Debt free money

Although banks no longer have the right to issue bank notes, they can create money in the form of bank deposits when they lend money to businesses, or buy securities…

The important thing to remember is that when banks lend money they don’t necessarily take it from anyone else to lend. Thus they "create" it.

Robert B Anderson
Secretary of the Treasury under Eisenhower
Interview on 31 August 1959 for U.S. News and World Report.

debt-free-moneySince 2004 - Professor Yamaguchi (then at the Doshisha Business School in Kyoto) worked on creating a mathematical model to understand and predict the effects of a "debt-free money system".

In 2010 he published a paper entitled On the liquidation of government debt under a debt-free money system. This report is posted on the right hand side.

This report concludes that implementing a "debt-free" money system will result in:

  • Higher GDP.
  • Lower price inflation.
  • Lower taxes.
  • Elimination of government debt.
  • Fair distribution of income.
  • An ecologically friendly environment.



Results of a debt-free money system

Below are a few extracts from the report by Professor Yamaguchi - that detail the benefits of implementing a "debt-free money system".

Extracts from the report

The government debt could be liquidated without cost under an alternative macroeconomic system of debt-free money...
[A] debt-free macroeconomic system is far superior to the debt-burden current macroeconomic system in a sense that it can not only liquidate government debt but also attain higher economic growth.
[Our] macroeconomic system of money as a debt seems to have fallen into the dead-end trap.
Under a debt-free money system, this fractional reserve banking system is abolished; that is, a fractional reserve ratio has to be 100%.
Commercial banks then create credits under a fractional reserve banking system by making loans to producers and consumers. These credits constitute a major portion of money supply.
[A debt based money system] continues to create unfair income distribution in favor of bankers and financial elite, causing inefficient allocation of resources and economic performances, and eventually social turmoils by the poor.
In short, system of money as debt is unsustainable as an economic system.
Under the system of debt-free money, a higher GDP is attained .... than the one under the system of money as debt.
[A] system of debt-free money can be said to be a far better system because of the accomplishment of higher economic growth without [price] inflation.
Persistent objection to the system of debt-free money has been that government, once a free-hand power of issuing money is being endowed, tends to issue more money than necessary, which tends to bring about [price] inflation eventually, though history shows the opposite.
Recent financial crises and runaway accumulation of government debt are caused ...... by the independence of the central bank under the system of money as debt.
The only tool to stabilize the monetary value is through the public management of the amount of money in circulation. This could be carried out through the control of lending money to the banks and through the fiscal policy.
[The] system of debt-free money is ecologically friendly to the environment, because forced payment of interest will be replaced with interest-free money, and borrowers of money, mainly producers, need not be driven into forced economic growth at the cost of environmental destruction. [A] system of debt-free money is indeed a system of sustainability.

end of report

Attached below is a copy of this report, which contains embedded comments from the ASP. These comments are included to point out where the ASP Monetary Policy is based on the concept of a "debt-free money system". Part 2 of this report is a modest revision of the first paper.

That is what our money system is. If there were no debts in our money system, there wouldn't be any money.

Marriner Stoddard Eccles
Past Chairman of the Federal Reserve
1934 - 1948