[R-G] [BillTottenWeblog] Publicly-Created Money:

[Bill Totten]

The Democratic Imperactive

by Alistair McConnachie

Prosperity (June 2003)


Prosperity was established to help publicise and clarify the Money
Reform proposal.

Our big issue is publicly-created debt-free money.

Few people are aware that almost all the money we use comes into
existence, not by governments creating it, but as a result of a bank
making a loan at interest.

Even the government must borrow this money from the private banking system!

We say: If banks can create money out of nothing, and expect people to
pay the money back, then governments could do the same, but not need to
ask for it back.

Our priority is to generate demand for the government, not the banking
system, to create a supply of money debt-free, and to spend it, not lend
it, into society on the basis of proven need.

A regular debt-free supply of money into the economy which was spent,
not lent, by the government on specific projects, would have the effect,
over time, of supplying the economy with a stable means of exchange,
rather than the unstable, debt-based means of exchange we have at present.


There is a Massive Democratic Issue at Stake

In our society today, the private banks have a virtual monopoly of
credit creation.

Money, the means of exchange of all the necessary goods and services
which we need to stay alive - the lifeblood of society - is issued into
circulation largely at the say-so of private institutions, and only as
interest-bearing debt.

Society must go into debt in order to obtain virtually all its means of
exchange. That is an astonishing state of affairs.

The only part of our money supply which is debt-free is the notes and
coins minted by government and consequently bought by the banking
system. The revenue from the sale of these notes and coins is credited
to the Treasury and represents an effective debt-free input to the
public purse.


Our Money Supply Raises Fundamental Issues

The nature by which our money - our means of exchange - comes into
society, raises fundamental political issues.

These are not just obscure economic questions. They go to the very heart
of what we understand as "democracy".

For example:

Money is only available by going into debt. Why should we go into debt
merely to create our medium of exchange?

Why should a government - the one institution with the constitutional
authority to create money - delegate this responsibility and power to
the banking system?

What does it mean for democracy - rule by the people, for the people,
allegedly - when we are reliant upon the banking system for virtually
all of our medium of exchange?

Why do the politicians, professional economists and academics see no
connection between the social problems associated with spiralling debt
and the way money is created?


Let's Talk About "The Distribution of Credit"

As Rosamund Stock has written: "This is a case of sovereignty and of the
distribution of resources: it is the banks who decide who gets what now
that a large part of people's spending power comes from bank-created
credit. We talk about the distribution of wealth but we have not even
started on the distribution of credit".


We Want Publicly-Created Money

Our democratic argument is that it is wrong for virtually all our money
supply to be created by private means.

We need a publicly-created supply of money.

We need to ensure that all the people have a stake in the creation of
their means of exchange.

We need to ensure that they reap the benefits of a publicly-created
means of exchange.

At the moment, those who reap the benefit from the present debt-based
system, are the bankers who reap the interest, and the speculators who
engage in currency manipulation and hostile takeovers.

As Richard Greaves wrote in the November 2001 Prosperity, "For as long
as the power to create money is in the hands of private interests who do
it for profit and control, we can never say that we live in a democracy".

We want money for the people, by the people.

However, one of the main lines of objection we receive is usually a
variation on the theme that the government of the day would abuse its
power to create this debt-free public money - usually by "over-spending"
or by "centralising its power".

We examine some of these specific objections below.

As we do so, let us distinguish the economic merits of any proposal as
being a related, but separate, issue from its democratic merits.

For example, the objection that Money Reform will "centralise power" is
really a criticism of the democratic deficit in society, rather than a
criticism of the economic correctness of the Money Reform proposal per se.

If our proposal is correct economically, then let us ensure we can make
it correct democratically.


Frequently Heard Objections to Debt-Free Money

Objection Number One: "The last thing we need is for our government to
have access to an unlimited supply of money".

Answer Number One: We are not suggesting that money should be created
without limit. That would, of course, be inflationary and irresponsible.
We are not suggesting that the government simply "prints money willy
nilly ad lib".

We are suggesting that a specific amount of debt-free money should be
created for specific projects by a democratic and accountable state
authority. The money is only created when a project is agreed, and it is
only created for that particular project. It is spent, not lent, into
society on that basis.


Objection Number Two: "What is to stop any government simply spending as
much debt-free money as it chooses, in order to butter-up the electorate
in time for the next election? For example, it could simply use the
debt-free money to lower taxes and hence boost its own popularity".

Answer Number Two: If the government were given the power to create
debt-free money then it would be necessary for its new money creation
powers to be strictly controlled within a set of legal and
constitutional parameters.

Given that, however, it stands to reason that any government has a
vested interest in carefully controlling the amount of debt-free money
which can be created each year, in order to avoid inflation.

If the government does not make this calculation then it will mismanage
the economy and pay the price of electoral failure. There will, as
usual, be no incentive for any government to over-spend and risk inflation.


Objection Number Three: "But don't you know that 'government is the
problem'. Why do you want to give it more power?"

Answer Number Three: Some people are hostile to "the government" per se.
Without getting into a debate on that particular political view, we
point out the following:

The priority is to bring the money supply under democratic control.
Government involvement is a means to this end, not the end in itself.

Money Reformers seek Economic Democracy - the democratisation of
economic power. This requires the democratisation of the power to create
the means of exchange - the money - which we all need to survive.

That democratisation is obviously going to involve the government
playing a major role - in a democratically accountable manner.

There has never been any suggested solution to the world's economic woes
which does not involve "the government", in some form, playing a major
role. To imagine that Money Reform can occur without the involvement of
government is sheer idle fantasy.


Objection Number Four: "Look at the present democratic deficit between
the government and the people. How can you trust the government to get
it right?"

Answer Number Four: That is not an argument against the rightness of the
Money Reform proposal, rather it is an argument against a particular
political situation.

Those are two different issues - the Economic Issue, and the Democratic
Issue. Don't confuse them.


Objection Number Five: "Your idea of government-created debt-free money
will simply centralise even more power in the hands of government. It is
a license for tyranny."

Answer Number Five: Again, we should distinguish between the economics
of our proposal, and how, politically, it would be administered.

Of course, Money Reformers are agreed that it will be necessary to
ensure that the administration of our economic proposal does not
centralise economic power.

But even as the system stands at the moment, there is an extent of
democratic accountability with the government - where there is none with
the banks. Indeed the banks represent a form of "hidden government".

It is the government, which the voters empower, which will make the
decisions, not the un-elected bankers. It is the government which will
pay the price if it gets it wrong. Governments can be voted out, bankers
can't!


Objection Number Six: "Don't you know that Karl Marx believed in
'Centralization of credit in the hands of the State, by means of a
national bank with State capital and an exclusive monopoly'. (Chapter 2,
The Communist Manifesto, 1848) Your proposal will simply centralise all
financial power, as Karl Marx wanted."

Answer Number Six: Nobody is saying we "centralise all credit"!

We are simply calling for a greater proportion of our money supply to be
created debt-free by a democratically accountable public body, and
spent, not lent, into society.

Moreover, Money Reformers still see a role for the private banking system.

Publicly-created money is not a "left-wing" idea, nor is it a
"right-wing" idea. It is intended to help democratise - not centralise -
economic power.

Anyway, Marx did not challenge the debt-based money system, nor advocate
debt-free money. His proposals were being made within the conventional
economic system.


Objection Number Seven: "The availability of debt-free money could open
up the potential for socially desirable projects, but it could also make
it easier for the government to spend on bad things!"

Answer Number Seven: That's true. But that's the sort of political issue
which will always be with us.

For its part, the government will still be constrained in its spending
decisions by normal political considerations - whether those be with
regard to its ideology, or with regard to what it calculates it can get
away with, or with regard to its continued electoral survival - just as
it is at the moment.

For our part, even under a reformed money system we will still have to
hold our government to account. We will still have to ask of it some
fundamental questions.

For example, we will still need to ask:

Under whose authority are decisions being taken?

Are issues presented to us one choice at a time?

Are decisions being taken after proper consultation?

Do they reflect the will of the people, to the extent that it can be
defined?

Are decisions made on a proper basis of responsibility, and not just
necessarily on a question of numbers … and so on.

So, nobody is saying that the Money Reform proposal is some kind of
be-all-and-end-all, which will fix everything for all time.

What we are saying is that the Money Reform proposal will help us move
towards a more democratic dispensation.

But even with Money Reform in place, it will still be for us to continue
to work on the on-going process of making our political system more
accountable and democratic.


Objection Number  Eight: "Such money creation powers in the hands of the
government will lead to corruption".

Answer Number Eight: Abuse may occur, regardless of whether money
creation powers are vested publicly or privately.

If government is vested with these powers, then, if corruption occurs,
people will know the source, and there will be an ability to seek
redress. To that extent, people will have been democratically empowered
by the reform.

If money creation powers are vested primarily in private institutions,
however, then the abuse is hidden. It is anonymous, and the buck stops
nowhere. It is difficult, or impossible to identify the culprits, and
rectify the problem, even though the abuse impacts negatively upon all
of society.

Democratically speaking, the crucial power over the money supply should
be vested in transparent and accountable public bodies. Publicly-created
money is a democratic imperative.

_____

Perhaps you have insights you'd like to add to the above, or questions
you'd like answered. Prosperity is assembling a list of Frequently Asked
Questions for future issues. If any of our readers would like to
contribute, please get in touch

Please print out, photocopy and distribute these articles. Also copy and
paste them to emails, and circulate widely, and please include all the
essential contact information below. Thank you.

Essential Further Reading:

Prosperity: Freedom from Debt Slavery - is a four-page quarterly journal
which campaigns for publicly-created debt-free money, edited and
published by Alistair McConnachie. A four-issue subscription is
available for GBP 10 payable to Prosperity at 268 Bath Street, Glasgow,
Scotland, UK, G2 4JR
Tel: 0141 332 2214; Fax: 0141 353 6900
admcc at admcc.freeserve.co.uk  http://www.ProsperityUK.com
Or you can follow this link to our subscribe page:
http://www.prosperityuk.com/get_involved/subscribe/index.php

The Grip of Death: A study of modern money, debt slavery and destructive
economics by Michael Rowbotham [Jon Carpenter Publishing, 1998] and
Goodbye America! Globalisation, debt and the dollar empire by Michael
Rowbotham [Jon Carpenter Publishing, 2000] both available from the
address above.

http://www.prosperityuk.com/articles_and_reviews/articles/faq.php


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