The Instigator
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The Contender
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15 Points

There is no better alternative for society than debt free currency

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Voting Style: Open Point System: 7 Point
Started: 8/3/2009 Category: Politics
Updated: 7 years ago Status: Voting Period
Viewed: 3,142 times Debate No: 9118
Debate Rounds (3)
Comments (26)
Votes (6)




For the sake of this debate, the issue here is that debt free currency, created by fiat, produces no national debt, allowing a society maximum flexibility in organizing its resources for the benefit of the majority.

There are two, basic monetary systems which nations might adopt. The first, is a system where money - legal tender is created by a public authority, and allocated for the public good without an interest charge. [debt free currency]

The second, a private entity obtains the authority from a public entity to create money - legal tender and charges interest on the use of that legal tender. [debt obligation]

That is, when currency is issued by a private central bank on behalf of the public authority, principle and interest charges must be reduced by payments obtained from either additional borrowing and/or taxes.

Issuance of fiat money, through a private entity, therefore, creates an economic and financial cost to society manifested by the accumulation of debt and debt service (the ravages of compound interest) as well as opportunity costs inherent in having to make less than optimal choices for the allocation of scarce resources. Choices that amount to providing more or less transportation, public infrastructure, education, and defense, etc. Competing priorities dependent upon the level of debt a society can absorb, are seldom, fully funded.

In a debt free currency world all public sector programs could be funded without concern for debt ceilings. Constraints would be primarily those related to effectiveness, and capacity to fund recurrent costs for the maintenance of public sector services and infrastructure.

In the U.S., a debt free currency system would function to relieve the nation of its current decent into the abyss of debt by monetizing all public debt and then liquidating all debt instruments, never to issue them again, thereby, eliminating the threat of inflation since the supply of money would then be unchanged. Conventional monetary policy and systems do not liquidate debt instruments once redeemed.

Historically, this nation experienced real growth under the mantle of debt free currency when Abraham Lincoln used Greenbacks to finance and win the Civil War. It is the accumulation of debt that constrains society in the efficient allocation of resources.


Thanks for bringing this interesting topic to the table. Monetary economics is a complex and interesting topic. There are many ideas being proposed on how to improve the current system, and debt free currency is one of those.

As mentioned, debt free currency is a fiat currency created by public authority and allocated without an interest charge. And here I must first clear up a misunderstanding. There is no connection between the money being crated by a private or a public authority and debt free currency and debt obligations. In fact, most of the worlds currencies are fiat cirrencies created by a public authority that does charge interest on it.

So the question of debt free currency or not can be simplified. It's not a private vs public question. Both todays currency system and debt free currency systems are fiat currencies created by public authorities.
So lets look at the effects this will have.

So there are three difference betweens todays system and the debt-free currency system. Not all of these three differences is needed to be in effect for the currency to be called debt-free. some proponents of debt-free only proposes parts of these three points. So let's look at them one by one.

1. No interest on the money borrowed from the central bank(no obligation to return the money.

In todays system, when banks borrow money from the central bank, they pay interest on it. This is simply to make them give the money back. This interest i usually very low, around 0.25% per year. This interest has two functions, the first is that you this way can regulate the amount of currency in circulation. If it increases the interest rate, the banks will return money, while lowering the rate will make banks borrow more money. This regulation of the money in circulation will have an effect on what money is worth, and hence, it will affect inflation. Higher interest, less money, money becomes worth more, lowers inflation. Less interest, more money in circulation, stimulates economy, but can cause inflation.

Without this interest, the central bank has lost one way to keep the economy stable and minimize bubbles in crashes.

The second effect is the simple effect that banks will give money back. If they don't have an incentive to give money back, they will not. That means that whatever money the central bank prints, will quickly be borrowed by the banks, and then be lost to the central bank. If the state then needs money, it either has to borrow money from the banks, or print more money. Printing more money will increase inflation. Borrowing money from the banks will not, but since some of the claims of debts free money is to get rid of government debt and/or inflation, we see here that this is clearly not achieved by debt free money.

2. The state banks allocates money instead of lending.

One way to solve the problem with the banks borrowing up the money is to not lend money at all, but just give it away. This means that the state now will allocate who gets money. And here we see a third use of the interest rate. With an interest rate, it costs money to borrow money from the state. You will therefore not borrow the money unless you need it. You will not borrow money just to sit on it, you will only borrow it if you can make more money with the borrowed money that without it. This works as a regulation of who gets the money, and the state does not need to allocate it. It automatically goes where it's needed.

Without this function, the state must now allocate money. This is central planning, which is well known not to work. Instead of having the market and the system automatically allocate money where it's needed, you now have bureaucrats sitting and trying to figure out who needs the money. This is practically impossible, as you would need to have an oversight over the whole economy at once. And you can't just give money to anyone who wanted, because the interest-free money does not have any frawbacks, so everyone always want more. That means the state would have to just continue printing money, which would immediately throw the country into hyperinflation and collapse the economy.

3. No state debt.

This is the last and the most serious part of the debt-free currency ideas. Here the idea is that when the state needs more money, instead of borrowing it, they should simply use the central bank to print more money. This is an idea that has been tested many times in history. Some examples are Germany in the 1920's, Hungary in the 1940's and Zimbabwe between the early 2000's and April 2009. It has the same effect every time: Hyperinflation and economic collapse. It's the worst monetary policy possible.

In short, interest free borrowing only robs the central bank of their biggest tool to combat inflation and stimulate the economy. No obligation to return the borrowed money to the central bank will empty the coffers of the bank, and giving state a license to print money without debt is a recipe for economic disaster.

Debt free currency in it's worst interpretation is in not the best possible system, but in fact the worst possible system. In it's least destructive interpretation it is no disaster, but clearly worse than todays system. It is therefore clearly not the best alternative.
Debate Round No. 1


Cons substantive contention is that debt free currency leads to inflation.

The over supply of printed currency, counterfeiting, currency speculation, and the private lender's mismanagement of the fractional reserve system also contribute to inflation. We have empirical data on all of these contributors. The primary culprits generating and exacerbating inflation are those who speculate in currency.1 When a nation's debt burden is so high it can no longer service the debt, speculators hasten to bring down currency values.2

In the U.S., the Legal Tender Law of 1862 ushered in Greenbacks. They were legal tender and interest free and did not add to the national debt. Congress authorized only $450 million, of which fifty million replaced Treasury notes outstanding. The limitation on issue was Congress's way to control inflation and devaluation. Bankers did not mobilize against the new law which suspended convertibility of paper money created by the private banks into species. They had to wait until the beneficial effects of the new currency rescued their own positions in gold and brought the nation through the war. The suspension and banker's non-reaction to it showed that metallic backing of bank notes was a fiction - a fraud. For every dollar of credit lent, the banks were holding less than ten cents in gold. In effect, system wide, the debtors had not been loaned metal, but paper. Those banks pressing legal claims to have their paper redeemed with gold were all denied by the Supreme Court.

The Greenback lost substantial value during the Civil War, since bills of credit were still redeemable in gold and Greenbacks were new to lenders and borrowers alike. However, by the mid-1870's Greenbacks were redeemable one-to-one with gold.3

Comparing a wartime inflation under a government run money system (Civil War) to wartime inflation under a private banker run system (WW1), Civil War historian J. G. Randall wrote: " The threat of inflation was more effectively curbed during the Civil War than during the First World War. Indeed as John K. Galbraith has observed, 'it is remarkable that without rationing, price controls, or central banking, Chase (Treasury Secretary under Lincoln) could have managed the federal economy so well during the Civil War.'"4

The confederacy had no limitation on the issuance of its currency, they had no central bank, and the currency was not legal tender; it was only redeemable for species two years after issue. Inflation was rampant and by the end of the war..."...$1 in a confederate note had depreciated from $.90 in gold to $.017 in gold by 1865, and by 1866 Confederate notes were worthless.5 Lerner's estimates depreciation are now considered high.

Since the South supported free market-mercantilism it eschewed regulation of and impediments to the operation thereof. There were 38 private banks in the south during the Civil war and each had it's own currency and interest rates and while they were competitive among banks they were in no way designed to stabilize the supply of Confederate currency or specialized notes. Added to this profligate dispensation of legal tender was the rampant counterfeiting of all Confederate paper currencies. hence rampant inflation. Greenbacks could not be counterfeited because of special ink, paper and design.

Today we have a system of public sanctioning of private control of currency. In return for that privilege "...we now have 99 percent of the U.S. money supply owed back to private lenders at interest. The result is a growing federal debt, on which the interest burden alone will soon be more than the taxpayers can afford to pay. The debt is impossible to repay in the pre-Copernican world in which money is created as a debt to private banks....we have allowed our money to rotate in the firmament around an elite class of financiers, when it should be rotating around the collective body of the people...interest free."6

There are a number of major modern economies where money creation aids new industries, social welfare, and does not only benefit the profit motives of lenders. Japan, Malaysia, China, India are but a few. Government creation of money and debt allows many of these countries to forgive internal debt but honor foreign debt. These are defacto debt free currency systems.

The Japanese economic model that evolved in the twentieth century has been called a "state-guided market system." The state determines the priorities and commissions the work, then hires the private enterprise to carry it out. The model overcame the defects of the communist system, which put ownership and control in the hands of the state. Chalmers Johnson, President of the Japan Policy Research Institute, wrote in 1989 that the closest thing to the Japanese model in the U.S. is the military/industrial complex. The government determines the programs and hires private companies to implement them. The U.S. military/industrial complex is a form of state-sponsored capitalism that produces one of the most lucrative and successful industries in the country.7

The Japanese model was, by the end of the 1980's, regarded as the leading economic and banking power in the world. That model also proved successful for the "Tiger" economies--South Korea, Malaysia , etc. State guided capitalism provided for the general welfare without destroying capitalist incentive. High economic growth, rising social security, and universal education in a market economy - it was the sort of "Common Wealth" America's Founding Fathers had endorsed.

But the model represented a major threat to the international bankers' system of debt-based money and IMF loans. To diffuse this threat, the Bank of Japan was pressured by Washington to take measures that would increase the yen's value against the dollar and reduce Japan's trade surplus with the U.S. The surplus was being used to fund social and economic development in Japan and in developing Asian countries.8

By 1987, the Bank of Japan (pressured by Washington) had cut interest rates to a low of 2.5 percent. The result was a flood of "cheap" money that was turned into quick gains on the rising Tokyo stock market, producing an enormous stock market bubble.9

Engdhal writes: "No sooner did Tokyo act to cool down the speculative fever, than the major Wall Street investment banks, led by Morgan Stanley and Salomon Bros. began using exotic derivatives to short the Japanese market. Within months Japanese stocks had lost nearly $5 trillion in paper value.10

In sum we cannot have in the same fiscal year, under the current system of borrowing at interest: national health care reform, rehabilitation of our infrastructure, free, private and public universal education, a modern fully resourced military, and fully funded research on cancer, heart disease, autism, etc. All of these "needs" can only be funded through existing public, state and local institutions with national, debt free currency issued by the Federal Government as provided for in the Constitution.

(1. See, "The Web of Debt", p. 245)

(2. Stephen Zarlenga, "The Lost Science of Money" The Mythology Of Money - The Story of Power. American Monetary Institute Charitable Trust, 2002)

(3. E. G. Spauldinng, "A Resource of War", (repr.., CN:Greenwood, 1971), p.37.

(4. J. G. Randall, "The Civil War and Reconstruction, edit. D. David, (Boston: Heath & Co. 1937, 2nd edition 1961), pp.3-11.

(5. "E M. Lerner, in Milton Freidman's "Studies in the Quantity theory of Money, (Uiv. Chicago Press, 1956).

(6. Ellen H. Brown, "The Web of Debt", Third Millennium Press, Baton Rouge, Louisiana, 2007.)

(7. Chalmers Johnson, "How America's Crony Capitalists Ruined their Rivals," Los Angeles Times (May 7, 1999).

(8 Ibid)

(9.Ellen H. Brown, The Web of Debt, p253).

(10. William Engdahl, "A Century of War" (New York: Paul & Co. 1993), page 229.


Thank you for your answer. However, I must say that I find very little in form of substantial arguments in that answer. You seem to be saying a couple of things.

1. That inflation exists even without debt free currency.

This is true. But replacing the current currency with debt free currency will, as described, create much more inflation and depending on what interpretation of debt free currency you have even hyperinflation and economic collapse. You have not tried to counter my arguments to that effect. I can only conclude that you agree, and in fact you even mention that the civil war greenback did lose a lot of value, in other words, it had a lot of inflation.

2. That debt free currency worked better during the civil war then the currency system used then.

This is likely completely correct. As you yourself mention, at this point the US did not have one single currency, but many different banks made their own dollar notes. But the argument is not that debt free currency is better than the system used before the civil war, the discussion is if it's the bets *possible* system. And it clearly is not, as the current system we use now, of fiat money, is superior to debt free currency.

3. That pressuring Japan to increase their currency against the dollar had negative effects on Japanese economy.

I think most liberal economists would agree with that statement. Although being an economist, I surely do. But I fail to see how it is even relevant to the discussion.

4. Under the current system, the state can not spend freely.

This is also correct. Under the current system, the state can indeed not spend freely. However, the state can not spend freely under a debt free system either. You think that just because there is no debt, the state can simply print money to pay for whatever the state wants to pay for. But look at one of your first sentences. You say "The over supply of printed currency ... contribute to inflation". Indeed it does. And that's what you are suggesting here. You are suggesting that the government, when it wants to pay for something, simply prints money to pay for it. Since the money is debt free, this does not increase the debt of the state.

What it does, though, is increase the supply of printed currency, and hence inflation. The policy you are talking about here is nothing new. It is exactly that policy that each time it has been tried (and it has been tried many times9 leads to hyperinflation and economic collapse. Lastly in Zimbabwe, where they in April this year suspended printing of the Zimbabwean dollar, as it had lost all value. The result of debt free currency in Zimbabwe was the collapse of the economy, and the disappearance of the Zimbabwean dollar. No good came out if it.

So you can can't have the state spending freely under a debt free currency either. There is no such thing, as a free lunch, and there can not be such a thing as a debt free currency.
Debate Round No. 2


I must tell you that because you did not use a spell checker or grammar scan it has been extremely difficult to interpret your thought processes and especially since you use a syntactical style that is, as best that I can determine, shorthand for what you are thinking.

For example:"This is true. But replacing the current currency with debt free currency will, as described..." As described? Where? By whom?

Under your...item #1)

These assertions (..create much more inflation....even hyperinflation and economic collapse) are wrong on their face. You have not stipulated the conditions under which your conclusions obtain.

The Treasury could do the following and not create inflationary expectations, hyperinflation or economic collapse: For example, the U.S. owes the rest of the world $20 trillion held in bonds and other debt instruments. The Government decides to liquidate this federal debt by printing $20 trillion in debt free currency. That cash monetizes the debt. The Treasury then takes the 20 trillion in interest bearing instruments and liquidates them. Where's the inflation? There is none. (Moreover, I do not agree with any of your unsupported assertions, conclusions.)

Current policy allows the Fed to reissue these debt instruments even after monetization, ergo, inflation. Now creditors have the $20 trillion in cash and Treasury and the Fed can reissue the $20 trillion in debt instruments.

You state, "But the argument is not that debt free currency is better than the system used before the civil war, the discussion is if it's the bets *possible* system. And it clearly is not, as the current system we use now, of fiat money, is superior to debt free currency."

You make this assertion as if it were obvious on its face. It is not. Above is an example of why it is not. Here are more reasons why debt free currency is far superior to the current system of interest money:

If the current system is better, then some one needs to explain to Americans why it does not resolve the following:

-- insurmountable debt?

-- severe fiscal constraint in the provision of public services and programs?

-- rampant unemployment?

-- billions of dollars in resources sitting idle and/or going bankrupt because private banks won't lend?

Issuing debt free currency instantly resolves all of these issues, especially the liquidity issue within our State and local governments, without adding to national or State and local government debt or deficits.

The lack of liquidity was the environment in which Lincoln's debt free Greenbacks rescued the Union.

Why do we not see the same happening with debt-money during our extreme lack of liquidity where interbank interest rates are near zero and where commercial rates are extremely favorable?

Again, debt free currency can be issued without affecting the rate of inflation. You have ignored a number of critical variables in calculating the impact of debt free money on the supply of money. Namely, whether there are idle resources in the economy, whether the economy is deflating, etc.

You state, concerning my example of Japan's situation after the war,

"But I fail to see how it is even relevant to the discussion."

It's relevancy is that international private banks are a major source of financial instability for governments the world over. They finance speculators who use margins to carry out their attacks on a nations currency. What the banks fear is that debt money will be replaced with debt free money and they loose the profitable business of lending massive amounts of money to speculators. The potential of that loss drives banks to constrain the "offending" government. (Stephen Zarlenga, The Lost Science of Money), p. 500-600.

You said, "You think that just because there is no debt, the state can simply print money to pay for whatever the state wants to pay for."

I presented an argument not what I believe. Nonetheless, it is true, the state can print money for whatever it wants. Japan has done it. Russia and China do it. The isle of Guernsey does it. The State of N. Dakota creates its funding requirements through its State Bank. A system that all States should adopt, especially those in the grip of insolvency.

You raise the issue of Zimbabwe's hyperinflation. Let's review the history, in brief:

Zimbabwe is a dramatic contemporary example of runaway inflation. The crisis dated back to 2001, when Zimbabwe defaulted on its loans and the IMF refused to make the usual accommodations, including refinancing and loan forgiveness. Apparently, the IMF's intention was to punish the country for political policies of which it disapproved, including land reform measures that involved reclaiming the lands of wealthy landowners. Zimbabwe's credit was ruined and it could not get loans elsewhere, so the government resorted to issuing its own national currency and using the money to buy U.S. dollars on the foreign-exchange market. These dollars were then used to pay the IMF and regain the country's credit rating. Hyperinflation was caused by speculators who manipulated the foreign-exchange market, charging exorbitant rates for U.S. dollars, causing a drastic devaluation of Zimbabwe's currency.

The government's real mistake, however, may have been in playing the IMF's game at all. Rather than using its national currency to buy foreign fiat money to pay foreign lenders, it could have followed the lead of Abraham Lincoln and the American colonists and issued its own currency to pay for the production of goods and services for its own people. Inflation would then have been avoided, because supply would have kept up with demand; and the currency would have served the local economy rather than being siphoned off by speculators. (Stephen Zarlenga, "The Lost Science of Money", pp. 579-583.)

An accurate explanation of how inflation and hyperinflation obtained is that it begins with a credit crises not the profligate printing of money.

The last sentence of your response is a gross misrepresentation of the argument I present. No where do I imply that a "free lunch" is in the offing. There are always administrative costs. Other than that there are no real economic or financial costs to the public sector, citizens who benefit from the allocation of debt free currency, or even private sector banks who serve as depositories for holders of debt free funds.

Additionally, debt free currency would serve as a major solution in the development of Third World nations. Debt free currency on a global basis would relieve developing countries of annual debt repayments, these severely indebted countries could use the funds for investments that in Africa alone would save the lives of millions of children and provided 90 million girls and women with access to basic education.

If the money is owed to commercial banks, it was created with accounting entries. Third World debt represents a liability on the banks' books only because the rules of banking say their books must be balanced. To change this banks must be allowed to hold reduced levels of assets equivalent to the Third World Debt bonds they cancel. Alternatively, cancel the debt bonds, yet permit banks to retain them for purposes of accountancy.

Third World debt could be eliminated with the click of a mouse. Then these governments could create their own currency, interest free, rather than having to borrow dollars to buy currency from private banks.


Thank your for pointing out where I am unclear, that is most unusual, most of the time people just guess, and guess incorrectly, which makes debate hard and makes it impossible for me to improve.

There are no unstated conditions for these conclusions, these are inevitable effects of the proposals. As I said in my first argument, debt free currency can mean one or several of three different things.

1. No interest on the money borrowed from the central bank(no obligation to return the money. This makes it hard for the central bank to control inflation and avoid bubbles and crashes.

2. The state banks allocates money instead of lending. This leads to a centralized planned economy, and the inefficient economy, near zero-growth and in the long term poverty that results from that.

3. No state debt, which leads to free money for the state, which leads to the state spending by printing money, which leads to flooding the markets with currency which leads to hyperinflation, which leads to economic collapse.

There are no particular conditions for these effects. They will just happen.

You say that the state can liquidate the 20 trillion dollar debt by printing 20 trillion dollars. And that this will not cause inflation. That's astonishing, as you yourself in your last argument admitted that flooding the market with currency will cause inflation. And this is exactly what your proposal here amounts to. You suggest that the US prints 20 trillion dollars and dumps it on the market. As the total money supply at the moment amounts to about 10 trillion dollars, this would mean that the dollar would immediately sink to a third of it's value. No inflation? In fact, you couldn't stop there, as the dollar would start deprecating as soon as you start paying back the debt, which means that all debt in foreign currency would skyrocket. And pretty soon the world would lose all trust in the dollar as currency, and it would crash completely, and you would get hyperinflation.

It's also funny that you argue for reissuing debt instruments, as that would require the state to be in debt. What is the purpose of first printing 20 trillion dollars to pay off the debt if you immediately just borrow 20 trillian dollars again? It's a very complicated way to reach status quo.

-- The insurmountable US debt has nothing to do with the monetary system. It's there because the US state has borrowed an insurmountable amount of money. It's bad fiscla policy, nothing else, and it can only be fixed by good fiscal policy, not by monetary policy.

-- The fiscal constraint is an effect of basic natural and economic laws. There is no such thing as a perpetuum mobile neither in physics not in economics. The state can not spend freely any more than you can. You need your spending to be balanced by your income, or you end up deep in debt. As simple as that.

-- Calling the US unemployment "rampant" is pretty unique. The US has one of the lowest unemployment levels in the western world. But again, this has nothing to do with the monetary system. The whole western world has the same monetary system, But unemployment varies wildly. In July 2008 the US unemployment rate was 5-6%. In Sweden in France it was officially around 9%, and since they count differently the real rate in both countries are rather closer to 15%. Long term unemployment rate (unemployed longer than 27 weeks) in the US was in July 2008 just over one percent, while in France it's around 4%, and that is unemployed longer than a year.

Clearly, "rampant" unemployment is not an effect of the monetary system.

-- The banks refusing to lend at the moment is because the banks have a liquidity crisis. Basically, they don't have much resources, and they have a lot of unserviceable debt. They can't lend, because they don't have anything to lend. This is a temporary effect of the crisis of 2008-2009.

Debts free currency will solve exactly zero of these issues. Very few of them have anything to do with the monetary system, and you think you can make a country rich by having it printing money, but it doesn't work that way. It will only make the money worthless. The wealth of nations is in it's people, not in it's dollars.

International banks is just a source of instability if governments are running with a and fiscal or monetary policy. Your solution is to run with a bad monetary and fiscal policy permanently. It will hardly help. You are looking at debt free currency as a sort of magic Cornucopia, but such things do not exist. You can not have the government spending freely without getting in debt, it is simply impossible. You state that Japan has done it and Russia and China is doing it. This is simply false, these countries are not printing money without increasing debt.

If you look through your description of Zimbabwes crisis again, we'll notice that Zimbabwes monetary policy almost exactly mimics what you think we should do. First of all, you want the countries to stop lending. Zimbabwe did this, although not freely. They did it because the defaulted on their loans. You seem to think that it's a punishment not to lend money to someone who doesn't pay the loads back. That's a very strange view. The IMF and all other lenders refused to lend money to Zimbabwes, just because they knew they wouldn't get it back. That's not a punishment. Lending money to somebody who won't give them back is not lending at all. It's giving. It turns the loan into foreign aid, something Zimbabew also has had a lot of.

Instead of borrowing to spend (which is a bad policy) Zimbabwes government (who are completely uninterested in the welfare of Zimbabwe) turned to printing money to spend. Just as you say we should. The result is exactly what I said the result will be: Hyperinflation.

You say that Zimbabwe should have refused to play IMFs game, and "instead issued it's own currency to pat for the production of goods and services for its own people". But this is exactly what it did. That did not avoid inflation, it *caused* inflation.

Hyperinflation is not caused by a credit crisis, although that usually sparks it off. Hyperinflation is caused by the profligate printing of money to use for state spending or paying off state debts. This is exactly what you propose to do. Yet while you in one sentence describes how hyperinflation is caused, and in the next sentence proposes to do exactly those things that cause hyper inflation, you refuse to acknowledge that your proposed actions will cause hyperinflation.

Yes, you do imply that a free lunch is in the offing. It's obvious that you think that by printing debt free currency to pay off loans and to spend, you think you can solve all fiscal problems. Debt free money is a free lunch, and it doesn't work. You think that by printing money you can reduce inflation and unemployment, but all you will get is hyperinflation and economic collapse.
Debate Round No. 3
26 comments have been posted on this debate. Showing 1 through 10 records.
Posted by Vilhelmo 3 years ago
Money can be debt-free no more than water can be dry.

As a financial instrument, money is both a debt of the issuer & an asset to the bearer.

For example, the Canadian Dollar (CAD) represents a transferable, non-interest bearing debt of the Federal Government held by the private sector as a financial asset.
The 10 CAD note in my wallet is recorded as an asset on my balance sheet and a corresponding liability on the balance sheet of the Federal Government (Assets = Liabilities).

Nations can also issue interest bearing debt.

Monetarily sovereign nations NEVER have to issue Federal interest bearing debt. Any such issuance is voluntary.

Such a nation spends Federally simply by crediting banking accounts, issuing currency directly into the economy.

Taxes do NOT fund Federal spending. Taxes regulate aggregate demand & ensure currency demand.

Borrowing does NOT fund Federal spending. Borrowing exchanges non-interest bearing debt for interest bearing debt, altering the composition but not quantity of financial assets.
Posted by Cerebral_Narcissist 7 years ago
I am fascinated by this debate... but I am not sure I even understand it! Luckily I can't vote!
Posted by regebro 7 years ago
Unless you actually make money. Then you don't have to borrow at all. So I'm not sure I follow the logic. But yes, the current fiat system is based on everybody borrowing money. In one way every cent is borrowed, and in fact, it's borrowed many times over, thanks to fractional reserve banking. This is all a bit hard to get your head around, admittedly. :)

But the Wikipedia articles on Money, Fiat Currency and Fractional Reserve banking will go a long way to explain it.
Posted by Yakaspat 7 years ago
Think about this, if you have a debt based currency, and the Central Bank has total control over the lending out of that currency... you'd have a huge problem on your hands. Because if they lend the money out at an interest, and the only way you can pay back the interest on the money you were lent is to get more money with an interest from the bank. So it's an endless cycle that means we're always at a debt we can never repay.

Reasons for Voting:
After: Con
Conduct: Tied
Spelling and Grammar: Tied
Arguments: Con
Sources: Tied

Posted by I-am-a-panda 7 years ago
Sh^t! Did pro reference books and not interweb links?
Posted by Rezzealaux 7 years ago
Who am I apologizing to, Roy?
Posted by regebro 7 years ago
Meh, I spent 15 minutes reading up on it, and I'm not an economist, but it's not incomprehensible if you know a bit about monetary economics.
Posted by RoyLatham 7 years ago
panda, The problem is not that Pro's case is strong, the problem is that it is incomprehensible to those outside of the circle of people who believe it is true. It's like a theological debate presented in the terminology of a narrow religious tradition. It may be true or false, but it is inaccessible to most of us.
Posted by I-am-a-panda 7 years ago
Sadly this will turn into one of the RoyLatham classics that people are too afraid to accept.
Posted by I-am-a-panda 7 years ago
Lol at currency privatization. You can't have competition in money making. You need one, universal currency. One company can provide that.
6 votes have been placed for this debate. Showing 1 through 6 records.
Vote Placed by atheistman 7 years ago
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Vote Placed by tBoonePickens 7 years ago
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Vote Placed by comoncents 7 years ago
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Vote Placed by Yakaspat 7 years ago
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Vote Placed by Rezzealaux 7 years ago
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Vote Placed by RoyLatham 7 years ago
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