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I don't think fixing the banks' balance sheets by creating new government credit is remotely good enough. As asset prices fall, that only stops the credit bleeding from the wounds we can see.

The problem is the internal credit haemorrhaging of investor capital which we can't see. That consists of all of the credit created by the "shadow banking" that went on. Most of these declining credit balances are sitting overseas, and the debtor nations in the West are dependent on these creditors keeping their investments in the West.

ie here's the deal, Suckers, what we paid you with has just gone down the toilet, and we'd like you to keep on exchanging your oil for our deficit-based dollars and pounds. I think that creditors would only do that for want of an alternative. And I believe that there actually is an alternative, involving the direct connections of the Internet, and some lateral thinking.

Peer to Peer Investment - Unitisation -  changes not the Quantity of financial claims, but their Quality - and it will stem the credit haemorrhage by replacing much of the National Debt - ie that part of our current money = debt which relates to the stock of productive assets, which is not in circulation, and hence cannot be inflationary - with a National Equity.

Peer to Peer Credit - mutually guaranteed bilateral credit creation and Credit Clearing - gives the transfusion, and credit in circulation constitutes a shrunken National Debt.

In both of these dis-intermediated mechanisms, banks are no longer credit intermediaries putting their capital at risk, and become service providers.

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

by ChrisCook (cojockathotmaildotcom) on Thu Jan 22nd, 2009 at 05:16:44 AM EST
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