Frequently Asked Questions


Won't your reforms be bad for business?
While our reforms would undermine the ability of businesses to offer low wages and meager benefits, there are significant upsides for businesses as well. Increased public spending and wages due to the job guarantee would mean that consumers have more money to spend, bolstering sales. In addition to this our reforms would reduce private debt levels which would reduce the extent to which the private sector’s debt burden would eat into consumer spending power. This also would help sales.
*Equity mutual funds provide a structure for private lending which prevents the process of lending from resulting in the creation of financial assets which we consider equivalent to money. Equity mutual funds raise money by issuing shares to investors and lend out these funds according to terms agreed to with investors. The shares that investors receive are different than bank deposits or shadow money instruments in that not only do the shares entail the explicit risk of losses, but losses can be passed onto investors without triggering a default of the intermediary (the mutual fund). This reduces pressure to bailout the intermediary which if done would make the shares equivalent to deposits and therefore equivalent to money.
Why credit controls?
Credit controls put constraints on bank lending. This means that they can be used to limit bank lending to public interest uses. To be clear, the idea is not to limit all lending to public interest uses. Our reforms would accommodate private lending of private funds to private uses via equity mutual funds. The point is that because bank money creation essentially entails the allocation of public funds, bank lending should therefore be limited to public interest uses. Capital controls allow us to do this. Under our reforms a bank might manage various equity mutual funds, and in this sense the lending done through these funds could be thought of as bank lending, but it would not be bank lending in the traditional sense which entails money creation. We do not propose that credit controls be applied to equity mutual funds.*
Broadly speaking there are two kinds of credit controls: qualitative and quantitative. Qualitative credit controls constrain the kinds of uses to which banks can lend, and quantitative credit controls limit how much lending banks can do. While we prioritize qualitative credit controls, we are also open to quantitative ones in the right situation (for instance as a way of checking inflation without raising taxes on the general public). This would raise the issue of whether to impose interest rate caps to prevent interest rates from spiking to an undesirable extent in response to the imposed scarcity of credit.
Won't these regulations undermine the banking sector's ability to provide the economy with access to credit, thereby harming the economy?
The credit controls we propose are aimed at limiting banks’ allocation of public funds to public interest uses. Productive business lending, for instance, would not be curtailed by our credit controls. Conversely, bank lending for speculative uses is the most uncontroversial candidate to be designated as not eligible for public funds. Other more controversial categories are: credit cards, consumer loans, commercial real estate, and mortgages.
While the financial industry spends lots of money promoting the advantages of access to credit, a key point of our critique of the monetary system is that virtually unlimited access to essentially publicly funded credit comes with a significant and underappreciated downside. Not only are we tempted into taking on debts which we struggle to pay off and often leave us to pay interest indefinitely, but the money creation entailed in this borrowing limits the space for public spending within the bounds of acceptable levels of inflation. This means that by borrowing from banks for non-productive uses, we limit our government’s capacity for responsible public spending which could be used to alleviate our reliance on borrowing.
The key for our curtailment of bank lending to have an overall positive effect on the economy is that curtailed bank lending must be replaced by increased public spending. If not, then limiting access to credit would likely be harmful to the economy. This is why we propose a job guarantee in conjunction with credit controls, which should be implemented prior to the implementation of  credit controls. This would have the effect of ensuring that when credit controls are implemented, they serve to check inflation in a robust economy rather than creating deflationary pressure in a shaky economy.
Where does the name "Our Money" come from?

“Our Money” refers to our belief in the importance of recognizing that the money created by the government as well as by banks and other private financial institutions is fundamentally public in nature and therefore, our money. This is the basis of what we see as the strongest political and moral justification for asserting public control over the power of money creation — if it is our money, we should be able to say how it is allocated.

What about the interest we pay on the national debt?
The interest we pay on the national debt is a fairly complex issue which generates a great deal of confusion, and this is not the place for a comprehensive treatment of the subject. This said, it is important to recognize that the interest we pay on the national debt is entirely a policy choice and is not at all necessary to obtain revenue in order to fund the government. This is because the government does not need bond holders’ money as the government has the power to issue money itself. Why pay interest on our bonds or issue them at all then? There are a number of reasons which may or may not on balance justify the practice. The most obvious and uncontroversial reason is that by paying interest on treasury bonds, the government provides savers with savings instruments that allow them to earn interest with negligible risk of default. The public interest argument for providing such instruments is clearest in the context of their use by pension funds. For wealthy money managers of course it is less clear that it is in the public interest to provide such an instrument.
One thing is clear however, which is that the issuance of interest-bearing government securities need not be linked to deficit spending as it currently is. The federal government can and should deficit spend without issuing corresponding treasuries. Then, if we consider it on balance in the public interest to provide interest bearing government securities we can allow investors to purchase them in whatever quantity we see fit without being constrained by aligning the issuance
of these securities with our deficit spending.
What about shadow banking?
In recent decades, shadow banking has become central to our financial system. There are countless ins and outs to how it works, but the following is meant to provide a verybasic account in order to give people a sense of how we view it and its significance for our project. Shadow banking is typically defined as credit intermediation outside the traditional banking sector. It is generally thought to have arisen both in order to avoid regulations associated with the traditional banking sector and to provide investors with substitute secure savings instruments in the context of a shortage of US treasury bonds. 
For the purposes of our project there are two main points with regard to shadow banking. First, shadow banking, like traditional banking, entails the “private allocation of our public’s monetized full faith and credit”, or in other words, private money creation which relies on public support to prop up and maintain the value of the money created. Second, the existence of the shadow banking sector means that any imposition of regulations on the traditional banking sector threatens to drive financial activity into the shadow banking sector, potentially rendering these regulations counterproductive or at least ineffectual. We believe it is nonetheless viable to impose credit controls on the traditional banking sector in order to limit bank allocation of public funds to public interest uses, because there are ways of curtailing shadow banking activity as well, such as with a financial transactions tax (among others which we will elaborate in an upcoming paper).
Isn't money creation hyperinflationary?

Contrary to popular belief, money creation is not a rare occurrence that is hyperinflationary whenever it takes place. As we say elsewhere, money creation is as common as dirt, and is performed everyday by the government as well as by banks and other financial institutions. Irresponsible money creation however can be part of a dynamic that creates hyperinflation. Actual cases of hyperinflation are generally, if not always, the result of deeper political and economic crises.

Doesn't money need to be backed by gold?

No. The past several decades since the collapse of the gold standard in 1971 shows definitively that money need not be backed by gold in order to retain its ability to function as a medium of exchange, store of value, unit of account and means of settlement. The idea that money must be backed by gold is a relic of the gold standard era. It is key in order to take advantage of the opportunities presented by the post-gold standard era that we get beyond this kind of thinking.

Isn't it irresponsible for the government to spend more than it collects in taxes?

Actually it is irresponsible for a government that creates its own currency not to spend more than it collects in taxes. By spending more than it collects in taxes the government provides the economy with a money supply that is created through public spending rather than private lending. This reduces the economy’s reliance on private borrowing and allows the government to better attend to public priorities.