Hello Mises,
Some of you may have heard of Positive Money, a UK based NGO working on researching and advocating monetary reform.
We have recently opened up a forum, please come along and say hello if you're interested in discussion.
Click here to visit our forum
http://www.positivemoney.org.uk/solutions/what-is-a-positive-money-system/
So this is basically a non-inflationary money supply?
Hi Nero,
Our goal is to take a mutualist approach to monetary reform. The forum is open to anybody who would like to discuss the current fractional reserve system and all the available alternatives.
Ultimately, the decision whether to inflate the money supply is taken by politicians, so for the time being, due to the divided opinions on inflation, any proposed changes to the monetary system are unlikely to get far without provision of some form of mechanism for inflation.
Currently, we believe that banks gain a huge benefit in inflation by creating more money than growth, so in our proposed full reserve banking system an independent agency of the state, such as the Monetary Policy Committee, would be responsible for enacting the government inflation target by printing new money and adding it to government revenue.
It would then be up to the electorate to decide whether the inflation was "worth it", or whether to vote for a pro-inflation government at all.
We understand that the ideas of inflation and government itself are against the values of much of the community here, but also feel that politicians are unlikely to come to a consensus on this in the near future, and therefore that a full reserve system with a fiat currency and the ability for new money to be spent into the economy by the government is the most feasible solution in the mean time.
Constructive discussion is useful on technical issues, and we'd like to draw upon the economic knowledge of this community to take the idea of a non fractional reserve system forward.
Ben Curtis:Ultimately, the decision whether to inflate the money supply is taken by politicians, so for the time being, due to the divided opinions on inflation, any proposed changes to the monetary system are unlikely to get far without provision of some form of mechanism for inflation.
Are you saying that decision must always and necessarily be taken by politicians? Why or why not? Otherwise, can you substantiate what you mean in the last clause?
Ben Curtis:Currently, we believe that banks gain a huge benefit in inflation by creating more money than growth, so in our proposed full reserve banking system an independent agency of the state, such as the Monetary Policy Committee, would be responsible for enacting the government inflation target by printing new money and adding it to government revenue. [Emphasis added.]
The phrase I emphasized is a contradiction. No agency of the state is truly independent, because it's still part of the state.
Ben Curtis:It would then be up to the electorate to decide whether the inflation was "worth it", or whether to vote for a pro-inflation government at all.
Why is that?
Ben Curtis:We understand that the ideas of inflation and government itself are against the values of much of the community here, but also feel that politicians are unlikely to come to a consensus on this in the near future, and therefore that a full reserve system with a fiat currency and the ability for new money to be spent into the economy by the government is the most feasible solution in the mean time.
I think that raises the question, why depend on politicians to come to any consensus?
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Voluntaryism Forum
Those are good questions, unfortunately I don't have the time to get into a debate about this, but you will hopefully find many people to engage in this kind of discussion on our website. I'll provide some quick answers....
In the current monetary framework, inflation targets are set and implemented in a certain way, we simply seek to change the mechanism by which this target is implemented, rather than to do away with inflation targetting altogether, because this will just stimulate a debate about inflation, rather than on the fractional reserve banking system. Our philosophy is to focus on this for the time being.
Opinions on inflation are very divided, and the current consensus, regardless of veracity, seems to favour low and stable inflation, and as such doing away with making inflation possible altogether isn't likely to allow monetary reform ideas to gain traction amongst politicians in the present day.
As to the neccessity or desirability of inflation, this is open to debate, and for viability the monetary framework should reflect the existence of a debate for the time being, which means allowing for inflation or no inflation depending on who is in control at any one time.
We should at least ensure that as far as possible the mechanism doesn't give disproportional benefits to private companies, for instance banks.
The issue of true independence from the state is of course a problem, in a money system where money supply changes are purely decided by the government, at the very least the electorate would be able to vote out a government who they felt created too much money. Currently, if a bank creates too much money, there isn't much a voter can do about it. We feel the best way to seperate this power is to seperate targetting and implementation as much as possible, and to try and secure the independent agency from governmental influence as much as possible.
Our goal isn't to design a perfect system, but to significantly address the issues with fractional reserve banking and to make the first step in the long and continuing road to the optimal money system one that is easy for the politicians who will walk the road (in the first instance) to swallow.
As to your last question, it is a good question, but unfortunately for the time being we do depend on politicians to make decisions, and they don't come to consensuses. So if we have to design a different money system it should reflect the fact that all MP's will have to vote on whether to implement it, and that it will need to be flexible enough to allow for pro and anti inflation governments, for the time being.
I hope this answers your queries
Not to seem silly, but this all smacks of Monetarism. Austrians don't follow the quantity theory of money literally or naively as the Monetarists do. So, why post on a forum like ours when even Mises criticized quantity theory of money?
"The power of liberty going forward is in decentralization. Not in leaders, but in decentralized activism. In a market process." -- liberty student
We're just an organisation dedicated to investigating this issue, our views aren't set in stone, and we encourage debate and discussion. We have a database of around 5,000 people registered to receive updates and many of them disagree with our proposals, but our main focus is on highlighting the problems with the current system, and the forum is also a place to discuss this.
These are the proposals we're working on and our emphasis is in the first instance to make them feasible, not perfect, while still offering a significant improvement.
I think it's helpful for all involved to have these discussions in a neutral setting, we'd like to see debates about the quantity theory and other reforms on our site in order to try and develop some agreements between different schools of thought, if not on solutions but on problems, in the interest of getting something done.
I just came here to introduce our forum as a place for people to discuss these issues if they want to, I would like to encourage discussion between different schools of thought, who often want the same thing but for different reasons.
Ben Curtis:Those are good questions, unfortunately I don't have the time to get into a debate about this, but you will hopefully find many people to engage in this kind of discussion on our website. I'll provide some quick answers....
Thanks. I am thinking about joining that forum.
Ben Curtis:In the current monetary framework, inflation targets are set and implemented in a certain way, we simply seek to change the mechanism by which this target is implemented, rather than to do away with inflation targetting altogether, because this will just stimulate a debate about inflation, rather than on the fractional reserve banking system. Our philosophy is to focus on this for the time being.
Fun Fact: fractional-reserve banking contributes to monetary inflation. See here for more.
Ben Curtis:Opinions on inflation are very divided, and the current consensus, regardless of veracity, seems to favour low and stable inflation, and as such doing away with making inflation possible altogether isn't likely to allow monetary reform ideas to gain traction amongst politicians in the present day.
What do you think is the origin or cause of that consensus? Have you or anyone in your group investigated this issue?
Ben Curtis:As to the neccessity or desirability of inflation, this is open to debate, and for viability the monetary framework should reflect the existence of a debate for the time being, which means allowing for inflation or no inflation depending on who is in control at any one time.
How is that different from any existing central-banking system?
Ben Curtis:We should at least ensure that as far as possible the mechanism doesn't give disproportional benefits to private companies, for instance banks.
This would require either distributing newly created money evenly to everyone (i.e. proportional to their current money/wealth holdings) or simply revaluing the monetary unit. However, the money multiplier (and hence fractional-reserve banking as a whole) throws a monkey wrench into both of these things.
Ben Curtis:The issue of true independence from the state is of course a problem, in a money system where money supply changes are purely decided by the government, at the very least the electorate would be able to vote out a government who they felt created too much money. Currently, if a bank creates too much money, there isn't much a voter can do about it. We feel the best way to seperate this power is to seperate targetting and implementation as much as possible, and to try and secure the independent agency from governmental influence as much as possible.
Again, how can you secure a government agency from governmental influence? By definition, it's impossible.
On another note, the notion that "the electorate would be able to vote out a government..." is an extremely leaky abstraction.
Ben Curtis:Our goal isn't to design a perfect system, but to significantly address the issues with fractional reserve banking and to make the first step in the long and continuing road to the optimal money system one that is easy for the politicians who will walk the road (in the first instance) to swallow.
Let me ask you this: how can you trust politicians?
Ben Curtis:As to your last question, it is a good question, but unfortunately for the time being we do depend on politicians to make decisions, and they don't come to consensuses. So if we have to design a different money system it should reflect the fact that all MP's will have to vote on whether to implement it, and that it will need to be flexible enough to allow for pro and anti inflation governments, for the time being.
I don't think you understood my last question. What I meant was, why depend on politicians to make a decision about this? Saying that they're in power etc. is not an answer. That's no reason why one must work with them instead of working against them or around them.
Ben Curtis:I hope this answers your queries
Not entirely, but thanks anyways. I look forward to more answers from you. :)
1) FRB certainly does contribute to monetary inflation (in our opinion), banks cause inflation, harmful to savers, by creating money and earning a profit themselves. If we accept that low inflation is desirable (some do, some don't), it would be better for the taxpayer to receive the benefit from creating money (those activities performed by the state that do benefit us) than a private bank.
2) I haven't personally investigated this issue.
3) A full reserve banking system would prevent private banks from creating money, monetary inflation would be implemented by the state directly money, rather than permitting a certain level of money creation by private banks.
4) The money multiplier wouldn't exist in a full reserve system, the mechanism we would advocate in the interim would be for the agency of the state to evaluate the level of money needed to achieve the inflation target, create it, and add it to the coffers of the state, this way the money creation would be "democratised"
5) You can't completely secure it, but it's better than what we have now. The parameters of the game should ensure that interference doesn't cause hyperinflation, as this is in nobodies interest. Taxation is generally a safer way of increasing revenue, as inflation harms the economy and is likely to be less popular than increased taxation if it is seen to be more harmful. As monetary inflation would be solely attributable to direct money creation by the state, the population can evalue whether the inflation was more desirable than increased taxation.
6) You can't trust politicians, but we still need to do something about the money system and for the moment this will be reliant on politicians.
7) I think in the immediate future, working to lobby politicians to change the money system is going to lead to a better outcome than trying to bypass it somehow.
I'm afraid this really will have to be the end of my contribution here for the time being!