THE MAGIC TRIANGLE AND ITS IMPLICATIONS FOR BARTER INDUSTRY

Szczęsny Zygmunt Górski szczesnyg@tlen.pl

The IRTA EU Conference Gliwice, Poland, 12-13 April 2008

THE MAGIC TRIANGLE AND ITS IMPLICATIONS FOR BARTER INDUSTRY

Contents

THE MAGIC TRIANGLE OF MONEY

THE FUNCTIONS OF MONEY

CAN THE SAME TOOL SERVE AS A TRANSACTIONAL, MEASURING AND ACCUMULATING DEVICE?

RANKING OF THE FUNCTIONS OF TRANSACTIONAL MEANS IN THE ECONOMY

SOME IMPLICATIONS FOR THE BARTER INDUSTRY

BIBLIOGRAPHY

We can conceive the best monetary system possible

but if we based it essentially on

rivalryrather than on co-operation

it would be like building a house on sand

THE MAGIC TRIANGLE OF MONEY

THE FUNCTIONS OF MONEY

Money as a transactional instrument

Money as an universal yardstick for measuring value

Money as an accumulator of value

Money as a transactional instrument

Money is a catalyst for transactions because it reduces their costs

The acquisition of transactional means must be accompanied by their expenditure

A fluid satisfaction of needs occurs when there is a balance between total supply and total demand

Fluid supply needs the presence of fluid demand

Money as a transactional instrument continued

A fluid influx of transactional means ensures a proper connection between the supply and the demand of commodities

A fluid influx of transactional means is the fundamental condition for economic development based on the division of labour

The Polish term for a prosperous economy, koniunktura, is derived from the Latin coniunctio = connection

To ensure a fluid influx of transactional means its emission must cope with transactional needs

Money as a transactional instrument continuedThe rate of the influx of transactional means is

optimal if:

It comes into existence at the start of the transactional cycle: commodity ► transactional means

It is recycled as quickly as possible

As a result, it raises the frequency of completed transactional cycles: commodity ► transactional means ► commodity

The accumulation of transactional means by withholding them from circulation prevents other possible transactions

Money as a transactional instrument continued

The rate of the influx of transactional means is optimal if:

A moderate inflation of about 5% slightly exceeds the liquidity incentive. It can therefore accelerate the circulation of transactional means.

Another tool for accelerating the circulation of transactional means can be a demurrage on keeping a credit as well as debit balance.

The demurrage on credit balance encourages one to quickly spend transactional means by buying commodities while the demurrage on debit balance encourages one to quickly buy them by selling commodities

Money as a transactional instrument continued

The rate of the influx of transactional means is optimal if:

A moderate inflation encourages one to spend transactional means rather than buying them by selling commodities

Actual giro money is fit for short-term transactions

Money as a transactional instrument continued

The rate of the influx of transactional means is optimal if:

The barter transactional units (with demurrage accelerator on credit and debit balance) are a preferable transactional tool to actual money, with its inflational acceleration.

The interest-free bartering of transactional units greatly reduces transactional costs in comparison with bank credit money charged with interest.

Bibliography recommended for this section

Fritz Anders Das Geld im Kerislauf der Volkswirtschaft Revolution Nr 7 April 2002INWO International Sektion Deutschland INWO e.v. Max Bock Str.55 60320 Frankfurt /M

Dieter Suhr The Neutral Money Network www.geldreform.de lub System pieniądza neutralnego www.barter.org.pl/index.php

Money as a universal yardstick for measuring value

Money should enable one to express and to compare the value of all commodities

It can function as a yardstick only if the unit of measure does not change over time

Thus actual money, treated as a commodity, is not suitable for long-term transactions

Bibliography recommended for this section

Th. H.Jr. Greco Money and Debt, geldreform.de ; Pieniądz i dług www.barter.org.pl/index.php

Money as a universal accumulator of value

Money should be suitable for comfortable safekeeping

Actual money, considered as a commodity, is not suitable for the storage of value in long-term transactions, because of the possibility of its speculative distortions

Bibliography recommended for this section

Silvio Gesell A Story of Robinson Crusoe www.ccdev.lets.net/crusoe Historia Robinsona Crusoe www.barter.org.pl/index.php

F.E. Ricardo Die Giralkartoffeln www.geldreform.de Opowieść o pyrach żyrowych www.barter.org.pl/index.php

CAN THE SAME TOOL ACT AS A TRANSACTIONAL, MEASURING AND

ACCUMULATING DEVICE?

Transactional function versus market value measuring function

Transactional function versus accumulation of value function

Universal yardstick for measuring value function versus universal accumulator of value function

Transactional function versus market value measuring function

Measuring market value has no meaning in the absence of exchange

Without measuring value, market exchange cannot take place

The stability of the measuring unit of value is all the more important the longer the time interval between the exchange phases: commodity ► transactional means ► commodity

This is especially important in the case of long-term savings ex. disability allowances and old-age pensions.

Transactional function versus accumulation of value function continuedIn the case of the rapid circulation of transactional means,

the stability of the unit of value is not that important

On the other hand, the more stable the unit of value the slower the circulation rate of transactional means

However, treating the transactional means as a commodity causes instability of the measuring unit of value. This is especially the case with massive stock exchange speculation

This applies to the uncertainty of any economic calculations

Bibliography recommended for this section

Th. H.Jr. Greco Money and Debt, geldreform.de ; Pieniądz i dług www.barter.org.pl/index.php

Transactional function versus accumulation of value function

In the case of short-term transactions, the function of value accumulation is not that important

The function of value accumulation is all the more important the longer the time interval between exchange phases: commodity ► transactional means ► commodity

The better the function of transactional means as an accumulator of value (such as gold and silver coins), the worse is its function as a transactional meansThe tendency to withdraw it from circulation increases: Kopernik – Gresham principleEspecially when economic expectations are poor: economic and political crisis, war

Universal yardstick for measuring value function versus universal accumulator of value

function

Both functions essentially support one another

Bibliography recommended for this section

Th. H.Jr. Greco Money and Debt, geldreform.de ; Pieniądz i dług www.barter.org.pl/index.php

RANKING OF THE FUNCTIONS OF TRANSACTIONAL MEANS IN THE ECONOMY

The transactional function – the most important, as it regulates the division of labour The function of short-term yardstick for measuring value to enable short-term transactions

The function of accumulating value for short-term transactions

These three functions are served for local purposes by the cashless barter transactional units better than by actual money

Barter cashless accounting is not suitable for long-term transactions, the long-term accumulation of value, or as a long-term universal yardstick for measuring value. Nor is the commonly-used money. These tasks would be better served by other tools

Relevant propositions have been given for instance by Dieter Suhr, Silvio Gesell and T. H. Jr. Greco, F. E. Ricardo, to mention a few from a long list

SOME IMPLICATIONS FOR BARTER INDUSTRYThe transactional, accumulation and measuring value functions can be served satisfactorily by one instrument only in the case of short-term transactions

These can be served by ordinary money or bank giro or by cashless barter clearing units.

Ordinary money and bank credited giro payments are sub-optimal in comparison with barter credit giro

The demurrage on both credit and debit balance accelerates circulation better than an inflationary accelerator

In the case of long-term transactions, the barter credit giro is unsuitable for transactions, as a yardstick for measuring value, or as a tool for accumulating value

One monetary instrument cannot serve three functions of money for long-term transactions at the same time.

The current international money system, based on its emission with interest, builds rivalry and egocentricity, on both a global and local level. It benefits mainly the wealthy, who possess superfluous money. That money is made available with interest to others in dire need of it for their existential transactions. Ultimately it brings about the present global state of economical, political and social crisis, wars and ecological devastation. It is the merciless robbery of our planet's resources freely made available to all of us.

Perhaps we cannot change this enormous powerful structure on a global level. However, we can prove the feasibility of the barter industry on a larger scale.

After all, we can use our rationality much better than for irrational ventures.