Hotspot TransAct Seminar series: on Transformative ideas: Prof. Klaas van Egmond and Prof. Bert de Vries on a Sustainable Financial System

The systematic, society-wide transformation towards sustainability cannot be made without the prior reform of the current financial-economic system. In particular, the financial system is inherently unstable and thus absolutely unsuitable to support the coming societal transformations. Building on earlier work since the Chicago-school in the aftermath of the 1929-crisis, a system dynamic model was developed to simulate the transformation to a sustainable financial system. Herein, public and private roles and responsibilities are disentangled. This means that the role of exclusive money creation of private banks is reassigned to the (European) Central Bank, under the ultimate, legal responsibility of the government. As private banks create money profit oriented through lending, in particular as asset mortgages, the system is pro-cyclic and thus unstable. In contrast, the Central Bank can create money anticyclic to the economic activity, thus stabilizing the system. In maintaining a targeted interest rate of 2% and meanwhile repaying government debt, yearly a sum in the order of 600 bn euro’s can be spend debt free directly into circulation. The money can be spend for example on the coming energy transition. There is no need for coming generations to repay the money. A further benefit would be that the resulting, direct control of the amount of money in the system by the ECB, would render policies of inflation control (QE and QT) far more effective.

This presentation will be open to everyone at the University: staff and students from all faculties. No need to register. Do not hesitate to share in your networks!

Contact: transact@ru.nl