Removing the constraint of currency for full employment

It is common knowledge that banks do not lend out savings, but rather create money out of nothing when a contract is signed.

For example, the currency (account balances) for a mortgage does not exist until the contract is signed. Then a bookkeeping entry gives the bank an asset and the borrower a liability.

This newly created currency can then be used to purchase a house, materials, contractors, etc.
But there's a catch ...

The magic of money

The magic of money

Once upon a time a little village had merchants such as the baker and brewer who provided bread and beer to the carpenter and farmer, knowing that in exchange the carpenter kept the furniture and fittings in order, while the farmer supplied grain at harvest time.

Friday afternoons in the pub they often pondered on how to trade with the village up the slope for grapes and wine, and the village downstream for beef and milk. The dilemma was coinciding the availability of products to barter, for eg., milk was available daily while wheat could be offered only at harvest time.

It would be difficult to establish the required trust to settle what is owed with strangers, or even neighbours who were not friends or family. So trade was stalled.

One Friday afternoon (in the pub again), a smartly-dressed sorcerer entered and offered a solution to the trade impasse. He opened his hand to reveal gems so attractive that everyone desired some. He said they were made from moonlight through a sacred process only sorcerers possessed, and called them moondrops.

He explained that since moondrops were universally sought after, they could be used purchase wine milk from neighbours at any time. The villagers immediately saw the utility of moondrops and agreed to secure a supply to trade with, by pledging their common land as collateral.

Trade expanded rapidly. The villagers enjoyed exotic foreign products such as milk, beef, grapes, and wine, while neighbours acquired a taste for bread and beer.

Almost unnoticeable, moondrops seemed to evaporate slowly. In order to maintain the level of trade, the supply of moondrops needed to be maintained by further pledges of assets and produce, and eventually even labour.

Inevitably, the sorcerers ended up with everything, reducing proud, skilled craftsmen and merchants to employees in their previous businesses earning just enough to feed themselves, and to keep coming back, indistinguishable from slaves.

A variation on the theme …

Instead of going to the pub, the sorcerer went to the king with promises of vast wealth through the purchasing power of moondrops secured with crown land, that the king could continue to use. What a deal eh?

Citizens could be paid with moondrops, and then use them to trade among each other, and pay taxes.
However, moondrops were hexed, and slowly drained the vitality of citizens, and production from crown lands. The citizens found themselves working harder and harder, for less and less, while being taxed more and more to maintain the strained government trying to maintain crown lands, and law-and-order among a continually impoverished citizenry.

Eventually, rundown businesses were ripe for take-overs, and undefendable land vulnerable to invasion.

Of course the drained energy accrued to the sorcerers who used this power to create floods moondrops used to buy up land and businesses, and to foment wars against those who resisted. Eventually all assets were owned by the sorcerers, and all people relegated to slavery on the lands and businesses of their parents.

Lucrative arms industries to supply law enforcement and wars, and pharmaceutical industries to supply chemicals that temporarily relieved the energy drain of moondrops arose. Owned by sorcerers these industries soon became the dominant industries on the planet.

But of course, this is all make belief …