The interview with Mr. Bischoff can be found here:
I posted the comments below at the Daily Bell site as well.
Real Bills are inflation. They expand the money supply beyond the savings available. Setting aside the other (possible) merits of Real Bills, it cannot be ignored that they are inflation. I have demonstrated this before, using the words of both Fekete, and Bischoff, I will do so again.
IB: These surplus goods where exchanged via a "barter system". When the barter system proved too localized and lacking in a fixed standard of value, the "money system" evolved….Gold is "Money", because it is the one commodity with constant or near constant marginal utility.
BM: from these statements, gold represents the value of the “surplus goods.” Therefore, gold represents the “savings” produced and available within an economy.
IB: Gold as a medium of exchange lost its usefulness when the demand for goods outstripped the ability of physical gold to finance the production of goods.
BM: Is the concern the loss of the ability of gold to finance the production of goods? Are we talking about a solution for a lack of credit? There is only a lack of true credit if there is a lack of savings. By definition this is so. Any creation of credit beyond savings illegitimately transfers wealth from one party to another through inflation.
IB: Gold as a medium of exchange to separately finance each step in the production of consumption goods in a modern economy is completely unworkable.
BM: Gold as a medium of exchange ESPECIALLY in a modern economy is completely workable. We don’t need images of tradesmen carting bags of gold to the town market. With modern computers and telecommunications, gold can be used as a medium of exchange instantaneously, countless times per day. The infrastructure is already in place.
IB: The solution was found by using Real Bills as "clearing instruments" to finance the production of consumption items.
BM: Clearing instruments or financing instruments? They are not necessary to clear, and if a financing instrument, they are utilized because, as IB says above “Gold as a medium of exchange lost its usefulness when the demand for goods outstripped the ability of physical gold to finance the production of goods.”
To be clear, IB states clearly that the surplus produced by society is represented in the gold. But when there is not enough gold (surplus, or savings) to finance production, Real Bills are utilized. It is fractional reserve banking. Credit despite lack of savings. This is inflation.
IB: Real Bills function as "clearing instruments." They are not "credit instruments", as is widely asserted.
BM: This is widely asserted only because proponents of Real Bills go back and forth, as IB does often in this interview, for example: “The solution was found by using Real Bills as "clearing instruments" to finance the production of consumption items.” Can IB blame the critics for this misunderstanding?
IB: “Soon, the use of gold as a medium of exchange proved insufficient to finance the production of goods and also facilitate their exchange.”
BM: Once again, are they clearing or are they credit?
IB: Only producers of consumption items which are sold within ninety days are acceptable to a drawer of Real Bills.
BM: Says who? Some law passed by parliament a few hundred years ago? As DB points out in the afterthoughts, IB shows a faith in the state to protect trade that has little basis in history.
IB: Strong supervision by the State over commercial bank operations is essential to prevent rogue bankers from creating havoc.
BM: See my comment immediately above.
IB: Contrary to the widely held perception that the Federal Reserve Act was the result of lobbying and manipulations by the big money center banks, the Federal Reserve Act was really an attempt by the states to rein in the violation of good banking practices by the big money center banks and to preserve the application of the "Real Bills Doctrine" for commercial banking.
IB: The original FRA of 1913 authorized a "redeemable" Federal Reserve Note to be created only against Real Bills and gold within the system. "Anticipation Bills" or U.S. Treasury debt instruments were specifically banned from monetization under the original 1913 FRA.
BM: I have no idea if this was what was in the original legislation. I will grant that it is true. With that, is it not possible that the camel just wanted to get his nose under the tent? The big banks worked out a law that had some teeth, only knowing that, once under the tent, they could manipulate it to their liking?
IB: When in the early 1920s the national economy experienced a recession, the NY FED under Benjamin Strong promptly violated the prohibition against the monetization of U.S. Treasury debt by initiating Federal Open Market Operations (FOMO).
BM: As I said above, perhaps this was the plan all along. Getting the nose under the tent is a useful strategy for actions that must be shrouded in stealth.
IB: With the prohibition of gold ownership, the Real Bills market was destroyed. Businessmen will simply not draw Real Bills that would only be settled with irredeemable currency.
BM: It is done today, every day, in a different form. Revolving credit, which is exactly what Real Bills represented when used.
IB: With the ratification of the 17th Amendment, individual States as governing entities lost their seat at the table of power in the federal government.
BM: No, the states lost their seat at the table in 1865. After proving the point with 600,000 dead, the federal government had little trouble convincing states to tow the line. BTW, wasn’t the 17th amendment ratified at a time when the states controlled the selection of senators?
IB: I assume that by this question is meant, could Real Bills coexist with central banking? The answer is yes. They can, as long as the central bank currency is not protected by a "legal tender" provision.
BM: I am fully supportive of competitive currencies and banking in a free market.
IB: Of course, the ideal is to have a redeemable "National Reserve" currency based on the Real Bills Doctrine similar to the redeemable "Federal Reserve" currency created under the original Federal Reserve Act of 1913.
BM: No, the ideal is to allow competitive banking and currencies, with no one method or system supported by legal tender or other state mandated preferences over any other.
IB: It does not matter whether a "U.S. Dollar" is valued to be 1/20.65, 1/35 or 1/42.22 of an ounce. Any reasonable amount of gold that could be struck into a workable coin would do.
BM: EXACTLY. So when would there never be enough gold? The value of gold relative to the things gold would buy would adjust regularly with the supply / demand characteristics of the various commodities.
IB: Real Bills in and of themselves are non-inflationary. Their volume can expand and contract without causing any inflation whatsoever. It must be remembered that Real Bills are not "credit instruments". They are "clearing instruments" which facilitate that consumption items get to the consumer without first having to pay separately for every step in the production process.
BM: One more example of the reason for the confusion. They are clearing instruments (not needed certainly given today’s technology), but they are not credit instruments (although they came about because there was not enough gold, gold representing the value of the surplus). In and of themselves, Real Bills are inflationary to the money supply.
IB: The criticism I seem to detect is that the free-market quarter views Real Bills as credit instruments and therefore deems them inflationary. Real Bills are not credit instruments and inherently are non-inflationary.
BM: I hate to keep repeating myself, but must because IB keeps repeating himself. See my comment immediately above.
IB: I must correct you. I favor a "land value tax" which is fundamentally different from a "land tax".
BM: In one of our earlier conversations, IB introduced me to this concept. As much as I abhor all taxes, this bears some study. I maintain some interest because I can see it not as a tax paid to a state, but as a system that could likely be supported by a free market.