New Economic Perspectives has the article Two Loaves.
Recently, I’ve been trying to zero in on a peculiar set of ingredients that seem to be baked into our economic pie―and which are depriving that pie of a sustenance we, as a collective society, need it to provide. The peculiar ingredients have to do with our monetary system. Specifically, the fact that we―whether intentionally or by happenstance―have put in place and operate a money system that seamlessly creates dollars, as necessary, for profit-making enterprise, but specifically does NOT create dollars for not-for-profit ventures.
The explanation of how this system operates may seem deceptively simple. However, it may require some deep thinking to accept its conclusion. I think I have a clue as to why this description is correct and how we got to the situation we are in.
When our monetary system was on the gold standard, we pretended that our money was redeemable in gold, and internationally it was. Banks could not make loans unless savers deposited money in a bank for the bank to lend. Fractional reserve banking allowed banks to lend more money than they actually had on hand. Banks held a fraction of the deposits as reserves to pay out any money that savers wanted to withdraw. This system worked well as long as the savers didn’t suddenly want back too much of the money they had deposited in the banks. The Federal Reserve Bank was created to smooth out situations where there were local demands from savers for more money than a local bank had on reserve.
The rules for how our government collected taxes and paid for services were written with an understanding of how money and banking worked. When President Nixon took the country off the gold standard, the way money was created changed drastically. The Federal Reserve System could now create money just by crediting Federal Reserve accounts with new money. However, our rules for government operation were never changed to take into account the changed system.
What we need to do now, is to figure out how to change the rules of government taxing and spending to take into account how the system operates now. As long as we have the rules based on the old system, we fool ourselves into thinking that there is a limited supply of money for the government to use to make the economy work for all of us. This makes us think that our money system cannot create dollars for not-for-profit ventures. As long as we think that is true, we won’t think about how to create those dollars for not-for-profit ventures.
Of all the Presidential tickets we now have to choose from, only the Stein/Baraka ticket understands the need for change before we can have a functioning economy that works well for all of us.