Tag Archives: monetary reform

Transcendence instead of reform: taking a fresh look at money and its function

Here is  my comment on a recent article titled Krugman’s Craziness that appeared in the New York Sun. –t.h.g.

Very few people today, including prize-winning economists, possess a deep knowledge of the fundamental principles of reciprocal exchange, and most of those who do are committed to maintaining the global interest-based, debt-money regime that enables an elite few to control economies and governments worldwide.

In the wake of the 2008 financial meltdown and the ongoing economic crisis, more and more people are waking up to the fact that there is something seriously wrong with our systems of money, banking, and finance, but remain mystified by it and have no idea what to do about it.

Many are calling for reform of the system via the political process, and most reformers want a return to the gold standard and favor a government monopoly over the issuance of money. Clearly, new legislation is needed to reverse the trend toward ever greater centralization of power and concentration of wealth, but such measures have no hope of passing into law so long as the “money power” is able to buy politicians wholesale. Further, since money is a human contrivance that is supposed to facilitate the exchange of value (like goods, services, and various financial claims), people should be free to use whatever payment media they find mutually agreeable. Rather than monopoly of money, either bank-controlled or government-controlled, we need competition in currency. Let us have more freedom, not less.

There are solid precedents that prove the effectiveness of private and community currencies, as well as direct clearing of credits among buyers and sellers, a process that has the potential to make money as we’ve known it obsolete. Private initiative is presently bringing to market new and creative mechanisms of exchange and finance that have the power to bring about economic and financial stability, social harmony and a dignified life for all.

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A Monetary Reform Proposal for Iceland

I have recently received from several sources word of a new monetary reform proposal. This one, commissioned by the Prime Minister of Iceland, is titled, MONETARY REFORM A BETTER MONETARY SYSTEM FOR ICELAND, and is authored by Frosti Sigurjonsson.

I’ve taken the time to read only the Overview and summary portion, but that is sufficient to discern the crux of the Sigurjonsson proposal, which is this:

The Central Bank will be exclusively responsible for creating the money necessary to support economic growth. Instead of relying on interest rates to influence money creation by banks, the Central Bank can change the money supply directly. Decisions on money creation will be taken by a committee that is independent of government and transparent in its decision-making, as is the current monetary policy committee.

New money, created by the Central Bank, will be transferred to the government and put into circulation in the economy via increased government spending, by reduction in taxes, by repaying public debt or by paying a citizen dividend.

The Central Bank will also be able to create money for lending to banks for onward lending to businesses outside the financial sector.

Sigurjonsson indicates that his proposal draws heavily upon an earlier proposal titled, A Monetary Reform for the Information Age, by Joseph Huber and James Robertson (New Economics Foundation (2001)), which I critiqued early in 2002. That critique, along with subsequent dialog between the authors and myself, can be found at http://reinventingmoney.com/monetary-reform-information-age/.

Since both the Sigurjonsson proposal or the Huber/Robertson proposal advocate the same basic approach, I strongly believe that any serious consideration of either, should also consider my above mentioned earlier critique and subsequent dialog.

While I agree with much of what Huber and Robertson (and presumably, Sigurjonsson) say about the defects in the present money system, I believe that their proposed centralized “solution” does not go nearly far enough in solving those defects. Continuation of the money monopoly in (presumably) different hands does not get to the root of the problem. It is my view that the key to achieving more equitable and sustainable economic interrelationships lies in liberating the exchange process from monopolized money and banking, enabling the creation of competing currencies and credit clearing exchanges, and allowing the needs of traders themselves to determine the supply of exchange media (money) in circulation at any given point in time.

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