You can make a lot of criticisms of the economic system as a whole. And many of them will be valid criticisms. However, that does not in any way make a case that money and banking are the, or one of, the root causes of the problem.
Money as it is utilised in the current international economic system is the root cause of the problem, without a shadow of a doubt.
Despite my sarcasm, you do make a few good points and have a few true claims in your post. However, you would benefit by making the distinction between "money" and "credit," also between "deposits" and "reserves". There is certainly far more credit in the world than there is money, and I don't see the problem with that.
Deflation can indeed cause defaults as the real value of debt, and deflation is indeed usually not an appealing prospect. There we are in substantive agreement.
The problem with that is private companies are profiting from a necessary economic function, unnecessarily. Look at it like this: why should we be paying interest at all, if all money is created without actually being backed by anything tangible (in essence)? Seeing as loans are in the most part created out of thin air (and in some cases entirely out of thin air), what's the point in having banks (in the sense that you and I know them) any more? None, I tell you.
Government can provide finance to business and people. And people can either save wealth securely in a 'bank', or invest it at risk in a venture, or spend it, as they see fit. Just like we do now. Only difference: money creation is taken away from private mostly privileged individuals and handed to the people, the collective. Yes, it's true the very rich won't benefit from getting lots of interest by simply keeping it in a bank. And so what? This will allow for a healthy economy where there is high velocity, high entrepreneurship and investment. (Although we could still guarantee a certain amount, or even larger amount, than we do now and allow banks to invest like they do now, of course, and therefore still provide interest to savers just like now) In any case inflation would be significantly lower than what is achievable in our current system and, as well, I would imagine more manipulatable than at present.
Plus we will have the benefit of interest repayments of nil. The UK currently pays over 30 billion a year in interest repayments to private individuals. Why are we paying banks (the largest buyers of sovereign bonds) for making money by typing into a computer, selling it to us at a profit and then buying our debt with that? This is madness to the highest degree!
And please don't say government can't be trusted to control money creation directly because you might as well argue we hand over the streets to the cosa nostra and I could argue you were an anarchist by the eternal right of logic. We have essentially chosen the far, far worse of two evils as our system!
Interest does more damage than just demanding more from all of us on a personal and federal level. Think about it, as money is destroyed when debt is paid back, the interest repayment to the bank has to come from an ever dwindling supply of cash in the system, and if you follow this logic to its inevitable conclusion you realize more debt is required somewhere in the system to service the old interest repayments or else the debtor goes defaults and bye-bye. As we get wealthier, someone is getting in debt. More people need to be in the red than in the black, forever, in the current system because when we spend money in our bank account, someone is getting into debt for us to do that.
That is why we need exponential growth, year after year. This is where our current unsustainability truly stems from. Hey, maybe I'm looking too deep into this, but to me the more I read about economics, the more this gets clearer. The system is a vast ponzi-scheme.
Oh and guys, please don't pick on one thing in my argument and dismiss the rest. I'll admit maybe I'm wrong at various points and I would appreciate your opinion, but it sends me crazy when you dismiss everything out of hand without taking the whole thing in.
Here's another challenging question:
Since market monetarist are generally positively disposed towards the efficient market hypothesis, does it follow that they take the rise in gold price as an indication that inflation will take off at some point? How do they resolve the contradiction between this and the relatively tame indication of expected inflation from things such as the TIPS spreads?
From what I've read gold is artificially lower in value than it should be through fractional reserve banking of gold reserves. Gold bonds are not backed 1 for 1 with gold bars more like 10 bonds for 1 bar of gold. I have read that the true quantity of gold kept in national central banks is a closely guarded secret. This is because most of the gold in the world is kept in one bank, apparentlys New York, where the world's ultra-rich (Rothschilds, et al) control the value of gold so that they have ultimate control over currencies (they are able to raise and lower the value of currencies by affecting the price of gold). Look it up there's quite a lot out there about this when I last checked.
