bendyson2013
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10 years ago @ Great Leap Forward - DEBT-FREE MONEY: A NON... · 2 replies · +1 points
Old fashioned banknotes (prior to 1931 in the UK) were redeemable for gold. The Bank of England effectively 'owed' gold to the holder of the banknotes, and could rightly be said to be in debt to holders of banknotes.
But now, someone redeeming a banknote will receive another identical banknote.
If you have an IOU to someone, but they have no right to redeem anything other than another identical IOU from you, then you owe them nothing. You cannot be 'in debt' to them. In the same way, banknotes (and electronic sovereign money, if it were issued in the way we're suggesting) would not be a debt of the state or the central bank. That's the meaning of the phrase 'debt-free'.
Now, you claim that the state is in debt to the holders of money because it accepts money in payment for taxes. But this is false. Your tax obligations are calculated on the basis of what you earn (and various other rules). Beyond that obligation you have to the state, you have no right to hand over more money and demand more services in exchange. (Try it at the IRS sometime.)
If state-issued money was a debt of the state, then the (federal) state's obligation to provide services to you would depend on how much money you held. Those willing to pay more taxes (voluntarily) would receive more services. It clearly doesn't work this way: the STATE decides what obligation it has to you, regardless of how much money you hold. In fact, in many circumstances (via means testing), the more money you hold, the LESS service the state will provide (think of old-age care, where someone's savings are assessed before the state provides assistance).
To be crystal clear, we see a difference (which is more than just semantic) between:
a) something being recorded as a liability on a balance sheet (which is an accounting convention), and
b) a debt, which implies a contractual obligation of one party to give you something of a certain value (other than the promise that you're already holding).
Money can be recorded as a liability on a central bank's balance sheet without implying that the central bank (or government) actually 'owes' anything to the holders of money. In other words, this money is just a token, used by the public to trade.
10 years ago @ Great Leap Forward - Something is Rotten in... · 5 replies · +1 points
WRAY: "In its modern dress, the proposal is to set up a centralized nongovernmental committee of experts to decide who gets the loans."
Well this statement is factually untrue. The committee (such as the Monetary Policy Commitee) would decide how much money to create. This money would be added to government budgets and spent into the economy. The only people deciding 'who gets the loans' would be loan officers in banks, and customers of peer to peer lenders - entirely consistent with what you advocate in the article.
Just to restate: we are NOT proposing that a central committee decides who gets loans.
So many of the points you make above are invalid, because they attack something that we've never proposed.
For the other points, I'll respond in full with a blog post, but one quick point on this:
WRAY: "As Michael Hudson argues, the interest rate charged was 20% or 33% depending on the type of economic activity (lower for commercial, higher for consumer)."
Like Ann Pettifor, you're implying that lending without money creation would lead to the high interest rates of ancient history. But there are much less misleading examples that exist right now, such as peer-to-peer lender, which allows people to lend pre-existing savings to borrowers at rates which are equal to or even below the rates offered by big banks. Funding Circle, which is a peer-to-business lender, charges rates between 6% and 15% depending on risk. (HSBC business loans start from 7.9%). So there's no evidence to support the claim that lending without money creation leads to high rates.
There are more problems above, so I'll write a full blog post in the next couple of days and post the link here.