We might be suffering from terminological overload, Fickle Pickle, but I'm even more puzzled than ever, thanks to this:

>>the ideal is to have 100% reserves - or that banks only lend money that is on deposit... We set up a system that reduces the need for credit money and always uses fiat money<<

I thought that the weight of opinion here is that "fiat money" is the root of all evil? And that if you have "100% reserves" (whatever that means), there is no need for "fiat money", where...

"the only thing that gives the money value is its relative scarcity and the faith placed in it by the people that use it"

http://www.kwaves.com/fiat.htm

Colour me confused, again.

>>When I did explain to you earlier, in my own words, why our privatised money-creation system leads to an impossible contract for society as a whole, it went completely over your head.<<

Only if you believe that you were talking sense, daggett.

Which you weren't.

>>The need originates from the fact that that money used to repay the debt, originated as debt somewhere. Of course, the person paying you may not have had to go into debt to get the money, and maybe the person who paid him/her did not have had to go into debt, but somewhere at some point someone did have to go into debt to get that money.<<

"Someone, somewhere, at some point"?

Hardly definitive.

Come now daggett, admit that it is pure invention.

There is no imperative for anyone to go into debt, in order to repay a debt. Heck, if they have to repay a debt, then they are in debt already.

>>The start of the whole chain could simply have been the money having been created on the government printing press<<

I know a government that did that once.

http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html

The present setup - so long as you are prepared to discard international banking conspiracy for a moment - operates on a system of checks and balances.

It is not perfect.

But trusting governments to do it on their own is, frankly, more scary.

Pericles,

Yes we have a problem with matching our world views (or economic views). I know where you are coming from but I do not think you understand what i am talking about.

In summary I believe that we would be better to have more fiat money and less credit money. I do not think it possible or desirable to get to 100% fiat money all that quickly but that should be the aim.

I think your difficulty in understanding what I am talking about comes because you think that the only way to create fiat money is for the government to "print money". I say there other ways and I have given a few ways it can be done. The one that is probably achievable is the zero interest loans approach as it fits in with the existing system.

The reason I have persisted in this dialogue is that I am giving a presentation next week to government officials who could endorse the idea and make it happen and I want to find the problems with the idea and why people cannot understand what I am talking about before I go into the meeting.

Fickle Pickle,

Of course, I wish you well in what your are trying to do.

Please keep us posted on the outcome of your presentation to government officials next week, whichever way it goes.

My only concern is that if we ever did achieve a thoroughgoing financial reform in which the right to create money is taken back from private bankers by our Government, then these sorts of measures which would considerably improve our circumstances, in the context of today's dysfunctional financial environment, may become redundant.

Those employed to run such schemes would have to be offered employment somewhere and somehow within our publicly owned banking and financial system.

Ellen Brown discusses this extensively towards the end of her book.

Fickle Pickle, I also wish you well.

If we assume that your theories meet with agreement, the biggest remaining question will be the political hot potato of legislation that allows the government to print money at will, instead of having to borrow, as it does at the moment.

This is in fact the point at which theory meets reality.

In your reality, the government will only print the amount of money needed to fullfil its particular project obligations, be it NBN or whatever. Because it is project-oriented, it cannot spill over into the existing economy (if I read you correctly).

Keeping it within these boundaries, given the exhilaration that such freedom brings, will test the most sober of Treasurers.

Which is why the governance model to oversee such projects would be pretty crucial, I think you would agree. Whom would you trust to take on this role - given of course the government would say "trust me, trust me".

Very loudly.

On the theoretical side, there are still a couple of questions that you may be quizzed upon.

What do you see as the realistic limits (i.e. checks-and-balances) that should be placed upon a government that is allowed to create "debt-free" money?

In a steady-state environment, you could possibly stipulate that any increase in supply should equal the country's productivity increase.

But how do you reach that point in the first instance, given that other instruments are already in use?

A corollary question would be, how would your system respond to an economic downturn, e.g. a decrease in the country's productivity, or adverse international terms-of-trade.

There will be others, depending on who you are talking to.

Incidentally, if you are planning to use TransACT as an example, I would look again very closely at your own evaluation of the reasons for the changes in their capital requirements over the years. I think you are making too many assumptions on the relationship between capital investment and subscriber uptake.

Keep us posted. Fascinating stuff.

the current system..[of bankers creating the boom bust depending on monetory supply and inflaTION..is flawed...if money creation returned to govt it would be accountable...extra supply atomaticly deflates the exchange rate...bad govt is soon exposed...not so bad banking that collapses overnight...and only the insiders know of it

currently the whole game is played by non electable elites who control..who gets what...and we have all seen how sustainable the huge bebt defaults..leaving investers holding empty promises or getting cents in the dollar invested...isnt working

these defaults..are built-in to the current ursury based system..[never an audit of the fed who plays games with monetory supply and intrest rates that increase defaults...to the advantage of their shareholder banks...holding shares of the silver/gold looted from the people..by demonetising gold/silver coin[..the only constituted legal tender

only bankers or banker shrills would blindly say huge bonus is fair return...for money created at the whim of bankers..suplying their mates...with no oversights at all...thec oversight bodies are a sham...run by former insider stooges

the curreent system sees capitalists capitalising themselves or their mates with fiat availment or credit.. to each other..while the lender of last resort..[the tax payer still needs to bail them out when/while they suck us dry]...

we seen how the current banking system failed...how our taxes underpin /underwrite..their excess...while we get bankfees and charges..where we used to get intrest...now its only the elites get intrest...and the credit...never having to acount for their lies

audit the fed...or return the power to govt...govt that is restricted by having to explain to the people at budget time...as well as the market..via exchange rates

Pericles,

You have hit on all the big issues and I had thought of possible solutions before latching on to the idea of printing money to fund investment in "community goods".

Although the government is allowing the printing of money the real advantage of the system is that we use a market to distribute the money. The market is not the one we normally think of but is the "investment market". The reason for distributing the money (or the zero interest loans) widely is to have a lot of buyers in the market. The reason for specifying the "general area" for investment is to have a lot of sellers where people can invest their money.

The reason it does not matter if the Treasurer prints too much money for say renewables is that the renewables vouchers will become worth less if too many are printed and people will hold them rather than spend. That is, inflation will be restricted to the area for which the loans are being made. That is there is only a certain amount of investment in a particular area that an economy can sustain and once we get to that then pouring more money in will simply inflate the money for that area or reduce the price of the right to get a zero interest loan.

The elephant in the room in such a system is ensuring compliance and stopping people ripping off and abusing the system. However, we have a good model of how to do this with EBay. What you do is to require both buyers and sellers to agree to the terms and conditions of the market place which includes investing the money on new assets not on buying old assets. If either buyer or seller is suspected of breaking the rules they are simply suspended from further operation in this market place or in any similar ones unless they can prove otherwise.