Too many people believe that FREE MARKET ECONOMY and CAPITALISM is one and the same thing, as opposed by COMMUNISM.

Communism is nothing more than a philosophy originating from a study of the poor living conditions of workers during the industrial revolution.

Capitalism is nothing more than a monetary system originating from the use of gold and later deposit slips for gold as a means of exchange.

But Free Market Economy is a natural way of bringing offer and demand in balance that already existed in the time of barter trade.

Capitalism exploits labour to create added value …. or so Karl Marx said.

But let’s face it ….. The only real existing value in this world is LABOUR! Nothing can be achieved without it. No raw materials can be extracted from the earth without labour …… No food can be produced …… No added value can be created….. No profits can be achieved …… Nothing! On the other hand …… CAPITAL has no real value at all. You can’t eat it. In Mugabe’s Zimbabwe, they burn CAPITAL (paper money) because it is cheaper than firewood!

Contrary to popular believe: Money is TIME! When you earn money, you have given your time in producing something … in rendering a service of some kind … in trading something ….. or whatever ….. and received money for that! This money allows you to buy TIME from somebody else. You can buy a product that someone created with his time … a service ….. you name it. It is always TIME that you buy! Part of the time that you can buy for your money has already been transferred into products. A car waiting to be sold ….. Food in the supermarket …… Tools of some kind …… A house…. But services still to be rendered ….. products not yet created …… are still in their basic form of available TIME! So when unemployment is skyrocketing we should be so happy! There is so much TIME available! What richness! What wealth for a nation! But are we happy with high unemployment?

TIME when it is not consumed loses it’s value. At a rate of 100 % per day. We are used to transfer the time that we are owed into CAPITAL in order to be able to transfer it back into TIME when we want to buy something or invest it. CAPITAL keeps, but TIME doesn’t!

In order to persuade someone to invest his capital he wants interest or profit of 4 % or more or he hangs on to his capital. In order to persuade someone to invest his time in a period of unemployment you can give that person less than what he needs to survive and he will still sell you his time. Something is better than nothing!

And that is how capitalism is able to exploit labour to create added value. By transferring time owed into CAPITAL and only buying time back when it can make a profit, allowing TIME or LABOUR to be completely lost when it is thought that no added value can be created with it. High unemployment, poverty and crises are the flaws of CAPITALISM. Not of the FREE MARKET! Without transferring the time that we are owed into CAPITAL and having to consume that time without too much delay we would still have a FREE MARKET ECONOMY, but we would not have CAPITALISM!

So how can we have a Free Market Economy without the flaws of Capitalism?

Barter trade? Of course not! We live in the 3rd millennium! Even though we still use a money system from the 1st or 2nd millennium! If CAPITAL or MONEY is to be a means of exchange for TIME, then it should have the same property as TIME! Meaning … it should lose value when it is not consumed within a certain period, just as TIME does! But how to achieve that?

Nothing is easier. Let’s look at one possibility: Substitute V(alue) A(dded) T(ax), which is a punishment for transferring labour into added value, by V(alue) D(iminished) T(ax) on money in possession as long as it is not used. A negative interest Tax on money. For that we would have to change cash money into digital money in our bank account. But hey! We pay with pin, credit card, chip, cheque, internet, mobile phone ….. We are in the 3rd millennium! Substituting VAT by VDT will certainly make us all a lot richer. As TIME or LABOUR is the only real value that exists we cannot accept a monetary system like CAPITALISM that allows it to go to waste.

Does anybody know alternatives to mainstream authors?

The problem I think, is what needs to happen is exactly what our “leaders” are trying to prevent from happening. The fat needs to be trimmed and the economy will get back to real production and values, but the fat is what they want to save, since they are the fat.

I have one small praxeological quibble though:

“…short-term interest rates need to rise dramatically. It is analogous to the prices of flashlights and canned food during a hurricane that knocks down power lines. The price needs to shoot up in order to ration the available units to those who need them the most.”

Your phrase “those who need them the most” is a value judgment. Wouldn’t it be more accurate to say “those willing to pay the highest price which implies there most highly valued use.”

What will happen with these extremely low interest rates is that few businesses will borrow to produce more because of the uncertainty created by the Feds, but a lot of people will borrow to invest in cheap assets, like the stock market, or some form of the carry trade.

One thing I always keep in mind is “If it all goes down the tubes, there is [paradoxically] nothing to worry about, everyone will be in the same boat! and maybe boat isn’t that far off!

If we get hyperinflation, then we are also in the same boat, you just want to own the boat so you have some hedge.

If what you do has some real value, you will at least have a job. So if you are an economist, maybe keep a back up plan!!!

” Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent. ” Greg Mankiw

A year give more than enough time to everybody to put every currency they have in their bank account and pay everything with account-money, that is to say with debit cards, credit cards, checks, bank mandates, transfers by computer directly from home, and … coins !

Student: 0% !

Teacher: 0% !!

It’s a puzzlement!

I doubt most regular folks working hard every day realize that wages are generally the last thing to increase in an inflationary environment. People are literally going to get poorer by the day with fools and thieves running a command and control economy that we’re quickly marching toward

Well, I’d like to protect what meager net worth I have. If only I knew what the Fed and the US Treasury and Congress was going to do next. I’m real close to deciding to go into major debt (negative net worth) to purchase investments that should do well in a highly inflationary environment, re-mortgage house, run up open credit lines, etc. That way after the massive wave of inflation hits, I’ll cash out the investments, payoff the devalued debt, take the extra and do something else with it. I’m a little leary of gold, since the Fed can play games with the price by selling large quantities on the open market. How about, other metals, like copper, and maybe some other commodities. What investments will respond quickly to inflation, that the Fed has traditionally not been involved in?

But when the door opens and all that money floods into the economy you better have an Ark ready. God sent the rainbow to let us know that the earth would never be flooded with water again, but he never said anything about a flood of dollars.

Ask yourself how in the world governments enter into the downward helix of hyperinflation? Do they decide that self destruction is a good idea? No, they decide to start printing money to pay the bills. The presumption (presumptuous and preposterous) is that the authorized counterfeiting of money can occur faster than it loses value.

Mankiw is simply proposing hyperinflation by another name. Sadly, when it comes he will not recognize his own child or take responsibility for what he desires to sire. Mankiw will get a giant game of monetary hot potato going that will spiral out of control and destroy all savings and investments.

The promise that next year’s inflation will make this year’s savings worthless will light a fire for everyone to dump their money as fast as possible. It will also naturally result in no one wanting the money at all. We can laugh about the stupidity of the proposal, but there are people who take it seriously enough to implement it, and soon.

Previous hyperinflations have occurred in the context of sounder currencies to flee to. If the Almighty Dollar is destroyed, where will we run? Could it precipitate the collapse of all meaningful commerce beyond barter? If that were to happen, what would happen to the hundreds of millions who depend upon the specialized economy and division of labor? Could civilization collapse before new methods of interchange arise?

http://www.lifegen.de/newsip/shownews.php4?getnews=2009-02-25-5123

Baxter BAX is set to make a killing if we are lucky enough to get a mandantory vaccine shot for everyone in the US!