Skip to content

A system solution for the problems caused by the current money system

July 26, 2015

Societies, and individuals, economic problems are exacerbated by how our money systems operate. The systems were developed for commodity based currencies and as such correctly assume that the Units of Currency [UoC] have not only their face value but also have  a real value equal to the face value right from the point of issuance. This was correct because each UoC was supposed to be backed by real value in the form of a legally stipulated fraction of the State’s gold holding.

We now operate with a fiat currency however and the same is not true for the UoC of a fiat currency. Incidentally fiat currencies are now what most , if not all, countries of the world  use.

At issuance a fiat currency has no real value to back its face value. The real value comes about in one of two ways. The always honest way is when the newly issued UoC directly participates in a completed voluntary exchange.

The dishonest way is when a UoC is issued not connected to any particular voluntary exchange. If its issuance sometimes happens to  coincide with participation in a completed exchange then it gains its real value from that exchange and it’s real value is honestly acquired. If there is no completed exchange for its issuance to coincide with then it has to get  what it can, of a real value, by stealing it from the real value of the already issued currency. In this case the newly issued UoC debases the currency giving rise to inflation.

This is what is happening with our current money system. It operates as if we were still dealing with a commodity based currency, when we aren’t, we are operating with a fiat currency. This means that our money system is following the dishonest way of issuing new money. This explains our constant battle with inflation.

This problem would be solved if the money system was changed to issue new money, as new money debt, to anybody who needed it to enter into the purchase half of an exchange. They would execute the supply half of the exchange as soon as they received money from the sale of a good or service of equivalent value and thereby settled their new money debt.

Such a change would also mark the end of money poverty in society and open the way for everybody to become economically active.

Its implementation would require political will.

a) Because business as usual would not be possible for financial institutions like banks.
b) In order to be able to issue new currency at any point of need it would need to be done through a smart phone and for that ideally we would need to convert to a completely  digital currency.

Advertisements

From → Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: