2 thoughts on “Let’s not ban private money”

  1. Posted 07/05/2014 at 13:32 | Permalink

    Great article, Kevin.

    Isn’t the whole point, to the statists, to subvert the banking system to become nothing more than a means of financing the government and its chronically rising deficits?

  2. Posted 12/05/2014 at 12:17 | Permalink

    I criticised one of these 100% fiat money schemes four years ago. Little has changed since, Wolf is recommending something similar.

    http://www.cobdencentre.org/2010/06/a-problem-with-the-baxendale-plan/

    Kevin Dowd writes: “Bank lending to the private sector would go to zero and banks would then exist primarily to finance government.”

    I see this problem a little differently. Banks provide many services to account holders, those services are partly funded by fees charged to those customers, but they’re mainly funded by interest from debtors. In the proposal discussed government bonds would take the place of commercial debtors. They’re unlikely to pay such good rates. As a result banks would have to charge much higher fees to their customers than they do now. The country’s government debt isn’t magiced away, rather bank account holders would pay it gradually thorough higher fees.

    Also, great incentives exist to create a functioning credit market. If the state were to put roadblocks in the way then the private sector would work very quickly to remove them. Bonds would quickly replace bank accounts as the normal way to save, and the source of funding for credit. It wouldn’t be very long until someone invents a “bond” that matures and roles-over every day or every week and is effectively the same as a bank account.

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