Sunday, June 13, 2010

Environmental Economics' Implications for Monetary Policy

Lately I've been trying to figure out exactly where money comes from and who really adds to the money supply. It seems that very few people really know the answer to this, and even now I think I still do not know the full answer. As far as I can tell, there is some initial supply of money, and then additional money is simply created when people take loans. There still seems to be a conservation law missing, though, since more loans are needed to pay interest on those loans unless the Central Bank really just adds to the money supply when paying interest when it borrows from private banks.

Smark and I watched a documentary called Money as Debt by Paul Grignon. The descriptions of how money is created and exchanged seem accurate although the ultimate message ends up sounding kind of paranoid. Even so, some of the suggestions for alternatives sound reasonable.

Maybe one thing that needs much more focus on is creating a monetary policy and banking system that is financially sustainable, but also environmentally sustainable.


Lynn said...

yea, i wonder about that too. Like who decides when to print money? And how does one assess how much money there is circulating? Financial institutions should def be environmentally sustainable as well.

radmike said...

Neal Stephenson's Baroque Cycle talks about some of the early foundations of money (that whole goldsmiths --> banker transition). Not so much about the modern system, but a good read nonetheless (although a bit long winded at times).

mirthbottle said...

hey mike! awesome, i'll check it out :)