Not likely, argues John Michael Greer in a March 2014 article called "American Delusionalism, or Why History Matters." If history is any indication, governments will simply, once again, change the rules.
In fact, the rules of money and banking have changed every 20 or 30 years for the past three centuries, in an ongoing trial-and-error experiment in evolving a financial system, and an ongoing battle over whose interests it will serve. To present that timeline in full will take another article, but in a nutshell we have gone from precious metal coins, to government-issued paper scrip, to privately-issued banknotes, to checkbook money, to gold-backed Federal Reserve Notes, to unbacked Federal Reserve Notes, to the "near money" created by the shadow banking system. Money has evolved from being "stored" in the form of a physical commodity, to paper representations of value, to computer bits storing information about credits and debits.
The rules have been changed before and can be changed again. Depressions, credit crises and financial collapse are not acts of God but are induced by mechanical flaws or corruption in the financial system. Credit may stop flowing, but the workers, materials and markets are still there. The system just needs a reboot.
Hopefully the next program that gets run will last more than 20 or 30 years. Ideally, we might mimic the ancient Mesopotamians, the oldest and most long-lasting civilization in history, and devise an economic system that lasts for millennia. How they did it, along with some other promising models, will be the subject of another article. For more on this, see The Public Bank Solution.
About Those Derivatives
How to kill the derivatives cancer without killing the patient? Without presuming to have more insight into that question than the head of the Fed or the IMF, I will just list some promising suggestions from a variety of experts in the field (explored in more depth in my earlier article here):
- Eliminate the superpriority granted to derivatives in the 2005 Bankruptcy Reform Act, the highly favorable protective legislation that has allowed the derivatives bubble to mushroom.
- Restore the Glass-Steagall Act separating depository banking from investment banking.
- Break up the giant derivatives banks.
- Alternatively, nationalize the too-big-to-fail banks.
- Make derivatives illegal and unwind them by netting them out, declaring them null and void.
- Impose a financial transactions tax on Wall Street trading.
- To protect the deposits of citizens and local governments, establish postal savings banks and state-owned banks on the model of the Bank of North Dakota, the only state to completely escape the 2008 banking crisis.
These alternatives are all viable possibilities. Our financial leaders, in conjunction with our political leaders, have continually re-created the web of money and credit that knits our economy together. But they have often taken only their own interests and those of the wealthiest citizens into account, not those of the general public. It is up to us to educate ourselves about money and banking, and to demand a system that is accountable to the people and serves our long-term interests.
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