It is difficult to know where to start with this slight piece of whimsy.

I know that it is the current fashion to look to blame as many external factors as possible, for what is essentially a problem that individuals have created for themselves, but this is more an exercise in "wouldn't life be wonderful, if only..."

And as such, it fails to come to grips with the major pitfalls associated with its primary proposition.

For a start, the author substantially underplays the political angles.

"...under the control of a public agency responsible for carrying out money supply objectives laid down by the elected government, accountable to the legislature, and subject to democratic control... Safeguards would ensure that the agency did not allow politicians to create additions to the money supply for their own electoral or other narrow political purposes."

Anybody who believes that our politicians will suddenly become apolitical, simply because we give them the keys to the piggy-bank, deserves a special award for naivety.

But there are in fact two key areas to consider here. How we make the journey from A to B, and what life will look like when we get there.

The first, interestingly, doesn't even warrant a single sentence in the article. But re-engineering the entire system from a base of democratic capitalism to a centralist command-and-control system won't be particularly pleasant.

And if we need to understand what life will be like if the objective is ever achieved, it may be worth swotting up on the US experience, prior to the creation of the Fed.

"The main motivation for the third central banking system came from the Panic of 1907, which renewed demands for banking and currency reform." (Wikipedia)

http://en.wikipedia.org/wiki/Federal_Reserve_System

It's a good read.

It is a great idea to stop banks from being able to create money substitutes at will, unbacked by money in specie. That is what has caused the current depression and the boom that preceded it; and the same for the Great Depression.

But it is laughable to suggest that the way to achieve this end is to centralise a monopoly of creating money in the hands of the state. That is what is causing the problem in the first place.

To talk of ‘the money power’ is to assume that it is a valid function of government to print money out of thin air, and that the political process would provide an adequate protection against government abusing this monopoly.

Both these assumptions are false: as the history of the 20th century, and the Federal Reserve, have shown.

The author talks of a government monopoly of money are returning the money power to “the people”, but it would do nothing of the sort. The state is not the people, and the people are not the state.

The state has a direct conflict of interest with the people in that the state has an endless interest in inflation, which causes enormous social and economic chaos and hardship. Inflation is a sneak tax. The effect of it is to transfer money silently from everyone’s pockets and bank accounts, to government and the political favourites that they bribes for votes.

The banks’ ability to create money substitutes out of thin air is enabled by monetary policy, without which, the market disciplines of loss and bankruptcy would return real power to the people.

It is interesting to do the thought experiment of what would happen if governmental control of the money supply were abolished. There would then be no more occasion to talk of ‘the money power’, than there is now to talk of the ‘the food power’ or ‘the sex power’. Should government have monopoly control of these things too, on the ground that they’re so important, they should not be left to the operations of liberty and competition?

Whatever system is used:
1) Make it transparent. Secrecy causes corruption.
2) Make it efficient. Massive profits are as bad as massive taxes.
3) Make is sensible. Current systems don't even make sense in theory, let alone practice.
We currently have a mish mash of centralised system that has been neutered so that it can protect the corperations, yet not actally regulate them.
Prepare for inflation folks.

There's a free DVD to download, burn, and share at

http://www.chrismartenson.com/crashcourse

It explains why exponentially increasing money supply loaned into existence with interest attached CANNOT be sustainble.

What if we reach the "maximum" goods and resources that the world can support? What if we need a "stable, no-growth" economy, whatever that looks like?

Do you really think loaning money into existence WITH INTEREST is a way to achieve that, and doesn't inherently demand economic growth so that the extra money is not inflationary?

My understanding is the argument that giving money control to the State at least makes them accountable to US at the ballot box. Giving money supply control to fat-cat bankers makes them accountable to the public... how exactly? Oh, you mean we get to have our economy and jobs crash when they walk out with $10 million dollar pay bonuses, and that's "punishing" them?

Wing-Ah-Ling, you don't happen to be a corporate banker do you? ;-)

(Nudge nudge, wink wink, say no more, say no more!)

This is why we need an independant National monetary Fund whose board members are elected by the people.If a reponsible independant body can create currency and be responsible to the people for excessive inflation,then we will have sustainable growth.We then would not be in so much debt.Our govts could borrow from and NMF and we could own our roads instead of paying tolls.

Many self interested groups want the present system to remain,since the inflation created by the private banks feeds the avaricious share market that eventually distorts and perverts the real economy.We should never have sold the CBA or any of the state banks since they did the job of the Global Reserve Banksters.We cannot build infrastructure because we have to borrow too much.Soon Kevin will have us in $300 billion in debt.Add to this the balance of payments deficit of ove $600 billion nad we are in serious trouble.

Why borrow from the likes of Rothschilds who create money from nothing,when we can create currency based on the real productivity of the Australian people?

it must be clear that both systems have their mistakes..[yet the current system clearly isnt working..[when tax payers bailout millionairs we got communism...pure and simple]

we need a new system[this point must be clear]...and the new system is that moneyt creation returns to the people..[who's labour is the only valid currency]...now how to make it work...becomes the point

the only thing i see is that each elected-member[of govt]gets elected to supervise their own local currencies...and held to account for their missuse...thus local govt members get a purse to spend in their constituency...federal members get a purse to spend in their portfolio

the ammounts they get to spend are set at city/state/federal levels[directly by the peoples vote[the elected have nominated their spend in the process of their election,and each vote is accorded a value

the biggest vote..runs the dept till his/her cash reserves are runout,..then the next elected goes in and does their spend...yeah its complicated but the totality of govt oversees the spend...

the current system sees 51 percent lording it over the 49 percent..[who are kept perpetrually disempowered]..simply because they never get the numbers...when each vote is worth a value,..the limitation of funds at least falls back to the number of votes you got

it would be nice if i could qwuote an egsample of where it works,under the current system...but clearly it is too much of a franchise,..giving money to your mates,and able to create as much as they can get away with...till they default[leaving their stolen gain in some family trust/or with the misses]

there must be a way to create monetary units and not get ursury[the big problem being the intrest..[if all money was to repay debt..[we wouldnt need inflation...

i guess to keep it simple..toss away the right to issue ursury...it is enough/to be able to acces credit...in the end all wealth was stolen from the poor...either via taxes..[or ursury..leading to reposession..or from their labour they needed to give..to simply survive