Seigniorage Reform: a monetary reform for the information age
Sepp Hasslberger noticed our entry on the “Creating New Money” report by the New Economics Foundation in our wiki, and gives a summary of the essential policy proposals contained in it.
Report: CREATING NEW MONEY: A monetary reform for the information age. By Joseph Huber & James Robertson. New Economics Foundation, 2008.
Sepp Hasslberger:
“The reform that is being proposed by Huber and Robertson is articulated in a very simple two steps:
1. Central banks should create the amount of new non-cash money (as well as cash) they decide is needed to increase the money supply, by crediting it to their governments as public revenue. Governments should then put it into circulation by spending it.
2. It should become infeasible and be made illegal for anyone else to create new money denominated in an official currency.
Commercial banks would thus be excluded from creating new credit as they do now, they would be limited to credit-broking and a financial intermediary role.
“We refer to this as “seigniorage reform”. While adapting to the new conditions of the Information Age, it will also restore the prerogative of the state to issue legal tender, and to capture as public revenue the seigniorage income that arises from issuing it. Originally, seigniorage arose from the minting and issuing of coins by monarchs and local rulers. Extending it to the creation of all official money will correct the anomaly that has grown up over the years, resulting today in 95% of new money being issued, not by governments as cash (coins and banknotes), but by commercial banks printing credit entries into the bank accounts of their customers in the form of interest-bearing loans.”
So the central principle is that new money should be created as debt-free public revenue and not as debt-constituting banking industry assets. The paper discusses various options for spending that money into the economy. The advantage of this versus earlier similar approaches to monetary reform is that the proposal is no-nonsense and doable, and the discussion leaves room for government decisions while clearly outlining what the important changes are that should be at the basis of a new system.
I recommend you download the paper for study. It brings a lot of clarity into a rather murky area that has been kept so for a long time by economists’ unwillingness to look at, and propose to change, the basics of how we create and tune money so it will best serve our individual and collective economic interests.”
