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Exogenous and Endogenous Money
| NB. In all dictionaries, 'endogenous'
has the meaning of coming or growing from within and
'exogenous' has the meaning of coming from without.
However, conventional economics (concerned with maintaining
the contradictions and inequities of the present system)
has perverted those meanings to almost their exact
opposites. |
a) Exogenous money
Exogenous money is either money coming from abroad
OR money created by the international banking system operating
within a country. Its usual form is that of interest-bearing
loans which are not necessarily directed at productive
capacity and furthering the needs of society; and which
hand control of society either to a narrow elite or to
outsiders.
b) Endogenous money
In happy contrast to exogenous money, endogenous money,
although repayable, bears no interest and is always directed
at productive capacity. 'Endogenous' means coming or growing
from within. Therefore an endogenous money supply means
a money supply arising from within the society. Endogenous
money is issued by the central bank but can be administered
by the banking system. An endogenous money supply is of
immense importance because it is capable of ensuring, among
other things:-
· economic and social
justice
· an end to the imposition
of interest
· a direct linking of
new money to productive capacity
· a widespread ownership
of productive capital
· an increase in political
freedoms
· an efficient wealth
creation
· a basic income for
all inhabitants
· policy to unite inhabitants
who have different linguistic, religious, geographical
and ethnic backgrounds
· an ability of a society
to control its own destiny as opposed to being ruled
by outsiders and others
· a new economic system
which, by a proper use of interest-free loans, spreads
productive capacity to all individuals in the population
so that they produce (and thus earn) independently
of whether or not they also have a conventional job.
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The result is a combination of efficiency with social and
economic justice.
Endogenous money ensures that a society's
currency is always backed by productive assets. Taking the
form of state-issued, interest-free loans (administered
by the private banking system) it is directly related to
the real economy, made repayable and, when repaid, is cancelled
or cancellable.
It has four main uses:
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Public capital investment thereby
allowing hospitals, roads, bridges, sewage works,
fire stations, schools etc. to be constructed for
one half, or one third of the present cost. Over time,
the National Debt would reduce. However, the capital
projects can still, if wished, be built by the private
sector, managed by the private sector, even owned
by the private sector. The key point is that the cost,
at the very least, is being halved.
Private capital investment if such
investment creates new owners of capital and is part
of policy to enable all individuals, over time, on
market principles, to become owners of substantial
amounts of productive capital. By using state-issued
interest-free loans, administered by the banking system
on market principles, a company/corporation would
get cheap money as long as new shareholders are created.
Green capital investment, particularly
for clean, renewable energy. At present, using interest-bearing
loans, a lot of green technology is not financially
viable. With interest-free loans, however, it would
become viable. Thus we could have, for example, clean
electricity through tidal barrages, dams, windmills,
wave machines, solar electricity, and geothermal power
stations.
Small and start-up businesses thereby
freeing them from the crushing pressure of interest-bearing
debt. (In the case of small and start-up businesses,
there would be no requirement for wide ownership.)
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These uses have huge practical implications not least that
the cost of all productive capital investment is reduced
to a half or less of what it costs at present. Moreover,
there would be a money supply whose origin is not fraudulent
because it is directly and continuously related to the real
economy with counter-inflationary effect. Perhaps best of
all, the widespread ownership of productive capital would
give all owners a stake in the economic success, and social
cohesion, of their society. By profoundly involving all
individuals in the economthrough individual capital ownership,
political unity can be built. Countries with different ethnic,
religious, linguistic or other groupings will be able to
give all their people a strong sense of common cause and
purpose.
Complementary Currencies
Endogenous money is already in widespread use as a medium
of exchange in the many local trading systems generally
known as complementary currencies. Complementary currencies
are:-
a) created within the society without debt to a credit institution
(eg a bank) and are local
b) directly related to provision of a good or service
c) issued by individuals - in a transaction as a simultaneous
debt and credit (although the "timebanks" model
now allows individuals to build up credits without a corresponding
debt).
d) have no interest attached
e) cannot be inflationary
It is not suggested that this form of endogenous money
is a complete substitute for a national currency, but it
enables goods and services to be produced (and in effect
directly monetised, but without using ordinary money) to
facilitate socioeconomic intercourse.
Debt-free (non-repayable) money issued
by the state.
Debt-free (non-repayable) money issued by the state is neither
endogenous nor exogenous. It is endogenous in the sense
of being issued by the state but, since it is not directly
related to productive capacity, a key aspect is missing.
It is best to view such money as being neither endogenous
nor exogenous but "sui generis"
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