This is a challenging book. It is challenging in the sense that it examines the current monetary system, and secondly attempts to reeducate your own beliefs. This is not a book that you are going to read in one session. You need to read, assimilate and even challenge some of the statements and theories in the book. So it is not an easy read but essential.
Briefly, the Answer highlights the world’s addiction to debt. There are plenty of examples and the financial crash in 2008 is highlighted as a modern example. US Banks lend money that they don’t have in their vaults. In fact, under current laws, they can lend out 10x more! Where is this money coming from? They borrow it from various sources but typically from the government. Debt levels are increasing every year, and like 2008 another financial crisis and crash are almost inevitable. Banks love to lend as they get paid interest. They want Joe Public to be in debt. The more debt, the better for banks.
The US dollar was for many years tied to Gold but since the convertibility of paper U.S. currency into any precious metal was suspended in 1971, the U.S. dollar is de facto fiat money. Fortunately, the US dollar has been the default currency for oil. So the dollar is in demand worldwide.
Governments are not supposed to print money to solve financial crises like 2008 and the 2019/20 pandemic. Printing money reduces the value of the currency and causes inflation. Of course, governments will use “tools” to overcome financial pain. The current tool to effectively print money is QE (quantitative easing). Yes, the politicians and bankers are conning us! They are getting richer and relatively every year we are getting poorer.
And The Answer is?
What is The Answer? According to the author, the Fair Value System. In essence, replace loans requiring interest with profit sharing. Say, as a company I wish to borrow $100 million to expand my manufacturing capability. I borrow from the bank, and share the profits with them instead of paying interest. For mortgages, the government owns a bank or institution that loans to Joe Public with no interest. There are many illustrations in the book to amplify the Fair Value System.
It is debt that is the inherent problem. If (and a big if) we could transition to a Fair Value System, we would need to get rid of debt. We are talking trillions here. The Answer proposes that governments write off all outstanding interest!!
In my humble opinion herein lies the problem: writing off interest. Interest is not just due to US financial institutions and the US government but to investors, financial institutions and worldwide governments. Are they really going to write off interest? Daily we read of corrupt dictators, sheikhs, investors squirrelling away into offshore banks. Are they going to agree??
Finally, I would like the book to have a section where independent economists can debate the Fair Value system. As it stands the book provides a unique view but a balance is needed. I am not an economist but this complex solution needs debate.
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Web site link: https://fairvaluesystem.com/