Editing Monetary reform (section)

== Arguments for reform ==
Among the arguments for a transition to [[full-reserve banking]] or [[sovereign money]] are as follows:

* Money are created when a loan is made and this money disappear when the loan is paid down.{{vague|date=April 2021}} The central banks cannot control the [[money supply]] when private banks are creating credit money. Credit money can be converted to reserve money in various ways so that there is no practical limit to the amount of credit money that can be created by private banks.<ref 
name=Werner2016>{{cite journal |last1=Werner |first1=Richard A. |title=A Lost Century in Economics: Three Theories of Banking and the Conclusive Evidence |journal=International Review of Financial Analysis |date=2016 |volume=46 |issue=July |pages=361–79 |doi=10.1016/j.irfa.2015.08.014|doi-access=free |hdl=2086/17270 |hdl-access=free }}</ref><ref 
name=BenesKumhof2012>Benes, Jaromir and Michael Kumhof (2012). "The Chicago Plan Revisited". IMF Working Paper, no. 202.</ref> This increases the risk of [[Financial crisis|economic crises]], [[unemployment]], and [[Bailout|bank bailouts]] or [[bank run]]s.<ref 
name=zarlenga2002>{{cite book |last1=Zarlenga |first1=Stephen |title=The Lost Science of Money: The Mythology of Money – The Story of Power |date=2002 |publisher=American Monetary Institute |isbn=1-930748-03-5}}</ref><ref 
name=DiMuzioRobbins>{{cite book |last1=Di Muzio |first1=Tim |last2=Robbins |first2=Richard H.|title=An Anthropology of Money: A Critical Introduction |date=2017 |publisher=Routledge |isbn=978-1-138-64600-1}}</ref>

* Less than 6% of the money in circulation in the world is coins and bank notes, the rest originates from bank credit, carrying interest. This interest allows banks to earn rents from the mere fact that money exist. Reformers do not think it fair that the whole society is paying rents to the banks just for having money to circulate.<ref 
name=BenesKumhof2012 /><ref name=zarlenga2002 /><ref 
name=JacksonDyson>Jackson, A. and Dyson, B. (2012). ''Modernising Money: Why our Monetary System is Broken and how it can be Fixed.'' London: Positive Money.</ref>

* The total amount of public and private debt in the world is now between two and three times the amount of [[broad money]] in circulation.<ref>Data sources: 
{{cite web |last1=CIA |title=The World Factbook |url=https://www.cia.gov/library/publications/the-world-factbook |archive-url=https://web.archive.org/web/20070601020457/https://www.cia.gov/library/publications/the-world-factbook/ |url-status=dead |archive-date=1 June 2007 |website=Central Intelligence Agency |access-date=6 September 2018}}.
{{cite web |last1=Desjardins |first1=Jeff |title=All of the World's Money and Markets in One Visualization |url=http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/ |website=The Money Project |access-date=6 September 2018}}</ref> This is a result of the accumulated compound interest of credit money.{{citation needed|date=April 2021}} This counterintuitive fact makes it virtually impossible to repay all debt.{{citation needed|date=April 2021}} The mathematical consequence is that somebody will have to go bankrupt even if they have done nothing wrong. It seems unfair{{to whom|date=April 2021}} that somebody will become destitute as a consequence of the money system rather than because of their own reckless behavior.<ref name=BenesKumhof2012 /><ref name=DiMuzioRobbins /><ref 
name=HodgsonBrown>{{cite book |last1=Brown |first1=Ellen Hodgson |title=Web of Debt: The Shocking Truth about Our Money System and How We Can Break Free |date=2012 |publisher=Third Millennium Press |isbn=978-0983330851}}</ref>

* It is not only individual persons and businesses that go bankrupt as a consequence of the fact that there is more debt than money in circulation. Many states have gone [[sovereign default|bankrupt]] and some states have done so many times. The debt problem is particularly severe for [[Developing country|developing countries]] that have [[Debt of developing countries|debt in foreign currencies]]. The [[International Monetary Fund]] and the [[World Bank]] have been promoting loans to resource-rich developing countries for the expressed purpose of promoting economic growth in these countries, yet these loans were denominated in foreign currencies and most of the money were used for paying transnational entrepreneurs without ever entering the local economy. These countries have been forced to sell off national assets in order to service the debt.<ref name=Werner2016 /><ref 
name=HodgsonBrown /><ref name=DiMuzioRobbins /> Also a number of countries in the [[European Union]] are affected when a large part of the money circulating in the country originates from banks in other member countries. The spiraling, unpayable [[national debt]] has led to social chaos and even war in some cases.<ref name=zarlenga2002  /><ref 
name=Eisenstein2011>{{cite book |last1=Eisenstein |first1=Charles |title=Sacred Economics: Money, Gift, and Society in the Age of Transition |date=2011 |publisher=North Atlantic Books |isbn=978-1-58394-397-7}}</ref>

* A major part of all new credit money that is created is spent on changing the ownership of existing assets rather than creating new assets. This process inflates the prices of assets, including real estate, factories, land, and intellectual rights. This makes living unnecessarily costly for everybody. It contributes to growing inequality and it makes the economy unstable because of the creation of [[Economic bubble|asset bubbles]].<ref>Bezemer, Dirk, and Michael Hudson (2016) "Finance Is Not the Economy: Reviving the Conceptual Distinction." ''[[Journal of Economic Issues]]'', vol. 50 (3), pp. 745–768.</ref><ref 
name=JacksonDyson /><ref name=Korten2010>{{cite book |last1=Korten |first1=David C. |title=Agenda for a New Economy: From Phantom Wealth to Real Wealth |url=https://archive.org/details/Agenda_for_a_New_Economy_2nd_9781605093765 |url-access=registration |date=2010 |publisher=Berrett-Koehler Publishers}}</ref><ref name=DiMuzioRobbins />

* The exponentially increasing debt in society can only be serviced as long as the rate of economic growth exceeds the interest rate. This creates an imperative for perpetual growth in production and consumption. This leads to [[overconsumption]] and overexploitation of resources.<ref>Mellor, Mary (2010). ''The Future of Money: From Financial Crisis to Public Resource''. London.</ref> The technological progress in labor-saving technologies has not given us more leisure as we expected, because of the necessary growth in consumption.<ref name=Eisenstein2011 /><ref 
name=JacksonDyson /><ref name=Korten2010 /><ref name=DiMuzioRobbins />

* The unpayable debt leads to [[Bankruptcy|bankruptcies]] of homeowners and [[foreclosure]] of their homes. This allows banks to replace their virtual assets in the form of money created 'out of thin air' with physical assets in the form of [[real estate]].<ref name=BenesKumhof2012 /><ref name=Eisenstein2011 /> In 1968, a court in Minnesota decided that this practice was [[Constitutionality|unconstitutional]] because the process by which the bank had created money from nothing was fraudulent (see [[First National Bank of Montgomery v. Daly]]).