thanks Ralph, I hope Herman Daly will get to see your commentary!

Michel

First you repeat an idea which is popular amongst 100% reserve supporters namely: “Why should the public pay interest to the private banking sector to provide a medium of exchange that the government can provide at little or no cost?” The latter idea was promoted by Michael Rowbotham in his book “The Grip of Death”. It’s also promoted by Positive Money: a UK group that backs 100% reserve.

However, I suggest that when anyone borrows from a bank, the interest paid is purely and solely for the LOAN, not for the provision of a form of money. To illustrate, if a borrower were to borrow from a non-bank entity (i.e. an entity that DOES NOT create money when lending), the borrower would pay exactly the same rate of interest: the going rate.

I.e. when it comes to handling or transferring money, banks normally make a SEPARATE charge. E.g. it costs about £1 to clear a cheque in the UK, and banks charge in one way or another for doing this.

My next quibble is with the paragraph starting “Returning to domestic institutions….” where you say the Treasury would replace the Fed. I think a bit of baby has been thrown out with the bathwater here.

There IS SOME logic to independent central banks, namely that the decision to adjust aggregate demand is to some extent taken away from politicians. If the latter have complete control of AD, they are famous as we all know for boosting AD prior to elections, or pitching AD too high on a permanent basis.

Thus I suggest the decision as to how much new money to print and spend into circulation should be taken by some sort of independent committee of economists, like the “fiscal responsibility” committees that have sprung up in some countries recently, or the Bank of England’s Monetary Policy Committee.