Tim Di Muzio, an associate professor in international relations and political economy at the University of Wollongong, Australia, has been studying global debt and money. As he noted in a full-length article posted at www.socred.org, a website managed by Canadian professor and monetary-reform author Oliver Heydorn, government actions in response to the COVID-19 outbreak have revealed a lot of societal weaknesses that otherwise were unknown or safe to ignore.
Chief among the weaknesses is the debt-based money system—which is often glossed over because most people wrongly see the monetary-financial system as an immovable “law of nature,” as opposed to being a particular system created by human beings that can be changed in particular ways. But before positive change can happen, a crisis of some kind usually is needed, unfortunately.
As Professor Di Muzio noted: “The current way of organizing a government’s finances is neither natural nor inevitable. During … nation-state formation, no wise Good Samaritan with the public interest at heart designed and imposed [the current] fiscal-monetary system. It is the product of historical power struggles and therefore, as a historical product, it can be changed.”
According to Di Muzio, COVID-19 has caused enough of a disruption to make a fundamental re-examination of monetary policy less taboo.
Getting to the root of the problem, he noted: “If no one borrowed, our capitalist economies would go into severe contraction because the vast majority of our money is created as debt.”
That matches what then-Fed Chairman Marriner Eccles told Congressman Wright Patman of Texas in 1941. Patman, who chaired the Currency Committee, asked how the Fed got the money to purchase two billion dollars-worth of government bonds in 1933.
Eccles: We created it.
Patman: Out of what?
Eccles: Out of the right to issue credit money.
Patman: And there is nothing behind it, is there, except our government’s credit?
Eccles: That is what our money system is. If there were no debts in our money system, there wouldn’t be any money.”
Di Muzio continued: “This is why financial elites were rattled during the global financial crisis [of 2007-2008]; they feared credit would dry up and credit is the lifeblood of global capitalism. But the fact that our democratic governments are not in control of producing the vast majority of new money leads to perverse outcomes for the majority of society.
Such bad outcomes have been brought into sharp focus during COVID-19.
“Suddenly, as if in a worldwide war, there is money for just about everything when, just months before the pandemic, our leaders bowed down to the gods of fiscal discipline [tight spending] and balanced budgets, or at least paid lip service to these concepts,” the professor observed.
As a proposed solution, Di Muzio is calling for “sovereign money.” He feels COVID-19 has created an opportunity in which all nations could get their financial house in order and democratize the monetary system so the benefits extend well beyond “the 1%,” or Super Rich, who were the only real beneficiaries of the 2007-2008 crisis.
He summarized: “In our present crisis, I would argue that those of us who want to see a better world for our families and future generations should consult the most progressive idea lying around: Sovereign Money … [I]n general, sovereign money is the idea that democratic governments should be in control of new money creation and that new money should be issued [debt-free] as a public credit or dividend based on the productivity of the economy (instead of borrowing at interest from the private banks).”
Accordingly, the one-time round of COVID-19 stimulus checks issued under the Trump administration could be made permanent, to fill the glaring gap created by having a roughly $20 trillion economy, with only about half of that being paid out in wages and salaries.
The Automatic Boost to Communities Act (HR 6553), sponsored by US Rep. Rashida Tlaib (D-Mich.), has some of the “stuff” to make that happen. Whatever the bill’s imperfections, readers might want to contact Congress and ask that the ABC Act be given an urgent and fair hearing. The fragile economy clearly needs the purchasing power, which would supplement work income and help the workforce take its nose off the grindstone — an especially helpful concept given the massive layoffs as of late.
Mark Anderson is a veteran journalist who divides his time between Texas and Michigan. Email him at truthhound2@yahoo.com. \
From The Progressive Populist, July 1-15, 2020
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