I think it might be helpful to set this proposal in the context of th challenge posed by climate change ie our dysfunctional & debt ridden financial system is not fit for purpose of dealing with the challenge of climate change.

The investment needed in new techologies & new approaches to the way we create our energy, grow our food, transport ourselves etc will merely mean under the existing system more and more debt. Under these new proposals there will be no debt and the financial system will work to support the enormous challenge facing humanity – not frustrate ur efforts by scarcity of money”.

So these proposals are of their time and the challenge facing uis in the 21 st century whereas the old system was designed for the Industrial Revolution. Its now outdated & dysfunctional.

Good Luck!

Yes, that’s what happens at the moment – but it makes inflation (with all its drawbacks) a necessary part of the system. One of the primary functions of a monetary system is providing a ‘standard of value’ and if the medium of exchange is continuously losing value, at an unpredictable rate, that function is seriously impaired.

“…. there is an incentive for people to invest any spare money, as they will not earn interest on anything held in a Transaction Account”

But ‘interest’ is the mechanism by which money flows towards the rich. Their ability to charge it rests on their ability to take the medium of exchange out of circulation – i.e. their ability to hold, for their own private benefit, something which was created by the state, for the public benefit. In a system in which cash depreciates if it stops circulating, interest rates would rapidly drop to zero (and quite likely turn negative at times), because people would no longer be able to use it as a long-term store of value.

It’s very nice, for those who have it, to be able to hold surplus wealth in liquid form, but real wealth always has a ‘carrying cost’ – in a mature society that would be reflected in the monetary system.

As I said before, your proposed reform might be an improvement over the current system, but I think you’re over-estimating its benefits. The roots of monetary instability don’t just lie in how money is created; they lie primarily in the fact that, in its base form, the authorities have no control over it once it’s in the hands of the public.

With this reform there is an incentive for people to invest any spare money, as they will not earn interest on anything held in a Transaction Account. As Investment Account funds will be invested, all the money will in fact be circulating. If you take your money out of circulation, and, for instance, bury it, it will lose value every year through inflation, so there is a strong incentive in the system for people to invest rather than keeping money out of circulation.

Under the reform, the source of money that isn’t circulating would be the money held in investment accounts, which would then be used for loans, and would then circulate. Base money would therefore lose value if held in transaction accounts for a long period of time, as it would not be earning interest. All investment account money would in fact be circulating, until the demand for credit ceases, at which point money would no longer be flowing towards the rich, as they wouldn’t be earning interest, and the poor obviously wouldn’t need credit (and therefore probably wouldn’t be poor!).

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As long as we have a medium of exchange which (in its base form) can be taken out of circulation by anyone who has a surplus, then the rich can charge everybody else for the privilege of using it – which is one reason why money constantly flows towards the rich.

It also means that the total stock of money is always greater than the amount actually circulating – which is a source of instability. To make up for whatever isn’t circulating at its ‘natural’ rate, new money has to be created to prevent prices falling …. but then if a lot of the stagnant money comes back into circulation, there is suddenly too much …. and prices rise.

Until base money is created in a form which loses value if it stops circulating, I don’t see how the monetary authorities can ever have proper control of the monetary system. Your proposed reforms might be an improvement over the current system, but I think it’s still well short of what’s really needed.