APHORISMS ON THE MONEY PROBLEM

by Ulrich von Beckerath, translated by John Zube. The German original was published ca. 1932 in BANKWISSENSCHAFT. It was previously filmed in PP 587/588.

   The question whether one could utilize non-interest-bering, long-term loan certificates and mortgage bonds in small denominations, e.g. "Wagemann Money", "Feder Money" etc. as means of exchange, could perhaps be put into the following formula:

   Money is a MEANS OF TRANSPORT. it serves to overcome spatial distances. With money one exchanges values that do already exist in the present. The exchange of harvested grain for clothing, houshold goods and hay forks is done through MONEY.

  MONEY is necessarily interest-free. Both justifications for interest, namely
a) difference between future and present services and
b) a just share for the creditor in the production of the debtor,
do not apply to MONEY.

   The notes issued by a note-issuing bank or clearing bank are, by their very nature, clearing certificates ( settlement scrip ). As such they should not remain in circulation as long as possible but, instead, disappear from it as soon as possible.

   To oblige any issuing centre ( Zettelbank ) to exchange its clearing certificates at any time for metal, is not only superfluous but harmful and contradicts the nature of this paper money as a clearing certificate ( or settlement scrip ).
 
   The interest rates charged by a note-issuing lcearing centre are not interest but fees. Insofar, a properly conducted issuing centre operates INTEREST-FREE. Only when any customer of the note issuing centre delays the clearing ( settlement ), does the bank charge INTEREST FOR LATE PAYMENT. This interest is something quite different from clearing, although both are CALLED interest and are ACCOUNTED as interest. ( It is more in the nature of a contract fine. J.Z. )

   Credit instruments that are FORCED INTO CIRCULATION, like e.g. interest-free mortgage bonds in small denominations, must lastly DESTROY credit. They amount to putting warehouses on wheels and wanting to drive in them. That is POSSIBLE but the goods storage business is thereby ruined - although it appears, at first, as if one had solved two problems with one stroke. It reminds of the famous rifles that were to be at the same time useful as umbrellas, telescopes, lances and tobacco pipes. But they were somewhat IMPRACTICAL. ( Lombard loan certificates do often represent present goods, in large quantities, that are kept out of the present market in the expectation of future price rises. If such certificates are monetized then, obviously, the present purchasing power is increased but the present goods offered on the market are not correspondingly increased. J.Z. )

   In all inflations reported by world history, their essence consisted in forcing into CIRCULATION assignments upon FUTURE services, prescribing them as equal to PRESENT ones. Either the State issues as much state paper money with legal tender that not only the current taxes but also those of the COMING months could be paid with them ( and the latter were not levied ) or, as from 1914 to 1923, the State borows from a bank, grants its notes legal tender and deposits treasury certificates as secrity, based not on current tax assets ( that would be in order ) but upon the tax revenue of many FUTURE months or even years.

   Inflation is impossible without forcefully equating future services with present ones. Many do not realize this as yet.

   Interest bridges differences in time. It makes possible the just exchange of FUTURE services with present ones. Between the present and the future neither TRANSPORT takes place nor CLEARING. Consequently, to bridge the present and the future is not a task for a CLEARING INSTITUTE like a note issuing bank ( Zettelbank ).
   Indeed, a credit instrument with a properly certified interest claim, does have a value in the present and can thus be exchanged for other, present goods. Such a credit instrument ( mortgage bond, annuity certificate ) is even the natural means of payment for goods that exist in the present but are not PRODUCED in the present, e.g. for REAL ESTATE. For this reason, mortgages are often used as means of payment in REAL ESTATE PURCHASES. But goods PRODUCED in the present do require scrip as means of payment ( notes or clearing cheques ), if the producer wants to consume the equivalence in the present. If he does not want this but wants to consume only in the future, then the proper means of payment is, again, the credit instrument, e.g. the standardized mortgage bond.

   Feder wants to create a means of circulation that at the same time bridges differences in SPACE and in TIME. That can NOT be done. ( A sound commercial bill does it, to some extent, in a limited circulation sphre and only for a short period. Moreover, the bill debtor has immeditely a corresponding quantity of goods for sale. J.Z. ) A railway has to overcome e.g. the distance between Berlin and Hamburg as fast as possible, if it is a GOOD railway. But if, at the same time, it is to act as a STORAGE facility, too, then it can no longer serve as a means of TRANSPORT.
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(Transcribed here again, from the fiche, since I have somehow mislaid the paper originals. J.Z. )