Share on Google Plus Share on Twitter Share on Facebook Share on LinkedIn Share on PInterest 1 Share on Fark! 1 Share on Reddit 2 Share on StumbleUpon 1 Tell A Friend 1 (6 Shares)  
Printer Friendly Page Save As Favorite View Favorites View Stats   74 comments, 3 series

OpEdNews Op Eds

The Flip Side of Debt Free Money

By (about the author)     Permalink       (Page 1 of 3 pages)
Related Topic(s): ; ; ; ; ; ; ; ; ; ; (more...) ; ; ; , Add Tags  (less...) Add to My Group(s)

Well Said 4   Must Read 3   Supported 2  
View Ratings | Rate It

opednews.com Headlined to H4 7/15/14

Become a Fan
  (63 fans)

Is there a Money Tree? Does it need nurturing?
(image by Global Economic Intersection)

Reprinted from econintersect.com

Randy Wray's article - Debt-Free Money: A Non-Sequitur in Search of A Policy - which I can't help thinking was at least partly inspired by a monetary reform offline email conversation we had for a few days before this first came out on the New Economic Perspectives blog - points out the main shortcomings of debt-free money from the U.K's Positive Money group and the American Monetary Institute here in the U.S. (though he doesn't name this second NGO).

Follow up:

He and Ann Pettifor are right to worry that credit will be so constrained if restricted to what banks actually have on deposit (in which case, it might rightly not be called "credit" at all, but just lending-what-you-have) that growth would be throttled before it started.

He is also right to worry about over-centralization and about a Monetary Authority (as the AMI calls it) turning out to be either

  • (A) Just the Federal Reserve by another name; or

  • (B) A truly independent body so immune to outside pressure that it does not provide the economy with funds even when they are needed.

I don't know which is worse, though I suspect Wray, who believes the Fed is part of government already, would say B.

There are, however, other options which allow for true government issuance of money, yet are also independent of out-of-thin-air credit-money creation by banks, but with restrictions to prevent the destabilizing excesses that recur over and over, and lately each resulting in a larger crisis than the last (e.g. the S&L crisis was smaller than the 2008 credit crisis, etc. going backwards).

To set the stage, let's stipulate three virtues of any economic system:

  1. Simplicity - this may seem strange to economists, who seem to live for complexity, but if we are ever to sell this to the public that elects its political leaders, it must be based on simple principles that most will understand.
  2. Decentralization - As Wray points out, the central government or even a special committee can't anticipate overall monetary needs of the economy. And even the perception that the new Monetary Authority is holding back productivity would stir resentment.
  3. Redundancy - some flexibility is needed to change sources of money, or credit, which Greenbackers like me, Stephen Zarlenga, Ellen Brown, Bill Still, etc. maintain is not the same thing, and Wray and MMT do not.

We have a trillion dollar output gap right now, according to the CBO, and we've had it since 2008. One can quibble over exact figures, but that misses the larger point. The banks are not producing money, so government must fill the gap. Wray and the Modern Monetary Theory folks and Greenbackers agree on that much.

I am a Greenbacker in the model of president Lincoln. Lincoln introduced the first federal form of paper money, the first Legal tender, in fact. It was $450m in 3 installments (1862-1863), a form of debt-free money. Yes, originally it was supposed to be redeemable in gold, but in reality that never happened, and by the end of its circulation (Treasury burned the last $239m in 1996), it was not even considered applicable to the national debt, according to the Treasury's own Debt Report, Table III:

That's why the government debt didn't decrease by $239m when the stock was burned. It was as if that money never existed. Talk about government waste!

But the important point is that government did, could, and does issue debt-free money all the time. Coins are an example. Stamps are another, though for limited uses. Neither of these can ever "run out" save for the lack of metal or paper in the world.

Let's take an actual bill to show how this would work. No, not HR2990 - the bill crafted by the American Monetary Institute and put forward by former Congressman Dennis Kucinich. That's too laden down with other things, like abolishing fractional reserve banking and making the FRB part of Treasury. There's a much simpler bill that slightly preceded it, but still came after the Treasury burned its last stock. In 1999, then Congressman Ray LaHood (later Obama's Transportation secretary) introduced HR 1452 (Text of the State and Local Government Economic Empowerment Act).

Next Page  1  |  2  |  3

 

http://newthinking.blogspot.com/

Scott Baker is a Managing Editor & The Economics Editor at Opednews, and a blogger for Huffington Post, Daily Kos, and Global Economic Intersection.

His anthology of updated Opednews articles was published by Tayen Lane Publishing (December, 2014) and may be found here:
https://tayen-lane.squarespace.com/america-is-not-broke/

Scott is President of Common Ground-NYC (http://commongroundnyc.org/), a Geoist/Georgist activist group. He has written (more...)
 

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon

Go To Commenting
The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Follow Me on Twitter

Contact Author Contact Editor View Authors' Articles

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Obama Explains the FEMA Camps

Was Malaysian Flight MH370 Landed Safely in Afghanistan?

Let the Sun Shine on a State Bank in Florida

Batman, The Dark Knight Rises...and Occupy Wall Street Falls

The Least Productive People in the World

The continuing plight of Malaysian Flight MH370 - 2 month update

Comments

The time limit for entering new comments on this article has expired.

This limit can be removed. Our paid membership program is designed to give you many benefits, such as removing this time limit. To learn more, please click here.

Comments: Expand   Shrink   Hide  
8 people are discussing this page, with 74 comments
To view all comments:
Expand Comments
(Or you can set your preferences to show all comments, always)

Article: The Flip Side of Debt Free Money | OpEdNe... by Pal Palsimon on Tuesday, Jul 15, 2014 at 10:10:56 AM
While I don't like either the Fed or fractional re... by June Genis on Tuesday, Jul 15, 2014 at 11:52:56 AM
The two main groups pursuing this - American Monet... by Scott Baker on Tuesday, Jul 15, 2014 at 5:20:08 PM
And who will decide what the "under-producing area... by June Genis on Tuesday, Jul 15, 2014 at 6:57:29 PM
I think it might happen sooner the other way.That ... by Scott Baker on Tuesday, Jul 15, 2014 at 7:06:56 PM
Sorry Scott, but I still seem to be missing someth... by June Genis on Tuesday, Jul 15, 2014 at 7:38:21 PM
Yes, normally the president needs Congress, as Lin... by Scott Baker on Tuesday, Jul 15, 2014 at 9:50:58 PM
Okay, although I don't have the time to chase down... by June Genis on Tuesday, Jul 15, 2014 at 11:22:10 PM
NO. I am reading your conversation and waiting for... by Pal Palsimon on Wednesday, Jul 16, 2014 at 12:27:07 AM
The scenario you set up is a bit of a straw man. ... by Scott Baker on Wednesday, Jul 16, 2014 at 6:14:16 AM
I agree completely that, at least as things stand ... by June Genis on Wednesday, Jul 16, 2014 at 9:22:26 AM
The banks provide, and have always provided, most ... by Scott Baker on Wednesday, Jul 16, 2014 at 10:14:28 AM
Well, I'm not a single-taxer. I'm more of a no-ta... by June Genis on Wednesday, Jul 16, 2014 at 12:35:02 PM
Actually, Georgists agree you should not be taxed ... by Scott Baker on Wednesday, Jul 16, 2014 at 6:12:52 PM
""But, the American Monetary Institute and Positiv... by Joe Bongiovanni on Wednesday, Jul 23, 2014 at 6:28:59 AM
The 'duopoly' would have nothing to say about it. ... by Joe Bongiovanni on Wednesday, Jul 16, 2014 at 6:51:09 PM
The two become separate governmental functions.One... by Joe Bongiovanni on Wednesday, Jul 16, 2014 at 4:52:40 PM
Money is what can be used to buy things. Historic... by Lance Brofman on Tuesday, Jul 15, 2014 at 2:35:30 PM
So if the total supply of money has actually gone ... by June Genis on Tuesday, Jul 15, 2014 at 4:31:02 PM
Yeah, there's that.In fact, inflation AND unemploy... by Scott Baker on Tuesday, Jul 15, 2014 at 5:26:46 PM
You confuse the construct of a national money supp... by Joe Bongiovanni on Wednesday, Jul 23, 2014 at 6:40:53 AM
What? You want to end the kamikaze mission our eco... by John Rachel on Wednesday, Jul 16, 2014 at 7:41:36 PM
The Federal Reserve = an exclusive banking cartel.... by Lance Ciepiela on Saturday, Jul 26, 2014 at 12:51:56 PM
Scott,Sorry, this is a paraphrase of a non-sequitu... by Joe Bongiovanni on Thursday, Jul 17, 2014 at 8:22:56 AM
That's not really true.First, the LeHood bill spec... by Scott Baker on Thursday, Jul 17, 2014 at 9:56:40 AM
Me: The LaHood Bill is not debt-free mon... by Joe Bongiovanni on Tuesday, Jul 22, 2014 at 8:18:45 AM
Well, first of all, saving up to 50% on highway pr... by Scott Baker on Tuesday, Jul 22, 2014 at 10:30:02 AM
Scott, I don't mind the real-politic aspect at ... by Joe Bongiovanni on Wednesday, Jul 23, 2014 at 7:06:32 AM
Back to Scott's narrative...read this last.Then th... by Joe Bongiovanni on Tuesday, Jul 22, 2014 at 8:21:57 AM
There are a lot of educated economists - not just ... by Scott Baker on Tuesday, Jul 22, 2014 at 9:41:12 AM
Scott, I have taken my commentary DIRECTLY to B... by Joe Bongiovanni on Wednesday, Jul 23, 2014 at 7:57:20 AM
I don't believe in philosopher-economists in eithe... by Scott Baker on Wednesday, Jul 23, 2014 at 2:12:21 PM
Part One Conjuring is a difficult tactic to engage... by Joe Bongiovanni on Thursday, Jul 24, 2014 at 10:04:10 AM
I think there would be some real operational diffi... by Scott Baker on Thursday, Jul 24, 2014 at 10:51:02 AM
Well I don't think you know that much about bank f... by Joe Bongiovanni on Thursday, Jul 24, 2014 at 8:24:01 PM
Scott,Really glad you are posting some serious que... by Joe Bongiovanni on Thursday, Jul 24, 2014 at 10:23:03 AM
Part Three, in harmonyOn YOUR postulation of what ... by Joe Bongiovanni on Thursday, Jul 24, 2014 at 10:31:44 AM
Ah, but there is empirical evidence of how land sp... by Scott Baker on Thursday, Jul 24, 2014 at 11:11:27 AM
Scott,No problem with the Georgist land-wealth-gra... by Joe Bongiovanni on Thursday, Jul 24, 2014 at 8:52:00 PM
Still, like I, and apparently a few of my prominen... by Scott Baker on Friday, Jul 25, 2014 at 3:37:59 AM
Scott,Thanks for this effort at comparative analys... by Joe Bongiovanni on Friday, Jul 25, 2014 at 7:16:43 AM
Part Three So, you and Bill consider a 50-member ... by Joe Bongiovanni on Friday, Jul 25, 2014 at 5:33:53 PM
Part Two2. That speculation in land would control ... by Joe Bongiovanni on Friday, Jul 25, 2014 at 7:22:03 AM
On #2, that is definitely NOT a Scott Baker Postul... by Scott Baker on Friday, Jul 25, 2014 at 9:40:34 AM
Part One Reply""On #2, that is definitely NOT a Sc... by Joe Bongiovanni on Friday, Jul 25, 2014 at 11:56:02 AM
Part Two ReplySorry, but a bit of irony in evi... by Joe Bongiovanni on Friday, Jul 25, 2014 at 12:04:34 PM
Part Three ""I'm not even convinced the AMA would ... by Joe Bongiovanni on Friday, Jul 25, 2014 at 12:20:47 PM
From Wiki: en.wikipedia.org/wiki/Derivative_(finan... by Scott Baker on Friday, Jul 25, 2014 at 2:08:28 PM
So, using this definition of derivatives, they are... by Joe Bongiovanni on Friday, Jul 25, 2014 at 8:03:29 PM
This article, like all written on government iss... by Paul Krumm on Thursday, Jul 17, 2014 at 11:27:15 AM
Scroll about halfway down this link to see how the... by Scott Baker on Thursday, Jul 17, 2014 at 11:51:26 AM
You didn't get my point about double entry bookk... by Paul Krumm on Thursday, Jul 17, 2014 at 10:34:05 PM
Seigniorage has nothing to do with how money is sp... by Scott Baker on Tuesday, Jul 22, 2014 at 10:08:46 AM
Where I disagree with you, Zarlinga and other re... by Paul Krumm on Tuesday, Jul 22, 2014 at 11:40:56 PM
Well, I'm all for it. Set up a LETS system, a Ber... by Scott Baker on Wednesday, Jul 23, 2014 at 1:42:15 PM
For starters, the local currencies that were crea... by Paul Krumm on Wednesday, Jul 23, 2014 at 11:43:19 PM
""If you can't pay your taxes with it, it's not U.... by Joe Bongiovanni on Thursday, Jul 24, 2014 at 9:29:07 PM
C'mon Joe, that is a difference with distinction. ... by Scott Baker on Friday, Jul 25, 2014 at 3:25:32 AM
Morning,Maybe I need to be a little more specific.... by Joe Bongiovanni on Friday, Jul 25, 2014 at 5:38:13 AM
After last night's gathering of Georgists, in whic... by Scott Baker on Friday, Jul 25, 2014 at 9:56:18 AM
Scott, You can make any claim you want in attempt... by Joe Bongiovanni on Friday, Jul 25, 2014 at 8:43:03 PM
The Zimbabwe example proves the uselessness of the... by Scott Baker on Saturday, Jul 26, 2014 at 2:31:17 AM
Part One ReplyNot sure what the point of the Zimba... by Joe Bongiovanni on Saturday, Jul 26, 2014 at 8:17:25 AM
Social Security is included in the AMA as a budget... by Scott Baker on Saturday, Jul 26, 2014 at 11:27:03 AM
Darned, if you didn't go right to the part of the ... by Joe Bongiovanni on Saturday, Jul 26, 2014 at 1:39:27 PM
Part Two Reply....continued The only way that n... by Joe Bongiovanni on Saturday, Jul 26, 2014 at 8:32:44 AM
I think you mean "Positive Money" not "Positive Ch... by Scott Baker on Saturday, Jul 26, 2014 at 11:45:49 AM
Funny how whenever you describe the solution that ... by Joe Bongiovanni on Thursday, Jul 24, 2014 at 9:05:35 PM
Lead? Well, now that you mention it, I am preside... by Scott Baker on Friday, Jul 25, 2014 at 3:21:55 AM
Scott, All very interesting, but ""Zarlenga... by Joe Bongiovanni on Saturday, Jul 26, 2014 at 9:10:01 PM
Glad to see your disagreement with Randy on this s... by Joe Bongiovanni on Wednesday, Jul 23, 2014 at 8:27:30 AM
""A major difference then between government issu... by Joe Bongiovanni on Wednesday, Jul 23, 2014 at 8:11:22 AM
Yes, I agree with that, and would add that the Tre... by Scott Baker on Wednesday, Jul 23, 2014 at 1:48:31 PM
""Siegniorage ...........implies that the issuer... by Joe Bongiovanni on Wednesday, Jul 23, 2014 at 8:35:38 AM