HOW TO REVERSE FINANCIAL TYRANNY: “WE SHALL PREVAIL”
Text presented to the American Monetary Institute 2009 Conference

Richard C. Cook
http://www.globalresearch.ca/index.php?c...;aid=15061

The world’s most important gathering of monetary reformers takes place each year in Chicago at the American Monetary Institute’s annual conference. This year’s event takes place September 24-27 at Roosevelt University . Chairing the conference is Stephen Zarlenga,
AMI director and author of the landmark book “The Lost Science of Money.”

For information and the list of speakers, including monetary economist Michael Hudson, see http://www.monetary.org/2009schedule.html. While personal matters will prevent me from appearing on-site, I have sent the following remarks. Segments of my six-part DVD, “Credit as a Public Utility,” will also be shown.

It is not difficult to come up with methods to solve today’s economic crisis through monetary reform. Many of us are doing it. The key, as I have been writing for the past several years, is to treat credit as a public utility, not the private property of the world’s financial elite.

If we truly adhered to this concept, we would be able to see that a debt-based monetary system, where money only comes into existence through bank lending, can succeed only in isolated circumstances when a growth bubble outpaces the ability of the public to pay interest charges for the privilege of having money to spend and thereby to survive.

Whenever the growth bubble fails, as we have seen over the last three years, the system crashes, the financiers pick up assets for pennies on the dollar, and the cycle starts again. It seems haphazard and unpredictable, but we all know that the system was designed this way and that only the wealthy profit in the long run.

The rich use governments, through which they control politicians, bureaucrats, and covert operatives, to protect and enhance their power. Democracy is subverted. Once the rich have their host country firmly under control, they branch out to the rest of the world. The key then becomes the use of financial power to control the world’s resources through trade and currency manipulation and the management of legal codes and institutional rulemaking.

If social classes within the host country or foreign nations victimized by financial hegemony should happen to rebel, police and military forces are deployed to crush the rebellion. Educational systems and the mass media are employed to brainwash civilian populations by keeping them docile and compliant. A host of methods are employed, including false-flag terrorist events, to instill fear in the population and keep them beholden to the authorities for protection. Because the financial elite are parasites who kill their hosts, they must constantly ensnare new victims.

The foregoing is a complete picture of the present world situation. The last two hundred years have been marked by the march toward world conquest by the money-masters through the Anglo-American military-financial-intelligence colossus, combined with their bought-and-sold allies from the privileged classes of subservient nations.

The outcome was in some doubt during the 1970s in the aftermath of the Vietnam War. But beginning with the Reagan Doctrine in the 1980s, where a decision was made to gobble up the world one small country at a time, the march forward resumed. The 1990-91 Persian Gulf War, the carving up of Yugoslavia later in the 1990s, and the conquest of Iraq and Afghanistan most recently have brought the Western alliance to the borders of Russia . The attack now continues through the Caucasus region, even as Iran and Pakistan are being isolated.

It may be controversial to say that Russia is the target. Why might this be so? It’s because the financial takeover by the West in the 1990s didn’t work. An independent Russia has made a comeback. They have a lot of nuclear weapons and know how to use them. The collapse of the Soviet Union, leaving the U.S. “the world’s only superpower,” created a far more perilous imbalance than most people are aware of. It’s an imbalance that has caused Western military planners—for instance with NATO—to dangerously overreach.

The big question geopolitically is whether China can be induced to stand with the West. This was the objective of the effort beginning around 1971 under President Richard Nixon’s “Opening to China ” to incorporate China into the Western financial system. But today China increasingly seems to be standing alone, with the makings of a self-sufficient banking and industrial complex—and a stable currency—that is defying Western attempts at control.

Will there be an “oriental surprise?” Will China reach a point where it makes an irreversible decision to side with Russia or stand against the West? No one knows. Henry Kissinger wrote in the Washington Post on August 19, 2009, that keeping China as a friend to the West is essential for the “New World Order.” And yes, he used those words—this is not a big secret. The winds of change are also blowing in Japan , where the pro-American ruling party has just been voted out.

Personally, I find this struggle for world domination repugnant—the complete triumph of the rule of materialism and violence. As Rodney King said, “People, I just want to say, you know, can we all get along?” Indeed, why can’t we see that life on earth, as Pope Benedict XVI recently pointed out in his encyclical Caritas In Veritate, is a gift from God to man, a gift that bestows on all of us the duty to treat each other fairly and with compassion?

So, in the face of the current world horror, what chance do monetary reformers have to be heard?

The answer, I believe, is that we are being heard. My mind goes back to 2003, only six years ago, when Stephen Zarlenga came to my office at the U.S. Treasury Department in Washington , D.C. , where I had booked him to give a presentation based on his book, The Lost Science of Money. Later I worked with Steve on his first draft of the American Monetary Act. The time came when Steve began to meet with Congressman Dennis Kucinich, briefing him and others in Washington on monetary ideas.

So much has happened since then. So many more people have become aware of the evils of the debt-based monetary system. We have seen Congressman Ron Paul ignite a national storm of revulsion against the Federal Reserve System. There is now even hope that the American Monetary Act might be introduced on the floor of Congress.

But it is also perfectly obvious that this is only a start. The start, however, has been made, though there’s a long way to go.

We’ve had promising starts before. Back in the latter part of the 19th century, the American public were far more attuned to ideas of monetary reform than at any time since. There was then a Greenback Party that elected members of Congress and ran candidates for president. The Populist Party understood monetary issues and the importance of a flexible and expansive currency. Henry George became the leading author of the day with his reformist ideas based on the principle that the earth was a commons from which all have a right to benefit.

But then, when the international bankers finally succeeded in taking over the country through the passage of the Federal Reserve Act of 1913, the curtain fell. It wasn’t an iron curtain; it was a red velvet curtain, such as graced the windows of the rich financiers of the age who benefited. These financiers started two world wars to consolidate their dominion. They may yet start a third. The Reagan Doctrine may have made it inevitable.

But I do not believe the warmongers will have the last say. Even if they bring down upon us another world catastrophe, those who believe in the better side of humanity will eventually win, because our cause is just and our ideas are based upon truth. Without monetary reform there can never be economic democracy. But with it perhaps the chief cause of war can be eliminated: the unjust distribution of wealth among people and nations, where some get far too much and many get nothing.

I strongly support the American Monetary Act, the movement for a basic income guarantee, and proposals supporting citizens’ dividends such as those of the Social Credit movement or the ones already in place through programs like the Alaska Permanent Fund. Even if such measures are not immediately implemented, the effort to promote them serves the purpose of educating millions of people.

Our present responsibility is getting the word out that there is indeed a far better way to do things and that real change is possible. That money and credit can empower people, not just enslave them. That debt is unnecessary when credit is viewed as a public utility. That technology when properly distributed can free people for higher intellectual and spiritual pursuits, not just eliminate jobs and force millions of people into bankruptcy and starvation. That, as Henry George and his successors have made clear, resources are for everyone, not just a few.

I have come up with my own proposal for immediate relief that I call “The Cook Plan.” One of the worst myths of our time is that for government to spend money it can only collect that money ahead of time through taxes or by borrowing. “The Cook Plan,” instead, would have the government print and distribute vouchers in the amount of $1,000 a month to any adult resident who applied.

The vouchers could be spent on necessities of life such as food, housing, clothing, transportation, or communication. They would then be deposited in a series of community savings banks and used to capitalize low-interest lending to individuals, students, small businesses, and family farms. The backing for the vouchers would be the new economic production they would engender at the grassroots level of every community.

This measure alone would take a giant step toward bringing about a healthy U.S. and world economy at the level of “We the People,” rather than the fruitless and hypocritical attempt to create “recovery” through bank lending and government deficit spending. “The Cook Plan” has met a positive response from around the world during the several months since I proposed it.

My views, while economically sound, have a spiritual basis. I believe in God, and I believe that man was created in the image of God. I believe that a world where we love our neighbor as ourselves and implement this love through social and economic policy is not just a dream, that it is the only practical way to live.

I believe in the family of man and the responsibility of man to be a good steward of the earth and the environment. I believe financial tyranny has done its best to destroy these values. But I see an upsurge of desire and commitment among people for a new day, a truly democratic society, and a life on earth that is organized and conducted sanely, compassionately, and wisely.

Those who attend such events as the American Monetary Institute’s 2009 conference understand all this. Together we will continue to work toward our ideals, no matter what disasters may intervene. It will take time and hard work, but we and those who come after us shall prevail.

THE COMMONS AND INTEGRAL CAPITAL

James Quilligan
http://www.kosmosjournal.org/kjo/about/b...igan.shtml

"The global economic crash is very big news. But what the media headlines and reports do not mention is how deeply this crisis is rooted in our history. During the past several centuries, businesses and government have become enmeshed in a single system. State capitalism now exists in virtually every sovereign nation. These Market States distribute the benefits of a decent quality of life, rule of law and political security to their people—a great advance on pre-modern economies where most land and resources were held in common under fragile political conditions. Yet it is increasingly clear that, as a model for social transformation, the Market State rests on crumbling foundations. Our traditional commons still have much to teach us."

James Bernard Quilligan Bio

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The Commons and Integral Capital (617 KB)


PROFESSIONAL BACKGROUND

James Quilligan has been an analyst and administra­tor in the field of international development since 1975. He has served as policy advisor and writer for many international politicians and leaders, including Pierre Trudeau, François Mitterrand, Edward Heath, Julius Nyerere, Lopez Portillo, Olof Palme, Willy Brandt, and Jimmy Carter.

He has been an economic consultant for government agencies in 26 countries, including the United States. He has also served as an advisor for several United Nations programs and international development organizations.

Quilligan’s articles, under his own name, or as a ghostwriter for others, have appeared in the International Herald Tribune, the Manchester Guardian, the Christian Science Monitor, the Washington Post, Newsweek, Der Spiegel, the Economist, World Press Review, Tikkun, and other books and publications. He is also a musician and composer.

EDUCATION

Quilligan received BA degrees in Philosophy and Literature from Kent State University (1973), an MA in Literature from Michigan State University (1975), an MA in Political Campaign Management from Kent State Uni­versity (1985), and completed all coursework but thesis toward an MA in Communication from the Annen­berg School of Communication, University of Pennsylvania (1987).

THE BRANDT COMMISSION

From 1978 to 1984, Quilligan worked with the Brandt Commission, a distinguished group of world leaders headed by former German Chancellor Willy Brandt. The commission conducted what may have been the most comprehensive ‘state of the world’ report and proposed a series of mea­sures to reduce the vast and unjust economic discrepancies between the developed and developing worlds. Their first report was published in 1980 by MIT Press as North-South: A Program for Survival, and was followed by another report Common Crisis, published in xxxx. A summit of world leaders met on the heels of the Brandt Commission (Cancun, 1981) but failed to implement the recommendations, and now the majority of the world's economies are in what can only be described as “critical condition”.

THE CENTRE FOR GLOBAL NEGOTIATIONS

The resulting chaos has fueled age-old tensions, inspired virulent acts of terrorism, and ignited new wars around the globe. Because it is even more urgently needed now than it was 25 years ago, the Brandt plan has been updated for today's world, and has been re-introduced by James Quilligan as The Brandt Equation: 21st Century Blue­print for the New Global Economy, available in its entirely at <www.Brandt21Forum.info>. From 2002 to the present, Quilligan has presented this information to a wide range of audiences, particularly in he US and Canada.

Due to the vast scope of the work, Quilligan has associated himself with an expanding group of dedicated and skilled co-workers who, in 2004, formed the non-profit, 501©(3) Centre for Global Negotiations. The name derives from Willy Brandt’s conviction that: The aim of ‘global negotiations’ is international consensus. This means that no single problem, energy or debt or food, for example, would be viewed in isolation without considering its direct implications on the full global agenda of interconnected issues.”

THE COMMISSION FOR AFRICA

In xxxx British Prime Minister Tony Blair and activist-musician Bob Geldof launched the Commission for Africa, which included active politicians and Heads of State from around the world. The commission represented a new attempt at implementing Brandt's visionary plan, and Quilligan was asked to serve as an advisor. Their report, Our Common Interest, formed the agenda for discussion at the 2005 G-8 Summit in Scotland and resulted in ………

GLOBAL MARSHALL PLAN

In 2006 Quilligan was asked to serve as the US Coordinator for the European-based Global Marshall Plan Initiative, a group of distinguished leaders in many fields who have been working diligently toward the implementation of an action plan to end international poverty, promote development, restore the environment, create alternative sources of finance, and restructure the international economy in support of sustainable development. Their plan is inspired by the American ‘Marshall Plan’, a widely acclaimed emergency relief and reconstruction program from 1948-51 that reduced poverty significantly and led to economic recovery throughout Western Europe during the postwar period.  

The main focus of the Centre for Global Negotiations and the Global Marshall Plan Initiative during this next period will be helping to organize the Coalition for the Global Commons – an international consultation process that is engaging partners across the world in the development of a common global action plan. The dialogue and feeback process is open to all leaders, experts and the public, creating a wide circle of input for the development of a consultation text. The results of this consultation round will be presented at a conference of internaional  stakeholders in 2010, the Convention on the Global Commons. Quilligan is serving as Policy Development Coordinator of this coalition.


WAXMAN-MARKEY PROPERTY RIGHTS TO THE SKY ?
Part 3 Interview with Economist James Quilligan

Christiana Wyly: Considering your positioning as a global economist working on both environmentally and economically sustainable policy solutions, what do you think of the new Waxman-Markey cap and trade bill?

James Quilligan: There is not space here to examine all the flaws in Waxman-Markey, which can be readily found in commentary elsewhere. To me, the most objectionable thing is that this legislation represents an abiding commitment to neo-liberal economic policies for decades into the future. While the atmosphere currently has no propertied boundaries -- just as our lands and seas and spectrum had no legal boundaries centuries ago -- the Waxman-Markey bill effectively gives corporations long-term property rights to the sky through privately held carbon emissions permits. Once again, another part of our commons -- the air we breathe -- is being parceled into discrete units of economic value for a favored group without returning value to the actual stakeholders of the resource -- all of us.

We The People should not be allowing our government to give away -- totally free -- 85% of these carbon emission permits to corporations which will be used as virtual money and traded like derivatives. After all the financial crimes that have recently come to light on Wall Street, are we now going to let the fate of our planet's climate system rest in the invisible hand of this 'self-regulating' market? That is market ideology gone wild -- enormous windfalls for select businesses and a major erosion of equity and quality of life for everyone else.

It's not just a question of entitlement and social justice, but of our essential relationship with nature. Cap and trade is an epistemological mistake of a very high order: a presumption that the price system and market forces have greater collective intelligence than the biosphere itself. Have we actually forgotten that the air can exist without us, but that we can't exist without air? Human beings are living in world time; we need to start managing the planet by creating a new ontological dynamic among all of Earth's sovereign stakeholders.

Instead of granting carbon emission rights to corporations, government should be assigning the rights of the sky to a commons trust representing all of us. The trust would establish collective governance of the atmosphere, creating a cap on carbon emissions and renting the emissions rights to industries that want to emit carbon dioxide. The revenues from these rents would then go back into the trust and be invested in clean fuel and technology and also dispersed as dividends to the stakeholders of the trust -- which is everyone. This allows the shared responsibility and decision-making of people all over the world to be expressed directly in reversing climate change -- a collective wisdom far greater than that of the marketplace.

CW: The Marketplace and/or the Government I presume? At first glance, your assertion is similar in theory to Peter Barnes' concepts on Cap and Dividend. It seems that if we the global citizens are suffering the consequences of negative externalities such as air, water and soil pollution, that we should also be compensated for the use or depletion of our shared resources. How do we create such a structure in a scalable way? Can you speak more about building this common sector?

JQ: I'm very impressed with Peter Barnes' work, but since it's locale- and nation-specific, it doesn't scale up to the global level, as you say. That's largely because there is no current framework for sponsoring or implementing such measures globally. The United Nations has been working for decades on proposals known as 'alternative multilateral financing for development'. This involves cross-border commons that could be tapped to generate funds for international development and, in my view, could also be a basis for commons depletion and replenishment rents. These potential revenue sources include carbon dioxide pollution, international investment, foreign exchange, global trade, international jet fuel, maritime freight, ocean fishing, wildlife, forests, land, aquifers, surface water, minerals, seabed mining, energy consumption, hydrocarbons and exhaustible resources, satellite parking spaces, electromagnetic spectrum, advertising, patents, copyrights, internet and genetics.

We are recognizing that our shared spaces and resources generate their own value which must be maintained and replenished. And because they are commons goods -- not public or private goods -- responsibility for these cross-border resources must be undertaken through the self-organization and collective action of individuals, civil society and supra-national organizations. As citizens -- regardless of our sovereign obligations or commercial loyalties -- we must speak collectively for our region on matters concerning the welfare of our people when it's clear that threats like climate change, energy insecurity, unpayable debt or mass poverty are profoundly affecting the ability of our commons to sustain our livelihood and well-being.

Unlike the world's public and private sectors, commoners have deep experience in the safekeeping and supervision of these living systems, both locally and transnationally. Individuals across the world could organize trusts to govern the various commons -- for example, a sky trust like Barnes suggests, water trusts or copyright trusts. Commoners would share responsibility for the decision-making and preservation of the designated resource and there would be fair access to that commons for members of the resource community. Credit would remain within each commons area and be non-monetized to the extent possible; that is, people would trade this resource without converting it into money. But other credits for the extraction or use of the resource could also be monetized in the marketplace through rents to the private users or commercial providers of that resource. This would generate revenues which would go back into the replenishment of the commons and also create a dividend for people who are affected by the use or depletion of the particular resource.

CW: But how do we deal with the conflicts of interest -- that on one hand we need to support the economic development of the world's most impoverished communities, and on the other -- we need to protect those very resources -- air, water, soil, forests, oceans -- in order to ensure the long-term survivability of those communities? Is there a road forward for sustainable development?

JQ: The conflicts of interest you mention will continue to intensify until we reconceive and recalibrate the vital links between development, energy, environment and economics on the planet. I do believe there is a robust path to sustainable development, but it's not what mainstream politicians and experts are presently envisioning. Let me explain.

Many people are now acknowledging the need to internalize the external costs of environmental degradation and climate change into the market system by setting a real price on carbon emissions -- whether through cap and trade or a carbon tax. The triple bottom line of 'people, planet, profit' proposes that tackling our social, ecological and energy problems will create a massive stimulus for business and jobs through pollution cleanup, market-driven innovation, efficient use of energy and the development of clean technology. The goal is that as consumers and businesses are forced to adjust their practices and lifestyles by reducing their oil consumption, and businesses find that investing in efficiency or alternative energy is cost-effective, they will absorb most of the new environmental costs through higher prices.

But let's also remember that because oil is priced primarily in dollars across the world and has more direct influence on the value of currency than any other factor; the United States dollar is fundamentally linked to global crude oil as its de facto reserve base. So when it sets interest rates, the US Federal Reserve is actually reacting to relative price stability -- inflation or deflation -- largely caused by the global reserve and flow of petroleum as it affects US and global economic output and growth. Thus, it is the oil-driven engine of productivity in relation to the global oil reserve that the Federal Reserve uses to determine the value of its currency and, by virtue of US dollar hegemony, the world's currencies.

So, let's say we begin today to de-carbonize the global economy by increasing the price of carbon-based energy, reducing our demand for oil, developing alternative fuels and achieving energy efficiency through technological advances. Even if every business and every person in the world were to adopt clean and renewable sources of energy right at this moment, petroleum will remain the most important ingredient of economic growth, and the profit and wage incentives in these 'green' enterprises will still be denominated in dollar values that are linked directly to oil. So that's why I say that our current green stimulus plans are in fundamental conflict with the existing monetary system.

Simply greening all of the world's businesses and our consumer habits through the economic signals of the marketplace will not change the energy base of civilization from fossil fuel to solar or zero-point or other renewable energies as long as the reserve standard of the dominant global currency remains tied to fossil fuels.

CW:That does seem like a gigantic train wreck in the making. What I hear you saying is that we cannot transform our energy base from fossil fuel to alternative energies through market prices and incentives alone -- that there is a deep connection between sustainable development and the value of money?

JQ: Right. Sooner or later, the external costs of global poverty, climate change and geopolitical security must be adjusted not only through global market prices, but also through an adjustment of the world reserve currency system. The day is fast approaching when the US will be forced to negotiate the terms of a new global monetary system with China and other nations, almost certainly ending the currency link with fossil fuels. Then the big question is, what will the new reserve base be? Everyone has a different opinion on this. Here's mine: ultimately, global currency value should be determined by the priority and sustainability of global energy resources as commons reserves -- not by their price in the marketplace based on economic productivity and growth.

After all, the commons -- our environmental, social, cultural, genetic and intellectual resources -- is the stock from which all wealth grows. Because these resources provide the basic support systems of life, neither the market nor the state is sustainable in the long run without them. We know that if we extract resources at a rate beyond the level of their replenishment -- ignoring nature's vital role in producing the food, the water, the oil, gas and minerals, the fibers in our clothing, the materials of our houses and the medicines for our health that are so essential to our lives -- our commons will collapse. At the same time, the government's green stimulus packages are promising that if we just keep on increasing our exponential indebtedness to nature, we will find a way to pay it all back and everything will even out in the end. The lesson that we should be learning from the global financial crisis is that we cannot borrow ourselves into wealth -- including our deficit spending to pay for a Green New Deal.

Don't get me wrong -- I'm completely for greening the planet. But I believe that we can only make this adjustment by valuing our commons in real time -- by realizing the extent to which we are borrowing from the natural world without paying it back. Fundamentally, it's a question of attuning our economic relationships to the collective presence of 6.7 billion people and the carrying capacity of the planet to sustain them. The stock of planetary capital must be shifted to a rate of growth and development that the planetary commons can support. That's the only way we are going to have the perspective needed to make the Great Adjustment from energy dependence to energy intra-dependence, from a fossil fuel civilization to a solar or zero-point energy civilization, from a deficit-based economy to an asset-based system yielding new forms of natural and social equity, and from a world of poverty to a world of prosperity and peace.

CW:Thank You for your time James. Your ideas are thought provoking and your vision is inspiring.

Greening the planet is great. But if in the process we fail to recognize that every human being on earth is just as entitled as we Americans consider ourselves to be to the natural resources of the world, or fail to adjust our systems and structures to that recognition, what have we accomplished?

The most logical way of thinking about this that I've come across draws on the thinking of Henry George, author of "Progress and Poverty" and "Social Problems" (both available online), who recognized that civilizations must adapt their structures to new realities; asserted that we are all equally entitled to nature's bounty; and showed how through a simple remedy we could all have our share.

The alternative is to continue to watch the wealth of the world concentrate in a very few pockets. Colonialism and its modern equivalents are transferring wealth from south to north, and perpetuate a structure which inpoverishes most of the world's people.

Are we created equal, or are some of us more equal than others?

BEYOND CRISIS
http://www.touchstoneblog.org.uk/categor...nd-crisis/

TUC AND GUARDIAN One day conference 16th November 2009

A BANKING SYSTEM WE CAN TRUST
Laurence J. Kotlikoff and Edward Leamer
http://www.forbes.com/2009/04/22/loan-mo...-bank.html

Turn all financial firms into mutual funds.


Before throwing more money at Wall Street, let's understand what our financial system was supposed to deliver, what it did deliver and what price it charged.

The system was supposed to channel our hard-earned savings into the best real investments: new homes, offices, factories, equipment and research. And it was supposed to correctly price our assets.

It did neither. Instead, Wall Street morphed into a vast gambling enterprise, generating massive trades of existing securities without, in fact, raising the investment rate or growing the economy.

During the dot-com bubble, Wall Street funded all manner of silly businesses, and during the housing bubble, it put millions of people in homes they couldn't afford. This "expertise," which cost one-tenth of our output, was delivered by the best and brightest, with half of Harvard's graduating classes becoming high-class croupiers.

As for pricing assets, the stock market's been on a five-decade roller coaster, notwithstanding a relatively stable real economy. The market rose dramatically from 1950 through the mid-1960s. It then spent the next decade and a half falling through the floor. Then it rose like crazy in the late '90s, crashed, soared and crashed again.

We need a financial sector but not one like this. Nor do we need Wall Street hitting us up for its gambling debts. What we need is Limited Purpose Banking (LPB), which would transform all financial corporations, including insurance companies and hedge funds, into mutual funds. They would, henceforth, be called banks.

Under this system, banks would never fail for a simple reason. They'd never hold any financial assets and they'd never borrow except to finance their mutual fund operations. Instead, they'd be limited to their legitimate purpose--financial intermediation. Under LPB, people, not companies, bear risk as their mutual funds do well or poorly.

A new Federal Financial Authority (FFA)--would rate, verify, supervise custody, disclose and clear all securities purchased, held and sold by LPB mutual funds. Private rating companies could stay in business, but no one would need to trust them ever again.

Banks would initiate personal and business loans (including mortgages), send them to the FFA for processing and then sell them to mutual funds, including their own. Loans would activate when sold, so no bank would ever have an open position.

All mutual funds would break the buck with one exception: cash mutual funds. These funds would strictly hold cash and be valued at $1 per share. Owners of these funds would write checks against their balances and never have to worry about a bank run. Fractional reserve banking and the FDIC would be history.

LPB would include insurance mutual funds. These funds would pay off based on the losses experienced by contributors. If losses are larger than expected, less is paid out per loss. Hence, LPB prevents insurance companies from insuring the uninsurable, e.g., claiming they'll pay the same life insurance claims even if there's a plague.

All risk allocation arrangements can be run through mutual funds, including credit default swaps. Take a bank that markets the GE-Defaults-On-Its-Bonds-In-2010 fund. Under this closed-end fund, shareholders specify in advance if they want to get paid off if GE does default on its bonds in 2010 or paid off if GE doesn't default. All money put into the fund, less the mutual fund's fee, would be held in one-year Treasuries and paid out at the end of the year to the winning shareholders in proportion to their holdings.

Hence, Limited Purpose Banking can accommodate credit default swaps (CDS) as well as any other risk product. But what Limited Purpose Banking won't do is leave any bank exposed to CDS risk since people, not banks, would own the CDS mutual funds.

If such mutual funds sound revolutionary, they're not. Funds of this kind have been around for centuries. They go by the name "tontines," or systems of "pari-mutuel betting."

Limited Purpose Banking would enhance liquidity, since all funds would trade in the market even if their underlying assets are illiquid. It would permit the extension of as much credit as the public--which is the ultimate source of credit--wishes to provide by buying mutual funds that purchase household and business loans. And it would force banks to charge fees and pay their employees based on their mutual fund performances as determined by the market.

What LPB will eliminate is insider rating, freeriding on FDIC insurance, self-custody arrangements, no-doc loans, institutionalized gambling, me-now compensation plans, financial malfeasance and the possibility of future financial collapse. In other words, it would be a system we can trust.

Laurence J. Kotlikoff and Edward Leamer are professors of economics at Boston University and UCLA.

ECONOMIC TRANSPARENCY
http://action.gfip.org/p/dia/action/publ...n_KEY=1507

The Task Force on Financial Integrity and Economic Development promotes greater transparency in the global financial system, as a key measure required to alleviate poverty and maximize growth in developing countries. We may be at a rare moment when the interests of rich and poor countries are synonymous. At the heart of the current worldwide economic crisis is a lack of transparency in the global financial system. This is the end product of a half century of creating and expanding a shadow financial structure comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, and fake foundations. Also included in this system are trade mispricing mechanisms, money laundering techniques, and gaps left in national laws that facilitate movement of the proceeds of bribery and theft, criminal activity, and commercial tax evasion across borders.


The consequences of this murky structure and the money it moves are now clear:

In developed countries, credit collapsed in large part due to the difficulty of appraising the quality of assets held by financial institutions that operate partially or wholly within this opaque system. In developing countries, an estimated US$1 trillion a year of illicitly generated money is shifted abroad through this system, constituting the most damaging economic condition hurting the poor, undermining poverty alleviation, delaying sustainable growth, and weakening democracy and the rule of law.

The Task Force on Financial Integrity and Economic Development urges the G20 to focus on substantially improving transparency in the global financial system. Thus far in communiqués, discussions, and commentaries, greater emphasis has been given to strengthening regulation within the existing structure. While regulatory improvements are clearly needed, we believe that such steps alone are incomplete. If “the era of bank secrecy is over,” then more effective progress toward this goal can be accomplished by significantly curtailing the shadow financial system.

Accordingly, we ask that the G20 give careful consideration to the following steps:

Beneficial Ownership Agree that the beneficial ownership, control, and accounts of companies, trusts, and foundations must be readily available on public records, and set a date for achievement of this goal.

Automatic Exchange of Information Agree that automatic exchange of tax information is the end toward which tax information exchange agreements should be directed, and set a date for achievement of this goal.

Trade Pricing Agree that pricing of imports and exports of goods and services by all trading parties should conform to considerably strengthened transfer pricing guidelines, and set a date for achievement of this goal.

Country-by-Country Reporting Agree that multinational corporations and financial institutions should report sales, profits, and taxes paid in all jurisdictions where they are established or active, and set a date for achievement of this goal.

Anti-Money Laundering Agree that predicate offenses for money laundering charges should be harmonized at the most restrictive level and codified, and set a date for achievement of this goal.

These measures will accelerate the movement toward economic transparency in the global financial system, benefiting both developing and developed countries.

The Task Force on Financial Integrity and Economic Development

Raymond W. Baker  Managing Director
Tom Cardamone     Managing Director


The Task Force on Financial Integrity and Economic Development is a consortium of governments, NGOs and foundations. The Task Force is guided by a Coordinating Committee which consists of the following entities: Global Financial Integrity, Christian Aid, Global Witness, Tax Justice Network, Transparency International and the  Secretariat of the Leading Group on Innovative Financing for Development with Government members from Algeria, Bangladesh, Belgium, Benin, Brazil, Burkina Faso, Cambodia, Cameroon, Cape Verde, Central African Republic, Chile, Congo, Cote d’Ivoire, Cyprus, Djibouti, Ethiopia, Finland, France, Gabon, Germany, Great Britain, Guatemala, Guinea, Haiti, India, Italy, Japan, Jordan, Lebanon, Liberia, Luxembourg, Madagascar, Mali, Mauritania, Mauritius, Mexico, Morocco, Mozambique, Namibia, Nicaragua, Niger, Nigeria, Poland, Sao Tome and Principe, Saudi Arabia, Senegal, Sierra Leone, South Africa, South Korea, Spain, Togo, and Uruguay. The Task Force’s Partnership Panel comprising governments and foundations includes the Governments of Norway, Germany, Denmark, France, Spain, Chile, the Ministry of Foreign Affairs of the Netherlands, and the Ford Foundation.

ROBIN HOOD TAX CAMPAIGN

Hoyle, Lindsay

That this House supports the Robin Hood tax campaign which calls for the introduction of a financial transaction tax; notes that by taking an average of 0.05 per cent. from speculative banking transactions, hundreds of billions of pounds could be raised every year to tackle poverty and climate change, at home and abroad; believes that banks, which had a large role in causing the economic crisis, should do more than just pay back the bailouts or insure against future crises; further believes that a Robin Hood tax would be an effective and popular response, with a recent poll finding that 80 per cent. of respondents supported the introduction of a Robin Hood tax; commends the work of all those organisations backing this campaign who have mobilised their supporters to increase the pressure for such change; believes that this tax is an idea that has come of age; and urges the Government to do all possible to ensure that the Robin Hood tax becomes a reality.
Signatures( 58)

Status


Hoyle, Lindsay
Crausby, David
Dobbin, Jim
Meale, Alan
Burgon, Colin
Lloyd, Tony
Russell, Bob
Durkan, Mark
Bottomley, Peter
Prentice, Gordon
Simpson, Alan
Simpson, David
Hopkins, Kelvin
Jones, Lynne
Lazarowicz, Mark
Lepper, David
McCafferty, Chris
McDonnell, John
Murphy, Paul
Owen, Albert
Campbell, Gregory
Campbell, Ronnie
Clelland, David
Cohen, Harry
Corbyn, Jeremy
Cryer, Ann
Dismore, Andrew
Drew, David
Francis, Hywel
Hancock, Mike
Battle, John
Twigg, Derek
Leech, John
Ussher, Kitty
Riordan, Linda
Hunter, Mark
Davies, Dai
Skinner, Dennis
Hoey, Kate
Iddon, Brian
Jackson, Glenda
Jenkins, Brian
Dean, Janet
Walley, Joan
Hemming, John
Slaughter, Andy
Williams, Mark
Dodds, Nigel
Anderson, Janet
Stunell, Andrew
Wyatt, Derek
Pound, Stephen
Murphy, Denis
Caton, Martin
Clwyd, Ann
Cook, Frank
Galloway, George
Borrow, David S

GENERAL ELECTION 2010

Dear All

There are no differences between Clegg, Brown or Cameron - before it was an alternating Duopoly - which might become a 3 way scam - but as Gladstone pointed out and Clegg should be made to remember: "The bank of England from becoming the Bankers bank has become the Government's Government" - THEY will all find themselves "In office but not in power"

James stated:-

I am a little disappointed in the opening statement of Nick Clegg on College Green yesterday:  "We must do something different this time."
It sounds as if you do not know what to do. He does but as a City man with Vince Cable - an Orthodox (Chief British Petroleum) Economist at his side he will only be any good at rearrange Titanic deckchairs - I have visited him at his surgery in Sheffield and found him affable but not prepared to consider anything or do anything which seems unorthodox. I gave him a copy of TORTS - THE OTHER ROAD TO SERFDOM and THE U.S. HOUSE BANKING COMMITTEE REPORT 169 QUESTIONS & ANSWERS ON MONEY.

It also sounds as if 'something different' is more important than, for example, doing something more effective at reducing the deficit than other Parties are proposing. THE DEFICIT MADE ME DO IT HAS ALSO BEEN SENT TO HIM AND THE OTHER LEADERS. PLEASE SEE THE ATTACHED.

It could have been followed by: "We are going to cancel Trident, saving £100B.While ever we insist on only putting money into circulation through 'employment' why cut £100 billion from circulation? Money is not a finite resource which must be taken from one pocket in order to place into another - also improved engineering skills, metallurgy, and other manufacturing jobs are served by such "make-work" arrangements - however, just because you spend billions on arming our selves does not mean that you have to "use them every now and then"  

We will withdraw troops from Iraq and Afghanistan immediately. TO UNDERSTAND WHY WE ARE IN IRAQ AND AFGHANISTAN PLEASE READ - DELUSIONS OF CANDOUR - ABOUT KISSINGER'S WAR FOR OIL POLICY.

We will avoid the cost of another war by distancing the UK from its threatened attack on Iran. WAR IS AN INEVITABLE CONCOMITANT OF DEBT AND INTEREST - STOP THESE AND YOU'LL STOP WARS.

And we will help the UK economy by encouraging recycling and refurbishment rather than paying people to scrap their cars and other items: RECYCLING MUST PLAY A BIGGER PART.

By aiding renewable energy schemes on a serious level (I have plans for this):  ALGAE CAN PROVIDE MASSIVE IMPROVEMENTS OVER EXISTING RENEWABLE FUEL TECHNOLOGIES.

By exporting our expertise to Emerging Countries like India, China, Brazil: WHEN YOU EXPORT EXPERTISE OR ANYTHING ELSE IT MUST ONLY BE AFTER YOU HAVE SATISFIED ALL DOMESTIC REQUIREMENTS - ONLY EXPORT TRUE SURPLUSES FOR WHAT YOU CANNOT PRODUCE FOR YOUR SELVES - DO NOT SELL ON CREDIT - OR PROVIDE 'MONUMENTAL LOANS TO FOREIGN THRONES'.

By stopping immigration and returning illegal immigrants to help those who are here legally to work and contribute to the country without depriving more indigenous people of their share of the economy:  WE HAVE CAUSED THE CONDITIONS IN THESE COUNTRIES BECAUSE OF DEBT BASED LOANS - WE MUST STOP THE ROT. SOMALI PIRATES ARE FISHERMEN WITH NOTHING TO CATCH BECAUSE OF THE HOOVERING UP OF FISH BY INDUSTRIAL TRAWLERS. ALSO THE DUMPING OF TOXIC AND NUCLEAR WASTE IN THEIR COASTAL WATERS - IS NOW CAUSING SERIOUS FOETAL ABNORMALITIES IN LOCAL CHILDREN.

By shifting development from over-heated Regions like the South East to Regions with spare capacity in housing, infrastructure and land. THERE ARE NO SERIOUS SHORTAGES - ONLY A LACK OF WISDOM AND A USURER FRIENDLY SYSTEM THAT IS AT THE HEART OF THE OVERALL PROBLEM.

YOURS SINCERELY
DAVID PIDCOCK

Would that be dfferent enough?

Best wishes
James  B Thring
.


"THE DEVIL DEFICIT MADE ME DO IT"
THE MYTHS ABOUT GOVERNMENT DEBT EXPLODED AND DEBUNKED
by

Harold Chorney
Assoc. Professor of Political Economy
and Public Policy Concordia University,
Montreal

John Hotson
Professor of Economics
University of Waterloo

Mario Seccareccia
Assoc. Professor of Economics
University of Ottawa


CCPA Popular Economics Series
Editor: Ed Finn

Canadian Centre For Policy Alternatives
ISBN 0-88627-118-5

ABOUT THE CENTRE

THE CANADIAN CENTRE FOR POLICY ALTERNATIVES
is an independent, non-profit research organization.  It is one of the few national institutions addressing Canadian public policy issues from a progressive point of view.

The Centre produces researches reports, books and organizes public symposiums and conferences.  Some key topics addressed by this Centre include: social, economics and constitutional policy, free trade, tax reform, industrial and employment policy, labour and human rights, employment equity and technological change.

For more information about the Centre call or write:
Canadian Centre for Policy Alternatives /
Centre canadien de recherché en politiques de rechange
804 – 251 Laurier Avenue West
Ottawa, Ontario K1P 5J6
Tel: (613) 563 – 1341
Fax: (613) 233 – 1458

Acknowledgements

Assistance for research and writing this publication was provided by the Canadian Labour Congress and the National Union of Public and General Employees.  Cover design provided by the Canadian Union of Public Employees.  Translation and printing provided by the Public Service Alliance of Canada.  Charts courtesy of Canadian Dimension.


Note:
In 2010 - Scanned, Re-Set and Re-Issued
by David M Pidcock.
Forum For Stable Currencies –  Robin Hood Cross Party Alliance  

"The Deficit
  Made Me Do It!"

Harold Chorney
John Hotson
Mario Seccareccia

Editor: Ed Finn

ISBN # 0.88627-118.5 May 1992

INTRODUCTION

Governments these days find it easy to defend cuts in services and programs.

All they have to do is point to their annual deficits and their total accumulated debts.

In the case of the federal government, the annual projected deficit is about $30 billion and its net accumulated debt about $420 billion.

This public debt provides the politicians with a convenient excuse for cutting spending or raising taxes or both.

“We're broke,” they tell us plaintively. “We can't afford to increase public services, or even keep them at their present level.”

The same excuse is used to defend a failure to stimulate the economy and create more jobs.

That would sink us even further into debt, they protest. “We can't let the deficit get any larger.”

In their obsession with the monetary deficit, however, the politicians are ignoring the much more serious deficits that we are running up in our human capital and public infrastructure. It will benefit Canadians not at all if the price we pay for getting the financial deficit under control is the decline of our health care, our education, our social programs, and our public sector. These are the "deficits' we really should be concerned about!

The rise of the public debt over the past few decades has not been caused by excessive government spending. It has been caused by excessive interest rates that now siphon off one in every three dollars of our taxes. Spending on social programs has actually gone down in relative terms, as a share of GDP. So if controlling the deficit is necessary, it should be done primarily through interest rate reduction, not by underfunding and slashing the public sector.

Unfortunately, most Canadians either don't realize that the deficit is interest-rate driven, or if they do, believe that interest rates are set by uncontrollable economic and market forces. In any event, they are intimidated by all the dire warnings they hear about the dangers of deficit financing. They accept "the big lie" that governments must get out of debt, even if that means cutting services or raising taxes in the midst of a deep recession.
For too long government monetary policies have been excluded from public scrutiny and debate. The political and bureaucratic "high priests" who set these policies would have us believe they're too .complicated for average Canadians to understand. In fact, they are not at all difficult to grasp, when they're properly explained.

It's time to debunk the myths that have been spread about government indebtedness. It's time to question the politicians feeble excuse that "the deficit made us do it "--or, more commonly, "the deficit won't let us do it.”

This booklet not only demystifies the deficit. It challenges the "logic" of current government priorities. It provides us with facts and figures justifying our demand that governments abandon the economic fallacies of the 19305 and start alleviating the economic misery of the 1990s.

The political and financial "high priests" who set monetary policy would have us believe it's too complicated for average Canadians (Brits and others) to understand.  In fact, the ways that governments collect, borrow and spend money are not at all difficult to grasp, when properly explained.

"THE BIG LIE"

As the deep recession dragged into 1992, Finance Minister Don Mazankowski said he couldn't do anything about it. His hands were tied, he said. The federal government was broke. The cupboard was bare. The deficit and accumulated national debt were so enormous that his first priority had to be to reduce them--even if that meant prolonging the recession and making it even worse.

So his budget contained almost nothing to revive the sick economy. With interest payments on the debt gobbling up one-third of tax revenue, his response was to keep taxes high and axe more public services and agencies.

Like Martin Luther before him, Mazankowski in effect proclaimed: 'Here stand I. I cannot do otherwise."

But it doesn't take an economist to see that in fact he could. All you have- to do is imagine what the government would do if it got involved in another Gulf War--or if that war were still raging. Would Mazankowski
have brought down the same kind of budget? Would he have said, 'We'd like to keep on fighting, but we're broke, so we're calling our troops back"? Not on your life!

Did Canada surrender half way through World War II because the national debt had grown even larger than the Gross Domestic Product? Of course not! Somehow the extra money was found. If it wasn't by raising taxes or borrowing from the private banks, why, the Bank of Canada simply created all the money the government needed-­and at near-zero interest rates, too!

When World War II ended, the national debt relative to the national income was more than twice as large as it is now. But was the country ruined? Did we have to declare national bankruptcy? Far from it! Instead, Canada's economy boomed and the country prospered for most of the post-war period.




Why isn't the same thing happening today? Why was a much larger national debt shrugged off in 1945, while today's much smaller debt (as a percentage of GDP) is being used as an excuse to let the economy stagnate?

The answer can be found at the Bank of Canada. During the war, and for 30 years afterward, the government could borrow what it needed at low rates of interest, because the government’s own bank produced up to half of all the new money. That forced the private banks to keep their interest rates low, too.



When World War II ended, Canada's national debt relative to national Income was twice as high as It Is today. Yet the economy boomed and the country prospered for most of the post-war period



Since the mid – 1970s however; the Bank of Canada, with government consent, has been creating less and, less of the new money while letting the private banks create more and more. Today our bank creates a mere 2% of each year's new money supply, while allowing the private banks to gouge the government--and of course you and me, as well--with outrageously high interest rates. And it is these extortionate interest charges that are the principal cause of the rapid escalation of the national debt. If the federal government were paying interest at the average levels that prevailed from the 1930s to the mid­ 1970s, it would now be running an operating surplus of about $13 billion!

Mazankowski and the Tory government he represents are engaging in a colossal flim-flam. He knows as well as we do that a sovereign government can always find money to do whatever it really wants to do: such as fight a costly war; or dispense billion-dollar handouts to profitable corporations. So what he was really telling us in his budget speech was that his government was willing to spend the money required to save Kuwait, but is not willing to spend the money needed to save the Canadian economy.

The finance minister, of course, would argue that, yes, the additional money could be found to stimulate the economy, but it would be inflationary. Having plunged the country into a deep recession in order to 'wring inflation out of the economy, the Tory government says it doesn’t want to trigger another rise in living costs.

So the war on inflation is another war the government thinks is worth fighting, even after it's won. Even if its continuing anti-inflation measures have the effect of raising taxes and interest rates, while pushing down personal incomes and corporate profits (bank profits excepted. of course), and. throwing hundreds of thousands of  Canadians out of work.

The toll of economic ruin and human deprivation exacted by the federal government and the Bank of Canada will become even more devastating if the counterproductive policies of restraint are pursued much longer.



If the federal government had been paying interest at the levels that prevailed prior to the 1980s, it would now be running an operating surplus of about $13 billion.



THE MYTH OF GOVERNMENT
"OVERSPENDING"


Whenever an economic downturn requires more government spending, the hue and cry over "the deficit" breaks out anew. And this despite the obvious responsibility of the state, in times of low demand and high unemployment, to restore demand and create more jobs. In the process, unavoidably, the government deficit increases because its tax revenue drops during a recession while it must spend more to help the recession's victims.

Such was the situation during the Great Depression of the 19305. Such was the situation in the recession of 1981-82, and now again in the much worse downturn of 1991-92.

The entire history of public indebtedness incurred to finance public activities is linked with the rise in our living standards over the last 100 years. Most of the credit is given to the private enterprise system. Far less appreciated is the fact that society has also benefited enormously from the roads, hospitals, schools, and other public facilities and programs that are provided by government--and which business needs as much as private citizens do.

Nevertheless, the myth priests that the public sector does not contribute to--but rather subtracts from--the overall wealth of the nation. It's a myth that underlies the fierce opposition of most business executives to deficit financing.

Their real objection is not so much to the deficit, per se, but to the expansion of the public sector that deficits permit. Lest there be any doubt about that, simply ask yourself whether the same outcry is raised about the growing reliance on credit (deficit financing by another name) on the part of both business and consumers.

In fact, the explosion of private credit has been far greater than the increase of public debt. Total private sector debt has soared by more than 1496 a year over the past decade, compared with a much more modest growth of 696 annually in total public sector debt. Indeed, the combined debts of about $1,600 billion owed by households, corporations and financial institutions are nearly triple the debts owed by all levels of government!Because of its far more vulnerable nature, this kind of private debt is much more risky and potentially serious than public debt. Still, apart from an occasional murmur about the overextension of credit to companies and individuals, hardly any criticism is heard. Certainly nothing to compare with the torrents of abuse and hysteria about the "evils" of public debt and the "dangers" of growing government deficits.
We are constantly warned by business people and media commentators that government deficits are now .out of control" and have reached historic heights. "I1ds is patently untrue. Measured against either personal income in .the case of the provinces, or the GDP in the case of the federal government, the accumulated public debt is nowhere near the levels it reached during the 1930s or in the immediate post-war period. The current ratio of accumulated federal debt to the GDP, for example is 61%, which is just a little over half the ratio of 110% reached during World War II.



The increase of private credit has been far greater than the increase of public debt. The combined debts of households, corporations and financial Institutions are nearly triple the debts owed by all levels of government.



REPLAYING THE 1930s

The attack against deficit finance is essentially an attack against government, and it has been going on for the last hundred years or more. Literally thousands of artic1es and editorials in the commercial press since the early 1900s have decried government deficits and called for cuts in public services along with balanced budgets.
­
The media have been filled with horror stories about the disastrous consequences of 'uncontrolled government spending.' Ironically this anti-deficit uproar is even more pronoul1ced during economic slumps than during times of prosperity. A review of the business press over the past 75 years makes this point very clearly. The predictable business response to a recession is to call for less, not more government spending. 'That was its response to the Great Depression of the 1930s, and the same corporate chorus of restraint and deficit reduction is being heard today.

Too many business leaders learned nothing from the 1930s. Their ideology remains unchanged. Their stubborn and doctrinaire refusal to consider opposing views make them no better guides to wise economic policy today than they were 60 years agoUnfortunately, it is their strident call for cutbacks and belt-tightening measures that is being heeded again by most governments--even 'though, in tough economic times, it is the worst possible course to follow. It is in fact a lethal prescription for recreating the widespread unemployment and suffering of the 1930s.

(The 11.1 % unemployment rate early in 1992 was not that far below the average 13% rate that prevailed from 1930 to 1939.)

What was so drastically false in the 1930s.is no less false today. It's not the deficit that causes recessions, high interest rates, and unemployment. Rather the converse is true. As unemployment rises, tax revenue declines even as the demand for government aid increases. And of course the higher that interest rates are pushed up, the more government revenue has to be dispensed in interest payments to support the debt.


Business leaders learned nothing from the Great Depression. Their demand for deficit reduction is a lethal prescription for recreating the widespread unemployment and suffering of the 1930s.


EXORBITANT INTEREST RATES


Real long-term and short-term rates of interest, though lower than they were in the 1980s are still far too high, given the decline in the inflation rate.

The unnatural and unjustified levels of these rates are exposed when we compare them with the average rate of real interest over the period from 1933 to 1985--1.4%.

There's a direct correlation between high real interest rates and high unemployment. For example, during the 19305, the long-term real interest rate averaged 5.696, and during the 1980s and early 19905 they've averaged 5.396. Both of those decades were periods of high unemployment. In contrast the real rate of interest during the 1940s was only 1.896, during the 1950s 1.296 and during the 1960s 3.2%. These were all decades of low unemployment. Coincidence? Hardly

When the federal government has to pay interest on its debt of more than 6% in real terms, as compared with the historic level of 1.4% its costs are tremendously inflated and controlling the deficit becomes much more difficult. Indeed, a reduction to the traditional rate of 1.4% would save the federal government $6 billion in debt charges in the first year and $10 billion by the third year.

Thousands of years of sad experience with the concentration of wealth and debt slavery caused all the ancient books of wisdom--including the Bible and the Koran--to condemn the charging of immoderate rates of interest.



But today we have a monetary system where money is a piece of paper or a byte in a computer's memory--a system where the money supply can be increased simply by borrowing it into existence from a bank. In such a system, inflation and the over concentration of wealth can ­only be avoided by charging a low rate of interest.

The conventional wisdom, however, is that inflation is the greatest threat to the economy and must be restrained by raising interest rates. This flies in the face -of the common-sense observation that rising prices (inflation) are caused by rising costs, and that Interest rates are costs. So raising them will raise prices, not lower them.

Also raised by this policy, of course, is the income of the money-lenders, which explains why they subscribe so fervently to the perverse doctrine that high interest rates are somehow anti-inflationary. Certainly the world’s bankers and other money-lenders have gained much from the nonsensical notion that, while giving workers a big raise is inflationary, giving money-lenders a big raise is not.

Many economists rail against "wage push." and it's true that wages have risen by 2,700% over the past 50 years. But in the same period government tax revenue went up by 3,400% and net interest by 26, OOO%! Yet most of the economic textbooks that deplore rising wages don't even mention the tax and interest pushes. And it's not because they are complex ideas-­rather, they are simple and obvious--but because it would be so embarrassing for economists to admit they've made a boner of such magnitude: that their theory of monetary policy violates basic principles of scientific logic.


The bankers have gained much from the nonsensical notion that, while giving workers a raise in pay is inflationary, giving money­ lenders a raise in interest rates is not.


THE CREATION OF, MONEY

One of the most pervasive myths about the government deficit is that governments which spend more than they receive in revenue must borrow the difference, thus increasing the public debt.
In fact a government can choose to create the needed additional money instead of borrowing it from the banks, the public, or foreigners.
Business and the conservatives in politics and the media are horrified by the suggestion that the government exercise its right to create more money. They claim it would precipitate another ruinous bout of inflation.
But money creation is money creation - whether by a private bank or the Bank of Canada; and a government in debt only to the government own bank is not really in debt at all. If it wants to go through the rigmarole of having the Treasure "borrow" from the central bank and, later pay interest that is a minor matter of bookkeeping. As long as the central bank's profits are returned to the Treasury, the results are much the same as if the Treasury had created the money itself.

When the Bank of Canada was brand new back in the 1930s, it produced most of the money supply from 1935 to 1939 and 62% of new money during the last years of World War It This policy gave Canada the highest employment rate it has ever had, very low interest rates, and very low inflation.
After the war years, and up to the mid­1970s, the Bank of Canada traditionally created enough new money to absorb (or "monetize") between 20% and 30% of the federal government deficit. Since the bank's conversion to monetarism in 1975, however, it has steadily reduced its share of the deficit, and therefore the broadly defined money stock. The ratio is now down to 7.5%

There is no reason why the growth of Canada's money supply (averaging about $22billion annually in recent years) could not be more substantially created by the Bank of Canada. If that policy had been followed, the federal government would not have been obliged to add to its debts to pay interest on its old debts. Instead the Bank of Canada has produced barely 2% of the money added in recent years, while the chartered banks added the rest as they made loans to households, businesses and all levels of government.
At the very least, the Bank of Canada and the chartered banks should share the privilege of creating money on a 50-50 basis.
Those who dismiss such a proposal as' "inflationary" should be required to explain why it would be more inflationary for the government's bank to create $11 billion and the private banks $11 billon, rather than the present practice of having the government's bank create $0. 7 billion and the private banks $21.3 billion!
Clearly the current problem of the Canadian government's deficit is not its absolute size, or its size relative to the GDP, but the insane way it is being financed. A return to the policies of the World War II era, when the Bank of Canada produced almost one-half of the new money at near-zero interest would do wonders for the economy while greatly shrinking the deficit.
In light of these facts why do so many people still believe that large deficits cause economics problems, rather than being caused by economic stagnation and inordinately high interest rate? No doubt this widely held misconception reflects the success of the sustained business attack on the deficit, but one would expect by now that many Canadians would begin to question the business community's infallibility.






LOWER INTEREST RATES = LOWER DEFICIT


According to the Mulroney government, there are only two ways to control the deficit. One is to raise taxes, and the other is to cut government spending.
But in fact there is a third way to reduce the interest rate. The Bank of Canada can set the rate of interest at which it lends to the chartered banks at any number it chooses, and it can peg the rate on government bonds, too. This was evident during World War II when it set the rate on Treasury bills at as little as 0.36%, and on longer term bonds at less than 2.5%. And this was at a time when government deficits were as much as 27% of Canada's GDP and the money supply was increasing at a 20% rate each year.
At present the deficit is less than 5% of GDP, and would not even exist at all if the Central Bank had not raised interest rates beyond all reason. In doing so, the Bank forced Ottawa to pay as much as 20.8% on three ­month. Treasury bills when the bank was perfectly capable of creating all the money the government needed at just 0.36%, as it did in the 1940s.
Canada has been compared to a Third World country such as Mexico that must continue to borrow just to make its interest payments. But our federal government finds itself forced to borrow from private Canadian banks and citizens to meet interest payments set at needlessly high rates by another arm of government the Bank of Canada.

This is an outrageously artificial state of affairs. The Third World countries at least face a real obstacle, since the financial terms and conditions for their debts have been set by outside banking institutions such as the International Monetary Fund and the World Bank., over which they have no control. In Canada, on the other hand, the current “crisis” of our federal deficit has been manufactured by none other than the high interest-rate policy of the Bank of Canada.
In its early years, the Bank did a fairly good job of holding down interest rates and serving the public interest. But, over the past few decades, the Bank has become the "wholly controlled subsidiary" of the private banks, rather than their overseer. That is why it now lets the private banks create all but a tiny fraction of the nation's money supply, and let their income from interest grow many times faster than any other form of income.
To illustrate just how inexcusable the misconduct of Bank of Canada officials has been, economist Jan Kregel suggests comparing the Bank with the Coca Cola Company. This is a company run by executives who obviously know what needs to be done to earn a high rate of return for their shareholders. They've got a secret cola formula that guarantees their product will account for at least half of all soft drink sales world wide.



Now imagine a new management taking over Coca Cola. This new bunch gives the secret formula to Pepsi, free. They tell soft drink consumers that Pepsi is better for them, anyway. Then they shut down most of their bottling plants. Not surprisingly, their market share plummets from 50% to 2%.


The size and repayment of Third World countries' debts are determined outside their borders by the International Monetary Fund and the World Bank. In Canada, on the other hand, the size and repayment of our government debts are determined by the Bank of Canada.



This scenario, of course, would never play itself out. Long before the new gang of management wreckers could go this far to destroy Coca Cola, the stockholders would have thrown the rascals out, and probably have them jailed for breach or trust.

A far-fetched analogy? Not at all. We, the citizens of Canada are the “stockholders” of the Bank of Canada, and we should be just as outraged by the Bank's antics in recent years as our hypothetical Coca Cola shareholders would have been. Because the Bank of Canada was set up and for many years operated on our behalf to keep interest rates at a reasonable level. It was an efficient low – cost “money machine” before it was subverted by the inefficient high – cost private banks it was supposed to regulate.

The first order of business for a post Mulroney-era government must be to regain effective control of the Bank of Canada and make it the primary source of money creation.
Deficit as % of Gross Domestic Product








THE "MERCHANTS OF DEBT"

Some of the severest critics of government deficits are themselves “merchants of debt.” Take bankers, for instance. Not only is society perpetually in debt to them, but they are also perpetually in debt to society. Even in the best of times, only some 5% of the assets of a bank are matched by the bank's equity. The rest is debt-financed-money owed to depositors. '

A banker who forecloses on a farmer who can't pay his bills, while the banker is himself insolvent, is in a dubious moral position. How to lessen his guilt? Why, denounce the national debt and he'll feel better.

Never mind that the government has a far better asset-to-liability ratio than the private sector. Never mind that the national debt grows more slowly than other forms of debt except during wars and depressions. Never mind that the only way to prevent depressions when private borrowing dries up is for the government to spend more than taxes are bringing in. Never mind that a banker lecturing the rest of us against debt is like an arsonist warning us against playing with matches, Make a speech demanding that the government stop going into debt to fund public services, and you're sure to be applauded by your business, political and media soul-mates.




Composition of Annual Deficits ($Billions)




85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95



THE "CROWDING OUT" MYTH

Another business - supported myth is that high deficits "crowd out" private investment. There might be a grain of truth in that claim if large-scale gove~ment.borr6wing and spending took place during economic boom times, thus eating up money that private investors might otherwise use to expand production.

Our current debt situation, however, occurs in an environment of large-scale unemployment, low consumer demand, and the underutilization of people and resources. As such, there is no way that government indebtedness or spending can displace private initiatives, because such initiatives are not being taken. Rather, the wise infusion of government funds in such hard times can stimulate economic activity and benefit both the unemployed and the private sector.

Closely tied to this fallacy is another one – that deficits damage the economy by reducing national savings. But there is no evidence to support that allegation, either. On the contrary, past experience points in the opposite direction.






Large deficits in the 1980s were accompanied by high rates of savings, while small deficits (and even surpluses) in the 1960s were accompanied by low rates of savings. Even though the current savings rate of 10% is down from a high of 18% reached in the early 1980s, it is still at a comparatively high level, even with the deficit.

Nor is Canada's savings rate unreasonably low by international standards. Over a recent seven ­year period, the net savings rate by households in Canada was 9.7% of net national income, compared with 6.296 in the U. S., 4.5% in Britain, and 8.9% in Germany.

Savings of course, have a worthwhile social function. They permit households to invest in consumer durables and housing, and thus boost the economy and create jobs. However, savings that are not invested for this purpose - such as those in bank deposits - are going to waste. They're unproductive.


A banker lecturing a government about debt is like an arsonist warning us against playing with matches.


Any country in which unemployment rises as high as it is now in Canada is trying to save too much through the acquisition of financial assets. It is trying to save more than investors and other spenders are willing to spend in order to achieve full employment.  In such circumstances, there is only one way that the economy can be stimulated so that the needed additional jobs are opened up Governments must step in and fill the spending vacuum.


A private debt that generates future wealth is considered justifiable.  So should a public debt that is incurred to create jobs.


PUBLIC DEBT, PRIVATE DEBT:
THE DIFFERENCE

One of the most enduring deficit myths is that there is no difference between private debt and public debt, or the "burdens" they impose. In fact, the two forms of indebtedness are entirely different.

In the case of an individual or a company, for example, the debt is owed to outsiders and therefore can legitimately be considered a burden, since it must be repaid out of future income. Default can lead to bankruptcy.

In the case of Canada as a country, on the other hand, most of the debt incurred is not owed to outsiders, but to its own citizens and financial institutions, who consider the government's debt an asset. Furthermore, unlike an individual or a company, a country like Canada just doesn't go bankrupt.




The other often-overlooked aspect of government debt is that its "burden" is largely offset by the government's own assets. Debts secured by assets are investments in the future wealth of the economy. Our network of highways, transit systems, hospitals, ports, airports, power plants, universities, schools, public buildings, Crown lands and natural resources all represent enormous wealth-producing assets. Yet the government's public accounts value these assets at the nominal value of $1.00. Clearly this is absurd - just as absurd as the often heard claim that “the government is broke.”

If households or corporations kept their accounts like that, it would mean that people could never borrow to buy a home, or companies borrow to invest in new plant and equipment.

Did you ever hear of a corporation that doesn't have large outstanding debts? Of course not. It makes no sense not to borrow if you are making capital investments. If the federal government followed the sound accounting practices that business firms and households do, it would only deduct each year's depreciation charges, not the full amount of new capital spending.

The only sense in which private debt and public debt are comparable is that in both cases the future cost of debt repayment can be measured against the future stream of benefits.

A private debt that generates future wealth is considered justifiable. But so is a public debt that is incurred to create jobs. If the debt is not incurred, a government's future income will be lowered by the extent to which it is necessary to meet the needs of those left jobless by the lack of social capital investments.

Every road, school, hospital or airport that is neglected today simply guarantees a more expensive burden for the future.

Critics of the deficit often bemoan the "legacy of public debt" that we are bequeathing to future generations. Those future generations, however, will be much worse off if, instead of a deficit, we leave them a country plagued by ill-health, poverty, joblessness, decrepit schools, and a crumbling infrastructure. A balanced budget will not be viewed as an adequate substitute for social and economic security.




Critics of the deficit say it’s unfair to pass our debts on to future generations. Those future generations, however, will be much worse off if instead of a deficit, we bequeathe them a country plagued by ill-health, poverty, joblessness, poor education, and crumbling highways.






HOW BIG IS THE DEFICIT, REALLY?

The size of the federal deficit is grossly exaggerated by the failure to make the necessary adjustments for inflation, for “double counting” and for the normal ebb and flow of the business cycle. If the deficit or even the accumulated federal debt of $420 billion--were properly accounted for, it would be considerably smaller.  Our concern should be with the real debt--that is, the debt adjusted for inflation.

It stands to reason that the deficit should be reduced by the annual rate of inflation, since the repayment in each succeeding year is mad~ in deflated dollars.

The deficit should also be reduced by separating from it all the debt held by the Bank of. Canada and other federal government bodies ($23 billion), as well as the debt held by provincial governments and municipalities ($22 billion). It makes no sense to count as a burden interest payments made to other branches of the Crown. .

Adjusting the deficit to the business cycle reflects the inevitable drop in government tax revenue that is caused by a recession, its consequent rise in unemployment, and the need for more government spending for social assistance.

It is misleading to judge the size of the deficit without taking these factors into account. Some economists say that, if these adjustments were all made, as they should be, the real deficit would be down from $31 billion to less than $ 10 billion. And the remaining deficit could be converted into a sizeable surplus if the many tax concessions and handouts to profitable companies and wealthy individuals were eliminated, and interest rates brought down to a reasonable level.


Attempts to revive the private sector by savaging the public sector are equivalent to the ancient medical practice of bleeding to "cure" the patient.




"RESTORING CONFIDENCE"

The federal government tries to defend its spending restraints during a recession by arguing that deficit reduction is necessary to 'restore business confidence" in the economy.

The premises of such a policy are that (a) only by restoring business confidence can the economy be revitalized; and (b) any cuts in public services or employees that flow from such spending restraints would be good for the private sector.

These two assumptions are myths.

Let's concede that business confidence is important. No one denies that. But consumer confidence is equally important. It would be futile for business to produce more unless consumers were willing .to buy more, no matter how “confident” business might become as the result of a lower deficit.

Public sector cutbacks do not build consumer confidence. They may appease the government's business supporters, but they make average citizens and workers very uneasy--particularly if they involve the layoff of public employees.

In our mixed capitalist economy, the public sector employs up to 25% of the work force. Government restraint that leads to job losses in schools, hospitals, municipalities, and other public institutions are rapidly spread through the whole economy, causing a multiplier-effect loss of private sector jobs. Thus, for every increase in business confidence that may follow public sector­ cutbacks, there will be an equal or greater offsetting loss of consumer confidence.

Moreover, because of the interdependence of the public and private sectors in Canada, cuts in one inevitably spill over into the other, both through direct job loss and reduced spending. Attempts to revive the private sector by savaging the public sector are equivalent to the medieval practice of bleeding to "cure" the patient.

Business people don't seem to realize that income support programs such as pensions, unemployment insurance, and social assistance are essential to sustain a strong demand for private sector goods and services. In opposing such government programs, they help to bring about the very decline in their own profits which they so piteously lament.


Restoring business confidence in the economy is important. But it would be futile for business to produce more unless consumers were willing and able to buy more no matter how “confident” business might become as the result of a lower deficit.



BIG BUSINESS - BIG BROTHER

The only "reason" left for us to be concerned about the deficit is because most of the big corporations want us to be concerned about it. By deluding us that the deficit is a serious problem, they legitimize their broader attack on the public sector and public services--which are their real targets.

Instead of-attacking the role of government head on, the neoconservative leadership of the business community seeks to reduce the role of government and slash social programs by convincing us that otherwise the deficit will soar out of control and the sky will fall.

(In the United States, incidentally, David Stockwell and other officials with the Reagan administration now openly admit that, at the behest of their corporate friends, they deliberately increased the deficit so that it would justify later cuts in social program funding!)

The case for spending cuts rests on the dubious claim that Canada can no longer afford to retrain its workers, to relieve poverty, to improve education, to keep its people healthy, to protect the environment, or maintain its public infrastructure.

Yet, for want of such government spending, children go hungry, students drop out of school, workers lack needed skills, people without jobs turn to crime, pollution poisons our air and water, and congestion chokes our cities.

The deficit in public spending the failure to invest in social capital--will in the long run be much more serious and impose a much greater burden on our children and grandchildren than will the federal deficit that politicians and executives so shrilly denounce.  Indeed, it will not only degrade the quality of life for millions of Canadians, but it will have a crippling effect on Canada's productivity and competitiveness.

Productivity, we're continually reminded by business after-dinner speakers, depends on growth in capital per worker. But three kinds of capital are needed to ensure that workers are productive: private capital, such as factories and machines; human capital, such as education and training; and public capital, such as roads, airports, schools, and other parts of the infrastructure.

Human and public capital--which business tends to overlook--are surely just as important as private capital. In fact, in a global economy, where private capital transcends national boundaries, there are only two competitive advantages any country can give itself--a highly skilled work force, and an efficient public infrastructure.

The case for spending cuts rests on the dubious claim that Canada can no longer afford to keep its people healthy: well-educated, and gainfully employed.


FACT: OUR PUBLIC SPENDING IS TOO LOW!

Why all the panic about government spending in Canada, anyway? By international standards, our public spending is quite modest--and our spending on social programs disgracefully inadequate.

According to the latest available data, Canada's social spending accounted for 21.5% of GDP. This compares with a 25.6% average for the major industrialized nations, and with a 30% average among the countries of the European Community.

At its present downward slide, social spending in Canada will fall even further to just 17.3% of GDP by the year 2000. That would be the second lowest among the Group of Seven countries, only marginally above the projected U.S. level of 16.4%.
By contrast, France and Germany are predicted to be spending nearly twice that percentage on their public facilities and social programs by the end of the decade.

Canada's inadequate social spending is reflected in its poverty rate, which is among the worst among the Western nations. While 12% of Canadians are officially poor, the rate in Germany, Sweden, Norway and most other European countries is less than 6%.

The most shameful figure, of course, is that over half of Canadian children in one-parent - families live in poverty--which is from three to five times more than the comparable rates in Europe.



In the new global economy, there are only two competitive advantages any country can give itself – a highly skilled work force and an efficient Infrastructure.




HOW TO LOWER THE DEFICIT

No one denies that the deficit and the level of public indebtedness is a cause for concern. What has to be clearly understood, however, is that it's a problem caused mainly by unjustifiably h1~hinterest rates.

To illustrate the key role of interest rates, all we have to do is compare the effects of borrowing $1 million at 2% and borrowing the same amount at 10%. At 2% it would take 36 years of compound interest for the $1 million to double to $2 million. But at 10% interest, the same loan would generate a $1 million return in just seven years! And in 36 years it would double and redouble five times to $32 million!

The folly of the federal government's current high-interest rate policy may be grasped by calculating what the deficit would be like today if interest rates had been held to just a few points above the, Cost of Living Index, which was its historic level before the Bank of Canada launched its “holy war” against inflation. This year's deficit would not only be completely eliminated, but the government would actually have a $13 billion surplus!

It is ludicrous for the government to put billions of dollars into circulation by borrowing from the private banks, when it can create the extra money it needs, virtually free.

We have to keep in mind that our monetary economy only grows when the money supply grows. Under the present debt-driven system, the only way we can increase the money supply is by borrowing it into existence from the private banks, thereby increasing our indebtedness to, them.

It can't be stressed too much that the private banks, unlike non-bank lenders, create the money they lend.  They do not--as is so widely imagined, even by the bankers themselves--lend their depositors' money. The amount of new money created by a bank loan, however, is only sufficient to pay back the principal. No money is created to pay the interest, except that which is paid to the holders of bank deposits. That's why debts must continually grow faster and faster in order for each layer of additional debt and interest to be paid. Indeed, the higher the rate of interest, the faster the money supply must grow if the economy is not to stall. If the system ever stops growing, or even drastically slows down, it crashes.


The latest available data show that spending on social services in Canada accounts for 21.5% of our GOP. This compares with a 25.6% average for the major industrialized nations, and a 30% average among the countries of the European Community.


If that strikes you as a very dumb and dangerous way to operate a monetary system, you're right. C1early it would be much safer and more sensible to have at least a large amount of the needed new money spent into circulation debt free by the federal government--or lent by it interest free to, the junior levels of government which lack the power to create money.

Reform of the monetary system is therefore the key to controlling the deficit and lowering the public debt. It would also help to increase government revenue.
Can this be done without adding to the tax burden on low- and middle­ income Canadians?  Certainly! We have an extremely inequitable tax system that allows the wealthiest individuals and business firms to escape paying their fair share of taxes. A truly fair tax system would correct this inequity. It would add billions to the government's coffers without penalizing Canadian workers.

A wealth tax, for example, would net the federal government $3 billion a year. Repealing the capital gains; tax deductions would bring in another $3 billion.

Repealing the 5% tax credit to manufacturing rums, the fast write-offs of capital investments, the tax subsidies for real estate developers, the subsidies for business me entertainment, the subsidy for business lobbying and advertising--these would yield a combined $ 7 billion to the federal Treasury.

The kind of fair tax system created by these and other reforms would not only make profitable corporations and the rich pay taxes on the same basis as the rest of us. It would also help immensely to get rid of the public debt that corporations and the rich are always complaining about!

A truly fair tax system would not only make the rich pay their fair share of taxes; It would also help immensely to get rid of the public debt the rich are always complaining about.


Re-Issued in 2010
By David M Pidcock
The Institute For Rational Economics
Forum For Stable Currencies
National Association For Victims of Fraud & Banking Malpractice

Robin Hood Tax and Cross Party Alliance Candidate                                             SHEFFIELD CENTRAL  

CALL FOR A ROYAL COMMISSION OF ENQUIRY INTO THE ECONOMY


Herewith the text of the letter to the Times, published July 8 2010

Sir,

The turmoil in the City and in world financial markets continues and we have yet to understand its full cost. This is already recognised as the profoundest crisis at least since 1929; but how did we get to this point?

At the time of the 1929 crisis, the government set up the Macmillan committee to investigate the relationship between finance and industry. In 1957 - prompted by letters to The Times - the Radcliffe committee was set up to look at the postwar monetary system. And in 1977, after the secondary banking crisis, the Wilson committee was asked to investigate the functioning of financial institutions. These committees had wide remits that looked across the entire UK financial system.

Since the Wilson committee there have been fundamental changes to that system, from deregulation and the independence of the Bank of England to global speculation of dizzying scale and complexity.

The Wilson committee observed that there seems to be an inquiry into the financial system “about every quarter century”. A new inquiry into the fundamentals of the entire system is long overdue and urgently needed, if we are to order our financial affairs sustainably for the long term.

This inquiry needs to be much broader and deeper than recent Treasury Committee inquiries and the forthcoming Independent Commission on Banking. It would best assure public confidence if a Royal Commission, of wide remit and prestigious membership, were to be charged with this task. We therefore call upon the Government to set up a Royal Commission of inquiry into the workings of the entire economic system.

Colin Dexter, OBE, Author and educationalist

Lord Phillips of Sudbury

Lord Harries of Pentregarth

Jonathon Porritt, Author and broadcaster

John Christensen, Director, Tax Justice Network

The Right Rev Dr Peter Selby

Dr Manazir Ahsan, Director General, Islamic Foundation

Anil Bhanot, Hindu Council UK

Rabbi Jeffrey Newman, Director, Earth Charter UK

Bert Schouwenburg, International Officer, GMB Trade Union

Carlos Ruiz, Emeritus Professor of Engineering Science, University of Oxford

Professor Timothy Gorringe

Chris Brown, Former President, National Association of Estate Agents

David M Triggs, Executive Chairman, the Henry George Foundation of Great Britain

Miles Litvinoff, Co-ordinator, The Ecumenical Council for Corporate Responsibility

The Rev Paul Nicholson, Chair, Zacchaeus 2000 Trust

The Rev Canon Lucy Winkett, St Paul’s Cathedral

Canon Giles Fraser, St Paul’s Cathedral

Sacha Adams Stone, Chairman - Humanitad Foundation

Diana Basterfield, Co-Founder, Ministry for Peace

NO INTEREST IN A FAIRER SOCIETY

Calvin was an inspiration to generations of Scots churchmen...and bankers

Moeen Yaseen
http://www.heraldscotland.com/business/m...-1.1043417

Faced with global economic turmoil, one of the worst recessions since the Second World War, and the resurgence of the right, we seem to be witnessing an action replay of events in the 1920s and 1930s.

Faith in conventional economics and economists has failed us. We are asked to support bail-outs for those who caused the problem, and austerity measures for everyone else.

At an event in the House of Lords last week, Global Vision, the Islamic financial think tank, proposed in the face of this global economic instability that our immediate priorities should be debt cancellation and an end to the 200-year-old practice of fractional reserve banking. This is the system by which banks keep only a fraction of their deposits as cash and other highly liquid assets, and lend out the remainder. They do this while maintaining the simultaneous obligation to redeem all these deposits upon demand.

The practice has led the world into its present debt crisis because it allows the commercial banking system to create money from nothing.

A continued financialisation of the economy will produce more bubbles and crises in the future, any one of which may have even more severe consequences than the present one. In its place, we need to promote a holistic, sustainable, green and socially productive economy. One in which the focus is on meeting the needs of all rather than the wants of a few, and in which the various types of financial deception that we have witnessed in recent years are criminalised.

Today, Islam is the last bastion of opposition to the interest-based fractional reserve banking system. Moeen Yaseen
For the roots of the present crisis we need to go all the way back to the Reformation when canon law on usury was subjected to revolutionary review. The protestant reformer Martin Luther sanctioned the charging of interest as a penalty for a delay in repaying a loan beyond the agreed repayment date, so long as the charge fairly reflected the injury caused by that delay.

But it was Luther’s successor Calvin, inspiration to generations of Scots churchmen, who was responsible for unleashing the immorality that we see in the world today. For Calvin, taking interest on capital was no different to taking rent on land. In a famous letter, he denied that a payment for the use of money is inherently sinful, portraying its prohibition as merely a reflection of attitudes prevalent in Old Testament times. Yet even Calvin qualified his position by arguing that usurious rates should not be inflicted on the poor or needy.

With these theological impediments removed, later economists including Petty, Locke, Turgot and Bentham further attacked the anti-usury lobby. In the process, I believe that they undermined the moral authority of the Christian church itself. Meanwhile, the taking of interest on the great sums of wealth traded by merchants became commonplace through the discounting of bills of exchange.

Today, Islam is the last bastion of opposition to the interest-based fractional reserve banking system.

In Islam, wealth is given as a trust from God and must be used to help others, not to exploit them.One of the injustices of the interest-based system is that it pits the money-lender against the entrepreneur, by allowing the one to receive guaranteed ­interest payments while the other suffers most of the risks of business failure. It also biases the game towards those who are already rich, as they are the ones who have got the most ­collateral to offer as security for a bank loan.

It must be said that the Scots themselves bear some responsibility for how things have transpired.

It was Dumfriesshire-born William Paterson who, in 1694, formed a private joint-stock company called the “Bank Of England” to provide a loan of £1.2 million to the Crown. In return, King William, the ultimate “banker’s man”, granted the bank a charter allowing it to practice the deceptive art of money creation in the capital. Although taxes were to be levied in order to assist with the repayment of the government’s borrowings, we have lived with a national debt ever since. By 2009, the original loan of £1.2m had ballooned to almost £800 billion, with an annual tribute in interest payments exceeding the entire Scottish budget.

It is incredible, but true, that the entire UK national debt could be redeemed in a single day through the issue of new money by the Bank of England. This would be quantitative easing with a difference, the creation of money not for new lending but for debt repayment.

This would be money that the government had “prudently created” rather than “imprudently borrowed”. By this measure, the pressure to raise taxes and balance the national budget would immediately be resolved. With appropriate regulatory changes to the fractional reserve banking system, the resulting stimulus to the economy would result not in inflation but in a return to employment and infrastructure improvements for millions of people.

It is surely time for all political parties to follow the correct Scottish version of the Lord’s prayer, “Forgive us our debts as we forgive our debtors” and to understand that the solution to our indebtedness is as simple as the monetary deception that got us into it.

Moeen Yaseen is managing director of Global Vision 2000, an independent international Islamic think tank



SEE  ALSO YOUTUBE
THE RISE AND FALL OF CIVILISATION: PERSPECTIVES OF MORAL POLITICAL ECONOMY

http://www.google.co.uk/search?hl=en&...p;gs_rfai=