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An alternative to bailing out Wall Street

by Magnifico Tue Sep 23rd, 2008 at 03:22:50 AM EST

There is another way to solve the banking problem on Wall Street and that is to abolish money as debt. Here is a movie, Money as Debt, from Canadian animator Paul Grignon from 2006. The film is 47 minutes long. Please give it a view.

The film has been around in a shorter form since at least 2002. I think it is important to at least view before we Americans sign $700 billion over to the Wall Street and international banks.


We have a systemically flawed monetary system. We cannot fix the fundamentally flawed system. The fundamentals of the American financial system is a bottomless pit of debt.

Frankly, I think we Americans should nationalize the banks and take away the ability to create money (through debt) from private hands and place in the hands of the people.

Since the banks have proven quite effectively that they are not profitable, we should buy out the banks and convert the American banking system into a not-for-profit service. The U.S. government should lend itself money without interest to create value for the public good such as improving and maintaining the nation's infrastructure, researching alternative, renewable energy, and protecting the environment.

Money lent to private individuals would have interest with the interest being used to fund other societal needs. If there is, by chance, a surplus, then we could play dividends to citizens.

Why should the U.S. federal government borrow its own money at all? The U.S. does not have a sustainable economic system and since debt = money, we are always at risk to this financial collapse again and again and again.

I believe we should move to a system where money = value.

To do this we first must abolish the private lending system. Banks should no longer be allowed to loan money it does not have.

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.

Inflation becomes a way of taxation. The higher the inflation is the higher the tax rate is in effect. If this isn't palatable, then to reduce inflation the government taxes at a higher rate and removes the money from the system.

To control deflation, the government would simply create more money by creating more value for the people of this country.

A side benefit of this would be the eventual elimination of U.S. national debt. There would be no federal debt because the government would create the money it needed for its projects.

The key is to eliminate the private banking system -- the very same system that wants at least $700 billion of American tax money, which is money as debt, not value.

We need to think outside the bank. The bank is broken. The current financial system is not sustainable. It wasn't in 1929 it isn't today. Now is the time we the people take responsibility for the American's financial future and stop leaving it in the hands of bankers, traders, and money lenders.

 
Cross-posted from Docudharma.

Display:
I'm always reluctant to put up my naïve economic thinking up at ET since it's liable to either be offensive or laughed at, but I really want to add this to the conversation. If for nothing more to have it destroyed, so I can 'dream' about another solution.

And to the bankers here, I mean no offense.

by Magnifico on Tue Sep 23rd, 2008 at 03:27:02 AM EST
Magnifico, you are in good company. This is not the first time that the "Money as Debt" video has been on ET.

Anyone who has read my Diaries and Comments will know that I am interested in developing practical alternatives to the conventional monetary system by mutualising the banking function of guaranteeing credit, and creating new mechanisms for "pooling" and "unitising" land rental value and energy value.

For instance, I just posted the following comment in response both to another comment, and to today's Guardian article by Tony Juniper itself

Bring on the Carbon Army

which is long on good feelings and short on practical solutions.



Comment
Green' energy has to be subsidised. This means that taxpayers have to pay twice, once to generate it and once to use it.
In fact "green energy" - whether energy produced by tides, wind or sun is free. Energy savings are likewise "free" in that there is no ongoing cost of production.

The question is how we finance the upfront investment necessary to produce these "MegaWatts" and ""NegaWatts" respectively.

This is actually quite straightforward. Rather than monetising credit created by credit institutions; CO2; tradable quota's; or anything else inherently valueless, we monetise the intrinsic value of energy.

Step One: create an "Energy Pool" fund - constituted within a partnership/trust framework, not a Company.

Step Two: fund the pool with a levy on carbon-based energy transactions - this could be applied retrospectively, if the view is taken that energy companies have received windfalls, from high prices, the daft ETS scheme, or both.

Step Three: divide the Pool into "Units" redeemable for (say) 10 Kilowatt Hours of energy at the market price. So a Pool of £100m would create 200 million "Units" at an initial market price of 50 pence per Unit.

Step Four: use the £ proceeds for investment:

(a) directly in "Units" of future production of renewable energy projects - the average wind turbine may be funded if between 30 and 40% of its production is "sold forward" in this way;

(b) directly in "Units" of energy savings -eg retrofitting combined heat and power - and here the recipients of the interest free investment/ "Energy Loan" simply buy back Units from the Pool at the market price, which they can afford to do out of the savings they make.

The only policy issues are the question of how the initial 200 million Units - and the excess energy production of renewable energy projects - should be distributed, and the viability - in energy accounting terms - of "investments".

Recipients of Units would be free to use them by redeeming them for something of value - ie energy consumed or saved - or by selling them to someone else at the market price.

"Unitisation" of energy in this way completely reverses the polarity of the financial system from a "deficit basis" to a basis in something with intrinsic value.

It's not Rocket Science, either.

It is my view that the "Anglo Disease" so well diagnosed by Jerome cannot be "cured" within the same "deficit-based" paradigm involving credit creation by credit intermediaries/middlemen.

The solution IMHO lies in new "Peer to Peer" mechanisms for:

(a) mutual guarantee of credit (aka "time to pay")created "Peer to peer" between sellers and buyers;

(b) direct "Peer to Peer" investment in future production by "Unitisation".

The key is to "Unitise" the use value of energy - thereby creating a globally exchangeable or "fungible" Unit of currency,and land rental values - which creates a nationally exchangeable and fungible currency.

There is nothing whatever stopping any groups or networks of individualsfrom coming together in "Community Partnerships" to implement such solutions immediately.

I am not just advocating this, but doing everything in my power to work with people to actually do it, and post "Credit Crunch" I am getting immense interest.

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

by ChrisCook (cojockathotmaildotcom) on Tue Sep 23rd, 2008 at 06:18:40 AM EST
[ Parent ]
I will put ehre the comment in Jerome diary....

There is something that does not makes sense.

And he reason it does not makes sense; I think, it is that economic theory is not right... it is not, it can not be epistimelogichally right.

The basics of the economy , or so called basic of the economy are not clear at all. It is not only about stuff, money around (M1, M2, M3), companies , consumers and money-value or money-debt.

There are tendencies, impulses and simbolic variables not taken into account.

I have not still seen any clear and new perspective, new way to look at the glbal system (and the US in aprticualr) which makes sense.

The "normal" way to look at this stuff is krugman eyes, it makes sense, sort of, but not quite completely. Banks were deregualted, they had a lot of liquidity, made awfull bets to enrich themselves, nobody knew exactly what they were buying, so they bought stuff that nobody knows how much it costs..s now there is no market.. if there is no market,there is no liquidity ina bucn of assets and no credit and economy halts..

But given that debt-money is a 30 trillion market (almost like GDP accordign to soem readings credit swaps are worth one year US GDP) what was really the bas bet? Well, actually the whole market.

Antoher approach is that the financial institutions, all of them except local banking, are useless. this is, this is a failure of Wall Street...We do not need finantial services.. but is it true? We do not need credit? But can capitalism exist without credit?

And what about the way stirling looks at it.. captalism does not exist as such, there are purely periods in history where particualr arrangements are set in place to make feel people happy by creating a particualr production-money structure. Stuff produced is no longer a problem: it is kept constant, the improtant thing is the sense of growth, which sicne the great depression came from land for money, then oil-for money and finally debt-mortgage for money.
Bt if this was the general structre in palce, what about doing stuff, you know making things (computers, planes, cars, medical apparatus). Why peple got moey in the frst palce by making things and selling them? who were the first money-holders who wanted huge profits for their money?

Probably it is because I do nto know enough details about economics, or maybe it is becasue economics never quite makes sense.

Structrually one would think that a major redution of wall Street is necessary, and that energy and public transprot investment shuold be the way to creat money-value for consumers. it really seems the best way to go... but I am nto so sure about if it is the way to go fro china, or India.. or even Japan..
So wat happens when some coutnries like the US would benefit for it, while probably europe would but not that much, and china probaby can get more money-value for tis citizens int he way of producing stuff we have adn 1 billion peple may want?

But we could all be wrong, maybe a small Wlall street does not address the problem, maybe debt is the problem as magnifico says, maybe is the investment nature of capitalism, maybe it is the economy fundation... maybe it is that this econmic system does not makes sense at all...maybe..

maybe Europe will avoid the meltdown... but again how is a balacned economy ,a s the german or french, suppose to grow? what is growth? maybe growth is just accounting.. or not..

only maybes...

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Tue Sep 23rd, 2008 at 11:23:43 AM EST
I don't think that American Institutionalism, for one, is incapable of talking about large numbers of symbolism, tendencies and regular patterns of behavior that traditional marginalism is incapable of talking about.

Now, given the armies of traditional marginalist economists and the relative handfuls of analysts in heterodox approaches, it is an open question as to what a particular heterodox approach is capable of effectively addressing ... that is, the ability to talk about a problem in an approach is no guarantee of the ability to effectively address the problem in that approach.

However, an inability to talk about a problem in an approach is a guarantee of an inability to effectively address that problem.

Traditional marginalist economics, for example, has a unit of analysis that is incapable of addressing the accumulation of legitimizing folkviews around habits of behavior that reinforce the institutional system that depends upon those habits. It also has a unit of analysis that is incapable of addressing strategic decision making in the face of intrinsic uncertainty regarding critical information required to make the "rational" fully informed decision.

That means it is incapable of talking about anything that is crucial to understanding why financial systems get into financially fragile states, or how to get out of those states. And if sliding into a financially fragile state is of short term benefit to the accumulation of wealth of the wealthy, it is no surprise that a trained incapacity in understanding the risks of credit/debt leverage is quite popular in the middle of an asset inflationary boom.


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 Tue Sep 23rd, 2008 at 11:59:43 AM EST
[ Parent ]
I a clsiming that American Institutionalism ability to talk about these issues is purely illusory, that is my claim.. and I stand by it :)

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Tue Sep 23rd, 2008 at 12:12:07 PM EST
[ Parent ]
Specifically, about which issues are you making that claim.

If you are actually standing by it, then that includes being specific.


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 Tue Sep 23rd, 2008 at 01:05:21 PM EST
[ Parent ]
It is illusory the way they talk about value, it is illusory the way they talk about markets.. markets has lost any meaning when there is a bunch of things now at the core which are out of the market, or there is no market.

M1, M2 and M3 almost mean nothing nowadays. te descritpion of the monetary base is illusory. Does it reall matter when the arkets freeze becasue there is no amrket for sm assets? no correspondence or capital movimetns around the world and black holes or deposits hidden from tax heavens.

The whole structure is illusory also regarding exprimental measures, there are no experiemtal language, no xperimental structure, no double checks.

Also very itneresting is the money graph movement, the knowledge and description of money acroos different industries and consumers ort he work on geo-differences is almost nill becasue the lack of ability to redict. But this is more a lack of interest or methods tahn illusory.

And trade, wow, trade.. I think we have been discussing about that.. it was not illusory but probably bad faith regarding how Friedmanists plunder a bunch of industries in favor of the rich guys. But, it does seem hat some nerd really buy into that given the whole illusory structure.

And then, there are a bunch of others thing that once in a while I think "wow there again non-reality based, event he basics makes no sense" but toehrs seem to make some specific non-illusory claims.

Some examples.

Do they really know wha theya re talking about when they talk about dollar problems and stampede, do they know about the way the dollar print and the whole global system work once the gold standard was eliminated? Do they know what they talk about when economists explain the inflation without aywhere mentioning mesoinflation or micro inflation or across the board inflation (except stirling)?

And on a related note, the realtion betewwen production , goods, money to buy, debt, loan and bubbles seem disconnected without a coherent frame. Sometimes lack of coherence frame also indicates lack of real knoweldge regardintg the descrption, and most of the time there is a illusory component.

I can go and on . but I think you get an idea.

A pleasure.

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Tue Sep 23rd, 2008 at 01:42:22 PM EST
[ Parent ]
Some of the talk, language  here was not introduced by AI but the general lack of coherence or the new language sounds to me very simialr.

that was my point... but maybe it is my lack of knowledge. Maybe economists have made improvements after Keynes (and that monetary ass may matter) on consolidating the Economic Bulding, but  from where I stand, I really do not see the improvement. It still looks illusory.

But ei. what do I know? I do physics of complex system and biology nor economy... and Ic an certainly do not know how to apply everything I knwo about complex system to economy..

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Tue Sep 23rd, 2008 at 01:52:02 PM EST
[ Parent ]
... are you reading that talk in terms of:
It is illusory the way they talk about value, it is illusory the way they talk about markets.. markets has lost any meaning when there is a bunch of things now at the core which are out of the market, or there is no market.

This sounds very much like an argument why the American Institutionalist approach to analysing markets as one among many real world socioeconomic institutions is superior to the traditional marginalist approach of looking at all transactions through the filter of the market model.

Many American Institutionalists do indeed use a General Theory informed description of the macro-economy, but not all do, and its not in the core of the approach ... obviously Veblen and Commons couldn't have done since they died before the publication of the General Theory, but the work of Wesley Claire Mitchell was more used by Keynes for empirical information on the operation of the business cycle than making use of Keynes.

And trade, wow, trade.. I think we have been discussing about that.. it was not illusory but probably bad faith regarding how Friedmanists plunder a bunch of industries in favor of the rich guys.

Yes, that would seem to be the most common institutionalist analysis of these so-called "trade" agreements, that they are in reality agreements to eliminate constraints on the exercise of economic power by large transnational corporations.

I am not clear on why you disagree with that analysis. Are you seriously siding with the traditional marginalist economists? worshipping at the alter of "free trade" no matter what the details of the agreement may happen to be? You prefer that position to the American Institutionalist analysis that it is a naked power grab?

Really?


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 12:03:26 AM EST
[ Parent ]
... based on models taken from physics without being able to validate the assumptions for social systems, and if we reject the method of trying to find regularities of behavior and systems of behavior in the historical record, what approach would you then prefer?


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 Tue Sep 23rd, 2008 at 01:07:31 PM EST
[ Parent ]
How much do you know about American Institutionalism?

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Sep 23rd, 2008 at 01:09:57 PM EST
[ Parent ]
well not as mcuh as I woudl like, but despite Keyns the wording, the concepts wer ere to say.

new instituonalism school can discuss with small changes int ehframework.

So My point is, since them it all seems ilusory.. maybe I am wrong.

At elast Keynnes made some sense of the structure, but nowadays economists sound like them in the terms of illusory structrues.

Maybe I am wrong though.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Tue Sep 23rd, 2008 at 01:47:13 PM EST
[ Parent ]
... like New Keynesian is to Keynesian or New Classical is to Classical ...

... after enough examples, at Tennessee we decided that "New" is an acronym for "No Effing Way". "New Institional" is No Effing Way Institutional, "New Keynesian" is No Effing Way Keynesian, "New Classical" is No Effing Way Classical.

The frustrating thing about the New Institutional approach is that they have an analytical toolkit that could be used to consider questions beyond the limit of what traditional marginalist economics can talk about ... but they refrain from doing so in order to remain in contact with traditional marginalist economics.

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 12:07:22 AM EST
[ Parent ]
... banknotes as money and near money pre-dates the establishment of central reserve banks to regulate credit-money and act as lender of last resort when credit-money periodically gets itself into a bind.

So the question is not whether a money can be established on a different basis, but first, whether to eliminate depository institutions as creators of debt money, and second, if so, how to do so.

In particular, the current crisis shows what happens when an important central reserve bank is captured by its industry, and instead of acting as a regulator, acts as a collaborator in expanding an asset inflationary boom.

I don't see how changing to a different monetary system solves that problem. There will still be lenders, if we still have a monetary production economy. Those lenders will still get into the binds that they get into periodically. They will still have an incentive to capture the control center of the main monetary system.

It seems like looking at a drunken teenage driver that has driven a sports car into a ditch, and saying that the solution is to give them a 4-by-4 so that if they drive into a ditch they can keep driving.

If we can recapture the regulatory function from the finance sector, we can get a functioning system that will serve an important and useful function for a generation ... a generation in which we have quite important real work to do in terms of massively restructuring our energy economy.

And if we instead devote our efforts to building a new monetary system, the three alternatives are

(1) that there are so few willing to jump on board that those efforts are marginalized or wasted;

(2) that those efforts are successful after a long fight, and a decade or more in the future we can turn our attention to addressing the challenge of reconstructing our energy economy; or

(3) that those efforts are successful after a long fight, but it turns out in practice that there is an unintended consequence of the new monetary system that is worse than the known side-effects of the system it is replacing.

In the American descendant of Rugby Union Football, Woody Hayes argued against a pass attack rather than a run attack on the basis that three things could happen ... complete, incomplete, or intercepted ... and two of them are bad. I'm not sure I see why a fight to design a novel monetary system right now is as good as that.


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 Tue Sep 23rd, 2008 at 12:12:01 PM EST
Bruce
It seems like looking at a drunken teenage driver that has driven a sports car into a ditch, and saying that the solution is to give them a 4-by-4 so that if they drive into a ditch they can keep driving.

I think that the problem is one of appropriately reconnecting the political to the economy.  Your analogy illustrates the problem when you use a drunken teenage driver as the protagonist. It was not drunken teenagers that got us into this mess.  It was sober captains of finance that did.  They may be better analogized as pirates masquerading as investment bankers, regulators and real estate brokers.

If what they did is not illegal, it should be.  But I find it inconceivable that many laws were not broken.  The problem has been political: a lack of will to enforce laws on some of the most powerful individuals in our society.  (That will may be emerging in the form of rage amongst the general population.)  

This lack of will was, IMHO, partly enabled by the presence in our population of a large number of traditionalists who see  business and political leaders in the context of strong fathers.  Calvinists will always tend to defer to the wealthy.  To them the fact that these folks are wealthy is a justification of their claims of authority, per se.  Finding ways to reduce the incidence of that mindset amongst the next generation will be the best insurance against a recurrence of this type of crisis.  With a substantial  majority of people who function as self aware adults rather than as manipulable children such shenanigans would me more difficult to sustain.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Sep 23rd, 2008 at 04:15:12 PM EST
[ Parent ]



Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Tue Sep 23rd, 2008 at 04:19:42 PM EST
[ Parent ]
Fucking brilliant.

Better than any television I've seen since June.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Sep 23rd, 2008 at 04:40:45 PM EST
[ Parent ]
... very much of what they did was illegal ... that is, what they did that directly led the finance sector far beyond the bounds of financial prudence. Teaching Money and Banking at the upper division Undergraduate level is a long walk through a series of steps removing the regulatory limits on behaving stupidly with other people's money.

Now, the argument for each deregulatory step was that the people doing the finance knew more about what would work and what wouldn't work than the regulatory authorities, but starting from the 1950's, through to the Fed getting permission to take garbage as the debt instrument for a 3-month repo loan, its been a fifty year slide downhill into "do what you want, make a million, if you go broke, its your own damn fault".

And the reason the regulations were in place was because we know how financial systems like that work. Under the pressure of competition, financial firms that do not "keep up with the Joneses" get squeezed out of the market, so its abandon prudence or abandon market share, and then once financial fragility is in place, something interrupts the money train, and a Banking Panic is set off.

It used to be illegal to do the stuff that put the bread and butter home mortgage and small business 90-day finance of the wage bill business of the commercial banking system at risk ... but that interfered with maximizing profit in go go times, and so they changed those laws, one by one by one, starting under Eisenhower from before I was born.

Now, once the Fed started lending with 3-month repos on assets that were overvalued at 85 percent of face value rather than undervalued ... by then there was clearly a capitalization crisis in place, and so people desperate to avoid things going bad before they could get out with their golden parachute might have cut corners. But I would not be surprised if most of the damage was done adhering to the letter of the law that has had its spirit completely forgotten decades ago.


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 Tue Sep 23rd, 2008 at 11:46:31 PM EST
[ Parent ]
I agree about the baleful effects of deregulation. It proponents would now be adorning the ends of long sharp poles in other worlds and times equivalent to this.  But, amazingly, given all the evil and stupidity that can legally be done, it appears that Fanny, Freddy and AIG all may well involve accounting fraud.  Roaring greed impales itself in its attempt to get just a little more!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 24th, 2008 at 12:58:49 AM EST
[ Parent ]
... activity engaged in by those who find that their institution is under water and are trying to get back to solvency before "anybody finds out" ...

... that provides enough scapegoats to allow the systematic policy that put those firms under water in perfectly legal ways to escape unscathed.


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 09:09:34 AM EST
[ Parent ]
We have to drive a stake through both the perpetrators and the policies.  If we let the perps off, they will be emboldened to begin anew to subvert any reasonable regulations so as to get their cons going again.  Discredit the policy and philosophy.  Prosecute and destroy financially all that can be convicted of fraud.  Firmly establish the connection between the deregulatory philosophy and fraudulent behavior.  Drive this home to the public.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 24th, 2008 at 10:28:19 PM EST
[ Parent ]
... of right wing monetarist fairy tales and historical lies, such as the video in this diary?


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 Sat Oct 4th, 2008 at 11:36:04 AM EST
[ Parent ]
and economics shouldn't resemble gambling so much, that makes it a game to the players, while to trusting, naive people downline of the purposely arcane lipsticked pigfarm-in-a-trillion-little-pokes, it's anything but.

compound interest has a relentless quality to it over time, making it a potent force. what we see now is what happens when that force is misused by shallow, greedy individuals.

obviously the temptation to break trust while in such a tempting situation is not for those too weak to resist it.

there should be an algorithm that governs compound interest so it's not such a juggernaut, thus removing, or at least tempering such a lottery-winner mentality that has developed around the financial (self)-service industry.

as there is no moral litmus test which will let us know whom to trust to watch our goodies while we sleep, there seems like there are two ways to go, one make it a capital crime to betray the public trust, with the show trials and even death penalty, or exile to the equivalent of siberia.

second, rotate the responsibility, so no-one gets too fond of the power for too long.

the first would have to be real, it would have to have as terrifyingly deterrent an effect, as has the glittering fantasy of hyper-acquisition to make some people succumb, human nature being what it is, there will always be people who will try and game it, just to see if they can.

transparency, transparency, transparency, keep the sun on it.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Sep 23rd, 2008 at 08:57:01 PM EST
[ Parent ]
... this part:
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
credit-money is always created to pay for something.

I think that needs clarification.

Credit is necessary to create "Productive" assets with a "Use value".

"Deficit-based" Credit is not necessary to buy productive assets already in existence - "asset-based" finance or "quasi equity" through a process of unitisation of the use value (eg Kilo Watt hours; Square Metre Years) may be used instead eg Real Estate Investment Trusts ("REIT's").

It has been the use of deficit-based credit to buy existing assets which has been behind every Bubble since John Law's Mississippi Bubble inflated by his Banque Royale in 1819/20.

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

by ChrisCook (cojockathotmaildotcom) on Wed Sep 24th, 2008 at 10:12:12 AM EST
[ Parent ]
... which is, if it is going to function as money, flexible in how it is going to be used, how do you prevent an institution with the ability to create money from creating money to buy a used real asset or a financial asset rather than a newly created real asset?

And if there is a means of doing that, why not impose that on depository institutions? "This is the business that depository institutions can engage in", "this is the business that pure financial intermediaries can engage in".


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 10:30:56 AM EST
[ Parent ]


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