Abolishing debt-based currency isn’t a new idea, but it could hold the secret to ending our economies’ environmentally damaging addiction to growth, reads an excellent article in the Guardian, 5th Nov 2016. *
Here’s a short extract:
When it comes to global warming, we know that the real problem is not just fossil fuels – it is the logic of endless growth that is built into our economic system. If we don’t keep the global economy growing by at least 3% per year, it plunges into crisis. That means we have to double the size of the economy every 20 years, just to stay afloat. It doesn’t take much to realise that this imperative for exponential growth makes little sense given the limits of our finite planet.
Debt is the reason the economy has to grow in the first place. Because debt always comes with interest, it grows exponentially – so if a person, a business, or a country wants to pay down debt over the long term, they have to grow enough to at least match the growth of their debt. Without growth, debt piles up and eventually triggers an economic crisis.
We could abolish debt-based currency altogether and invent a new money system completely free of intrinsic debt. Instead of letting commercial banks create money by lending it into existence, we could have the state create the money and then spend it into existence. New money would get pumped into the real economy instead of just going straight into financial speculation where it inflates huge asset bubbles that only benefit the mega-rich.
The responsibility for money creation would be placed with an independent agency that – unlike our banks – would be democratic, accountable, and transparent, so money would become a truly public good.
As it turns out, reinventing our money system is crucial to our survival in the Anthropocene – at least as important as getting off fossil fuels. And this idea is already beginning to gain traction: in the UK, the campaigning group Positive Money has generated momentum around it, building on a series of excellent explanatory videos.
* Note: There are a few inaccuracies in the article about our current money system:
“Banks only hold reserves worth about 10% of the money they lend out.”
– In reality, there’s no reserve requirement in the UK (more here).
And about the Positive Money proposal:
“…there would be a 100% reserve requirement”
– Instead of backing deposits with reserves, the Positive Money system would give people access to state-created means of payment itself. (more here)
But it is an excellent article very much worth a read!
Read the whole article here.