This thesis is about our (the world's) monetary and financial system. It starts by focusing on monetary creation, which is the basis of our financial system. After defining the monetary creation process, it is about its control, which has been transferred from the States to the Central Banks and then to the Commercial Banks. It explores the reasons of these changes and the situation it created, particularly regarding the public debts that started at one point of time and which have kept on growing ever since. After defining this problem, it explores the possibility for a Central Bank to finance the State's investments at zero interest rate, like it was the case when it had this right. This study will show that this model is viable, and would allow the collectivity to pay back the public debt and lower the taxes at the same time.
After this, this thesis will go over the financial crisis that the world has been going through in the past couple of years, and will find its reasons. It highlights the conjectural causes that started it, and also the structural reasons, that can be retrieved in the past crises this financial world has been through. It will explain how today's financial system is, by nature, unstable. The successive waves of deregulation that has blown over the liberal economies we are living in made it this way. This will lead us to analyze what the actual problems are in our financial and monetary systems, and where some reforms need to be implemented in order to make our financial world more stable and more reliable.
Finally, it offers a concrete direction to take, in order to meliorate it. This starts with the idea of a Central bank, in every State and monetary union, which would be given (back) the monetary creation control. Today, commercial banks, which control it, are responsible for the economic stability, without bearing this charge. This Central bank would have the economic stability as a charge, and would be the only establishment allowed to create money. It would have the possibility to finance the State's investments at no interest rate. The banking industry would be split into three independent entities that would be deposit, lending and investment, this will be in order to strengthen the banking system. In addition to that, stock markets have to be more regulated, passing intraday quotations from day to day, banishing trading softwares and forbidding banks to speculate for themselves. These reforms will take time to implement and will face many interests, but at the end, they will benefit the collectivity.
[...] For the past decades, a wave of deregulation has blow over the financial world, involving the disappearance of any obstacle to the free movement of goods, services and capital. According to this theory, the disappearance of all obstacles to these movements would be both necessary and sufficient for optimal allocation of resources throughout the world condition. Every country and every social group would see their situation improved. Market was seen as 64 likely to lead to a stable balance, completely effective, that could operate on a global scale. [...]
[...] 5 The financial crisis: the need for a new system? 6 Introduction "The truth about the public debt". This is the name of a website I visited while surfing the Internet. It immediately caught my attention. I feel concerned about the public debt and have thought several times about how States end up so deep in debt. It is a major problem most of the States in the world are facing today. Worst, this problem gets bigger and bigger every year. [...]
[...] In addition to those criteria, such an organization of the banking and financial system would need the simultaneous implementation of very basic conditions: the impossible creation of any money and buying means outside of that currency area the suppression of any potential imbalance arising from financing long-term investments with loans contracted on the short or medium term expansion of global monetary supply, consisting of only the basic currency at the rate desired by monetary authorities reducing at most, if not totally, the magnitude of cyclical fluctuations assigning to the State the gains resulting from the monetary creation, allowing the State to lower taxes and reimburse the public debt an easy control by public opinion and Parliament of the money creation and its implications Maurice Allais was supporting those ideas about the reform of the monetary and financial system. [...]
[...] The Fed reduced its benchmark rate for loans between banks by three-quarters of a point, for the first time since the establishment of the current rate system in the early 1990s. Unusually, the Federal Reserve made its decision outside of the regular meeting of its Monetary Policy Committee, scheduled for 29 and 30 January. It is up to 2001, after the attacks of September 11, to find a lower rate of emergency. As the situation worsens, on December the Fed decides to cut rates to (margin of fluctuation between 0 and 0.25 causing a rapid fall of the dollar against all other currencies and physical gold rush. [...]
[...] Since we are today using the Euros, those decisions need to be taken from a global Central Bank like the BCE (Banque Centrale Européenne), which would allow loans for each State individually. Those financing would allow States to get back good budgets balances and on a long term to pay back the public debt. States would save a lot of money that people would get back paying less taxes. The only losing parties would be private investors that would lose the goods and risk free return on investment of public obligations. [...]
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