The Root of the Problem — and the Solution. (Norman G. Kurland)

All of today’s economic gurus and policymakers understand the need for faster rates of sustainable growth.  Yet all of their strategies presume that we need either the rich or the government to finance growth.

They’re wrong.  The 99% do not need the money of either the rich or the State to grow our economy, rebuild our crumbling infrastructure, or finance new technologies.  We also need not waste our time in attacking or begging today’s ownership elite or politicians for more income redistribution or non-productive credit that will sink us further into the consumer debt trap.

What the 99% of humanity need to do is to organize, surface new leaders, and mobilize enough “people power” to demand the lifting of unjust barriers in our “social tools” to achieve both growth and full equality of ownership opportunities in new growth capital investments. This Just Third Way strategy requires no “enemies” and takes no property rights over existing productive capital from today’s ownership elite.

How money is created and regulated by the central bank and member commercial banks is the key to progress and more just and equal ownership opportunities. The 99% need to demand a comprehensive overhaul of the current monetary and tax systems of the world as proposed under the Capital Homestead Act.

The propertyless wage slaves, welfare slaves, charity slaves and consumer debt slaves among the 99% need to become aware that future growth does not depend on past savings. This fact was pointed out in 1935 by Dr. Harold Moulton, president of Brookings Institution for over 20 years, in his book The Formation of Capital.

Unfortunately, while Dr. Moulton disproved John Maynard Keynes’ past savings assumptions about how to finance economic growth, it has been Keynes’ ideas that have governed the monetary policies of the U.S., and that of most nations of the world, since then.

A New Look at Money and Credit

When a commercial bank finances new capital assets in a well-managed enterprises on “credit,” the bank creates a form of “money” that can be used by the enterprise to pay for new plant and equipment.  The bank can back up that loan with “past savings,” but, as Moulton points out, the economic system is better off when the bank uses “pure credit.”

The new money created by the bank in the form of a pure credit loan is expected to be repaid by “future savings.”  “Future savings” are the future profits the company is projected to generate as a result of the increased production and revenues produced by those newly added capital assets. To protect lenders and the banking system as a whole, capital credit insurance can cover the risk of default on any pure credit bank loan.

In other words, contrary to conventional thinking, financing new capital assets with the future earnings of that capital — and thereby creating new owners of those assets — is an idea whose time has come.

“Pure credit” (interest-free credit repaid by future savings/profits) would help build a more liberating and humanizing system beyond monopoly capitalism and socialism. This new system would provide the “social tools” (institutions, laws, and systems) for growing a just and balanced free enterprise economy within any country.  [The graphic overview describes the principles of the Just Third Way and how its monetary and credit system would finance sustainable, green growth and universal citizen access to ownership of productive capital.]

What’s the use in focusing all our frustrations and energies on ineffectual political leaders, corrupt Wall Street bankers or wage system thinkers wedded to the status quo?  They’re not the real problem.

The problem is in the system. The system was created by people and now must be re-created. The solution will emerge when the 99% wake up and demand that our institutions open up equal access to the pure credit and asset-backed money needed to build a true economic democracy and society of citizen-owners.


Norman G. Kurland, J.D. is President of the Center for Economic and Social Justice.

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