Declaring all digital money to be legal tender

A small history lesson on money was published in the latest edition of  Irish Village Magazine 

An 1830s’ recession preceded the great famine. Worried about their savings and the future, people reined in their spending which only exacerbated the downturn. Since food was actually then abundant, it seemed odd to most people that routine trading was hampered by what was explained as the mass hysteria of people saving rather than spending. While most people, then and now, naturally expect a continuously rising standard of living, the student of economics expects a rise and fall despite the fact that technology rarely if ever goes backwards.

In the 1830s, banks simply printed money with their own name on it, to facilitate loans.  So after a particularly long ‘fall’ the leaders of that era began to suspect this might be the root of the problem. After all, each pound lent created a matching debt. If people settled their debts with banks, business was no better off because the money used to do so was out of circulation.

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Cue the Bank Charter Act of 1845 which took a year to make its way across the Irish sea. By then the Bank of England had taken the exclusive power to print the legal tender of the land in a bid to provide a stable money supply and foundation for the economy.

…One proposal being discussed to bring about a transition from the money-as-debt problem involves declaring all digital money to be legal tender. With your bank balance already acceptable as payment of taxes there’s no reason why it shouldn’t join the legal-tender club with cash. If electronic money boasted the status of legal tender, immediately the banks would have to halt their routine of deleting it upon repayment. Effectively outlawing the creation of euros through loans would get right to the root of the debt crisis problem also and the banks would automatically become the intermediaries of existing money only, as many of us always assumed they were.

Read the whole article here.