Many people are getting tired of waiting for the Federal Reserve and the federal government to act, and one of them is a Minnesota resident named Byron Dale. Dale has drafted a bill called "the Minnesota Transportation Act" (MTA), which is scheduled for hearing before the Minnesota Senate Transportation Committee on March 25, 2008. If adopted, the bill could represent a major innovation in the way state and local projects are funded. It would mandate Minnesota's Transportation Department and State-chartered banks to enter into an agreement providing that the banks would advance funds for legislatively-approved transportation projects in the same way that banks make commercial loans – simply by "monetizing" the projects themselves. Banks routinely monetize the promissory notes of borrowers just by making book entries to a checking account and saying "you have a new deposit with us." (More on this below.)
Under the MTA, the state-chartered banks would create a pass-through account titled an Asset Monetization Account (AMA), monetizing the bid value of projects. This would be done in the same way banks that monetize collateral, except that the deposit would go on the bank's books as an asset rather than a liability, turning the bid value of the project into "money" without debt. This money would be debited electronically out of the AMA and credited to the State's Transportation Account (STA), from which it would then be debited out and credited in to the contractor's bank account in a state bank, according to the terms of the contract. The contractor would spend this money to complete the project. The money would flow into Minnesota's economy, where it would provide for better, safer, more durable roads and bridges. It would be used to purchase goods and services, benefiting business. It would go to pay taxes, helping the State balance its budget. And it would flow back into the state-chartered banks as interest on outstanding loans, reducing the number of loan defaults and improving the profits of the state-chartered banks. In this way, says Dale, the MTA would benefit every segment of society.
All of humanity's problems stem from man's inability to sit quietly in a room alone. - Blaise Pascal
Just curious, what is your background? You seem to have a lot of knowledge on these topics.
I think Byron Dale's intention is to try to find a way to get around the creation of money as debt.
Is it not problematic that bankers have the ability to conjure money into existence and loan it out at interest? It seems like this system not only necessitates a constantly expanding money supply (to account for repayment of interest) but it also leaves the real productive capacity of the economy at the mercy of a private cartel whose willingness to create money determines whether projects will or will not be undertaken. When the economy is booming, money flows easily leading to bubbles and when it is contracting money gets tight leading to under utilization of productive assets.
When one looks at the great depression, it is a head scratching event. How can a monetary system be so poorly designed that it allows a nation of immense productivity and resources to lie fallow while people hunt and peck for scraps on account of there not being enough of something (money) which can be conjured into existence at the stroke of a pen?
We have gone through many different types of money in our country's history. Libertarians would turn to the free banking era probably for answers. But is the solution really to have 15,000 different currencies all of which carry different values based on the perceived strength of the issuing institution? Sounds like chaos to me and a hinderance to commerce.
If we elect to have a system like today with a central bank, is there a way that it can be designed so as to be more robust? Is the creation of money as debt with interest a built in flaw that benefits a few while at the same time creating other negative consequences?
I think there is a movement today among many activists to address this " money as debt" system that we live under. Do you view this as an absurd idea or one that has real merit?
Last edited by doodle on Tue Apr 09, 2013 9:55 am, edited 1 time in total.
All of humanity's problems stem from man's inability to sit quietly in a room alone. - Blaise Pascal
I would agree with you doodle that the free banking solution would start out a mess. But hoping for a central solution is fraught with peril too; we may end up with the central system we currently have all over again. Elites have a tendency to be really good at tilting systems in their favor. You and I do it right now by taking advantage of the tax code to shelter huge amounts of wealth and potentially gain access to it before the "spirit of the law" would say we're supposed to… but I digress.
Here's my real issue:
Hoping for a central solution amounts to putting your faith in society's elites to devise something ideal, and working through the centralized political process to change things if it's not.
Hoping for a market solution amounts to putting your faith in society itself gradually evolving something "good enough" and working through the decentralized market process to change things if it's not.
Personally I would rather toss my hat with the market and accept the risk that it will start out messy and end up imperfect rather than take the risk that it will start and end terribly, with no hope for redress save for the broken, polarizing political process.
Last edited by Pointedstick on Tue Apr 09, 2013 11:25 am, edited 1 time in total.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
