One of the great things my children tought me was that, when you are playing a game with defined rules, if the rules are not working well you change them. The meta-game of manipulating the rules is itself of value, and extends the life of the game. This has application in real life!
It seems not long since UK politicians were proclaiming that the magic money tree does not exist, and there was no alternative to austerity. Yet it turns out that it does indeed exist, and is being deployed by central banks to help governments to handle the financial crisis erupting in the wake of covid-19. Money is created, by the central bank, at the stroke of a key on a keyboard, is used to solve the problem, and may get paid back eventually. There is now no alternative to the magic money tree.Read More »
It is one of the main dilemmas of our time. Economic growth is seen by governments and people as essential. If the economy falters then there is unrest and governments get thrown out.
Yet economic growth is creating unsustainable demands on the ecosystem – pollution, global warming, resource depletion, and so on. The two do not appear to be reconcilable. We know all this.
There has to come a solution. If we leave it to the earth’s natural systems, we may well not like the result. We are getting a taste, as extreme weather events become more common, plastic pollution becomes increasingly pervasive, species extinctions accelerate. Refugee crises, population migrations and epidemics are likely to get much worse.
So it’s important to consider possible solutions. One is put forward by Positive Money in their excellent research paper Escaping Growth Dependency, just published. They argue that the debt-based money system is a major factor driving the growth imperative, and reform of this money system is essential as part of the solution.
They propose adding a new tool to the Central Bank’s toolkit: ‘sovereign money creation’, and preventing banks from creating money altogether. Thus money as means of payment is decoupled from money as a source of credit.
The paper suggests that such a change could ‘open the door to a transition to a sustainable economy’. I’m all for that!