Money and Banking for Transition

Essential Knowledge for Transition

By Marco Vangelisti

Website: ek4t.com

Contact: ek4t.com/about/contact

Notes prepared by Russ Faure-Brac 3/19/2014

  1. What’s possible?
  • Massive government employment program to:
    • Rebuild our infrastructure
    • Improve the education system
    • Improve health care and prevention
    • Climate adaptation
    • Environmental restoration
    • Rebuild the local food system infrastructure
    • Repopulate rural areas and transition to organic agriculture

 

  1. Motivation
  • The design of the money and banking system is directly implicated in all the largest problems we face:
  • Increasing levels of debt (public and private)
  • Economic instability
  • Concentration of wealth
  • Loss of democracy
  • Environmental and climate disruption
  • We cannot solve those problems without a radical redesign of the money and banking system

 

  1. Punch Lines
  • All money is created as debt
  • No money is created to repay the interests on the debt
  • The private banking sector has the monopoly on money creation
  • Money is an agreed upon fiction
  • The debt-based money system is in the process of collapsing

 

  1. Definition and History of Money
  • Three Ways a Sovereign Government Issues Fiat Money
    • Spend it into existence
    • Lend it into existence
    • Borrow into existence (US and most modern governments with a private central bank!)

 

  1. Understanding Money Creation
  • A $1,000 deposit creates a total of $10,000 in the system, given a 10% reserve requirement. System Design and Key Questions

 

  1. Bail-out and Bail-in
  • TARP
  • Government Bailout
  • Cyprus style bail-in
  1. Problems with the Current System
  • Money is created with issuance of debt but no money is created to repay interest on that debt
  • Impossible contract
  • Debt repayments/defaults shrink money supply
  • Money is created by unaccountable private entities, its quantity driven by profit motive
  • We the people, through the taxing power of our government, are ultimate backers of money created and directed by banks
  • Our money = banks’ IOUs
  • Banks’ IOUs backed by banks’ risky assets
  • Payment system linked to credit and investment risk
  • Government on the hook when those risks blow up
  • Bailouts require additional borrowing by government
  • Moral hazard and perverse incentives
  • FDIC
  • Too-big-to-fail

 

  1. Systemic Solution and New Possibilities
  • Our debt is our money supply
  • What we need is a national currency
  • How do we get out of this pickle?
  • Remove the power of private banks to create money
  • Return that power to a transparent and accountable process
  • Create money free of debt
  • Create money only when inflation is low and stable
  • Make sure that new money goes into the real economy instead of financial market (or real estate speculation)
  • Path toward the Solution
    • Build understanding and awareness
    • Build on public banking movement
    • Nationalize to-big-to-fail banks (at the next crash)
    • Break them apart and turn them and the rest of the banks into financial intermediaries
    • Nationalize the Federal Reserve (branch of US Treasury) –depository of electronic money
    • De-link money and payment system from assets of banks
    • Promote a diversity of local monetary systems
    • New Possibilities:
      • Reduce power of private banks and money on government
      • Remove artificial scarcity in the money system
      • Government as employer of last resort
      • National dividend until we reach full employment and full capacity utilization
      • Reduce government and private debt
      • Massive government employment program to:
        • Rebuild our infrastructure
        • Improve the education system
        • Improve health care and prevention
        • Climate adaptation
        • Environmental restoration
        • Rebuild the local food system infrastructure
        • Repopulate rural areas and transition to organic agriculture

 

 

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