Monday, September 22, 2008

Saving The Fincancial System from Meltdown

There is another way to finance the $700 billion needed to save the country from financial instability. It need not increase the Federal debt that is already astronomical. When our economy is not using all of its resources, it makes no sense to have the government extract capital from the economy and switch it to buy bad mortgages. The Federal Reserve and the Treasury could simply write checks on themselves. They could create new money just as the banking system does when it makes a loan. The problem is that banks don’t want to make new loans in these troubled times, so the government needs to be its own banker and fill in. If banks are empowered to create money, why can’t the government’s own bank do it too?

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