The Future of Money?

by
Robert W. Zimmerer

Money, Myths and Magic explained why money must be constantly created in the vast quantities needed to support todays globalized trading economy of some 6 billion people. New money now enters circulation following conventional bookkeeping practice in which dollar liabilities must equal dollar assets. This requires newly created money be “balanced” by a newly created debt, a debt which has no more substance than the new money, both created by bookkeeping entries! But these new debts earn interest which can only be paid with more new money.

A bookkeeping system better suited to modern needs would introduce newly created legal tender as direct payment of basic national costs, e.g., constructing new hospitals, schools, highways, railroads, internet; educating physicians, scientists, engineers, teachers; public health maintenance. These direct payments would be carried on the “books” as investments in the future of the nation, “balancing” the newly created legal tender against the miles of highway graded and paved, the number of college graduates produced, the number of hospital patients treated - not by a dollar denominated interest paying national debt.

As described in Money Magic legal tender once introduced into commerce remains part of the ever growing money base private banks use, as they once used gold coins, to further increase money in circulation by the process of fractional reserve banking. There would be new debt backed money created as well as legal tender but no new national debt created!

A basic role of government is to “promote the common welfare” by which private initiative can thrive and citizens can be “secure in their persons.” One of the very first US government actions was to create and operate the US Postal Service to guarantee the flow of information. The US Patent Office was created to secure personal property rights to inventions. Maintaining an army, navy, navigable waterways, federal judiciary, were more financial and administrative functions of the new USA.

The federal government now spends much money directly and through grants, subsidies and tax rebates. This proposed new method of bookkeeping would eliminate new national debt and the accompanying fantasy of ever paying it off, an impossibility which presently clouds all discussions of government spending. With no dollar deficit more rational discussion of government spending could ensue. Just as private banks consider the use to which their loans are put and the prospect that they will be productive enough to enable interest to be paid, so too would Congress be obliged to consider national investments it makes with debt-free new legal tender. Certainly one important consideration would be to not fund frivolous unproductive projects which simply put new money into circulation with no real public benefit. This would be classic money printing clearly debasing the value of new legal tender, a historic cause of rapid price inflation.