Money Creation (away from the banks towards the governments)



Not that many people know that the money creation in their nations is done by the banks. They think that banks loan out attracted third party capital (savings/investments/loans), but that is not the case: banks loan out created money. Money = Debt Created by the issuing of loans by the banks. If developed/western nations not take back the licence for money creation system from the banks (which has taken over it from the governments as they abused it to fight endless wars with it), the Global North/West faces severe economic decline, which will deliver economic/societal/civil turmoil/turbulence. As the banks currently holding the licence on money creation, they have the biggest skyscrapers, the highest wages, the biggest bonuses, the most governmental influence by political ‘sponsoring’, etc: all paid by the free money creation licence they hold (and the right to charge interest on this money).

To think that banks use money of savers to loan it to the markets is a misconception: money = debt, money is created any time someone signs a debt contract and made ‘live’ in the IT system of that financial. This is why the financial system with mathematic certainty collapses when growth stops: only the principal loan amount is created at the time the loan is issued, not the money for the interest payments: the money of the interest payments is created by growth and inflation: if both are absent the financial system collapses instantly. By the way: inflation makes artificial growth (no real growth by products and services: just higher numbers for the same product/service), but if real growth stops, the financials can carry on this model for some time by creating artificial growth by pumping up the financial values of an economy (higher real estate prices, higher stock/bond prices).

Real growth has left the Global West somewhere in the nineties: but it was replaced by artificial growth on credit, mainly driven by a mortgages driven housing bubble. Till credit reached it the end of its elasticity aka peaked. Leaving the developed/western world with a consumption focused economies, with a credit crunch (so further artificial ‘growth’ on credit is no longer possible), with a pile of access credit that should be serviced (interests and amortization), with a very much contracted production part of the economy (their only possible for a way out): the result of all those facets is a) disappearing of the artificial by credit funded economy: delivering a picture of the (in times of over-credit very much contracted) real economy: a picture that’s not nice.

So now the artificial -pure credit bubble driven- economy is gone, the real aka production economy is heading towards half its former size, there is debt to be repaid, there’s interest on debt to be paid: half the economy and double the costs. This is the situation for both households and governments for the coming years. The Western World has gone wild/drunk in the 80ties and one generation later the West is bankrupted and both households and governments have not much ‘purchase power’ left: debt servicing (amortization and interest) will eat most of the income. The financial industry has brought both the governments and households of the West into serfdom. Eating all purchase power and all credit availability and by that killing what’s left of the production economy after the consumption focused economy era.

There is huge difference between financial capitalism and productive capitalism. Financial capitalism makes anyone more poor and only those in finance more wealthy (enlarging inequality). Productive capitalism makes anyone richer: it delivers wealth redistribution by the market mechanism (reduction of inequality: so no need for governmental wealth redistribution programs). The financial industry obtained the licence to issue money with the argument that governments 200 years ago abused their money creation possibilities to fund/fight wars and by that ruined economies. This fairytale is over. The financial industry has proven to do a worse job than the governments did 200 years ago. Time for some changes. Time to break out the prison of a parasitical financial economy and move to a production focused economy.

Financial capitalism (any size of the financial industry in the GDP larger than 1%) is ruining nations and households (in 2008 on the peakcredit momentum, the financial industry was 10 till 15% of GDP in the nations of the West). Delivering first excess credit and then taking over all purchase power. As long the nations of the West are in the prison of the financial industry they have no future. Or the financial industry will seize governments (by a global reboot under their management) or the governments seize the financial industry (before they initiate a global reboot under their conditions). There are no more flavours: just those two.

There is an extra facet to this all: the USA as issuer of the global reserve currency has a unlimited creditcard (money creation can go wild there without the dire consequences that non-reserve currencies would face if they did so): therefore the West in divided in two camps: the USA and the rest: they are both in total different reality (and policies too). Those who not understand this difference should not make monetary/fiscal/economic policies. The USA and the rest of the West are in total different realm due the fact that the USA owns the global reserve currency and by that can create any amount of money: something the rest of the West can’t. That’s quite another playing field (better said: it’s no level playing field at all).

While other nations had to produce to create wealth: the USA just can print it: delivering paper/bits for real products: a dream scenario only the owner of a global currency has. Without money creation banks will collapse (as explained earlier: absence of growth results is no money creation for interest payments): bail-in templates (the standard in the West outside the USA) will not solve this: money creation is needed to fix this. The USA has it’s own way to do it, the rest of the West lacks this way: they have to find another way to do this without a wide spectrum of possible negative consequences. Money creation that not delivers inflation. Money creation that not feed the parasitic financial system, but money creation that reduces the grip the financial system has on governments and households.

The nations each should seize the money creation back from the banks. But than nations will do stupid things right? Nations can’t handle such a matter right? If there’s a good independent press, an active/critic parliament and full currency freedom to restrain the government it will keep the governments within the borders of reality/certainty/wisdom. Governments don’t like dissent: that’s not clever of them: dissent is what keep them on the right track: without dissent they are sooner of later lost.

Without a critical independent press money creation by the government will turn into a looting engine for the government connected corporations. An independent press will prevent that. Without an active parliament, the government will benefit some special domestic/foreign interest and not service the people. So governments should make legislation that a) forbids banks to create money and b) deliver this (in some nations constitutional) right back to them. What should governments do with this new responsibility: First they need to share it with their central bank (who all hate inflation more than governments do).

Money should be created (as growth is history and otherwise the money for interest payments is not created). How? By delivering money to the banks? No. The banks are on their own now. If they fail they will taken into receivership (that’s quite different from nationalization) in a Chapter 7 model (liquidation). Governments should with their new money creation powers guarantee deposits, but in a 5 year towards zero guarantee schedule. Deposit insurance of the state was not a wise move: it made the financial industry parasitic (privatizing profits, socializing losses). Governments should be governments, so they should not act/behave like banks do. The government only issue the currency. How they do that: they create demand for the currency by demanding that taxes should be paid in their currency. They should create money in a way that not delivers inflation (inflation is the invisible tax, nobody ever voted for). They should pay part of their expenses with it: reducing the need for taxing an economy dead: taxes could be half of their current level by this: and they should be mainly by a consumption tax: not burdening the production part of an economy. They should pay their all bills within 30 days.

But this will deliver inflation right? No. Not if. What not if? If thy should use it to gradually replace debt as the foundation of currency towards assets. How to do that? By EQE/EBS. EQE is Energy Quantitative Easing. EBS is the distribution method of EQE: Energy Backed Securities. So not a ‘trickling down’ model: as in the trickling down model no capital ever reaches main street in a trickling down model: the banks will use the capital for carry trade in their desire for high yields, knowing that when bets go south/sour the public will pay the bill. But in a ‘percolating up’ model. Identical as was in place on the real estate market. Only with several huge differences/upsides: Energy can be transported (real estate not). Energy has a transparent market price (real estate not). Energy is measurable (real estate not). Energy is easy auditable by its outcome (real estate not). Energy has a natural counter party: the grid (real estate not). The EQE/EBS combo will divert the money growth away from (bubble creation in) real estate. The EQE/EBS combo also will fix the energy drain any economy has.

More on EQE/EBS can be found in the Energy Finance part of the Energy Economics paper. Diagrams of the EQE/EBS combo are available at Planck Foundation. All models mentioned here will deliver wealth preserving productive capitalism instead of wealth reducing financial capitalism. Productive capitalism that is good for each person/household/company/municipal/government and preserves wealth for the Western World outside the USA aka without the access to a global reserve currency like the USA has.

For emerging nations there are some extra inflation free QE possibilities besides EQE: they also can do other types of inflation free QE models: WQE (Water QE), AQE (Agriculture QE), IQE (Infra QE) and DQE (Desert QE: a combination of EQE/WQE/AQE/IQE). Those methods are describes within the DesertCorp concept (see http://www.desertcorp.com).

Without governments reclaiming their right to issue money a global financial reboot designed and managed by the financial industry (under leadership of the one of the USA) will happen. This reboot will deliver the USA a new era of special benefits at the cost of the rest of the world. They will offer nations that go with this reboot a debt discount. So it’s act or being acted on. What’s better is clear: determine the own interests before third party will do so.

The problem is: nobody in all parliaments understands any line of this text: so they will do nothing and will loose their power to the global financial industry on the night of the reboot and than they will understand it in just a few hours, but than they will not being able to change anything. That time is now. When the reboot is there and it has been done it will too late: than other interest will determine the faith of nations.

It’s about determine it’s own faith or let third parties do it in their (not public interest driven) own benefit.



See also International Currency Stability
See also Europe: Diagnosis and Prescription
See also Governmental Funding Turbulence
See also Labour Taxation
See also Money Creation
See also Energy Open Finance Platform
See also Global PV Solar Energy Finance Model
See also EQE/EBS Model Summary Diagram
See also BQE: Bilateral Currency Swaps
See also Gold Backing vs EQE/EBS Backing
See also Secular Stagnation as Denial Term
See also Financial QE vs Productive QE
See also Productive Capitalism Perspectives
See also Emerging Nations - Electricity PPP
See also Emerging Nations - Solar PPP
See also Easy Instant Solarizing Nations
See also Making The Euro More Offensive
See also Structural EU/EC Boat Refugees Solution



See also Global Solar Rollout - Description - Diagram
See also Regional Solar Rollout - Description - Diagram
See also Obama Administration Energy Strategy
See also China As Global Leading Solar Energy Nation
See also Open Finance Platform for Energy Investments
See also Iceland 3.0: Geothermal and Energy as Currency
See also Addressing Economic Decline of the Global West
See also IntraContinental: Continental Rail Schedules
See also Global West Enters Economic Adulthood
See also Global East Driven Globalization 2.0
See also Financial Capitalism vs Productive Capitalism
See also CIRI (China India Russia Iran) Avoids Dollar
See also Global West Gets A Common Currency
See also What Ended Global West Dominance
See also National Economic Development Organizations
See also Desert Investment Economics
See also Ending Global Poverty (By Sea Water Irrigation)



See also Global Deserts Exploration Model
See also WaterTech and MicroCredit Merge
See also Lupin As Soy Replacer
See also Global Seed Cartels Aren't Right
See also Global Food Model: Local to Global
See also Sun / Earth Interactions
See also Telco 3.0 : Telco out of the Cloud
See also National Business Clusters Abroad
See also Scientific Education/Research Funding
See also Iran: National Economic Plan
See also Immigrants and Trade
See also Emerging Nations - Minerals PPP
See also Emerging Nations - Deserts PPP
See also Emerging Nations - Energy PPP
See also National Solar Fund Model
See also Secular Islamic Finance
See also Open Energy Finance Platform

AUTHOR

Gijs Graafland / Planck Foundation / Amsterdam



(texts can be republished freely when the source location is mentioned or the source link is provided)

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