Contents

1

 

  • ABSTRACTi

  • SUMMARYii

  • INTRODUCTION1

  • Chapter 1. PAYMENT SYSTEM33

  • Money and money stock. Deposit multiplier36

  • The levels of payment system. Definition of money. Property alienation as a bridge to price definition39

  • The secondary nature of the deposit multiplier. The fundamental nature of the primary lending rate40

  • The multiplication of credit deals as a consequence of credit and payment systems mix-up42

  • A game showing that commercial banks do not really create money when lending. The importance of centralised money issuance43

  • Enter deflationary crises, issuance income and the direct issuance of money. The credit issuance of money as the first stage of reverse issuance of money44

  • A continuation of the game, and less obvious examples of how commercial banks create money in payments and not in lending. Physical turnover49

  • Important examples demonstrating the fundamental nature of physical turnover expressed in monetary terms54

  • Money alienation (payment) as a moment when property price is formed. Forming the price of money in a credit deal. Definition of price. Link between money issuance and price of money57

  • Physical turnover and manufacturing61

  • Physical turnover and large integrated firms. More on mirages at large commercial banks as viewed through a physical turnover prism61

  • Inflation and deflation63

  • Physical turnover and the Dutch disease68

  • Once more on the relationship between physical turnover and GDP as partial proof of the price definition71

  • Physical turnover expressed in monetary terms and global currencies. Credit and physical turnover as a basis for the existence of global currencies76

  • Definition of economy. Labour. Preview of Chapter 280

  • Chapter 2. COSTS AND INTEREST RATE85

  • Systemic costs. Labour productivity. Revolutionary (formation change) and evolutionary (technological progress) cost reduction85

  • Technological evolution: the big movement. Neoclassical and Keynesian mathematical economic models. The priority of demand in a microeconomy93

  • Technological evolution: movement of investment money. Savings and money stock. Remarks on Keynes’ s theory (savings and stimulation of consumption)96

  • Reduction of systemic costs110

  • Ronald Coase and transaction costs. Division of labour and coordination of labour115

  • Two examples illustrating coordination costs127

  • Ronald Coase and transaction costs; division of labour and coordination of labour (continued)130

  • Rough History137

  • Division of labour and coordination of labour (conclusion). Costs and a firm’s expansion140

  • Moving along Chapter 2 (Stage 2)142

  • Modelling of the new financial system, paragraph two143

  • Market forming of the domestic interest rate under the new financial system and its distortion under the existing system144

  • Logical connection between a lower primary lending rate and deflation from costs145

  • Bank bankruptcies in the existing formation and under the Perfectly Competitive Market. Observations on the Great Depression146

  • The simplest definition of overproduction. Further discussion on deflation from costs (or how contraction of credit chains leads to having less money in the real economy)148

  • The partial direct issuance of money in the economic policy of F. D. Roosevelt during the Great Depression. Notes for John M. Keynes’s theory (continued)150

  • Psychology and rationality in theoretical economics. Notes for John M. Keynes’s theory (continued)160

  • “Pink-coloured glasses”, or why the institution of private property provokes overproduction. Price forming in a practical economy. Final notes on John M. Keynes’s theory166

  • How credit should work in the new financial system and why today’s interest rates are not really market rates177

  • Excessive stratification resulting from property distribution at artificially low prices. Enrichment and competition179

  • Trade credit. Retail chains183

  • Trade credit (continued). Accounts receivable as the beginning of an overproduction crisis. Credit discipline as a mandatory condition for the PCM188

  • Letters of credit. The “marketplace”. Credit relationships between households. Illicit credit. Advance payments196

  • Securities (theory). Particular moments of leasing land (L←M). Problems of stock compatibility with the theoretical framework of the PCM199

  • Securities: weakening of the final cost regulator’s effects209

  • Securities: increasing cyclical development swings. Futures contracts217

  • Securities: the artificial nature of high liquidity compared with the liquidity of physical assets221

  • Preview of Chapter 3224

  • Chapter 3. CROSS-PRICE228

  • The participants in the deals229

  • National domiciles of the deal’s participants230

  • Corporate cards. A foreign affiliate business in the new formation230

  • The “electronic errand boy” and currency exchange banks. Multi-currency deals232

  • Cash233

  • Keeping funds in foreign currency as part of its circulation. Diminishing the currency depreciation effect234

  • Deflation from costs237

  • Gold under paper capitalism239

  • The creation of a single global currency by Western nations245

  • How the famous “decay of capitalism” might happen248

  • Chapter 4. FREQUENTLY ASKED QUESTIONS (and other appendices)250

  • FAQ: Can you explain the gist of modern capitalism’s problems in plain English?250

  • FAQ: The old central bank versus new central bank. Illustration of the existing three-tier payment system and the two-tier payment system under the PCM251

  • FAQ: The shrinking of money stock and the interest rate256

  • FAQ: Full-reserve banking263

  • FAQ: How will budding entrepreneurs raise money, given the strict credit discipline of the PCM?266

  • Appendix: Marginal cost. The priority of sales (demand over supply) in the market microeconomy268

  • The law of diminishing returns269

  • Marginal cost272

  • FAQ: Services, “post-industrial society”, information, opportunity cost284

  • FAQ: Transition to the PCM290

  • FAQ: Where did the “demand for money” go?302

  • FAQ: The quantity theory of money (and monetarism as its extension)303

  • CONCLUSION307

  • A few final words312

  • GLOSSARY314

  • BIBLIOGRAPHY323

  • INDEX325

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