ARTICLES
(Scroll down to read: most recent, first):

Scotland's Council of Economic Advisers in need of advice (19)

It's the system that's the problem (18)

The application of engineering methods to finance, by CH Douglas (17)

Unhitching wages from incomes in an age of automation (16)

Alternative currencies and money reform advances in Italy, by Marco Della Luna (15)

Economic democracy  (14) 

But it works, doesn't it?  (13) 

Only economic democracy can deliver the goods (12)

Conspiracy, and other red herrings  (11)

What about gold? (10)

Money reform: left or right? (9)

An end to free banking ? (8)

Is income tax really necessary? (7)

Raking in the money (6)

What's the difference between a basic income and a state hand-out? (5)

Their profit, our loss (4)

A weapon of mass destruction (3)

Doctor prescribes revolutionary treatment (2)

What are they afraid of ? (1)

In “The Scotsman” of Saturday 6^th December 2008 we were introduced to the 11 members of Scotland’s ‘Council of Economic Advisers’ (CEA)  -  an august body of Economics Professors, three business men and a former Bank Chairman, who were putting forward their plans to lift Scotland out of the economic mire and on to the road to recovery.  The headline “Let’s build our way out of this”, flattered to deceive, because it was followed immediately by the panel’s recommendation that “the Scottish Government should BORROW money to fund a recession-beating public works programme”.

Whether as an individual or a Nation which is already in debt, you don’t become solvent by borrowing more and going deeper into debt.  The type of debt we are mainly talking about is that put out by Banks, on which a further charge of interest has also to be paid.  So the principal + the interest charge has, at some time, to be paid ‘back’ to Banks, who themselves did not have real money to lend in the first place.  They would in most cases have made a book-keeping entry on a computer screen in order to lend out this ‘debt’ which they call ‘credit’.   Even all this so-called ‘liquidity’ which is pumped/injected into Banks' black holes by the Federal Reserve in America and the Bank of England in the UK are officially loans.  So our Government’s debt borrowing, we are told, will be going up to over one hundred billion pounds, which we are warned will have to be paid back by our tax payers.  Well not exactly; the taxpayers will never be able to pay this off; it goes on our National Debt.  What they will be asked to pay, each year, is the interest which will be some £50 Billion, and this has to be paid out to those who supplied the credit/debt, before any spending on hospitals, schools, roads and associated infrastructure can be ‘funded’ with what is left.  Little wonder, then, that ‘Prudence’ has accompanied the bath water down the drain.  Indeed Gordon Brown, prior to the abandonment of the Stability and Growth Pact, had wedged it sideways by saying instead of keeping to yearly rules it made more sense to take it over the 7 year business cycle. 

The ghost of the oft-misunderstood J.M. Keynes is resurrected to justify our present erroneous political economy's pouring of debt money into consumer retail spending, which is supposed to make everything right in our own little financial world.  Sitting in the middle of the world’s financial black hole are derivatives. For a full definition of what they are, look it up on the internet.  Suffice to say they are financial bets which in themselves have no intrinsic value.  Indeed, Warren Buffet called them “weapons of financial mass destruction”.   [Derivatives trading was legitimized some years ago by the then Fed chairman, Alan Greenspan; the same person who was giving away money at 1% interest.]  To give some idea why this metaphorical hole is also insatiable, I ask you to assimilate the following:  in 2005, derivatives were 5 times all Bank assets of the world; 6 times world GDP; 7.5 times all stock market valuations in the world; and then in 2007, only 2 years later, the derivatives figure itself has increased another fourfold.  

What we are currently doing both in the UK and in the USA is akin to putting a ‘Band Aid’ (sticking plaster) on the patient’s open wound after open heart surgery instead of wiring up the rib cage, carefully stitching inside and outside wounds, giving over a place in intensive care prior to being released into ward care, and then, and only then, being monitored on the path to recovery in the outside world.  The financial diseases which cause us to come out in painful bubbles on an ever-recurring basis are symptomatic of financial capitalism, lurching to extremes in a manic-depressive, illogical manner.

There are many historical instances of people in worse circumstances than we are in right now pulling themselves up by their own bootstraps.  I will give but two examples. 

Germany just after the Second World War was left with Reich Marks, which were so devalued as to be almost worthless.  One of the main players in creating a new currency, the Deutsche Mark, was a Bavarian politician named Ludwig Erhard – an avuncular, portly, experienced politician who would not tolerate opposition to his ideas, because he knew he was right.  He had not only to convince those in power in other political parties, but to deal with the three overlords of the American, British, and French sectors – the Russian sector always went its own way. 

While the Russians ripped out all the machinery they could get their hands on and sent it back to Russia, the more sensible ‘West’, especially the British, saw that the path to recovery was to help the West Germans to help themselves.  So the British Army actually were the ones who re-started production of Volkswagen cars, at a time when, in Britain, only doctors and essential others could apply for a rationed motor car. 

Production of real assets was the first priority.  They stopped the black market in food, clothing, rent, and raw materials.  Electricity, gas, water, coal, house rents, and public transport were controlled.  Anti-cartel and anti-monopoly legislation was enacted, and debt was discredited in such times.  This was 1948. 

The new West Germany was born, and so was the rise of the new German mark.  It was possible to exchange old currency for new, but the old elite had lost almost everything and they too had to start again.  There was limited social credit.   The young and old were set to work and paid a wage in the new currency, removing them from the black market by also putting previously hoarded goods into the shops, to be sold on a legitimate basis.  Some of  the most likely higher earners had additional money put in a bank account for them, which could not be accessed until a future date.   Even today, the now united Germany is more astute in times of turbulence, as many of them remember their history of a worse financial crisis during the Weimar republic.

The second example is the little island of Guernsey after the Napoleonic war in 1815.  As a Crown Peculiar or Dependency, its cri de Coeur fell on the stony ground of the British Parliament.  All wars devour money and this one was no exception.  Even before that, Guernsey had a crippling public debt on which it was paying 12% interest annually, trying to balance this with an income barely in excess of the interest payments. 

The sea wall defences were in danger of crumbling and a mini Katrina beckoned.  They had a ready and willing labour force and plenty natural stone and other materials, but there was no money. More borrowing was not an option. 

Do they just sit there until the sea washes over them?  

A body of citizens realised that money was not wealth; their wealth was in their community’s assets.  The citizenry were consulted and the States Parliament agreed to a monetization of a certain number of their real assets.  They issued an amount of their own currency notes limited to their required public works programme and spent directly to that.  All people involved were paid in these notes, with the result that they circulated in the community and were accepted, as they were seen to have real purchasing power.  The money was to be redeemed after a few years through taxation, to allow an issue to be cancelled.  

This was redeeming a CREDIT, not paying off a DEBT with its concomitant Interest.   It was so successful that many other future note issues were thus put into circulation.  Sadly in the present day, the Channel Islands, particularly Jersey, are looked upon as tax havens for wealthy outsiders, to the detriment of the indigenous population.

So the recommendation of the C.E.A. is for the Scottish Government to borrow money in order to fund a recession-beating public works programme.  Like the second bit: hate the hackneyed idea of going into yet more debt.  Where is the ersatz ‘money’ to come from?

The UK Treasury/Bank of England is already tuckered out trying to save the whole of the UK and the world.  The National Debt will be rising to over a trillion pounds shortly. There is little hope of going to what were Scotland’s two greatest Banks: one is dead and the other is almost terminally ill.  PFI was an old labour ruse to keep expenditure off Balance Sheet and instead saddle forthcoming generations with payback of principal + interest + other costs: and in many cases the public won’t own the asset, even at the end of 30 years.  PFI currently stands at abut £50 Billion.  PFI has been seen for what it is and our SNP majority doesn’t like it, both financially, and politically because it was prescribed by the previous Labour majority. 

The SNP is floundering about trying to find an alternative slot where they can jump onto this carousel of debt.  Scottish Futures Trust is just that: something for the future, where the hope is that someone somewhere will buy bonds or otherwise finance projects.  Public sector pensions provisions will be unaffordable and therefore unsustainable in their present form.  All of our Local Authorities are so heavily in debt themselves, it is no use looking in their piggy banks. The SNP could invoke the so-called Tartan Tax, which could be political suicide.  Scotland is a Nation but within the true governance of the Westminster parliament.  We can have our own police but not our own army.  [We cannot even keep many of our own Scottish Regiments.]    We can’t have our own money as that would contravene UK and EU laws.  We cannot in Scotland’s name cry out to the IMF.   We seem to be at the end of the road, where as one door closes another one is slammed in our face.

The Scottish Assembly/Parliament/Government can change its name, but like a toddler in reins it is limited in how far it is allowed to run.  There is a way to fund our public works programme without borrowing debt from banks, and that is effectively to monetize our public assets.  Tokens can be defined as a type of currency circulating as a means of exchange.  The Scottish Government could issue SCOTs, where a SCOT is defined as “Scottish Currency Official Token”.  

Such paper tokens, backed by the Scottish  Government, could be issued for example to build the new Forth Bridge.  The contractors in receipt of these could pay their men with the same SCOTs paper, which in turn would have full acceptance in Scotland.  The cash-strapped Councils could accept SCOTs in payment of Council Tax and a further round of circulation would take place.   The broad principle is not new, nor novel, as it has been successfully effected throughout history in many places.  Each case is different and the detail has to be tailored to the specific circumstances of the time.  While there will be many who will bring up reasons why it cannot be done, we and they should be thinking how it can be done.

Ronald J. Rankin   

December 2008

18 

It's the system that's the problem

This website has now been in existence for close on a year, and the articles and comment posted should make it clear exactly where we stand, as far as the need to pinpoint those responsible for our present dysfunctional financial system is concerned.  But perhaps it’s time to state our position even more plainly.

All too often any discussion about money reform degenerates quickly from a focus on the drawbacks of using debt as our means of exchange, and realistic proposals for implementing a debt-free alternative, into a bitter whodunnit scrap, with claims and counter- claims attempting to pin the blame on one or other preferred villain of the piece.

The Venetians and the Dutch are favourite also-rans; but the principal contenders for the title of profiteers from the present debt-based monetary system are, without doubt, either “the British” (hot favourites among patriotic Americans) or “the Jews”.

No impartial investigation into the origins of debt-based finance can fail to note the importance of the Bank of England in its progress, or the adverse reactions of spokesmen for the British establishment to the fledgling American nation’s unconventional  -  and highly successful  -  monetary initiatives.  As the Moneymasters documentary (see our Websites, Books, DVDs section) relates, persistent attacks were made by international financiers based in Europe and, in particular, the City of London, to scupper a debt-free means of exchange, both in the old colonies, and in the newly-emerged United States; and it seems clear that the prosperity of the British Empire was built on the ability to impose “free” trade on subjugated nations, backed by debt finance and force of arms.

Recently a book called “The Great Red Dragon” (published in 1890, in America, by LB Woolfolk) was brought to our attention by a new member.  Although some of its contents seem to us questionable, we were intrigued by its account of how the East India Company, with the aid of debt-finance provided by backers in the City of London, succeeded over a period of time in reducing a prosperous land, well able to live off its own resources, to the status of impecunious client state, with whole sections of its populace suffering endemic deprivation (a feat which has been repeated countless times, since then, by high finance and its incestuously linked corporate associates in many third-world countries).

However, one company, and its monetary facilitators in the City of London, hardly amounts to “the British”, many of whom were living in gutters and slums while merchants and money manipulators built huge fortunes and took control of the economic life of the country, subjecting ordinary people’s wages to the implacable logic of finance.  Even if we accept Woolfolk’s claim that companies all over the world were subsequently founded, and are presently controlled, by a strictly limited number of powerful plutocratic interests with their roots in the City of London, this certainly can’t be blamed on the vast mass of ordinary British people.

While fixing a large measure of blame firmly on “the British”, Woolfolk goes further, and identifies these powerful  interests in the City as “Jewish”.  Here he treads upon dangerous ground.  It is quite acceptable to name and shame “the British” (as long as attention is not drawn to the preponderance of Scots among the empire-building traders).  Nobody considers it “racist” to accuse “the English”, in particular, of even the most heinous crimes.  But to single out “the Jews” in this way is considered offensive  -  in many countries, criminally so.

As far as we are concerned, discrimination as to which nations may or may not be accused of collective responsibility without the accuser being liable to prosecution is grossly unfair; and lumbering entire nations or races with responsibility for the wrongdoing of a minority in their midst is plain silly.  To equate the international banking system with “the Jews” is as wrong-headed as identifying the East India Company and the City of London with “the British”.

Yes, the big banking fraternity includes many very rich people of Jewish origin.  It also includes many very rich people who are neither Jewish by birth, nor Zionists by profession, and who have no connection whatever with the State of Israel.

What we are up against here is not a particular race or nation: it is a transnational oligarchy who have no loyalty to any particular race or nation, and who regard the world as their oyster, from which pearls of new wealth may be endlessly extracted, with the help of other people’s ill-paid labour, and a little skilled financial and political manipulation.

It is those at the top of this incestuous alliance of “free”-trading corporations, big finance and governments, not the malign self-seeking of any particular race or nation, which threatens to enslave ordinary people throughout the world.  With each new monopolistic takeover, each successive cycle of debt-induced boom and bust, leaving a trail of bankruptcies in its wake, wealth, and the power wealth  brings, are being concentrated into fewer and fewer hands, and the gulf between the staggeringly rich and the rest of humanity grows wider and deeper.

If anyone needs to be targetted, it's specific individuals, or whatever race or nation, who see fit to exploit their fellow human beings for their own advantage, by manipulation of the present financial system.

It seems to us mistaken to focus on proving the responsibility of particular races or nations for our present sorry financial state, rather than targetting the system itself, and the mechanisms by which small numbers of individuals obtain control over billions. Arguing about whether the British or the Jews or the Masons or the Jesuits are the villains of the piece doesn’t just give many people the impression that money reformers are a lot of crazy conspiracy theorists, chasing all kinds of different quarries into the tangled undergrowth of myth and legend; it wastes valuable time and energy which might otherwise be used to make people aware of the consequences to themselves and their families of using debt as our means of exchange.  Instead of seeking to fix the collective blame, we should be doing everything we can to ensure that this most important of all issues is placed at the centre of the popular political agenda.

We believe that the vast majority of British people, together with the vast majority of Jewish people, just like everybody else, suffer, rather than gain, from the present dysfunctional monetary system. 

So what about  books like “The Great Red Dragon”?

Well, in our opinion people should not be prevented from reading books which investigate various theories on the origins and practice of debt-based finance.  Everybody should be free to explore all the available facts, and all the possible implications to be drawn from those facts, and to reach their own conclusions.  To put some books or ideas off-limits is what used to be known, in less politically correct times, as censorship.

But remember: the enormously influential push for money reform between the two World Wars lost support when it became associated with anti-Jewish sentiment.  Even the penetrating analysis of the financial system by CH Douglas was marked down as beyond the pale, and fell into postwar oblivion, because of a focus, in some of his writings, on Jewish involvement in the banking system.

As far as we are concerned, Douglas’s ideas on social credit, stripped of the racial allusions  -  which, in any case, occupy only a small space in his works  -  offer a valuable signpost for today’s money reformers.  As Frances Hutchinson says, in an article in Sustainable Economics (http://www.sustecweb.co.uk/past/sustec15-3/why_i_am_not_a_social_crediter.htm), "Would the study of social credit really lead impresionable people into setting up Nazi-style death camps?"  The suggestion is, of course, completely ridiculous.

So we’d like to ask our readers, when they talk about money reform to their families and friends and workmates, to focus on the very obvious problems inherent in the system itself, and the mechanisms by which they are perpetuated.  The fact that using debt as our means of exchange makes it impossible to deliver a steady flow of goods and services to the population of the world is quite enough to damn it.

Your aim, like ours, should be to spread an intelligent awareness of the issues involved among the wider population, so that pressure for reform from the grass roots pushes proposals for a switch to publicly-created, debt-free money to the top of the political agenda, undermining the position of those who profit from, and therefore seek to perpetuate, the present system.

17 

The Application of Engineering Methods to Finance

World Engineering Congress, Tokyo, 1929

(Paper No 685)

C H Douglas 

In defining the profession of engineering as the application of the forces of nature to the uses of man, the Institution of Civil Engineers no doubt had in mind those forces which at the present time we are accustomed to call physical forces.  There is no reson to limit the definition of such forces, and it is becoming increasingly recognised that the province of the engineer, and in particular the scope of the engineering method, can with advantage be extended to cover forces of a more metaphysical and psychological character.

Assuming that there is reason to bring the financial system under review, on the ground that it is not operating satisfactorily, and that, being in essence a combination of an enlarged Works Order and Distribution System combined with a metaphysical scheme for the mobilisation of human activities, it is at any rate interesting to consider the matter from an engineering point of view, and stripped of the emotional irrelevances with which it is frequently clothed.

In attacking an engineering problem the first point we settle, with as much exactness as possible, is our objective.  No engineer observer of the discussions which take place in political and lay circles on the industrial problems of the present day can fail to be struck with the fact that the problem itself is rarely stated with any clearness. 

For instance, the paramount difficulty of the industrial system is commonly expressed as that of unemployment.  Therefore the suggestion involved is that the industrial system exists to provide employment, and fails.  Those who are engaged in the actual conduct of industry, however, are specifically concerned to obtain a given output with a minimum of employment, and in fact, a decreasing amount of employment. 

Consequently, those who are conducting industry have in their minds objectives which are diametrically opposed and incompatible.  On the other hand, the great majority of those engaged in industry, anyhow, in the lower ranks, would claim that what they want from the industrial system is goods.  Finally those whose interest in industry is purely financial, require from industry, simply, money,

We have, therefore, to recognize that there are at least three separate and distinct objectives alleged in the industrial system  -

(1)               Employment

(2)               Goods and services

(3)               Money.

(1) Employment as the Objective of the Industrial System.

For a given programme of production and a given standard of development of the industrial arts, output is proportionate to the energy employed in industry.  Broadly speaking, the source of this energy is immaterial.  So much solar or mechanical energy, so much less human energy.  If employment is accepted as the objective of the industrial system, therefore, and output to be a dependent variable of this objective, (a) either process and mechanical energy employed must be kept rigidly constant, or (b) output must be completely unfettered by any difficulties of sale.

(2) Goods and Services as the Objective of the Industrial System.

There are here two possible cases: (a) a fixed programme of production with unlimited improvement of process and employment of mechanical energy, resulting in a rapidly and constantly decreasing amount of employment in man-hours; (b) an advancing programme of production with unlimited improvement of process and employment of mechanical energy, resulting eventually in a saturated psychological demand, and automatically becoming similar to (a). 

(3) Money as the Objective of the Industrial System.

It is perhaps only necessary to state this in brief form.  Money is not made by making or selling goods; it is made: (1) by digging gold, silver, and copper out of the earth and minting them; this represents perhaps 0.3 of 1 per cent of money in circulation; (2) by the printing of paper money, representing, perhaps, 10 per cent of the money in circulation; (3) the creation of credits by banks, representing, perhaps, 90 per cent of the money in circulation.*  With the exception of the labour employed in mining and working the metals in the first insignificant division, and the labor employed in the elaborate organisation of the banking system, the creation of money has nothing to do with the industrial system, although it represents an effective demand upon the whole product of the industrial system.

The making of money as an objective of the industrial system, therefore, bears a close resemblance to charles Lamb's method of obtaining roast pork by burning down the piggery.

Since money is not made by the industrial system, it is important to understand whence it originates and whither it eventually returns. 

The matter has been epitomised in a short sentence by Mr McKenna, Chairman of the Midland Bank: “Every loan creates a deposit, and the repayment of every loan destroys a deposit.”  The following explanation may make this clear to those who are not familiar with the technique, and who imagine tht the money which banks loan to their customers is limited by the amount they receive from other customers. 

Imagine a new bank to be started  -  its so-called capital is immaterial.  Ten depositors each deposit £100 in treasury notes with this bank.  Its liabilities to the public are now £1,000.  These ten depositors have business with each other and find it more convenient in many cases to write notes (cheques) to the banker, instructing him to adjust their several accounts in accordance with these business transactions, rather than to draw out cash and pay it over personally.  After a little while, the banker notes that only about 10 per cent of his business is done in cash (in England it is only 0.7 of 1 per cent), the rest being merely book-keeping.   

At this point depositor No 10, who is a manufacturer, receives a large order for his product.  Before he can deliver, he realises that he will have to pay out, in wages, salaries, and other expenses, considerably more “money” than he has at command.  In this difficulty he consults his banker, who, having in mind the situation just outlined, agrees to allow him to draw from his account not merely his own £100, but an “overdraft” of £100, making £200 in all, in consideration of repayment in say, three months, of £102.  This overdraft of £100 is a credit to the account of depositor No 10, who can now draw £200.

The banker’s liabilities to the public are now £1,100; none of the original depositors have had their credits of £100 each reduced by the transaction, nor were they consulted in regard to it; and it is absolutely correct to say that £100 of new money has been created by a stroke of the banker’s pen. 

Depositor No 10 having, happily, obtained his overdraft, pays it out to his employees in wages and salaries.  These wages and salaries, together with the banker’s interest, all go into costs.  All costs go into the price the public pays for its goods, and consequently, when depositor No 10 repays his banker with £102 obtained from the public in exchange for his goods, and the banker, after placing £2, created by himself, to his profit and loss account, sets the £100 received against the phantom credit previously created, and cancels both of them; there are £100 morth more goods in the world which are immobilised  -  of which no one, not even the banker, except potentially, has the money equivalent.  A short mathematical proof of this process is given in Appendix I (below).

There is, I think, little question that the true objective of the industrial system is the production and distribution of goods and services.  Assuming this to be so, an examination of the existing arrangements with a view to discovering the causes of their partial failure, is involved.

The application of engineering methods to the production of goods and services has enabled one human unit to produce considerably more goods and services than are necessary for his own use.  The application of mechanical power and improved process and organisation can tend only to increase the output per man-hour.  It should be obvious, therefore, that a system by which purchasing power is distributed mainly through the agency of wages conflicts sharply with the physical reality involved in the fact that a decreasing number of persons tend to be involved in the production of the necessary amount of goods and services.

Before leaving this portion of the subject, however, it may be desirable to indicate the effect of raising or lowering wages considered as a component in the cost of unit production.

The money distributed in the production of goods consists in wages and salaries.  (Dividends are distributed subsequently to the sale of goods.) 

Since labour costs are not the only costs of production, labour costs are less than prices.

If wages, that is to say, labour costs, are reduced, the ratio of purchasing power to prices is lessened.

We can deduce, therefore, that lessening the item of labour costs in the total factory cost of an article reduces the capacity of the wage-earning portion of the population to buy the total volume of goods produced, although for a total amount of wages distributed the amount of goods produced is obviously greater.

Since it is generally recognised that the average dividend of an industrial undertaking distributed to the shareholders is very small compared to the amount distributed in wages and salaries, probably not averaging more than 3 per cent, we may be led to suspect that the reduction of the ratio of direct labour costs to total  costs involves a principle of fundamental importance.  This is so. 

If we take a cross-section of the flow of purchasing power delivered to the buying public in the form of wages, salaries, and dividends, and at the same moment take a cross-section of the flow of prices generated in the industrial system, we shall find that the latter cross-section is always greater than the former.  This may be put as follows.  All industrial payments may be divided into two groups.

Group A  -  All payments made to individuals (wages, salaries and dividends).

Group B  -  All payments made to other organisations (raw materials, repayment of bank loans, and other non-personal costs).

Now the rate of flow of purchasing power to individuals is represented by A, but since all payments go into prices, the rate of flow of prices cannot be less than A plus B.  Since A will not purchase A plus B, a proportion of the product at least equivalent to B must be distributed by a form of purchasing power which is not comprised in the descriptions grouped under A.

The explanation of this apparent anomaly is complex, but is in the main due to the fact that the buyer of goods is at one and the same time paying for the goods and repaying to the banking system, via intermediate producers, the money which the industrial system borrowed from it but which the banking system created by means of a book-keeping transaction.

The repayment of bank loans in the industrial system may be considered as included in the balance of the payments made from one business organisation to another, that is to say, in Group B, as explained above.

On the assumption that the delivery of goods and serices is the objective of the industrial system, it is obvious that the rate of flow of purchasing power should be equal to the rate of generation of prices.  The existing financial arrangements make a crude effort to approximate this condition by issuing purchasing power to manufacturing organisations in the form of loans, which in turn the manufacturing organisations distribute in wages and salaries against future production.  In other words, the existing financial system increasingly mortgages the future in order to sell the goods existing at present, the most obvious form of this practice being the instalment system of purchase.  Since the financial system is in essence merely a book-keeping system, having for its proper objective something not very dissimilar to the “progress” department of a large factory, the defect in it which is disclosed by the preceding cursory examination is obviously capable of adjustment.

Bearing in mind the premise that the consumer should collectively have the financial means to exercise the full call on both the sum of actual production and the balance of potential production represented by unused plant and available labour and material, it is easy to se that under existing conditions prices ought to vary inversely as the rate of production.  The difficulty involved in this is that producers would lose money, and to avoid this and to stimulate production some modification is necessary.

Reverting to the physical realities of the productive system, it can easily be seen that the true cost of a given programme of production is the consumption of all production over an equivalent period of time.  In other words, the true cost of a programme of production is in general not the money cost, but considerably less than the money cost, and a given programme of production can be distributed to the buying public only if sold at its true cost.

Many methods will suggest themselves for putting into operation the foregoing priciples. Articles might be sold at cost plus profit as at present, and a rebate to the purchaser be made through the banking system, representing the difference between the apparent cost and the true cost.  The source from which this rebate would be made would be exactly the same source from which at present the banking system creates money out of nothing, that is to say a book entry based on the security of a country considered as a producing mechanism. No inflation is involved in such a process.  Inflation consists in an expansion of the figures of money available accompanied by a corresponding rise in prices.  The objective in theis case being a fall of prices to bring them collectively within the buying range of the general public, any rise of prices would merely result in the use of a smaller amount of credit.

It will be realised from the foregoing analysis that a considerable increase in the total purchasing power is necessary to obtain a sufficient effective demand upon the possibilities of the modern industrial system.  Having obtained this initial increase in effective demand, the problem of the distribution of the increase assumes manageable proportions.  Merely to endeavour to reallocate the initially deficient amount of purchasing power by taxation, as at present, can only result in a serious curtailment of production. 

(Appendix II of The Monopoly of Credit, by CH Douglas, 4th Edition, published by Bloomfield Books)

*  After the World War Two the proportion of cash to credit was much higher: at the more traditional level of over 40 per cent, in 1948.  It has since declined precipitously to its present ratio of around 3% cash to 97% credit.

16

Unhitching  wages from incomes in an age of automation

By Gillian Swanson

No more easy-going days plucking fruit from the trees of Eden for us descendants of the original sinner, then  …

Those in employment tend to take what they perceive to be God’s side, looking unkindly upon those who enjoy a life of idleness while cadging off virtuous taxpayers like themselves.  After all, it’s only right, isn’t it, that these good-for-nothings should scrape by on the bare necessities, or even a lack of them, if they’re not prepared to knuckle under and take any job that offers  -  even if it means a cut, rather than an increase, in their family income?

Or is it?

Isn’t it time to take a closer look not only at what we understand by money, but what we understand by work  -  and perhaps adjust the equation which relates them to each other?

I’m speaking as someone who’s been apologising for years for failing to come up to scratch, as far as work is concerned.  From infancy, I had a pretty clear idea of what work was. Experience suggested that if something was a) enjoyable or b) unpaid, it did not qualify as work.  Work, then, must fulfil the prerequisites of the divine curse on Adam.  It must be something nasty that you do for money.

With time, I realised that many people seemed to have found ways of getting round the curse, and were being paid for doing enjoyable things.  These favoured people  -  eg, actors, artists, writers, musicians, sportsmen, eternal students lodged in attractive universities, etc  -  always protested that their enviable jobs entailed a good deal of hard work, and even boredom.  Nevertheless, if you compared their lot with that of the average wage-slave, you couldn’t fail to see that they were cheating God’s manifest intentions by sweating in a far more agreeable fashion than most other people, and often for considerably greater rewards.

Recently it's also became impossible to deny that those with the wit to manipulate the welfare system to best advantage, by mixing it with a little part-time moonlighting, have also found a way of by-passing the requirements of the Almighty  - just like their idle, but more socially acceptable equivalents who were born rich.

But there remain the vast majority, bound to the treadmill of dreary and monotonous paid employment for some forty hours a week, if they are to escape dependence on taxpayers’ charity and keep their families fed, housed and clothed.

And then, at the very bottom of the pile, in terms of respect, are those who, being neither physically incapacitated nor in receipt of a wage packet, are supported not by government, but by members of their family; among whom, scorned beyond measure in this age of female “emancipation”, lurks the lowest of the low: the full-time housewife, like myself   -  a parasite on the labour of others, reputedly wallowing in indolence, indulged and cosseted in a life of leisure and  “legalised prostitution” (the implication being that such scroungers would be better off on the streets engaging in the more respectable trade of a "sex operative", doing  “something nasty for money”).

I have spent years apologising for being that almost extinct creature, a non-wage-earning wife.  I even used to feel apologetic when enduring sleepless nights and rising at 6.00am to feed babies, do washing and ironing, shop and prepare home-made meals, clean the house, make and mend clothes,  teach and entertain young children, maintain the peace, apply first aid, wrestle with the accounts of a limited household budget  …  fetching and carrying, picking up and sorting out the negligently discarded detritus of an active juvenile household, while coping with constant interruptions  ... finally calling it a day at around midnight: all without the consummatory pay packet which would have sanctified my activities as “work”. 

At one point, to assuage the guilt of all this “idleness”, I took a part-time job which involved standing around in a shop for hours at a time, stacking the odd shelf and flicking the odd duster, while chatting to a fellow “worker”, to ease the boredom of all those dead periods between serving customers.  (Yes, I know most shops are busier than this.  The point is that, busy or not, if you get a wage for it, even standing around doing nothing qualifies as “work”.)  I would then go home, and cram in several hours of very necessary, but unpaid non-work on the domestic front, before retiring, exhausted, to bed.

Brainwashed as I was by the general belief in paid employment outside the home as the sole acceptable means of  bringing work and money into quantitative relationship with each other,  I was nevertheless vaguely aware that something, somewhere, didn’t add up  … 

Yet still the penny didn’t drop.  Even though I knew, from experience, that lack of a wage packet didn’t necessarily equate with a corresponding lack of worthwhile productivity (whereas possession of a wage packet frequently did), the idea that it might not only be plain common sense but actually possible to unhitch the horse of paid employment from the cart of income, now that automation was destroying so many traditional jobs, simply didn’t occur to me.

Not, that is, until I read Michael Rowbotham’s book, The Grip of Death (see here); and followed it up with a bit of investigation into the ideas of CH Douglas, and the Social Credit movement in the first half of the 20^th century.

At last the mist began to clear.  Contrary to common assumptions, I realised, the purpose of an economic system is not to create money, and certainly not to maintain all citizens between the ages of twenty-one and sixty in full-time, tax-paying employment.  Its purpose is, quite simply, to produce and distribute sufficient goods and services to ensure the well-being and prosperity of all.

Now that machines and computers are increasingly able to help us out, it is absurd to chain all but the fortunate few to a life of dreary clock-watching in increasingly useless jobs, just to circulate enough money to keep the wheels of consumption and taxation turning; and it is not only absurd but counter-productive to penalise those usefully employed in a non-wage-earning capacity by keeping them short of money: no doubt in a bid to drive them back into the kind of "economic activity" that yields rich pickings for the Chancellor of the Exchequer .   (Fixated by the need to be constantly finding more money to throw at our insatiable national debt,  politicians don't stop to think of the additional costs they're piling up for the future by encouraging dysfunctional families and the proliferation of social unease.)

The truth is that our modern, automated world could function quite efficiently on part-time employment, as long as pay packets were not the sole respectable mechanism for distributing purchasing power throughout the population.

The social-credit solution, in fact, by adopting a practical approach to the consequences of automation and the IT revolution, makes it possible for hours of productive and creative work, performed for love rather than money, to take their place alongside paid employment as an important and necessary ingredient in our lives.

As opportunities to cut back on "human resources" increase, and governments raise taxes to fund the swelling public-sector payrolls that leech off productivity while keeping official unemployment figures in check, is it sensible to insist dogmatically on the virtues of full-time jobs for all?  Why not simply double the number of paid positions available by halving the hours worked, and boost the consequent drop in wages and salaries with a non-means-tested basic income?

Here, of course, we run up not only against the use of bank-created, interest-bearing debt as our means of exchange, but the determination of powerful vested interests to preserve this nonsensical way of doing things. 

Yet our present debt-based monetary system is quite incapable of adjusting itself to improved production methods which replace repetitive human labour with machines and computers. The switch to shorter working hours implied, offering  an easier pace of life, with increased leisure for home and family activities, creative hobbies, and voluntary work of all kinds, can only be made possible if the part-time workers who will be the new norm have access to an adequate supply of money: and what we are pleased to call “credit” (ie, debt), being continuously sucked back into the pockets of the banking system as old loans are repaid and serviced, is always in short supply.  Worse, it is distributed strictly in accordance with the priorities of the private "lending" businesses which have a virtual monopoly on its issue, and which are unlikely to favour potential wealth producers who would benefit the whole economy over speculators looking to make a quick financial killing, when company profits are at issue.

Only with publicly-created, debt-free money, distributed in the form of a basic income for all adult citizens, will it be possible both to achieve the more leisured, yet higher standard of living which we were promised in the fifties and sixties, and to honour the contributions to human well-being and quality of life made by work done for love, rather than for a pay packet.

And if any moralistic puritans think that a more humane existence is no fit excuse for violation of the protestant work ethic, with its insistence on joyless quotas of toil and spinning, whether they're needed or no  -  just spare a thought for the lilies of the field.

"Unemployment is capitalism's way of getting you to plant a garden."  -  Orson Scott Card

For more about Social Credit, see http://www.douglassocialcredit.com

Conference,

Let me introduce myself quite briefly: I have a degree in law and one in psychology, and am by profession a solicitor.  I also write essays and articles, mainly on the instruments and techniques of domination, that is, the means and practices by which people dominate other people. The science studying this subject can be called Cratesiology, from the Greek ‘Kratesis’, domination.

Coming now to our topic, the question of seigniorage and the issue of money is currently enjoying an unprecedented popularity in Italy. Since the release of the 1st edition of my essay Euroslaves, (which met with success beyond expectation, with almost 20,000 copies sold  -  we are now at its 3^rd edition, almost double the size of the first) I have been invited some 15 times by countrywide and local networks to speak on TV and some 5 times on the radio, not counting public and private lectures, talks, debates and articles in a few magazines.

So, together with some associates of mine, I have been able to reach enormous numbers of people, as many as 500,000, according to our estimates. Of course, only a minority of them will have understood what we endeavoured to explain, and subsequently retained it. All the same, a critical mass seems to have been generated, and this has made possible what follows.

There are now several groups working on seigniorage and for money reform at different levels. Three small political parties support us to some extent: one of the 3 Christian Democratic Parties, one of the Three Communist Parties, and the National Fascist Party (which is no longer totalitarian); plus a part of the Northern League. The Vatican does not support us. The Holy See has its own state bank, the I.O.R. or Institute for Religious Works, practising seigniorage very intensively and safely, sheltered from any kind of investigation, thanks to its being the bank of a sovereign country

A big campaign for the introduction of complementary currencies is about to be launched in Italy by a money reform network http://www.arcipelagomoneta.org, especially in Tuscany, a region whose financial and banking enterprises in the Renaissance played a telling role in deciding the fate of Europe, and in particular of England, where they played so much havoc, plundering that country during the Wars of the Roses, and bringing the Crown to bankruptcy  -  that is, the repudiation of outstanding debt towards the banks.

Tuscan accountants in the Renaissance devised the accounting principles and standards which, right up to the present day, make it possible for banks not to enter their seigniorage proceeds on their balance sheets, and to disguise the machinery which creates credit out of thin air, thus making both items unrecognisable, as well as non existent, as far as the tax inspector is concerned.

Two currencies, notably, the Florin and the Tau, will be introduced this coming winter in Florence and in Lucca respectively. More currencies, the Cro and the Thyris, will be issued in Southern Italy, and still more in the North.

Two such currencies have been tested already with some success: the Scec (pron. “sheck”), or Walking Discount, in Naples; and the Ecoroma in Acilia, a town near Rome. The Scecs in particular, although there is still only a very limited stock of them, have proved helpful, increasing the purchasing power of families and the turnover of some shopkeepers and craftsmen.  Scecs have been gifted to needy people.

By ‘complementary currency’ we mean a currency which is not a substitute for legal tender, but a remedy for its scarcity, and an aid to local producers who are being challenged, if not forced to close down, by the rise of large malls and supermarkets, most of them owned by French capital.

The main general features of these complementary currencies are as follows:

They are not money, strictly speaking, but discount vouchers that can be used an unlimited number of times. This is intended to prevent legal attacks, in that these vouchers imitate the discount vouchers issued by the big mall chains, which the judiciary and the government could not afford to defy, as they constitute the second largest market in Italy. We walk in their wake, as it were – we stalk the malls.

The currencies are established by general consent: that is, they are based on private agreements subscribed to by business people and city councils, which all undertake to accept them for the payment of at least 1/5 of their prices or fees.

They are not convertible into legal currency, thus they cannot become a means of storing value.

They are created and distributed freely, without any indebtedness whatsoever.

The conditions under which they will be distributed, as well as other details, will be discussed and possibly set forth in a meeting called for the 20^th of this month (October, 2007).

After some debate, we agreed that complementary currencies must be free of demurrage or a negative interest rate  -  these two terms being both misnomers and eulogisms for a tax on money, that is, a form of seigniorage, and therefore inconsistent with our basic principles. The advocates of demurrage thereupon stepped out of the money reform network, slamming the door and shouting that seigniorage is sheer delusion.

We expect the complementary currencies to allay the dire consequences of monetary scarcity – a scarcity that we deem to be created intentionally and maliciously. As Professor Richard Werner of the University of Southampton convincingly showed in his recent essay New Paradigm in Macroeconomics, Palgrave-McMillan 2005, the money supply, far from being regulated by the laws of the free market according to the principle of the maximisation of profit, is, in the real world, regulated by political strategies implemented by the banking system, following the principle of the maximisation of sheer power  -  political power.

In particular, we expect that, besides improving the purchasing power of households, the complementary currencies will sustain local production, local retail, and small businesses; and that they will remain within the locality, instead of being channelled overseas to the remote, cheap-labour markets from which the mall chains get their supplies.

But the most important factor of all, we consider, is the educational value of the complementary currencies, their power to enable ordinary people to experience for themselves, directly, in their daily lives, the secrets of money  - secrets which are otherwise difficult to learn and accept: as, for instance, the fact that money does not need to be backed by gold or some other commodity in order to have a value; and that it does not need to be backed by debt either  -  that it can be created and injected into the market without creating any debt.

All this is a tremendous, mind-blowing discovery for those who manage to grasp it: an over-arching discovery, one that puts the overall understanding of economics, of wealth  -  and of credit, of politics, too  -  into  a whole new framework.  But it is also one that may arouse reluctance and disbelief, unless it is not only clearly conveyed, but supported by first-hand practical experience. We are of the opinion that handling complementary currencies and deriving benefits from the use of them will, over a period of time, lead many people to a crucial insight into what money actually is; and that this will be achieved far more easily than through theoretical explanations or priming, thus winning a significant number of citizens over to the ideas of money reformers and to the money-reform movement.

Last Sunday, after a lecture I gave in Milan, a youth stepped up to me and said: “Thank you very much for opening my mind. If it weren’t for your books, I would still be living in fairyland.”

I do find that opening the minds of our fellow men and women, enlightening them, awakening them from the spell under which the lies and fabrications of the establishment and the media contrive to keep most of mankind, is a noble and very valuable achievement in itself. Generally speaking, values and goals do not exist in themselves, nor in the books or scriptures, but as the subjective experience of human beings.

Enhanced awareness, an improved understanding of how things work in the real world, the dispelling of illusions  -   in short, the enlargement of consciousness, are momentous gains in our lives, possibly the best gains of all. The most hallowed line in the Hindu holy books, the Vedas, says “let us widen our insights” or “let our insights be widened.”

On the other hand, complementary currencies are not a structural remedy for the problems caused by a private seigniorage system, nor for a money regime based on indebtedness. They can lead people to realise how that system works, what it costs the general population and the advantages it brings to a very few. I don’t think they can perform much more than that  -  just as nationalisation of the central bank of issue can achieve nothing, if the present untruthful accounting standards are maintained, and if private interest and capital take possession of the state itself.

We believe that the dissemination of knowledge regarding the nature of money and seigniorage is a much more powerful means of generating a demand for money reform, notably because these topics, in connection with the tax issue, appeal to entrepreneurs, who obviously have far greater means at their disposal, and who will also be more dedicated than the general population in pursuing the issue.

I would certainly recommend that the question of untruthful accounting standards for banks  -  the I.A.S., or International Accounting Standards  -  should be raised and brought to the attention of entrepreneurs, trade unions, consumer unions, and economists; and that these people should be made aware that such standards have been engineered with deliberate intent to conceal seigniorage proceeds and the machinery of credit creation out of thin air at virtually no cost or risk to the banks.  I would also recommend telling them that if those standards were reformed, the banks would have to pay tax on their profits, which otherwise would remain invisible; and also that one major function of the contorted Basle II Regulations is to create a fog of confusion, to hide the fact that the fractional reserve system has come to an end, and that credit, liquidity, is now created without the least backing in hard currency or any other medium.

To be frank, I am pretty certain that the existing system, however bad and unjust it may be, cannot possibly be reformed unless general conditions change dramatically; not only because those who currently hold and benefit from monetary sovereignty will never hand it over, choosing rather to resist any serious attempt to overthrow their rule and dispossess them of their privileges by any means, including force and mind control technology, but also for other reasons.

Monetary empowerment of the nation would be equal to implementing democracy: and throughout the whole of history, democracy has never existed. All societies are ruled by oligarchies, no matter what picture they present in their formal constitutions. No social or political psychologist believes in the possibility of democracy, unless by this word you mean the manufacturing of consent and compliance: unless you mean a pretence of democracy, leading the masses to accept whatever the rulers decide to do. Take the war on Iraq as an instance, the way it was made acceptable to the general public through lies and forgery.

Democracy cannot be implemented in the real world for a number of practical reasons. One of them is that it presupposes that all or most citizens have an adequate understanding of the functioning of society, economics, the world, the issues they have to vote upon; and that they are not manipulated, not gullible. But then the most relevant information is kept secret, is withheld from the general population.  Just think of the science of money! How can democracy exist when only a negligible fraction of the population are aware of things like seigniorage? You will also agree with me, that very few people take the trouble to learn enough about all it’s necessary to know in order to vote or debate competently.  On the contrary: the general population is massively manipulated through the media, and by more subtle means of disinformation and mind control.

 
Today’s de facto polity could be described as a remote, unaccountable, invisible autocracy committing invisible crimes while hiding behind formally democratic institutions  -  institutions which are left there in order to incur debts and take the blame for all that goes wrong. Real power is vested in corporate monopolies and trusts, such as the banking monopoly of money-and-credit creation and destruction; or the monopolies of commodities or the Internet or other technologies. You will be familiar with the notion of corporate takeover of the State’s functions and powers by private capital. Central banks, the WTO, IMF, WB, the EU Commission and so on are privately managed agencies, if not privately owned  -  virtually, if not statutorily unaccountable. The power is theirs.  Parliaments are supplanted, overridden, reduced to stewardship.

The whole Earth is, as it were, enveloped in a network of financial agencies whose business can be likened to that of the mining industry  -  only, instead of extracting ore from underground, they extract value, purchasing power, from an unknowing society; from the workers; from the productive economy.

Seigniorage on legal currency and seigniorage on credit (the latter amounting to approximately 50 times the former) are not the only means to carry on that process of extraction - other procedures have recently been disclosed to me by businessmen who, after reading Euroslaves, decided to discuss this topic with me and with certain clients of mine. 

                  
In this oligarchic, elitist structure of power, the top of the pyramid - which is identical, in my view, with the lords of seigniorage  -  is literally taking off from the bulk, the lower layers; and everything possible is being done to increase the gap, till, with the dismantling of the middle classes, it becomes so wide that the separation will be irreversible and final. Remember the pyramid on the U.S. dollar: its top, with the triangle and eye inside it, is featured as taking off from the rest. We should always be mindful that, in our own eyes, we are human beings: but in the eyes of the ruling elite, we are cattle to farm, exploit and eventually dispose of.  

                                                                                                        
That system will probably come to an end, one day  -  but not through our efforts. It is far too powerful.  Rather, it will rot away or collapse of its own accord, owing to its inherent contradictions. Nevertheless, such efforts on our part should not be omitted, because, as a side effect, they are bringing about a wonderful expansion of our consciousness.
Many of you will not like to hear this, some of you may find it paradoxical, but we are fighting a battle that could be lost before it begins, if our goal is solely to achieve money reform and liberation from seigniorage.  But it is also a battle that we are winning day after day, in terms of individual enlightenment and personal fulfilment. 

I agree with what was said during yesterday’s session, that the cause is the current system itself, not individuals and the individual choices they make. What we have not analysed yet, is why that system is maintained, even though it tends towards self-destruction; and how, realistically, it could be changed into a fair, equitable and efficient system. Therefore, we need to resort to Praxeology, from the Greek  ‘praxis’, action  -  the science that studies causes, the natural laws that control the behaviour of human groups, both formal and informal: societies; organisations; corporations; political bodies, etc.

When dealing with economic issues and seigniorage, we are chiefly concerned with the most significant forms of behaviour  -  the aggregate behaviour  -  the behaviour of corporations, of banking systems, of political parties and institutions, of markets.

The behaviour of these groups is determined far more radically than individual behaviour by money and the pursuit of financial profit, because economic choices are choices between alternative allocations of resources, and the allocation that guarantees the highest payback wins, and attracts the funds. 

The comparison of alternatives is a quantitative calculation and is therefore based on measure, on the measurability of costs, risks and expected paybacks. Anything that is not measurable cannot be compared, cannot be factored in, cannot be entered into the accounts, the balance sheets, the business plan. Since this is the case with human values and sensibilities, natural beauty, pollution, fellow-feeling, justice, none of these things can affect corporate policy, and hence the policy of our corporate societies. That is why the behaviour and structure of society, and especially corporate behaviour, are determined by money and not, or only marginally, by human values.

Once people identify reality with quantity, with things that are defined by quantity and are limited, like space, matter, time, energy, labour  -  once people do that (and this is what people have been doing, whether they are aware of it or not), then, as a consequence, their obvious goal is to possess as much of those quantities as they can, even if it means taking them from others, and even in order to gain power over others, since people, too, can be counted. Hence, conflict is generated automatically and inherently by this paradigm of reality.

Because of that, we shall never achieve the money reform we desire, nor democracy, nor the rule of law, until people themselves, and their paradigm of reality, as it were, have also been reformed.

Religions can do little in this respect, because they all maintain that matter, time, etc., are reality, or at least the worldly part of it. They are inside the present faulty paradigm. What they actually do, is implant in people other, altruistic values, contrary to self interest, thus encouraging guilt, inhibition and conflict, instead of liberating us from conflict. The conflict is shifted inside: from interpersonal, it becomes intrapersonal. What we need is, rather, a rational criticism and refutation of the present paradigm, and practical techniques to set ourselves free. My new book, The Code of Mâya, appearing in November 2007, is dedicated to that goal.

 
Thanks for your attention.

Why?

Because it ignores the item which, more than any other, gives people power over their own lives: money.

Those who spend their days being wage slaves, and their evenings doing household chores, before flopping down in front of the television, will have very little energy left over for sitting on committees, or deciding which, among a variety of equally unappealing alternatives proposed by their “representatives”, is the “least worst”.

What most ordinary people want is economic democracy; the kind of democracy you experience when you have enough money in your pocket to make genuine choices for yourself and your family: money that you can spend within your own community on services which you actually want and need  -  and which you can refuse to hand over to fund things which you do not approve; money that enables your family to get by on one wage packet, allowing time for voluntary work, and for real involvement within the community, tackling individual and local problems in individual and local ways.

At the moment, money is removed systematically from the grass roots into the coffers of the Treasury.  Our councils are not only too remote, and representative largely of the political parties whose placemen fill their seats; they have been reduced to the status of impecunious beggars, able to pursue only those policies which get the go-ahead from Westminster  -  often at the behest of Brussels.

Even discounting the farce which party politics and huge unitary authorities have made of local government, all the present system offers us  -  and that only if our protest is channeled through an approved group or organization of “stakeholders” -  is to effect minor alterations in blueprints which have been decided in advance not merely by a distant central government, but by its delegates at European or global  conferences. 

What it all amounts to, in fact, is tier upon tier of unrepresentative government imposing one-size-fits-all policies, increasingly reinforced by law and regulation, upon people who haven’t the financial clout to resist   The voters’ job is merely to sanction, at five-year intervals, this or that manifesto in which they have had no say, and none of which coincides exactly with their own preferences. 

If people are to become involved in the political process, the occasional power of the ballot box is not enough.  It must be backed up with the power of the purse strings.  That is to say, they must have enough money to take care of the well-being of themselves and their families, and a direct voice in how their taxes are, and are not, spent. 

What is more, their spending power, both as private citizens and as taxpayers, should not be debilitated to the tune of billions by the need to service national and local authority debts to which they have never given their direct consent; nor should their solvency be put in perpetual jeopardy by their government’s perverse decision to allow banks to create practically the entire money supply in the form of loans owed to themselves.

Were the people of this, or any country consulted, when governments decided to create their means of exchange in the form of unrepayable debts?   Have they ever been offered, at the ballot box, the alternative of publicly-created, debt-free money, as a sound foundation for the exchange of their assets and labour?  If politicians genuinely wish to see people more involved, this is the basic issue they must put at the centre of their agenda.

People impoverished by debt and taxation are without power.  People who have an adequate income  -  like the English yeomen of the late middle ages, who were the envy of Europe for their prosperity and independence  -  would not only be able to relieve government of responsibility for the health, education and welfare of themselves and their families, but to alleviate much more effectively, on a local and personal basis, those social ills which persisted.

Voter apathy will only be solved by taking financial and political power away from the centre, making far fewer matters subject to national majority voting, and giving people the publicly-created, debt-free currency that would let them run their own lives and communities along uniquely appropriate lines.

Ever hear those words, when you try to get the need for money reform through to a friend?

When people perceive something to be a problem, it’s easy enough to convince them of the need for change.  But most people just don’t see the way we create our money supply as a problem. 

Housing is a problem; personal debt is a problem; rising prices are a problem; unemployment is a problem; the need for two wage packets per household is a problem; pollution, low-quality products and congestion are all problems: but none of these problems is linked, as far as they can see, to the fact that we use debt as our means of exchange.  In fact, most people aren’t even aware that we do use debt as our means of exchange.

So when you suggest that perhaps it isn’t a good idea to let banks create the country’s money supply as a debt against businesses and ordinary people, you’re likely to be greeted either by a blank stare, or by the comment, “Well, it works, doesn’t it?”

It reminds us of the Flanders and Swann song, The Reluctant Cannibal.  For those too young to remember, this takes the form of a conversation between a cannibal and his non-person-eating son, and the father’s argument is:

People have always eaten people.
What else is there to eat?
If the Juju had meant people not to eat people,
He wouldn’t have made them of meat!

No, we’re not suggesting that bankers are cannibals, despite scurrilous rumours on the internet. It’s just that money reformers are faced with similar arguments in favour of the status quo  -  eg:

Bankers have always made our money.
How else could it be made?
If the Good Lord had meant bankers not to make money,
He wouldn’t have given us trade!

You see what we mean.  People have been brainwashed by habit into thinking that the  present way of doing things is the only way possible.

And after all, it works, doesn’t it?

Well, yes. In the same way that, for example, an inefficient and antiquated electric fire works in a big, draughty room. 

It certainly puts out heat  …  but you have to sit pretty close to feel it.  Once the inadequate warmth starts travelling away from its source, a lot of it escapes out of badly insulated windows and doors.  And every so often the thing will blow a fuse, maybe even threaten to set fire to the house.

If you had a heating problem like this, you’d probably be very keen to make changes.  You would take measures to exclude any loss of warmth; and, as soon as you could afford it, you would go out and buy a decent fire  -  one which not only kept you warm, but didn’t endanger your family.

You wouldn’t put up with a faulty fire in a draughty sitting room, if you could help it.  So why put up with a financial system that only works for those who already have enough assets to borrow large sums from the banks; which gets side-tracked into non-productive outlets before purchasing power has been satisfactorily distributed among the population; and which, every so often, breaks down, threatening to ruin individuals and families and bring the whole economy to its knees?

Because this is the kind of financial system we have at present: a system which serves itself and those who profit from it, rather than promoting the easy exchange of goods and services among the population at large.  It has its own internal logic  -  but the demands of this internal logic flout, rather than support, the needs of  real people in the real world.

Let’s imagine that we’re starting out from scratch.  How likely is it that we’d positively choose to set up a system which relies upon businesses and individuals borrowing money as if there were no tomorrow, just to produce tokens representing the amount of debt they have got themselves into?  Wouldn’t anyone with half an ounce of common sense see that what was necessary for transparent, straightforward trade was not tokens representing debt, but tokens representing value?

Again and again, over the years, the present faulty system has caused widespread misery, as levels of borrowing, for one reason or another, have fallen, and the bank-created money (ie, debt) dependent upon continuous borrowing has disappeared from circulation.   Whenever this happens, trade grinds to a halt, even though there are still plenty of goods to be had, and traders are falling over each other to sell them.  When money signifies the amount of debt people are prepared to undertake, such destruction of the normal patterns of buying and selling can happen almost overnight.  

If, on the other hand, money is issued as a token of value, in line with the amount of goods and services actually available, only a drop in the availability of those goods and services will affect people’s living standards. With money representing value, rather than debt, the amount issued would be an accurate reflection of the country’s true wealth, rather than of how much people could be persuaded to borrow.

Of course, just as the cannibal feared dire effects if he altered his diet, those who are at ease with the debt-money system, and able to manipulate it to their own advantage,  believe that the sky would fall in if we had no way of producing extra billions on demand for people wanting to buy out companies, or to ruin the economies and the lives of other human beings with their clever speculative activities.

But in the not-too distant future, the practice of making people go into debt en masse if they want to exchange goods and services with each other will probably appear as barbaric, to a more enlightened generation, as people eating people appears to us today. 

12

Only economic democracy can deliver the goods

In response to an article by George Monbiot in favour of an elected global parliament, published in The Guardian, 24 April, 2007 (http://www.guardian.co.uk/comment/story/0,,2063921,00.html)

So we need “a directly elected assembly” at global level, do we?

Our first reaction, on hearing that this highly suspect proposition is “acquiring some serious political muscle” was: then it must offer some serious advantages to the politically muscular  -  whose numbers do not comprise the poor and downtrodden of this world. 

Proposals aimed at watering down the power of the mighty do not find their way onto the global agenda without overwhelming pressure from millions, rather than thousands, of ordinary people; and this proposal certainly isn’t driven by any such overwhelming pressure.  How often have you heard people here at home saying to each other, over a pint in the pub, “Things are getting pretty bad, what we really need is an elected world government”?  And it’s unlikely that this is the common currency of everyday conversation anywhere else, either.

So why are the mighty muscling in on this one?

When a particular agenda is allowed the oxygen of publicity, you can be pretty sure that it is not regarded as a threat by the financial interests which own the big corporations and the mainstream media.

Take, for instance, man-made global warming.  This particular dogma could never have attained the prominence which it now enjoys if it did not offer the prospect of enormous profits to the politically muscular and their train of financial profiteers.  They would not otherwise have publicized it prominently in the pages of their newspapers or allowed the approved  “Nostra culpa!” mantra to be repeated ceaselessly during peak-time television and radio news broadcasts, in the teeth of protests from dissenting, and studiously sidelined, scientists.

One of the most curious features of the climate-change-is-caused-by-wicked-human-beings belief is that some of the most wicked human beings of all, from an emissions point of view, are venerated as saints by the faithful, even as they fly between energy-guzzling homes in their energy-guzzling private jets.  And these same ecological reprobates call down anathema on the heads of those whose greatest sin is running a clapped-out, second-hand car, for lack of public transport, or allowing a little too much CO2 leakage from windows which they can ill afford to replace!

Look, for instance, at the profits being raked in on the back of man-made climate change by Al Gore.  His global warming disaster movie has made more than $50 million; and he can now charge $100,000 to $150,000 a lecture.  He is also cashing in on the growing market for solar and wind power and the sale of emissions permits  -  no doubt soon to take over from property as the biggest global money spinners (see our News and Comment section, 20 April).

But while Gore has been the most public in exercising political muscle to his own advantage, lined up behind him more coyly are the representatives of global finance and big business, including major oil companies  -  none of them notable for disinterested altruism, however much they try to look good and curry favour with environmentalists and other fashionable lobbyists by cultivating and funding hand-picked special-interest groups.  Do they really believe that a minute reduction in CO2 emissions can bring the workings of the cosmos to heel?  Or do they merely have an eye to the main chance? 

In an attempt to decide, let’s forget about global warming for a moment, and look instead at a movement  -  at one time a mass movement  -  that has found it remarkably difficult to gain the support of politically muscular persons and organizations: the campaign for money reform.

Despite a whole succession of Early Day Motions, arousing the interest of quite a few MPs over the years (http://ww.monies.cc/); despite a notable speech by the Earl of Caithness, in the House of Lords (http://www.moneyreformparty.org.uk/caithness.htm);  despite several outstanding books setting out the imperatives for change, and possible ways of achieving it (See our Websites, Books, DVDs section); despite successful experiments with publicly-issued, debt-free currency, at various times and in various places (eg the American colonies, http://en.wikipedia.org/wiki/Colonial_Scrip, Guernsey, http://66.102.9.104/search?q=cache:oHe2TWR_RjMJ:prorev.com/sovreign.htm+Guernsey+debt-free+money&hl=en&ct=clnk&cd=8&gl=uk, Silvio Gesell’s stamp scrip, notably in Worgl, Austria, http://66.102.9.104/search?q=cache:ZHZyfrlw938J:userpage.fu-berlin.de/~roehrigw/kennedy/english/chap2.htm+successful+experiment+Austria+%22Worgl+%22&hl=en&ct=clnk&cd=7&gl=u); despite world-wide discontent among those who realize that the growth upon which the  present financial system depends is largely responsible for wasting the earth’s resources, while visiting poverty upon billions: despite all these reasons for deserving the support of some top-level political muscle, this is a movement which has been put in a straightjacket and kept locked up by the media in a small, dark room.  Very occasionally, it manages to force itself free for a brief airing  -  usually to be hustled quickly back out of sight, on the grounds that it is quite, quite mad  (see, for instance, the Telegraph’s interview with Dr Hamlyn, Number 2 in our Articles section).

Why has a movement with so much solid experience and plain common-sense behind it been cold-shouldered and ridiculed, while a vigorously contested theory, based on ambivalent data worked up into a catastrophe by computer modelling, commands the support of brawny political heavyweights?  Can it have anything to do with the undoubted fact that the second offers the wealthy and powerful opportunities to acquire even more wealth and power, while the first would minimize the chances for unearned profits for the few, while offering the millions left in penury by the present system the basic security which would allow them to make use of their skills and talents?

There is every reason, it seems, to be cautious, when powerful people are weighing in with support for something which has never been spontaneously desired by those whose good they claim to have at heart.

The European Union was such an enterprise, imposed upon the British electorate without so much as a by-you-leave.  As anticipated by many, it has proved a gold-mine for transnational corporations, working hand-in-glove with ambitious politicians who have sworn away any loyalty to the nation from which they sprang, and who may now cavort, at increased public expense, upon a larger and showier stage; but a disaster for agriculture and fishing, for home-based manufacturing and heavy industry, for small businesses, and for people who, if asked, would prefer to maintain their traditional freedoms and their nation’s right to make its own laws.

The rearrangement of our counties into amorphous unitary authorities and regions is also such an enterprise, resisted by the electorate, when put to the referendum here in the North-East, but now being imposed through the back door by corporate and financial interests in cahoots with politicians and their pet special-interest groups.

The enforced subjugation and taxation of whole populations in deference to the unproved, but highly profitable, theory of man-made global warming is certainly yet another instance of influential people tipping the scales in favour of a policy because it serves their own ends. 

In fact, if any policy may not be questioned, if a person is derided and, as it were, excommunicated, merely for holding a contrary view, it almost certainly figures high on the elite agenda.

So if political muscle is now being exercised to promote a world parliament, we can be pretty sure that this is designed  -  like the European Parliament  - not to give a voice to ordinary people, but to ward off criticism of globalization by bestowing upon it a patina of legitimacy. 

After all, even the directly-elected global parliament that is Mr Monbiot’s ideal could hardly deliver unmediated representation of the world’s most impoverished people. The sheer number to be represented defies such an outcome.  Agreement would be impossible, without the dilution of local and individual preferences which he so rightly acknowledges to be a failing of our own "representative" system.

The fact is, as he himself admits, that “True democracy could exist only in the village, where representatives are subject to constant oversight by their electorate.”  So why pointlessly seek, at the global level, an even more ludicrous distortion of what is already a travesty at national and European levels?

If political democracy is possible only in the village, why not abandon the futile attempt to achieve it via higher and higher levels of unrepresentative government, and focus instead on something which is actually attainable: economic democracy? 

We may not be able to hear the voices of the poor, filtered through the cacophony of interests vying for attention at global level; but we can ensure that every country, by monetizing its wealth in the form of its own debt-free currency, frees its citizens, rich and poor, from the burden of borrowing an ever-less-adequate means of exchange into existence from the international banking system, and repaying it at interest.  Publicly-created, debt-free money would provide people throughout the world with the means to look after themselves and the communities among which they live; sending to the national government, in taxes, only enough to pay for what cannot be done either locally, or in cooperation with neighbouring councils.

Attempting to help the world’s poor through a global parliament would prove as useless as fining Mr and Mrs Smith £100 for negligent recycling, in order to put an end to climate changes which originate in the cosmos. 

Making reform of the monetary system our first objective, on the other hand, would not only lay the foundations for eliminating poverty, but would free the world from the treadmill of compulsory growth which, with all its attendant waste and pollution, is implicit in the decision to create the world’s money supply as an interest-bearing debt.

How about joining the Money Reform Party, George? (http://www.moneyreformparty.org.uk/index.htm)

Conspiracy, and other red herrings

So you’ve just become interested in money reform.  You’ve read some books and articles, you’ve explored websites on both sides of the Atlantic, and you’ve finally realised why you, and just about everyone else you know, is saddled with that huge mortgage; why Gordon will soon be putting a tax on breathing; and why it’s getting harder and harder to make ends meet, let alone put a bit aside for a rainy day.

You’re probably feeling pretty shocked by the agreement your government has with the banks  -  an agreement which allows the banking system to create more or less the entire UK money supply at the country’s expense.  You may also be wondering why the vast masses of ordinary people don’t put their foot down and call a halt to this farce, instead of continuing to pay through the nose for the privilege of exchanging goods and services with each other.

Attempting to understand this mystery, you read up the history of the banking game; and  inevitably you come across stories of the intrigues and plots of the big financiers, as they sought to gain a monopoly of  “the issuance of money”.  You read about the assassinations, or attempted assassinations, of various US presidents, possibly at the behest of “the money power”; of secret agents of the Rothschilds, sent to bribe American politicians; of covert meetings of very rich bankers, plotting the imposition of income tax and the Federal Reserve.

All this may be fascinating; but it’s basically irrelevant: and putting too much emphasis on it, when you talk about money reform to your friends, will do your campaign no good.

For a start, those who are quite happy with the present system (probably because they have enough assets for the banks to consider them worth a sizeable loan, and a generous  enough income to service the debt without undue hardship) will immediately mark you down as a “conspiracy theorist”: short-hand for mad person who believes that American presidents practise human sacrifice, or that the Queen, in between her public appearances, likes to relax in the shape of a lizard.  Alternatively, you may be accused of anti-semitism  -  never mind that your Jewish friends, like all the rest of us, are victims of the present debt fiasco.

Conspiracy, however alluring, is a red herring.  Steer clear of it.

Even if you believe that bankers deliberately contrived the present abject financial subjugation of “free” nations, why wander down the paths of speculation away from this central, irrefutable fact: that the present monetary system is terminally wasteful and inefficient.

The best argument against it is, that it doesn’t work  -  or, at best, that it can only work by subjecting those who embrace it to endemic inflation and perpetually alternating cycles of boom and bust: and there’s no need to resort to “conspiracy theories” to prove that.

Another red herring: don’t allow yourself to be drawn into unnecessary complexities

Orthodox economists and people who work in the field of finance regard the present system as natural.  They are comfortable with its peculiarities, which fit snugly into their lifestyle, and do not question them. They therefore find it very difficult to picture a system which functions quite differently, and worry about the fate of the national debt and about lucrative business takeovers, and speculation in bonds and shares and currencies: things which are currently their bread and butter, and which would obviously be affected by the switch to a debt-free system.

In fact, with publicly-created, debt-free money, many of these things would become redundant.  They result from the uncertainties and insecurities inseparable from the decision to create money as a debt; and, with the advent of a stable currency and more predictable financial parameters, there would be far less need or opportunity for this kind of speculation.

So refuse to get involved in discussing technical problems.  If you are then told that you, a mere amateur, should leave serious things like this to the experts, point out that, as one who is intimately affected by the consequences of creating money as a debt, you have every right to object to it; and ask why you should be content with a money supply which is controlled by the complex anti-social needs of parasitic sub-systems which have grown up over the years, in preference to one which promotes transparent business dealings, facilitates trade and exchange, and allows human beings to benefit from the fruits of both their own industry and ingenuity, and that of their forebears.

Can you imagine, for instance, that people setting out to trade together would say, “Of course, our first priority must be to create lots of debt, and plenty of opportunity for speculators.  With insecurity built in, this would allow us to expand our insurance and financial services sectors, which would be a great export line, and would help solve the unemployment problem  -  after all, we can’t have people idling around job-sharing, or doing part-time work  …  and we certainly don't want parents rich enough to stay home looking after their children!”

Seen from the common-sense point of view, the present system is a bad joke.

Those who resist reform will also ask you how you propose to replace the status quo, waiting to booby-trap you with cries of “Impossible!  Inflationary!  You can’t get something for nothing!”

Don’t even bother to point to the sun, the rain, the enormous bounty of the earth, people’s innate talents and genius, the love of  parents for their children,  spontaneous acts of kindness  …  the list goes on and on.  If they want to believe that only those who work for a wage are entitled to live, let them.

It is enough to state simply that the country’s means of exchange should be created by a public authority, debt-free at source.  For more detailed discussion of the technical topics dear to their hearts, direct them to the works of  money reformers such as James Robertson, Michael Rowbotham, and Stephen Zarlenga, and give them a few useful website addresses (see our section, Websites, Books, DVDs).

Just remember: you don’t have to be an expert to see that there is a need for reform.  Leave detailed solutions to those who have studied the subject in depth.  Your job is to tell your friends and neighbours what the problem is, and how it affects them: because until enough people are aware that there is a problem, and begin to complain about it to their MPs, you can be very sure that nothing will change.

Gillian Swanson

I first became aware that there might be a serious fault in our financial system while living in Taiwan.

This was the time when I finally grappled with basic computer literacy.  There were no English papers to be had, no family to occupy my time, and, until I got to know a few people, little social life, for someone who did not speak the language. 

I used the computer to chat to the family back home; to catch up with the news (I could read the papers online before anyone in Whitley Bay was up); and to wander all over the internet, picking up interesting facts and ideas.

That is how I came across an article by Alistair McConnachie, called The Wonderful Wizard of Oz: A Money Reform Parable (read it here: http://www.prosperityuk.com/prosperity/articles/wizzoz.html). 

Having spent the previous couple of years repeatedly watching the Judy Garland film with my small granddaughters, I was intrigued to find that the story was, in fact, an allegory of the fight for money reform in America, during the 1890s and early 1900s.

At that time, money was scarce for ordinary people, because a strict gold standard had been imposed on the country, so that it was not possible to issue an adequate means of exchange (ie, enough money to purchase all the goods and services actually up for sale); and the book on which the film was based was written by a supporter of  three-times presidential candidate, William Jennings Bryan, who “advocated the coinage of silver” (which, unlike gold, was in plentiful supply) “at a fixed ratio with gold, in order to break the bankers' monopoly and manipulation of the gold-backed currency”.  This is why the original Dorothy wore silver, not ruby, slippers (the silver standard) to carry her along the yellow brick road (the gold standard) to confront the wizard (the President) in the Emerald City (Washington).  For a complete explanation of the cast of characters, see Alistair’s article.

So my very first introduction to the subject of money reform made me distrust a gold-backed currency as the alternative to our present unsatisfactory system.

Over the next couple of years, I explored various websites, ranging from the conspiratorial to the practical, and could not fail to notice that, in the States at least, fiat currency, in the form of government endorsed notes, coins or credit unbacked by precious metal, was held in contempt, particularly by libertarians.

For a while I was pulled both ways.  Gold does, after all, exert a considerable fascination.  It is the stuff of myths and legends, the untarnishable yellow metal that has been used as an adornment and a symbol of wealth and power from time immemorial, and which endures and holds its value throughout centuries of change.

Yet the words of Bryan echo down the years:

"Having behind us the producing masses of this nation and the world, supported by the commercial interests, the labouring interests, and the toilers everywhere, we will answer (the bankers’) demand for a gold standard by saying to them: 'You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold.'"

True, Bryan did not abandon the idea of using precious metals as such: he merely wished to supplement a metal which was scarce with one which was plentiful  -  a policy similar to that which is currently being urged in Mexico, by Hugo Salinas Price (http://www.plata.com.mx/plata/plata/english.htm).

But Bryan’s arguments against gold would apply equally to silver, or to any other commodity.  Even something which is naturally plentiful can be made artificially scarce, by design: and where there is an advantage to be gained, there are always those who are ready to manipulate the market to achieve an artificial scarcity.

This is the danger of gold, as pointed out by Pat Carmack and Bill Stills in their unmissable three and three-quarter-hour epic, The Money Masters (http://www.themoneymasters.com)  -  and they back up their rejection of gold, silver or any other commodity money by the experiences of people throughout history who have been pauperised by the imposition of easily manipulated currencies of this kind.

In fact, they argue, along with the American Monetary Institute and most UK money reformers, that there is nothing inherently wrong with fiat currency  -  only with a fiat currency which is issued exclusively by a privileged set of people for their own profit.

Publicly-created, debt-free fiat currency (ie, notes, coins and credit backed by the wealth of the country, rather than by a precious metal) is the most sensible solution, if people are to be provided with a means of exchange sufficient to trade all the goods and skills and talents which they can offer each other.

The original purpose of money was to act as a convenient accounting system, to make such trade easier; and that should still be its purpose today.  It should surely not be beyond the wit of those clever men in the Monetary Policy Committee to work out how much currency would be necessary to achieve this end.  After all, it should be a lot easier to decide this than to manipulate the money supply at one remove, via interest rates, with all the unknown factors and unpredictable reactions which that entails.

So is there a place for gold?

Yes, of course there is  -  but not as a currency, or as backing for a currency.

It is undoubtedly useful as a store of value.  As G Edward Griffin pointed out, in The Creature from the Black Lagoon, in ancient Rome one ounce of gold would have bought you a good-quality toga, complete with belt and sandals.  Today, one ounce of gold will still buy you a good-quality suit, plus belt and shoes.  As a store of value (barring the discovery of previously unknown and superabundant reserves) gold probably can’t be beaten.

But as a means of exchange, or backing for a country’s money supply?

No!

This is particularly important at the present time, when the fiat money created as a debt by commercial banks is leading to serious problems.

The danger, as Carmack and Still point out, is that there will be an attempt to return to a gold-backed currency  -  and this should be resisted at all costs.

What is needed is not a return to the discredited practices of the past  -  practices which, one hundred years ago, led to widespread poverty and deprivation, and had people flocking to support William Jennings Bryan.

Forget about gold, outside its role as a store of value.  What is needed is publicly-created, debt-free money, issued in line with the country's wealth, and capable of supplying us with a stable means of exchange, beyond the manipulation of a greedy minority.

Ann Dymond

Money Reform: Left or Right?

 
Most people think about politics in terms of political parties.  You are either Conservative, in which case your opponents stick you into a pigeon hole labelled bigoted, insular, callous about the poor, and pretty well-off yourself; or left-wing, in which case you must be a woolly-headed idealist, always trying to get your hands into other people’s pockets, and keen to extinguish any remaining individual freedoms which offend your social conscience.

This obsession with left and right, expressed through party allegiance, obstructs the impartial examination of many issues, money reform being one of them.

Conservatives tend to be wary of it, believing it challenges a status quo which, as far as they can see, works perfectly well.  You can’t blame them.  Until mounting floods of debt and taxation began to wash around their feet, high earners with a certain amount of property would have found nothing to complain of in the present system.  Even now, the middle classes are protected by (possibly illusory) house-price rises from feeling the pinch.

Socialists, on the other hand, look to the state to control human greed and inequalities, and tend to favour anything that puts more money into the public purse.  Yet, for whatever reason, very few of them have actively argued for reform of the financial system.

In fact, money reform is neither of the left nor of the right.  It is essentially neutral.  It does not prescribe how publicly-created money should be used, or even how it should be distributed.  It merely assumes that the sensible way to issue a country’s means of exchange is via a non-political public authority, in quantities commensurate with the wealth in goods and services available for exchange, rather than as a debt against anyone whom the banks choose to consider creditworthy.

When it comes to how publicly-created, debt-free money should be distributed, political choices must be made: and these decisions should be left to the electorate, voting in the normal way at general elections.

With a known debt-free budget available, and the national debt rendered inactive (see, eg, http://www.prosperityuk.com/prosperity/articles/interest.html), each party could propose how to spend the new, stable money into circulation.  Voters could then choose which programme they preferred.

Many money reformers favour the idea of distributing publicly-created money as a basic income to all adult citizens.

Some socialists distrust this idea, which they feel would take power away from the state.  Conservatives also tend to have a knee-jerk reaction against a benefit which appears to them to be giving the undeserving something for nothing, or to aim at redistributing incomes.

In fact, the basic income, like publicly-created money, is, in itself, neutral, since it would be received by all, irrespective of wealth or status.  Used as a vehicle to distribute any necessary new money into the economy, it would simply raise the starting point of everyone’s earnings, without any complicated forms to fill in or applications to be made, obviating the need for many of the usual supplementary benefits.

(For a discussion of the basic income, in the context of the gradual introduction of debt-free money, see The Grip of Death, by Michael Rowbotham, Chapter 16.  You can read the first chapter here.)

In fact, money reform would bring the opportunity to reconcile the divergent aims of the traditional right and left wings in politics.

The right want lower taxes, and less public spending. 

The left want high public spending, to be financed by taxation of those they consider well-to-do.

With the de-activation of the national debt, and the introduction of stable, debt-free money created by a public authority, it would be possible to have better public services and a decent infrastructure without high taxation. The removal of the need to service public debt alone would release billions into the economy (see James Robertson and Joseph Huber, Creating New Money, (free download available here: http://www.prosperityuk.com/prosperity/articles/interest.html, and The Grip of Death, see above, and in our Website, Books DVDs section).

In short, money reform is policy-neutral: but it would but open up possibilities, to politicians of all persuasions, which are increasingly denied by a financial system that cannot create a pound of money without creating an equal quantity of debt.

 
According to money reformers in the States, income tax is inseparably linked to the national debt.

Until 1913, when Americans finally lost their long battle against the financiers of Europe, and were duped into having a privately-owned central bank (see The Money Masters DVD, in our Websites, Books, DVDs section), they were not subject to a tax on their incomes.  What is more, many US citizens still hold such a tax to be unconstitutional  …  and when they have refused to pay it, and have been taken to court by the IRS (Internal Revenue Service), the courts have found in their favour.

The fact is that whenever countries set up a central bank, with a view to borrowing large amounts of money, they must tax their citizens’ incomes.  That is part of the deal.  The bankers would never ‘lend’ them anything in the first place, without the guarantee of a huge captive pool of taxpayers to service the ‘debt’; and as this unrepayable ‘debt’ snowballs (see our National Debt section), income tax  (or, if governments want to maintain an illusion of generosity, less obvious stealth taxes)   must increase proportionately.

American money reformers maintain that, if the national debt were de-activated (for a possible scheme, see http://www.prosperityuk.com/prosperity/articles/interest.html), and the issuing of the means of exchange taken from the banks and given to a public authority, a tax on incomes would no longer be necessary; and presumably the same would hold good in the UK.

Income tax unfairly reduces working people’s take-home pay.  Contrary to popular belief, it does not pay for any services: it merely services a completely unnecessary debt.

We do not need banks to create our money for us in the form of a debt. 

As Thomas Edison said, “If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good”; and what goes for dollars goes just as well for pounds.

Publicly created money would eliminate the need for income tax.  What is more, with tax on earnings abolished, over-large unitary councils sent packing, and publicly-created money destributed as a basic income (see Article No 4) the way would be open for sales and property taxes to be collected by traditional councils, and perhaps supplemented with an adequate supply of local authority vouchers, which would provide additional liquidity to be spent within the tax district.  A certain amount of the tax take would then go towards funding any essential national administration, rather than the other way round, where councils must go begging to the national government for hand-outs.

No, it isn't  -  unless your country's unfortunate enough to have a national debt.

6      

Raking  in  the  Money

By Gillian Swanson

A young mother drives along the road, after the morning rush is over.   Highly conscious of the presence of her two infant passengers, she takes no risks.  She’s on her way to collect a baby-walker advertised on E-Bay.   If the family are to live on one wage, so that she can stay home and look after her pre-school children, to buy new would be an extravagance. 

In her hand, for convenience, she holds directions to her destination, but she’s familiar with the first stage of the journey.  Her eyes are on the road.  Later, if she needs to check the route, she can draw up at a suitable stopping place.

Suddenly she is hailed by two policemen. What’s wrong?  Her tax disc is displayed, she is driving with care, and she’s in full control of her vehicle.

The police accost her.  Why was she reading directions while driving?  She says she wasn’t.   That doesn’t matter, she’s told.  The very fact that she was holding the directions in her hand merits a £60 fine, and three points docked.  The police then escort her to her destination, though far more urgent matters may need their attention.

Well done, officers!  You’ve struck another blow for road safety in North Tyneside!

Or have you?  Wouldn’t it have been sufficient, if safety were your concern, to have issued a warning?  After all, the offence was contested, and no dangerous driving had taken place.

Or is the point of such on-the-spot fines not to enhance safety, but to rake in as much cash as possible, with officers rated on their “productivity” in this respect?

Well, at least this incident (and yes, it did happen) was simply a case of human beings acting like mindless automatons, instead of using their common sense.  Not so with the Greed Cameras which have proved such a hit with the Exchequer.

If you believe these things contribute to your safety, take a look at the Safe Speed website at http://www.safespeed.org.uk/ .  Here you’ll find a different slant on the subject: but ordinary people know from experience that watching out for cameras causes accidents  -  when, for instance, a car in front of you pulls up abruptly, to avoid a fine.

But perhaps Greed Cameras will soon be a thing of the past.  Gordon is hoping that there’ll soon be an even better way to fill his coffers.  With a little black box installed in every car, at a cost of £200 to the owner, he won’t have to make do with the odd snapshot of wrongdoing.  Every move a driver makes will be tracked.

Soon, every infringement of the speed limit, however minor, however brief, may be registered by the robot taxman in your car, and charged to your “customer” account.

It seems pretty clear that the government’s objective is not greater safety.  If it were, priority would be given to improving black spots like the A1.

Punitive fuel taxes, fixed fines arbitrarily, and often inappropriately, imposed, either by machine or by police officers keen to notch up their daily quota, and now these latest plans to track and charge every vehicle, are the work of a government desperate to raise more money, as our monstrous national debt swallows the income-tax take whole, and is still hungry for more.

Under a debt money system, rich or poor, you will be taxed until the pips squeak.

5                                

By Gillian Swanson

The first time I heard someone say the government should distribute a basic income to all, I recoiled.  This seemed the very extreme of recklessness, guaranteed to be the death of honest toil.  Probably your reaction is the same.

So how come I changed my mind?

It was when I realised how closely a basic income tied in with reform of the financial system, being perhaps the fairest means of distributing a debt-free money supply.

If we want to take the power of money creation away from the banks, and give that responsibility to a publicly created authority, the electorate will have to decide exactly how the new, debt-free money should be put into circulation.

The choice will be ours.

One way would be via public spending: either on capital projects, or to maintain, or expand, public services.

Though this might please the socialists among us, it would certainly not be a winner with those who think politicians already waste too much of our tax money.

So, let’s look at the second option: putting the new money into circulation as a citizen’s income, to be distributed to all adult British subjects without exception.

Such an income would not be large enough in itself to encourage idleness; and since those who had a job would be equally entitled to this universal benefit, it would not act as a disincentive to seeking work.   Quite the opposite: the unemployed would be more likely to seize any opportunity to better themselves, if they were not instantly penalised for their efforts.

What is more, a basic income would encourage job-sharing and part-time work, giving the opportunity for greater leisure, and more time to spend with the family.

Since the basic income would be the same for everybody, regardless of wealth or status, there would be no means test, and no attempt to make people “more equal”.  Rather, there would be a transfer of power and resources away from both the government and the banks to individuals and families, who could make use of this increased prosperity to improve life for themselves and their communities as they saw fit.

A predictable objection is, “you can’t have something for nothing”.  

Actually, that’s not true.  Plenty of people get a great deal for nothing, or for very little beyond mere luck.

If someone gives you a present, you get something for nothing.  If you pick fruit from the hedgerows, you get something for nothing.  If you inherit a fortune you have not worked for, you get something for nothing.  If you win the lottery, you get something for nothing.  If you’re a financial speculator, you get rather a big something, while contributing absolutely nothing of value, and frequently causing widespread misery.  And if you own a bank which makes you wealthy by conjuring up money out of thin air  -  money which you can then use to make yet more money, and buy yet more power  -  you are most certainly getting something for nothing.

A basic income for all would simply redistribute the particular something for nothing over which wealthy banking interests at present have a monopoly, spreading the benefits throughout the whole population  -  including the manager and staff at your local high-street bank, who are in the same position as the rest of us.

A basic income would rationalise the arbitrary unfairness and muddle of the benefits system, slashing bureaucracy, and eliminating the need to spy on those who, at present, are, eg, moonlighting, or pretending to have no partner, simply because they believe this is the only way they can provide a decent living for their families.

Since both partners in a family would be eligible to receive it, a basic income would be particularly welcome to women (or men) who wished to run the household and care for young children or ageing relatives, rather than seek paid employment outside the home.

 So what is the difference between a basic income and a state hand-out?

Well, state hand-outs are designed primarily to transfer money from one section of the electorate to another, according to the particular preferences of whoever happens to be in power at any given time.  The government decides who is deserving, and who is not.  This encourages people to cast their votes for whichever party promises to give them a bigger share of the tax kitty.  Those who get the cash are happy, those who have it taken from them are resentful.

The primary task of a basic income, on the other hand, is to provide the country with sufficient debt-free money to encourage maximum trade and exchange; and it does this in a manner which encourages, rather than cripples, industry and prosperity, fostering the growth of small, local businesses and thriving communities. 

There is nothing either rational or immutable about the present way we choose to create and distribute our means of exchange; and if we decide to take back the almost total monopoly on money creation at present enjoyed by the banking sector, and bestow it instead on a democratically accountable public authority, a basic income for all adult citizens is one option which deserves serious consideration.

(This Article appeared as the In My View column in the Newcastle Journal of 7th November, 2005)

I don’t know how I came to miss the return of Adrian Mole.  The hardback version of the latest book somehow passed me by, but I snapped the paperback up with joy a couple of weeks ago, and was not disappointed.

In “Adrian Mole and the Weapons of Mass Destruction” Adrian, now in his mid-thirties, progresses from a child-like faith in nice Mr Blair’s assessment of Saddam Hussein’s fire power to complete repudiation of the Iraq war.  But throughout the book he is also haunted by another Weapon of Mass Destruction:  debt.

Countless readers will identify with his descent from the firm ground of comparative solvency into a morass of competing mortgages and loans  … credit cards and store cards … the endless juggling of one debt against another  … rescheduling and amalgamating them … stuffing unopened threats and demands for cash  into drawers  - out of sight, but never quite out of mind … struggling to pay off a meagre sufficiency, while taking on yet more post-dated debt in a despairing attempt to keep head above water  …

By the end of the book, Adrian has found a solution: he has down-sized, and is living happily within his means in a converted pig-sty, with wife and child.  At last, a rational life!

But does he fully understand the iniquity of the way in which he and thousands upon thousands of other ordinary folk are lured into insolvency by overblown offers of  “credit”?  And  -  even more shocking  -  does he realise that our society depends on ever-increasing numbers of  people like him taking up those inflated offers, simply in order to provide us all with a means of exchange?

I don’t think he does.

At the height of his misery, when he finally faces up to financial facts, he writes of “the consumer durables I had so recklessly spent somebody else’s money on”.

“Somebody else’s money”  …  ?   No, Adrian, no!

When you borrowed that money, nobody else’s account was debited.  The money you so trustingly thought pre-existent was either created out of nothing especially for you, or put back into circulation on your account, having originally been created out of nothing for somebody else and “paid back”.

If we were to discuss who actually owns that money, we’d have to acknowledge that  some bank or building society would claim it as theirs:  but only because banks and building societies have decided to act as if the money they create out of thin air as a “service” to the borrower actually belongs to them;  and, crucially, because both MPs and electorate allow this assumption of ownership to persist.

When the money which banks and building societies create out of nothing is paid back, it isn’t cancelled out, along with the debt.  It stays on their books.  Even though it didn’t exist until they performed the “service” of conjuring it up, the financial institutions which created it account it as their own, to be re-lent at interest  -  or, if borrowing is slack, invested for profit.

So, Adrian, you didn’t recklessly spend someone else’s money.  You gave the “lenders” an opportunity to create profitable new money for themselves, at your own considerable expense.  And you also contributed, temporarily, to the total amount of money circulating in the economy.

For, yes, this is the way our government chooses to provide us with 97% of the wherewithal to exchange goods and services, instead of doing its duty, as in the past, and issuing between 20% and 40% of our currency debt-free.

Let no-one point the finger at Adrian.  Let no-one despise him as a foolish or immoral spendthrift.  In these days when bigger and bigger loans are required to replace the huge amounts continuously flowing out of the productive economy as money created as a debt is repaid, we are increasingly dependent on gullible, improvident or just plain desperate borrowers putting more and more debt money into circulation, simply to keep the rest of us in business.

I’m glad that Adrian finally  -  well, until the next book, anyway  - solves his problems and achieves contentment.  But make no mistake: if everybody did likewise, the whole rotten superstructure of debt upon debt that we call our financial system would collapse.