Cause and Effects of Money Scarcity
(Left: William Jennings Bryan, a few months after he delivered his famous speech.)
American Populists always focused on scarcity of money. Expanding the money supply was their main goal, not Usury abolition. But Usury is the fundamental cause of money scarcity.
Money scarcity is the phenomenon of insufficient liquidity in the economy to finance all possible trades. This results in (permanently) depressed economies. Money scarcity always has been the key issue that Populist monetary reformers wanted to solve, ever since the Civil War. They proposed to add Greenback-style debt free United States notes to the money supply. But the call to monetize Silver was even more common. That was the background of Bryan’s famous ‘you shall not crucify Labor on a cross of Gold’ speech, for instance.
Gold as money is always scarce. There is never enough of it. This has been the case throughout US history. The economy grows quicker than Gold supplies and, worse, the Money Power has always controlled Gold (and Silver too, of course) and has routinely withheld massive amounts of specie from circulation.
Austrians deny money scarcity, citing Say’s law, which claims free markets will always clear. Prices will go down and suppliers unable to follow suit will just go out of business. In itself this is not untrue, but the destruction before markets clear is uncanny and leads to the premature death of millions, not to speak of the suffering of millions more who survive. Adding some liquidity to the economy is basically a no-brainer, but then the Austrians scare everybody to death with inflation fearmongering. Interestingly, warnings of inflation have always been the banker line in the past, when resisting adding money to the economy.
Money scarcity is pleasant to the Bankers. They prefer depressed economies, because it prevents the poor from becoming middle class. Bankers like cheap labor and people licking their boots for below sustenance job. The industrial revolution, which caused generation after generation to be destroyed in the sweat shops, is a typical example. Austrians will always hail the industrial revolution as that great era of wealth production, but they like to ignore that the wealth production was done by the laborers, while the wealth itself went to those providing the capital. The industrial revolution was the greatest defeat labor ever suffered against capital.
Furthermore, artificial scarcity of money raises the price of it and this obviously is to the monopolist’s liking. In this way money scarcity is as much a cause of usury as the other way around.
Causes of Money Scarcity
Money scarcity is caused by three main issues: deflation, usury and racketeering. Deflation is obvious: if the economy is operating at near max capacity and the money supply starts dwindling, markets will have to clear at a lower price level, causing recessions and depression in the worst case.
Usury is a constant drain on the money supply. Banks spend some of the interest back into the economy, but not all. They relend another part back causing even more debt and associated interest costs and indeed, worsening money scarcity. The rest is siphoned off to the financial economy (the ‘two-loop economy’), where it is used for their financial con games. Like speculating in commodities (raising prices), creating bubbles on the stock market, FOREX and of course the derivative trade, which is currently their favorite exploitative tool.
And racketeering: manipulating the volume of money. Banks routinely stop lending, saying ‘confidence is lacking’ or calling for ‘structural reform’, which unfailingly worsens the conditions of labor. In the days of metal backed currency, they simply stopped circulating their Gold and Silver. They have been at this forever. Here is a nice story about how the Venetians bankers took Silver out of circulation in the middle ages, causing the long term depression of the 14th century.
Money Scarcity and Empire
Money Scarcity is favorable to Capital, as it makes their monetary means more in demand. Labor will sacrifice greatly to avoid starvation.
However, closely associated to money scarcity is a lack of demand in the economy. Demand is lacking when production outstrips consumption. This is the case in every developed economy and has been the norm in Europe and the United States throughout modern history. This is unpleasant to Capital, because it cannot market all the goods it managed to force Labor to produce cheaply. This is what Social Crediters call the Gap. Keynes called a lack of aggregate demand.
Because of this problem, the merchant class seeks foreign markets and this was undoubtedly a key driver in Europe’s expansion during the Age of Discovery and beyond. Corporate interests looking for markets to dump their excess production still drives Empire to a large extent today.
Money scarcity is implicit in a usurious environment. This is something to keep in mind when we promote debt-free money to solve it, something we will discuss in the next article.
Interest-free money will not only see sufficient liquidity, it will also solve the basic cause of money scarcity, preventing its return.