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Money, the Commons, and Growth VT Law School Class 2. Gary Flomenhoft Gund Institute . “INVISIBLE BOOT”. “INVISIBLE BOOT”. system. “ MONEY SYSTEM AS A PURE PUBLIC GOOD”. Excludable. Non-Excludable. Open Access Regime:
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Money, the Commons, and GrowthVT Law SchoolClass 2 Gary Flomenhoft Gund Institute
“MONEY SYSTEM AS A PURE PUBLIC GOOD” Excludable Non-Excludable Open Access Regime: Oceanic fisheries, timberetc. from unprotected forests, waste absorption capacity, roads(congestible) Market Good: land, timber, fish once captured, farmed fish, waste absorption capacity? Rival} Potential market goodbut inefficient: patented information, pond Pure Public Good:climate stability, ozone layer, clean air/water/land, Biodiversity, information, habitat, life support functions, etc. Non-rival}
Alaska Model: Alaska Permanent Fund (Share of the commonwealth)
A Brief History of Exchange C= commodity M= money C-C’ = barter C-M-C’ = money as a medium of exchange M-C-M’ = mercantilism, money as a store of value and end in itself M-M’ = speculation, money as a way to redistribute real wealth
A Brief History of Exchange M-M’ = speculation, money as a way to redistribute real wealth • Speculative exchange in the global economy • Buying and selling of goods and services is about $30 trillion per year globally • Buying and selling of paper is about 1.5-2 trillion per day, or 500-700 trillion per year. • 95% speculation in paper! M-M’
A Brief History of Exchange “Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.” -John Maynard Keynes
WHO CREATES MONEY? (SEIGNORAGE) GOVT: $600 BILLION TOTAL: $8.6 TRILLION 600/8600 = 7% BY GOVT 100-7 = 93% BY BANKS!
HOW DO BANKS CREATE MONEY? INTEREST!
Magic of money creation FRACTIONAL RESERVE ~3-5% How the Federal reserve system creates a private banking monopoly cartel! PRIVATE LOCAL BANK FED RESERVE BANK LOANS $20,000 $20,000 ASSETS $1000 (5% OF $20,000 “on reserve”) PLUS INTEREST! INTEREST $1000 DEPOSIT Best scam going: privatization of huge public asset
3 PROBLEMS WITH BANK CREATION OF MONEY (GRECO) Artificial scarcity- debt grows with passage of time. Not all debtors can pay. Never enough of it to serve the purposes for which it is created Misallocated at the source- goes not to those who are most in need or who will use it most effectively, but to political power centers, well-connected insiders, and those already wealthy Systematically pumps wealth from poor and middle class to the wealthy.
MONEY AND GROWTH What grows faster, trees in the forest, cod in the ocean, or money in the stock market, or compound interest? Consider opportunity costs. How do you maximize profits?
Alternatives to bank money-govt. Money as a public good 100% reserve requirements and money creation through seignorage Government spends money on public goods Government issues money as basic income $90,000 interest free government loan to 18 year olds? Would it need to be a loan?
