CDXLIII – The Bread Standard

When you water your brain good thoughts grow, that is why people have shower thoughts. Such is the inception of the subject of this post: The Bread Standard.

The root of the thought was this: I recalled my introductory accounting classes where the question of “what is money” was brushed aside in favor of “how is money used”–the answer being ‘as the means of exchange’. What money is, is very important because it reveals the philosophical underpinnings of the economy. Zippy famously tried to answer this question by saying that money is tax vouchers. I disagree, and as an alternative I suggested that money is a unit of the delegated authority of the sovereign.

What follows from this is that I wanted to think of a simple analogy or otherwise how to explain my model of currency to a child, or someone uninterested in finance. I began by suggesting the starting point is that the Sovereign is responsible for providing all the needs for his subjects, but because that is impractical he issues vouchers redeemable for some unit of value. Issuing a token that says “One Dollar” on it doesn’t mean much in a vacuum, this is why proponents of the gold standard try to substitute Gold. It makes the logic go something like this: This slip of paper that says “one dollar” is tradeable for one ounce (lets say) of Gold. So now you are not trading “dollars” but you are trading gold by proxy. But what the Sovereign is really concerned about is the necessities of his subjects, so what if he made the slip of paper that says “one dollar” tradable for one loaf of bread?

The great thing about a Bread standard is that it lines up with the idea of “purchasing power parity“, which compares world currencies by comparing how many local bucks it costs to buy some standard commodity–bread being a common comparison. If it costs $5USD to buy a loaf of bread in America, and it costs ₱500PHP to buy a loaf of bread in the Philippines, then $5=₱500, and a ‘colloquial’ exchange rate can be reasoned. If we had a Bread Standard, then 1 Bread Buck would always buy one loaf of bread, so that would make comparing bread bucks to other countries relatively simple.

Within a country like, for example, Scootland, Bread Bucks could be valid stand-ins for bartering with loaves of bread. If you need a wagon, if you need a mule, if you need a car, if you need gas–how much current or future bread would it be worth to you to trade for it?

This calculation makes the economy begin to make a lot more sense. It explicitly refers to the Sovereign providing necessities for subjects, it expresses what the basic necessity of the subjects is (bread) and it facilitates trade so that you aren’t just trading hypothetical “Scootbux”–how do you value that?–but you are trading the authority to buy for yourself one loaf of bread.

I don’t know that I have succeeding in creating a simple explanation, but I really like the idea of a Bread standard.

What follows is just a fun (for me) breakdown of Bread based currency:

฿1 Sovereign, colloquially known as a Loafer
߿1 Tenth, colloquially known as a Slice
10߿ make ฿1, or 10 Slices to the Loaf
2߿ are known colloquially as a Sammy

AMDG

CCCLVIII – Zippy on Property Taxes and Currency

I was reading Zippy again, here comes trouble. I stumbled upon some comments of his in the wild on other sites and just really admire the clarity and force of his arguments. Now that I grok his points, his arguments are very frustrating to witness. He is saying things very clearly and it is literally only the blindfolds of his interlocutors that prevent them from understanding him. He was extremely patient at answering respectful questions and extremely diligent at ending the conversation the second it turned south.

So, one thing led to another and I end up at this article by Zippy that touches on Property Taxes and all my old gears started spooling up again.

This article is going to be a stab at restating Zippy’s argument in a way that I can understand so that when I try to fit my ideas of currency into it, I am speaking from an intelligible place.

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“Usury is rent charged for something which does not actually exist. Thus usury is unjust: it is (…) a something-for-nothing taking from the borrower.”

“The value imputed for the property tax rests on the mere potentiality of selling the property for its assessed value. There isn’t any actual sale for actual dollars; there is merely a potential sale which does not in fact occur.”

“If it is intrinsically unjust to charge rent for something which doesn’t actually exist, it is also intrinsically unjust to tax what does not actually exist.”

These are the key premises according to Zippy.

There are some assumptions:

• Currency as tax vouchers
  • This is the best explanation of the tax vouchers thesis I’ve seen from him so far: Currency has value as a means of exchange because it can be used to pay taxes.
    • I don’t agree with this because it feels tautological. I will revisit it in a subsequent post if I don’t touch on it here.
• Property taxes are a tax on the potential sale.
  • I think there is an argument to be made that property tax is rent for use of sovereign land, and the assessed value is just a macguffin for calculating that. Zippy’s approach might be realist in that sense but I think it accidentally uses the wrong part of the transaction as the fulcrum for realist analysis.

Lets start digging into this with our ideas.

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Currency and Taxation Revisited

I don’t like the tax vouchers idea because it is tautological. Currency has value because the sovereign accepts it as payment of taxes. It reduces the function of the sovereign to that of a tax administrator, and it presumes that currency is freely in circulation and the sovereign could accept empty cans of cola in payment but it chooses to accept greenbacks.

Currency is more complicated than that because only the sovereign can issue it, the medium of the currency itself doesn’t have to have any value whatsoever, and the exchange rate for real property changes based on the amount in circulation. Note that the issuance, valuation, and exchange of currency has nothing to do with taxation. Taxation is a separate function of the sovereign, and by no means the only function of the sovereign.

Taxation is a lawful function of the sovereign, and takes the form of a levy of property kind of like the draft is a levy of personnel. The specific mechanism of taxation can be just or unjust, but in principle taxation is allowed to the sovereign.

The easiest to understand and most just form of taxation is a direct levy. The sovereign says “I need One Billion scootbucks for some public good” and sends the bill down the chain such that every citizen of Scootland gets their portion of the billion scootbuck levy.

Progressive taxation changes the amount of the levy for each person based on their accumulated property. A person with more property has to pay a higher levy. A person with less property has to pay a lower levy.

Sales taxes are intelligible because they are a standing levy on economic activity. If taxation is “returning to Caesar that which is Caesar” then it is analogous to “pouring one out” for the boys–sacrificing the first part of a drink or a meal in homage to God or ones friends of fond memory. Sales tax is saying the first part of your economic activity should be to give a token to the Sovereign and the rest is barter between willing parties. Sales taxes are inherently progressive because people with more property have more means for transacting and so naturally transact more and pay more as a proportion of their income to the sovereign.

Income taxes are complicated, but it is similar to the Sales tax in that you are paying the first part of your economic activity to the sovereign. I receive a wage of SB100 and pay SB1 in homage to the sovereign so I take home SB99. Sales and Income taxes avoid the levy system and allow the sovereign to have a standing order of property from the people, in the form of default tokens received from economic activity.

This brings us to property taxes. Zippy’s thesis that property tax is a tax on a potential sale doesn’t make sense to me, because it’s not economic activity. It’s a tax on the property itself, as the name implies. As I suggest above, property tax could be construed as rent for use of a portion of the sovereign land. But if that were true, everyone’s property tax bill would be identical per unit of that land. What makes property taxes confusing is that they are based on the improved value of that land–improvements which the sovereign had no hand in other than to authorize via the delegated authority to acquire property that is currency. I would argue that the thing that makes property taxes unjust is the reliance on the improved value. It would be OK if property tax was merely a charge for use of property. This has negative economic consequences, sure, but at least if everyone had the same tax per acre then it would be intelligible and “equal”. Charging for the improved value penalizes improvements, and provides an economic disincentive. It is unjust the same way a progressive levy is unjust, because it penalizes people for the arbitrary reason of having property and not for the intelligible reason of using property.

Of course, the use of property does not automatically make a tax just, just that it does a better job of treating all subjects to the sovereign as equal in his paternal eyes. The benefit offered to the poor is taken away by the injustice done to the rich.

So, to quote the inimitable Zippy:

“Thoughts?”

AMDG

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EDIT:

AHA! I feel very affirmed, I followed some links to the previous article and ended up at the Orthosphere. Zippy says in a comment there:

Again, precisely what is at issue is if it is possible for the sovereign to commit theft against his subjects (whether he labels it a “tax” or not), and under precisely what conditions.

Someone might contend that it is not — that all ownership is merely delegation of sovereign authority rather than a distinct authority in its own right under the natural law. But playing games with labels (“tax”) and declaring taxation licit is just a pointless nominalist rhetorical gambit which attempts to avoid what is at issue rather than addressing it.

My theory of currency is derivative of this: Currency represents future property, so it is a stand in for ownership until the unit of currency can be traded for a unit of real property. The delegated authority follows. Zippy is aware of this logical conclusion but did not follow it through to the currency used to acquire property. I don’t know why.

I’ll count this as a win though, it is nice to see I am not treading any new ground just discovering old ground that is so well worn as to be unrecognizable!

CCCXX – Inflation

Ed Feser has an interesting article up about Economic and Linguistic Inflation. It’s mostly about linguistic inflation but it begins with a point about economic inflation. Here’s the beginning of Feser’s article:

F. A. Hayek’s classic paper “The Use of Knowledge in Society” famously argued that prices generated in a market economy function to transmit information that economic actors could not otherwise gather or make efficient use of.  For example, the price of an orange will reflect a wide variety of factors – an increase in demand for orange juice in one part of the country, a smaller orange crop than usual in another part, changes in transportation costs, and so on – that no one person has knowledge of.  Individual economic actors need only adjust their behavior in light of price changes (economizing, investing in an orange juice company, or whatever their particular circumstances make rational) in order to ensure that resources are used efficiently, without any central planner having to direct them.

Inflation disrupts this system.  As Milton and Rose Friedman summarize the problem in chapter 1 of their book Free to Choose:

One of the major adverse effects of erratic inflation is the introduction of static, as it were, into the transmission of information through prices.  If the price of wood goes up, for example, producers of wood cannot know whether that is because inflation is raising all prices or because wood is now in greater demand or lower supply relative to other products than it was before the price hike.  The information that is important for the organization of production is primarily about relative prices – the price of one item compared with the price of another.  High inflation, and particularly highly variable inflation, drowns that information in meaningless static. (pp. 17-18)

We have the tools to solve this problem! There’s two points worth making:

• What inflation is & what information it conveys
• What information is conveyed in any price whatsoever?

Let’s start with the second question first, because I like thinking backwards.

What’s In A Price? A Rose By Any Other Name Would Cost Twice As Much

I will make two mutually counterintuitive claims about Price. First: Price contains perfect information about the world at the moment of every transaction. Second: Price contains imperfect information about the market because it simulates but does not convey an expression of value.

Price contains perfect information about the world at a moment in time because of the equilibrium it achieves between supply and demand. If we are talking about oranges, the supply side of the market equation includes the substitutes and replacements, the derivative products and trades–every possible orange and every possible thing like oranges is represented by perfect knowledge of the supply side of the market. The demand side of the market equation includes every person for whom it is possible to buy oranges, every person for whom it is not possible, every currency they can buy it in, every conceivable purpose for oranges, and every conceivable derivative product from oranges. In short: the price of oranges includes who is supplying oranges and who is not. It includes who demands oranges and who does not. Every price includes this information, because if demand was infinite price would be infinite too. A market cannot just be an expression of who wants something, it has to factor in who doesn’t want it, and why. I am not in the market for oranges at this very moment because I ate grapes a few minutes ago. That decision is included in the price of oranges. If two minutes from now I get an idea for a way to make unlimited clean energy out of orange peels then two minutes from now my demand for oranges will increase dramatically, and that will affect the price of oranges.

(Kristor wrote an article and made this point in the comments, or i made this point, or I was learning it from him–anyway I can’t find it on the Orthosphere yet but I will link here if I can find it).

There’s a whole other side to this equation, that does not get a lot of consideration. What can oranges be exchanged for? This is a good point to pivot into inflation.

Inflation Makes Me Want To Blow Up

Inflation typically refers to the increase in prices of goods due to an increase in the money supply. Typically, inflation is treated like weather–it is a thing that happens to economies, and it is hard to predict. Inflation is a quality of markets. In fact, a more sensible way of discussing economic inflation would be an increase of supply for a resource available for barter. Remember the Zippy rule: All exchange is barter. So what makes it that I am willing to trade a sack of oranges for a few sheets of paper?

The core of this idea is the fact that the paper represents the delegated authority of the sovereign to provide for my needs. The sovereign issues a paper which says “I would buy this citizen one dollar’s worth of goods, but I cannot, so I trust this citizen to buy it for himself.” When the sovereign issues a LOT of these papers, they become worth less and less in barter. If the total economy is just me and my friend Joe the Orange Seller, and our total savings is $10,000 between us, and I go and offer to buy one orange from Joe for $10–that is a substantial amount of the total economy being spent on this one transaction.

If Joe the Orange Seller and I have a sum total savings of $10,000,000 between us, and I offer $10, that is less substantial of an investment. The sovereign needs to carefully manage the money supply or else there will be an over abundance of the resource. This makes sense if we were to use another resource.

If where I live, Guinea Pig husbandry is rare, then offering Joe a Guinea Pig in exchange for an orange would be a pretty big deal. If where I live there is an infestation of Guinea Pigs and they have become a pest, such that you cannot walk outside without stepping on one, then offering Joe a Guinea Pig would be a joke–he could step outside and fill a basket with guinea pigs right now, for free–why would he give me an orange for one?

Managing money as a resource is the key. Price is the twofold equilibrium between the supply and demand of the product being sold and the thing being traded for it.

This means you should be able to make a model for price that includes the supply and demand of oranges and the supply and demand of barterable resources and set the price in [resource] for oranges given both. I’m imagining two intersecting graphs with supply and demand on it and price being the point at which both graphs are in mutual equilibrium.

Price as twofold equilibrium is the new idea for me. Maybe economists realized this a long time ago but I’ve just realized it so I will probably write more on this topic.

AMDG

CCCXIV – Rubles, Rai Stones, and War By Other Means

I am writing this at 10:00am on April 27th, 2022. This is important because in War, the mornings intelligence briefing is obsolete by the time it reaches the hands of the President, and the decisions he’s made in response to that briefing is obsolete because the next intelligence briefing is already on the way with updated information. This is one reason why Truth is always the first casualty of war. So this article will likely be obsolete by the time it publishes.

The news I read this morning went something like this: Russian state Gas corporation Gazprom has cut off Poland and Bulgaria from their supply of Liquid Natural Gas. Poland’s response has been “We are going to be OK”, Bulgaria has responded with “This is a breach of contract.” This is all I know.

All of this is interesting to me because it represents a discussion of Economics and Currency as well as War by Other Means. Lets try to get a feel for what’s going on:

The European Union sanctioned Russia by cutting them off from the mechanisms of Foreign Exchange. This had the effect of making Russia’s supply of foreign currencies useless, and the Ruble useless to other countries.

Russia responded by saying that payments to Gazprom must be paid in Rubles. This had the effect of turning the tables on the European Union–now their currencies cannot be used to pay for Gas, and because they cut Russia out of the mechanisms of Foreign Exchange, they cannot get more Rubles than what they already have in reserve.

The European Union prior to this morning has responded that requiring payment in Rubles is a breach of contract plus a lot of other legalistic hemming and hawing. Russia and the European Union know that if Russia cuts off the gas supply then there will be extraordinary human suffering on a massive scale in Europe–my understanding is that this gas supplies power and heat to most of the population of Europe.

Let’s start by talking about Currency. Why does the denomination of Currency matter? Here in the US, my experience with foreign exchange has been that when I get a Canadian Quarter I can’t use it in vending machines, and in the past when I visited my family in Canada I would come back with a lot of colorful bills that I can’t use. Some banks will accept foreign currencies and exchange them for US dollars, but that is a bit of a hassle. I have the knowledge that I can exchange Canadian bills for US Dollars but I choose not to because I don’t have enough to make it worth the trouble.

When we talked about foreign exchange in my graduate studies, it was treated as a given. There is a calculation you can do to decide whether to “Build or Buy” a given product in a foreign country, so you plug in the inputs and make decisions based on the exchange rate at the time. There was no discussion of the specific mechanism of foreign exchange.

We know based on our discussions here that Currency represents the delegated authority of the sovereign and that the denomination someone uses tells you who their king is because we put the sovereign on the bill (American dollars say e pluribus unum which means “out of many, one”–a perhaps accidental reference to the fact that the people are sovereign in aggregate).

So why does the denomination of currency matter? Because the denomination tells you who is boss; the denomination determines who matters when you make decisions; the denomination determines how challenging a given transaction is.

The EU wants to be boss, so the EU wants gas to be paid for in Euros. The EU doesn’t want to consider Russia when making decisions, and so far Russia hasn’t cared enough since foreign exchange was relatively easy, so the EU wanted to pay in Euros. When the world cut Russia out of the foreign exchange system, that particular sword cut both ways, and made Foreign supplies of Rubles useless. Immediately after this decision, Russia put limits on how much money Russians could send outside the country or even carry with them, because the supply of Rubles suddenly mattered a great deal. This move by Gazprom to require payments in Rubles is a way for Russia to call back foreign reserves of it’s currency, which struck me as a very clever way of turning the tables.

Considering the Economics of the decision allows us to factor the actual gas into the calculation. When Russia was supplying gas, nobody really was motivated to address the Rubles demand–they felt Russia would keep supplying and accept whatever they paid. Russia turning off the supply is simultaneously increasing demand for the gas, and when demand increases we know also that price increases. Poles and Bulgarians who were previously comfortable in their heated and powered homes will clamor for Russian gas at any price if a cold snap strikes. Honestly–I think Russia waited as an act of mercy, supposing that the human suffering would be limited in warmer weather. I don’t know how much warmer it is at the end of April than it is at the end of February, but I am sure it is noticeably warmer in both countries.

Russia in this move has created a domestic popular demand for Russian gas, and Poles and Bulgarians will be advocating on Russia’s behalf in short order, when gas shortages are felt. The price of gas will increase, which will increase Russia’s demand for Rubles, and amplify the difficulty of the decision before the European Union. Russia is turning the economic screws.

Now we can talk about War by Other Means with a complete understanding. I mean by this phrase to invert an old saying I heard somewhere that “War is politics by other means”–now, politics has become war by other means.

If the international order exists in a state of Anarchy, the levers of war are pretty sparse. If Russia has no connections to the United States, the United States has no means of influence over Russia. The Global Order is a way of inventing ways for the United States to be able to influence Russia and conduct a war by other means. Every Embassy, every trade deal, creates a bond which can be leveraged for conflict or to avoid conflict. The world responded to Russia’s invasion of Ukraine by isolating them and cutting them out of the global mechanisms that have been invented. But the mistake they made was to cut them out all at once. Now Russia is figuring out how to operate in a globally isolated way, and everyone else has run out of levers. Russia’s biggest levers are it’s gas supply and the threat of war, which it is now using to the fullest extent. And Russia didn’t make the mistake of cutting off the entire gas supply, but doing so selectively. After they see the reaction, I bet they will evaluate the decision and either cut off more countries or negotiate some concessions.

All of this is supremely interesting political gamesmanship, if one completely ignores the massive human suffering the depleted gas supply will cause and the ongoing war in Ukraine is causing. That is where world leaders need to remember their role as custodial sovereigns: the care of their people ought to be the foremost concern, not the preservation of their regime. The war is not a just war, and both sides are in the wrong in their conduct and both sides are victims in their own way. Aggravating human suffering as a bargaining chip is an inhumane act of cruelty.

O Lord, Jesus Christ, have mercy on us, and on the whole world.

AMDG

CCLXXXVI – Currency and Taxation

Let’s return to the ideas surrounding currency, sovereignty, and taxation. I believe Taxation was one of the open questions from my last thought-sprint on the topic, but I had to step away for a while to let the seeds of thought germinate and allow the spiritual focus of this blog some elbow-room. So lets see what thoughts remain after some time away!

The question at hand is what is taxation. Zippy, again, referred to currency as Tax vouchers because he didn’t have a model of currency or taxation that fit closely. For his purposes it worked, because he framed a lot of his thinking in terms of contracts and titles to real property. I feel fairly confident in my description of currency as delegated authority of the sovereign, so that influences what taxation is.

In one of my articles, I take this glancing blow at answering the question: Sacrifice (or, Worship generally) is the practice of giving back to God the things that are Gods, so taxation is giving back to Caesar the things that are Caesars. But why do we owe anything to Caesar at all?

First, we have to accept that taxation is a morally permissible act, and indeed one aspect of the sovereign duty to care for his subjects. The basic idea is that when the sovereign has some goal to be undertaken for the good of the state and his subjects–be it war, infrastructure, bureaucratic reform, anything–it requires people and resources to accomplish. A Draft is a sovereign levy of personnel; a tax is a sovereign levy of property. A tax is a sovereign levy of actual property–any currency received is provided in lieu of the property needed by the sovereign. Sometimes it might be food, so the sovereign requisitions grain. Absent grain, some amount of dollars will do. This is because dollars represent future property which can be purchased with the sovereigns authority to provide for necessities.

In a previous draft of this article, at this point I went in to talk about all the different kinds of tax systems–but I think that is a moot point. The underlying principle of taxation is sound. How taxation is implemented might be just or unjust in type, amount, or character. In democracies, taxation tends to be unjust because of the inherent flaws in absence of a true sovereign.

If we accept the premise that all ownership is derived from the Sovereign, then really all taxation is, is recalling property which was delegated to the people from the sovereign in the first place. And the people have a duty to provide it, the same way there is a duty to comply with a draft if one is implemented.

“But Scoot, what about private property? Isn’t that Natural Law?”

You’re right–private ownership is an element of natural law. But this concept of taxation doesn’t abrogate that. Private ownership is a kind of authority and that authority flows from God through the sovereign to you. That shovel is yours, you and the shovel are the King’s, the King and all his subjects are God’s. No other person can eliminate your claim on that shovel, but the King can requisition it for a higher purpose to which you owe a duty out of filial love if not obedience.

I think that is the last point which remains to be made clear, and I might write about in more detail later on, disambiguating ownership, authority, and sovereignty.

AMDG

CCLXXX – What If I’m Wrong?

In my previous three articles on the Sovereign and Property, I treated it as a given that currency is a token of authority delegated from the sovereign. I know this is not the conclusion Zippy came to, so for completeness’ sake I want to explore why that might be and just generally think about ways this whole idea might be a complete waste of time. And so, in no particular order:

NB: Each of these Errors should be taken as an independent argument contra my previous articles and not a combined case.

CCLXXVI – Change The Subject

Or, The Sovereign & Property, Part 1 of 3

We’ve talked a lot about Authority and we’ve talked a lot about Property and we’ve talked a lot about what it means to be a peasant, but we haven’t joined all of these ideas together, so here I will aim to do that. This is part one of a three part discussion on the relationship between Property and Sovereign.

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In a previous article I said the Sovereign kind of “owns” the state. That’s how it is possible for a unit of currency to represent the delegated authority of the sovereign to transact and provide for our necessities. Currency comes to be a kind of allowance from the Sovereign. Let me back up for a second, because I am getting ahead of myself. Here is the relevant excerpt from my previous article:

In ownership, it means the King owns the land of the Kingdom. If a peasant carves out a patch of land for himself, he must buy that land from the King. The King may also fief land to nobles to rule a smaller, more manageably sized chunk of the Kingdom. All of this is a delegation of authority from the sovereign, and not an abrogation of authority. The Peasant has private property, but it is not independent from the domain of the King. Both the peasant qua subject and the land qua property belong to the king, but the peasant is given free exercise of the land insofar as the King respects private property.

Here is the conflict: What does it mean for the peasant to own private property and the King to control it? Who is losing–the peasant, for having to give some control to the sovereign; or the sovereign, for having to lose direct ownership to the peasant?

We know private property is an element of natural law from some encyclicals somewhere. So private property is a necessity when we are talking about this subject, we cannot invalidate it. But, neither can we get around an obligation to a sovereign. So lets start by thinking about what exactly private property is and build up from there.

Well, right now I think of private property as my computer on which I’m writing this article; or a pen I use to take notes; or the land on which I live. Its private because its mine, its property because it is not me.

We know also that ownership implies responsibility—we have the responsibility of disposing of our private property well, and for the glory of God and benefit of our neighbor, and with deference to the will of the sovereign.

Excursus: Property that is committed to the will of the sovereign is considered patriotic. Property that is underutilized is considered wasteful. Property that is committed against the will of the sovereign is sedition. Remember the Parable of the Talents? The parable is starting to make more sense the more I think about this. Same with the parable of the Rich Man and Lazarus.

Lets jump to the other side of the spectrum. When I talked about currency I argued that currency is delegated authority of the sovereign, which allows us to supply our own needs on his behalf. That means to a certain extent our money is like an allowance from the sovereign.

We see this in microcosm in a family. I give little Johnny a ten-spot to go buy baseball cards. The baseball cards are little Johnny’s property even if the money came from me. Little Johnny still has the responsibility of disposing of his allowance in a way that satisfies his needs and still glorifies God. There is no dispute that the baseball cards are little Johnny’s property even if he is subject to me.

You can think of Land in this way. The sovereign is responsible for the territorial possessions of his state. He “owns” the state—this is why when I buy a house I will still be an American citizen, private property doesn’t divest me from obligations to the sovereign. My property and I are still subjects to the sovereign.

We can think of ownership of property as a lesser order of authority or control when compared to Sovereignty. This is because ownership still is subject to the sovereign, while sovereignty is subject only to God. This is why the responsibility of the sovereign is very great, and the responsibility of the peasant is comparatively minute.

To be subject means that we live in the lesser order of authority, and give the better part of our deference to the Sovereign.

While the focus of this article is on our earthly sovereigns and material possessions, it is worth making the spiritual parallel explicit. We are all subject to God, which means we owe God the greater part of our deference and we owe an obligation of Worship. God has given us all our spiritual property: our gifts, talents, blessings, health, life, relationships, even our material property. We thus have an obligation to use these things for His greater good, for the good of the King of Kings, the Sovereign of Sovereigns. God is an infinite being and has provided everything to us directly, how much more do we owe him as dutiful, patriotic subjects?

More to come, keep an eye out for Part 2.

AMDG

CCLXX – Render to Caesar the Garbage That is Caesar’s

DavidTheBarbarian’s comment on my previous article is excellent and touches on a lot of points which I noted in my reply to him but which I wanted to expand upon.

First, we need to disambiguate what money is in fact from how it is used. In medieval times, money was made of gold, but it was used to delegate the sovereigns authority to acquire property. Today, money is made of nothing, but is used to delegate the sovereign’s authority to acquire property. The important part of a currency is NOT what it is made of, as evidenced by modern currency being literally nothing. The important part of a currency is that it signifies the sovereign’s authority to acquire property.

This concept coheres with my previous discussion of yap as a unit of value. Anything is only valuable insofar as people want it. Money is the same way. If there was only one coin in the world which bore the sovereigns authority to acquire property, even if it was made of garbage, people would accept a lot of property in exchange for that coin. This is because no exchanges would be possible without it unless they were direct property-to-property exchanges. Exchanges always happen at a yap profit for both parties and sometimes happen at a money profit for one party. If the sovereign printed a trillion such coins, each individual one would not be tradable for very much property.

The important point here is that how much property you can exchange for money is not an intrinsic property of money, but is a consequence of how much money is around. The purpose of the money supply is to facilitate exchanges of property, and the money supply should match the number of exchanges performed by all citizens over the course of a given time period.

Another key point is that as the delegated authority of the sovereign, money properly belongs to the sovereign. When we offer a sacrifice, we are returning to God that which is Gods. When we pay taxes, we are returning to the sovereign that which is the sovereigns. So suddenly, what Christ said in Matthew 22 suddenly makes sense: Render therefore to Caesar the things that are Caesar’s, and render to God the things that are God’s.

Tithing, it’s important to note here, is baptizing the purchasing authority of the sovereign. In other words, it allows the sovereign to satisfy the needs of the Church. Taxes simply give back the Sovereign’s authority; Tithing is committing that authority to the work of the Church.

AMDG

CCLXVIII – Currency as Future Property

I’ve had some time to think about Currency since I wrote this article which included numerous ill-formed thoughts on Zippyist ideas of currency.

I wanted to explore an idea for a moment, tentatively, because it would represent a break with Zippy on what we consider currency. I want to make sure I understand this idea fully before I commit to it, so I’m going to explore it here and once more I’ll invite comment and criticism on the idea.

In my previous article I noted in one graf the thought that currency may represent deferred assets. Deferred assets is not an accounting concept, even though it uses accounting terminology. It describes that currency represents future property–future real assets. I’ve noted elsewhere in a separate discussion that currency is not intrinsically useful. This is kind of what people mean when they say cash is “liquid”: it is easily transferable and functional as a medium of exchange but not useful for anything. Real assets–property of any kind–are “hard” because they are not easily exchanged. I can exchange one dollar for one dollar with perfect ease, but I cannot easily exchange a pack of gum for one dollar, nor can I easily get one dollars worth of other property in exchange for a pack of gum. Real assets are the only things with intrinsic value which is sustained over time.

Why does it make sense to think of currency as future property at all? Especially if we think about it in terms of the government issuing future property?

We have to start by thinking about the true nature of the sovereign. This gets complicated in democracies so lets simplify by thinking about a minute Kingdom. We’ve talked about how all authority is delegated from the sovereign, because the sovereign is the responsible caretaker of his Kingdom. The sovereign is responsible for the national defense, for example, but the sovereign may appoint Generals to discharge this duty in his name. In a way, the sovereign owns his kingdom. Again: not as a dictator or tyrant, but as a responsible caretaker. In ownership, it means the King owns the land of the Kingdom. If a peasant carves out a patch of land for himself, he must buy that land from the King. The King may also fief land to nobles to rule a smaller, more manageably sized chunk of the Kingdom. All of this is a delegation of authority from the sovereign, and not an abrogation of authority. The Peasant has private property, but it is not independent from the domain of the King. Both the peasant qua subject and the land qua property belong to the king, but the peasant is given free exercise of the land insofar as the King respects private property.

The same is true if the peasant chops down a tree. The tree is on land that belongs to the King, but delegated to the Peasant via the purchase of land. The tree is processed and the Peasant carves it into a cart, and goes to buy iron fasteners from the blacksmith. The iron was mined in the kingdom, and so belongs to the King, and was delegated to the owner of the mine, who is a subject of the King, who hired miners (also subjects) who brought out the iron and who sold it to the blacksmith (also a subject) who turned the iron into fasteners which were purchased by the peasant.

Lets cut to the punchline: Currency represents delegated authority to acquire property on behalf of the King. This suddenly makes it appropriate to stamp the Kings image and name on coins–the King is he in whose name an exchange is made.

When the Sovereign issues new coins, he is releasing tokens of his authority to acquire future property. Whether the Sovereign issues new coins to an institutional bank or to the peasants directly doesn’t matter–each coin bears the authority to acquire real property in the name of/on behalf of the King. The King would do all these things himself but he can’t be everywhere at once, authority must be delegated and especially insofar as it pertains to the welfare of the peasants, they know best what they need and so receive delegated authority to buy for themselves food.

Turning our attention now to taxation, in practice this appears to be a kind of rent paid to the sovereign in exchange for bearing his authority to acquire future property. The King delegates authority to the peasant, and the peasant gives some of that authority back. This is simplest (both morally and procedurally) with Sales taxes. The peasant, in the name of the King, acquires some iron fasteners from the blacksmith, and pays a tax that amounts to one coin which he gives to the blacksmith to return promptly to the King. Said another way, the peasant exchanges future property for real property, and some of that future property goes back to the treasury to be used by the state to directly acquire property rather than to do so via delegation.

How can we think about wages? An employer would give you real property if it was liquid but it isn’t, so it gives you these tokens of future property (on behalf of the King) so that you might acquire your own property. Income tax then is a surrender of some authority in proportion to the amount of delegated authority you earned in a given year.

This conception of currency is also congruent with Zippy’s thoughts on profitable interest: If your friend is in need and he borrows some amount of future property from you, the interest is collecting MORE future property than was given.

I think this idea solves some of the challenges of thinking about currency as tax vouchers while retaining Zippy’s moral and financial understanding of currency.

AMDG

CCLXVII – A Jumble of Thoughts on Currency

I finally found a good primer from Zippy regarding currency as Tax Vouchers. I decided to turn my accounting brain to the task of what it would take to create a balance sheet for the US Government. The answer I’ve arrived at feels like cheating so I invite a thorough critique from any and all readers.

The problem with fiat currency–I will call them fiat vouchers form hereon out to avoid confusing myself–started (for me anyway) with thinking of the creation of the fiat vouchers themselves.

Primer: DR = Debit, CR = Credit

Imagine the accounting process one follows when creating widgets. First, you buy the raw materials with cash: DR – Raw Materials Inventory (RMI), CR – Cash. Second, you process the raw materials into finished goods: This is an entry in two parts. Part 1, DR – Finished Goods, CR – RMI. Part 2, DR – Work in Process (WIP), CR – Cash. NB: The first part records the transformation of the product, the second part records the work being done on the transformation. Then, you sell the finished goods: DR – Cash, CR – Finished Goods; and you recognize the costs of what is sold: DR – Cost of Goods Sold (COGS), CR – WIP.

That is a lot of accounting jargon but I haven’t figured out a better way of illustrating this stuff in a blog format yet.

Now imagine creating fiat vouchers. They are printed on paper, but once complete they represent the unit of measure and not an item of inventory. When your widget inventory is $1,000, it means you have one-thousand dollars worth of widgets. You can’t have an inventory of one-thousand dollars worth of dollars–not in any sensible way.

Lets imagine this process was still with a gold coin. First you “buy” the raw gold (pay laborers to mine it): DR – RMI, CR – Gold Treasury. Second, you process the raw gold: Step 1 – DR – Gold treasury, CR – RMI; Step 2 – DR – COGS, CR – Gold Treasury. (NB: I’m simplifying Step 2 because you’re paying the minter to mint Gold coins, that is what is represented by COGS). This works because the Gold treasury is an inventory of actual Gold coins.

When you have a Gold-backed currency, it stays simple. The Gold treasury becomes one step removed, and instead you issue vouchers that are called “Gold Payable”. Issuing Gold-backed currency looks like this: DR – Some Expense, CR – Gold Payable.

So at our simplest form, we are dealing with a Gold Treasury as the inventory of the asset, Gold as the raw material being processed, and Gold Payable as the issuance of Gold-backed currency.

Fiat vouchers removes Gold from the equation. There is no Gold treasury because there is no asset aside from mere paper, but now even paper isn’t necessary. There is no asset so there is no material to process. So we are cutting out the WIP and COGS part of it and we are left with merely DR – Some expense, CR – Fiat Vouchers Payable.

The reason this doesn’t work is because Zippy’s point of view is that all liabilities represent claims on some asset. CR – Fiat Vouchers Payable is a liability, but there’s no underlying asset to claim against.

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This is interesting to me because it feels as if the ideal currency is one which costs nothing to make, which was difficult before but is easy now. It literally represents free money. It makes sense why this would be the ideal and why society–or government–would move towards it. I wonder if the United States even goes through the formality of printing bills before sending money to banks, or if there’s not a computer algorithm somewhere that just adds zeros.

There is a way I could fudge the accounting without breaking accounting rules that would provide an asset that the fiat vouchers could claim against: Goodwill. When a company buys another company for more than their book value, the difference in valuation is referred to as goodwill, and will be amortized over some period of time since it doesn’t represent anything real. This does actually happen, even if it sounds nonsensical. Companies will pay a premium for a brand, or for access to a market, or access to a product. One could argue that the difference between real assets on the books and fiat vouchers payable is goodwill for the government. The government can retire fiat vouchers payable, and reduce it’s goodwill such that it’s assets approaches only its real value. Or the government can issue more fiat vouchers payable and increase its “goodwill”.

But again–it’s not really increasing goodwill in this case. And the operating arm of the government still needs to operate in dollar-denominated slips of paper.

Let’s see if we can simplify further by going back to the Sovereign and the Gold Treasury. If we look at the Sovereign as the owner of the state–not just the ruler, but he holds the title, the deed, for the state and the people and markets within it, then all money is a distribution from his personal reserve. So even with Gold, all money is “due” back to the sovereign anyway–it’s his, and he’s given it to you as a medium of exchange. This is all very simple with a unitary sovereign, but if we accept that the Liberal ideal is that the people is sovereign, collectively, then it becomes very muddled. Whose money is it?

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Here’s another thought I had. Is it true that the ideal currency is one that is spontaneously created out of nothing? It wasn’t possible until the digital age, but now it is. It has no intrinsic value so serves exclusively the role of medium of exchange. A collection of currency represents your exchange power, and as long as everyone else accepts that medium, you can exchange the increments of nothing for hard assets.

In a sense, if you earn an income you are collecting “deferred assets” by collecting an income, and when you trade those “deferred assets” in for hard assets you move them around on your balance sheet. Taxes would then represent giving the Government as an organization some deferred assets.

Furthermore–if the ideal currency is spontaneously generated ex nihilo there would need to be some kind of meta entity responsible for generating and retiring currency, because an ex nihilo currency would need a single-sided accounting entry to just increase or decrease its supply. From the meta entity, accounting would proceed as normal but it takes the problem of currency out of the USG balance sheet and moves it to the meta-entity.

I’m going to need to take these ideas and clean them up a bit but I hope you can follow my train of thought.

AMDG