the Root of the Problem?

Unashamedly nicked from James Robertson's website and newsletter at http://www.jamesrobertson.com/newsletter.htm :

The UK Coalition Government's Emergency Budget proposals of 22 June ignored a huge potential source of expenditure saving and public revenue. It has been estimated at £200 billion (click here).

It consists of: the hidden subsidies that we all pay to commercial banks because our governments give them the privilege of creating our national money supply as part of their profit-making business; and the lost money we would be benefiting from if new money was created as public revenue and spent into circulation by the government on purposes that meet public needs.

Political and media reporting and debate about the recent UK budget has been limited to conventional questions: does it strike a proper balance between rich and poor, between tax increases and public spending cuts, and between a Keynesian and a Thatcher/Reagan economic response to our potentially disastrous prospects? Decision-makers and mainstream commentators appear to be totally unaware that monetary reform could change our prospects dramatically for the better by providing a very significant contribution to paying back our huge deficit.

As well as that contribution to our immediate needs, there are other overwhelming arguments for monetary reform. They require no academic economic teaching to understand, just common sense. They include the following.

(1) In a more "normal" context, if the banks are allowed to create over 95% of our money as interest-bearing debt, the only way to maintain a financially sustainable situation is to let them create more money continually, in order that borrowers can pay the interest on the debt already created. That systematically creates inflation, a more indebted society, and a growing gap between rich and poor.

(2) "Normal" situations can't last very long when money is created that way. As profit-making businesses competing with one another, commercial banks are inevitably under pressure to create too much money; that causes recurrent booms which end in busts; in busts the banks will not create enough money to meet society's needs; then they can hold the government to ransom to bail them out with enough taxpayers' money to enable them to lend us what should be our own!

(3) Allowing the banks to decide how almost all the money in society is used on its first entry into circulation, and to be paid interest on it as it circulates until it is repaid,

- distorts the economy in favour of activities profitable to the banks,

- imposes a hidden charge on everyone who uses money, and

- subsidises the banking industry, and so reduces the efficiency of the services it offers.

All these problems could be avoided by transferring to an agency of the state (the Bank of England) the function of:

- creating all the national money debt-free to meet the monetary objectives laid down by the government; and

- giving it to the government as public revenue to be spent into circulation under democratic budgetary procedures.

The present out-of-date, undemocratic way of managing national money supplies is a central part of how the world's money system now operates perversely as a whole, nationally and internationally.

Citizens of other countries also suffer unnecessarily from it, as the G8 and G20 meetings last month in Canada confirmed.