Transforming Government's Role from Liability to Asset Through Receivables Assignment in a Credit-Based Monetary System
Executive Summary
This discussion paper presents a detailed exploration of how the government can transition from being a liability in its role as Payor of Last Resort to becoming an asset holder through receivables assignment in a credit-based monetary system. The paper outlines the current challenges faced by governments in a debt-based fiat currency system and proposes a shift towards a Credit-to-Credit Monetary System, where government intervention is backed by tangible assets. This transformation not only enhances economic stability but also provides direct benefits to both the government and the public.
Introduction

Governments around the world often assume the role of Payor of Last Resort during financial crises, stepping in to stabilize markets, bail out failing institutions, and provide liquidity. In the current debt-based fiat currency system, these interventions typically lead to increased national debt, inflation, and financial instability. The money created in these scenarios is not backed by real assets, resulting in a devaluation of currency and a loss of public trust.
However, this paper argues that by transitioning to a credit-based monetary system, the government can transform its role from a liability into a potential asset holder. By acting as the assignee of receivables during financial interventions, the government can back its currency with tangible assets, providing a more stable and transparent economic environment.
The Current Role of Government in a Debt-Based Fiat System
- Liability of Intervention:
- In the fiat system, government interventions are often funded by borrowing or printing money, leading to an increase in national debt. This debt is a liability on the government’s balance sheet and creates long-term financial obligations.
- The unbacked creation of money in response to crises can lead to inflation, reducing the purchasing power of the currency and eroding public trust in the financial system.
- Economic Instability:
- The lack of tangible backing for the money created during interventions contributes to economic instability. The devaluation of currency can lead to financial crises, making it difficult for the government to maintain economic stability.
- Public Discontent:
- The public often bears the burden of these interventions through higher taxes, reduced public services, and lower purchasing power. This can lead to public discontent and a lack of confidence in the government’s ability to manage the economy effectively.
Transforming Government’s Role into an Asset Holder
- Government as Assignee of Last Resort:
- In a credit-based monetary system, the government can assume the role of assignee of receivables when acting as Payor of Last Resort. This means that instead of simply paying out money during interventions, the government acquires the rights to collect on receivables, turning a potential liability into an asset.
- The receivables assigned to the government can include outstanding debts, future tax revenues, or claims on real assets, providing a tangible backing for the money created during interventions.
- Asset-Backed Currency:
- By backing the currency with real assets through receivables assignment, the government can ensure that the money supply is directly tied to the real economy. This reduces the risk of inflation and enhances the stability of the currency.
- The asset-backed nature of the currency increases public confidence, as the money in circulation represents real value rather than just government promises.
- Enhanced Economic Stability:
- The consolidation of receivables under government control allows for more strategic management of the economy. The government can use these assets to support critical sectors, ensure liquidity, and stabilize financial markets during downturns.
- The transition to a credit-based monetary system provides a more resilient economic framework, capable of withstanding financial shocks without resorting to unbacked money creation.
Benefits to the Government and Public
- Reduction in National Debt:
- As the government moves away from a debt-based system, the need for borrowing decreases. The money supply is directly tied to receivables rather than loans, reducing the overall national debt and associated interest payments.
- The government’s role as the assignee of receivables allows it to use these assets to settle obligations, further reducing the debt burden on the economy.
- Public Investment in Stability:
- The public benefits from a stable, asset-backed currency that retains its value over time. In contrast to the fiat system, where government interventions often lead to inflation, the credit-based system ensures that the public’s purchasing power is preserved.
- The transparency of the credit-based system allows the public to see how their tax dollars are being used to create real value in the economy, fostering greater trust in government financial management.
- Economic Growth and Stability:
- The credit-based monetary system promotes long-term economic growth by ensuring that money creation is tied to productive economic activities. The government can issue money directly linked to receivables, supporting investments in infrastructure, education, and other critical areas.
- The stability provided by the asset-backed currency reduces the risk of financial crises, creating a more predictable environment for businesses and consumers.
Addressing Potential Challenges
- Moral Hazard:
- The expectation that the government will act as Payor of Last Resort could lead to moral hazard, where financial institutions take on excessive risks. However, the credit-based system mitigates this risk by ensuring that money creation is tied to tangible assets, creating a natural check on excessive risk-taking.
- Administrative Complexity:
- Managing a large portfolio of receivables requires significant administrative capacity. The government must develop the systems and expertise needed to effectively manage these assets. Investment in technology and skilled personnel will be critical to the success of this transition.
- Transition Costs:
- Transitioning from a debt-based to a credit-based system involves upfront costs, both in financial resources and in restructuring financial institutions and markets. However, these costs are outweighed by the long-term benefits of a stable, asset-backed currency.
- The transition can be managed gradually, allowing the economy to adjust without significant disruption. This phased approach minimizes the impact on financial markets and the broader economy.
- Conclusion and Recommendations
The transformation of the government’s role from a liability in the fiat system to an asset holder in a credit-based monetary system offers significant benefits for economic stability, public trust, and long-term growth. By becoming the assignee of receivables, the government can turn interventions into opportunities for asset accumulation, reducing national debt and enhancing the value of the currency.
To achieve this transformation, the government should consider the following steps:
- Develop a Comprehensive Plan: Establish a clear roadmap for transitioning to a credit-based monetary system, including timelines, milestones, and key performance indicators.
- Invest in Administrative Capacity: Build the necessary infrastructure and expertise to manage the receivables portfolio effectively, including technology systems, skilled personnel, and regulatory frameworks.
- Engage with Stakeholders: Work closely with financial institutions, businesses, and the public to ensure a smooth transition. Transparent communication and education efforts will be essential to gaining buy-in and minimizing resistance.
- Implement Gradual Transition: Phase in the new system over time, allowing the economy to adjust and minimize the risk of disruption.