What I would really love to see you explicate is how the financial system can be "tied" or "bound" (gagged, too?) to the real economy.

The key to this is the "monetisation" of "Value" eg units of energy (kilowatt hours); labour (man hours) and most of all - land rentals.

Our current "Money as Debt" is based not upon Value but a Claim over Value (IOU) issued by a credit institution and based only upon a small amount of "regulatory capital".

The mechanism by which this monetisation will occur, I believe, is a reinvention of "Equity" via a process of "unitisation" to give:

(a) redeemable Units of these different fungible forms of value; and

(b) non redeemable (because there must always be 100%) proportional Units of production;

are available to investors.

In the former case there may be a return, as the market price varies over time, but the investor will always have the choice of actually redeeming the unit for something of value to him.

In the latter case, there is a variable return, which depends upon the production of the asset.

But note that for neither of these is there are a time constraint, as with debt. The former is for an indefinite period; the latter for an infinite period.

NBBooks:

Now, fixing these problems will require enormous amounts of money. Where shall such amounts be obtained?

The solution lies in a "Debt/Equity" swap on a massive scale. All of the existing mortgage debt and securities in their myriad manifestations will be gradually exchanged for units of index-linked property rental revenue flows.

Affordable rentals for the occupiers on the one hand (because no capital is repaid, and an index-linked return is lower than a conventional return).

A reasonable - say 1 to 2% real return - on the other hand with the attraction that the affordability of the rental leads to greater certainty of payment.

The outcome will be that the greater part of value in circulation is then "land-locked" in that it is redeemable only in the country of issue. ie exchange control is built in....

Cross border value flows, on the other hand, would be of fungible units of energy, and of course in the labour value we ourselves produce.

All of these fungible units will be exchanged on what is a barter network or "International Clearing Union".

Any necessary credit = "time to pay"  will come from the use of risk sharing "Guarantee Societies" which are backed by provisions made into "Pools" of value units by both buyer and seller.

This is exactly what Keynes had in mind with the "Bancor" when he suggested that both holders of positive and negative Bancor balances should pay a charge in respect of their balances.

NBBooks:

But to return to my key question: How do we ensure that the credit mechanism of the economy is not being misused for private gain? How do we ensure that the credit mechanism of the economy is instead being misused for to advance the public good? And the credit mechanism, of course, is the financial system.

The result of the "unitisation" of secured credit within partnership-based frameworks would in fact give rise to a system with no "rentiers", where all finance originates from the productive economy.

A world without "Debt" in fact.

"The future is already here -- it's just not very evenly distributed" William Gibson