The Future of Monetary Reform and the Real Economy: The Ethics of 100 Percent Reserve Requirement Monetary System

The Future of Monetary Reform and the Real Economy: The Ethics of 100 Percent Reserve Requirement Monetary System

Copyright: © 2014 |Pages: 32
DOI: 10.4018/978-1-4666-4643-8.ch011
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The further analytical result derived from the previous chapters on the money and real economy relationship with financial bridging in a gold-standard system is now further extended to the requirement of the 100% Reserve Requirement Monetary System with the Gold-Standard. The formal model in this regard is developed in order to bring out the power of unity of the ethical worldview of avoiding interest rates and its replacement by trade instruments. The relationship between the Central Bank, commercial banks, and the real economy with the interest-replacing trade instruments is explained. The resulting configuration of the financial and banking system in this regard under the episteme of unity of knowledge is made to explain how stabilization is attained in this same kind of epistemic worldview and its monetary and real economy interrelationship. Thus, the socio-cybernetic worldview of pervasive complementarities, equivalently participation, representing unity of knowledge in the good things of life, is once again expounded.
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The Future Of Monetary Reform And The Real Economy: A Problem Of Trade Versus Interest

Often in recent economic and financial experience it has been proven that a low rate of interest by bank regulation, macroeconomic policy objectives, and market forces have ended in fiasco in stabilizing the economy. The low real rate of interest during the 1960s in the face of low nominal rate of interest fueled the subsequent increase in inflation; and this resulted in stagflationary economic periods (Siven, 1978). The recent macroeconomic policy to drive the nominal rate of interest to zero in Japan, as an example, resulted in non-performing loans that were abundantly provided to borrowers. Most starkly true, the sub-prime mortgage rates on real estate in southern United States resulted in an aggressive spirit of borrowing to fuel the housing boom that turned sour.2 The inference drawn is that a low or zero rate of interest is a necessary but not a sufficient condition for the road to economic bliss. Structural changes in the relationships between money, finance, and market exchange must be established simultaneously with reduction in the rate of interest.

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