Debt-free money

Debt-free money is simply the creation of new money into the economic system. Governments already do this by the issuance of paper, and coin. However, this only makes up a small amount of the entire money supply. The rest of it is created by relending the money they hold in deposits. The method of credit creation is called fractional reserve banking. This is referred to by some as a debt based system unlike governments which can, and do create debt-free money already. Opposition to fractional reserve currency is not widely found amongst orthodox economics.

Also to be considered is the sovereignty movement in America that calls for the printing of debt-free money to make interest-free loans available to state and local governments for capital projects.

Debt-free money is notably discussed in the writings of Clifford Douglas who was the founder of Social Credit. He believed that some amount of debt-free money could be used and not repaid without causing serious inflation. This would reduce taxes until they were necessary to combat inflation.

Debt-free money has been created by governments during times of emergency (ie. wars, and revolutions). But afterwards money created by bank loans is the money in circulation that nations tax to advance their national programs and meet their operating and capital needs.[Citation needed]

Opponents of "debt currency" claim that super-computers could directly control the levels of inflation. Unlike the old limited wages, and incomes policies of the past it would be possible to allow for super-price flexibility essential for the present day capitalist system. If there is a persistent rise in price these could be automatically fined, or capped. Of course, companies, and individuals would be forewarned of this so that they can comply without penalty. Furthermore, a huge excess of debt-free money could be created even if it outstrips the production of goods, and services. It would be simply saved in deposit accounts which could be indexed-linked to inflation levels. As more, and more products, and services are created then this "dead" money can then be used, and become part of the active economic system. Orthodox monetary economics however, would consider these accounts, not being in circulation, as not being part of the money supply and thus, not money.

All this will allegedly give rise to the possibility of a non-tax, and indeed, an interest free economy. The social, economic, and political implications would be tremendous. Research, and development is currently being undertaken on this issue by Robert Searle, the originator of Transfinancial Economics. This is the most advanced version of what is now called Non-Taxation Monetary Reform. He claims this will be desirable to business as a) no taxes are paid b) loans would be interest free, and c) non-repayable business incentive grants (or BIG) would encourage greater growth.

Other people have had similar ideas about using debt-free money as a means of replacing taxation. Abba Lerner believed that this could be achieved with savings which could reduce the amount of money in circulation, and thus, allow governments to create new funds. However, if there is a rise in inflation taxation may be re-introduced temporarily. An engineer Theodore Thoren has used mathematics to apparently show that zero taxation is indeed possible. John DeSantis also believes in such ideas, and has set up a website to that effect.