Sunday, 24 July 2011

Monetary reform

From my limited knowledge of particular monetary reform proposals, I would say they are a stepping stone to an RBE. The reforms proposed by Positive Money are very inviting. The obvious one is its proposal to eradicate the fractional reserve system, and I'm going to agree and set that to one side.

One of my rerservations centres around the control of money supply. They propose to wrest this from the hands of bankers and politicians - yay - and give it to n independent body. OK, but how is this independent body going to decide by how much to increase money supply, and in whose interest will they do so? Their own, presumably. And will they be inccorruptible?

My other observatiion is that most ordinary people will still have to work to get hold of money, and therefore there will be pressure to create work so that people can do it, which leads us straight into the idea that problems (say  disease and disorder) are s good because they create work/jobs for people to solve them. This does seem to be a weakness of money that these reforms have not addressed, unless I'm mistaken.

Under Positive Money you would enter into a bond, actively allowing the bank to use your money for an agreed period during which you would not be able to take it back. You also get to decide which projects your capital will be spent on. Logically fine, and on the second point you can already choose ethical investments.

The problem as I see it, though, is that some people will still want the maximum return on their investment, so even if the projects invested in aren't sociilly constructive, and/or if they liquidate natural capital and call it income (to quote Natural Capitalism), they will still attract investement because they give a high return on the money put forward.

As I understand it, posiive money is itelf undecided on how it will quantify money supply.  And he point is that even if we willingly put a brake on money supply, the limiting factor is still real resources and not money.

Nevertheless, we cannot ignore this stepping stone. The looming finacial crisesmay be alleviated by a system which uses positive money.

No comments:

Post a Comment