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Home > Money and Credit Conversion > About Money > On monetary communism

On monetary communism

In the context of a simmering global debt crisis, various ideas on monetary reform are circulating, among them the so-called debt-free money theories. For example, in a March 2015 report commissioned by the Prime Minister of Iceland, Frosti Sigurjónsson advocates the introduction of a Sovereign Money System, in which “the amount of money in the economy is controlled directly by the Central Bank, preventing private banks from expanding it.”

During the 20th century, we have learned that centrally directed economies do not perform well compared to market economies. It is only in market economies, with the proper social constraints, that human creativity and productivity can develop fully. How, then, can we think that a centrally directed money supply will solve our problems?

Our planet is an immense reservoir of natural resources, real estate and human productivity. It is against this collateral that money is issued—an issuance that is an expression of human will. Any individual, any corporation naturally wishes to decide freely how much credit they want to issue, within the constraints of the collateral available to them and of their individual creditworthiness. And it is precisely because credit thus issued is an emanation of human willpower, and carries in itself the readiness to work and to produce, that it is the natural foundation for sound money.

Any attempts to deny this basic fact and to institute what amounts to monetary communism are bound to fail.