1. Monetary Reform Conference
On the Liquidation of Government Debt under A Debt-Free Money System - Modeling the American Monetary Act-
The 6th Annual AMI
Monetary Reform Conference
At University Center
in Downtown Chicago
Sept. 30 – Oct. 3, 2010
Prof. Kaoru Yamaguchi, Ph.D.
Doshisha Business School
Doshisha University, Kyoto, Japan

2. Background: SD Macroeconomic Modeling Series 2003 - 2008

3. SD Macroeconomic Modeling Series
Principle of Accounting System Dynamics Modeling Corporate Financial Statements - New York City, July 20-24, 2003
Money Supply and Creation of Deposits (SD modeling 1) University of Oxford, England, July , 2004
Aggregate Demand Equilibria and Price Flexibility (SD modeling 2) Boston, USA, July 17-21, > Visit Prof. Jay Forrester (Sept. 14)
Integration of Real and Monetary Sector with Labor Market (SD modeling 3) Nijmegen, The Netherlands, July , 2006
Balance of Payments and Foreign Exchange Dynamics (SD modeling 4) Boston, USA, July 29 – August 2, 2007
Open Macroeconomies as a Closed Economic System (SD modeling 5) Athens, Greece, July 20 – July 24, 2008

4. 　National Model
A creation of a system dynamics model of the United States economy - a project as leading to a new approach to economic science and a fundamental understanding of the way macroeconomic systems work.
Although his national economic model remains unfinished, the most noteworthy intermediate result is that the model generates a 40- to 60 year economic cycle or “long wave (or Kondratiev cycle)” that not only explains the Grerat Depression of the 1930s, but also shows that deep economic slumps are a repetitive feature of capitalist economies.
Sept. 14, 2005, MIT

5. Macroeconomic System Overview

6. Engines of Dynamics A Relation between Stock and Flow
わかる！図解キャッシュフロー
　　　久保豊子著、ダイアモンド社
　　　２０００年、p. 111
Business Dynamics by John D. Sterman,
　　　McGraw-Hill Companies, 2000, p.194
Cash through
Operation
Cash through
Investment
Cash through
Finance

7. Double Entry Rule of Bookkeeping as Debit and Credit
Principle of Accounting System Dynamics - Modeling Corporate Financial Statements -
Analytical
Methods
Presented at the 21st International Conference of the System Dynamics Society , New York, 2003
Balance Sheet as a System of Stocks
Double Entry Rule of Bookkeeping as Debit and Credit

8. Creation of Money: Gold Standard

9. Creation of Money: Gold Standard
Monetary Base of Gold = 200
Required Reserve Ratio
10% -> 4% at t=8
Money Multiplier: 4 -> 5
Money Supply: 800 -> 1,000

10. Creation of Money: Gold Standard
Monetary Base of Gold = 200
Required Reserve Ratio
10% -> 100% at t=8
Money Multiplier: 4 -> 1
Money Supply: 800 -> 200

11. Macroeconomic System Design - American Monetary Act -

12. Bank Deposits (Credits)
Macroeconomic System of Money as Debt - Money out of Nothing (Thin Air) -
What is Money ?
Who can create Money?
Privately-Owned Central Bank issues Money (Notes)
Credit Creation by Commercial Banks (A Fractional
Reserve System)
Monetary Control by (and for) the Elite Bankers
Money Supply =
Currency Outstanding
(Cash: Bank Notes and Coins) +
Bank Deposits (Credits)

13. Money as Debt System - Transactions of the Central Bank -

14. Expert Ideas for Macroeconomic System Design
608 pages, 4th ed. 2002
724 pages, 2002

15. A New Macroeconomic System Design
Money as Debt System
- Money out of Nothing -
A Debt-Free Money System - the American Monetary Act -
Privately-Owned Central Bank issues Money (Notes)
Credit Creation by Commercial Banks (A Fractional
Reserve System)
3. Monetary Control by (and for) the Elite Bankers
Government Issues Money (Nationalization of the Central Bank)
100% Fractional Reserve（Abolishment of the Credit Creation）
3. Monetary Growth for the Economic Growth and Public Welfare

16. Macroeconomic System of Debt-Free Money - Transactions of Government -
Leverage Point
Seigniorage

17. Macroeconomic System of Debt-Free Money - Transactions of the Public Money Administration -

18. The Issue We are Facing Repeated Financial Crises (in September 2008)
Government has no money! Why can’t they borrow or tax?
Run-away Debt Crises
(in Japan, USA, Greece, etc.)

19. Nixon Shock 1971 No Convertibility between US dollar
Debt Crisis in Japan！
About $56, per
each Japanese
Nixon Shock 1971 No Convertibility between US dollar
and Gold
2009

20. Debt Crisis in OECD！ 190 % Japan Italy 110 % Canada USA France Germany
of annual gross domestic product.
of annual gross domestic product.
Debt Crisis in OECD！
190 %
Japan
Italy
110 %
Canada
USA
France
Germany
U.K.

21. File:Public debt percent GDP world map
File:Public debt percent GDP world map.PNG From Wikipedia, the free encyclopedia
In 2009
Japan
189 %
Belgium
98 %
Austria
69 %
Spain
53 %
Italy
115 %
France
78 %
U.K.
68 %
USA
Greece
113 %
Portugal
77 %
Norway
61 %
Poland
47 %
Singapore
Canada
75 %
Brazil
60 %
Finland
44 %
Iceland
108 %
Germany
72 %
India
58 %
Denmark
42 %

22. Solutions under the current Macroeconomic System of Money as Debt

23. Mostly Equilibria in the Real Sector

24. Government Debt is Build in the System of Money as Debt
Built-in Debt
For Growing Economy

25. Liquidation of Government Debt under the System of Money as Debt
Built-in Debt
For Growing Economy
Liquidation of Government Debt By
Primary Balance Ratio of 91%
(9% Spending Cut) at t=6

26. Liquidation of Debt is Costly !
Current Macroeconomic System is Dead-End !
Recession

27. Solutions under the Macroeconomic System of Debt-free Money

28. Liquidation of Government Debt and Debt-GDP Ratios
Under
A Debt-Free Money System

29. Higher Economic Growth by Debt Liquidation

30. Comparison of Prices and Inflation Rates
No Inflation is triggered
by the Liquidation of Debt

31. Criticism of Debt-Free Money System: Inflation !!!
Can we trust the Government ?
No: Political business cycle proves it.
Then
Can we trust privately-owned Central Bank ?
No: History of economic crises proves it.
So, what can be trusted?
Gov’t Policies based on SD models

32. No Inflation under GDP Gap
GDP gap by changing the Exponent of Capital
0.4 -> 0.43
New Issues of of money by the amount of 23 for 10 years
from t=6

33. Inflation by Mismanaging Money Supply
In Equilibrium
increase spending by 10 for 3 years
starting at t=10
Political Business Cycle

34. Business Cycles by Mismanaging Money Supply
Increase in
spending by 10 for
3 years
starting at t=10
Political Business Cycle

35. Build-in Feedback Mechanism for Preventing Inflation (Deflation)
Independence of Political Power Abuse

36. Conclusion From a viewpoint of system design,
macroeonomic system of debt-free money
is worth being implemented
to avoid government debt, financial crisis
and environmental destruction

37. Thank you for your attention !
Macroeconomic Dynamics - Accounting System Dynamics Approach-
On-going Draft (v.2, 350 pages)
and SD Simulation Models
are available　
at Session A, 5PM, Oct. 2.