{"id":30827,"date":"2015-05-05T14:05:29","date_gmt":"2015-05-05T04:05:29","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=30827"},"modified":"2015-05-05T14:05:29","modified_gmt":"2015-05-05T04:05:29","slug":"icelands-sovereign-money-proposal-part-1","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=30827","title":{"rendered":"Iceland’s Sovereign Money Proposal – Part 1"},"content":{"rendered":"

\t\t\t\tIn a way this blog is being written to stop the relentless onslaught of E-mails coming, which seek to promote so-called positive money. I am regularly told that I need to forget Modern Monetary Theory (MMT) and instead see the benefits of this alleged revelationary approach to running the economy. Other E-mailers are less complimentary but just as insistent. Then there are the numerous E-mails recently with the following document attached – Monetary Reform: A Better Monetary System for Iceland<\/a> – which I am repeatedly told is the progressive solution to bank fraud and, just about all the other ills of the monetary system. The Iceland Report was commissioned by the Icelandic Prime Minister and is being held out as the solution to economic and financial instability because it would wipe out the credit-creating capacity of banks. It has been endorsed by the British conservative Adair Turner, who formerly was the chairman of the UK Financial Services Authority and who recently advocated so-called overt monetary financing (OMF) as a way to resolve the Eurozone crisis. I agree with OMF but disagree with his view that it is the credit-creation capacity of banks that caused the crisis. The crisis was caused by banks becoming non-banks and engaging in non-bank behaviour rather than their intrinsic capacity to create loans out of thin air. A properly regulated banking system does not need to abandon credit-creation. Further, I am aware that in holding this view, I and other Modern Monetary Theory (MMT) proponents are accused of being lackeys to the crooked financial cabals that hold governments to ransom and brought the world economy to its knees. Let me state my position clearly: I am against private banking per se<\/em> but consider a properly regulated and managed public banking system with credit-creation capacities would be entirely reliable and would advance public purpose. I also consider a tightly regulated private banking system with credit-creation capacities would also still be workable but less desirable.
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This is a two-part series given the topic is rather massive.<\/p>\n

Please note that I do not want my blog to become a forum for a long discussion on positive money. I hope this two-part series states my position and I plan to end it at that. I will also delete comments that provide links to positive money sites.<\/p>\n

Basic MMT<\/strong><\/p>\n

As background, please read the following blogs – Operational design arising from modern monetary theory<\/a> and Asset bubbles and the conduct of banks<\/a> – for further discussion.<\/p>\n

Please also read the following introductory suite of blogs – Deficit spending 101 – Part 1<\/a> – Deficit spending 101 – Part 2<\/a> – Deficit spending 101 – Part 3<\/a> – for basic Modern Monetary Theory (MMT) concepts.<\/p>\n

Please also note that the term ‘money’ is quite difficult to pin down given that it is a social construct with embedded power relationships. For us to understand the history of money requires us to also be sociologists and anthropologists among other things to penetrate the broader relationships that govern the use of a ‘thing’ which might be called money.<\/p>\n

We have a tendency to think of money in numerical terms and construct additions and subtractions when talking about it. But we should always be mindful that underlying these ‘transactions’ (or the “arithmetic problem” as Randy Wray calls it in his work – The Credit Money and State Money Approaches<\/a>) are complex social relationships.<\/p>\n

Economic exchange is always embedded in a power hierarchy, which determines, among other things, how the surplus production is generated and how it is distributed.<\/p>\n

Note also that:<\/p>\n