The one thing I would question here is, is it really private banks that should be deciding how our credit is expanded? They take a pretty big skim of the economy for it, have almost no interest in funding socially useful schemes, have little incentive to avoid harmful ones, and they do pretty well out of both the boom and bust cycles - during the bust cycle, they foreclose on real assets
1) I don't think our money system is "designed" per se. I think it's more like natural selection where things that "work" continue into the future and things that don't, don't. And there is one important aspect of how this system worked.
2) We've heard there is such a thing as "too much money" in an economy, and if that framing makes sense, it must also follow that there such a thing as "too little" and "the right amount". Yet I'm not sure I've ever heard anyone ask "How much money should be in circulation?".
Credit expansion banking causes the amount of money in circulation to expand and contract with demand for credit.
Which clearly is not a perfect system as it creates booms and busts, but has an inherent flexibility, but I would be hard pressed to design a better one.
We can however make credit expansion banking better but taking ideas from Minsky's Financial Instability Hypothesis and turning them into counter cyclical policies, which we did start doing after the Great Depression, which was even before Minsky wrote down some of his ideas.
But today, we CAN take his ideas further by recording what credit is being used FOR, and funnel the use of credit towards the production of goods and services and away from financial speculation.
What seems to burn us, every time, is debt used for financial speculation.
So, in aggregate, do far less of that.
And what seems to add to our collective material wealth is debt used to produce more goods and services.
The one thing I would question here is, is it really private banks that should be deciding how our credit is expanded? They take a pretty big skim of the economy for it, have almost no interest in funding socially useful schemes, have little incentive to avoid harmful ones, and they do pretty well out of both the boom and bust cycles - during the bust cycle, they foreclose on real assets
I have two thoughts here:
1) I don't think our money system is "designed" per se. I think it's more like natural selection where things that "work" continue into the future and things that don't, don't. And there is one important aspect of how this system worked.
2) We've heard there is such a thing as "too much money" in an economy, and if that framing makes sense, it must also follow that there such a thing as "too little" and "the right amount". Yet I'm not sure I've ever heard anyone ask "How much money should be in circulation?".
Credit expansion banking causes the amount of money in circulation to expand and contract with demand for credit.
Which clearly is not a perfect system as it creates booms and busts, but has an inherent flexibility, but I would be hard pressed to design a better one.
We can however make credit expansion banking better but taking ideas from Minsky's Financial Instability Hypothesis and turning them into counter cyclical policies, which we did start doing after the Great Depression, which was even before Minsky wrote down some of his ideas.
But today, we CAN take his ideas further by recording what credit is being used FOR, and funnel the use of credit towards the production of goods and services and away from financial speculation.
What seems to burn us, every time, is debt used for financial speculation.
So, in aggregate, do far less of that.
And what seems to add to our collective material wealth is debt used to produce more goods and services.
So, in aggregate, do more of that.