tag:blogger.com,1999:blog-7530776363222965313.post6695926786784616476..comments2023-10-07T13:16:34.756+02:00Comments on Simon Thorpe's Ideas on the Economy: Yet another solution to public sector debt - use the Magic Money TreeSimon Thorpehttp://www.blogger.com/profile/02605233720415886802noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7530776363222965313.post-40323105325289163842014-10-12T17:05:00.733+02:002014-10-12T17:05:00.733+02:00Damien, I'm a big fan of Positive Money - I do...Damien, I'm a big fan of Positive Money - I donate them money every month and couldn't be more enthusiastic. But they do consider that reducing government debt is not a priority (Ben Dyson has told me that directly). Personally, I think that we should also be trying to reduce the massive drain on taxpayers that is caused by the 3% of GDP that is wasted paying interest on public sector debt. <br /><br /><br />I also believe that while it would be enough to "take away from banks the right to create money", something tells me that there may just the odd one or two vested interests who might resist. That's putting it mildly.<br /><br /><br /><br />We need to have a multi-stranded approach if we are to make progress.Simon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-3626962696475888382014-10-12T04:16:25.351+02:002014-10-12T04:16:25.351+02:00Positive Money has produced a document which expla...Positive Money has produced a document which explains their vision for implementing monetary reform in the UK. It's very good and even debunks the main arguments that have critics have used against it.<br /><br />https://www.positivemoney.org/wp-content/uploads/2014/07/Creating_a_Sovereign_Monetary_System_Web20130615.pdf<br /><br />At the end of the day, the solution is going to be a political one. Simply take away from banks the right to create money. It's really a win-button for whichever government implements the reforms, so it's a matter of getting them to pay attention so that we can explain how reform would result in a significant increase in government spending power (without the need for increased taxation or spending cuts elsewhere).Simon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-78644605954088930582014-10-09T08:33:36.326+02:002014-10-09T08:33:36.326+02:00Very nice comment Damian.
I am absolutely 100% c...Very nice comment Damian. <br /><br />I am absolutely 100% convinced that allowing direct money creation by governemnts (via their central banks) would be wonderful. And yes, it is totally stupid that governments emit bonds that are bought up by banks with fictitious money, and using the Basel rules that means that they don't even have to have any capital (since lending to AAA to AA- sovereigns has a risk-weighting of 0%). Those banks can then sell those bonds to third parties who can sit back and cream off 3% of GDP for doing nothing. <br /><br />The question is, how to get there? The main problem is that there are massive vested interests that will try and keep the gravy train on the rails. My proposal to set up a public interest bank to use fractional reserve money creation is just a way to get there. It's a stupid system, so lets just prove it. It's called hoisting the banks by their own petard.<br /><br />Cheers<br />SimonSimon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-88259105503508514922014-10-09T02:09:32.406+02:002014-10-09T02:09:32.406+02:00Simon, this is a great blog and I'm delighted ...Simon, this is a great blog and I'm delighted to see you tackling the issue of government debt. Some other people have already come up with a different solution which doesn't involve using fractional reserve banking against itself.<br /><br />What is government debt?<br />When a government needs more money than it can collect through taxation, it will issue bonds. These are sold on the open market and will pay interest to whomever holds <br />them. So, government debt is typically in the form of bonds which are often bought by banks.<br /><br />What would be the difference between a government printed bond and government printed currency?<br />Both are promises to pay and the elements that make a bond good would make <br />government printed currency good also. The difference is that bonds pay interest to whomever holds them. This is one of the drivers of inequality - wealth is transferred from the hands of the many (taxpayers whose taxes repay the interest) into the hands of the few (bond holders who receive the interest).<br /><br />How can government debt be eliminated without destroying the financial system?<br />Here are the steps:<br />1) Government issues currency (no debt).<br />2) Government begins buying back the bonds it has issued.<br />3)As bonds are bought back from banks, the reserve requirement (reserve ratio) is raised proportionally. This continues until all bonds are bought back from the banks and their reserve requirement is 100%. In other words, fractional reserve banking would be replaced with full reserve banking.<br /><br />This would leave the banks with enough money to continue lending. This big difference for the banks would be that, as the reserve requirement would be 100%, they would no longer be able to create money. This means that banks would behave the same as any other business, providing services which people need and using money which they actually have on deposit.<br /><br />It's all simple and fair. Many people, such as the Occupy movement, campaign for the benefit of the 99%, but it's perfectly feasible to have a system which works in a fair manner for the 100%.Simon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.com