[Translated from Socialistische Gruppe]
Unlike private households, the state’s income does not result from exchange transactions, but is confiscated from its society by law, thus by force. This is equivalent to confiscation in that no citizen who has to pay taxes to the state consequently accrues any claim on the sovereign.
The form of confiscation — taxes — expresses at the same time the respect that the state wants to show for its source of money. By not drawing in a fixed amount, but only a certain portion from ongoing business activities, it does not want to ruin private business success, but keep it running. For this reason the state is sensitive to the private business success that is realized in its society. It only wants to collect money if some was earned there.
Over and above the direct collection of taxes, the state borrows money from its banking sector and so itself promotes a business, by paying interest on the borrowed money.
In its projects, the state depends on the financial means that are available to it. The material basis of its power stands or falls with the success of its accumulation of money.
In the form of the budget it becomes clear that the highest purpose of the state is the facilitation of a successful money accumulation. The state does not appropriate what it needs for its tasks by force, but pays for them. With its expenditures it also initiates the basis for private business.
In both the collection of taxes as well as in the things that the state procures, the state signifies its subordination to the fact that the course of business should not to be harmed by all its sovereign activities. However, if the supreme force in its sovereign activities subordinates itself in such a way that in its society business should run, then one already knows the purpose of the state in this form. It commits its power to serve money accumulation, its source of money.
When the state requires money tributes from its citizens, the whole society is obligated to earn money. The state arranges thereby an economy separate from it, in that it is not about state requirements, but is a matter of private wheeling and dealing. An accumulation of money wealth is to come about on this basis. The state on its part helps itself to the results of the business activity which thereby come about.
The state forces its subjects to earn money. Therefore everyone tries to take advantage of the solvent needs that exist in the society, in order to grab a part of the social wealth. 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 that satisfies the need accessible. The importance of a need has to be qualified by the degree to which it is solvent, thus is a lever for enriching others.
Everyone is interconnected in mutual dependence. However, the interconnection is no purpose-directed cooperation. Rather, everyone tries to take advantage of others’ need to rely on their products in order to pull money from their wallets. The purpose of money accumulation — which the state orders upon its society — lets needs go unmet. So poverty and immense wealth exist directly next to each other, and the full shop windows and the empty wallets 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. To a greater degree, because all production and services are only a matter of money, it represents wealth and does so only because it can increase without limit. If, however, everything will be turned into money, then money is the independent form of wealth that makes everything available. In money private individuals have the power in their hands, or in their wallets, to access 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. If one cannot manufacture things in order to sell to others — means of production are also subordinated to the excluding power of property — then one must find someone who has sufficient money to hire one. A business hires, however, only if the job is promising for business, meaning the paid work increases its money. If one does not have sufficient money, one must earn 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 commanding over other’s work, as an authority over the production of wealth.
Money is the stuff that makes everything obtainable. Because money overcomes the society’s exclusion principle, is the means of command over others’ property, everyone chases after it. That money has the power of command over others’ property is based on the fact that everyone must take it in exchange for their stuff. The character of money to be the means of command only comes into the world 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 into the society by a federal authority, the Central Bank, lending the pieces of paper that it prints to the banks. By depositing credit papers, the private banks can borrow the state’s paper money at interest. This mechanism crucially restricts the banking business:
The peculiar business of banks consists of the fact that they gain on the basis of their own and others’ credit deposits: Banks do not simply safeguard the money earned in the society and lend it further to others. Certainly, they collect the earned money; but they treat these debts that they have to the rest of society as the basis of their credit-worthiness. Because the whole world takes their money to the banks, they enjoy the confidence of the society that they will be able to honor their promises to pay. And the banks act with this confidence: when it grants credit, no bank wastefully leaves its means of business — the money that it has collected from 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 amount of due payments is not identical to the amount of credit granted because each quantity of promises to pay is registered in accounts in its own house, hence is only transferred; on the other hand, each bank settles its promises to pay to the other banks with these promises to pay, and 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 baker not with credit, but cash.
On the one hand, the bank emancipates itself from the limits of the hoarded treasure by means of credit creation; on the other hand, the credit business of every bank depends of course on the fact that it is solvent when money is required. It must be supplied by depositors and debtors who service their debts punctually, with solvency, with money only. And it must make certain that, in assigning yet more credits, or increasing existing credits, it does not “use up” its money horde to service the demands for payment that accrue against it. So the banks with their creation of credit 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 limited by the money already earned in the society by accumulation and by how much of it collects in their safes. The state eliminates this restriction on the credit business by prior accumulation by lending the banks its money from the Central Bank. The banks deposit their credit papers (blocks of shares, treasury bonds, etc.) with the Central Bank, and receive against interest as much cash as they need for their credit business – so consideration for money already recorded is superfluous. For every loan judged credit worthy there is enough liquidity because the state allows the banks to grant loans on debts – the credit papers just deposited with it. Thus the state, by its authority, transforms mere promises to pay, debts, into real money and supplies the credit business with its peculiar means of business: it credits the business of the banks and makes it thereby independent of the accumulated money of the society. Thus the state and its sovereign force over the society are the basis and the starting point for the credit business.
The state sets the credit business free from the money earned in the society and so intervenes into the relation between the banks and the productive and mercantile entrepreneurs and thereby completes the domination of credit:
Entrepreneurs are dependent on credit for their profit seeking. In order to hold ground on the market against their competitors, they must organize a productive business that enables them to undercut or at least meet the market price. Investments in expensive machinery, which guarantee the highest level of productivity, are essential. The investments that can be made are determined by these requirements of competition and not by what they have already earned. Their own fortune is the barrier to their profit seeking. 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. Then the ongoing business must not only meet the claims which the banks have already in hand with their assigned credit, but prove that further credit is well placed with there.
The financial business, for its part, treats production and trade as profitable fixed assets for itself in a way that emancipates it from the business success in which it participates at the same time: already with the “simplest” loan, interest requirements are placed 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 objects of business and act 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 issued credit paper 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 respect: the productive or mercantile entrepreneur has at his disposal business means which must justify the business reeled off only by his promise to pay. And the bank — although it assigns credit and receives only mere outstanding debts – orders monetary value for the property that it can lend or sell which thus represents at any moment an available financial mass, as long as the applicant for credit justifies its confidence by successful business with the use of the credit — and he has to! On this basis, the credit business is free to create every amount of speculative “financial products” whoses yields are not at all certain. Therefore every amount of “speculation” is allowed for the sake of completeness. The interest of this business is then in 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 a speculation on the speculation of the initial speculation, which causes an actual increase of money in the event 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 a factory must appear promising for the appropriate speculation on their securities, etc.
Also this does not remain without effects on the more banal businesses: the connection of speculation with the fate of an enterprise, a national economic conjuncture, 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 banking 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 earned. Therefore, the state, “above” the crediting of business, guarantees the necessary extent by crediting the banking system. However, it stands on another level whether the extensive use of credit increases only the certificates of indebtedness traded in the credit system or brings economic growth. With the borrowed money, yet another worthy 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 the financial products that are dependent on one or another form of business success are canceled.
Calculated in this way, the freeing of the credit business brings its 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.