A>B>C>D>E>A appears to be a chain sequence as typed, but is actually a wave. You can choose to see "credit" circulating clockwise, "debt" circulating anticlockwise or both taking place at the same time.

the use value of land.

I think the majority of people have no idea what 'use value' is. And unless you're planning to throw open the big estates and country parks in the UK and allow people to grow food or put up holiday cottages on them, 'use value' is meaningless anyway.

I'll try to explain this really simply - most people do not understand financial abstraction.

They understand that they can buy stuff, or not buy stuff, and do stuff, or not do stuff.

They particularly understand whether or not they can do more buying and doing of stuff than their neighbours can, because this kind of competition is encouraged and praised as a fruitful activity.

A few understand gold is shiny, and people seem to want it, so gold is good.

Everything else will forever remain a mystery to at least 95% of the population. (Including most politicians and not a few bankers.)

The majority of fiat currency is in fact indirectly based upon capitalised land rental value.

No, the majority of fiat currency is based on faith in the future, and violence - or threat of same - in the present.

Land ownership happens to be one of the claims on resources this system encourages. There's nothing primary about it at all.

I suggest you read the introduction to Polanyi ARGeezer mentioned in today's Newsroom, because it explains all of this much more succinctly than I can.

But the basic problem with all your suggestions continues to be that you're still essentially a marketista.

I'm not. Changing units of accounts does nothing to destroy market ideologies such as the Holy Rite of Competitive Acquisition.

And it's the ideologies that are the problem, not which metaphorical fingers people use to count with.

The problem is that so few people understand money, banking or 'money and banking'. 19th and early 20th century monetary economists such as Irving Fisher, John Maynard Keynes and Allyn Young clearly understood the problems of the gold standard. The UK only really came out of the Long Depression when large quantities of gold started coming out of South African mines. Then prices started rising again. It was the financial collapse of 1873 which led Walter Bagehot to write Lombard Street, describing how the banking system of the day worked to assure that cash flows were available to meet cash demands. Part of the problem we have in understanding the current ongoing crisis is that we have largely forsaken 'the money view' and taken our eyes off the money.

In The New Lombard Street Perry Mehrling describes his view as being based on 'the money view' and notes:

...a fundamental premise of this book is that a "money view" provides the intellectual lens necessary to see clearly the central features of this multidimensional crisis. The reason is simple. It is in the daily operation of the money market that the coherence of the credit system, that vast web of promises to pay, is tested and resolved as cash flows meet cash commitments. The web of interlocking debt commitments, each one a more or less rash promise about an uncertain future, is like a bridge that we collectively spin out into the unknown future toward shores not yet visible. As a banker's bank, the Fed watches over the construction of that bridge at the point where it is most vulnerable, right at the leading edge between present and future. Here failure to make a promised payment can undermine any number of other promised payments, causing the entire web to unravel. (p.2-4)

Mehrling goes on to describe how 'the money view', which was what Walter Bagehot described in the late 19th century in Lombard Street, has come to be eclipsed over the last four decades by 'the economics view' and 'the financial view'. These terms are Mehrling's analytical constructions:

On the one hand we have the view of economics, which resolutely looks through the veil of money to see how the prospects for the present generation depend on the investments in real capital goods that were made by generations past. On the other hand we have the view of finance, which focuses on the present valuations of capital assets, seeing them as dependent entirely on imagined future cash flows projected back into the present.

The Institute for New Economic Thinking has sponsored a course in Money and Banking offered by Perry Mehrling through Barnard College, Columbia University, and available free online through Coursea in which I have enrolled. The first reading assignment are three topics on the history of banking by Allyn Young, available in PDF through the online course. What I read there, combined with what I already knew inspired the above and much more, but I have decided that this material is better the subject of another diary, which I am currently preparing. If I posted the rest of what I have written it might derail Chris's diary and that is not my intent.          

"It is not necessary to have hope in order to persevere."

I'm not fixing the currency to anything because neither a commodity nor a unit of currency is a unit of account. A unit of account is a standard unit of measure for value by reference to which commodities, currencies and other value may be exchanged.

If I accept your IOU in exchange for my widget, and Mig accepts it from me in exchange for his gizmo and ARG accepts it from Mig in exchange for a nice lunch and ARG finally presents it to you in exchange for mowing his lawn then all of us will have made a value judgement in respect of your IOU by reference to a unit of account, in this case the abstract $.

Our value judgement will probably have been based upon our judgement of your capacity and willingness to provide goods and services to fulfil your obligations.

In other words, how good your credit is.

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