A Work-Standard Critique of “Debt-Free Fiat Currency”

In Philosophy, the most common conceptions of Currency were entertained by two predominant Theories of Money, the “Commodity Theory of Money” and the “Credit Theory of Money.” Those two Theories of Money helped contribute to the rise of the Fractional-Reserve Banking System in its contemporary form throughout the 20th century and well into this century. They are also responsible for the manner in which the Bretton Woods System took shape and the financial nihilism that followed after the Death of Bretton Woods. Both arose from initial attempts to explain how Western and non-Western “Cultures” and “Civilizations” (to use Spenglerian terminology) developed their conceptions of Currency.

The Commodity Theory of Money believed that Western and non-Western peoples implemented Currency as a replacement of bartering. One person traded good and services to another person under the condition that the second person will provide them with something of equal Value. When that second person discovered that the first person’s wares are nowhere as valuable as their own, the Currency was subsequently introduced to rebalance their transaction. If somebody’s wares proved unacceptable, then Currency could serve as a reliable alternative to bartering.

Conversely, the Credit Theory of Money suggested a different interpretation. It believed that Currency is a token representing a social construct backed by the “full faith and credit” of their issuing government. A “promise” is made by someone to provide goods and services to the person possessing the Currency. The Credit Theory of Money differs from the Commodity Theory of Money insofar as it stipulates that Currency is issued by privatized commercial banks, the Value of the Currency guaranteed by the issuing Central Bank. A similar variant, the “State Theory of Money,” takes this particular conclusion a step further by arguing that only the Central Bank can issue Currency in addition to the initial role of guaranteeing its Value.          

Barring the Commodity Theory of Money, which has its own set of objections to the Work-Standard, the Credit Theory of Money and its State Theory of Money are both unsatisfactory for the purposes of the Work-Standard. The notion that a “Debt-Free Currency” can somehow be achieved through Kapital and Schuld is rejected in The Work-Standard. The crux of the issue lies squarely in the proposals to address the Fractional-Reserve Banking System whilst preserving the paradigm shared between Production for Profit and Production for Utility.

What is the rationale shared by these proponents of “Debt-Free Fiat Currency?” They state that the Quantity of Kapital created by privatized commercial banks under the Fractional-Reserve Banking System yields an unnecessary Quantity of Schuld. In the Fractional-Reserve Banking System, all Kapital and Schuld are created simultaneously through the physical borrowing of loans (with or without Interest). As people borrow loans, the Quantity of Kapital increases alongside the Quantity of Schuld. And when people pay off their Schuld, the Quantity of Kapital decreases, thereby raising the likelihood of Currency Depreciation vis-à-vis the Inflation Rate.    

The proposal forwarded by proponents of a “Debt-Free Fiat Currency” is that the creation of Kapital and Schuld should be “nationalized” by the Central Bank. In essence, the Central Bank takes over the Fractional-Reserve Banking System by fulfilling the roles carried out by privatized commercial banks. Thus, the Central Bank becomes responsible for the creation of all Kapital and Schuld, including those of the Parliament, the Civil Society, and the Private Citizen. It is precisely here where the Work-Standard’s Sociable Currency can be easily distinguished from the “Debt-Free Fiat Currency.”

Even if the money creation process is left to the Central Bank, the hegemony of Kapital and Schuld will only persist. The real difference is that the Central Bank itself has now taken on the role of the privatized commercial banks within the circulation of Kapital and Schuld into the Market/Mixed Economy. The metaphysical framework behind the Fractional-Reserve Banking System remains unchallenged because the Central Bank is still relying on Schuld to back its Kapital as well as Interest Rates to control the Inflation/Deflation Rate. The latter in particular is also part of the arguments for a Debt-Free Fiat Currency, whose issuance is supposedly ‘immune’ from the effects of Currency Depreciation/Appreciation. Remember, the purpose of an Interest Rate in a Fractional-Reserve Banking System is to control the extent to which Currency Depreciation/Appreciation occurs vis-à-vis the Inflation/Deflation Rate.      

Arguably, the biggest problem that the Work-Standard has with the “Debt-Free Fiat Currency” is that it retains the theoretical premises of the Credit Theory of Money and the State Theory of Money. What the Debt-Free Fiat Currency did was to change the identities of the “debtor” and “creditor.” Currency continues to be treated as a “promise” to pay off Schuld with Kapital. This resulted in some misleading expectations about who or what creates the Schuld and who or what creates the Kapital. Worse, everything remains beholden to the Incentives of Supply and Demand.  

By contrast, the Work-Standard sought to simultaneously reject Commodity and Fiat Currencies as well as their intermediate, the Representative Currency. Although the Sociable Currency can be used to pay off Schuld, it is just one aspect of its core functions within the Work Theory of Money (WTM). The primary purpose of the Sociable Currency is to “command” the creation of Arbeit through a concurring creation of Geld under one unified process. This process is governed by the Intents of Command and Obedience, which is wielded by a Council State on behalf of the Totality and the Self. These arrangements form part of the backbone for the LER (Life-Energy Reciprocity) and LERE (Life-Energy Reciprocal Electrification) Processes.

A true “Debt-Free Currency” is one that openly rejects both Kapital and Schuld within its metaphysical framework. Under the Work-Standard, Schuld arises from trying to live beyond one’s own means of production. The issuance of Currency by the Reciprocal-Reserve Banking System involves all Geld being backed by Arbeit. Not all Arbeit is going to be created at the Reciprocal-Reserve Banking System. In fact, its contributions of Arbeit to the Life-Energy Reserve are dwarfed by those from the SSE, VCS Economy, Council State, and National Intranet. The real sources of wealth in the State of Total Mobilization are created by humanity itself, not its machines or its banknotes and coins.

More importantly, the Sociable Currency does not need Interest Rates and Inflation/Deflation Rates to control Currency Depreciation/Appreciation inasmuch as it relies on methods compatible with the Work-Standard. Instead of Interest Rates, the Central Bank harnesses the power of Automation to enhance the Totality’s ability to create Arbeit. And instead of Inflation/Deflation Rates, an Attrition/Inaction Rate is employed whose metrics are governed by the Quality of Arbeit.

It is because of the metaphysics surrounding Arbeit and Geld that the Work-Standard’s Sociable Currency exists in its own category, separate from Commodity and Fiat Currencies. The Work Theory of Money was intended to provide its own ideas and its own explanation of Currency. And unlike the State Theory of Money, it does not even rely on the Credit Theory of Money to explain why the Central Bank, State Council, and Head of State are presiding over the Reciprocal-Reserve Banking System as the Socialist Nation’s Financial Regime.  

Categories: Politics

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