5 Relationships Of Raw Materials To Money
Everything we use from this planet to live …
… comes in the form of Raw Materials.
Those who harvest nature’s bounty to provide Raw Materials for human society need to be able to do so without acquiring debt . Otherwise, if providing Raw Materials cost more than it paid, it would not be sustainable and providing Raw Materials becomes impossible.
Those who provide Raw Materials must be able to afford all the finished goods and services they require from the sale of the Raw Materials they produce. Otherwise, they could not continue to provide Raw Materials and survive.
(I know I repeated myself in the above 2 paragraphs. It is an essential point and I did not want it to be missed.)
The Price Level of Raw Materials determines
the amount of Free Currency in circulation.
Free Currency is Debt Free Money.
We’ve had Debt Free Money in the past, Free Currency, once upon a time in the United States of America.
Those who provide the finished goods and services to Raw Materials producers must be able to do so without acquiring debt. Otherwise, providing finished goods and services to Raw Materials producers would not be sustainable and it becomes impossible to provide finished goods and services to Raw Materials producers for very long.
Those who provide the finished goods and services to Raw Materials producers must be able to afford all the Raw Materials, finished goods and services they require from the sale of their finished goods and services. Otherwise, they could not continue to provide finished goods and services to Raw Materials producers and survive.
Those who provide finished goods and services to anyone are paid,
either directly or indirectly,
by the Raw Materials producers.
Having enough debt free currency to allow for the total debt free exchange of all finished goods and services depends upon the price level of Raw Materials.
It is not enough that farmers, fishermen, foresters, miners and recyclers make enough so that they may start a new production cycle, live long and prosper. All those who add their labor to animal, vegetable and mineral Raw Materials to produce finished goods need to make enough so that they, too, may start a new production cycle, live long and prosper.
(I’ll get to the service providers a little later because I feel they require more clarification and differentiation.)
The bottom line is that the price paid to Raw Material producers determine the amount of debt free money available to human society. The amount of debt free money available for personal savings and business investment is determined by the price of Raw Materials.
Here is a five part description of how Raw Materials relate to Money.
- Debt Free Currency
- A society’s annual production of raw materials must be represented in the economy by a sufficient amount of debt free currency (a price level) to optimize the debt free exchange between the raw materials producers and the finished goods and services raw materials producers purchase.
- Those who produce the basic raw materials for society must be paid enough to afford the manufactured goods and services required for raw materials production.
- This amount of debt free currency in free circulation must also be enough to optimize the debt free exchange of all manufactured goods and services at all subsequent stages of the economic cycle.
- Debt Free Exchange
- The amount of wealth in flow within the economic cycle must be represented in the economy by a sufficient level of debt free currency to permit the debt free exchange of all finished goods and services.
- Without enough debt free currency to meet the need of debt free exchange an economy stagnates and dies.
- Finished Consumable Goods
once produced and warehoused, must be monetarily represented somewhere in the economy by more than their minimum domestic labor value equivalent in free currency, so consumption of finished goods can occur without supplemental debt or abstinence from consumption. (a surplus of production in the midst of poverty) - The Volume of Debt Free Currency
available to distribute current production and facilitate the subsequent expansion of commerce is governed by the value placed on raw materials at the first point of sale. - The value of raw materials becomes the primary source of personal savings and business investment.
Human society cannot sell under-priced Raw Materials into a high priced retail market without replacing the underpayment with:
- capital debt
- interest driven inflation
- abstinence from consumption and
- a high rate of unemployment.
Governments and the FIRE (financial, insurance, real estate) industries know this and have known this for a very long time. Yet, these service providers have a verifiably long history of repeatedly screwing things up.
Some services I understand, such as education, entertainment and medical services. These seem reasonable and easily affordable if government and the FIRE industries did not cost so much and actually make things worse by repeatedly screwing things up.
I cannot believe that the world’s wealthiest and most powerful individuals with access to the best education repeatedly screw things up by accident. This whole thing concerning Raw Materials and money must go much deeper than the current financial meltdown and scandal.
The reason just about everyone else, including economists of all sorts, are giving more complicated explanations seems to be their need to retain all the rank, honors and privileges bestowed upon them by governments and FIRE industries.
Somehow, their rank, honors and privileges must be justified and maintained while explaining why things are screwed up. It is then no surprise that explanations become complicated.
To make things even more confusing, libertarian economists say things like:
“The governments of almost all countries are engaged in a campaign against the capitalists. They are intent upon expropriating them by means of taxation and monetary measures.”
-Ludwig von Mises
Now, Capitalism emerged as the dominant means to separate products from their producers subsequent to the general collapse of manorial feudalism during the Great Plague. Manorial feudalism gave us serfdom, bondage to the land, land owned by some big mucky-muck.
(I say general collapse of manorial feudalism because land bondage continues in the Southern United States with tenant farming, the foundation of Southern agriculture since the Emancipation Proclamation.)
In Europe, during and after the Great Plague, big mucky-mucks could not get enough serfs to do all the work, so they invented Capitalism to pay people to work. The plan was to pay people less money than what their products could be sold for.
The difference between the cost of Labor and the value of the products determined the amount of profit because Raw Materials costs had already been fixed.
The big mucky-mucks, AKA Capital, already owned everything, all they needed was a system to get people to work for less than their labor was worth.
(Well, they, Capital also needed a system to keep everyone in line. I get to that part a little later.)
In business, Capital is everything that is not Labor or Raw Materials. Capitalism just privileges Capital relative to Labor and Raw Materials, that is why they call it that.
This development meant that the big mucky-mucks, Capital, needed to find a way to have Labor pay for its own management. The old days of just getting a big guy with a whip to oversee the serfs were over.
Managers from the ranks of the workers themselves seek superior privileges over the other workers they manage. They are allowed rank, honors and privileges to the extent they are successful in profitably separating producers (workers) from their products (the job).
Successful managers are allowed to call themselves Capitalists to signify their usefulness to the system named for them, the Capitalist System.
Capitalists often internalize the system point-of-view through close identification with the owners, the big mucky-mucks, Capital. This mental construct then conflicts with their actual (negative survival potential) position.
Capitalists seem easily confused when the Capitalist System acts to collect the fruits of other people’s production. After all, that is the very reason it was invented.
Capitalists forget they are workers themselves, workers used to more profitably separate products from their producers. Capitalists are central to a system that must pay for its own management because the owners, Capital, does not produce anything of value to sell.
Capital, another name for the power behind the system’s infrastructure, claims its rank through national governments’ sanctioned cartels and monopoly control over Raw Materials. Capital is control over Raw Materials cloaked in status derived from military strength and the proven willingness to use it.
Capitalism is simply a system that privileges Capital over Labor (including management) and Raw Materials. Capitalists are simply specialists in separating products from their producers, Labor, for the benefit of Capital.
It is not that Capitalists are on the wrong side,
Capitalist are the wrong side.
The big guy with the whip who used to oversee the serfs now needed to be paid, just like everyone else in the Capitalist System. Capital invented the rank, honors and privileges of Sheriff just for him.
Sheriffs were employed to evict people from the Commons (common lands) where they paid no rents. With the Commons closed, people were forced into the cities for factory work so to afford rent.
The Security State Apparatus, a necessary part of Capitalism, descended from this role of the Sheriff as compliment to the Capitalist. The workers are assessed for the cost of being kept in line, policed, for the safety and security of Capital, Capitalism, Capitalists and the Capitalist System.
The cost to workers for their own management by Capitalists and the Security State Apparatus, that is, the cost of both separating them from their production and keeping them in line, is paid for by the workers themselves by means of taxation and monetary measures.
This is monitored by a Union enforced Labor hierarchy entrenched in government bureaucracies. The government itself legitimizes and defends the Union, giving it great political power, in an obvious case of conflict of interest and self-dealing.
Debt Free Money,
Free Currency,
comes directly from the sale of Raw Materials.
When Raw Material producers, those who produce finished goods from Raw Materials and those who provide desired educational, entertainment and health services can afford to live on Free Currency, Debt Free Money, then everyone in human society lives long and prospers.
The big mucky-mucks, Capital, using Capitalists and a Security State Apparatus monitored by government bureaucracies loyal only to their in-house Union, makes huge profits on debt. These huge profits come at the expense of Raw Materials producers, those who produce finished goods from Raw Materials and those who provide desired educational, entertainment and health services.
Debt is a fabrication of governments and the FIRE industries.
- Debt enslaves individuals and entire populations,
- enslaved as certainly as a chattel slave during Roman times
- enslaved as certainly as a serf under manorial serfdom
- enslaved as certainly as anyone coerced into doing something they truly do not want to do.
That is the relationship of Raw Materials to money.
Marketing Beats Selling
My dad, 84 years old and counting, lifelong salesman, sales manager, sales trainer and independent representative speaks with open disdain about marketers. Yet, when you listen to him talk about his sales process it becomes clear that he takes a straight up marketing approach.
The first thing he does as a “salesman” is to identify companies ready to purchase in commercial volumes. Among marketers this is known as locating a market.
Next he connects with a decision maker and during the interview clarifies what problems they have. Marketers often use polls and questionnaires to discover a market’s needs, wants and desires.
Then, my dad works with one of the companies he represents, or even locates a company he has never represented before, to come up with a solution. Marketers follow the same process and if the solution is an information product either hires an expert, obtains the rights or creates the product themselves.
Finally, he goes back to the prospect company with the solution in hand complete with pricing and delivery information. It also works exactly this way for marketers.
When someone believes they have come up with what they perceive someone else needs, without their input or guidance, they then must attempt to sell it to them in order to regain their investment, personal power and self esteem. Whenever you start with a product before you have a market you are faced with a sales proposition.
This is why marketing may be approached as a science but all sales initiatives originate in ideologies. I’ve lost count of how many people have approached me with their absolute need to sell something they just dreamed up or discovered in a bargain bin somewhere.
Science observes the natural world and creates mind maps to make sense of it. These scientific ideas never achieve closure and remain open to modification and obsolescence.
We create ideologies as mind maps to which the natural world is abused into conforming. These ideologies arrive as a package deal usually complete with a supportive all-encompassing world view.
The map is not the terrain.
Science knows the history of their mind maps and constantly compares them to the natural world so to modify the mind maps and increase their accuracy. Ideology acts as if their mind maps are the terrain while becoming proactive in manipulating the natural world to conform to the mind maps.
It speaks to the power of ideologies that this distinction between marketing and sales often seems to be the biggest conceptual challenge limiting my students. Indeed, they often insist upon just being delivered an ideology while ironically demanding that it accurately correspond to the natural world.
Offered the appearance of free choice, people seem to prefer ideologies which inevitably conflict with the natural world over science that never arrives at closure and always seems as work in progress. Ironically, successful ideologies often masquerade as science while science then comes under attack as ideology.
The weakness of science is the willingness to consider alternative solutions to real problems. In other words, the reluctance to become an ideology also becomes the weakness of science.
The strength of ideology is the high acceptance it finds for the quick and simple answers it provides to real world problems. Unfortunately, the answers are always wrong, regardless of first impressions or our desires for closure.
This problem manifests when a vendor becomes a consumer. Their consumer training to only accept the quick and easy, cheap and simple, silver bullet one-shot solution betrays them when they wish to provide products and services to consumers.
While consumers feel justified in thinking it is all about them this feeding of the ego sets up business people for failure if they cannot make the adjustment to the other side of the coin. This failure to adjust results in a selling ideology.
While a person’s ideas may be interesting and welcome as long as they are a consumer, once they become a vendor of products and services their ideas become irrelevant. The world is full of great ideas that few care about.
This ego driven need to see personal ideas accepted by other people, through deception, fraud and the threat of harm if need be, meets the definition of ideology. This also describes the underlying methodologies of many mainstream selling techniques.
Ideology and selling lack resilience.
The narrow point of view generated by a consumer perspective holds no more attractiveness to others than any other inflexible ideological opinion. This leads to the failures of businesses and the collapse of empires.
Resilience relies upon both the willingness to competently observe reality regardless of what we wish to see and the ability to modify activities accordingly regardless of how habitualized we may have become to them. A fixed belief in our own correctness, self-righteousness in other words, inevitably leads to both our unhappiness and the unhappiness of others.
That is why I do not accept students as clients who insist they have invented the next best thing, whether it be a business service, a physical device or social idea. They are always wrong and doomed to failure.
If you wish to make money, online or face-to-face, it is enough to start with that desire. When you bring your own preconceptions along you limit your resilience according to the strength of your beliefs.
Accordingly, my first question to you then is not concerning your product but concerning the market you wish to join. Identify a market first and the market will identify a successful product for you.
Wealth Facts
The Source Of All Potential Wealth
All new potential wealth, the foundation of all prosperity, comes from the earth. You can either harvest something or mine something to create new potential wealth.
Human labor produces raw materials to create jobs and incomes which consolidate into the basic industries of agriculture, forestry, fishing, mining, and recycling. This consolidation of human labor producing raw materials enables the economic cycle that manifests new wealth.
The economic cycle emerges through the structure of trade that manifests sufficient new wealth to afford all finished goods and services. This structure of trade must manifest a sufficient level of wealth to afford all finished goods and services or it becomes unsustainable due to growing debt.
If it is correct, as argued by Milton Friedman and Paul Samuelson, that money is a factor of production in the same sense as labor and raw materials are, that money has the same standing as labor and raw materials with respect to production or wealth creation, then money obviously has a claim to a share in output or wealth created. But, alas, it is not so.
The End of Mainstream Economics: An Interview with Gunnar Tómasson
The Economic Cycle
The economic cycle begins when raw materials producers manifest new wealth by trading for the finished goods and services necessary to live and produce raw materials. All the finished goods and services of the economic cycle come from the processing of raw materials.
Providing services creates a drain upon manifested new wealth.
Producing raw materials and processing them into finished goods by manufacturing creates service jobs in transportation, utilities, finance, and trade. Manufacturing and service jobs depend upon receiving a portion of the manifested new wealth.
It is fundamental nonsense to view money as a factor of production. Money plays many roles, but we live on what we produce. We do not live on paper money that we create as a superstructure on the foundation of our production.
Gunnar Tómasson, financial consultant and former senior staff member (1966–1989) of the International Monetary Fund
Producers Permit All Manifest Wealth
When raw materials producers by their labor extract potential wealth from the earth their manifested wealth must allow them to participate in the economic cycle without borrowing against future production.
Interest paid by the production sector does not reward any contribution of money to wealth creation. It must derive from money newly created in the banking system, which means that it must be loan-financed.
Gunnar Tómasson
Trade based on underpaying producers so they must borrow to begin the next round of the economic cycle and “structure debt” to hide their lack of manifested wealth is unsustainable. Producers must manifest wealth beyond their needs and the demands of manufactoring and service jobs.
Prosperity originates with raw materials being added to the economic cycle. Financial systems based upon ever growing debt are doomed to eventually collapse.
Impoverishing raw materials producers with unpayable debt impoverishes us all.
The proper word to use is: Parity.
Parity means that farmers are guaranteed to receive a price for their production that covers their cost. This protection from the predatory practices of the financial services industry becomes required with the political power exercised by the banksters.
5 Rules Of Raw Materials Economics
Charles Walters wrote an article for the National Organization for Raw Materials (NORM) in which he stated
The birth of raw material economics — while ancient in origin — has been credited to Benjamin Franklin, the Philadelphia philosopher, printer, and statesman, and to Thomas Jefferson, who as a historian once wrote “invented the United States.”
Although Jefferson gave a published expression to the concept of raw material economics, it was Franklin who sat down the general proposition in concise and understandable terms.
Writing in “Positions to be Examined” concerning national wealth, April 4, 1769, Franklin pointed out that there were three ways in which a nation might become wealthy:
- By war, which permits taking by force the wealth of other nations;
- By trade, which to be profitable requires cheating. For example, if we give and receive an equal amount of goods and services through trade, there’s no profit other than that obtained in our own production cycle.
- By agriculture, through which we plant the seeds and create new wealth as if by a miracle.
All human wealth must originate somewhere in the real world and the process that explains human wealth creation begins with raw materials. Understanding this process which begins with raw materials requires appreciation of the essential role of human productivity.
These 5 Rules Of Raw Materials Economics provide a basic understanding of the process of human wealth creation.
- The amount of raw materials removed from nature becomes humanity’s potential wealth. The potential wealth of the materials determine the number and value of jobs available to produce, transport, process, manufacture, distribute and retail finished products made from these materials.
- The values placed on raw materials determine the amount of money that can be paid for the tools and services used to produce raw materials and controls the price and volume of tools and services purchased by raw materials producers.
- Tools and services purchased by raw materials producers and the tools and services purchased by other people during the same economic cycle becomes the original method of job creation and manifests all the wealth necessary to purchase all finished goods.
- A fair balance between the value placed on raw materials and the value placed on finished goods automatically creates healthy markets and manifests the wealth required to purchase all finished goods.
- The act of production times the fair value of production (AoP x FVoP = wealth), or the proper relationship between production and price, manifests all the wealth necessary for the debt free consumption of all finished goods.
Charles Walters concludes his article with this appreciation of those who compiled the documentation and promoted their findings
Starting in the 1920s and going through the 1960s, several entrepreneurial gentlemen of profound knowledge and inquisitive nature about macro-economics became the “Founding Fathers of Raw Material Economics.” They re-examined the Franklin-Jefferson principles by researching and analyzing the nation’s economic records…
Those “Founding Fathers” were: Charles B. Ray, Carl H. Wilken, Dr. John Lee Coulter and J. Carson Adkerson. They were ably followed by such stalwarts as Arnold “Red” Paulson, Vince Rossiter, Merle Willard, Kermit Couch and others.
Charles Walters could certainly be included among the stalwarts. I would also add Fred Lundgren and Jerome Friemel partially because of their book, The Nature of Wealth.
The essential element of their work seems encapsulated in the concept of Parity, emerging from the analysis of hard economic data and direct observation now stretching over 90 years. Raw materials producers must be paid well enough for them to begin another round of production without acquiring debt.
Parity pricing appears required for a healthy economy.
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