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THERE are many things wrong with the world's economies, and among them is a lack of printed money.
But now may not be the right time to start creating new money in the way that Jeremy Corbyn, a candidate for leadership of the UK's Labour Party, is proposing.
Central banks have already printed trillions of various currencies, so why is doing some more of that not OK?
Firstly, let us look at why the central banks began to print money in the first place. What was good about that? It became necessary to create/print money after the financial crash of 2008, because there was not enough money around to sustain the world's economies after that crash.
What happened was that the world had become totally dependent for money creation using a method whereby the supply of deposits available alternately surges and contracts. It surges to stimulate the economy, so that more money is then needed to sustain it.
Otherwise Peter has to wait to be paid before he can pay Paul. But just when more money is needed for the enlarged economy, the money supply contracts not just a little, but by too much. This has always been a risk, at least for a very long time, but it has not been a major world problem since the 1930s when a similar situation arose.
In other words, one of the root causes of the crisis was the way that money gets created. It comes and it goes. To an extent, one can say that a more active economy needs more money and a less active economy needs less money. The real problem is a lack of precision.
First too much money gets created, overheating the economy. Then as the level of activity falls, there is not enough. The amount of money needed by an economy is never constant and over time it has to be allowed to increase.
When people stop borrowing, the supply of money needed by Peter to pay Paul contracts. Reducing interest rates to boost borrowing is not a guaranteed way forward. People do not always want to borrow more.
When that happens, the economy goes into a recession and the result, if people do not want to borrow more, can be a deep depression.
When money is printed we get control over the quantity of money and that is how it should be. The main problem is that we all like our wages to keep on rising and economists think that it is better if prices do the same.
Having a stable rate of increase in the money supply is a very good idea. And that is best done by printing it.
I just say that:
(a) Politicians should not decide who gets the new money or when. This is why central banks were formed to stop interest rates from being dropped every time there was an election.
(b) By spending it on much-needed infrastructure in a temporary way, it will create temporary jobs. What is needed is permanent jobs. Everyone should get the benefit.
(c) There is a range of changes needed to get proper control over inflation and pricing. Doing this on its own is mostly confusing people. We need clarity. There is a learning process to be gone through.
Readers wanting more information are advised to read my earlier essays, as well as my various web pages.
* Edward Ingram is a leading thinker on the world stage of macro-economic design and has written a series of essays for Fin24.
