A Product that Can Save a System: Public Capitalization Notes

Abstract

The world's major money printers are in trouble. The debt-based monetary architecture is going through serious stress. The recent banking and sovereign debt crises are systemic symptoms indicating an upcoming and unavoidable change in money creation methodology. This paper addresses the key structural challenges of the crisis and proposes a solution in the form of a new product/channel designed for money creation that does not require a commensurate debt or credit increase in the system. Public Capitalization Notes (PCNs) are profit sharing investment instruments issued or guaranteed by the government treasury and purchased with fresh money by the central bank. PCNs are equity-like instruments with space value for money. PCNs, while channeling funding to where it is most needed, they facilitate job creation, employment, income, deposits, and real activity. Public Capitalization Notes allow the existing system: 1) to survive through a bypass of its own mechanisms, and 2) to balance the inadequacies of a purely debt-based model. After all, the State is the creator of money and a 'sovereign debt crisis' reveals a system chasing its own tale.

Keywords: Money Creation, Debt Crises, Austerity Measures, 2008, Monetary Architecture, Banks

JEL Classification: A1, E4,E5, E6, F3