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Some Radical Proposals for Monetary Reform

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Published on Jun 17, 2012

The 14 minute talk is a revised version of a previous presentation called "A Radical Proposal for Monetary Regulation" that I uploaded onto Youtube on Saturday 16th June. In the first 24h it was seen by 111 people and was "liked" by 11 of them. There were also 8 comments, but to make thing simpler, I have decided to remove the old version.

I got some excellent feedback on the original version, especially from Bill Still. Bill said that while he supported what I was proposing, he sent me a list of 15 suggestions for removing some imprecisions and factual errors. I'd like to thank Bill for his input and hope that this new version meets with his approval!

The key proposals include two ideas that have already been proposed by a number of authors including Bill Still himself, Ellen Brown, James Robertson and the Positive Money group (not to mention Andrew Jackson, Abraham Lincoln, Thomas Edison and JRR Tolkein, to name but a few!). All have argued that money creation by commercial banks should be banned, and that all money creation should be done debt free by elected governments, via the Treasury in the USA, or via central banks in most other countries. This would immediately save countless billions of taxpayers money that have been paid to banks as unjustifiable interest charges. The amounts are mind-blowing. US taxpayers have paid $8.5 trillion in interest charges since 1988, and taxpayers in the 27 European Union countries have paid €5.6 trillion since 1995. This is more than half of all government debt, and it totally unnecessary.

One new idea is the proposal that money creation by governments should be restricted to actions that receive massive support from citizens. I suggest that the threshold could be as high as 90%. Decisions could potentially be made using a referendum, or in the future by some form of electronic voting system.

The one real criticism of systems in which governments are allowed to create money debt-free iis that there is a potentially a risk of inflation. My second main proposition proposes a solution that avoids this problem. The idea would be to introduce a continuously variable Financial Transaction Tax that be used to automatically remove excess money from the system. At the first sign of inflation, the FTT rate would be automatically increased to mop up the surplus. And if there was deflation, the rate would be decreased. The optimal level for the money supply could be determined by an independent authority. Note that this independent authority would have no say in whether or not money is created by the government. Its only role would be to vary the FTT rate to keep the money supply level at the optimal level.

In such a system, there would be no need to match government expenditure with tax revenue. Indeed, government spending could be increased to cover the costs of any project that receives overwhelming public support. This would allow the money supply to expand naturally with the economy, and would allow wastage to be eliminated. It would allow a return to full employment, because as long as there are jobs to be done in the economy, it would be worth creating the government money to pay the people to do those jobs. Indeed, as long as there was still unemployment and spare capacity in the economy, there may not be much need for taxation at all.

Note that the scheme would avoid the possibility that people could "live off the state" on benefits. Unless someone was incapable of work, or had already reached retirement age, it is almost certain that they would be able to do something useful to do. It is likely that 90% of the population would prefer to see people paid to do something useful for society (paid for with freshly created government money) than providing them with money for doing nothing.

These are radical ideas that could really change the sort of society in which we live.

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