Note
Dr Richard Johnsson is the founder of Clearitt, dedicated to upgrading the financial system for businesses and individuals worldwide. With a doctorate in economics from Uppsala, Oxford, Innsbruck and Sydney Universities, Dr Johnsson personally coded the first Clearitt platform demo.
Back in 1909, Hartley Withers described the financial system and its elements that he considered to be the highest degree of economic civilisation and achievement.
At that time, the bank balance sheets couldn’t have been more liquid and consisted of precious metals and bills of exchange, i.e., a type of transferable mostly international invoices, due in less than 90 days.
The highest degree of economic civilisation specifically referred to the clearing of bills of exchange, checks and bank balances in the financial system, which facilitated much more economic activity to take place at any defined amount of cash, whilst lowering operating costs and counterparty payment risks.
Around the corner, yet an even higher degree of economic civilisation was awaiting to be implemented as the next logical step - the clearing of domestic invoices for everyday businesses. That would have extended the benefits of clearing to the wider population, facilitating even larger amounts of economic activity with even less cash, further lowering operating costs and counterparty payment risks.
But instead, the progress came to a screeching halt.
All of a sudden, the central banks in nation-state after nation-state were granted a monopoly on the note issuing, something that the private banks used to be doing too.
This meant that the competitive element that had made the private banks refrain from any excessive note issuance suddenly disappeared. Instead, the banks were now required to hold government bonds on their balance sheet, replacing the bills of exchange. And the central banks could suddenly buy almost unlimited amounts of government bonds, given their newly established monopoly.
Coincidentally (or not), the dominant dynasties of the European nation-states, all first cousins or relatives, had decided to find any excuse to go to war, and the central bank monopolies were the ultimate way to fund the war efforts.
The nation-states now had a new way to fund wars - by issuing bonds, requiring banks to hold them and by printing money, making the wars last longer, be way more destructive, and taking the horrendous human sufferings to another dimension. Not since the Thirty Years' War, fought to create the then-new concept of the nation-state, had the inhabitants of these lands seen such destruction and suffering.
As the dust settled, the soldiers returned home to face a new reality. The businesses suddenly couldn’t fund their business in the same way anymore, as there were no outlets for and clearing of their bills of exchange. The basis for the working capital, and the so-called wage fund, had been destroyed. With no clearing infrastructure to fund the working capital, mass layoffs and massive unemployment followed in many places. Hyperinflation in others. Or spectacular stock market booms, and an even more famous bust.
The degree of economic civilisation had dropped significantly in just ten years.
In this chaos, various egregores and dark ideologies found even more fertile grounds and drove the world to more warfare, all supported by the new centralised financial system.
Then, gold was slowly pushed out of the hands of people and off the bank balance sheets. And eventually, even the central banks abandoned the most readily available and liquid money there has ever been, making banks always on the brink of collapse and only propped up by the central bank's printing press. The degree of economic civilisation dropped even further.
Unemployment was made permanent, warfare perpetual, and the nation-state that had best perfected the centralisation could be the most aggressive on the international scene. Dramatically rising taxes followed suit, with marginal taxes even exceeding 100% in the country where I grew up. Further centralisation, like the establishment of an unelected EU government and a European central bank, and the phasing out of physical cash, were logical next steps. Where, not so long ago, you could pay anyone without any intermediary, everything now goes via the accredited centralised hubs.
That is a rough picture of the changes to the financial system of the last one hundred years or so, as far as I can tell. Although we are led to believe everything is better now, every study is showing the average family was better off financially 50 years ago.
Objectively speaking, some of the forces that have been let loose in the last hundred years haven’t been the peak of human glory. The degree of economic civilisation is not what it used to be, despite all the fancy technology.
One way to fix all this would be to pick up and continue the development that was about to happen at the start of the previous century. To indirectly undo the destructive elements, making them obsolete. To restore the lost working capital. To restore the wage fund. To end permanent unemployment. To bring domestic invoice clearing to everyday businesses and people. To continue and not only bring back what was called the highest degree of economic civilisation, but to take it to an even higher degree.
That is what I am doing. That is what I see as my duty. That is why I founded Clearitt. To bring about a higher degree of economic civilisation.
PS. Credit to John Zube, the sage, for urging me to find ways of spreading clearing to the masses. Professors George Reisman and Antal Fekete deserve mention, too, for showing me the direction where to find more answers. And Thomas H. Greco, Jr. for bringing the Hartley Withers book to my attention.