Summary:

Gunnar Heinsohn and Otto Steiger contrast their property economics with the neglect and misunderstanding of the fundamental property titles of collateral and own capital in classical and neoclassical as well as in New Institutional and New Keynesian economics. The fundamental flaw of the great economic schools is seen in their confusion of possession, a thing, with property, a societal relation. The authors wish to replace the misleading dichotomy between State property and private property with the distinction between property and possession. The latter distinction allows them to present a coherent, property-based theory of interest and money, explaining why genuine money is always creditor’s money. In the creation of such money in a credit contract, the issuer of money as the creditor must burden his property, his own capital, and the receiver of the money as the issuer’s debtor to encumber his property by supplying it as eligible collateral. What may happen when collateral is missing and own capital lacking is exemplified by an analysis of the recent subprimemortgage crisis.