Public Credit

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= as advocated by Brown: a non-debt money supply created as a public service, operated by and for the benefit of the people

Main Thesis


"My main focus is the need for monetary reform, which can achieve these important goals, among others –

– shift the money power from the creation of a national “debt supply” through parasitic bank loans – a power now held chiefly by Wall Street — to a non-debt money supply created as a public service, operated by and for the benefit of the people.

– provide public benefits including the elimination of the national debt and its interest payment of ~$400 billion/year.

– make the government the employer of last resort, creating full employment and falling prices due to wise investment of this labor (infrastructure, education, etc.).

– create credit at cost as a funding mechanism for public services/goods, with state-level credit creation an important option.

– provide total benefits of at least a trillion dollars a year that we can quickly calculate, and probably more." (


"How are you going to wrest Congress from the grip of Wall Street? Here’s my plan: (1) break up the “too big to fail” banks by freezing foreclosures – ForeclosureGate – something that is happening right now; and (2) eliminate the “too big to fail” mystique by setting up an alternative banking system, one run by the people for the people, involving a partnership of publicly-owned banks and local community banks." (



  1. Commonwealth of Australia Bank
  2. Guernsey's Monetary Experiment


Ellen Brown:

"I now turn to less controversial examples of countries that pulled themselves up by their own bootstraps simply by drawing on the credit power of the nation. My favorite one right at the moment is the Commonwealth Bank of Australia, but another was featured on NPR just this week. The clip, called “How Fake Money Saved Brazil,” describes how Brazil transformed a collapsed economy and money supply into the nation’s present state of vibrant health, just by issuing a new currency.

On Hitler’s remarkable popular following, I was simply reporting. He DID have a remarkable following in the early thirties, and they were not marching in lockstep for no reason. It was because he had turned an utterly destitute economy around; and he did it basically by putting people back to work, paid for with a new currency backed by nothing but the credit of the government and the people. Your argument that this necessarily leads to fascism is belied by history. It did not lead to fascism when employed in Australia in the first half of the 20th century, or in New Zealand or Canada during that period, or in Guernsey for the past 200 years, or in the American colonies, or in this recent case of Brazil." (

Chris Cook on why public credit is not inflationary

"I'm afraid you share a fundamental misconception in relation to the money created by banks, which is in fact a credit instrument, not a debt instrument.

When private banks create credit they create a virtual IOU as an accounting object. This interest-free IOU is a 'look-alike' of the interest-free IOU issued by Central Banks, and is routinely exchanged for such notes and coin in private hands when they are 'deposited' in the banks. It is currency created as an object or thing to which account owners have title.

When a private bank lends this currency into existence it is creating BOTH the currency AND the interest-bearing loan relationship with the borrower under a debt contract. The currency is not the debt, but a credit instrument identical to those issued by government.

The debt is created in exchange for the use over time of the currency. When a private bank spends currency into existence it creates virtual credit instruments, and 'deposits' these into the accounts of suppliers, staff, management or shareholders by crediting them with an entitlement to these virtual assets.

These credit instruments/IOUs are accepted by governments in payment of taxes, and that is what gives them their value. There is functionally no difference between an invoice issued by a private business for private services rendered, and a tax demand issued for government services rendered.

Likewise, the issue by government of an undated IOU redeemable against taxes is functionally equivalent to the issue by a private business of an undated IOU redeemable against goods and services. eg Air Miles, Store Loyalty points, or the well known DeliDollars.

Government IOUs differ from private ones in that they are made universally acceptable against debts by 'legal tender' laws aka by government fiat.

So in a nutshell, governments do not create debt when they 'print money' and spend it. Government IOUs are in fact credit instruments analogous to a form of undated non interest-bearing redeemable preference share.

Of course, these credit instruments must be issued and spent sensibly, and not in relation to existing assets, where they will cause inflation as the private banks demonstrated by creating the property bubble.

In my view public credit need not be inflationary if used to facilitate the circulation of goods and services and the creation of new productive assets, such as affordable housing; renewable energy and energy saving projects; infrastructure such as transport, schools and hospitals, and of course on training and education of the population to enable them to create these assets.

Such public credit creation should be professionally managed by service providers with a stake in the outcome, and accountably overseen by a Monetary Authority (as in Hong Kong, where there is no Central Bank). Once productive assets are created with public credit, they may then be refinanced by private investment in long term credit based upon their productive value (eg rental flows and energy flows).

In this way pension investment will enable the public credit used to create new assets to be retired and recycled. Likewise, the newly productive workforce will pay taxes, which again will retire and recycle the public credit which made the workforce productive." (via email, 2/2011)