To build our Republic back better we must build our banks better. The overwhelmingly greater part of our investment capital is now publicly generated yet privately managed. But pervasive and still underappreciated recursive collective action predicaments endemic to all exchange economies, combined with the decoupling of profits from production made possible by stratified capital ‘markets’ in such economies, render this unsustainable.
The only way to get public capital allocation right, and thus to get credit modulation and long-term productive investment right, is to manage public capital publicly and private capital privately. This paper shows how to do that through the simple organizing framework of a public balance sheet conceived as a central bank balance sheet.
Restoring our Regional Federal Reserve Banks to their original status as a network of regional development banks – ‘Spreading the Fed’ – will ensure that all assets financed with public capital are productive assets. This it will do both by discounting production-associated business paper, as in the past, and by strictly conditioning Fed lending to private sector banks upon promised local and regional production.
The liability side counterpart to this asset side supplementation of the Fed balance sheet will be the provision to all citizens, businesses, and legal residents of digital P2P Citizen and Business wallets through which an upgraded ‘People’s Fed’ issues ‘Democratic Digital Dollars.’ This will end commercial and financial exclusion, leaky monetary policy, and consumer financial data ‘harvesting,’ while enabling the equitable sharing of public wealth growth through ‘Commonwealth Growth Dividends.’
A macro-prudential Price Stabilization Fund – or ‘People’s Portfolio’ – and FSOC-inspired National Reconstruction & Development Council, comprising the heads of all cabinet-level executive agencies with jurisdiction over infrastructure and industry, completes the picture, enabling perpetual democratic determination of what nationally ‘counts’ as ‘development’ and, therefore, ‘productive.’
Date of Authorship for this Version
Investment capital, Central banks
Hockett, Robert C., "The Capital Commons: A Plan for Building Back Better and Beyond" (2020). Cornell Law Faculty Working Papers. 124.