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Then, to replace our current system in the U.S., money would be created and added to the economy by the U.S. government by creating value. Investments made the public good -- such as durable infrastructure that helps the economy such as roads and bridges, or climate change / alternative energy research. Value must be placed on things that are priceless too, such as wilderness areas, clean water and clean air.

The key is money is created as value -- to pay for something, not as debt. The value is the thing or project the money was spent on.

credit-money is always created to pay for something. When the government spends, it creates money in the sense of cash money ... when it taxes, it destroys money in the sense of cash money. When a bank creates money to finance a home mortgage, it is created to buy something ... the money is not a newly created debt for the productive sectors of the economy, its a newly created asset, its the mortgage that provides the bulk of the asset for the bank corresponding to its deposit liability that is the debt for the productive sector.

Money is a "debt" from the perspective of the bank creating the deposit, because it represents an obligation to perform a service. But that will be true for any monetary system other than one where the central government has somehow destroyed the ability of the private sector to create a financial asset that functions as money. And I don't see anything in the above proposal that destroys the existing ability of the private sector to create a financial asset that functions as money.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Sep 24th, 2008 at 09:18:28 AM EST

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