Money only represents human potential.It is the oil that lubricates the economic engine.We have turned money into a commodity that perverts real human productivity.

When we signed the Bretton Woods agreement of 1940,we signed away national sovereignty since we could not then create all the money that equalled our productivity.We became debt slaves to the international banking system.This is why we are in the present economic debacle.We have destroyed human capital and relaced it with flawed monetary one.It was destined to fail.

arjay, you could not be more wrong the bretton woods system gave stability to international trade. fixed exchange rates increased certainty encouraging investment in meaningful production. when we abandoned the bretton woods system money then turned into a commodity. replacing fixed exchange rates with floating exchange rates reduce certainty thus reduce investment in productive activity. traders have to divert money from investment to hedge against sudden and wild exchange fluctuations caused by speculators.

This article is based on a religious superstition, namely, that the Reserve Bank is able to distinguish between what the price of an asset is, and what it should be. But the notional "true worth" is, and can only ever be, an exercise in arbitrary power.

To put the same question a different way, assuming an RB intervention changes the price of an asset from what it was or would have been in an "asset bubble" to what it was after the intervention, then how would the RB know whether or not the difference, the resources diverted as a result, are serving a more urgent purpose from the point of view of the ultimate consumers?

The fact is, there is no way of knowing. All we know is that the consumers *voluntarily* preferred the original disposition, and that the use of *monopoly coercion* was requried to change it. The rest is mere economically ignorant state-worship that has no basis in reason. Not much of an argument, is it?

This is a good article with the sensible idea of having other ways of adjusting the money supply than trying to rely on setting of overall interest rates.

In a traditional market place the price of a commodity is meant to match supply with demand so in theory interest rates (the price of capital) is meant to be the regulator to match supply with demand.

Capital is used to purchase old assets so that greater value can be extracted from the assets or to build new assets to earn income.

The supply and demand for different asset classes is clearly different so why not have different money markets for these different asset classes?

The argument against this is that we want capital to move to the area where it gets the greatest return. Unfortunately the "greatest return" is the greatest monetary return which turns out to be the manipulation of money markets themselves rather than the "real" economy of real goods and services.

I am unconvinced that the proposed mechanism is the appropriate one because it uses financial fiddling to affect real world outcomes and that is difficult to do and predict. A more direct method is to encourage investment in new productive resources by allowing banks to give loans for new investments that do not yet exist rather than banks only giving loans against existing assets. New investments are a greater risk than investing in existing assets but our economic system is set up so that investors take ALL the risk rather than the community sharing some of the risk. The community can share the risk by allowing loans at lower rates for new investments rather than requiring new investments to be funded through equity which is a much higher cost of finance.