WHY EVEN THE FINANCIAL TIMES’ MOST INFLUENTIAL COMMENTATOR MARTIN WOLF WOULD SUPPORT THE NEW GREEK GOVERNMENT PRINTING ITS OWN MONEY
FLASHBACK TO APRIL 2014 WHEN MARTIN WOLF ARGUED THAT CREATING PRIVATE MONEY SHOULD BE “TERMINATED”
GREECE CAN AND SHOULD PRINT ITS OWN MONEY IMMEDIATELY, GREEK CENTRAL BANK SHOULD START TO PRINT OWN EUROS, STOP ALL DEBT PAYMENTS
Strip private banks of their power to create money
By Martin Wolf, Financial Times, April 24, 2014
The giant hole at the heart of our market economies needs to be plugged
“…creating private money is … the source of much of the instability of our economies. It could – and should – be terminated.
Banks create deposits as a byproduct of their lending. In the UK, such deposits make up about 97 per cent of the money supply.
A maximum response would be to give the state a monopoly on money creation. One of the most important such proposals was in the Chicago Plan, advanced in the 1930s by, among others, a great economist, Irving Fisher….A 2012 study by International Monetary Fund staff suggests this plan could work well.
…central bank would create new money as needed to promote non-inflationary growth. Decisions on money creation would, as now, be taken by a committee independent of government.
Finally, the new money would be injected into the economy in four possible ways: to finance government spending, in place of taxes or borrowing; to make direct payments to citizens; to redeem outstanding debts, public or private; or to make new loans through banks or other intermediaries. All such mechanisms could (and should) be made as transparent as one might wish.
The transition to a system in which money creation is separated from… (private banks)… would bring huge advantages. It would be possible to increase the money supply…(and) transfer… the benefits from creating money….to the public….If the central bank decided this could grow at 5 per cent a year, the government could run a fiscal deficit of 4 per cent of GDP without borrowing or taxing. The right might decide to cut taxes, the left to raise spending. The choice would be political, as it should be.
This is a giant hole at the heart of our market economies. ….. the provision of money…(is)… rightly a function of the state.”