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FX MONETARY POLICIES


accessible, and other projects. The federal government can help by, for example,


responsibility


banks, setting environmental or social


capitalizing public standards


for loan programs, or tying tax incentives to participating in public bank loans.”


UK professor Richard Murphy adds another role for the central bank – as the issuer of new money in the form of “Green Infrastructure Quantitative


Easing.” Murphy,


who was a member of the original 2008 UK Green New Deal Group, explains:


“All QE works by the [central bank] buying debt issued by the government or other bodies using money that it, quite literally, creates out of thin air. … [T]his money creation process is … what happens every time a bank makes a loan. All that is unusual is that we are suggesting that the funds created by the [central bank] using this process be used to buy back debt that is due by the government in one of its many forms, meaning that it is effectively canceled.”


The invariable objection to that solution is that it would act as an inf lationary force driving up prices, but as argued in my earlier article here, this need not be the case. There is a chronic gap between debt and the money available to repay it that actually needs to be filled with new money


56 FX TRADER MAGAZINE April - June 2019


every year to avoid a “balance sheet recession.” As UK Prof. Mary Mellor formulates the problem in “Debt or Democracy (2016)”, page 42:


“A major contradiction of tying money supply to debt is that the creators of the money always want more money back than they have issued. Debt-based money must be continually repaid with interest. As money is continually being repaid, new debt must be being generated if the money supply is to be maintained.… This builds a growth dynamic into the money supply that would frustrate the aims of those who seek to achieve a more socially and ecologically sustainable economy.”


In addition to interest, says Mellor, there is the problem that bankers


and other rich people


generally do not return their profits to local economies. Unlike public banks, which must use their profits for local needs, the wealthy hoard their money, invest it in the speculative markets, hide it in offshore tax havens, or send it abroad.


To avoid the cyclical booms and busts that have routinely devastated the US economy, this missing money needs to be replaced; and if the new money is used to pay down debt, it will be extinguished along with the debt, leaving the overall money supply


A network of public banks including a central bank operated as a public utility could similarly fund a US Green New Deal – without


raising taxes, driving


up the federal debt, or inf lating prices.


Ellen Brown


President of the Public Banking Institute


Author of:


Web of Debt and


Te Public Bank Solution


and the inflation rate unchanged. If too much money is added to the economy, it can always be taxed back; but as MMTers note, we are a long way from the full productive capacity that would “overheat” the economy today. Murphy writes of his Green QE proposal:


“The QE program that was put in place between 2009 and 2012 had just one central purpose, which was to refinance the City of London and its banks.… What we are suggesting is a smaller programme … to kickstart the UK economy by investing in all those things that we would wish our children to inherit whilst creating the opportunities for everyone in every city,


town, village and


hamlet in the UK to undertake meaningful and appropriately paid work.”


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