I missed your original post fisking Dyson’s CiF piece (I really should look at my RSS feeds more!).
Did you see Izabella Kaminska’s post at FTAlphaville on Dyson’s piece? Link is here http://ftalphaville.ft.com/blog/2011/11/15/747991/on-the-demonisation-of-debt/
Dyson responded to Kaminska’s critique here http://www.positivemoney.org.uk/2011/11/ft-alphaville-touched-nerve/#comment-8221
There was an extensive debate on both posts about the wisdom or otherwise of Positive Money’s proposals. What became very clear to me in the course of that debate was how many people simply don’t understand that debt=savings, and that when banks create money in the course of lending savings also increase by the same amount when that money is spent. Several people suggested that the problem is “debt doesn’t equal savings”. They are looking at individual banks, rather than the monetary system as a whole, noticing that deposits don’t cover lending, and assuming that therefore there is a pyramid of debt made entirely of imaginary money which could just as easily be wiped out without affecting anyone. If only this were true.
The proposals for a “debt jubilee” from Steve Keen and others actually amount to a proposal to wipe out all private savings. And Positive Money’s proposals for 100% reserve banking would not only create the mother of all credit crunches, they would also have the effect of seriously limiting people’s ability to save. For someone to have savings, someone else must be in debt…..We really do need to understand the impact on BOTH sides of the debt=savings equation in order to consider whether these are changes we can afford. Too many people think that eliminating debt is simple and cost-free. It isn’t.
Posted by: Frances Coppola | November 20, 2011 at 01:17 PM