ABSTRACT OF PAPER
Title: An Evaluation of Selected Ethical Issues Raised by Credit-Based Monetary Systems and Proposed Solutions
Author: Werner Richard
Despite a number of important exceptions, in the past 5,000 years the majority of monetary and economic systems has relied on bank-based credit creation, and usury. This paper considers a number of ethical and economic challenges, which such systems raise. These include fraud, debt accumulation and debt traps, predatory lending, misuse of power and control, insider information and conflict of interest, excessive growth bias and environmental destruction, widening income and wealth disparities, and generally social injustice. The paper then discusses several important responses to these challenges in a non-exhaustive manner, beginning with ancient ones in the Bible, Ancient Greece, China and the Koran, as well as more recent proposals. A common, if modest, denominator of such alternative approaches is that an explicit treatment of the ethical dimension and problems with bank-based credit creation systems is required. This serves to justify some form of government intervention, if only to redesign incentive structures or regulate the banking industry more appropriately. Implications for central bank independence are discussed. Further open issues are addressed and likely fruitful directions for future research are indicated.
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