Public vs Private Finance and The Need For a New Monetary Paradigm

KZ: Most historians of the United States (and before) agree that Alexander Hamilton saved the United States after the Revolution through his changes to the US economy. One of these changes was establishment of a US National (public) bank. Modeled along the lines of the Bank of England, a central bank would help make the new nation’s economy dynamic through a more stable paper currency. The bank would also provide the financing needed for American businesses to operate and to make them independent of foreign competition. With a public bank in place there was little need for a US private financial sector except to foment speculation in the value of money and money surrogates such as stocks, bonds, etc. So, I do not agree with the position in this post that, “The relevant dividing line does not run between the real economy and the financial economy, rather between the two hemispheres of the financial economy: on the one hand those areas that contribute to financing the real economy, on the other hand those areas that do not contribute to financing economic output. In short, the dividing line runs between GDP finance and non-GDP finance.” It is my view that the relevant dividing line in terms of finance is between public financing of American commerce through a public national bank and the financing of that commerce through private sources that always run the risk of giving into the temptation to finance for the profit of the private financialists rather than the welfare of the nation’s economy. Simply put the economic welfare of the nation must never be allowed to rest on the gaming club of private financial investors. If the national bank can find a use for such investors and can control them sufficiently to ensure this welfare is protected is the only circumstance in which their financial input into American commerce should ever be allowed. It should never be the intent of the American economy to support the recreation and gambling of groups of lay about louts.

Me: Ken,
Correct, except you can’t cut off every one of the heads of the hydras at the same time and even if you do each still grows two more out of the stub. It’s the problem/lesson of palliative reforms expressed. Private finance must not be allowed to create money, only aggregate already created amounts of it. And even then such aggregative funds must be firmly and ethically regulated. Public finance must become ascendant.

And even then one still hasn’t addressed the philosophical and temporal universe problem of the current monetary and financial paradigm of Debt Only. The new paradigm of Monetary Gifting must be integrated into that current monopolistic system. No more endlessly fighting the hydra on merely the temporal level. Change its philosophical and ethical nature….and turn the tables on the problem and its elites.

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