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Options for Reforming the Financial System

Shann Turnbull

The IUP Journal of Governance and Public Policy, 2011, vol. VI, issue 3, 7-34

Abstract: The paper presents four non-exclusive options for reforming the economy and the financial system. Three options reintroduce cost-carrying money as supported by Gesell1, Fisher2 and Keynes3, but in electronic form. One variant is a government issue redeemable into official money as proposed by the US Bankhead-Pettengill Bill of 1933. A second option is to allow private issues redeemable into official money as occurred during the Great Depression. The third option involves private issues convertible into specified commodities as occurred in Europe in the 1920s. The redemption of a currency into kilo-Watt-hours (kWh) of electricity generated from renewable resources provides a way to create “green” dollars with a stable unit of local value. Green cost-carrying money could make renewable energy cheaper than burning carbon. The fourth option involves using existing fiat money to reduce: (i) the cost of seigniorage; (ii) interest on government debt; (iii) size of organisations considered too big to fail; (iv) tax incentives to favour equity rather than debt; (v) the different types of risks accepted by financial institutions; and (vi) ability of banks and “shadow” banks to create credit to finance derivatives many times greater than the GDP of the global economy.

Date: 2011
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