Following an encounter with the Chief Operating Officer of Positive Money it might be timely to look again at some of their current thinking. Some of it is interesting – and that will be the subject of another blog, but we have to start with the really bad news.
I was dismayed to discover that Positive Money still think that there is a conflict of interest in government between the creation of money and the spending of it. That is, politely, nuts. What on earth is the point of creating money if you are not spending it? The whole point of creating money is to spend it. It may be true that selling bonds to, say, a pension fund is not, strictly speaking spending money but it is creating it for a societal purpose. The government creates money in an endeavour to allocate resources towards the goods and services that society requires. If the purpose of government is, at a most basic level, to give us defence and justice then the method it uses to achieve this is to create money (just as previously it used to ‘create’ tally sticks).
Positive Money are, as far as I can see, actually suggesting that money, something that is unlimited and costless to produce, should be limited artificially on the advice of a banking committee, presumably so that our governments do not cause inflation.
This is the bogeyman of the rich, who are always more threatened by inflation because they have acquired money which they are unhappy to see lose its value. When, on the other hand you are borrowing it, you are rather happier to see its value decline because a loan becomes gradually easier to repay.
The real alternative to high inflation is increased taxes which the rich often fear most – especially when they are levied, as of necessity all the most effective taxes must be, in accordance with the ability to pay, which ‘disadvantages’ the better off.
Positive Money is perhaps being further influenced by the fact that private banks can create new money for financial or speculative purposes. That could be stopped simply by making such contracts unenforceable. There is no need for the sledgehammer of a Monetary Policy Committee on steroids dreaming up the quantity of money that the whole economy requires (presumably excluding any amount for speculation). A government, such as we have today, would probably refuse to spend it all.
Yet, even so, by giving such an important and indeed fundamental decision to outsiders, the government would be subcontracting its ability to allocate resources to the goods and services that it is elected to provide. Admittedly it already subcontracts in the private arena by giving private banks a licence. But Positive Money, by proposing the withdrawal of those licences and giving instead one, and one only, to a centralised banking committee that is unelected, has exposed their pupose – it it is to protect government from itself.
We might call this system the dictatorship of the banking classes.
We might have thought that we’d had enough of that already.
Positive Money’s proposals would make it much, much worse.