Reform Money Along Keynes' Lines

Advanced economies are being choked by the lack of credit that prevents any hope of recovery. Central banks have created money in huge quantities, to no avail. The money generously made available to banks is neither lent nor spent. This is because it acts as storage of value. And in moments of radical uncertainty such as these, there's no safer form for holding wealth.
Debtors' insolvency seems to justify the prudence of who accumulates liquidity and does not lend, unless prohibitively high interest is paid. But this prudence ends up reducing credit, depressing investment and consumption, prevents firms from selling, and ultimately makes it even more difficult to repay debt.
It's a vicious circle, and traditional economic recipes do not seem to apply. Austerity policies only further depress demand. On the other hand, expansionary policy needs additional moneys. If the new money created by central banks does not circulate, governments' tax revenues do not increase and the cost of financing debt does not go down, either.
It is wishful thinking to hope that in a similar situation all that is needed is to give additional leeway to the market mechanism to make the economy grow – the idea being that higher competitiveness pursued through structural reforms reduces economic waste and increases productivity.
It is questionable that such policy can achieve tangible economic results, while surely having major social costs, when competition no longer means producing better to sell more, but a rush toward ever more liquid assets. Today, as in 1932, competition has turned into what Keynes then called "the competitive struggle for liquidity".
It's not about stigmatizing those that in times of uncertainty find shelter in liquidity: it's an understandable choice and, for banks, is often imposed by regulators. But this does not mean we should be blind to the disastrous implications of this. And when lawful conduct yields anti-economic and anti-societal results, the time has come to change the law.
What's needed is then a reform of the monetary system that takes away from money its function as value storage. An illusory function, furthermore, which is constantly endangered by inflation. Moderate inflation would be desirable, in order to reduce the burden of debt and encourage those holding money to spend it and lend it. But inflation is dangerous: it's unpredictable, it can run off wild and affect in an arbitrary and destabilizing manner the distribution of income and wealth.
A monetary reform should enable us to define deliberately and ex ante devaluations of the currency that inflation inevitably provokes in a disorderly, random manner, only verifiable ex post.
This had been Keynes' preoccupation since 1923. The proposal for Bretton Woods was his. It had been the distinctive trait of all monetary systems until the establishment of the gold standard. Today its echo can be found in the proposals to set a minimum inflationary target for central banks. In Europe, this could take the form of a tax on banks' deposits at the ECB or on positive net balances of creditor countries Target 2. In general, we need to put in place any incentive that induces creditors to spend, so that debtors can start repaying.