Money Reform is Not Inflationary

 

Blogger Reference Link http://www.p2pfoundation.net/Transfinancial_Economics

This article appeared in Prosperity, April 2009

By Alistair McConnachie
Following the press coverage this year about “quantitative easing”, it is clear that the major obstacle against our Reform is fear that new money created by the State is always “inflationary”.
Certainly, new money can be inflationary. This is so when it is spent on the wrong thing – that is, when it is spent on short-term consumption, rather than long-term investment (education, training, research) and production, and when it is spent without regard to the 6 policy considerations listed here:
1. Control of Capital
If we pump in billions, but billions are taken out the country by individuals, corporations or financial institutions, then the economy is not benefiting in the long-term!
2. Control of Imports
On what is the new money in the economy being spent? If it’s on consumption, instead of investment and production, then all it may be doing is making the importers of cheap foreign goods wealthy! We will be giving people money to undermine the industry of their own country! Money will be leaving the country and doing nothing for the long-term health of the economy.
3. Control of Borders
If we allow the newly-created jobs to be filled by imported migrant workers, or even illegal immigrants, then there is no long-term benefit to the economy. There has been no long-term national investment in education, training and research. No new traineeships or jobs for the nation’s citizens have been created to ensure long-term productivity, and any wealth generated will eventually be taken out the country.
4. Control of Welfare
Money pumped into the economy via the Benefits system, for example a “Citizens Income” can backfire if you allow these benefits to be given to people who are not national citizens and who will take the money out the country. Similarly, unless conditions are in place to limit the Benefits to national citizens, then such a generous programme will simply encourage welfare immigration, making the matter worse.
5. Lower Taxes
Lower taxes enable people to keep more of their own money and – we trust – invest it for their long-term interests, (children’s education, enterprise, pension) which will also benefit the economy.
6. Encourage Savings
This enables people to have a cushion to see themselves – and the economy – through the bad times. This also ensures the nation’s banks have long-term healthy balance sheets. Savings can be encouraged by not penalising them via the tax system.

SPENT PROPERLY, INVESTMENT WILL LOWER COSTS!
The following was circulated by Stephen Zarlenga of the American Monetary Institute (www.monetary.org) on 4 March 2009:

Whether new money spent into circulation is inflationary or not will depend in large part on where and how it is spent. Direct it into warfare or pushing up asset prices as in a real estate or a stock market bubble, and it will be inflationary, at least in the areas into which it is directed, without production.
But direct it into creating goods and services, and it’s not necessarily inflationary because you are left with the goods and services, and they will tend to keep prices down.
Directed into infrastructure, it makes everyone in the society more efficient and effective, again putting pressure to keep any inflation down.
The classic example is the Erie Canal which lowered the cost of shipping goods from the East Coast to Buffalo (then the midwest) from over $100 per ton down to $9 or $11 per ton.
Look what good infrastructure would have saved in New Orleans! Or in Minneapolis, where people who had used that bridge before it fell down probably lost 2 hours a day getting back and forth to work. Even directed largely into research and it’s not necessarily inflationary when you consider that investing in NASA Space Agency has given us all the modern computerization/communications our lives have come to depend on. That just took a decade and a half.
In our American Monetary Act, the task of guarding against inflation is closely monitored and in the hands of the monetary authority. It doesn’t have the taxing authority, as it is presently written – that would require tremendous political alteration; but it does have the power to withhold substantial amounts of the money already created, out of circulation and to stop creating more if necessary.

Purchase back issues of Alistair McConnachie’s Prosperity money reform journal here
And here is a link to Alistair McConnachie’s Google Profile.

• Tweet

More Articles in this Section:

• How Publicly-Created, Debt-Free Money Addresses the Islamic Concern about Interest
• 4 Reasons Why we Can Trust the Bank of England to Create Money
• How We Got into this Situation and What We Can Do to Get Out
• Money Reform is Not Inflationary
• Money Reform Ideas Begin to Emerge
• Time to Put the Horse before the Cart Again: Time to put the Economy before the Banking System
• An Interview with Stephen Zarlenga
• Making the Case 2: Broadening Economic Management
• Making the Case 1: Why Debt is Bad
• Stopping the Debt Driver
• What Systemic Debt Means to You and Your Family
• Our Money Reform Brings Democracy and Freedom from Debt Slavery
• Policy Proposal: Fund the Interest on the National Debt
• Money Reform: A Progressive Innovation
• Keynes Without Debt
• A Briefing on Money Reform
• Publicly-Created Money: The Democratic Imperative
• A Summary of Seigniorage Reform
• Creating New Money – Some Frequently Asked Questions
• Making a Case for Money Reform
• Establish a State Bank
• It’s the People’s Money
• The Single Most Important Reform
• Mike Rowbotham Speaks at the House of Lords
• A Motion to Restore the Power of the Issue of Money to the Crown
• Economic Democracy: Fair Shares for All
• The Prosperity Proposal
• A Strategy for Victory