I've been disappointed with some P2P monetary theorists, who seem to repeat the same tired criticism of the current system without offering any viable alternatives, and often seem to ignore the historical trends that led to the creation of certain types of institutins, as well as the nuances of their existence, including both upside and downside potential.
The following is largely a critique of the following piece, which I think has various suppositions that range from inappropriately contextualixed to downright misguided: http://p2pfoundation.net/What's_Wrong_with_the_Current_Monetary_System#1._Money_is_created_as_debt.
- Money is created as debt.
Innovations like fractional reserve banking usually have certain benefits and deficits with respect to previously existing systems. It'sclear that this particular innovation increase sthe overall endebtedness of society, but they also increase the overall liquidity of society, by making more money available. It's possible that you could create a society without debt that provides the same benefit, but if so you need to outline when and how that would be the case. It's not useful to just point out a problem with a particular innovatoin without pointing out the problem that the innovation was introduced to solve or to see what other potential solutions there are to the same problem.
- The money supply is under private control.
This has been the case for the entire existence of fractional reserve banking and ,even if not every investmetn is in the net benefit of society, it has not facilitated massive betting on short term profit. Actually, it's just the contrary, banks have typcially been extremely risk-adverse in their lending portfolio, which has spawned entire other industries, including venture capital and i-banking. The support of "short-term financial speculation" is not really a part of commercial banking nor is it very clear that it has anythign to do with the nature of debt.
- Bank deposits are not secure.
They are secure insofar as they are insured and the insurer is trustworthy. It's not really clear that this relates to the criticism above, given the natural, legal, and regulatory seperations between traditional commerial banking and i-banking.
- The money supply is pro-cyclical.
This is feature and likely flaw of the current monetary system, but it's not clear what would solve it. There is a "liquidity" trap in any sort of system wide shock. What would replace it?
- The money supply fosters inflation.
Inflation, like demmurage, can be seen as a feature rather than a deficit. It encourages people to not let their money sit idle. There is no clear treatment that indicates that a system without inflation is necessarily better than one with.
- The privilege of creating money is a subsidy to the banking sector.
Once again, this is a question of the degree to which a healthy banking sector, ostensibly including fractional reserve banking, produces liquidity and finances desirable production at the societal level. Also, it does not necessairly follow that because of the existing of banking and/or debt that sovereign debt must exist. The existance of sovereign debt, which does indeed qualify as a subsidy, is a distinct issue.
- Money as debt contributes to growth pressure.
While it is true that anyone receiving financing is forced to grow, it's not clear that one must do so, or that one even must keep the majority of one's assets in legal tender which is subject to inflation. A variety of other options have been available, including the use of commodities (i.e. gold, silver) as inflation protected value stores. As for the exploitation of natural resources, it's not at all clear how this follows. Just because people who receive financing are forced to go, this has no necessary corrolation to the destruction of the natural environment (which presumably can be protected by regulation, and fostered by proactive government action, including the creaton of wildlife preserves). As for a "finite world," it's not clear that resources are finite. The sun shines every day and lots of potential energy is wasted. Oil, a clearly finite resource, is gradually being replaced by better technologies. Innovation around agriculture and medical technologies allows the same land to support a larger population without overflow. Perhaps growth should not be an imperative, but there are certainly many benefits to growth, including better and more robust infrastructure, including technologies we now take for granted like sanitation, clean water, well paved roads, automobiles, and, increasingly, cleaner and better versions of the same.
- Interest fosters wealth concentration.
Any sort of banking necessarily leads to an increase of wealth in those who successfully manage the financial flows, although in a healthy banking system, those investors are rewarded only who succeed in investing something that produces future value. This includes the major potential of upward value creation from people who would not ordinarily have the ability to access financail flow. Keep in mind the way that feudal systems worked. Wealth concentration was hereditary and fixed. Banking systems created a new elite, but they also created the possiblity of upward movement from turning normal manual labor into smart labor. It's true that manual labor ends up net devalued, but it also made possible many types of things.
- The monetary system is unstable.
This needs to be assessed with respect to other possiblities. What about a monetary system with a single central bank that does not allow debt, perhaps controlled by the Catholic church? Is that a better or worse system? Can a crisis be created even when a single central bank decides to print lots of its own currency? The answer is clearly that there are lots of ways of creating crisises and that the pro-cyclical nature of the current system is only one potential cause of crisises. If you wanted to make this meaningful you would need to unpack the overall quantity and scale of various crisises and to which they were derivative of this particular design.
- The monetary system violates ethical values.
There are lots of potential ethical values, some of which coincide in a meaningful way and some of which do not. Was there justice in a sytem governed by hereditary, feudal, landed elite? Some of these things are relative. Justice is not a binary, it is something that is always incomplete and always can be done in a better way. Judges, for example, should be free from bias in their judging. When they get corrupted this can because of simple ethical breech on the individual level or system design flaw, potentially embedded in the level of the culture itself. For this secondary category there is no clear answer regarding solutions. Cultural, institutional, and individual issue are all intertwined and even if there is no clear problem at the institutional level there can be a clear problem at the cultural level.
With respect to sustainability there is also no clear solution. Should we privledge a sort of Schumpeterian creative sestruction, in whihc certain institutions die, some survive, some are born and others or re-invented? This means breaking things and fixing them, which, while it may create problems, may also create solutions. Imagine that we still lived in fear of the humming of the automotive engine and preferred our horse and buggy. We can criticize the smog and the smoke and the strange petrol politics that liberate and enslave at the same time, or we can take the collective effort to create something that is better than already exists.
The sad alternative is a reactive politics that always finds something to criticize and assumes that by the removal of a bad thing we get a good thing. The reality is that we need to know why something that is not good and may even be bad exists, how it got there, and what can provide the same benefits in a cleaner way. As I see it, banks are something like automobiles. They guzzle a certain amount of gas, the potentially produce petroleum cartels, and they, in their last days, try to fight any attempts at innovation in order to keep their wonderful monopoly.
And yet, at the same time, in the world of digital currency there is something brewing that has the potential to not merely create a new model for an old engine, but to radically re-invent banking via distributed networks that bring the power previously associated with large institutions to the people.
As for me, I think that to invent the way forwards is way more radical than looking backwards.