[Translated from Socialistische Gruppe]
Annual budget debates are arguments about the report of the government in office over the past year. They issue budget resolutions that outline the future use of state power. There is a good reason that decisions about state activity for the coming year, setting public expenditures and putting them in the right relation, are negotiated as a problem: this force monopoly economizes with the money that it takes from society. Therefore, it is divided and makes all governing at the same time a problem of correct cash management. Turned around: the national budget documents all state activity and sets national priorities.
In contrast to private business, the state’s income does not result from an exchange, but is confiscated from its society by legislation, thus by force. It corresponds to confiscation in that, although citizens must pay taxes to the state, no reciprocal demands follow for them against the Highness.
The form of confiscation — taxes — expresses at the same time the consideration that the state wants to make on its pecuniary resource. By not drawing in a fixed amount, but only a certain portion from current business activities, it wants private business not to be destroyed, but continued. Thus the state resorts to dependence on the private business success that is achieved in its society. It wants to draw in money only if there was money earned there.
Apart from the direct collection of taxes, the state borrows money from its banking system and so instigates itself a business, by paying interest on the borrowed money.
The state depends on the funds at its disposal for its projects. Thus the material basis of its power stands and falls with the success of accumulation.
In the form of a budget it becomes clear that the highest purpose of the state is the facilitation of a successful money accumulation. What the state needs for its tasks, it appropriates not by force, but pays for. It immediately provides the basis for private business with its expenditures.
And when collecting taxes from its subjects, the state expresses its subordination by the fact that the course of business is not to be damaged by all its sovereign activities. If the highest force subordinates itself in such a manner so that business can proceed, then one already knows the purpose of the state in this form. It uses its power to serve money accumulation, its pecuniary resource.
When the state requires money from its citizens, the whole society is obligated to gain that money. The state establishes thereby an economics separate from it that is not about national guidelines, but private wheeling and dealing. On this basis it arrives at an accumulation of money wealth. From the results of business activity, the state avails itself for its due.
The state forces its subjects to gain money. Therefore everyone tries to draw on the solvent needs that exist in the society in order to attract a part of the social wealth for themselves. Needs are not at all the purpose of production, but the lever to squeeze money out of others. Needs are not served by the mere existence of products that can satisfy them. Rather, everyone is in principle completely excluded from the objects of their needs because they belong to other people. Only money overcomes this exclusion and makes the product available to satisfy the need. How important a need is considered to be has to qualify to what degree it is solvent, thus is a lever for enriching others.
Everyone is interconnected in mutual dependence. However, this connection is not for co-operation in using unique things. Rather, everyone tries to use the dependence of others on their products to attract money to themselves from others’ wallets. The purpose of money accumulation — which the state orders upon its society — lets needs go wanting. Thus poverty and immense wealth exist directly next to each other, and the full shop windows and the empty purses that characterize the free-market economy are self-explanatory.
The wealth of the nation is measured in money. This quality of having a value measured in dollars and cents not only makes all goods and activities qualitatively equivalent and quantitatively comparable. Rather, because all production and services depend only on money, it represents wealth and does so only because it can multiply itself as much as possible. If, however, everything wants to become money, then money is the independent form of wealth that makes everything available. In money private individuals have the power in their hand, or in their wallet, to have all the goods and services in the society. The wealth that is measured in money exists not in supply, i.e. in the facilitation of work or its benefits, but in the private power of access to the goods and services of other private individuals in the society.
If money is the private power of access to things and activities that exclusively belong to private individuals, then everything is decided by how much money one possesses. If one has enough to overcome the exclusion from the basic necessities, money is used for consumption, and then one must again look for money in order to make use of things. Because one cannot manufacture things in order to sell to others — means of production are also subordinated to the excluding power of property — one must find someone who has sufficient money to pay. A business pays, however, only if the employment promises an increase of its money from the paid work. If one does not have sufficient money, one must make money: on the one hand, for one’s own consumption; on the other hand, for increasing the money of somebody else. If one has sufficient money, then one can use it to increase it: one buys means of production and pays workers, and thereby produces things or services for sale, thus producing wealth.
Thus established, money is for some a means of exclusion from wealth; for others, a means of access to the increase of wealth by means of command over other’s work, as authority over the production of wealth.
Money is the material that makes everything available. Because money overcomes the exclusion principle in the society as the means of command over alien property, everyone runs after it. The fact that money has the power of command over alien property is based on the fact that everyone must take it in exchange for their stuff. The quality of money that makes it the means of command results only from a super-ordinate force — the state — that requires private individuals to use it as “legal tender.“ The commanding power of money is thus based on force and nothing else.
Central bank money, which by power of state force is the legal means of command over social wealth, comes from the fact that a federal authority, the Central Bank, lends the pieces of paper that it prints to the banks. By depositing credit papers, the private banks can borrow national paper money at interest.
This mechanism crucially restricts the banking business: The peculiar business of banks consists of the fact that they grant credit on the basis of their own and others’ deposits: Banks do not simply safeguard the money made in the society and lend it to others. Certainly, they collect the money owed; however, they treat these debts that they have to the society as the basis of their credit-worthiness. Because the whole world carries their money to the bank, they enjoy the confidence of the society of being able to redeem promises to pay. And the bank acts with this confidence.
If it grants credit, no bank wastefully leaves its means of business — the money that it has collected from the society — to its customers, but generously permits it to pass through demands for interest payments while it takes responsibility for the account. In this way, the bank can assign a multiple of what it has as a horde in its safe as credit. Certainly, the bank must have money in order to settle the demands connected with its granting of credit — however, the extent of due payments is not identical to the extent of granted credits because each quantity of promises to pay is expressed only once in its own accounts, thus is “transferred”; on the other hand, each bank settles its orders to pay to the other banks with these orders to pay, and so in the end the arising balance must only be adjusted. The banks still need a little cash for the transactions of the “little people” who have to pay the bank not with credit cards, but cash.
On the one hand, by means of credit creation the bank emancipates itself from the limit of the hoarded wealth; on the other hand, the loan business of each bank hangs depnds on its solvency, so money is required. It must be supplied by depositors and debtors who serve their credits punctually, with solvency, with money only. And it must make certain that, with the assignment of yet more credits, or an increase of existing credits, they do not “use up“ their money horde to serve the demands for payment that accrue against them. So the banks in their credit creation are then again dependent on the money earned in the society by their customers. Their ability to grant credit, and thus their business, is always thereby limited to the money already earned in the society by accumulation, and much of it collects in their cellars. The state eliminates this restriction on the credit business by prior accumulation, by lending the banks money from the Central Bank. The banks deposit credit papers (blocks of shares, federal government notes, etc.) with the Central Bank, which receives interest for them as so much cash, as they need for their credit business – so consideration for money already brought in is redundant. For everyone judged as credit worthy there must be enough “liquidity,“ so the state allows the banks to grant loans on debts -- the deposited credit papers. Thus the state, by its authority, transforms mere promises to pay, debts, into real money and supplies the credit business with its peculiar business means: it credits the bank business and makes it thereby independent from the accumulated money of the society. Thus the state and its sovereign force over the society are the basis and starting point for the credit business.
The state liberates the credit business from the money earned in the society and so interferes in the relationship between the banks and the productive and mercantile entrepreneurs — and thereby completes the rule of credit.
Entrepreneurs are dependent for their wheeling and dealing on credit. In order to hold ground on the market against their competitors, they must organize a production that enables them to undercut or at least meet the market price. Investments in expensive machinery, which guarantee the highest productivity, are essential. The advance that can be spent is determined by these requirements of competition, and not by what they have already earned. Their own fortune is the barrier to their wheeling and dealing. They overcome it by help of borrowed capital, raising credit to an amount that enables them to make the necessary efforts in competition. And because only credit – which, therefore, they all need — helps them do it, they must prove their credit worthiness in competition on the product markets. Then they are compared as an investment with every other business and their competitiveness has to meet a definite criterion: as the most credit-worthy investment promising the best yields in the future. The current business must then meet not only the requirements of the operation, which the banks already have in hand with their assigned credits, but prove that further credits are well placed there.
The credit business, for its part, treats production and trade as worthwhile in that it emancipates itself from the business success in which it participates at the same time: already with the “simplest“ loan, interest places a requirement on the future business success of the debtor, confirmed by a contract, completely independently of whether this business succeeds or not. And because this right — completely independent of the real fate of the lent money – exists completely practically as a lasting requirement on the anticipated success, the banks make such demands the object of business and acts with them: future profits which have yet to be made become in this way available property. Very fairly, the monetary value of the credit paper awaiting sale results from how much money the credit paper put out probably represents if one compares its yield with the average net yield of investments.
Thus property doubles itself; however, this doubling is prospective in every regard: the productive or mercantile entrepreneur has business means in hand, which must justify the business reeled off only by his promise to pay. And the bank — although it assigned a credit and received only mere outstanding debts – orders monetary value for property that it can lend or sell, which represents thus at any moment an available financial mass, as long as the applicant for credit justifies their confidence by his business success with the use of the credit — and he must! The credit business is free on this basis to create every amount of “financial products“ on this speculation whose yield is not at all certain. Therefore every amount of “speculation“ is allowed for the sake of completeness. The interest of this business is then the deviation of the credit paper’s purchase price from the selling price that results from the expected trend of prices. The whole business with credit papers is then only one speculation on the speculation of the initial speculation, which causes an actual increase of money in the case of a boom in business. The credit business creates thereby its net yield and the money for further speculation. However, the banker is here also not independent of the real course of business. The course of business of a corporation must justify, for example, quick speculation on their shares; the situation of a nation or factory must appear promising for the appropriate speculation on their papers, etc.
Also this does not remain without effect on more banal businesses: the connection of speculation with the fate of an enterprise, a national economic situation, etc. requires that the really made profits confirm what the financial business in its lofty position already long anticipated.
And because the state ensures that the credit business always has sufficient ability to create credit, it can create credit papers and speculate on their appreciation whenever it is worthwhile. By state supply of the credit business — its liberation from all hindsight on the money already earned — the criterion of the credit business, whether an investment is worthwhile for speculation, is the only valid one in the society. Thus the starting point for any business in the society is credit, and the disposal of the business world over money is subjected to this criterion: all real business takes place only if it satisfies speculation. The accumulation of wealth then takes its leave of the state money supply of the credit business and takes place within speculation. The financial provision of the productive entrepreneur is part of this speculation and his business success only another indication for whether his further financing for speculation is worthwhile. The state thus liberates the credit system from its money supply for an accumulation of credit, which the money making in its society has to meet.
The state supplies the money to be earned in its society with its force and at the same time makes itself the financier of the bank system by supporting the money hoard of the private banks on which all credit operations are based, beyond the influx of capital drawn from operating businesses’ “liquidity.“ With the “money market,“ which is established between the state issuing bank and the private credit institutions, the state credits the banking system and thereby sets it free to finance every business judged worthwhile – either of a material or a speculative nature. By this mechanism the state makes itself the overseer of all business activity in the country.
With the mechanism of a central bank, the state enables the banks to finance everything that promises to be a worthwhile investment. It does this for economic growth, the financing of which is not to fail because of the limited amount of finances already gained. Therefore, the state, “above“ the crediting of business, guarantees the necessary extent by its crediting of the bank system. However, whether the extensive use of credit increases only the certificates of indebtedness traded in the credit system or brings economic growth stands on another level. With the borrowed money still another worthwhile business needs to justify the assigned credit with its yields. If not, not only the credit-financed business is stuck in the sand, but all financial products that are dependent on one or another form of business success are canceled.
Thus calculated, the freeing of the credit business brings its reciprocal success criterion with it: each business must perform satisfactorily as a worthwhile investment for the credit created with state assistance because otherwise every amount of titles of indebtedness, which function in the society as the monetary value of property, thus real capitalistic wealth, is destroyed.