Unsecured debentures, the so-called “commercial paper”, are now being used to finance the operating costs of the company. As of Real bills is that they are both short instrument time; apart from this, Commercial Paper and Real Bills are worlds apart.
The true qualities Real Bills were recognized by Adam Smith. In fact, he wrote about them in his famous work, The Wealth of Nations. Real Bills were nothing new, even in his time; but since Adam Smith was the first natural philosopher .. . today named economist … to write about them and their important roles in the economy, the name of Real Bills doctrine of Adam Smith has stuck.
To begin with, the bill is usually only available to large, credit worthy business … as they are unsecured debt issuance business. On the other hand, the Real Bills drawn against consumer goods in urgent demand, on the way to the consumer. The products Bills are drawn against will be sold and Gold coins (money) merchant receives from the consumer will pay the bill when it comes due.
Thus, the credit representative bills will be extinguished by the consumer of gold coins. In contrast, commercial paper will be repaid by the issuer, the issuer with less than stellar credit ratings pay relatively higher interest rates; indeed, the market refuse to provide loans to shaky companies of any interest.
For this reason, because of the increased risk, commercial paper has a higher cost (interest) but pledged loans. However, the Bills discount, and the discount rate is always lower than even the lowest interest rate … the Bills have the lowest risk of any paper. “Twix cup and lip there’s many a slip ‘… but with bills that’ cup ‘is already touching the lip!
Again, however Bills not subject to the creditworthiness of each company, as they are not issued (sold) by the company. Rather, Bill drawn from actual goods delivered to stores … just like a commercial invoice is approved by the dealer to the delivery order.
For example, assume that eighteen wheel tank truck drives up to the local gas station, making the supply of gasoline, around 30,000 liters. Wholesale price of this much gasoline is about $ 25,000 dollars … at least in 2010 in Canada, where a liter of petrol retails for around $ 1.00.
Now, you expect a gas station attendant gives truck driver $ 25,000 cash to pay for this delivery? Hardly! Or write a check for $ 25,000 …? Not likely, is it? In fact, the attendant simply signs the bill; ’30, 000 liters of petrol was taken on this day … for an amount of $ 25,000. ” This account embryonic Real Bill.
It represents the value, to the tune of $ 25,000 … and cash needed to pay the bill will be charged by the station gradually, as it sells 30,000 liters in the coming weeks. The time it takes to collect $ 25,000 depending on traffic in certain places, and the due date of the account will take this into account.
The next question is what does the wholesalers do with this account? Keep it until the due date, use it (along with many other accounts … the ‘Accounts’) as collateral to borrow against … and pay interest to the bank? Or, perhaps, send it along to the refinery as payment for gas … it bought at a discount, of course. Now melt will be happy to get this bill … it’s as good as cash, and gives discounts as well … it’s melt will pay less for the bill, while the nominal value. The purification can reduce use it to pay for crude oil … and so on up the line
This gasoline bill is an example of vertical distribution. the bill is used to transfer the value or “net out” business in one industry. Real Bills enjoy horizontal circulation; they are available to any industry … the Real shares do not distribute the Fiat paper board
Real Bills highest quality paper documents only. They are earning asset that mature in no more than 91 days, in gold. No one in his right mind would never trade Real Bill rapidly decreased, dubious items as irredeemable bank note!
Another difference between accounts and Commercial Paper becomes clear if we look at the bigger picture. Real Bills reflect the value of goods actually sold into the market; they are strictly consumer driven. In fact, the rapid circulation of money is a proxy for Real Bill creation.
For more expenses (rapid rate) the more Real Bills are drawn … and if the rate money -or tend to spend – is reduced, fewer new accounts drawn. bills in existence development, are paid by … and so the total value of bills in circulation decreases. Real Bills are never rolled over, but must be paid in gold at maturity
Real Bills have money quality, to be used as a means of exchange. but unlike freely printed currency, they are not inflation. Real Bills are self-liquidating. Under the Real Bills system, huge trade imbalance between China and the United States is impossible
Yet another benevolent signs bills to the physical limits of the economy constrain the number of bills that can be drawn. if the ability to refine more gasoline is not available, it is clear that no new Bills gasoline can reduce … as no more gas can be returned to the retailer. No such constraint applies Commercial Paper, or indeed fiat currency.
Know the Real Bills with non-inflationary properties, consumer driven their qualities, fast and automatic response to consumer demand and to physical constraints. .. With “bills”. Board Commercial Paper lies in the hands of large corporate interests, banks and politicians. Price and volume set of “authority” … not by demand. This leaves the Commercial Paper market ripe for manipulation based on greed and corruption … with little consideration for the needs of the real economy. Dare we say ‘Wall Street vs Main Street’
By contrast, the Real Bills and Gold Coin standards are truly Democratic; The power is in the hands of consumers that goes Gold coins daily voting him. The discount rate is set by consumer spending, just as interest rates are set by the savings consumers. No central bank is required; Real Bills actually spread very well without the banking system whatsoever. As Austrian economist Hans Sennholz so aptly put it
“Sound money and free banking are not impossible, they are only illegal Hence money must be voluntary The Gold Standard will come back as soon as people realize .. that honesty is the best policy.
As von ill gain is the beginning Fiat standard, so is honesty mother of the gold standard. The Gold Standard is as old as civilization. Through the centuries, the gold standard has emerged again and again because the man had a reliable medium time. “
No doubt we are witnessing the re-emergence of the gold again, as the current regime of irredeemable currency ‘Fiat’ collapses. The important thing for us is to ensure that Real Bills traffic eased back … or else all new Gold Standard is doomed to fail, as the efforts of Britain to return to gold after the great war was doomed to failure.