Modern monetary theory recognises governments that issue their currency can never run out of money. They can always pay their bills because they create more money if they have none. The issue is knowing when they have made enough to keep inflation controlled and the economy running efficiently.
Today, governments create money through the Central Bank's contracting with banks to make more money by issuing debt. Central Banks control the supply by increasing or decreasing the cost of money. Controlling the money supply this way is a hit-and-miss approach. We know it does not work because central banks have given up stopping inflation by persuading themselves that a bit of inflation is a good thing.
The other major issue is that it increases debt, where money generates more, and new money is only available to those who can take out loans. Increasingly, the already wealthy slow down the movement of money, particularly for investment.
A better way of controlling the money supply is to use new money to buy and build assets that consumers own. The article “Canberra Light Rail Commons” shows one example. The following outlines how the Canberra Water Supply will benefit from becoming a commons. The same approach can apply to other common goods and services areas, including roads, active travel, housing, education, airports, high-speed rail, hospitals, health services, and community facilities like nature parks, stadiums, and sports facilities. Each situation will be different, but the principles will remain the same. They are:
It is economically efficient for local communities of consumers to own assets and recycle money for local investment. Reducing the funds needed for a given investment is financially efficient. Increasing profits by reducing the cost of producing goods and services rather than increasing the price is economically efficient. It is financially efficient to provide new money directly to communities rather than via loans to providers of services and assets.
Canberra Water Supply
Canberra Water Supply is operated and owned by a quango or quasi-autonomous government organisation called Icon Water. It has $4.6 Billion in assets and $2 billion in liabilities. It had sales of $330 million and an interest bill of $107 million. It spent $80 million on new assets and $220 million on operating costs. It borrows money to finance new investments.
The following is one possible way the Canberra Water Supply can be turned into a commons.
If the Reserve Bank issued $2 billion in zero-interest money to Icon Water, Icon Water would save $107 million in one year without increasing the money supply. Icon Water would not have to repay the money to the Reserve Bank provided it sold consumers shares when they paid their water bills. Icon Water would pay its bills using the funds from the payment of water bills and the sale of shares to consumers or other investors.
All investors would sell 10% of their shares to consumers or other investors each year, and as a return on investment, investors would receive 5% in new shares. Consumers who pay for goods and services receive 5% of the 10%.
In the first year, the government should allocate the EBITDA profit of $110 million divided by 5% or $2,200 million in shares.
Icon Water can sell shares to investors. It can be agreed that consumers get 50% of their payments back as shares. In the first year, consumers receive back $330 million divided by two worth of shares or $175 million in shares according to another formula where those who consume less receive a higher percentage.
Icon Water's finances would become transparent.
In the first year, the government would receive $110 million in new shares, and the consumers would receive $175 million in new shares—effectively reducing the cost of water. Icon Water would have about half the remaining shares that did not earn a dividend, and Icon Water would not make a profit and not have to pay taxes. The government would receive more than it does today and could sell its shares to finance other capital works.
Governance should change, and the ICRC would not need to set prices. It is suggested that the government appoint the chairperson. Another six board members would be selected by sortition from a selected or elected group of candidates.
