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By M. Samuel Anderson
Tim Di Muzio is an Associate Professor in International Relations and Political Economy at the University of Wollongong and Associate at the Center for Advanced International Relations Theory, University of Sussex. While his research examines economic inequality and energy policy, most recently he has been studying global debt and money.
As Di Muzio noted in a full-length article posted at www.socred.org, a website managed by Canadian professor and monetary-reform author Oliver Heydorn, the government actions in response to the Covid-19 outbreak have revealed a lot of weaknesses in society that otherwise were unknown or safe to ignore. In other words, as the Covid-19 “flood waters” begin to recede, we may see things that weren’t visible or noticeable before Covid-19.
One of those weaknesses is the debt-based money system—which is often ignored because most people see the monetary-financial system as an unchangeable, immovable “law of nature” handed down by God—as opposed to being a particular system created by human beings that can be changed for the better by human beings.
But before positive change can happen, sometimes a crisis of some kind is needed, unfortunately.
As Professor Di Muzio noted: “The current way of organizing a government’s finances is neither natural nor inevitable. During the course of nation-state formation, no wise Good Samaritan with the public interest at heart designed and imposed [the current] fiscal-monetary system. It is the product of historical power struggles and therefore, as a historical product, it can be changed . . . . The present fiscal system was not handed down by God.”
He added, “There are real and practical alternatives to mounting fiscal deficits that will only contribute to further policies detrimental to the health of our economy and our society.”
Interestingly, Di Muzio outlines how Covid-19 has caused enough of a disruption to make discussion of monetary policy less taboo and more prone to be changed.
He noted: “If no one borrowed, our capitalist economies would go into severe contraction because the vast majority of our money is created as debt.”
He continued: “This is why financial elites were rattled during the global financial crisis [of 2007-2008]; they feared credit would dry up and credit is the lifeblood of global capitalism. But the fact that our democratic governments are not in control of producing the vast majority of new money leads to perverse outcomes for the majority of society.”
He said such bad outcomes have been brought into sharp focus during crises such as COVID-19.
“Suddenly, as if in a worldwide war, there is money for just about everything when, just months before the pandemic, our leaders bowed down to the gods of fiscal discipline [tight spending] and balanced budgets – or at least paid lip service to these concepts,” the professor observed.
Di Muzio’s full-length article linked above and below outlines the three ways that governments borrow money at interest, rather than creating their own interest-free.
He concludes by calling for “sovereign money,” which means he sees Covid-19 as having created an opportunity in which all nations, Canada, the U.S., Australia and beyond, can get their financial house in order and democratize the monetary system so the benefits extend well beyond “the 1%,” or Super Rich, who were the only real beneficiaries of the 2007-2008 crisis.
As Di Muzio summarized: “In our present crisis, I would argue that those of us who want to see a better world for our families and future generations should consult the most progressive idea ‘lying around’: Sovereign Money . . . . [I]n general, sovereign money is the idea that democratic governments should be in control of new money creation and that new money should be issued as a public credit or dividend based on the productivity of the economy.”
He also points out that because governments don’t directly create their own money free of debt, and instead borrow from commercial banks, central banks or the financial markets, they have to make constant adjustments whenever tax receipts fall short of government spending (which is what brings about the perceived need to borrow money in the first place ). Another way of raising money besides borrowing and taxing is for governments to sell off public assets and privatize them—water systems, electrical power systems, converting freeways into tollways operated by private companies, etc.
That means that as the economy grows, the people should be treated like shareholders who receive regular dividends (grants of money not counted as debt to supplement work income), not as debt-holders who must toil their whole lives to pay most of the taxes to the government while shouldering burdensome interest charges on nonstop debts for credit cards, home mortgages, car loans, etc.
Outside of what Di Muzio sees as “the environmental emergency” [climate change] and the COVID-19 outbreak, “the biggest challenges of today are the dearth [lack] of public money, the creation of private money as debt, and the need to bring forth an economic system that works in the interests of all, not just the 1% and their obsession with their differential rates of return,” he concluded.
AWN (Awakening News) would add that, according to our experiences, the monetary and debt issues explained by Professor Di Muzio might help explain why Orillia, Ontario sold off its electrical distribution system, and why Ontario and other Canadian provinces, and several states in the U.S., are so keen on maintaining and expanding a casino culture. Casinos addict the state to the tax revenue from the slot machines and other sources within gambling houses, although only individual citizens addicted to gambling suffer the consequences (alcoholism, drug addiction, bankruptcy, divorce, resorting to crime etc.). Nevertheless, tax revenue from casinos can help offset the government’s need to borrow more money or raise tax rates whenever revenues fall short of government expenses (which they most often do).
Readers are urged to check out Di Muzio’s full-length article for more details. Again, the link to that article is: https://www.socred.org/s-c-action/social-credit-views/covid-19-capitalism-neoliberal-debt-the-need-for-sovereign-money