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Why Can't the Government Create Money? watch

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    I want to emphasise first and foremost that I don't belong to any particular socio-political ideology. I am a free thinker. I believe that there is an element of truth in every persuasion of thought, and that information ought to be gleaned in order to arrive at any given truth. It is all about reading between the blurred lines so as to connect the dots.

    On that basis, I kindly request that you resist the temptation to respond with an ideologically charged opinion. You are entitled to your opinions, but you are certainly not entitled to your own facts. I want the discussion to flow with the facts and lead wherever it may.
    This is just to lay the ground rules, which are hopefully reasonable enough for adherence.

    As to the main discussion...

    The Bank of England released a quarterly bulletin last year, in March, entitled "money creation in the modern economy." It states, clearly, that the private commercial banks have a monopoly over the creation of money. It is the process of lending which creates a new deposit of money, and the bank does not borrow from savers in order to lend to customers.

    I want to know the reason why the money supply can't be nationalised so that the government can be the sole issuer of money, provided checks and balances are in place. I will discuss the checks and balances that can be applied at a later stage. Note that I am not advocating the nationalisation of the private banking cartel. This is not the problem. Commercial banks can be stripped of the power to create money and simply serve as intermediaries between savers and borrowers, which is already perceived to be its usual business.

    The problem is that all money in the economy is debt-based. If we want more money, it necessarily has to come with a corresponding debt. If we want less debt, we necessarily have to suffer with less money. Such is the bipolar nature of the current system. I am advocating a way to separate debt and money from each other.

    I have a proposal in mind, but I will reveal it in a piecemeal fashion so that every point can be fully digested. If there is uncertainty in some area or a need for clarification, do enquire.

    In principle, what is the problem with the state creating and issuing money free of debt in order to finance public services and infrastructure projects? Why is it perceived as a natural state of affairs that the government has given a private banking cartel the privilege to create money and must borrow from the same banking cartel (through the issuance of gilts), when it can easily create money on its own without needing to go into debt?

    If a government can issue a bond, why can't it issue a bill?
    The obvious benefit is that most forms of taxation (income tax, council tax, etc.) can be abolished and there would be lower levels of private debt as a result of a greater amount of debt-free money circulating the economy.

    I want to receive factual objections. Thanks.
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    ...it can...?
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    (Original post by Onde)
    I am probably less cynical of government than the average person but...you really think re-nationalising the Bank of England would be a good thing?

    You say all money in the economy is debt-based...is that not the inherent point of money?
    The BoE is nationalised already...
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    (Original post by Onde)
    I am probably less cynical of government than the average person but...you really think re-nationalising the Bank of England would be a good thing?
    The BoE is already nationalised. It is accountable to a Parliamentary cross-party committee.

    You say all money in the economy is debt-based...is that not the inherent point of money?
    Why do you think that? I can only assume you think in this manner because you haven't considered the possibility for money to be issued free of debt. I want to clarify that the private banks would continue to issue loans, but that the government would counter the debt with state-issued money free of debt. It would be a countercyclical system so that there would be a constant supply of money in the economy. Money would not be destroyed when it is repaid, as it is the case now. Money would be created at the same rate as private loans are being repaid and credited to the Treasury's account to be issued into the economy debt-free.
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    (Original post by Onde)
    ah sorry, I meant be made non-independent
    Monetary and fiscal policy would be independent. The Monetary Policy Committee at the BoE would determine how much money to create in line with inflation rates. The interest rate mechanism can be abolished.
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    (Original post by Quady)
    The BoE is nationalised already...
    That is myth. The Bank of England is owned by a small number of shareholders who are unknown because the shares were issued as "bearer shares".

    The company structure is called Bank of England Nominees Ltd.



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    (Original post by Polymath0)
    I want to emphasise first and foremost that I don't belong to any particular sociopolitical ideology. I am a free thinker. I believe that there is an element of truth in every persuasion of thought, and that information ought to be gleaned in order to arrive at any given truth. It is all about reading between the blurred lines so as to connect the dots.

    On that basis, I kindly request that you resist the temptation to respond with an ideologically charged opinion. You are entitled to your opinions, but you are certainly not entitled to your own facts. I want the discussion to flow with the facts and lead wherever it may.
    This is just to lay the ground rules, which are hopefully reasonable enough for adherence.

    As to the main discussion...

    The Bank of England released a quarterly bulletin last year, in March, entitled "money creation in the modern economy." It states, clearly, that the private commercial banks have a monopoly over the creation of money. It is the process of lending which creates a new deposit of money, and the bank does not borrow from savers in order to lend to customers.

    I want to know the reason why the money supply can't be nationalised so that the government can be the sole issuer of money, provided checks and balances are in place. I will discuss the checks and balances that can be applied at a later stage. Note that I am not advocating the nationalisation of the private banking cartel. That is not the problem. Commercial banks can be stripped of the power to create money and simply serve as an intermediary between savers and borrowers, which is already perceived to be its usual business.

    The problem is that all money in the economy is debt-based. If we want more money, it necessarily has to come with a corresponding debt. If we want less debt, we necessarily have to suffer with less money. Such is the bipolar nature of the current system. I am advocating a way to separate debt and money from each other.

    I have a proposal in mind, but I will reveal it in a piecemeal fashion so that every point can be fully digested. If there is uncertainty in some area or a need for clarification, do enquire.

    In principle, what is the problem with the state creating and issuing money free of debt in order to finance public services and infrastructure projects? Why is it perceived as a natural state of affairs that the government has given a private banking cartel the privilege to create money and must borrow from the same banking cartel (through the issuance of gilts), when it can easily create money on its own without needing to go into debt?

    If a government can issue a bond, why can't it issue a bill?
    The obvious benefit is that most forms of taxation (income tax, council tax, etc.) can be abolished and there would be lower levels of private debt as a result of a greater amount of debt-free money circulating the economy.

    I want to receive factual objections. Thanks.
    I will try to give you a non-ideologically charged answer.

    The central banking system is set up so that only private banks can create money because they charge interest on the money they create. You would think that logically the state would take on this role so that base money was interest free but those cartels have influenced political power this way. Let's be clear I am not talking about retail banking.


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    (Original post by MKultra101)
    That is myth. The Bank of England is owned by a small number of shareholders who are unknown because the shares were issued as "bearer shares".

    The company structure is called Bank of England Nominees Ltd.



    Posted from TSR Mobile
    Who owns the shares?

    I thought there was only owner of the shares - the Treasury Solicitor.
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    (Original post by MKultra101)
    I will try to give you a non-ideologically charged answer.

    The central banking system is set up so that only private banks can create money because they charge interest on the money they create. You would think that logically the state would take on this role so that base money was interest free but those cartels have influenced political power this way. Let's be clear I am not talking about retail banking.


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    So Quantitative Easing didn't happen then? Was QE2 as myth as well...?
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    (Original post by Polymath0)
    I want to emphasise first and foremost that I don't belong to any particular sociopolitical ideology. I am a free thinker. I believe that there is an element of truth in every persuasion of thought, and that information ought to be gleaned in order to arrive at any given truth. It is all about reading between the blurred lines so as to connect the dots.

    On that basis, I kindly request that you resist the temptation to respond with an ideologically charged opinion. You are entitled to your opinions, but you are certainly not entitled to your own facts. I want the discussion to flow with the facts and lead wherever it may.
    This is just to lay the ground rules, which are hopefully reasonable enough for adherence.

    As to the main discussion...

    The Bank of England released a quarterly bulletin last year, in March, entitled "money creation in the modern economy." It states, clearly, that the private commercial banks have a monopoly over the creation of money. It is the process of lending which creates a new deposit of money, and the bank does not borrow from savers in order to lend to customers.

    I want to know the reason why the money supply can't be nationalised so that the government can be the sole issuer of money, provided checks and balances are in place. I will discuss the checks and balances that can be applied at a later stage. Note that I am not advocating the nationalisation of the private banking cartel. That is not the problem. Commercial banks can be stripped of the power to create money and simply serve as an intermediary between savers and borrowers, which is already perceived to be its usual business.

    The problem is that all money in the economy is debt-based. If we want more money, it necessarily has to come with a corresponding debt. If we want less debt, we necessarily have to suffer with less money. Such is the bipolar nature of the current system. I am advocating a way to separate debt and money from each other.

    I have a proposal in mind, but I will reveal it in a piecemeal fashion so that every point can be fully digested. If there is uncertainty in some area or a need for clarification, do enquire.

    In principle, what is the problem with the state creating and issuing money free of debt in order to finance public services and infrastructure projects? Why is it perceived as a natural state of affairs that the government has given a private banking cartel the privilege to create money and must borrow from the same banking cartel (through the issuance of gilts), when it can easily create money on its own without needing to go into debt?

    If a government can issue a bond, why can't it issue a bill?
    The obvious benefit is that most forms of taxation (income tax, council tax, etc.) can be abolished and there would be lower levels of private debt as a result of a greater amount of debt-free money circulating the economy.

    I want to receive factual objections. Thanks.
    Debt isn't the issue.

    The two main issues are:

    1) Where is the money going to be invested and,
    2) Interest

    Debt free money will debase the currency. The BoE buys gilts with debt free money and push up the price of gilts. Private banks buy people's IOUs with debt free money and push up the price of houses, stocks and other financial instruments.
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    (Original post by saayagain)
    Debt free money will debase the currency. The BoE buys gilts with debt free money and push up the price of gilts. Private banks buy people's IOUs with debt free money and push up the price of houses, stocks and other financial instruments.
    How can debt-free money debase the currency? If the private banks can issue money out of nothing and lend to the government without debasing the currency, why can't the government do the same? Why can't the government create money for itself via the central bank?

    The issue at heart is the debt-based monetary system. Without the government needing to go into debt, people would no longer have to pay taxes. The government would be able to finance public services without creating a debt.
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    (Original post by MKultra101)
    That is myth. The Bank of England is owned by a small number of shareholders who are unknown because the shares were issued as "bearer shares".

    The company structure is called Bank of England Nominees Ltd.
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    How is this a potential obstacle to the proposal at hand? Provide evidence. It doesn't change the fact that the MPC is accountable to Parliament.
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    (Original post by MKultra101)
    I will try to give you a non-ideologically charged answer.

    The central banking system is set up so that only private banks can create money because they charge interest on the money they create. You would think that logically the state would take on this role so that base money was interest free but those cartels have influenced political power this way. Let's be clear I am not talking about retail banking.
    Posted from TSR Mobile
    This has little do with the discussion at hand. Interest is a separate matter. I'm specifically talking about the poisonous relationship between money and debt.
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    (Original post by Polymath0)
    This has little do with the discussion at hand. Interest is a separate matter. I'm specifically talking about the poisonous relationship between money and debt.
    Soooooo QE.......?
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    (Original post by Quady)
    So Quantitative Easing didn't happen then? Was QE2 as myth as well...?
    Of course it happened. But it was an exceptional measure designed specifically to bailout the bankrupt financial system. It was form of debt free money which entered the financial markets but did not benefit the real economy.
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    (Original post by Polymath0)
    Of course it happened. But it was an exceptional measure designed specifically to bailout the bankrupt financial system. It was form of debt free money which entered the financial markets but did not benefit the real economy.
    And do you know why it wasn't inflationary?
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    (Original post by ETRC)
    Germany did it and look what happened
    Creating money will disrupt the balance of the economy and we will have a massive surplus that will make money useless- look where that led to in Germany
    Basically creating more of a "fictional thing" we created will make demand of "real things" high.
    This is an overused, worn out argument. In the Weimar Republic, money was created without due regard to inflation rates and was exacerbated by financial speculation. That is not what is being advocated here.

    Moreover, it was not the government that fuelled hyperinflation. It was caused primarily by the private banks.
    Note, too, that Germany at that period was a failed state with punitive reparation costs imposed by the Allies.

    "What actually drove the wartime inflation into hyperinflation, said Schacht, was speculation by foreign investors, who would bet on the mark’s decreasing value by selling it short."

    "At first, the speculation was fed by the Reichsbank (the German central bank), which had recently been privatized. But when the Reichsbank could no longer keep up with the voracious demand for marks, other private banks were allowed to create them out of nothing and lend them at interest as well."

    http://www.webofdebt.com/articles/hyperinflation.php
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    Govts do creat money but all they create is debt, have a look on a UK bank note and its says right on the note its an IOU.
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    (Original post by Quady)
    And do you know why it wasn't inflationary?
    It did inflate asset prices in the financial market, benefiting the already wealthy at the expense of the majority of the populace.
 
 
 
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