When banks offer loans, money is created as an IOU, something many MPs aren’t aware of. As a result the UK economy is based on ever growing levels of debt
You might not all agree with all of Positive Money's proposals, but I have put this up for discussion. KV
Back in November the big story arising from the Chancellor’s Budget wasn’t any of the gimmicks and giveaways designed to grab positive headlines, but something seemingly more mundane – the Office for Budget Responsibility (OBR) downgrading its growth forecast.
This shouldn’t be a surprise. Governments are obsessively judged by analysts and commentators on one figure, whether it’s going up or down, and by how much: gross domestic product, or GDP.
GDP measures the total economic output, or in other words, the value of all of the goods and services being produced in an economy. While the prospect of infinite growth in the amount of things we consume might sound like a good thing, it would destroy the planet on which we depend.
These drivers of growth tend to be the result of out-of-date and incomplete understandings of the economy which have seeped into every level of political and economic debate. But there is also another, often overlooked, source of growth-dependency – high levels of private and public debt. A key driver of which is the existence of a money and banking system which, in its current form, works to burden society with an endless supply of debt. While some debt is useful, too much can cripple an economy and lay foundations for a crash.
It is clear that issues such as climate change and inequality are increasingly becoming too urgent to ignore. These challenges require a bold rethinking of society’s priorities. A good place to start is the dysfunctional money and banking system underpinning it.
This means a discussion of how we create money, and whether it should be created privately as debt, in a way which demands unsustainable growth. There are alternatives, which could allow us to create money sustainably, in a way which works for people.
One option would be to utilise Sovereign Money Creation, or “QE for People”. This would involve the Bank of England creating money through a similar way to conventional quantitative easing, though this money would then be injected into the economy through Government spending on green infrastructure, or even a citizens dividend to pay down private sector debt.
The Independent
4 comments:
1. Yawn. For 100 years, Mises and his followers have explained ad nauseam that artificial creation of money and credit by banks is the cause of the boom bust cycle. The market does not and never did fail. Artificial creation of money and credit by banks was the cause the Great Depression and the boom bust cycle. That has been the case since the 1819 depression, before and after.
2. I am announcing a new contest for MMTers. The grand prize is a brand new $10 bill. THe prize will be awarded for the best essay on the following topic:
"How I know that Austrian School analysis is wrong and must be suppressed and ignored even though I haven't the faintest understanding of or familiarity with any of its basic concepts and/or analysis".
I don't see any reason for your essay to go over 250 words.
3. It is interesting that this writer has proposed that Keynesian "stimulus" is the cause of ecological degradation, something I have been saying for 35 years. It's fun being always right.
Fran Boait during her brief term as head of Pos Money has not added anything of use to the ideas PM set out during Ben Dyson's term as head of PM. (He actually set up PM about ten years ago). Fran is departing soon or has already departed to take up the job of Labor Member of Parliament I think. Ben now works for the Bank of England.
As for the idea that the fact of debt being a form of money increases the amount of debt, there is an obvious flaw in that idea: the total amount of debt VASTLY exceeds the amount of money needed to lubricate the economy. E.g. SME trade debts alone are nearly equal to three times GDP in the UK. Never mind mortgages and other debts.
It’s a bit like saying that using wooden tally sticks as money increase the demand for wood. Tally sticks actually formed a significant portion of the money supply in Britain between roughly 1150 and 1800. The amount of wood used for that purpose will have been about one thousandth the amount used for fuel, house and boat construction.
Re her advocacy of “Sovereign money” or “QE for the people” that amounts to the same as one of the methods Keynes advocated in the early 1930s for dealing with recessions: have the state print and spend money and/or cut taxes.
Bob Roddis,
Thanks for the invitation to take part in your essay contest. I’ll decline the offer.
If you don’t like artificially created money, presumably you want just gold to be used as money. Problem there is that the total stock of gold in the World is nowhere near enough to meet the World’s demand for money.
Yes, she's running for Gloucester. I wish her well.
https://www.scribd.com/document/366195081/Fran-Boait-for-Gloucester
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