AMERICAN MONETARY INSTITUTE
PO BOX 601, VALATIE, NY 12184
Tel. 518-392-5387, email ami@taconic.net
Stephen Zarlenga, Director
Dedicated to the independent study of monetary history, theory, and reform
“Whoever controls the money system controls the society.”
Dear Friends of the American Monetary Institute:
Three good things:
1) We had a wonderful 5th Annual AMI Monetary Reform Conference in Chicago!
(See reports below and at our website http://www.monetary.org)
2) Great News regarding progress with introduction of the American Monetary Act - again see below!
3) The new AMI Bulletin (#6) by Robert Poteat, (attached) showing why inflation is NOT "Too Much Money Chasing Too Few Goods!" After reading it you can blog your agreement/disagreement there.
FIRST - THE CONFERENCE - A brief report on the highly acclaimed 5th Annual AMI Monetary Reform Conference, held Sept. 24-27 at Roosevelt University in Chicago. Rather that writing the report ourselves, you can look at what participants are writing at http://www.monetary.org/2009conferencereport.html. Its hard to keep topping our previous conferences, but thats the impression we get ourselves and from participants.
There were truly remarkable speakers with outstanding talks. We are burning a CD with the text of their talks, and a DVD with a summary video of the talks. (You can order the CDs of the texts for $20 each and the 2 hour summary DVD for $75. A DVD of any individual Speaker is available at $50. Use the paypal Donate button at our website and specify what you want.)
SECOND - One major highlight of the Conference was when Congressman Dennis Kucinich (Ohio 10th District) phoned in to Stephen Zarlenga's mobile phone and asked me to announce to the meeting that he was changing the name of the American Monetary Act to the
American Monetary and Financial Security Act,
and he'd be introducing it shortly! That is really great news and we'll keep you informed on it! A video of Congressman Kucinich's address to the conference will soon be posted on YouTube.
THIRD - continuing with the AMI program to bring the work of outstanding monetary thinkers to your attention, attached is Robert Poteats essay on inflation. Here below is my intro to it. Please study his essay, and do stay in Touch!
Plus one last point below - a free monetary seminar on Wednesday evening, Oct. 7th! (see below)
Sincerely,
Stephen Zarlenga
Ami
Dear Friends-
Next in AMI’s presentation of monetary experts program, we proudly draw your attention to the work of Mr. Robert Poteat of Onalaska , Washington , one of America ’s most knowledgeable monetary system analysts and monetary reformers.
Where others often merely repeat “legends” without actually checking them out, Bob heads for the legal library to read the source documents. What’s actually in the Federal Reserve Act? Bob has read it several times. Did President Kennedy really try to introduce U.S. money? Bob has carefully read the document rumored to do that.
For years, Robert worked with his partner, Muriel Mobley on monetary reform questions until she passed away in 2005.
Robert Poteat, though not well known to the public, is known to us as a giant in accurate thought on monetary matters. He is the recipient of the American Monetary Institute Lifetime Achievement Award and is the Regional Director of AMI Chapters in the Northwest.
Here he probes the real causes of inflation, challenging the common misconception that it is caused by “too much money chasing too few goods.”
Stephen Zarlenga
Ami
(see attachment, or website http://www.monetary.org)
And Oh one last point - we are holding a free Monetary Seminar on Wednesday, October 7; 7:00pm - 9:30 PM. Please tell your friends in the Chicago area! Schaumburg Public Library at 130 South Roselle Road, Schaumburg, IL 60193
call 224-805-2200 to confirm attendance!
Dear Friends-
Next in AMI’s presentation of monetary experts program, we proudly draw your attention to the work of Mr. Robert Poteat of Onalaska, Washington, one of America’s most knowledgeable monetary system analysts and monetary reformers.
Where others often merely repeat “legends” without actually checking them out, Bob heads for the legal library to read the source documents. What’s actually in the Federal Reserve Act? Bob has read it several times. Did President Kennedy really try to introduce U.S. money? Bob has carefully read the document rumored to do that.
For years, Robert worked with his partner, Muriel Mobley on monetary reform questions until she passed away in 2005.
Robert Poteat, though not well known to the public, is known to us as a giant in accurate thought on monetary matters. He is the recipient of the American Monetary Institute Lifetime Achievement Award and is the Regional Director of AMI Chapters in the Northwest.
Here he probes the real causes of inflation, challenging the common misconception that it is caused by “too much money chasing too few goods.”
Inflation: Too much money chasing too few goods? – Hardly!
That more money is available than goods is a nearly axiomatic definition of inflation in economic texts, media, and politics. Empirical data from direct observation indicates it is not true in the current economic environment.
One can find many retail businesses offering discounts, and failing businesses while advertising is a multi-billion dollar enterprise. One can easily find retail stores full of merchandise for sale. This is direct evidence that there is not enough money to liquidate what is available for sale. Yet, prices keep going up. It cannot be too much money for consumption causing price increases.
Consumer debt is about $2.5 trillions for consumer goods that have not yet been paid for; and, still, retail stores are full of merchandise. Advertising of sales discounts is constant along with easy credit.
Inflation is often expressed as rising prices, but many things such as scarcity, seasons, fads, war, and weather affect prices along with the phenomenon of inflation.
Another way of expressing the inflationary effect on prices is devaluation of money.
Debt is bank-issued credit used as money. Examination of the bank credit mechanism shows that when banks issue credit as loans, banks only create the principal of the loan and not the interest. If not all of the interest charges are spent directly back into circulation, then there is a shortfall. This creates a demand for more and more loans to keep up with interest payments. In practice, the system requires the constant growth of credit/debt used as money. It is inherently and unavoidably inflationary when expressed as quantity of credit/debt in circulation without respect to production and consumption.
The growth of debt is confirmed in statistics. Credit Market Debt, as published in The Statistical Abstract of the United States and Federal Reserve Bulletin, has grown from $5 trillion in 1981 to $52 trillion in the fourth quarter of 2008.
From the same sources above, the imputed total assets of the United States increased from $17 trillion in 1981 to $141 trillion in the fourth quarter of 2008. What accounts for such an increase can only be attributed to inflation as decreased value of money. There is no more land. Resources have been used so there is less to be priced. The environment has been polluted making some places unusable, consequently, worth less. Some increase in housing, commercial building, and infrastructure has happened but not enough to offset the losses. If total assets, including the additions directly above, were accounted in tangible measurements such as acres of land, barrels of oil, standing board feet of timber, remaining ores, condition of fisheries, depth of top soil, housing, commercial building, and infrastructure, it would be seen that assets are reduced. Only the prices of assets increased.
Price increases are related to the exponential growth of debt. The bank credit/debt money system is inherently and unavoidably inflationary. It is necessary to raise prices to recover the costs of exponentially accumulating debt. Asset price inflations allow banks to create more credit/debt money, which in turn fuels further asset price inflations. These activities continually increase the overall debt burden on society, ultimately increasing costs and prices, i.e. inflation.
As shown above, banks have issued enormous amounts of credit/debt. Where did it go? It went into war, extreme stratification that led to speculation and other non-consumption sinks leaving insufficient credit/debt to liquidate consumption goods even after massive accumulations of credit/debt used as money.
For decades Federal Reserve officials have claimed they fight inflation by raising interest rates. Since our economy runs entirely on credit/debt, raising interest rates increases the cost of all business. In terms of price increases as a measure of inflation, raising interest rates would be expected to increase inflation. If prices come down it is because of squeeze on businesses and labor causing shutdown of production and increase in unemployment. It is anti-social not to mention classical double-think.
The time has come for monetary reform!
Stephen, attached is Bob's article about inflation for the article. As you can see from the discussion below, I thought some parts of it could be challenged, so I suggested a couple of slight alterations, which Bob agreed with. Jamie.
---------- Forwarded message ----------
From: robert poteat
Date: 2009/5/10
Subject: RE: for the bulletin
To: Jamie Walton
Your additions are good. You are welcome to add your byline.
Bob.
Date: Sat, 9 May 2009 22:28:54 +0100
Subject: Re: for the bulletin
From: eurojamie
To: rpoteat
Excellent article Bob!
I'm sure Stephen will want it included in the Bulletin.
I have a few suggestions (in bold), which you can take or leave (I'm thick-skinned).
1. The title, while excellent and apt, may have more impact if it reads:
Inflation: Too much money chasing too few goods? - Hardly!
2. Paul Grignon has shown (after being attacked by orthodox system-defenders) that it is theoretically possible for the money to pay interest charges to be made available to make the payments, if all the interest received is spent back into circulation in a timely manner (see http://paulgrignon.netfirms.com/MoneyasDebt/disputed_information.html). While common sense tells us this doesn't happen in practice (because in probably all cases interest revenue is diverted for other purposes), to cover ourselves from similar attacks by smart-alecks, it may be better to word the sentence along these lines:
Examination of the bank credit mechanism shows that when banks issue credit as loans, banks only create the principal of the loan and not the interest. If not all of the interest charges are spent directly back into circulation, then there is a shortfall. This creates a demand for more and more loans to keep up with interest payments. In practice, the system requires the constant growth of credit/debt used as money.
3. It seems the price-debt relationship is a little like the chicken-egg conundrum. As I understand it, price generation (at least for consumer goods) is a result of cost-accounting practices, and debt accumulation is a consequence of a financial accounting disparity between production prices and purchasing power (at least for consumer goods), i.e. the accumulating debt 'fills the gap'. I know this is still a contentious analysis. It is also very probable that a concentration of demand for finance in particular 'market' sectors, like real estate, creates a snow-balling effect which results in artificial asset price inflation, i.e. 'bubbles'. However, I'm not sure whether the increasing debt drives the prices up, or the increasing prices drive the debt up, or both. When a bank grants a mortgage, it does not decide the sale price of the house; but the collective actions of banks making finance for particular assets relatively easy to obtain does tend to trigger a 'mania'; everyone expects the prices will continue to go up, so they are willing to pay more than they normally would, and likewise banks are willing to lend more than they normally would, because everyone expects the asset will have a higher value in the future - 'demand pull'(?). There also seems to be a 'ripple-effect' phenomenon of increased costs, say a wage rise, causing increased prices, causing increased 'cashflow' from transactions, causing increased deposits, causing increased monetary aggregates - 'cost-push'(?). It can all get more than a bit complicated, and it may be over-simplifying the case to say that an increase in money supply (growth of debt, in the present system) relative to production volume causes or requires an increase in prices. It may be that price increases cause or require a growth of debt (increase in money supply, in the present system). To cover ourselves from pointed attacks by smart-alecks, it may be better to word the sentence along these lines:
Price increases are related to the exponential growth of debt. The bank credit/debt money system is inherently and unavoidably inflationary. It is necessary to raise prices to recover the costs of exponentially accumulating debt. Asset price inflations allow banks to create more credit/debt money, which in turn fuels further asset price inflations. These activities continually increase the overall debt burden on society, ultimately increasing costs and prices, i.e. inflation.
Anyway, the article is great. Let any smart-alecks out there 'bring it on'!
Cheers,
Jamie.
2009/5/8 robert poteat
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