Redesign of the national financial system by reorganizing the role of credit creation and government bond and currency issuance
― From a system that requires taxes to a system that does not make taxes an essential element ―
Summary
Redesign of the national fiscal system: Creating a system that does not require taxes
It is pointed out that there are institutional structural problems in currency issuance, government bond issuance, and credit creation role sharing behind the tax burden that has become indispensable in current national finances. In the current framework, the central bank issues currency while the government issues government bonds, so it is easy to accumulate government debt, and a system has been formed that makes it necessary to collect taxes to make up for it. I advocate a new system design of national finance, in which the government is responsible for issuing currency and the central bank is responsible for issuing government bonds. However, the government is not allowed to have a credit creation function like a bank, and it is most important to separate and maintain credit creation as a function such as private banks as before. By reorganizing this fiscal system, it is possible to make the national financial system completely tax-free through fundamental treatment that does not make taxes an essential element in the first place, rather than just symptomatic reforms such as tax cuts and tax rate changes.
A summary
This paper re-examines the combination of currency issuance, credit creation, government bond issuance, and tax collection in the current national finance, and envisions a system that does not make taxes an essential element of national finance by recombining these roles.
The starting point of this paper is not to see the tax itself as a problem first.
The problem is,
Why is tax necessary for national finances?
It is the institutional structure itself.
In this paper, national finances
Credit creation + government bonds
Recapture from the combination of.
On top of that, the current
Currency issuance → Central Bank Issuance of government bonds → Government
The combination presents an awareness of the problem that it forms a structure in which the government issues government bonds in the absence of a credit creation function, makes it easy to accumulate government debt, and leads to a structure that requires tax collection to support the debt. .
On the other hand, in this concept,
Currency issuance → Government Issuance of government bonds → Central Bank
Reverse the role to.
However, this does not mean giving the government a credit creation function.
Credit creation is maintained as a function of banks, and even if the government is the main body that issues currency, it does not create credit as a bank.
Therefore, the core of this concept is not “creating credit by the government”,
Redesigning the combination of currency issuing entities and government bond issuing entities after separating currency issuance and credit creation
It is in.
⸻
1. Raising the issue
In the current system, different subjects play different functions in the national finance and monetary system.
The basic structure is
Government → Issuing government bonds Central Bank → Issue currency
It is.
In addition, the central bank, as a bank,
Central Bank → Lending by Credit Creation
Do.
On the other hand, the government is not a bank.
Therefore,
Government → Does not have a credit creation function
It becomes a structure called.
The important thing here is that
Currency issuance and credit creation are not the same
That is.
Even if the government considers a system of issuing currency, there is no need to bankize the government.
⸻
2. Problems in the current system
If you simplify the current combination,
Currency issuance → Central Bank Issuance of government bonds → Government
It is.
Since the government does not create credit, when the government makes financial expenditure, it will be a structure that raises funds through the issuance of government bonds, etc. according to the current system.
As a result,
The government issues government bonds ↓ Debt is formed in the government ↓ The government itself does not have the function of creating credit ↓ It is necessary to collect taxes to maintain the government’s finances
The structure of.
The problem with this article here is,
It is not in the order of “issuing government bonds because taxes are needed”.
Rather,
Isn’t the combination of the current system forming a structure that requires taxes?
That’s the point.
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3. Not “Because Taxes Are Needed” But “A System That Requires Taxes”
Regarding national finances, in general,
Financial expenditure ↓ Financial resources are required ↓ Tax is required
It is often explained in the order of.
However, in this plan, this order will be reconsidered.
The problem awareness of this article is,
Instead of putting taxes as a premise of the financial system, examine why taxes are necessary in the financial system
It is.
In other words,
There is a current system because taxes are necessary
Instead,
Taxes are required due to the combination of the current system
Look at the system from the opposite direction.
From this point of view, the question is not only “which tax rate is appropriate”.
The problem itself is
Who will be responsible for currency issuance, credit creation, and government bond issuance?
It becomes a problem of institutional design.
⸻
4. Separation of currency issuance and credit creation
The most important principle in this concept is,
Currency issuance and credit creation are not treated as the same functions
It is.
Currency issuance
It is the function of issuing currency in the national monetary system.
Creation of credit
It is a function that allows banks to form new credit in the form of deposits, etc. by lending.
Therefore,
Issuing currency
And,
To lend through credit creation
Is treated as a separate function.
⸻
5. The government does not have the function of creating credit
In this plan, even if the government becomes the main body for issuing currency,
Don’t make the government a bank.
The government is not allowed to have the function of creating credit.
That is,
Government → Issue currency Government → No credit creation
The two principles are established at the same time.
This is an important boundary in this concept.
Since “the government issues currency”,
The government becomes a bank ↓ The government creates credit ↓ The government lends freely
It does not lead to the system.
Separate the currency issuing entity from the credit creator entity.
This is the basic principle.
⸻
6. Reversal of the role by this concept
The current system,
Take it as.
In response to this, in this plan,
Envision the division of roles.
The core is,
It is not about banking the government.
After all,
Reverse the roles of “currency issuance” and “government bond issuance” by the government and the central bank
It is.
⸻
7. The logic of system change
The logic of this concept can be organized as follows.
The present
Central Bank → Issue currency Government → Issuing government bonds
↓
The government does not have a credit creation function
↓
The government raises funds through government bonds
↓
Government debt is formed
↓
It is necessary to collect taxes to support the finances
⸻
This concept
Government → Issue currency Central Bank → Issuing government bonds Bank → Lending by credit creation
↓
The government becomes the main currency issuer
↓
However, the government is not a bank
↓
Credit creation is left in the banking system
↓
Separate currency issuance and credit creation
↓
Aim for a national financial system that does not make taxes an essential element
⸻
8. The core of this concept
This concept is,
“I issue a currency because I want to get rid of taxes”
It’s not a simple idea.
Rather,
“Why do we need taxes?”
It is to question from the root of the system.
In the current system,
Currency issuer = Central Bank Government bond issuer = government
It is a combination of.
In this plan, this combination itself is taken as a problem.
And,
Currency issuing entity = government Government bond issuer = Central Bank
Reassemble to.
In other words,
Instead of assuming a financial system that requires taxes, replace the system itself with a financial system that does not make taxes an essential element.
This is the central idea of this concept.
⸻
9. “Currency issuance by the government” and “creation of credit by the government” are different things
These two should not be confused in understanding this concept.
Currency issuance by the government
The government issues national currency.
Credit creation by the government
The government lends like a bank and forms new credit and deposits.
This concept adopts the former, not the latter.
Therefore,
Government = currency issuing entity
To do and,
Government = Bank
It’s completely different.
In this plan, these two are clearly separated.
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10. Institutional thought
The ideological change of this concept is,
From “a country that presupposes taxes” to “a country that does not make taxes an essential element”
It is not a simple tax change.
That is,
Redeploy the functions that make up national finance itself
It is an institutional reform.
Currently,
Currency issuance → Central Bank Issuance of government bonds → Government
It is a combination of.
This,
Currency issuance → Government Issuance of government bonds → Central Bank
Reassemble to.
At that time,
Credit Creation → Bank
The principle of this is maintained.
Therefore,
The change of the currency issuing entity and the change of the credit creator entity are separate issues.
⸻
11. Conclusion
The core of the institutional reform presented in this paper is not a change in the tax rate or a simple tax reduction.
Before that,
In national finances, who issues currency, who issues government bonds, and who creates credit?
It is to reconsider the division of institutional roles.
The current structure is
Government → Issuance of government bonds Central Bank → Currency Issuance and Credit Creation
It is.
This concept is this,
Government → Currency issuance Central Bank → Lending through government bond issuance and credit creation
Reassemble to.
However,
The government is not allowed to have the function of creating credit.
Credit creation is maintained as a function of the bank.
Therefore, the essence of this concept is
Instead of turning the government into a bank, reversing the subject of currency issuance and government bond issuance while separating currency issuance and credit creation
It is in.
And the ultimate goal is
To build a national financial system that does not make taxes an essential element in the first place without assuming the system of “run national finances because taxes are necessary”
It is.
This is not a tax reform, but a redesign of the basic structure of national finance itself.