Our land and houses based monetary standard
The monetary statistics are to quite some extent based upon the balance sheets of a particular kind of banks: the Monetary Financial Institutions (MFI’s). These banks have the legal right to accept debts which you emit and to use this as a collateral to create
money legal tender. What a remarkable (and profitable) privilege do these ‘MFI’s’ have! But why should they accept your debt? Your debt is their (profitable) asset and the MFI’s of course want this asset to be save! Well, they create and lend money because they trust you. Especially when you borrow for house and land purchase and emit a mortgage based debt (table). The single largest kind of money creating debt are mortgages (table, credit to households is largely mortgage debt). It’s not completely bonkers to state that we, to an extent, have a kind of monetary ‘housing standard’. And we bail out banks instead of households when the value of land and houses goes down, unemployment goes up and households can’t pay their mortgage anymore. Weird. The lender and the borrower created the money together and the best thing to do when the value of the collateral goes down is to bail them out, together, for instance by printing vouchers which households can use to pay down (part of?) the debt. We really have to learn to talk about save debts, instead of save assets, households have balance sheets, too (as shown in the modern national accounts). These really should become part of the monetary statistics. And no. Using such vouchers won’t make the banks forego interest income – the households can’t pay anyway.
By the way – who is the legal owner of this newly created money? I’m not sure if this is the bank.