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The Truth is out: Money is Just an IOU

posted by LaminatorX on Tuesday March 25 2014, @03:25AM   Printer-friendly

Anonymous Coward writes:

"http://www.theguardian.com/commentisfree/2014/mar/ 18/truth-money-iou-bank-of-england-austerity

Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn't know how banking really works, because if they did, 'there'd be a revolution before tomorrow morning.'

Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called "Money Creation in the Modern Economy", co-authored by three economists from the Bank's Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window."

 
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  • (Score: 1) by khallow on Tuesday March 25 2014, @10:29PM

    by khallow (3766) Subscriber Badge on Tuesday March 25 2014, @10:29PM (#21216) Journal

    But this business of creating money as pure debt is just greedy. It means all money has to be borrowed, and paid back at interest. This creates an artificial need to go out and earn money, to pay the interest, whether you want to or not. You might not be in debt yourself, but the money you earn comes from and goes to people who are. There is therefore a lot of stress about getting and having enough money.

    No, I'd say interest on debt appropriately reflects the interest of the lender who takes on several risks when issuing a loan. Note that even your land-usage currency can be lent to others.

  • (Score: 2) by prospectacle on Wednesday March 26 2014, @12:04AM

    by prospectacle (3422) on Wednesday March 26 2014, @12:04AM (#21247) Journal

    I'm not objecting to people lending money at interest (why would you lend money for free?). My objection was to money being created as debt in the first place (at the top level of money creation).

    You can base money on anything that a lot of people want and which the government can guarantee. You simply print IOUs for this thing and people can trade them. If they trust their IOUs are valid, they will continue to have trade value.

    There are so many options. Money could represent specific materials, like gold and silver, or it can represent access rights like water-usage (from public water sources), land-usage, road usage.

    If it's created as debt then it can't be distributed except at interest, and every link down the chain adds more interest, which is then passed on to customers, clients, tentants, etc, whether or not they choose to borrow money themselves.

    On the other hand if money is created as something renewable (like using a specific amount of land for a specific amount of time), then it can be distributed without interest, because the amount of money in circulation is fixed to the amount of land available to use. People can trade it however they want, but it always comes back to the government eventually because demand for land never runs out.

    Any lending or borrowing that people want to do with the money after it's created, is up to them.

    --
    If a plan isn't flexible it isn't realistic