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7.5. Towards effective reform: Questions to consider We have seen that the roots of an unstable money and banking system may lie in a mistaken understanding of money’s nature by successive sovereigns and governments. In Chapter 3, we showed how the Government’s need for funds, combined with its belief that only gold and silver could be used as the basis for money, gave rise to the particular institutional arrangements we have today. The misunderstanding of money as a commodity rather than a creditor/debtor relationship has so dominated the imagination of our leaders and economists that they have allowed the development of a monetary policy regime that, despite repeated crises, remains steadfast. Where Does Money Come From? reveals that a system where money creation is almost entirely dominated by commercial banks is not inevitable. This being so, any serious analysis of current monetary and banking arrangements gives rise to a plethora of unanswered questions, including: If the state’s role is so crucial in determining what money is, why does it seem to have such trouble controlling the money supply, as the difficulties of monetarist policies in the 1980s demonstrated? Why has the state been unable to prevent the financial and banking crises we have seen over the past eight centuries?15 Should the state have more power to determine how much money is issued in to the economy and for what purpose? As the money creation process has been privatised and banks hold the public privilege of money creation, should it not be incumbent upon them to ensure that this enormous power is used for activities that contribute to the common good? Should we continue to allow this public privilege to be used for the pursuit of banks’ own short-term interests, when apparently banks cannot always successfully look after their own medium – to long-term interests? Does it make sense for shareholder-owned and profit-driven banks to have such powers of credit creation whilst financial institutions, such as credit unions, for example, which are owned cooperatively and primarily have a social purpose, are restricted in their credit-creating powers?16 Does it make sense to regularly lay the costs of bankers’ mistakes at the door of tax-payers without apparent punishment or serious deterrent for bankers? Should the Government and the central bank consider less costly alternatives of dealing with banking crises that do not burden the taxpayer with huge debts? For example, could the central bank, in its capacity as lender of last resort, be the one to purchase non-performing assets from banks at face value and keep them on its balance sheet? Have central banks been given the right monetary policy targets, the right mandates, and the right powers to carry out these tasks? Banking crises are caused by credit-driven asset bubbles and it is the role of monetary policy to prevent banking crises. Should the consumer inflation target be replaced or augmented with targets for asset price inflation, achieved via a regime of credit

Andrew Jackson - Where Does Money Come From - Positive Money pdf from epub  

Andrew Jackson - Where Does Money Come From - Positive Money pdf from epub

Andrew Jackson - Where Does Money Come From - Positive Money pdf from epub  

Andrew Jackson - Where Does Money Come From - Positive Money pdf from epub

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