FX MONETARY POLICIES QE-funded Debt Relief
In antiquity, as Prof. Michael Hudson observes, debts were routinely forgiven when a new ruler took the throne. Te rulers and their advisors knew that debt
at interest
grew faster than the money supply, and that debt relief was necessary to avoid economic collapse from an overwhelming debt overhang. Economic growth is arithmetic and can’t keep up with the exponential growth of debt growing at compound interest.
Consumers need that sort of debt relief today, but simply voiding out their debts as was done in antiquity will not work because the debts are not owed to the government. Tey are owed to banks and private investors who would have to bear the loss. Te alternative suggested by Keen and others is to fill the debt gap with a form of QE dropped not into bank reserve accounts but digitally into the bank accounts of the general public. Debtors could then use the money to pay down their debts. In fact Keen says it should go first to pay down debts. Non-debtors would receive a
28 FX TRADER MAGAZINE April - June 2019 cash injection.
Properly managed, these injections need not create inflation. (See my earlier article). Money is created as loans and extinguished when they are paid off,
a “universal basic income,” but better would be to call it a “national dividend” – something all citizens are entitled to equally, without regard to economic status or ability to work. It would serve as a safety net for people living paycheck to paycheck, but the larger purpose would be as economic policy to stimulate demand and p r o d uctiv it y, keeping
the
wheels of industry turning.
The money created through QE to date has not gone to the consuming public, where it must go to fill the gap between debt and the money available to repay it
so the money used to pay down debt would be extinguished along with the debt. And the cash injections not used to pay down debt would just help fill the gap between real and potential productivity, allowing demand and supply to rise together, keeping prices stable.
A regular injection of money into personal bank accounts has been called
Money might then indeed become a servant of humanity, t ran sf orme d from a tool of oppression into a means of securing common prosperity. But first
the central
bank needs to become a public servant. It needs to be made a public utility, responsive to the needs of the
people and the economy. Ellen Brown
President of the Public Banking Institute
Author of:
Web of Debt and
Te Public Bank Solution
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