G20 Monetary Reform – James Robertson

Hi Paul,

I’m already familiar with your links but thanks anyway – they’re all good sources of information!

I particularly enjoyed the corporation, however having recently spent more time considering monetary theory, I now believe that corporations are (almost) as much a victim of the monetary system as the public. They have ever increasing debts to repay that encourages them to increase their margins by relaying some of their costs to the social and environment sectors (increasing their externalities in economic parlance). (“The Grip of Death” by Michael Rowbotham details this well). That’s not to completely exonerate them for their actions, but the system in which they function is clearly not conducive to reducing their social and environmental impact

For this reason, I believe the first step is monetary reform...

Isn’t that a good thing? Banks should only be lending to those that have a greater than realistic chance of paying it back. But you’re right in that it does instil inflexibility into the money supply. 

Fiat currency (M0) is actually pretty inflexible. It has remained pretty much static over the last 100 years (relative to the total money supply that is). It is credit money that fluctuates a lot. I’d agree that the current system, with the majority of money created as debt (97%) does inevitably lead to mismanagement, but that isn’t the fault of fiat currency, it is caused by allowing private banks to create money as debt.

Hyper-inflation is caused when debts become so high that the government has to inflate its way out of debt by turning on the printing press. The US and UK are all considering this at the moment through “quantitative easing”. At the moment they are just borrowing more money to get the economy going again. That’s not to say that quantitative easing will inevitably lead to hyper-inflation, but once the printing press is on and getting the economy out of trouble, it is tempting for them to leave it on too long and things can then get out of control, especially when the private banks then return to lending and further money creation. The govt-created money then has to be de-liquidated at that point.

So in summary, IMO it is not fiat currency that is the cause of monetary collapses, it is the fact that money is created as debt, and these debts inevitably become too large to handle. The question is: who should control the credit-money creation process so that these collapses don’t occur? Private banks have shown themselves to be inept at this, time and time again. I’d give the right to the government to create money (not as debt) and distribute it in the economy as the people feel right. There are obvious concerns that they’d create too much money so there has to be a mechanism to control this.

Simultaneously, I’d encourage the creation of complementary currencies to run parallel with existing currencies so that in the event of one currency failure the people would be able to use another one in its place. This almost always occurs in places that suffer from financial collapses where local scrips are invented.

See this post on more info:

http://www.peakprosperity.com/forum/complementary-currencies/12796

Either way, there are plenty of other good ideas related to monetary reform but mainstream economic/political thought is (deliberately?) oblivious to them. The first step is to open the debate!