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