example). Again, using very rough calculations, this means approx Almost every year 5 trillion dollars of “poof” are born – although crises appear to vary widely from year to year (for example, COVID19 stimulus programs).
The existing $ 5 trillion “puffs” through the magic of a fiat currency system and fractional reserve lending. Oddly, that’s about one New California per year. It could be said that monetary expansion through new debt creates jobs – in other words, it can create these New Californias. Maybe in part, but the lion’s share of debt today is covering government budget overruns, share buybacks, and other financialization of the markets – a smaller part actually goes into jobs that create jobs. Also note that New California exists before or after the creation of new money, does it really matter?
Let us return to the issue of ownership of assets created through fractional reserve loans offered by our current fiat currency systems. Who owns the monetary system anyway? Citizens, shouldn’t they? Central banks should be mere administrators of that system. Let’s go back to the New California referendum mentioned in our story above. Today, the choice we used to expand our monetary system is the first choice; Entrust the land (goods) to individuals, based on their present wealth – that is, the rich can borrow, the poor mostly not. Other ways could be imagined – such as choice two – to auction the “license” to expand the total money (the current rates paid today do not). Or even choice three. These last choices (choices 2 and 3) would drastically change the ownership structure of assets, flattening the wealth inequality curve.
In a fixed monetary system, none of these choices would be possible. Economies (GDP) could still grow with a fixed monetary system, as they have in the past. A fixed or non-fixed monetary system could work. However, in an unsettled monetary system, the way total money is raised can favor one (rich) group over another (poor) group. It can be a distortion in the free market if not done honorably. In a non-fixed monetary system, what choices should we make? The rules of the game matter.
We have seen in recent months America experience horrific protests and riots ostensibly because of race. Many people believe that it is more about class struggles: elites prefer to talk about race rather than class, to disguise their positions. Injustices and financial and moral inequalities are at the heart of many of these struggles. It can be understood that the thoughts here may be controversial. But is the monetary system at the heart of many of these moral injustices and inequalities?
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Syndication source for the original RWR article.
[ https://rightwirereport.com/2021/10/07/a-different-view-of-modern-monetary-theory-do-you-want-to-play/ https://d26toa8f6ahusa.cloudfront.net/wp-content/uploads/2021/07/30214746/a-quiet-place-part-2-bigs-16.pdf