Beyond the Bailout: Convert to Debt-Free Money

By David Korten | Website

Reprinted from "Sustainable Happiness," the Winter 2009 YES! Magazine
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This brings us to the most important reform of all: changing the way we create money. One key to Wall Street’s power and to the inherent instability of the financial system is the current practice of private banks creating money with a simple bookkeeping entry each time they make a loan. Because the bookkeeping entry creates only the principal, but not the interest, unless the economy grows fast enough to generate sufficient demand for loans to create the new money required to make the interest payments on the previous loans, debts go into default and the financial system and the economy collapse. The demand for repayment with interest of nearly every dollar in circulation virtually assures the economy will fail unless GDP and inequality are constantly growing.

Leading economists and political figures, including Thomas Jefferson and Benjamin Franklin, have advocated replacing the system of bank-created debt-money with an alternative system in which the government creates debt-free money by spending it into existence to fund public goods like infrastructure or education. The suggestion that government create money with the stroke of a pen sets off all sorts of alarm bells about runaway inflation. The primary change, however, would simply be that the entry is made by government for a public good rather than by a private bank for private profit. Ellen Hodgson Brown’s The Web of Debt is an informative current review of issues and options.

Privately issued debt-money adds to debt and taxes and bears major responsibility for environmental destruction because it requires infinite growth, extreme inequality because it assures an upward flow of wealth from Main Street to Wall Street, and economic instability because issuing loans to fuel reckless speculation generates handsome short-term bank profits. Publicly issued debt-free money would greatly reduce debt, taxes, and environmental harm, be more equitable, and increase financial stability. In a democracy, it should be ours to choose.

This is an opportune moment to move forward an agenda to replace the failed money-serving institutions of our present economy with the institutions of a new economy dedicated to serving life. The idea that we humans might put life ahead of money may seem unrealistic and contrary to our human nature. Surely, that is what our prevailing cultural story would have us believe. That story, however, has no more validity than the story that Wall Street speculation serves a higher public purpose. As I noted in my article We are Hard-Wired to Care and Connect, scientists have found that the human brain is hard-wired for compassion and connection.

My many years living abroad in Africa, Latin America, and Asia taught me that people of every race, religion, and nationality the world over share a dream of a world of happy, healthy children, families, and communities living in vibrant, healthy, natural environments. When they see an opportunity, people are willing to make extraordinary investments of their life energy in an effort to actualize this dream, as regularly documented in the pages of YES! Liberated from the predatory grip of Wall Street, this long-suppressed energy has the potential to transform our relationships with one another and Earth, and to realize our shared dream of a world that works for all.

Written by eldering at The Great Turning

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