Whose Money?

The Newcastle Journal, Wednesday, 22 July, 2009

Stop private banks from 'creating cash'

I agree with Gillian Swanson’s suggestion that the right of private banks to create money should be curtailed or abolished (letters, July 20). One big problem that this right gives rise to is that these banks behave in a “pro-cyclical” manner, that is they create more money just when they shouldn’t: when a bubble is being created. Plus they reduce the money supply during a slump or credit crunch: just when more money should be injected into the economy.

Gillian Swanson is following in the footsteps of Abraham Lincoln who said, "The government should create, issue and circulate all the currency and credits needed to satisfy the spending power of the government and the buying power of consumers. By adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity." 

Josiah Stamp, President of the Bank of England in the 1920s said something very similar. 

Ralph Musgrave, Durham

The Newcastle Journal, Monday, 20 July, 2009

Different kind of banks are needed

The proposed Post Bank is a good idea.  Perhaps it could even be run along the lines of the Bank of North Dakota, which is mentioned by American money-reformer Ellen Brown in a recent article in the Huffington Post, as "the only state-owned bank in the nation." 

The Bank of North Dakota, Ellen says, "was established by the legislature in 1919 to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men. By law, the state must deposit all its funds in the bank, and the state guarantees its deposits. The bank's surplus profits are returned to the state's coffers." 

As a result of this financial public-service initiative, North Dakota, one of only three states able to meet its budget, "is not only solvent but now boasts the largest surplus it has ever had". 

In conjunction with our own publicly-owned bank we should, of course, also nationalise the actual money supply.  This could be done by making it as illegal for commercial banks to create new non-cash money in the form of credit (ie, debt) as it already is for them to print notes or mint coins; and by legislating for a public authority along the lines of the Monetary Policy Committee to issue our national currency, both cash and non-cash, in line with the real wealth of the nation, and free of any debt at source.

Local and regional currencies could also play a very necessary part in reviving the fortunes of the North-East of England.

Gillian Swanson,

Whitley Bay, Tyne & Wear

The Newcastle Journal, Monday, 23 February, 2009

To get out of mess, we need reform

 

I beg to differ with your correspondent Michael Robinson (Voice of the North, February 13).  The Great Depression of the 1930s was not the result of protectionism,.

 

It was caused by a sudden contraction in the money supply due to the bursting of a massive credit bubble, similar to the present unfolding depression.

 

Before we can get out of this mess, there needs to be a fundamental reform of our ridiculous, usurious monetary system whereby all new money is created out of thin air as a debt owing to private banks.  (Journal readers may well ask: how could a bank possibly lose £10bn when they can make the stuff?)

 

The way forward for this, and the other countries of Europe, is then as autonomous sovereign nations running their affairs in the best interest of their own citizens.  It is not as vassal states dancing to the tune of a city in Belgium and being governed for the benefit of multinational corporations, fraudulent banksters and corrupt politicians.

 

Disingenuous politicians will no doubt seek to exploit the present difficult situation by calling for a "one world government".  This must be rejected by all means possible if we are to avoid total anarchy.

 

John Pearson

Adderstonemains, Northumberland

The Newcastle Journal, Thursday, 12 February, 2009

Loans should be based on real money

In reply to Alan Dixon (Voice of the North, January 26) I agree absolutely that a return to the gold stndard would be a disaster.

The alternative, however, need not be a continuing reliance on banks to create the non-cash componenet of our money supplu (97% of all purchasing power) as a debt against private individuals and businesses.

The alternative is for the Government to stop sanctioning the customary use of bank credit as legal tender, and to legislate instead for a democratically accountale public authority(eg the Bank of England Monetary Policy Committee) to have sole right to create non-cash money, in line with the actual wealth of the nation.

This non-cash money, like Treasury notes and coins, but unlike bank "credit", would be issued to the nation debt-free at source.

Of course there's "nothing wrong with banks and financial institutions extending loans".  However, those loans should be made out of money which already exists, not from newly-created sums dreamed up by private, profit-making businesses for the benefit of projects or persons enjoying their favour, or to match whatever value they choose to ascribe to a particular asset at any given time.

Gillian Swanson

The Scotsman, Monday, 12 January, 2009

Folly of relying on corporate banking sector for money supply into society
 
The fact that we need to "stimulate lending", that is to say, stimulate indebting people, in order to provide our economy with new money, demonstrates the reality of our debt-based economy and the folly of relying upon the corporate banking sector for the supply of money into our society ("So what if nothing works?" 9 Jan).
 
The real solution lies in enabling the Bank of England to take responsibility for creating our money supply directly and publicly, free of debt, rather than relying on the corporate banking system to create it out of nothing as a debt for its own private profit.
 
This reform, promoted by the Bromsgrove Group in the UK and the American Monetary Institute in the United States, will only work if the money is created debt-free and invested directly into society.
 
The corporate banking system will then compete to attract this money into its savings accounts and build up its capital reserves in this way.

This will be done at the same time as private banks are either forbidden from creating money completely, or have severe credit controls imposed on their ability so to do, thereby ensuring that inflation is not possible.

Alistair McConnachie
www.ProsperityUk.com

Newcastle Journal, Saturday, 13 December, 2008

So where are these jobs for mothers?

As jobs in our shrinking economy disappear with each passing day, what sense does it make to force mothers performing the valuable service of raising the next generation out into the “workplace”?  

By the way, ‘workplace is newspeak for place of paid employment outside the home, implying that only actions performed outside the family circle in exchange for money can be called work.

Has Prime Minister Gordon Brown not noticed that machines are doing more and more of the necessary work nowadays? Even during the recent ‘boom’ the Government had to dream up and fund hundreds of thousands of useless regulatory and bureaucratic jobs, at vast public expense, to keep the unemployment figures down. So where are all these new jobs for mothers going to come from, now that we’re in a recession?  And will they even provide adequate incomes, with companies that don’t actually go bust or cut back on staff holding down wages in an attempt to balance the books?

Instead of trying to squeeze blood from a stone as the national debt spirals out of control, and a single average wage packet can no longer keep a family, Mr Brown should take a closer look at the underlying cause of the nation’s financial impoverishment: the absurd decision to use bank-created debt as our means of exchange.  This insanity inevitably results in widespread financial scarcity whenever insufficient people can be persuaded, or permitted, to borrow the nation’s money supply into existence.

If it's ok for governments to issue notes and coins without incurring a debt, why can't they also issue the non-cash money that now forms around 97% of our money stock in a similar fashion?  Why must the nation go deeper and deeper into the red to produce it?

Newcastle Journal, 25 November, 2008

Sensible for nations to become producers

The need for EU competition rules regarding state aid endorsed by MEP Martin Callanan (Journal Letters, 21 November) only holds good as long as the prime objective of international trade is to import money, rather than the co-operative cross-border sharing of goods and services.  This is the direct result of using debt as our means of exchange.

When nations create virtually their entire money supply in the form of a never-ending round of compound interest-bearing debts owed to private lending institutions, they are sowing the seeds of trade warfare.

Under these conditions, free trade is an impossibility.  What is at present called  free trade is, in fact, a compulsive and highly regulated competition for exports.  Genuine free trade would obviously include the possibility of saying no to unnecessary imports (eg milk quotas).

As it is, rather than being content with a benign balance of trade, each nation, struggling to cope with essentially unrepayable debts, fights to export more than it imports, in order to get its hands on money created as a debt against people in other countries: people who will continue to be responsible for servicing and repaying that debt even when the purchasing power it represents is no longer available to them.

In a world where natural disasters and other breaks in production are a constant danger, it is only sensible for all nations to enhance their economic viability by encouraging maximum home production.  However, this will only be a realistic proposition if we kick the habit of raiding each others’ treasuries in order to boost the domestic money stock, and switch instead to national currencies issued debt-free at source, plus a stable international trading currency.

At present, common sense appears to have been abandoned in the race to export things of real value: not just in exchange for goods of equal value which the nation is incapable of providing for itself, but for money  -  something which can be produced at the tap of a keyboard, as long as there is sufficient real wealth in materials, labour and human ingenuity to back it up.

Newcastle Journal, 14 November, 2008

Bailing out banks doesn't add up

As the economy flounders in the morass of unrepayable debt created (with enthusiastic government encouragement) by loose-lending banks, Mr Brown's solution is to throw billions in public money at those responsible for the disaster, so that they can keep lending it back to us for a profit.

Something here doesn't add up.

So it's a relief for monetary "cranks" like myself to hear respected, and repeatedly elected, Democrat Congressman Dennis Kucinich endorsing our very different solution in his victory speech after the American election. 

It is, the Democrat says, necessary to "ask some fundamental questions about the way our money system operates", because this "isn't a Democrat/Republican issue, it's an issue that relates to whether or not we control our own govenment". 

At the moment, "... we borrow money from the banks to give to the banks",  and the "only way out is to take a new look at the way we create money in our society."  (http://www.youtube.com/watch?v=x2Xez11JfVM)

As in America, so in the UK.  This isn't a left/right issue, it's a question of who holds the power of the purse strings: the banks, or ordinary people.

I wish we could have more people with the judgment and values of Congressman Kucinich as parliamentary candidates on this side of the Atlantic.  If we did, those who have lost faith in the political process might actually bother to vote at the next election, rather than abstaining, or spoiling their ballot papers.

Gillian Swanson

Newcastle Journal, October, 2008

As Ruth Wallis says (Journal Letters, 20 October), the present crisis makes it clear that “money must become servant, not master”.  However, we do not have to endure the kind of “common sense” which, at the time of the Great Depression, looked on while people starved in the midst of plenty.

What is required, to save businesses from ruin and millions of people from hardship, is for Parliament to revoke the banks’ licence to create credit (ie, debt) as virtually our sole means of exchange, instead authorising an independent Monetary Policy Committee to issue us with a national currency created debt-free at source. 

No longer faced with the thankless task of trying to control the amount of non-cash money in circulation indirectly, by adjusting interest rates, such a Committee should find it comparatively easy to estimate the amount of liquidity necessary at any given time, issuing extra in line with any increase in home-produced goods and services available, and cutting back when there is any threat of inflation.  If we can have publicly-created notes and coins, there is no reason why we should not also have publicly-created non-cash money.

A nation which creates its own money supply, rather than borrowing it from the banks, and then continuously paying out to service and repay the debt, will have lower taxes, lower prices, and far bigger disposable incomes.  It might even be possible once more for families to pay off their mortgages, kick the credit-card habit, and acquire some real wealth, instead of the illusory kind conjured up in the form of loans and equity withdrawal during the recent boom.

The Times, 15 October, 2008

Deluded Bankers

Dear Sir, 

Only 3% of money exists as notes and coinage. Therefore the rest is magic money conjured into existence, and issued as debt by banks, at a ratio of about 33 magic pounds to 1 real pound, by the quite legal means of fractional reserve banking.

In a rising market, it follows that anybody able to create such money, from thin air, at such a ratio, can soon get rich. This has been responsible for many bankers regarding themselves as clever business people.

However, as they are now discovering, this leverage works just as dramatically in reverse.

As a skilled profession, banking ranks alongside selling ice cream on a hot day outside a children’s playground, and the calibre of people who work in banking reflects this fact.

Yours : Malcolm Parkin

The Newcastle Journal, Thursday, 9 October, 2008

It doesn't have to be this way

Your columnist, Unison North regional secretary Gill Hale is absolutely right when she said yesterday that if we can bail out fat cat bankers, we can spare the money to solve the problem of child poverty.  In fact, with the banking system now definitively revealed as a huge confidence trick, what better time to carry out thoroughgoing financial reform, rather than ineffectually attempting to plug the black hole of  systemic debt?

We are now seeing the consequences of allowing banks to create our money supply for whatever purposes they deem most profitable.  This has enabled them, for instance, to conjure up mortgage loans far in excess of either the value of property or of their customers’ ability to service and repay the debt.  It has also given them free rein to create money out of thin air in order to finance predatory takeovers, and to inflate the huge derivatives bubble now threatening to ruin millions of ordinary people.

Unreported by our mainstream media, Ohio Congressman Dennis Kucinich put his finger on the problem in a recent television interview when he said, “"We see ourselves in a position where the debt just keeps building and building and building and we're calling that economic progress.  It is not.  We need to challenge again the underlying assumptions of a debt-based economy."

What is an economy for?  Is it to produce money?  Or is it to produce goods and services?

Our present economy is geared largely towards the acquisition of money.  Financial manipulation and multiplication is rewarded to excess, while the production of real wealth (ie, essential goods and services) is despised and neglected.

Yet money can be produced without effort, at the touch of a keyboard.  If used properly, it acts as an accounting system. 

Why, then, does our government not take advantage of the present crisis to revoke  the banks’ licence to create this essentially worthless stuff according to their priorities as private, profit-making  businesses, and then charge us to make use of it?   

Why doesn’t the Treasury provide the nation instead with publicly-created money, issued debt-free at source by an independent authority, on the lines of the MPC? 

Until we stop using debt as our means of exchange, there is absolutely no chance of eradicating poverty, either in the Third World or on our own doorstep.  And until we succeed in eradicating poverty, human potential will be continually frustrated.

Gillian Swanson

(In reply to Derek Roberton's letter in the Journal of 24 March, see below)

Neither Al Gore nor Martin Durkin may have come up “smelling of roses”, after their recent documentaries.   However, as Derek Robertson admits, in his letter of 24 March, it is a fact that “global warming” (I would amend this to read man-made global warming) “is an issue that can’t be proven categorically”.

I appreciate the good intentions of those who wish to cut emissions, but do not believe that this would lead to any significant decrease in warming.  Variations in climate have always happened, and species must try to adapt to them.

Waste and pollution, on the other hand, are undoubtedly serious issues well within the scope of human action.  Why not focus constructively on these, rather than propagating highly debatable scare stories?

It seems that Derek, like myself, is unhappy with our present financial system; and I would suggest that anyone who cares about the environment should call a halt to doomsday preaching, and concentrate on campaigning for radical reform of the way we provide the country with the money needed to exchange goods and services.

Our debt-driven financial system, which can’t survive unless more and more people are forced into the red, continues to dictate the wasteful and environmentally damaging production of poor-quality “fashion” goods, which quickly need to be replaced, instead of the long-lasting, quality items which any mature human being would prefer.  

Isn’t it disappointing that the Green Party, at their annual conferences, consistently vote down moves by their more sensible members to put monetary reform at the heart of their agenda, when a stable money supply would be the most realistic means of achieving their aims? 

Gillian Swanson

Newcastle Journal, 24 March, 2007

The Channel 4 television programme, The Great Global Warming Swindle, which Gillian Swanson quotes as a rebuttal to global warming, hasn't exactly emerged smelling of roses  ... 

...  Global warming is an issue that can't be proven categorically.  However, to fall back into a position of continuing with the status quo in the hope that we are not responsible is to gamble with the future of succeeding generations.

The heating of the planet isn't the only consequence of limitless growth economics.  Resource depletion, land and sea pollution, and soil exhaustion are other effects that will ferment wars, create further mass migration of people attempting to escape from impoverished lands and limit, if not destroy, the ability of the planet to sustain any kind of life that's worth calling civilised. 

Within these pages, Gillian has posted some interesting articles on the illusory nature of our present monetary system.  It is therefore surprising she is happy to gamble the wellbeing of communities and the thin web of life of our planet that sustains them, out of concern for monetary consequences. 

Derek Robertson

 

Private purposes

Good to read your expose of the banking system (Banks Exposed, NI 392).

However, it would have been good also to read about the fact that the private bamks create money out of nothing, as a debt, for private profit.

The private banking system is now responsible for 97 per caent of our money supply.  This is to say, our very medium of exchange is created at the behest of private interests for their private purposes.

People like Mike Rowbotham, in The Grip of Death (1998) and James Robertson, in Creating New Money (2000), have argued that the right and responsibility of creating our medium of exchange should revert to a democratically acocountable public body, and that banks should only be able to lend money which has already been created by this public body.

Alistair McConnachie


And this letter appeared in the same issue:


Spiralling debt

The amount of debt in the economy has long ago surpassed the amount of money created by banks (NI 392), so inevitably more borrowing is required to pay off existing debts.  It is an unsustainable and iniquitous system, which, by creating money way in excess of increased production, creates inflation, which robs the world in general and, by spuriously creating debt, causes misery and drives ruthless competition with complete disregard for the welfare of people and planet.

Current bank lending practice amounts to legally permitted robbery, and shouldbe made illegal.  The poower to create national currencies as needed should be taken from the banks and restored to democratic governments on behalf of the people.

People campaign for social justice and protection of the environkment, but as long as banking practice sustains capitalist development the foot will remain firmly on the accelerator of economic growthwith its malign consequences  -  including climatic disaster.  There is an overwhelming need to campaign to secure universal recognition of the faudulent nature of the existing money system and demand its reform.

Clive Rosher

Reform of local government and of the financial system must go hand-in-hand

Newcastle Journal, 20 October, 2006

If John Gray wants regional government with real powers and no interference from either the EU or London, his priority must be the repeal of all Acts and Treaties authorising the supremacy of both EU law and any other unnecessary supranational regulations.

 

Given the restoration of UK sovereignty, however, regional government would be a poor second-best to reformed, non-party-political local government, in close touch with varying grass-roots priorities in the many diverse areas of north-east England. 

 

It is true that such local government would require proper funding: impossible without constitutional reform to institute a public body which would provide the country with a money supply created debt-free at its point of origin.  Without currency reform along these lines, around 25% of council tax revenue and billions upon billions in national taxes will continue to be wasted on servicing government debt.

 

Reformed local councils might also boost their revenues by part-paying their employees with vouchers acceptable in payment of council tax.
 
With most matters being dealt with locally, a central UK government would enjoy only the restricted remit of defence, justice and foreign affairs, and would have less opportunity to interfere where it was not wanted.

 

In a country without language barriers, where people constantly move from one region to another, and where bonds of family and friendship criss-cross boundaries in an ever-changing web, a sensible balance between good national and local government, rather than the exaggeration of  partisan, and potentially divisive, regional loyalties, makes the most sense.

Gillian Swanson

Good public services and low taxes need not be mutually exclusive

Newcastle Journal 29 April, 2006

With taxes sky-high, and services and pensions under threat, we are told that more generous public spending can only be had by raising taxes, and that tax cuts are impossible without cut-backs in public spending.

 

This is not the case.  There is a perfectly viable way out of the impasse.

 

Before 1844, only coins issued by the Royal Mint were legal tender.  Notes issued by private banks were not.

 

Then, in 1844, the Bank Charter Act made it illegal for banks to produce their own notes: only the Bank of England was authorised to issue bank notes, which were now also to be recognised as legal tender.

 

The intention of the Act was to stabilise the economy by making it impossible for commercial banks to expand and contract the money supply at will (by granting or calling in loans).  Unfortunately, by this time “credit” (ie, money created in the form of loans to bank customers, and existing only as figures in bank accounts) was already taking over from notes and coins

 

A century and a half later, legal tender accounts for a mere 3% of the total money stock.  All the rest is bank-created credit, owed to the banks which conjured it up out of thin air.

 

Isn’t it time to amend the 1844 Act, giving credit money, like notes and coins, the status of legal tender, to be issued exclusively by a public authority as a service to the nation, rather than by the  private banking sector as a debt against its customers ?

 

Huber and Robertson, of the New Economics Foundation, estimate that, if the state were to reclaim sole right of issue, around £48 billion per year would be added to public revenue, allowing either increased government spending, or significant tax cuts. 

 

Strange that the present government, so keen to get rid of old-fashioned freedoms, should have such a blind spot when it comes to modernising our thoroughly antiquated and anti-social financial system!

Gillian Swanso

Political reform without monetary reform will not do

 

Newcastle Journal, Saturday, 14 January 2006

 

As Mark Harms says (Letters, 10 January), an elected regional assembly would probably have replaced a couple of county councils with unitary authorities along the lines of unloved North Tyneside.

 

It would also have transferred yet more power from the local level to a part-appointed body with policies devised and co-ordinated by national and supranational civil servants throughout the EU  -  policies aimed at welding all member states into a single political and economic entity.

 

Arguments in favour of an assembly focus on its ability to wave the begging bowl more successfully.  If central government slashed regulations, and stabilised the money supply by issuing debt-free electronic credit in the same proportion as used to be available in notes and coins, there’d be less need to waste time, energy and money on begging. 

 

If this publicly-created credit were issued as a basic income to all members of the electorate, anyone moving into the region would automatically boost its money supply  -  and, as Paul Dixon pointed out (Letters, 5 January), this part of the country is becoming increasingly attractive, in comparison with the over-priced, over-crowded South-East.

 

Any North-East representatives committed to the regeneration of the region should campaign for the reversal of inappropriate regulations and join Sunderland MP Bill Etherington and Stockton MP Frank Cook in signing EDM 390, “Publicly-created money”.

 

Meanwhile, councillors, why not show central government that you mean business by issuing some regional currency in the form of vouchers, to fill the financial gap?

 

Gillian Swanson

All seigniorage is spent in the city of London

Newcastle Journal, 10th January, 2006

Gillian Swanson (letters Jan 6th) is wrong to dismiss the regional assembly as an extra tier of government, for as it involved abolishing two county councils it was actually a re-structuring of local government.   It was a major failing of the campaign not to push that side of the agenda. The key point about the assembly is that it would have been a focal point to demand exactly the devolutionary powers that Ms swanson is arguing for.

In the 19th century some local authorities such as Liverpool did create their supplementary currencies and these can be an engine for regional growth.  Under the present system all of our nations seigniorage is spent in one single region -  the city of London.  In the USA there have been requests made by 64 cities for the Federal Reserve Bank to provide them interest free loans.  None have been successful but at least they are asking fora fairer distribution of the nations money supply.  Our councils aren't but they should be.  If the Bank of England provided such interest free loans here, it would be a radical alternative to the usurious scheme of PFI.

Mark Harms

We need more money, not more politicians

 

Newcastle Journal, 7th January 2006

 

Those in favour of regional government argue that the problems it was supposed to address are still there (Joyce Quin, In My View, 4 January).

 

Those against it don’t see how a regional assembly, with its agenda set by civil servants committed to a politically integrated EU, would solve those problems.

 

It’s not the lack of an extra tier of government that’s holding us back.  It’s lack of money. 

 

Reliance on bank- and building society-created “credit” (ie, interest-bearing debt shouldered by businesses and ordinary people) as the basic mechanism for putting currency into circulation keeps money in short supply, giving excessive power to those who hold the purse strings.

 

Restricting bank “credit” and replacing it with an adequate supply of publicly-created, debt-free money, issued as a basic, non-means-tested income to all members of the electorate, would transfer power away from central government, giving people greater control over their own lives.

 

In less prosperous areas like the north-east of England, there might also be a place for supplementary currencies in the form of vouchers issued as part-payment to local authority workers, and accepted in payment of council tax and business rates.

 

A substantial input of publicly-created money spent into the economy is nothing new.  It is our present more or less total dependence upon debt which departs dangerously from previous practice.

 

Gillian Swanson

The Pensions Crisis - "In My View"

Newcastle Journal, 16th December, 2005 

If the government want us to save for retirement, they’re going the wrong way about it.  There’s no point crying crocodile tears over people’s reluctance to put something by for the future, when those who make the effort are seen to be heavily penalised by the tax and benefits system.

 

Take the case of a pensioner going into a residential home.  He or she may have paid National Insurance stamps for forty odd years, trusting that this would cover care in old age: yet for anyone with savings or assets in excess of £20,500 this is not the case.  They have to pay in full for nursing care as well as board and lodging.

 

Meanwhile, middle-income earners who keep their capital assets below £12,500, spending their money as it comes in and serially re-mortgaging their property to fund current consumption, have their bills paid by the State.  Is it any wonder that enjoying your “equity” while you can is becoming a popular option?  Even though you can’t pass your house on to your children, it can give you a comfortable life now, and there’ll be nothing left for the government to get their hands on when you go into care.

 

Then there is the danger of arbitrary raids on pension funds by a Chancellor always strapped for cash.  When every new budget brings the chance of a change in the rules, how can anyone plan ahead with confidence ?  And how can there be any respect for a government which takes a cut of your provision for the future with one hand, while wagging a finger at you with the other?

 

Besides, saving is out of the question for many people, in our debt-based society.

 

As successive post-war governments have failed to supplement the ever-diminishing percentage of notes and coins in circulation with a proportionate amount of publicly-created, debt-free electronic money, banks and building societies have taken up the slack from the Treasury more or less by default.

 

Nobody ever asked the electorate if they wanted private lending institutions to create 97% of our money supply as a debt.  No party manifesto announced such a policy.  There was no debate or vote in parliament, no exploration by the media of the issues involved.  It just happened, without even the fig-leaf of a focus group: a by-product of the demise of hard cash.

 

The result is that businesses and private individuals must increasingly go into debt if the country is to be provided with a means of exchange: and the need to service and repay that mounting tide of debt forces up prices and erodes disposable incomes, making the idea of saving a joke.

 

It’s estimated that someone in their twenties earning £20,000 a year would need to pay £213 a month into a pension fund to guarantee an extra income of £10,000 at the age of 65.  With tax relief, such a payment would amount to around one-tenth of total salary  -  but it would represent a far greater proportion of total disposable income.

 

For a start, there’s tax and national insurance.  On top of that, there may be student loans to repay, and a mortgage: and the proportion of monthly household income devoured by the average mortgage has at least doubled over the past forty years.  With outgoings like these, even before inflated food and heating bills are taken into account, is it any wonder that saving has become a luxury?

 

Yes, of course there is a certain amount of profligacy  -  encouraged by the eagerness of banks and large chain stores to offer ever more “credit” at a flick of those little plastic cards.  But when there isn’t enough to put by for a worthwhile pension anyway, it’s easy to settle for short-term indulgences like a new car or a holiday.  After all, it’s patriotic to spend.  There’s an excess of consumer goods to be sold, and if too many remain on the shelf the economy goes into free fall.

 

The pension crisis, like so many other problems in present-day Britain, would be at the very least considerably eased if governments didn’t choose to create almost our entire money supply as an interest-bearing debt.

 

Put the brakes on lending Mr Blair, and instruct the Bank of England to supply us with the same proportion of publicly-created money as was available in our grandparents’day. You might even spend some of it into circulation in the form of decent pensions  -  or, better still, as a basic income for each citizen of the UK.

 

Gillian Swanson

 

Inflation - endemic in a debt-based financial system

 

Newcastle Journal, 12th December 2005

 

Poor Gordon Brown!  He lifted up his hand and ordained 3.5% growth  -  and lo! the economy refused to obey him.

 

Still, all is not gloom and doom.  You and I may gaze, appalled, at our bank statements, trying to work out how to avoid eating into our retirement savings (or, if we’re helping to provide the country with its money supply by going into debt, how to squeeze out a living after we’ve serviced our loans), but never fear!   Here is Gordon waving the Retail Price Index, and promising us that inflation is under control!

 

The problem is that this averaging-out of price increases has little to do with the basic cost of living, which is the rate at which money must be spent to survive in the modern world.  Mr Brown, apparently, hasn’t realised that the cheap electrical goods which his RPI so proudly features are not the essentials of life.  Nor are low-cost, high-fashion  clothes from low-wage economies.  Food, water, heating, council tax, household maintenance and travel costs  -  all subject to rapid inflation  -  are: not to mention house prices, which, taking like for like, have more than doubled over the past ten years or so, and now dispose of around twice as much household income as they did in the 1960s.

 

Even those cheap electrical goods aren’t all good news.  Planned obsolescence and the need to keep prices down in the face of cut-throat competition mean that poor quality and  frequent replacement are the norm.

 

Here in the real world people switch to the cheapest (and frequently least nutritious) loaf on the supermarket shelves, and take to patronising the charity shops and cut-price stores mushrooming along our high streets (they’re the only ones that can afford the rates).

 

Meanwhile Gordon fixes his eyes on far, theoretical horizons, ignoring the tides of debt-driven inflation that lap about his feet  …

 

G S

Sponsors


Banks and PFI

Newcastle Journal, December 5th 2005

The Journal is right to be suspicious of PFI, beyond the smoke and mirrors lies a very simple but extremely profitable scam that Gillian Swanson exposed in her letter on pensions.  Successive governments have effectively privatized the the creation of the nation's money supply.  The valuable seigniorage rights of the nation have been handed over to private banks by the tolerance of a virtually fraudulent practice known as Fractional Reserve Banking.  As cash is no longer in demand banks can afford to back the electronic money they create with remarkably low levels of cash deposits. This level is around 5% which permits banks to create twenty pounds for every legal tender pound they hold.  If they were required to back their accounts with 100% of legal tender it would mean the government could spend this money into the economy rather than borrow it from the banks via dubious schemes such as PFI.  Is it any wonder that bank profits are counted in the billions when they literally have a licence not to print money but create it in electronic accounts
  Modern money, unbacked by gold or any other commodity is virtually free to create, it's simply absurd that private banks should benefit from this privilege and not the nation as a whole, seigniorage rights should belong to everyone and not an élite cabal of bankers in the city of London.

Mark Harms

 

Pensions

 

Newcastle Journal, December 2005

 

Huw Lewis’s anger (Journal, 28 November) is widely shared by all those who have seen their retirement income slashed by the Chancellor’s raid on pension funds.  If the government wants to start switching responsibility for pensions from the state to the individual, the first thing they should do is stop taxing savings and start issuing some publicly-created, debt-free money.

 

There’s little hope of most people being able to put anything much aside as long as they are also expected to go into debt to provide the country with its money supply.

 

Until recently notes and coins, produced as debt- and interest-free credit by the Bank of England, accounted for anywhere between 20% to 40% of total money in circulation.  The rest was largely created by the banks as a debt against businesses borrowing to invest.

 

Notes and coins have now fallen to 3% of the money supply, but businesses have been borrowing  money into existence as never before.  Indeed, by 1990 the proportion of business income required as interest on outstanding debt had risen to 28%, from a mere 7% in 1963. 

 

Yet though business and industrial debt has never been higher, it has shrunk drastically, compared with that of private individuals.  By 1996 ordinary people had already been driven into debt to the tune of £483 billion, creating, in the process, 60% of the UK’s money stock at their own expense.  Today those figures must be even higher.

 

Most middle income earners in their late twenties have a student loan to repay and a crippling mortgage to service, not to mention credit-card debt.  Many also have young families.  It’s a sick joke tell these people, who are already in danger of making themselves insolvent as they create money on the government’s behalf, that they should be saving harder.   The little they might manage to put by from anything that remains, after they have been taxed, serviced their debts, discharged their bills and paid inflated EU prices for food, would make little difference in their old age.

 

To make realistic levels of saving possible, the government’s first duty is to take the burden of money creation off the shoulders of ordinary people and lower offensive levels of taxation by authorising the Bank of England to supplement its issue of notes and coins with an adequate supply of publicly-created, debt-free money in electronic form.

 

Gillian Swanson

Debt-free money from abroad

 

Newcastle Journal, December 2005

 

Once again we have seen the peoples of Europe, “determined”, in the words of the EU Constitution, “to transcend their former divisions, and  …  forge a common destiny”, at each other’s throats over a little question of money.

 

It’s not surprising that East Europeans are disappointed not to be rewarded to the same degree as Ireland, or Greece, or Spain for surrendering their national independence so soon after regaining it.  But it’s not surprising, either, that UK taxpayers are resentful at the sums they pay into the EU budget.

 

Their donations consist entirely of money created by businesses and private individuals in this country as a debt against their property and their future.  Since debt in Britain far exceeds the total money stock, this must be so.  Every pound in circulation is a pound owed.  It’s bad enough to have debt like a millstone about your neck, without seeing money you have painfully created, and which you are struggling to pay back, disappearing abroad.

 

“European money”, for the net receivers, has the same magic quality as money from exports or inward investment: it comes as pure, interest-free credit, boosting the home economy, while leaving those in other countries who borrowed it into existence with the nasty job of servicing and repaying the debt.

 

But why create money as a debt in the first place ?

 

Money, unlike the real wealth of goods and services, can be summoned up at the tap of a keyboard.  So why is it being kept in artificially short supply?  Why does the government refuse to support the economy with an adequate means of exchange, preferring to go begging at the doors of multinationals or to let real wealth dwindle for lack of investment?

 

Gillian Swanson

 

A Weapon of mass destruction - In My View

 

 

Newcastle Journal, 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.

 

Gillian SWanson

 

 

 

From the author of "The Money Bomb"

 

Newcastle Journal, 4th  November  2005

 

Dear Sir,

              

It is refreshing to find our provincial journals exhibiting a more mature concern for the real problems of our society and communal life than the national dailies, which too often descend into scandal and witch hunts.

     

 I refer particularly to recent letters in your columns on public finance and the ever-increasing burden of private debt.  It is noticeable that your correspondents broach the subject with a certain amount of hesitance and trepidation, as if in wonder whether what they write and what they believe can possibly be valid, in view of its rejection by the financial and political Establishments.

    

They need have no doubts.  The fact is that Government, Treasury and Banking circles studiously avoid all serious debate on money, debt and usury  because their time-hallowed contentions on such matters are both morally and economically indefensible.  It would be immediately apparent to that proverbial visitor from Mars, for instance, that publicly created money spent debt-free on  essential  infrastructure, social amenity and other desirable objectives within the economy just has to be non-inflationary, since the capital outlays end when the last mile of track is  laid, or the final  bolts screwed into position.  (After that it's running costs only, unlike PFI, where the financing charges click in when the project is operational.)

    

There are a hundred and one opinions upon the application of money reform.   Some would have it all at once, even with elements of the unknown.   Others favour a more gradual approach, and personally I go with the latter.  There is nothing revolutionary about governments creating their own credit.  They've been doing it for a long time, and in the form of the shrinking coin and banknotes issues, it's still happening in the UK today.   Our complaint is that this form of credit creation has been seriously eroded by the credit card revolution, and would be totally abolished in a cashless society.  We cannot, must not allow this to happen.  We have our champions in Parliament, but still too few of them, and we must harry and alarm the majority,

                  

James Gibb Stuart

author of  "THE MONEY BOMB"  "ECONOMICS OF THE GREEN    RENAISSANCE"  etc

Convener of  THE BROMSGROVE GROUP

 

Effect of debt-based financial system on environment

Newcastle Journal, 2nd  November 2005

Both Andrew Duffield ("In My View", October 1) and Gillian Swanson (October 31) write sound sense on the issue of money supply.

 However, a related issue neither emphasises is the effect of having our money issued into circulation  with an accompanying interest-bearing debt: that this results, not only in the exponential growth of outstanding debt, but in pressure for “economic growth” in order to make those debts “serviceable”.  This is the fundamental driving force behind this “growth imperative” which now seriously threatens the future of life on Earth, through global warming, exhaustion of soils, forests and mineral resources and poisoning of air, land and seas.

 

Without the urgent reform of our money-supply system, “peak oil”, which we have now probably reached, will bring about the collapse of the world “economy”.  We need to introduce Citizens’ Incomes, as Andrew Duffield suggest, to support people thrown out of work by the coming crisis, while government-created money will be needed to replace all the debt-based money which banks will then be unable to create as the “economy” collapses; and this will facilitate the changes needed to adjust to the low-energy economy which we will be forced to create.

 

Brian Leslie,

Tonbridge Wells.

 

Debt-free money must come first

 

Newcastle Journal, 31st October, 2005

 

It was encouraging to learn (“In My View”, 1 October) that Andrew Duffield  -  a parliamentary candidate in the last elections  -  is in favour of government-created credit.  As yet, few of our sitting MPs have shown equal good sense.

 

However, there’s no reason why replacing bank money created as a debt with debt-free, government-issued credit should entail either a non-means-tested Citizen’s Income or a restructuring of the tax system along the lines Mr Duffield suggests.  While debt-free money is essential to the economic health of any country, there are many ways in which a government could issue such money.

 

A socialist government might simply spend it into the economy as a debt-free input into, eg, transport, or health, or education, or pensions.  

 

A government which emphasised individual freedom might prefer to give a basic income to each British subject, rich or poor.  This would decentralise power, allow more personal choice, act as a buffer against unemployment or ill-health, and perhaps make shorter working hours or job-sharing possible.

 

Again, part of the money created might be used for a smaller basic income, and the rest for public projects.

 

The point is that money reform isn’t party-political.  It offers a wide range of creative options to people of all persuasions, the politics of how exactly to issue it being subject to democratic choice.

 

One thing is certain: with debt in this country currently outstripping the money stock by billions upon billions of pounds, governments would have to create an awful lot of debt-free credit before there was any need to tax it out of circulation.  Time enough to do that when debt levels stabilised, indicating that adequate purchasing power had finally been achieved.

 

Presumably our present MPs are too timid to change the status quo.  However, with public, commercial and private indebtedness now reaching levels never before experienced, refusal to examine the credibility of the present financial system is far more of an act of faith than returning to previous practice, when between 20% and 40% debt-free, government-created money was the norm.

 

Gillian Swanson

 

In My View - Andrew Duffield

 

1st October 2005

 

When Gordon Brown eventually takes over from Tony Blair, he will leave a less than rosy legacy for his successor at the Treasury.

 

Credit-based debt in this country, both personal and national, has reached record levels under Brown’s stewardship, and although pump-priming the economy allowed him to dodge the worst of the global recession a few years ago, the “Iron Chancellor’s” claim to have eradicated boom and bust is looking very rusty.

 

Manufacturing industry continues its decline and yet more jobs are moving abroad.  Economic growth in the North-East has been almost all on the back of increased Government spending.

 

Given the state of our schools and hospitals, there is a dire need to invest in public services  -  but Government borrowing, direct or deferred with PFI, is not the answer.

 

The creation of credit by private banks for public expenditure attracts interest that has to be paid by increased taxes, costs that are ultimately passed on to the consumer.

 

This unsustainable cycle is similar to that which plagues developing countries, courtesy of the IMF and World Bank.

 

Conventional economists tell us there is no alternative.  If governments create their own credit for public expenditure it will be hugely inflationary.

 

The fact that interest paid on bank-created credit already fuels inflation is conveniently overlooked!  In trutyh, provided the Government collects on the wealth generated (in rising land values) from public investment, it could easily create its own credit in a non-inflationary way.

 

In order to recycle this social wealth the Government doesn’t need to tax more  -  just differently.

 

The prime reform required is a shift away from payroll taxes and on to the community-created value that flows into land.  Your don’t have to be an economist to see this flow occurring.

 

Think how the prices of properties in the catchment area of a good school vary considerably from similar properties swerved by a failing one.  The value of bricks and mortar is the same.  It is the value the market places on the land (or rather its location) that makes the difference.  If the Government invests in schools, or roads, or hospitals, it is surely appropriate to capture the increases in surrounding location values to pay for that investment, and to do so annually.

 

By phasing in a “Location Benefit Levy”, Government would be able to reduce economically damaging taxes, like those on employment and enterprise, benefiting the wider economy.

 

As LBL increased, so the cost of land would stabilise, making a permanent reality of affordable housing and ensuring that property ownership was no longer exploited as an investment vehicle for the appropriation of unearned wealth.  The route to riches would be through productive economic activity  -  untaxed as far as possible.  As even the rich can’t hide their land offshore, the unavoidable nature of LBL and the fact that it applies to all sites, even derelict ones, would ensure brownfield development and a higher tax take.  This could be re-invested in much needed social housing or the payment of a universal, non-means tested “Citizen’s Income” instead of the current morass of tax allowances, benefits and pensions credits.  Collecting and recycling socially-created wealth in this way would allow Governemtn to create its own interest-free credit for specific public projects at zero risk of inflation.  There would be losers: the banks would make less profit (shame!) and landowners would be compelled to put their holdings to best permitted use instead of idly waiting for them to appreciate.  However, low income households and poorer pensioners could defer their LBL liability until the sale of their property at some future date.

 

Three fundamental reforms  -  a phased tax shift, government-created credit and a Citizen’s Income  -  would end the bubbles caused by land speculation and genuinely redistribute wealth.

 

Andrew Duffield

House-price inflation

Newcastle Journal, September 2005

(Correspondence in the Journal's letter pages,  in response to 'K', who found herself unable to get onto the first rung of the housing ladder owing to house-price inflation, )

The experience of ‘K’ (letters, 22 September), shared by increasing numbers of young people, should be giving our MPs serious concern. 

 Why have successive governments sanctioned the insane levels of  borrowing which have led to runaway house-price inflation ?  Why have they made life harder for young families by allowing banks and building societies to base the amount they are prepared to lend on the assumption that both partners will be bringing in a full-time wage?

 

Without government complicity in turning a blind eye to ever-increasing levels of mortgage debt, house prices could not have risen to their present irrational levels, and people like ‘K’ would still have a chance of holding the deeds of their own home before they reached middle -age.

 

For the time being, those fortunate enough to have acquired a stake in a house while the going was good are able to convert inflationary price rises into hard cash by remortgaging; but only at the cost of owning less and less of their assets, and having nothing to pass on to their children. 

 

We are told that more people than ever own their own homes; yet what is actually happening is not an increase in property ownership among the general population, but the steady and systematic transfer of real wealth (ie, the deeds of houses) from individuals and families to banks and other lending institutions.

 

Why have governments made no attempt to restrain this excessive lending?

 

The only answer must be that, since conventional economic theory insists  -  without justification  -  that government-created money inevitably leads to inflation, our rulers have come to depend, instead, on banks and building societies putting newly-created electronic money into circulation as “loans”, in order to provide the country with a means of exchange.

 

But isn't the snowballing creation of money as a debt owed to lending institutions far more destructive than its judicious distribution  -  preferably as a non-means-tested basic income to all British subjects  -  by democratically elected governments?   House-price inflation is no less damaging, in the long run,  than other forms of inflation, and is already creating widespread misery:  witness ‘K’s’ letter.

 

The trouble is that, if house prices fall, there will also be a drastic fall in the amount of new money being created  -  along with plummeting levels of affluence and a further slow-down of the economy, as property owers (no, that is not a typing error) can no longer tap into their “equity” to finance current spending.

 

I know that most people find the subject of money reform confusing, but surely our MPs, at least,  must see its increasing relevance to many of our present problems  -  throughout the country, but especially in the north-east of England.  Presumably the Journal’s letter page is open to them.  It would be interesting to hear their views.

 

Gillian Swanson

 

Please, MPs, support reform of financial system!

Newcastle Journal, 2th September 2005

Hardly a day passes without news of some public service strapped for cash.

 Why?

 

In terms of real wealth, this is a rich country.  There’s no reason why we shouldn’t  adequately feed, clothe and house our entire population, and provide good education and health services, a decent public transport system, and proper care for the elderly and infirm.  No reason, that is, except the shortage of money.

 

It would make sense to plead lack of manpower or materials; but the manpower and materials are there.  All that is lacking is money: which  -  since it now has no link with any scarce commodity - can be produced in any quantity made necessary by the goods and services available for exchange.  So why is money being kept in artificially short supply?

 

As long as our governments rely on private individuals and businesses going into debt to put money into circulation, there will never be enough to go round.  As fast as this debt-money is created, it is sucked back again in repayments and interest charges.  In fact, every single pound currently being used to exchange goods and services in this country is simultaneously owed to some financial institution.

 

Not all our MPs are oblivious to this fact.  For the past few years, a succession of Early Day Motions have been put before parliament, urging reform of the financial system.  The one currently collecting signatures is EDM 390, “Publicly Created Money”.

 

How about some of our north-east MPs supporting it?

 

The knee-jerk response of many politicians is to say that government-created money would lead to inflation.  In fact, it is the disuse of government-created notes and coins in favour of debt-ridden electronic money “lent” into existence by banks and other financial institutions which has heralded endemic inflation.

 

Money is constantly being created out of thin air: the money supply has to increase, in line with goods and services available for exchange.  The question is whether it is more sensible to create this very necessary new money as a debt owed by businesses and families to banks and other financial institutions (and therefore only temporarily present in the economy) or as credit freely supplied by a democratically answerable government.

 

North-east MPs, please sign EDM 390, and initiate a debate on this subject in parliament. 

 

Gillian Swanson

We can't afford to pay for decent public services

Newcastle Journal, June 2005

No attempts to reform council tax will solve this basic problem: that people simply cannot afford to pay the kind of money necessary for a high standard of public services while their disposable incomes are being squeezed tighter and tighter by interest charges and debt repayments  -  the consequence of  our having to borrow money into existence to keep the economy afloat.

 

Even in the “wealthy” south-east, ludicrously inflated house prices don’t pay the bills.  Greater “equity” can only be converted into ready money by moving to a cheaper house, or taking out a second mortgage -  ie, handing a bigger slice of your chief material asset into the ownership of some bank or building society.   At this rate, mortgages will never be paid off, and the lending institutions will end up effective owners of the entire housing stock.

 

The only long-term solution is for the government to release ordinary people and businesses from the burden of creating the UK’s money supply, and start feeding enough interest-free credit into the economy to monetise this country’s real wealth  -  preferably in the form of a basic, non-means-tested supplementary income to each British subject.

 

New money is constantly being created, anyway, by banks and building societies, as a debt against society.  Why doesn’t the government restrict the power of banks to create this highly unsatisfactory form of money, and begin to provide us with a stable money stock, in proportion to the needs of the economy?

 

If our representatives want our taxes, they should make sure we have the wherewithal to pay them.

 

Gillian Swanson

 

National debts need not be inflationary

 

Newcastle Journal, June 2005

 

Your correspondent ELM Marchant (Journal Letters, 20 June) hasn’t got the figures right.  In fact, inflation in Germany reached a high of around 7% during the period from 1975 to 1979.

 

All the same, he/she has a point.  Although the German government was constantly increasing their national debt while we in the UK were savagely cutting ours back, we were the ones who suffered double-digit inflation.

 

Why?

 

Because all the evidence suggests that it is not national debts that cause the wage/price spiral … as long as they are large enough to make a significant contribution to the money supply.   Because they are rolled over and increased each year, national debts act effectively as interest-free credit supplied to the economy, so boost economic activity without forcing up industry’s costs, or acting as a drain on the purchasing power of consumers. 

 

Excessive commercial and private debts, however, raise prices and reduce disposable incomes; and governments which refuse to provide the country with a stable money supply, demanding instead that private individuals and businesses create the nation’s means of exchange as an interest-bearing debt against their own futures, are asking for trouble.

 

Gillian Swanson

Cutting back the national debt

 

Newcastle Journal, June 2005

 

C Harrison compares our infrastructure unfavourably with Germany’s, and doubts that Britain can be called rich. 

 

The fact is that Germany built its post-war prosperity with the help of massive annual injections of new money via the national debt.

 

Between 1970 and 1994, it increased its deficit from 18% to 64% of GDP, while enjoying an average inflation rate of  3%.  Even between 1975 and 1979, when its national debt nearly doubled, maximum inflation was a mere 5%, compared with our average of 15.5% during this period.

 

By injecting money in sufficient quantities, Germany was able to support a flourishing, low-inflation economy, while maintaining and improving its infrastructure.

 

We, meanwhile, were busy cutting our deficit from 250% of GDP just after the war to 52% of GDP in 1997: the most profoundly restrictive financial policy that has been pursued anywhere in the world.  Not only did inflation far exceed that of Germany: we ended up with an inferior infrastructure and under-funded public services.

 

However, with our continental neighbours now cutting back the annual increase in their deficits under the growth and stability pact, we can confidently expect them soon to join us in our public squalor  -  unless, of course, they decide to ditch the euro.

 

E L M Marchant

Debtors can't be savers

 

Newcastle Journal, June 2005

 

It’s not surprising that savings in this country are now so low that the government wants to force us to put money by.  However, with private debt rocketing above the £1 trillion mark, and far exceeding the actual money supply, it’s going to be a difficult policy to enforce. 

 

With debt repayments putting up the costs of businesses, and squeezing disposable incomes, where exactly is the money to save going to come from?  All the evidence suggests that people are finding it difficult enough just to make ends meet:  though, of course, those who have borrowed their way into property “ownership”, and seen the price (though not, in most cases, the value) of their houses soaring, enjoy the illusion of wealth by tapping into their “equity” and re-mortgaging.

 

In fact, what is happening in a society where goods are abundant and money is in short supply is the very opposite of saving: real wealth is increasingly being dissipated in return for spending power, and passing into the hands of banks and other lending institutions at an alarming rate.

 

The government would do better to restrict borrowing than enforce saving; but if hardship is to be avoided they would also need to do their duty and provide the country with a stable, interest-free money supply.

 

G S

Quick-fix Gordon

June 2005

(These two very similar letters were printed in the Journal within a day or two of each other.  Must have been some kind of a mix-up!)

Letter 1

 

Why be hesitant to use the words “quick fix” about Gordon Brown’s latest mortgage scheme?  It certainly doesn’t get to the root of the problem.

 

The endless escalation of house prices has nothing to do with what people can afford to pay  -  only with what they can be persuaded to borrow.

 

Loans from banks and building societies are not money borrowed from savers.  They are brand new money, freshly created as a debt owed to the relevant financial institution. 

 

Over the past thirty years or so the creation of money as interest-bearing loans to house purchasers has overtaken the creation of money as interest-bearing loans to businesses as the principal way of providing the country with its currency.  No less than sixty per cent of the (mainly electronic) money now in circulation owes its existence to increasingly heavy mortgages shouldered by the general public.

 

Since new debt must be created faster than old debts are being repaid if we are not to experience the drop in purchasing power which leads to recession, Mr Brown is naturally concerned at the inability of a new generation of debtors to undertake their required borrowing duties on behalf of the treasury.

 

His scheme will only encourage the inefficient creation of money as a debt against private citizens and businesses to continue.  He should be checking the cancerous growth of  bank "lending", and initiating reform of our mad financial system.

 

Letter 2

 

The Journal is being too kind in referring to Gordon Brown’s  plans to get first-time buyers onto the housing ladder as a “quick-fix”.  This scheme will do nothing to “fix” a house-price escalation unrelated to any real increase in value.

 

It is the willingness of banks and building societies not only to take two wages into account when deciding whether to lend, but to allow people to borrow as much as five times their annual household income, which has made this huge price inflation possible.

 

If lending institutions had stuck to the rules which applied in the post-war years, over-priced houses could have found no buyers.

 

Why have successive governments made no attempt to control house-price inflation by restraining lenders?  

 

Could it have anything to do with the fact that our rulers rely on new money being lent into existence via ever-larger mortgages to provide the country with a means of exchange  -  to the point where 60% of the money now in circulation has been created in this way?

 

What will happen to “growth” if the amount of new money being borrowed back into existence fails to exceed the old money constantly being withdrawn from circulation by mortgage and other debt repayments?

 

No wonder Mr Brown is keen to welcome new owners (or should I say owers?) to the housing market!

 

Why not scrap the quick non-fix, and set about replacing our inefficient debt-based financial system with something offering greater stability?

 

Gillian Swanson

 

Public squalor under a debt-based money system

 

Newcastle Journal, Summer 2005

 

Of course it is tempting to believe that greater support from the more financially prosperous south-east would improve life in the north-east.  But similar benefits were expected when the coast councils were swallowed up in the unitary authority of North Tyneside back in the seventies.  The theory was that redistribution of  money within a wider tax-gathering base would transform poorer areas without any harmful effect on those who were the net contributors.

 

This assumption has been proved wrong. 

 

Nobody who knew Whitley Bay as it was in 1975 could fail to note that the town is now suffering from long-term neglect.

 

It is true that Scottish visitors no longer flock here in the summer;  but South Shields proves that this need not lead to the kind of squalor we see in parts of Whitley Bay.

 

High rates imposed upon this “milk cow” for more deprived areas have resulted in ever more boarded-up shop fronts and charity shops, and, no doubt, decreasing revenues.

 

The beach huts are gone  -  too expensive to protect them from vandalism.

 

The sunken gardens are gone  -  too expensive to maintain.

 

Although it is high summer, flower beds stand empty, and some tubs are full of weeds.

 

The Spanish City has been awaiting redevelopment  -  along lines unapproved by residents  -  for some time.

 

And what about the former paddling pool on the lower promenade, left derelict for more than ten years?  The climbing frames have been removed, decorative paving slabs have been replaced by an uneven patchwork of concrete and tarmac, interspersed with weeds; the pool itself is an eyesore, with heaps of flotsam and rubbish filthying the occasional remaining puddle.  Once a pleasant amenity, the place is now frequented only by dogs, whose owners appear to be unaware of any duty to keep the place clean.

 

There is absolutely no evidence that redistributing money from richer to poorer areas works.  In an economy where money must both provide a means of exchange and repay the debt which created it in the first place, there will never be enough of it to go round.  Any attempt at redistribution will simply be robbing Peter to pay Paul.

 

With such glaring evidence that, when money is in short supply everywhere, redistribution simply spreads it too thin or leaves pockets of serious neglect, why is there never any move to reform the financial system either by MPs (with the exception of a very few) or in the media?  There can be no doubt that a problem exists.  Why don’t orthodox economists admit that their theories are failing us, and put forward suggestions to improve the situation?

 

For a start, there is absolutely no reason why we should not return to the status quo of the fifties, when 20% of the money in circulation was created by the Treasury not as a debt requiring repayment (and therefore not affording long-term support to the economy) but as a permanent addition to the money supply.

 

Gillian Swanson

The two-wage mortgage puts strain on family relationships

 

Newcastle Journal April 2005

 

As Philip Warren says (Journal letters, 14 April), with more and more mothers engaged in full-time employment outside the home, increasing strain is put on the family.  However, the root of the problem may have more to do with the pressures of our insane financial system than with women’s “liberation”.

 

As long as governments expect the people of this country to create their own money supply by going into debt, the financial burden on individuals and businesses will snowball.  Mortgages and loans created 97% of the currency temporarily in circulation. They must be repaid, and larger ones continually taken out, if we are to enjoy the privilege of exchanging goods and services with each other. 

 

When we borrow from the bank on loan or mortgage, no other account is debited.  The cash enters our bank account as newly-created money.  This is quickly transferred to other bank accounts, in payment for subsequent transactions, adding to the money supply. 

 

The problem is that a debt-based financial system requires increasing levels of debt if it is to continue limping along through boom and bust.  Just after the war, the average mortgage was around twice the average annual income, usually provided by one person’s employment.  It is now around four times the average annual income, usually provided by the combined efforts of two people.

 

Under these circumstances, there is little chance of many women being liberated from the wages treadmill to do what they would actually prefer: look after their home and family, and take a part-time job when the children are older for pin money.

 

Why, with levels of debt crippling individuals, businesses and the economy in general, is no major political party in this election putting reform of the debt-based money system at the top of its manifesto?

 

Gillian Swanson

How hard can you tax people crippled by debt? - In My View

 

Newcastle Journal, 2004

 

As Huw Lewis says, it’s time we had an honest debate about tax.  Why do people resist tax rises?  Would an extra penny in the pound really improve our public services?

 

Huw is right when he says that  “lower taxation is a lie”. Whenever income tax is held down, hidden taxes more unfair even than the hated poll tax hit the very poorest among us.  That is why we give a hollow laugh when we’re asked to love the taxman.  When did a chancellor ever wait for our approval before finding ways of taking a bigger cut?

 

With or without our consent, taxes rise - yet the quality of our public services declines.

 

No wonder people distrust the idea of a regional assembly, with no powers and no extra funding from Westminster, but nevertheless free to raise its own revenues not merely to the tune of 5p a week but by as much as it likes, after its first year in office!

 

Assembly or no assembly, council tax bills will go up, year after year; but who can blame us for thinking the rise would be even steeper if we had 25 regional representatives to support on top of expensive unitary authorities like North Tyneside?

 

Perhaps we wouldn’t resent taxation so much if it was used only to pay for services we actually wanted.  But it disappears indiscriminately into the black hole of public  spending.

 

Isn’t it odd how there’s always enough for anything that suits the government’s fancy  -  bills to ban hunting, for instance, or wars against countries that haven’t threatened us?  When it comes to health and education, though, or pensions and nursing care for people who have paid national insurance all their working lives, our rulers quickly feel the pinch. 

 

But a more cogent reason for resisting even the smallest rise in taxation is the knowledge that a government which took its responsibilities seriously could improve things at a stroke, by providing this country with a means of exchange sufficient for the unimpeded exchange of goods and services.

 

A large part of our resistance to higher taxes springs from the fact that our disposable incomes are constantly shrinking, as we are forced to take on more and more debt.

 

Why are we borrowing so much?  In most cases, not from greed, but to put a roof over our heads and feed and clothe our families  -  the problem being that there isn’t enough money in circulation to ensure a decent standard of living for the whole population, let alone maintain public services.

 

Why isn’t there enough money?  Because 97% of it has to be borrowed into existence by government, businesses and private individuals taking out interest-bearing loans.  The bulk of this burden falls upon private individuals, mortgages alone having created 60% of our present money supply.

 

Unfortunately, the more we borrow, the more we are forced to borrow to keep the economy going, as returning loans and savings shrink the amount of money available for spending.  If we stopped borrowing for a moment, everything would grind to a halt. But we can’t stop.  Servicing our debts eats drastically into disposable income, leading to yet more borrowing …

 

In 1963, 21% of our total money stock was issued by the government debt-free as notes and coins.  This money remained permanently present in the economy, without constantly having to be repaid and borrowed back into existence.  Total debt, public, private and commercial, stood at £9 billion.

 

With diminishing use of hard cash, the amount of interest-free credit spent into the economy had dropped, by 1997, to a mere 3.6%.  Is it a coincidence that total debt by then stood at £780 billion  -  a full £100 billion more than our total money stock?

 

Just because we no longer need as high a proportion of notes and coins, why should we be deprived of the added purchasing power which debt-free hard cash used to provide?  It did no harm when the government created 20% or so of our money supply as interest-free credit  -  in fact the economy was more stable.  So why can’t regular debt-free issues of electronic money by the Treasury do the same job now?

 

Time enough for those currently crippled by unnecessary debt to learn to love their tax rises when the government has done its duty and supplied the same proportion of interest-free credit to the economy as was present in the post-war era.

 

Gillian Swanson

Whitley Bay Guardian

 

Regeneration of Whitley Bay

 

Whitley Bay Guardian, Thursday, 19 January, 2006

 

Scott Carlucci, chairman of the Hoteliers Association, is quoted (News Guardian, 12 Jan, “Regeneration Plans Are a Joke”) as saying “The Spanish City looked fantastic, there was no reason why we had to lose that.”

 

He’s absolutely right.  If there has been consistent apathy towards the various plans for Whitley Bay seafront, it’s probably because there was no public demand for the Spanish City to be bulldozed in the first place.  Like the overnight disappearance of the children’s playground in the park adjacent to the library, it just happened.

 

What most people understood by “regeneration” wasn’t the flattening of a prime seafront site, so that our cash-strapped council could sell it off to housing developers in a losing battle against insolvency.  It was a return to decent standards of care and maintenance  -  standards which had been progressively abandoned by the unloved unitary authority of North Tyneside.

 

Government by a 100%-resident council with the backing of a supportive financial system would have made the present dereliction of Whitley Bay impossible.  It would also have kept more local entrepreneurs prosperous enough to adapt to a changing market and test it with their own original ideas, instead of having to hand the job over to committees of politicians and “stakeholders” with agendas frequently far removed from those of ordinary people .

 

Remorseless centralisation, over-regulation, excessive taxation, and the increasing indebtedness of both businesses and consumers have effectively deprived local people of the power to control government; and massive council debt has skewed planning in bids to plug the black hole by selling off as many assets as possible.

 

When will more politicians pluck up the courage to challenge a financial system which can only put a pound of money into circulation by simultaneously creating a pound of debt? 

 

The present situation might be alleviated if the Bank of England were to boost the present  public issue of notes and coins with a supplementary issue of electronic money, bringing the proportion of debt-free money in circulation back up to traditional levels.  After all, this is the first time in the history of this country that governments have depended on ordinary people and businesses going into debt to create 97% of their money supply.

 

Two North-East MPs, Bill Etherington of Sunderland and Frank Cook of Stockton, have signed Early Day Motion 390, “Publicly Created Money”,  currently before Parliament.  It would be encouraging if our own MP, Alan Campbell, would do likewise.

 

Meanwhile, Maggie Longton is right  -  Whitley Bay needs its own council, dedicated to the town’s interests, and perhaps even willing to consider using a local currency to get things moving.

 

Gillian Swanson

Council should take action on debt

 

November 2005

 

It’s disappointing that none of our councillors appears to be concerned by the effect of our present debt-based money system on the well-being of those they represent.

 

Even after all-out efforts to reduce council liabilities from £150,674,026 in 2003/4 to £139,250,786 in 2004/5, debt per head of population was still as high as £729.79, requiring interest payments of £16,734,000 to service it: about 25% of total Council Tax revenues, which, after a 4.89% increase, stood at £67,147,756.

 

These interest payments were nearly double the amount spent on the Passenger Transport Authority (£8,809,900); around two-and-a-half times as much as the budget for Highways, Roads and Transport Services (£6,711,504); and approaching half the  spending on Cultural, Environmental and Planning Services (£37,834,396).

 

The latest Corporate Assessment Report for North Tyneside awarded the council marks for good progress, saying that over the past few years “healthy balances” had been restored.  But how can these balances be improved without detriment to services, or even held steady, while 97% of the money in circulation is owed to lending institutions?

 

Money created as a debt has to be serviced.  This fuels inflation, driving up costs for businesses and prices for consumers.  Councils are just as much consumers as private individuals, and according to the report in the Guardian of 27 October, “costs are growing”: so even if the present regime resists further borrowing by raising taxes high enough to stay within budget, it’s unlikely that there will be any reduction in North Tyneside’s debts this year.  We will be stuck with paying at least the same amount of interest, at the mercy of any unfavourable changes in lending rates.  

 

In the nineteenth century, when bank notes were beginning to be generally accepted as “real money”, rather than just “credit notes” promising to pay the bearer in gold, the Bank of England was given responsibility for issuing them on behalf of the government, free of debt.  From that point onwards, any other bank printing its own notes would have been guilty of forgery, and subject to criminal proceedings.

 

As electronic money has taken over from hard cash, the proportion of publicly created money circulating in the economy has dropped from 46% in 1948 to 3%, to be replaced by money issued as a debt to banks and building societies.  The logical expectation, therefore, would be for the government to recognise this fact, and to authorise the Bank of England to supplement the publicly-created, debt-free money already issued as notes and coins with sufficient publicly-created, debt-free money in electronic form to restore a “healthy balance”.

 

If central government continues to keep debt-free, publicly created money in artificially short supply, individuals, families and councils will continue to be strapped for cash, and increasingly forced into debt just to put enough money into circulation. 

 

Surely it is time for our councillors to take matters into their own hands!

 

It may not be possible for them to follow the example of Guernsey, which, since the end of the Napoleonic wars, has provided itself with its own debt-free money supply in sufficient quantity to maintain the island’s infrastructure and increase its prosperity, while avoiding all public debt. But there is no reason why they should not finance a proportion, at least, of council expenditure by issuing, in part-payment of wages and local services, a supply of Vouchers which could be freely traded throughout the authority, and accepted in payment of council tax.  This supplementary currency would benefit local shops and businesses by remaining within North Tyneside, rather than disappearing to head offices in other parts of the country, or even out of it altogether, as is frequently the case with money spent in the big chain stores.

 

As a start, perhaps Vouchers might be created to the value of current interest charges.

 

How about it, councillors? 

 

Gillian Swanson

 

North-East MPs - please sign EDM 390!

 

12th September 2005

 

It’s good to know that the sale of land by Whitley Bay station to developers is not going ahead; but why didn’t Nexus inform residents of the streets affected as soon as the decision was made?

 

I’m sorry Mike Parker didn’t grasp the point I was making in my letter, which was that we can never expect to have sustainably decent public services as long as they are forced to supplement their income by selling off their assets, since sooner or later those assets are going to run out; yet public services  -  like private enterprise and ordinary people  -  are currently being forced to sell off or remortgage their assets, or to go deeper and deeper into debt, simply because governments refuse to supply the economy with an adequate supply of publicly-created, debt-free money.

 

At least Mr Parker responded to my letter.  Not so our MP, Alan Campbell.  Yet, when letter after letter in the Guardian complains of the neglect and degeneration of Whitley Bay, while other areas of North Tyneside compete fiercely over a pitifully inadequate budget, surely he must be interested in any proposals which get to the root of the problem.

 

Early Day Motion 390, currently before parliament, attempts to do just this.  It states:

 

“That this House is concerned at the growing difficulties of maintaining the higher levels of public spending on pensions, health, education and all the other public purposes an advanced society requires by taxation and public borrowing; notes that the proportion of publicly-created money in circulation has fallen from 20 per cent of the money supply in 1964 to 3 per cent today; believes that increasing the proportion of publicly-created money can provide a new means of financing public services; further notes that the use of publicly-created money can substantially cut the cost of public investment  by eliminating the need to pay interest; considers that such a policy of using the public credit to finance public purposes can be adapted without any impact on inflation if suitable regulatory changes are made; and therefore urges the Treasury and the Treasury Select Committee to commission independent reviews on how to increase the proportion of publicly-created money in the economy and on the benefits of doing so and report them to this House”.

 

Is Mr Campbell prepared to add his name to the signatories of this Early Day Motion?  If not, what are his objections?

 

 

 Gillian Swanson

 

Why not an adequate money supply instead of sale of assets ?

 

 

August 2005

 

Allotments by Whitley Bay Station

 

What is happening about the bid to sell land adjacent to Whitley Bay station for housing?  Despite a petition signed by a thousand people, Nexus has lost no time serving notice on tenants of allotments on the land in question.  Are they already so confident their application will be granted?

 

The council have no qualms about refusing planning permission for pvc windows overlooking the unfrequented back lanes of private houses, or for dormers or porches they think unsuited to the area.  Surely they can’t be intending to destroy the distinctively quiet and leafy ambience of entire streets by allowing new houses to be crammed in, jostling eye-to-eye with existing properties? 

 

Further development will reduce the value of  the original houses, since the mature trees and bushes currently masking the metro lines add so much to the streets’ attractions.  But it’s not only the property owners who will suffer, if Nexus’s plans go ahead.  Other people, too, enjoy walking along these pleasant streets on a daily basis. 

 

Why should one of the few green oases in this part of Whitley Bay be destroyed, to help Nexus out of its financial difficulties?  Selling off assets to pay the bills brings only temporary relief.  When everything’s been sold off, another solution will have to be found, so why not tackle the basic problem: the fact that there’s simply not enough money to go round.

 

At the moment, more than our entire money “supply” is owed to financial institutions.  People  think, when they take out a bank or building society loan, that they are borrowing money which already exists.  They aren’t.  When you “borrow” £100,000 for a mortgage, for instance, nobody else’s account is debited.  You’re simply giving your bank or building society the opportunity to create this sum out of thin air, and then to treat it as if it were their own.

 

Even if you yourself have managed to avoid all forms of debt, every penny in your bank account originally came into existence because someone, somewhere “borrowed” it  -  and  someone, somewhere, is now busy paying it back.  Why? Because, for some reason beyond the grasp of mere mortals, the government doesn’t want to provide us with a money supply.  Instead, they prefer to rely on businesses and private individuals going deeper and deeper into debt to do this job for them.

 

Because all this debt-money is forever being sucked back out of circulation as loans are repaid, it has to be re-borrowed, along with yet more brand new debt-money, if the economy is to keep going, let alone growing.  If everyone repaid their debts in full, there would be absolutely no money available for the exchange of goods and services. Even if the level of borrowing (euphemistically termed “consumer confidence”) falters, recession looms. 

 

Does this way of running an economy make sense?  No wonder Nexus struggles to survive, when its customers’ disposable incomes are cut, by the need to service their debts, to the point where they can’t afford to pay an economic price for fares!

 

When we used more hard cash in our daily transactions, a far greater proportion of the money supply was created by the government debt-free.  In 1948, for instance, 41% of money in circulation took the form of government-issued notes and coins, never needing to be repaid to some financial institution and then re-borrowed into productive use. By the 1960s, with diminishing use of hard cash, the proportion of debt-free government money had fallen to 20%; and now, with electronic transactions taking over from notes and coins, it constitutes a mere 3% of the total money stock.

 

But there is no reason why governments should not continue to support the economy by issuing the same proportion of debt-free credit in electronic money as it used to make available in notes and coins.  A return even to the 20% of the 1960s would put more money into permanent circulation, easing the burden of debt which is currently bringing businesses and consumers to their knees, and which constantly tempts companies like Nexus to balance the books in any way they can  -  often to their customers’ disadvantage. (What about your demands for more rent, Nexus, which closed down the newsagent’s on Whitley Bay station earlier this year?  Another amenity lost to the public  -  and all for no profit to yourselves, as the shop has now stood empty for the past seven months!  There simply isn’t enough money around to make the higher rent a sensible proposition.)

 

Early Day Motion 390, “Publicly Created Money”, sponsored by Austin Mitchell MP, is currently before the House of Commons.  Perhaps our own MP, Alan Campbell, would be interested in supporting it. 

 

Meanwhile, we can only hope that North Tyneside Council will see sense, and refuse planning permission to Nexus.  Apparently there’s a preservation order on some of the trees on the land being eyed for development; but the usual practice is for the developer to evade the issue by handing over the odd thousand pounds’ fine.  These trees -  for instance, the beautiful old chestnut tree in Waterford Crescent  -  are a public amenity, and should be destroyed only with the consent of those most closely affected  -  ie, the residents of the streets in question, and those who live in the immediate neighbourhood.

 

Many of us fear that, even if the council refuse development for housing, they will allow Nexus to cash in by changing the use of the land to a parking lot.  This would be equally unacceptable to those of us who value the present green and leafy environment of the allotments.

 

It is ridiculous that a man-made commodity like money  -  which can be produced at will, in quantities to correspond with the real wealth that needs to be monetised  -  should be working not to promote but to restrict the exchange of goods and services: not to improve but to reduce the quality of our amenities and environment.  It’s time we made money our servant, instead of our master.  Please, Mr Campbell, make a start by supporting EDM 390, and recommending it to your fellow MPs.

Gillian Swanson