PEOPLE For  Mathematically Perfected Economy™ (PFMPE™)  :  mathematically perfected economy™ (MPE™) is the singular integral solution to 1) inflation and deflation, 2) systemic manipulation of the cost or value of money or property, and 3) inherent, irreversible multiplication of debt in proportion to a vital circulation, engendering inevitable systemic failure at a finite system lifespan defined by an inevitable, terminal sum of insoluble debt. Mathematically Perfected Economy™ is every prospective debtor's right to issue their promise to pay, free of extrinsic manipulation, adulteration, or exploitation of that promise, or the natural opportunity to make good on it.

MORPHALLAXIS, January 14, 1979.

What's Wrong With Ron Paul and Milton Friedman's Idea To Stop Expanding The Money Supply?

mike montagne

Solo bow hunt, self portrait, 7 miles into the North Fork Wilderness.

Imagine that you are designing the first combustion engine:

A prototype finally starts. It sputters; it coughs. It stumbles.

You envisioned smooth delivery of power — efficient power. Your very initial objective was to achieve full possible power. So is an engine to cough? Is an engine barely to run?

No one would ever have built a decent engine if we exclaimed only how wonderful all the "running" amidst all the first sputtering.

Imposition of a central banking system on true free enterprise runs quite the opposite course. It takes a free running engine and irreversibly multiplies its debt until it can run no more. That it ran in the first place, that it ran for some time, and that it improved its production at times even faster than usury imposed ever greater oppression is no testament to the ostensible merits of usury; nor does it prove the subject commerce can sustain itself against the multiplying costs of debt forever.

In fact commerce is finite; and a system which can only multiply debt in proportion to commerce can only eventually exceed the capacity of finite commerce to support infinite, irreversible multiplication of debt in proportion to a circulation. Indeed, as ever more of such a circulation must be dedicated to servicing the multiplying debt, ever less of the circulation remains to sustain commerce.

The inherent collapse of a central banking system therefore approaches at an ever escalating rate, as the subject commerce struggles against all the malignant consequences of servicing perpetual multiplication of debt in proportion to the potential commerce which can survive to do so.

What's Wrong With Ron Paul and Milton Friedman's Idea To Stop Expanding The Money Supply?

Ron Paul regularly referred to an expanding money supply in terms which implied that because a money supply ostensibly can be increased beyond the value of our production, an expanding money supply is responsible for price inflation and devaluation of the dollar.

Similarly, Russ Roberts of George Mason University initiates a September 4, 2006 Milton Friedman EconTalk interview (Library of Economics and Liberty) with the following statement regarding "inflation":

Russ Roberts: Milton, I'd like our conversation to focus on the ideas contained in two of your books, A Monetary History of the United States, 1867-1960, a massive scholarly work, and Capitalism and Freedom, a slim monograph on the principles of a free society.

Let's begin with the Monetary History of the United States. Written with Anna Schwartz. Published in 1963, it was an extraordinarily detailed and careful study of the role of money in the economy. And among many important insights, it made the case that inflation is everywhere and always a monetary phenomenon.

In a purported economy which can only multiply debt in proportion to a circulation however, the impropriety is not simply an increase in circulation per goods and services (for which we might otherwise appropriately use the traditional definition of inflation) because it is impossible to increase the circulation with only this consequence, and it is further impossible merely to maintain the circulation with no other consequence.

First of all, we cannot really increase a circulation above the value of new or further enterprise, because the rules we comply with prevent us from borrowing into circulation more than the further enterprise the circulation is to sustain. We don't borrow $200,000 to buy a $100,000 home any more than we borrow $50,000 to pay for a $5,000 automobile. There is no real such thing as traditional inflation then; and thus there can be no fixed linkage between a purported increase in circulation per goods and services, and inherently increasing prices.

There is one and one only systemic cause driving prices ever upward, and that cause is interest. As we maintain a circulation by re-borrowing whatever we pay against principal and interest as subsequent sums of debt increased so much as periodic interest, the perpetual artificial multiplication of debt we must endure imposes ever greater costs of servicing debt for a given circulation. We must borrow at an ever greater rate then to maintain the circulation, and as the sum of debt increases, ever more of the circulation is inherently dedicated to servicing debt, while ever less of the circulation therefore remains to sustain the commerce which must service the debt.

The evils which Mr. Paul and Mr. Friedman therefore hope to address are inherent and unavoidable consequences of interest.

Despite the fact irreversible, inherently ever escalating multiplication of debt in proportion to a circulation ultimately engenders systemic collapse under sums of debt which the circulation cannot afford to service, Mr. Friedman waxes optimistic and blames these very consequences we are experiencing on government spending:

Milton Friedman: I have great difficulty not being optimistic about it. All the evidence would seem to be optimistic. On the other hand, I can't hold back a doubt. Governments want to spend money and sooner or later, governments are going to want to spend money without taxing it and the only way to do that is to print money — to create inflation.

Since the first deficit government has already been printing the money Friedman is discussing as if it will be a future malady to contend with. But of course, it's not; and the present reason we suffer the consequence is that private debt has been multiplied to the degree that we cannot afford to service its further multiplication. To sustain the improprieties of the system then, we simply are assuming government debt we cannot pay; and thus in not paying against it (which engenders the deficits), we have a way of extending the limited lifespan of the system to whatever degree we want to become ever more delinquent on even ever so much more debt.

Well this of course isn't really [only] "inflation" either, but Mr. Friedman goes on as if it is. He thus first says that "Inflation is a form of taxation," even as this contradicts the stated premise, that government deficits allow the populace to live beyond their means by in fact avoiding taxation.

The whole impetus for all this rigamarole nonetheless is the improprieties of the system. What we are paying for is our own production; the reason we are not rewarded so sufficiently as permits us to afford the production we have already paid for by the act of producing it is, so much, and ever more is taken from us in the form of the self-multiplying gains of the unassented system.

So they go on to discuss the obvious non-merits of a purported personality contest by which the so called Fed is chaired. A few tasty morsels are disclosed here and there, but these are things we should all know anyway. Where is the forum, to whom do we appeal for reform? Is anybody listening? Or is the nature of the system so unquestionable that all we are left is the disinterest of the personality contest?

Inflation is a form of taxation. How long will governments be able to resist the temptation? And particularly as people become adjusted to being in a world of stable inflation. They will be bigger suckers as it were. It will be easier to get a lot out of it. If everybody anticipated inflation, you couldn't get anywhere by inflating.

Russ Roberts: But once you get people lulled into the expectation of a lack of it, there's the potential to exploit it. Let me ask the question in a different way. A lot of people credit Alan Greenspan with the expansion and success. They give Paul Volcker some credit as well at the early part of this period that we're talking about.

But they make it sound like the key to success in monetary policy is you just got to get the right person in the job. When Ben Bernanke or whoever is following him comes in, there's this absurd microscopic examination of the aura and vapors around such a person. And you're suggesting it really has nothing to do with it.

Milton Friedman: Well, how is it that New Zealand can do it. How is it that Australia can do it. How is it that Great Britain can do it. These are all countries which followed New Zealand. New Zealand started it. But then Australia and Great Britain also adopted inflation targeting.

Russ Roberts: Well, they just happened to find the right guy in each of those places.

Milton Friedman: Oh, they were all lucky. Absolutely. (Laughter.) I've always felt that the big defect politically of the Federal Reserve is precisely that so much depends on unelected representatives. The central bank is treated as if it were the Supreme Court. That's why during the Depression, there was no effective controls on the central bank. There were members of Congress who knew what to do and who trying to get the Fed to do it but they had no way to do so.

Russ Roberts: There was no incentive directly. There was an indirect incentive, of course, which was humiliation and the stigma which has endured. They had no idea at the time of how bad that would turn out — how those decisions would look in retrospect. But you're suggesting that the disadvantage of the current system is a lack of accountability.

Milton Friedman: Right.

Well of course, no one here or elsewhere is holding anyone accountable at all for the flawed design of the system which can only engender these improprieties. So what's the difference if we cannot rectify the system? (Hello, hello?)

Russ Roberts: But the alternative, the elected system, has the problem that you mentioned earlier of the temptation to exploit the ability to create money to increase revenue.

Milton Friedman: But that's why what you want — if possible — is a mechanical system. If there was any virtue to the gold standard, it was that virtue. Maybe you could create the same thing now. My favorite proposal really is a little bit more sophisticated — or less sophisticated if you want to look at it that way — than a straight increase in the quantity of money. I would — if I had my choice — freeze the amount of high-powered money. Not increase it.

Russ Roberts: High-powered money being bills and cash.

Milton Friedman: High-powered money is the currency plus bank reserves.

The mechanical solution of course is to introduce so much circulation as our endeavors grow, to alleviate predation and consequent diminishing of our efforts through interest, and to pay the interest free debts of this finance off at the rate of depreciation or consumption. Yet Friedman talks of virtues of a gold standard which never provided the protection it was intended to, and which cannot provide the protection it was intended to, because only one thing guarantees the value of a circulation which can be increased so much as to sustain further production — and that one thing is the remaining value of the production itself.

Russ Roberts: Okay.

Milton Friedman: I would freeze that and hold it constant and have it as sort of a natural constant like gravity or something. Now, you would think that that's a bad idea because there would be no provision for expansion; however, high-powered money is a small fraction of total money and the ratio of total money to high-powered money has been going up over time. So the economy would create more money and on average, you would have a pretty stable money growth and a pretty stable monetary system.

What's wrong with Milton Friedman and Ron Paul's idea of restricting the monetary supply is 1) the resultant supply cannot sustain the further commerce we are capable of; and 2) their failure to address the root cause of inherent, irreversible multiplication of debt in proportion to a circulation 3) leaves the processes of interest yet to further multiply the costs of all things; and thus 4) to perpetually erode margins of solubility as ever more of the circulation is inherently devoted to servicing ever greater debt, leaving ever less to sustain commerce.

Without mathematically perfected economy™ they cannot solve the problems they intend to; with mathematically perfected economy™ the problems do not even exist.

So while Friedman is altruistically optimistic of usury and Ron Paul wants to be president for smelling the problem and while evading (our) discussion of singular solution... the economic hero, Friedman thus tells there will be no depression even as failure is imminent and the best we can hope for from usurers is to be kept at the edge of marginal solubility.

I haven't read the book(s); but I know one thing: the only thing that will save us is restoring to the people their authority to create and maintain a circulation which after all only represents their debts to each other; and so neither man offers up the most vital "principles of a free society," or paves the vital road to getting there.

RELATED EXTERNAL MATERIAL

RELATED PRIMARY ARTICLES

RELATED REFUTATIONS/REVIEWS OF CONTROVERSIAL MONETARY PROPOSITIONS

"To find the players in all the corruption of the world, 'Follow the money.' To find the captains of world corruption, follow the money all the way."

mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)

While 12,000 homes a day continue to go into foreclosure, mathematically perfected economy™ would re-finance a $100,000 home with a hundred-year lifespan at the overall rate of $1,000 per year or $83.33 per month. Without costing us anything, we would immediately become as much as 12 times as liquid on present revenue. Transitioning to MPE™ would apply all payments already made against existent debt toward principal. Many of us would be debt free. There would be no housing crisis, no credit crisis. Unlimited funding would immediately be available to sustain all the industry we are capable of.

There is no other solution. Regulation can only temper an inherently terminal process.

If you are not promoting mathematically perfected economy™, then you condemn us to monetary failure.

© Copyright 1979-2008 by mike montagne and PEOPLE For Mathematically Perfected Economy™. ALL RIGHTS RESERVED.Copyright 1979-2008 by mike montagne and PEOPLE For Mathematically Perfected Economy™. ALL RIGHTS RESERVED.

PEOPLE For Mathematically Perfected Economy™, Mathematically Perfected Economy™, Mathematically Perfected Currency™, MPE™, and PFMPE™ are trademarks of mike montagne and PEOPLE For Mathematically Perfected Economy™, perfecteconomy.com. The trade name, Mathematically Perfected Economy™, may only be used, and may freely be used, only by permission, and only by countries complying with the prescription for Mathematically Perfected Economy™ herein.

THANK YOU FOR VISITING PEOPLE For Mathematically Perfected Economy™!

Firefox™.BEST VIEWED WITH MOZILLA FIREFOX™ AND FULL USAGE OF A BROWSER WINDOW AT LEAST 1450 PIXELS WIDE.


Search perfecteconomy.com     Search Web