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The fundamental problem is not money but property rights. The deficit basis of money is important all right, but is ancillary to the principal problem, which is the completely unsustainable imbalance in ownership of productive assets - particularly land - which form the basis of the creation of money.

There's nothing new about this. The combination of compounding debt and private property in land has for thousands of years led to unsustainable concentrations of wealth. It is this imbalance of wealth that underpins the dearth of purchasing power and hence the lack of demand.

Contrary to Wolfstone above, all money is NOT debt, but credit, and while it is true that a great deal of this came about as claims over debt (interest-bearing loans), much of it came about when banks pay staff; management; suppliers; shareholder dividends; and buy productive assets.

This spending by banks creates demand deposits in the hands of the recipient in exactly the same way as the credit created as an interest-bearing loan.

If a private bank can spend money on productive people and assets in this way then there is no reason at all why a public bank should not do the same as an agent for the Treasury.

The bottom line is that printing money/QE solves nothing - it simply exchanges one asset for another. The only solution to our current plight is systemic fiscal reform, and by this I do not mean the Voodoo economics we are getting in spades, but rather the taxation of unearned income from privileged property rights, coupled with massive fiscal stimulus through spending on productive assets.

ie professionally managed spending on/investment in affordable housing; renewable energy and energy saving projects; a new generation of infrastructure, and above all in the training and education of domestic workforces capable of delivering these.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Oct 13th, 2010 at 07:57:28 PM EST

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