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New Currency Theory (NCT)


Cullen, is it really necessary to be condescending?

So you are claiming a bank enters the private contents of my cash held in their safe deposit box on their balance sheet?!!

What you said was factually incorrect.  My money is a bank liability and asset - I relinquish ownership. My asset is transferred to them as an asset on their balance sheet with a counter balancing liability to me, on their balance sheet.  All I am left with is an IOU, a promise to return my asset on demand -  indicated 0n my bank statement - and you know this.  If you don't, I suggest you take it up with Dr. Huber since you have an email relationship with him.

My household or business balance sheet is not affected at all by NCT.  It is the bank's balance sheet that changes.  Their only asset would be from custodial and other fees they charge.  My assets are off their balance sheet.  So don't make up the notion that I am doing away with accountants and double-entry bookkeeping.


I am not being condescending. It’s just that you’ve spent 50 comments here claiming to have discovered a new monetary paradigm and I’ve explained many times how it’s wrong. And yet you refuse to understand the accurate order of operations.

The reason I asked you to show your work was so that you would show the accounting of the next step where the govt actually issues the money to the household sector. But you didn’t do it and instead you keep talking about coins and now you’re talking about safety deposit boxes. You’re doing that because you know it’s a fallacy of composition and that if you do the accounting with an electronic deposit that it debunks your whole accounting framework. It’s quite simple really - people need electronic deposits to buy things in a modern economy. They aren’t going to use their safety deposit boxes or coins as you keep referring. It’s ridiculous. So, once you credit an electronic bank account with a deposit you NECESSARILY have a corresponding liability from the ISSUER. The issuer can be a bank or the govt in your example. It doesn’t matter. The accounting is the same. You still have govt or banking liabilities.

There’s nothing unique in your “new” framework. It’s just word games trying to claim that an IOU isn’t a form of debt for the issuer. Sorry, but it’s wrong and I am surprised that you are having such a hard time realizing how it’s wrong after all these comments.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

Ok - I give up.  First of all, this not something I "discovered"or concocted.  I thought you'd be interested in learning about a money system that economists such as Huber, Kumhof, Laina, Werner, Wortman, Yamaguchi, Simons, Benes, Soddy, Fisher have studied and modeled since the 1920's. You continually mispresent what I say and reinterpret my explanations in the most simplistic way.

Maybe others who are following this thread will have the curiousity and open minds to explore alternatives to the status quo.


Paul, I asked you to do something VERY simple. Show the accounting when the govt issues the money to a new bank account holder.

You couldn't or wouldn't do it. So don't blame everyone else if you can't explain the most basic elements of the theory you're promoting.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

It seems that the confusion in this thread is arising from the treatment of deposits vs coins. The reason coins are treated as government assets is because of an arcane accounting construct similar to the treatment of gold. For example, when the government mines new gold it is held as a non-financial asset. It is a pure asset for the government. Coins are treated similar because they are real assets. This isn’t money in any modern sense of the word and modern money is credit, as Cullen often notes.

The important point that Cullen has tried to emphasize is that once the government creates an electronic deposit they are issuing an asset to the recipient. It doesn’t matter if the government has gold or coins to support this credit issuance. The fact is, they’ve issued a new asset and are therefore the liability issuer.

Personally, I am not sure if this would be better or worse than the existing system. I suspect that the altruistic belief in government “doing the right thing” is misguided. Probably as much as the “free market” belief in letting bankers create all of our money in a competitive system. But one thing is clear - NCT still results in the government having monetary liabilities. Whether they understand the accounting appears to be another matter.

That's the whole point though! We dont have to choose one or the other because we already have both. We have a market based money distribution system via banking and we have a govt that taxes and redistributes for public purpose.

I think a lot of these "new" monetary theories have become popular because people misunderstand the POLICY mistake of inequality for being the result of our monetary system's design....


"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche


There may some truth to what you say in that coins created as assets is historical.  Article 1, section 8 of the Constitution gives the government the power to coin money - no liability involved at all on the part of the government.

I am curious over your definition of "liability", when you say "liability issuer".  What is the government liable for when it creates coins, for instance?  What is its obligation?  What specifically do you mean when you say "NCT still results in the government having monetary liabilities. "?

NCT is a kind of  chartalism and state theory of money without using financial instruments. Thus, there is no mechanism in NCT to describe  the concept of  financial assets and liabilities in a financial instrument used in current monetary system.

We can see that Huber misunderstands current monetary system from his  paper  "Modern Money Theory and New Currency Theory" here. He did many wrong side-by-side comparisons in this paper, and show few of them as follows.

Currency School1: Chartalism, State theory of money. Money is part of a state’s sovereign prerogatives and a question of monetary sovereignty. A state’s monetary prerogative includes 1. determining the currency, i.e. the official unit of account 2. issuing the money, i.e. the means of payment denominated in that currency as legal tender 3. benefiting from the seigniorage thereof.

Banking School1: Commodity theory of money.  Money is a commodity like any other, thus an endogenous creation of market participants, in particular of banks. Banknotes and demand deposits are a private affair, based on private contracts. Trust in free banking.


Currency School2: Separation of money and bank credit. Separation of powers between the creation of money and the use of money in banking and the economy in general. Banks should be free enterprises, but must not have the privilege to create themselves the money on which they operate. Control of the quantity of money is the responsibility of a state authority (e.g. central bank, treasury, currency commission).

Banking School2: Money and credit are identical and thus cannot be separate. (... which is certainly true if asserting a banking perspective of loaning money into circulation).


Currency School3: Debt-free money.  Money does not need to be loaned into circulation, but can equally be spent into circulation free of interest and redemption, i.e. debt-free.

Banking School3: All money is debt.  The creation of money includes the creation of interest-bearing debt, and extinction of the money upon redemption.








The banking only works two ways. You could have the Fed combined with Treasury operate as a bank where retail depositors can bank. Or you could keep the private banks and restrict them from making endogenous loans. In both cases the accounting is the same. The issuer of the deposits has a liability and the account holder has the asset.

In your specific example you would create assets with coin creation. This is the same accounting structure as mining an ounce of gold. If you then use that gold to create a deposit account for the same value then the government would now have a deposit liability for the equivalent amount that is backed by the gold. It is a fully reserved system, but the government still has liabilities in the form of deposits. Or, in the alternative case with private banks the banks have the deposit liabilities. As Cullen was explaining, the only net financial assets are real assets. The financial assets all balance out.



Would you clarify and specify your objections?  I will pass them along to Huber to let him defend his position if he desires.