|ECONOMIC DEMOCRACY FOR THE PEOPLE
This article by Alistair McConnachie was first published in the June 2002 issue of Sovereignty. For more information on this subject see Alistair McConnachie's site Prosperity: Freedom from Debt Slavery.
Right: Alistair with Money Reform colleague Dr Mohammed Naseem, Chairman of Birmingham Central Mosque, the largest Mosque outside London.
On the 26 June 2002, long-standing euro-sceptic MP Austin Mitchell presented an important and timely Early Day Motion for the consideration of the House of Commons.
The topic - the decline in debt-free money directly issued by the government - has wider implications for the Single Currency debate. For example, while we realise that political sovereignty requires economic sovereignty, many of us have yet to consider the extent to which our present structure already concentrates power in the hands of the banking system, and inhibits our government from delivering the services we require.
The essence of his Motion is that cash - notes and coins - now represents a steadily declining proportion of the money supply. Only about 3% of money in circulation is physical cash. This is relevant because the cash-issue is minted by the State, sold to the banking system at face value, and the payment received credited to the public purse. It is, in effect, a debt-free input - traditionally termed 'seigniorage' - to the public purse.
The other 97% of money enters society as a debt owed to the banking system, whether via national, personal, company or international debt. Most personal debts today are bound up in mortgages, a word which translates literally as death grip.
Enabling government - or more properly a democratically appointed and accountable State authority - to create money on behalf of the People, debt-free, without recourse to the largely private banking system, is an essential, albeit neglected, fundamental aspect of national sovereignty.
True sovereignty requires economic democracy for the People.
Austin Mitchell's Early Day Motion starts a welcome and much
needed debate on this most essential issue:
Sovereignty proposed exactly this method in the March 2002 Sovereignty Special Report, when we asked "Where's the Money to Come From?" to build our agricultural industry, and other national necessities.
According to The House of Commons Public Information Office Factsheet on Early Day Motions, an "Early Day Motion" is the "colloquial term for a notice of motion given by a Member for which no date has been fixed for debate" and where "in the vast majority of cases, there is absolutely no prospect of these motions ever being debated. Their modern existence is due to Members wishing to put on record their opinion on a subject and canvass support for it from fellow Members. They do this by inviting, actively or passively, other members to endorse the proposed motion."
Even if 250-300 Members might endorse it, "the lack of prospect of the motion being debated remains much the same."
You can track the MPs who sign by checking http://edm.ais.co.uk/weblink/html/motion.html/ref=1515
CAPTAIN HENRY KERBY MP
That the nationalization of the Bank of England did nothing to solve this problem as the bank only serves a subsidiary purpose and almost all money is still created out of nothing by mere book entry by private banks:
That the aims of those who want to assure private property and free enterprise, as well as those who want to protect the British people from unfair exploitation, would both be best served by restoring the power of issuing money to Her Majesty The Queen, in accordance with ancient tradition and law, as is also demanded by the American Constitution, which gives the right of issue solely to Congress, so as to assure the State and Nation the benefits of that emission and relieve them of the immense and growing burdens of a parasitical National and private debt; and to make certain that control passes to the taxed and is taken out of the hands of the present hidden and unlawful beneficiaries of taxation, much of the proceeds of which they collect as interest on all money and immense debts:
And therefore this House calls upon Her Majesty's Government to introduce the required legislation, to assert the proper sovereignty of The Queen in Council in this most important of all sovereign functions, to assure unprecedented prosperity with true sovereignty and liberty.
His additional comments were published in full in the October 2001 issue of Prosperity. See the article at http://www.ProsperityUK.com/prosperity/articles/kerby.html
DEBT REPAYMENTS GREATER THAN EDUCATION BUDGET
However, so long as government money is only available in the present debt-financed manner, then all he can hope to do is limit the rate of growth of the National Debt. It's always going to grow, and swallow up more and more taxes.
He sought to justify his position by saying, "You go straight in the door, and they hand you a piece of paper that tells you what the economic facts are." Here we have the democratically elected Prime Minister admitting that he is restrained in such vital decisions by what "they" tell him!
Our task is to find a way to repay the existing National Debt and fund new public spending, without having to borrow from the private banking system, and without raising taxes.
THE ANSWER IS GOVERNMENT CREATED DEBT-FREE MONEY
He also stated, shortly before he left the Labour Party for New Zealand, in the New Statesman of 19 February 1993: "Why shouldn't a socially aware and economically responsible government create credit where it is appropriate ... in order to ensure investment is made and at the same time strike a great blow for the democratic control of the economy?"
HOW IT WOULD WORK
"Government created credit, like the coins and notes they issue, would be created as a debt-free input into the economy, spent into circulation via public services, and contribute to a stable, circulating money stock.
"The monetary reformers have history on their side. In the 1950s and 1960s, the money stock consisted of about 75% bank created money and 25% cash currency, created debt-free. Inflation was lower, growth more stable and debts markedly smaller in comparison to average incomes, and related to GDP.
"Why should the declining use of cash mean that the difference is made up by bank created money and the debt it entails? Just because the economy needs less cash doesn't mean it needs more debt.
"This question was raised by Lord Sudeley in the House of Lords in May 1998. He asked whether the government intended to take any measure to compensate for the loss of debt-free money caused by the declining use of cash. The official reply, contained in a statement of masterly evasion and opacity, was 'No'.
"The government issuance of money has always been dismissed as inflationary. But this need not be the case. If sensible restrictions were placed on banks and building societies, the government-issued money supply would be compensated for by curtailing the production of new bank lending. For instance, there could be a limit, and gradual reduction, in the number of times a person is allowed to multiply their annual income as the basis of a mortgage. Since house mortgages support over 60% of the money stock, this could make a dramatic contribution to preventing monetary inflation as well as putting a break on the relentless rise in house prices, which benefits no-one. It would also mean that, over the years, house buying would became a competition based on money people have got, rather than at present, money they haven't got.
"An entirely new economic agenda is possible, and radically different fiscal conditions would prevail in an economy based on solvency rather than debt.
"Although this offers a range of government and commercial policy options that amount almost to an economic revolution, it is a reform that can be undertaken gradually, building up the liquidity in an economy and monitoring the effects over a number of years, effectively reversing the recent drift towards ever greater debt."
AT WHAT RATE SHOULD IT BE DONE?
By creating debt-free money at the rate at which the M4 lending counterpart is increasing, the growth in debt would be matched by an input of debt-free money. Thus, the increase in debt would be countered and future repayments of this borrowing supported.
The UK M4 lending counterpart is increasing by approximately 10% annually and rose by £60 billion from February 1996 to February 1997. The government, through its state authority, would create a fund of £60 billion of debt-free money. A fund of £60 billion is enough to fund major improvements in public services, among other things!
As each year goes by, government created debt-free money is distributed and circulates in society in proportion to the M4 lending counterpart. Eventually the M4 lending counterpart will decrease, as the need for government borrowing decreases.
In time, levels of private indebtedness will also decrease since private indebtedness is often a function of national indebtedness.
However, our first priority is to get the economists and the politicians accepting that this is a feasible and proper policy option, rather than arguing over the technicalities. Once this becomes a widespread topic of economic and political debate, then the appropriate means will be easily determined.
A WINNING POLICY
"We propose that the government - via a democratically accountable authority - undertakes the creation of a supply of money, debt-free, into the economy.
"This authority should spend, not lend, a supply of money into circulation on the basis of proven need. This will reduce the overall burden of debt in society, break reliance upon the banking system for the supply of money, and open potential for limitless change."
Once we get the principle popularly established that the government, via a State institution, can and should create money, then we are on the road to a democratic economic system.
All it takes is a political party to realise it can reduce the
National Debt, increase funding on public services, and lower taxes -
all at the same time. If that's not a winning policy, what