<< Monetary Reform
THE ROOT OF THE PRESENT CRISIS
AND ITS CURE
Who Should Create The
Should It Be Created
As Debt Or Debt-Free?
1. Who decreed that 21st-century
societies must depend for their supply of money on
banks creating it for their own profit? Not
God; no faith
scriptures teach it. Not Nature; winds, tides, plants,
trees, animals - none use money. Humans
made this system work as it does. Intelligent
humans can reform it.
2. Most of the money now used
in the international economy is money created as debt
in the currency of one country, the US dollar.
In national economies most of the money now used is
created by commercial banks as debt, written into their
customers' accounts as loans. (In the UK, for example,
less than 5% is created as coins and banknotes by public
agencies, and over 95% by commercial banks.) Central
banks try to use changes in interest rates to control
how much money the banks create.
3. That isn't effective. All the ninety recent credit
booms and busts in various parts of the world have taken
a similar form. The banks have hugely profited by creating
too much money in the booms, and have then received huge
bail-outs in the busts in order to reactivate their privilege
of providing the money supply.
4. The conventional response
to the present crisis is now combining a
massive increase in future debt with
new top-heavy regulation in order to reactivate the banks'
privilege once again. These features of the new "financial
architecture" are crazy. They ignore what first-year
students of architecture are taught: see
that the foundations are sound before you construct extensions
to the upper floors and overload them with heavy burdens. The foundations
of "financial architecture" are, of course,
money and how it is created.
5. International monetary reform
has now been proposed by Brazil, Russia, India and
China, to replace the US
dollar with a more genuinely international currency administered
by an international authority.
6. Shouldn't national monetary
reform follow that model?
It would include:
normalising "quantitative easing" by transferring
responsibility to a nationalised central bank to create
the debt-free additions to the national money supply
which it judges to be in the public interest;
requiring the central bank
to give the money to the government to be spent into circulation under normal
democratic budgetary procedures;
making it a crime, like forging coins and counterfeiting
banknotes, for anyone other than the central bank to
create bank-account money; and
- denationalising recently nationalised
commercial banks to compete unsubsidised in the market for borrowing
and lending existing money.
7. For practical details, including safeguards against
governments misusing the central bank's new function
for their own political purposes, see
The American Monetary
Institute's website - www.monetary.org
My Newsletter 22 and the accompanying links - www.jamesrobertson.com/news-mar09-3.htm
The contents of this Note may, but need
not, be attributed to its author.
6th April 2009