One of the bizarre feudal remnants of modern economics is that banks own money.

Actually, in the US, the Fed owns the notes, but the Treasury owns the coins.  (No reason for pointing that out.  Just popped into my head.)  The truth is that it wouldn't matter, whether people owned the actual money or not, because the value of money is based on what it can buy.

Money is made to be a limited resource for the sake of price stability.  You could print all the money you'd like to, but, in the end, you would simply be jacking up inflation -- which, as you know, can lead to pictures that are not at all pretty (Germany and others after WWI, Argentina on numerous occasions, and so on).  We have interest rates as a means to leading supply and demand roughly to equilibrium in the money market.  In feudalism, sure, you could've handed out land until you were blue in the face.  Everybody could have had an equal chunk, and this could also be made to be in the at the beginning of a period with money -- everybody being given (say) £18,000, which is, I think, roughly the average income in the UK ($30-35,000).

Would this end the debt-based financial system?  No.  Some would save, leaving a base to loan; others would borrow from that base for investment (or apparently consumer goods in the current American picture); just as we have today.  Loans are what allow people to invest in themselves to raise their incomes, whether a college loan or a small-business loan or or or.  (In the end, you can only loan as much as people save.)

Some would be successful, and pay off the loan, while others would not.  That's a fact of life, -- and not simply one of capitalism -- and it is the reason we have (and are right to have) the welfare state and various other protections.  Most economists, myself included, will tell you that bankruptcy protections, for example, interfere with market forces, but they will also tell you, I think, that they are, on the whole, a good thing.  You'll, of course, inevitably be encouraging people to take on too risky a project, but, without those protections, -- and I fear America may learn this the hard way if the Republicans don't cut the shit -- most people, being risk-averse, will be much less likely to take on loans for projects that are fairly low-risk, because of their fear of being practically owned by the credit companies.  And that will, in my opinion, inevitably make for a far less dynamic economy -- less competition (and, therefore, higher prices), less innovation, etc.

So the point is that the current system is not perfect, but it exists this way for a reason beyond politicians and "economic elites".

Be nice to America. Or we'll bring democracy to your country.

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Money as Dynamic Value

Few people understand Money: John Law:was perhaps the first, in 1705:

"Money is the Measure by which Goods are Valued, the Value by which goods are Exchanged, and in which Contracts are made payable".

"Every thing receives a Value from its use, and the Value is raised, according to its Quality, Quantity and Demand".

"Money is not the Value for which Goods are exchanged, but the Value by which they are Exchanged":

The following quote,by E C Riegel, is a good summary.

"The purpose of Money is to facilitate barter by splitting the transaction into two parts, the acceptor of Money reserving the power to requisition Value from any trader at any time. The method of Money is to employ a concept of Value in terms of a Value Unit dissociated from any object. The monetary unit is any adopted value, which value is the basis relative to which other values may be expressed."

The monetary process is a dynamic one involving the creation and recording of debt/credit obligations between individuals and the later fulfilment of these obligations.

Riegel speculated that Money exists only in the transitory instant of Exchange of Value: in other words that Money exists only in motion.  

This transitory monetary "Value Event"/ Transaction involves the creation of "Credit": so in exchange for something of Value to me (of whatever type) I will assume an obligation to provide something of equivalent Value at a future point in time.

These obligations may be recorded on transferable documents, electronically or even merely retained mentally. The sum total of all obligations as recorded in the accounting universe of all sets of accounting records essentially comprises a "ledger of ledgers" or "Master Ledger" as Riegel put it.  Another way of viewing it is as a "Cloud" of "Accounts Receivable" and "Accounts Payable".

This massive database of "Credit"obligations is not Money, but temporary "Capital" (often known as "Working Capital"). It is Static Value - which only becomes "Money" Dynamic Value when exchanged in the transitory Monetary process. Rather than the "clearing" of these obligations by a mutually owned and operated exchange and offset system we utilise Banks as intermediaries to carry out the "Clearing" function for us.

In this electronic age what we think of as Money is in fact not tangible "cash" but rather for the most part (97% of Money in circulation) the flow of data between databases of obligations maintained by Credit Institutions (ie Banks and Building Societies).

The role of Credit Institutions such as Banks in current Money creation is little understood. Banks literally "loan" Money into existence. In exchange for an obligation by an Individual to provide to Banks something of Value in the future (ie an IOU or claim upon Value) as described above Banks merely issue a reciprocal IOU.

These Bank-issued IOU's which we are accustomed to use as our Money are therefore not a claim upon Value, but rather a claim upon a claim upon Value. A "double negative" giving rise to what is essentially a "false positive".  

The true source of Credit is the Individual, not the intermediary Bank, and Banks therefore levy upon Borrowers a return - in the form of Interest - upon Money they create arbitrarily and which is for the most part not based upon Value at all.

In summary, Money need not be- as it currently is - an "Object" circulating in the form of a Bank-created IOU but should instead be a relationship involving a dynamic process of Value creation and exchange by reference to a "Value Unit".
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The question then is, what would be the principal forms of "Value" or "Money's Worth" customarily being used as Money within the necessary generic Clearing Union?

Firstly, I believe that energy is uniquely placed as a "Cross border" currency which would be available for global exchange. But it would of course be a Common currency, rather than a Single currency.

However, the vast bulk of Money in circulation in most "developed" countries came into existence as bank and building society loans. eg over 70% of UK money supply is "Asset-backed" but "Deficit-based".

I believe that it is possible - through the use of "Co-ownership" investment in property using "Land/Property Partnerships" to produce a stream of property rentals arising from direct ownership ie an "asset-based" stream of "money's worth".

This will likely come about from the simple fact that this partnership mechanism is the best Equity Release mechanism there is on the one hand, and a REIT on the other.

In other words, following John Law's reasoning some 300 years ago (although he did rather bugger up the implementation) the majority of money in  circulation NATIONALLY would be Property-BASED. as opposed to property-BACKED.

In this way we cure the problem identified by Marx in his later work of "Fictitious Capital".


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

Wherever loans are either repaid, or written off after defaults (as with the 30's Equity bubble when so many margin loans on stock went sour) then (Deficit-based or Credit) Money is destroyed.

"Stocks" of Money can only self combust if they exist as "objects".

As discussed elsewhere, Money actually is a Relationship, not an Object, and a monetary system results wherever a barter system incorporates:
(a) credit(extended interest-free by a seller, but with shared costs of admin and defaults);
(b) a "Value Unit".

"Value" or "Money's Worth", such as energy, property rentals or even gold may then be exchanged on such a barter network which may be characterised, with a mutual guarantee, as a "Clearing Union".

So in a true and "asset-based" monetary system there are no "stocks of "Money" - merely static or accumulated "Value" (aka Capital) awaiting exchange in monetary transactions.

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