Energy Rewards to stimulate the economy

We create a market place where suppliers are invited to offer goods and services that reduce the level of greenhouse gas emissions in the atmosphere. This market place will have goods such as house insulation, solar hot water heaters, solar panels, smart metering systems, investments in renewable energy plants, investments in ways to fix carbon, and so on. Any supplier can offer their goods and services provided they can show how the sale of their products will reduce greenhouse gas emissions. Buyers in this market place can use regular money or they can use Energy Rewards. When they pay with Energy Rewards the supplier receiving Rewards converts it to unrestricted money when the product purchased is delivered to the buyer.

Because we invest Energy Rewards in a market place it is likely that Rewards holders will seek ways to invest for the greatest profit. That is, the allocation will be efficient. Who is issued with Energy Rewards is a political decision as it is a wealth allocation issue not an economic issue. If too many Energy Rewards are issued, the Rewards themselves will reduce in value but because their expenditure still produces a productive asset they isolate the regular currency from inflation.

To summarise we can change the way we expand the money supply by creating assets first, then money. This removes the present, unhealthy positive feedback mechanisms from the money market thus helping to prevent over-expansion and over-contraction of the money supply.

The government can stimulate the economy by spending money through special purpose markets. The idea of using special purpose, internally regulated markets to implement particular policy objectives is one that I have promoted for several years through On Line Opinion.

• "Contingent loans to reduce taxation and reduce greenhouse gas emissions" shows how to give extra resources to the less well off without increasing taxation.
• "The credit crunch and how to solve" it has another description of creating assets then creating money.
• "A new way to fund health" describes how to distribute money for health through a market.
• "Reward the frugal and charge the profligate" describes a way to encourage people to consume less and to turn our society from one based on consumption to one based on sustainability.
• "A different approach to funding transport infrastructure" has some early ideas on funding public transport

All these articles are variations on the same idea; using internally regulated market places as a way to spend community money. In devising these schemes a central issue was always one of obtaining the money to fund the buyers in the market places. It turns out that the funding can be provided by using these market places as a way to expand the money supply without the government going into debt.

While it seems counter-intuitive that we can get something for nothing, that is the magic of investment. When we invest we expect to get back more than we put in. This approach can be used by the community as well as individuals. If the government starts to think like an investor and uses the appropriate tools, they can stimulate the economy, so that as a community we all become investors and increase our collective wealth. It's a much healthier approach than becoming borrowers and mortgaging our future.

The global financial crisis gives Australia an opportunity to change the way we spend public monies at the same time as delivering the Australian government the political capital to change the system to achieve their election promises of fiscal responsibility and reduction in greenhouse gas emissions. My advice to the Federal Government is to decide to do something about climate change and to issue $30 billion in Energy Rewards to the population each year for the next 10 years. The result will be zero emissions, no government debt, a booming economy based on low cost clean energy, with zero inflation and a stable money market.