Most people do not know that we increase the amount of money in society by the banks lending money they do not have. That is, the banks – including the Reserve Bank – make loans of money even though they do not have it on deposit. As soon as they create the loan the bank deposits the money in the borrowers bank account and so the money supply increases. The reason we increase the money supply this way is that it is assumed that banks will only lend money to people or organisations who will pay it back and to pay it back it is assumed you have to make the money work for you. While this is good in theory in practice it leads inevitably to credit crises, inflation and the so called business cycle.
There is a way of increasing the money supply that creates money after we have built an asset that will pay back the money. On Wednesday I am presenting to the ACT Legislative Assembly Committee on Climate Change such a proposal. We can increase the money supply by building infrastructure that will reduce greenhouse gas concentrations while at the same time returning a handsome profit.
Find out more about this idea at http://stableproductivemoney.wordpress.com/2009/04/10/presentation-to-the-act-legislative-assembly/ and see how we can reduce the ACT net greenhouse gas emissions to zero by 2020 without requiring the community or the government to go into debt and with a decrease in the cost of energy.
The same method can be used to build any productive infrastructure that has difficulty finding funding because the benefits accrue mainly to the community not to business or governments funding the infrastructure through loans. For example it can be used to fund and build a light rail system in the ACT or to build our water infrastructure so that we have no need for water restrictions.
Once we start to increase the money supply using this approach we will halt the tendency for lenders to inadvertently encourage asset bubbles and we will reduce inflation.
If you think it is an idea worth pursuing come along to the presentation or send your support to firstname.lastname@example.org
If you can see flaws in the idea then comment here.