The Financial System has low productivity because it values money based on its time value, meaning that money earns money because it exists. This attribute of money is unnecessary. We can evolve the financial system so that money is a measure of value, a store of value, and a means of exchange of value and take away the ability of money itself to generate value.
We can do this for the banking system by getting banks to obey the existing rules and regulations and stop allowing money to generate money by enforcing the numerous laws and regulations that most banks break including:
- Fraud
- Theft
- Cartel Behaviour
- Misleading and false advertising
- Predatory Lending
Banks do this by debiting a loan account but not using the increase in money for the borrower but keeping it to themselves as a return on capital.
Creation of New Money
One of the services banks provide is introducing new money into the economy for the Reserve Bank. The method used today is for banks to give loans to people with money or assets they could use instead. However, the banks choose to give most new money loans to the wealthy so they can purchase assets from others and take capital gains by purchasing with low-interest money and charging more for goods and services because others cannot compete against low-cost money.
Creating money via loans to buy existing assets costs the community the cost of the loan plus the cost of interest and fees. Creating money for organisations to build new assets removes those costs.
The Reserve Bank could stop lending new money to buy existing assets and only allow new money with low interest and low repayments to build community assets like new knowledge and new physical infrastructure and maintain and repair existing infrastructure. The money released would reduce the need for income and business taxes while leaving it for consumption.
Business entities could be encouraged to share profits by 50% of profits by buying shares in the assets that produced the profits.