The only real money is tax bills, as evidenced by the current crisis. As soon as credit (funny) money fails, everybody wants real (tax) money.
The only ethical way to introduce money into the system is for democratic governments to spend it in, instead of borrow it in, as the author suggests.
And yes, it must be done by an independent reserve or central bank and not by the political government of the day, or overspending and hyperinflation would be inevitable.
Governments, in setting their budget for the coming year, would have to nominate the amount of new money they would spend into the system, according to how much they would be taxing the people for the services the money would be spent on.
We need to recognise the current system of compound debt, constant growth and constant inflation is a debt that our children, and now our grandchildren, will have to repay.

James Robertson is spot on.

I urge everyone to immediately visit his web site at http://www.jamesrobertson.com and subscribe to his newsletter and then to order a copy of the abovementioned "The Web of Debt" at http://webofdebt.com which will cost you US$33.50 (= US$22.50 + US$11.00 postage)

The greatest idiocy is for governments to have surrendered to private banks the right to create money out of thin air.

Money should be nothing more than the means to exchange goods and services. It has no intrinsic worth and should not be used as a means to derive income through the charging of interest.

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Wing Ah Ling wrote: "Government control of money and banking is utterly failed; ..."

To the contrary, it has been a huge success nearly everywhere it has been tried. This included the British American colonies until 1764 when the Bank of England used its influence over the British Parliament to pass the Currency Act which made it illegal for the colonies to print their own money.

Prior to that Benjamin Franklin had said to an incredulous British audience:

"We have no poor houses in the Colonies; and if we had some, their would be no-one to put in them, since their is, in the Colonies, not a single unemployed person, neither beggars nor tramps"

That was to change very rapidly after the passing of the Currency Act, with the streets filling with unemployed beggars, just as they were in Britain. This in turn led to the American War of Independence. ("The Web of Debt" (2008) pp40-41, Ellen Brown)

I agree with Robertson about the systematic problems caused by the way we increase the money supply. We do not have to increase debt to increase the money supply and there are many ways that it can be done.

Here is one practical way to increase the money supply by $43 Billion dollars that will result in no debt to the government, a flat wholesale price for broad band throughout Australia, competition from suppliers of wholesale broadband, most people signing up for broadband which in turn will make broadband accessible to all at a reasonable rate.

http://stableproductivemoney.wordpress.com/2009/06/12/submission-to-national-broadband-network-greenfields/

The issue with increasing the supply of money is to ensure that the money created will be spent increasing the productive capacity of society and not wasted on asset bubbles or non productive consumption.

There are many places we can productively invest money - if only it was available and if we could pay it back including interest once the investment was earning money.

Take a look at this work in progress on how to fund innovation in our community.

http://cscoxk.wordpress.com/2009/06/18/a-strategy-for-investment-in-innovation/

I am now working on a variation on this idea that could be funded through the current banking system and does not require as Pericles states "a reengineering of the financial infrastructure" or centralisation of control.

There are many practical incremental ways to "fix" the financial system that will be efficient, will break the link between loans and money, and will be decentralised as Robertson (and Wing Ah Ling) suggest.

*We should never have sold the CBA or any of the state banks since they did the job of the Global Reserve Banksters*

I'd have to strongly disagree with that one. I have just renewed
my Eureka Report subscription, so they sent me an " Andex Chart
for Australian Investors" which makes for interesting study.

If we look at the broad figures and decades, the 70s and 80s were
high interest and high inflation years. I remember the 70s, obtaining
credit was extremely difficult.

Keating eventually deregulated the banking system, the money supply
increased, yet the 90s and 00s were far lower in terms of inflation
and interst rates. We all benefitted.

What made the difference to inflation was not those "evil" banks, but
globalisation. Local companies could no longer increase their prices
at will, they had competition. The Melbourne old boys club could
no longer screw the consumer, as they did for years, hiding behind
large tariff walls.

Our present banking system is in fact working quite well. Yes,
banks make profits and pay them to shareholders. By far the biggest
shareholders in Australian banks, are in fact Australian workers,
via their super funds. So in fact all of you benefit, if you work
and have money in a super fund.

The author forgets that the Reserve Bank can change the money supply
at will, by changing banks level of required reserves.

Exasperating as they are, threads like this - and there have been many in the past few months - are an important outlet for the frustration we all feel when faced with an economy as sick as this one.

However, it is necessary to keep a measure of common sense when proposing a "cure".

>>there goes periculiour with his destractions again,the current system creates money via the creation of debt..<<

Absolutely correct. Poor lending procedures have been at the heart of many of our current problems. But I would like to remind uog that the borrowers of this money did so willingly, and with the expectation of personal benefit.

>>thus the co signing little bank,takes my loan paper's to the central bank...central bank to the fed reserve,fed reserve to imf/house of settlements etc,its a complicated chain[that pericules him/herself cant describe<<

That's nonsense. It is a very simple process, and one that is completely transparent. Once you accept that Banks do not force-feed loans into other people's (or businesses') pockets, it all falls deliciously into place.

Remember, you cannot create a liability without creating a corresponding asset. Simple bookkeeping.

>>[when the debt is re-paid it's credit trail majicly disappears,..into the credit accounts held by business.<<

Nothing magic about it, oug.

And when it disappears, it disappears completely. It doesn't - magically or otherwise - reappear elsewhere.

In fact,if you follow your own example through, you will see that it returns, by definition, to the same place it came from.

Think about it this way. The government allows the Banks to create a million dollars, which they lend to you. You start a successful business with it, and are able to pay it back, with interest, after a year.

That money that they created for you doesn't exist any more, does it?

And on a slightly larger scale, that is why governments around the world have authorised the creation of more credit. So that we can keep the economy rolling while the underlying problems - masses of bad debts from people unable to pay back - are sorted out.

Yabby the reserve bank can change the interest rates and the level of required reserves but that does not necessarily change the rate at which banks lend money. Banks lend money when it is prudent for them to do so - that is when the loans are covered by mortgages or liens on existing assets.

The difficulty with this approach is that if asset values drop so does the capacity of banks to lend and so increase the money supply and that banks seldom lend for innovation yet innovation is the generator of increased wealth through doing things more simply or in different ways. Banks favour lending to preserve the status quo which is not necessarily the best way to generate increased wealth.

Pericles you state that when a loan is paid back the money goes away. That is true but it doesn't have to "go away" if money is not the same as debt. When a loan is repaid the loan can be cancelled but the money can remain and not have to be "recreated". In the current system money does not exist without debt. However we do not need to link money to debt if we create enough of it in other sensible ways. We hope that banks will only lend money for sensible purposes but unfortunately the system encourages banks to lend for non sensible reasons such as feeding asset bubbles.

We want banks to lend money that is deposited but we do not want them to lend to increase community money supply. This is the only change needed and it does not require a reengineering of the money system. It would in fact make the banks stronger and better able to resist the pressure on them to increase the money supply unwisely