Monetary reform

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Monetary reform is a government policy reform centred on changes in banking, central banks, money supply, and monetary policy. It affects how money is created and destroyed, and what constitutes a reliable measure of economic growth and measures of national income.

In the United States, the Federal Reserve and Department of the Treasury are responsible for these functions. Thus the term Treasury reform, which is a synonym but one that applies only to such reform of the US dollar.

In recent years debates have focused on improving the use of currency. These debates have been linked to some extent with the valuation of non-traded goods and social outcomes.

While ensuring the independence from government of the central bank or the creation of a currency board are practical monetary reforms that many countries have implemented (e.g. Bank of England) to combat inflation or currency speculation, many suggest that more radical monetary reform can assist in sweeping economic or social changes.

Many prominent economists have criticised the existing global financial institutions like the World Bank and International Monetary Fund and their policies regarding money supply, banks and debt in developing nations.

Many people criticize the fact that governments pay interest for the use of their own money. This leaves the state of a nation's economy susceptible to the interests of private bankers who control the issuance of money through fractional reserve banking. Many prominent Americans such as Thomas Jefferson, James Madison, Andrew Jackson, Martin Van Buren, Abraham Lincoln, and William Jennings Bryan have favored government issued money. It follows that if a government issues the money, they earn interest instead of having to pay interest, thus circumventing the need for an income tax and not having to accumulate a national debt. Some Governments have experimented in the past with government-created money independent of a bank. The American Colonies used this "Colonial Scrip" system prior to the Revolution, much to the praise of Benjamin Franklin. Franklin even believed that it was the efforts of the English bankers to revoke this government-issued money that caused the Revolution. Abraham Lincoln used interest-free money created by the government to help the Union win the American Civil War. Lincoln called these 'Greenbacks' "the greatest blessing the people of this republic ever had." In America and Britain, however, government-issued money has never been able to gain enough momentum to become an established institution because of the large degree of influence that private bankers have in governments. There is also the Island of Guernsey in the Channel Islands which creates its own money to supplement the British Pound.

There is also widespread criticism of the role of money GDP as a method of measuring well-being rather than methods based on human development theory. See measures of national income.

Some go further and suggest that wholesale reform of money and currency, based on ideas from green economics or Natural Capitalism would be beneficial. These include the ideas of soft currency, barter and the local service economy.

Many theorists (e.g. Robert Mundell) see a role for global monetary reform as part of a system of global institutions alongside the United Nations to provide global ecological management and move towards world peace.

Some (e.g. Henry Liu) argue that monetary reform is an important part of a move towards post-autistic economics.

While most mainstream economists favour monetary reforms to reduce inflation and currency risk and to increase efficiency in the allocation of financial capital, the idea of all-encompassing reform for green or peace objectives is typically espoused by those on the left-wing of the subject and those associated with the anti-globalization movement.

Still other radical reform proposals (with utopian objectives) emphasize monetary, tax and capital budget reform which empowers government to direct its economy toward solutions to economic problems markets do not solve.

[edit] See also

• financial capital
• creditary economics
• Debt-based monetary system
• Debt-free money
• Monetarism
• Social Credit