Two issues I will take with the Tedx talk a friend posted to Facebook a few days ago about the global monetary system is that:
a) Yes, the banks create fiat currency to finance loans/innovation seen as profitable and repayable. They don’t grant €100K to every potential furniture maker or web developer who may happen along. They finance good risks. The bet on sure things and by so doing they increase the wealth of the economy by collaborating with creative minds AKA entrepreneurs. The Tedx talk pretends that banks provide loans of fiat currency with no discrimination or discernment, with no consideration of the viability of the proposed enterprise. Even children know that banks don’t simply give out money for the asking. The talk also ignores the fact that the “growth” nurtured by the monetary system is the growth of individuals’ livelihoods, the financing of children’s’ educations, the building of homes, the replacement of furnaces, roofs, worn out clothes, food for families. And this growth is also, at its fundament, employment for a growing population.
b) The new algorithm proposed in the talk would provide everyone with a subsistence income but it would provide no seed money for major growth projects. If someone had an idea for a new furniture business, they would not be able to go to a bank and borrow €100K to purchase materials, rent manufacturing space, hire an apprentice . . . the idea would never leave the basement workshop. The result of such a monetary system would necessarily be stagnation at a “contented” level of well-being only slightly above the medieval. A healthy herd. Forever. No advancement. No improvement. No toys. Certainly no new toys. Nothing at all new, except rarely. As “excess” savings are explicitly to be clawed back by the totalitarian government of this hypothetical command economy, the furniture maker and the web developer and every other business, small or large would never be able to find the capital to start their businesses! All the little shops we love so much would be impossible.
What a terrifying, colourless, Orwellian future!
Behind the Hedge 