Author : Derryl Hermanutz
Publisher : CreateSpace Independent Publishing Platform
Total Pages : 108
Governments and central banks do not issue their economys money supply as debt-free "fiat money". Commercial banks create the money supply of nations as repayable loans of bank credit: credit-money owed as repayment debt.A credit-debt money system cannot accommodate long-term money-saving. Saving Crashes the system.Banks create money and debt by expanding their balance sheets: issuing new deposit liabilities to purchase new interest-bearing debt-assets. The banks new deposit liability is the borrowers new spendable deposit account "money". Bank-issued deposit liabilities are the original source of the economys "money supply". All of which is owed back to banks as debtors loan account debts.A bank loan creates new money and new debt. Repaying the loan uncreates -- "extinguishes" -- the money and the debt in a voluntary balance sheet reduction: a credit/debt paydown.Savings/debts imbalances build up within the credit-debt money supply. Debtors owe all the debts and cant earn their borrowed money back because savers "have" most of the money and arent "spending it"; which makes debtors debts arithmetically unpayable, which makes creditor-banks credits arithmetically uncollectable. Instead of voluntary credit/debt "paydowns", banks uncollectable credits and debtors unpayable debts are extinguished in involuntary debtor and bank "bankruptcies": credit-debt writedowns. "Bail-ins" involuntarily use depositors savings to forestall -- put off -- their banks bankruptcy. Resolution-by-bankruptcy "cleans the slates" of all the unpayable debts, uncollectable credits, depositors credit-money savings, and bankrupt banks.The system works in long supercycles of credit-expansion recovery and prosperity during which debtors debts are increasing equally as the economys money supply and savers savings are increasing. Credit/debt expansion rises to a peak then ends in mass debtor defaults and bank bankruptcies, monetary system Collapse, and debt deflation Depression; like 1914-1939; and like 1939-2008 and ongoing. World War spends the bankrupt world out of Collapse and Depression with renewed bank credit expansion to debt-finance government deficit-spending on War production and War waging.Debtor default and bankruptcy, bankrupts creditor-banks. Billions of savers credit-money savings were "extinguished" in the 1930s end-of-supercycle bank bankruptcies. Today trillions of depositors savings would be transferred to banks as depositor bail-ins to forestall bank bankruptcies; and ultimately extinguished in the bank bankruptcies.But this kind of Collapse is not inevitable. Today central bank liquidity injections and regulatory forbearance are forestalling the bank bankruptcies: the problem of creditor-banks uncollectable credits. But forestalling is not preventing, and the problem of debtors unpayable debts needs to be addressed. Governments and their central banks could -- but presently do not -- create positive sum debt-free fiat money, and add it as a supplement into their zero sum credit-debt money supply. By adding monthly Basic Income deposits of newly created debt-free fiat money into citizen bank accounts, debtors unpayable debts to banks become payable, which makes creditor-banks uncollectable credits collectable, which prevents the bail-ins and bankruptcies that extinguish depositors savings.Bailouts reduce taxpayers money to increase banks money. Bail-ins and bankruptcies reduce savers savings equally as they reduce debtors -- and debtor banks -- unpayable debts owed to their creditors. A fiat money-funded Basic Income is an additive solution rather than a reductive solution to "resolution" of the problem of creditors uncollectable credits owed as debtors unpayable debts.A fiat money-funded Basic Income is a macro monetary-fiscal policy alternative to bail-ins, bankruptcies, and ongoing Collapse of the credit-debt money supply system: at no cost to savers or taxpayers.
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