Why those cuts aren't optional

[Millennium3]

GC, one of the problems in discussing these issues is, in order to keep the subject relatively simple, that just a thumbnail sketch is possible.

As someone who is against our full participation in the global economy as, although it may significantly benefit the most wealthy in our society and those with specialist skills, unlike previous times these benefits do not seep through to the vast majority because cheap overseas labour is used instead of the relatively expensive indigenous form. Yesterday's unemployment figures once again demonstrate the impact of this change - particularly in the 16-24 age group. Using this labour, apart from condemning so many of our young to a bleak future, impacts unfavourably on our balance of trade.

You do not mention the calamitous use of PFI which enabled Labour to increase the nation's debt outside the usual reporting systems - this money was mostly spent on projects which would now be viewed as 'white elephants'.

Do you not accept that Brown allowed our dependence on the financial sector to become too great through neglecting, particularly, the manufacturing sector? Or that the financial sector was too lightly regulated [Greenspan's view - he believed the bankers would not be reckless because they valued self preservation] or that with stricter controls the true quality of the sub-prime packages would not have emerged before they could do so much damage? My understanding is that $200bn disappeared from the global economy because of this scam and this is the prime cause of our present dire financial state.

One of the problems is that our ruling elite do not wish to acknowledge that the UK is no longer a world power of any standing - just a medium sized nation struggling to survive in very difficult conditions - Cameron seems to be following Blair in this regard with his globe trotting and global announcements. It is for this reason historical comparisons are far less valid if they relate to the period when the British Empire was at its most powerful.

It is for these reasons, coupled to others unmentioned, that I stick to my view that 'the governments of Blair and Brown measured an all time low in stupidity & recklessness'.

[Geoffrey Collier]

M3: Constructing a Richter Scale for political stupidity and recklessness is an endeavour worthy of consideration for a Nobel Prize. The prevailing government at any given time seem enthusiastic to be considered as worthy candidates. Selling gold at low prices was not sensible. Some of those FPI contracts must have come close to criminal recklessness. I suspect that those contracts were intended to provide services which we could not afford, while making New Labour appear 'city friendly'. We can only guess as to the motive.

Thatcher chose to sell off the national utilities while not securing a guarantee. How have we benefited by seeing all those assets fall under foreign companies and governments? The banks, and perhaps the insurance companies, could be going in the same directions. Having had a nation is a state of idleness from 1918 to 1939, we discovered that we had little in the way of strategic reserve stock 'on the shelf'. To add to the folly we had to discharge members of the military to become Bevin Boys. We had some 300/400, years of coal reserves underground, but little on the surface. I'm sorry M3. the competition for the title the most stupid and reckless government of all time will be fierce, and could be brutal at times.

I agree that Britain should be master in its own house. Forget foreign agreed quotas; we decide how much agricultural products were produce. We don't share our fish-stock (70% around British shores) with an ever increasing EU membership. There should be no question of British oil being deemed an EU resource. This seems both sensible a justfiable, it is what other nations do, and it must surprise them when they encounter Mr John Bull who, in exchange for being a voice in the world, will surrender major economic assets. This is a serious psychological defect in our national psyche. In exchange for our wallet, we willingly receive some gold-brading in order to look important.

The post 1945 world-order is collapsing: we must, despite the problems, remain an international participant. A global financial market based in London, which is equal to New York, plus an insurance market of similar proportions, cannot be ignored. Time and time again we have been confidentally written-off only to recover and start again. Let us hope that we can do that again.

[Millennium3]

I enjoyed your post GC. I appreciate that we cannot withdraw entirely from the global markets and I will admit that Cameron's efforts to establish a 'no fly zone' over Libya do seem to be paying off.

I share your hopes for the future - but it's going to be tough to achieve.

[Paradox]

Shakespeare's prophecy

Over 400 years ago the famous English bard put it in the mouth of John of Gaunt what has proven to be a very accurate prophecy: "Me thinks I am a prophet new inspired and thus expiring do foretell of him... this blessed plot, this earth, this realm, this England. This land of such dear souls, this dear dear land is now leased out, I die pronouncing it, like to a tenement or pelting farm. England bound in with the triumphant sea whose rocky shore beats back the envious siege of water Neptune is now bound in with shame, with inky blots and rotten parchment bonds. This land that was want to conquer others hath made a shameful conquest of itself".

This land of England is no longer owned by the English. With over £800 billion owed to the Money Changers and the British taxed up to the hilt just to pay the interest on this debt, Britain has been "leased out". Or as someone else expressed it: "Virtually the streets of the whole earth are mortgaged to the Money Lenders".

With a lie printed across the top of every Banknote most people have completely been fooled about who really controls our money. The Bank of "England" is not English and is not a Government institution.

The truth is that in 1694 the Dutchman William III, urgently needed money for his foreign wars so he borrowed £1,200,000 in gold and silver coins at 8% interest from a consortium of unidentified financiers to be paid back a year later. They only agreed to let him have this money if he gave his royal permission for them to establish a Bank of England and print for themselves £1,200,000 worth of Bank Notes. Thus, he really agreed to pay them 108% interest on their original loan!

This date of 1694 is the most important in our history. Far more important than the Norman Conquest of 1066. For it represents the conquest of the Money Lenders over England. From henceforth they, and not the King or Parliament, would be the real masters of England.

In 1694, King William III and Parliament surrendered its sovereign right and prerogative to create the nation's money, interest and debt free as a service to the people. Beginning with the original "loan" of £1,200,000, successive governments have borrowed money from the Money leeches (money they create out of nothing) to run the country and fight its wars. All unpaid "loans" since 1694, plus accumulated interest, forms the National Debt, now estimated to be about £800 billion.

Your hard earned taxes service this absurd debt. Your tax money goes straight into the coffers of the richest people on earth, the International Bankers. Your puppet Government at Westminster is still paying interest on money borrowed to fight Napoleonic Wars and WWI and WWII. Interest to the Bankers out of your tax money. In America the financiers imposed their total control over the Republic on 21 December 1913 with the Federal Reserve Act (when most members of Congress were away for the holiday). This was in defiance of the American Constitution which declares:

"ONLY CONGRESS SHALL BE EMPOWERED TO CREATE MONEY". The Government of the USA now owes these same money changers some 5 trillion dollars.

The National Debt can never be repaid so Governments are beholden to the Money Bags.

Democracy is a total delusion. A cruel deception. The people who have stolen from sovereign Governments the right to create their money and determine its value and distribution are the real world leaders. Every institution of power and consequence on this planet is controlled by them, i.e., politics, the mass media, the police and judiciary, the military, secret societies, the Church education, ad infinitum.

Obviously, if the Government created its own money, interest and debt free, there would be no need to borrow money from the Bankers. They would have all the money they need for the NHS, education and defence etc. Is there any shortage of materials and bricklayers to build new hospitals and schools? No, of course not. There is only a shortage of little bits of coloured paper with pretty pictures on.

The proposed cuts which when they begin to bite will oppress the sick and the poor are completely unnecessary.

Usury is forbidden in both the Bible and the Koran.

[Millennium3]

Excellent post - our current financial plight unmasks the realities which are hidden in more affluent times.

The austerity measures will unmask many more.

[shagpile]

To increase our gloom and to help confirm that it was the mismanagement of the economy by Gordon [eliminate boom and bust!] Brown which got us so deeply into debt, the Germans have announced revised forecasts today and expect their economy to grow strongly this year.

Germany has also said that the British economy has been grossly mismanaged. Good to have constructive criticism from the European Meister (master craftsman) on maters of economy.

[Joshua]

House of Commons
London SW1A 0AA.

OPEN LETTER

Sir,
At this present time the news is dominated with “Cuts” the government proposes to make to reduce the deficit and save money. “Cuts” in education, defence, public services and all the rest and increased taxation. When in reality what is needed is not “cuts” and yet even more taxation but an HONEST MONEY SYSTEM free of debt. In all the reams published in the newspapers and broadcast on TV and radio on the subject of money and banking the people are never told the simple truth.

The government is forever short of money and in massive debt for the simple reason that instead of creating the nation’s money, which should be its sovereign prerogative; it borrows from the International Bankers. Where do the bankers get the billions from they lend to the government to enable it to function and carry out the nation’s business? Answer: They CREATE IT OUT OF NOTHING. Here is the source of the problem. If the government did the “creating” there would be no need to borrow and no need to pay interest. ALL MONEY IS CREATED OUT OF NOTHING. The only cost is paper and ink. What a monumental nonsense for the government to borrow money at interest when all it needs to do is create its own money. The National Debt is now estimated to be a staggering £1,000 billion (in America it is said to be $25 trillion).

If the government created its own money interest and debt free and spent it into circulation on public works like sea defences, industry, fishing and agriculture it could very soon create full employment. More money in people’s pockets would boost the whole economy and produce unprecedented prosperity. The government would have all the money it needed and there would be no need to borrow.

The real wealth of a nation is not measured in gold bullion of little bits of paper with pretty pictures. THE REAL WEALTH OF A NATION IS THE PRODUCTIVITY OF ITS PEOPLE AND THEIR CAPACITY TO PRODUCE GOODS AND SERVICES. Is there any shortage of asphalt, timber and bricks to create new schools and hospitals? Is there a shortage of iron ore to create more steel to build bridges and ships? Is there a shortage of skilled labour? No, of course not. But there is a desperate shortage of little bits of paper with nice pictures. It is a wicked iniquity when a lack of money prevents PLENTY FROM GOING TO WANT.

In the Victorian era there was abject poverty for many. Lots of children were undernourished, suffered from rickets and ran the streets shoeless dressed in rags. This was at a time when the shops and warehouses were bursting with food and many farmers were facing ruin because they couldn’t sell their produce. It was all artificially created by an evil and oppressive Money System and a government that didn’t have the guts to create an honest system of exchange.

What people are never told is that taxation does NOT pay for government expenses like defence, social security and education etc. It services the National Debt. Our government is still paying interest to the International Bankers on money borrowed to fight the Napoleonic Wars, not to mention WWI and WWII. Money which comes out of taxation. It is all the height of idiocy.

Why do we have a National Debt anyway? Let me explain. In 1694 the Dutchman, King William III (married to Mary the daughter of James II) borrowed £1,200,000 in gold and silver coins at 8% interest from a consortium of unnamed Financiers. They only agreed to let him have the money if he gave his royal permission for them to establish a “Bank of England” and print for themselves £1,200,000 in banknotes. Thus he really agreed to pay them 108% interest on their loan. Now note this carefully. The interest was to be paid OUT OF TAXATION OF THE BRITISH PEOPLE. This is how the National Debt was instituted and the people taxed to service it. Since the founding of this misnamed privately run “Bank of England” in 1694 successive governments have borrowed money at interest to run the country and fight its wars, all money created out of thin air. The National Debt represents the grand total of all the money borrowed plus interest. If all the money in circulation was used to help pay off this absurd debt it would hardly make a dent in it.

The solution to Britain’s present financial and economic crisis is as simple as pie:

1. Cancel the National Debt
2. Take the creation of money away from private bankers and place it in Parliament under the Crown.
3. Release interest and debt free money into circulation to ensure prosperity and full employment.

With no National Debt, taxation could be reduced to a tiny fraction of it’s present level.

On 22nd December 1964, Captain Henry Kirby M.P. introduced a Motion into Parliament calling on the government to adopt the above measures. It was rejected, demonstrating that all the Parties do not represent the British people. They operate in the interests of the Money Power. Benjamin Disraeli and William Gladstone stated this over a hundred years ago and it still remains true today.

Will you and other M.P.’s at last try to do something about it for the good of mankind?

Yours truly

-----------

“The game of politics is the pursuit of power. In all democracies there are two separate organisations playing the political game. The open and visible one, the members of which held office as members of the government and the invisible one, composed of individuals who control this visible organisation and in whom is vested the real power. The essence of which is finance, controlling the publicity which makes or unmakes its tools. This financial power may be used to promote truth or fallacy, good or evil, national prosperity or national ruin; but as long as human nature is what it is, so long as jealousy, greed, personal ambition and expediency can sway the lives of men, so long will the will of the invisible power prevail by methods inimical to the best interests of the nation. The strength of a democracy thus lies at the mercy of invisible leaders who being nationally irresponsible cannot be called to account for the consequences of the acts of government they control. This at the same time constitutes the inherent weakness of any form of government, the apotheosis of which is the control of both parties in the state, right and left, radical and conservative by the same forces. Then only the puppets change while the rule of the individuals controlling the machine continues unhindered. Voters who wonder why their efforts have failed wonder in vain as THE DUPES OF A CONTROLLED PUBLICITY. THEIR PRIVILEGE OF THE VOTE IS A FARCE.
Lady Queenborough in her book “Occult Theocracy” published in 1931 alias Edith Miller.

[Gaius Grachus]

Time to strengthen Reform Impulses ?

Parliamentary Reform has a long history aimed at protecting us ordinary citizens from Parliament, which otherwise becomes the instrument of a small, arrogant and wealthy elite – corporations, financiers, landowners and land-grabbers, foreign interests and tax avoiders and their hangers-on.

By the late eighteenth century the drive for reform centred on removing Placemen from the House of Commons, which controlled the budget. Apart from straight bribery (“when I’ve sold my Ayes, Sir, why then I’ll sell my Noes”) numerous paid positions or “places” in Church and State were in the gift of the government; these involved little or no work, or could be subcontracted out cheaply, and so were used as sweeteners to secure a Parliamentary majority. Reform agitation by the Liberal party’s predecessors led to the removal of these placemen, until by the 1820’s the Duke of Wellington complained that it was almost impossible to carry on “the King’s Government” since he could no longer buy up the necessary support – a situation which led to the 1832 Great Reform Bill.

Now-a-days the Placemen are back in force, with numerous paid positions and perquisites available to MP’s if they toe the Government’s line (the “payroll vote”). The government Whip who issues MP’s their voting instructions is officially titled “patronage secretary”. So the thrust of Liberal reform agitation should be: abolish all extra payment for Cabinet Ministers or for any duties involved with government and Opposition business, apart from modest travel expenses. Then we can hope the nobility of selfless public service might be reasserted. The modern “House of Lords” is a Placeman’s Paradise that should be abolished outright, in order to complete the Liberal 1911 Parliament Act which broke its power. It can only delay laws by no more than two years (later one year after 1945). For the rest cost-limited advisory panels could undertake the revisions the Lords now does, and it has already lost its Court of Appeal function anyway.

Increasing the number of eligible voters at election time has been the other thrust of Liberal reform, but with the failure of proportional representation and the growth of the political party system, this strand has now run out of steam. The 1832 Reform Bill increased the number of voters to about one in twenty of the population, which made little improvement: by 1835 the House of Lords had crept out blinking into the sun again. Subsequent increases in the number of voters, and their organisation by political parties (“Gentlemen, we must now educate our masters” as Disraeli put it) has not resulted in any greater participation in political power by the citizens. The membership of the three main political parties is less than three in a hundred people; the whole superstructure of politics is seen as irrelevant, corrupt and profoundly untrustworthy, while mass voting is by sentiment and whim, stirred up by wealthy backers for their own purposes – a demagogic plutocracy, as the sociologist Andrewski explained it. And the reason is not far to seek. “Democratic ideals” entrench the Rule of Money, and now the wave of destruction caused by the unregulated financialisation (1) of our economy is leading to a rebirth of debt-bondage serfdom.
This failure of party political democracy has been discussed for a century or more. Through the Parties democracy becomes the political weapon of money, and the media is the means through which the power of money operates a democratic political system.
The "tragi-comedy of the world-improvers and freedom-teachers" as Spengler put it, is that they are simply assisting money to be more effective. The principles of equality, natural right, and mass voting are all used for the war of the rich against the poor. In reality, freedom of the press requires money, and entails ownership, thus serving money at the end. Voting involves electioneering in which the donations rule the day. The various ideologies backed by candidates, whether Socialism or Conservatism, are set in motion by, and ultimately serve, only money. "Free" press does not spread free opinion—it generates opinion. Or so the argument runs.
For example, in return for Murdoch muzzling his papers, Tony Blair’s lot offered to tone down their union recognition and competition bills. Trade unions won the right to recognition if backed by majority vote of workers. But Blair added a killer clause: it had to exceed 40% in an employer-defined “bargaining unit”. So by fixing the membership of the “unit” the boss could rule union members in or out. (2)
So we still have eBay politics today: you make your offer and buy your politician, yes, but now it goes further than lobbying, it is about immensely valuable insider information: so a real-estate magnate who is a Labour Party donor is visited by an official “to explain how his money is going to be used”! Suppose Tesco gave £11 million to the Millennium Dome project, and in exchange got a promise that a tax on supermarket car-parking space will be dropped – worth £20 million a year – what project would yield better returns to Tesco than on such an “investment” were it done? The pickings of “investment” in political decision-making might be even better at local government level, as has been suggested in Spain, for example.

But doing deals is surely not a vice peculiar to democracy alone. Placemen, princes, third-world leaders can all have their mouths stopped with gold. The Reform Impulse needs to address the way total financialisation of government has stripped the mere citizens of rights: Goldman-Sachs, HSBC simply are the government, in Washington, Brussels and London. Sovereign nations find their elected officials replaced by ignorant banking technocrats told to heap debt on debts while impoverishing the debtors: a system harking back to the debtors’ prison era. 95% of the currency we use is lent into existence by banks. We pay them interest on our means of payment. And their pay and bonuses are awarded to them for expanding their loan-book, i.e. for debt-pushing. Since the banks break or write the rules, they can expand their lending many times the base of cash -deposits against which they lend. In USA J P Morgan administers the Food Stamp welfare system for the government, and appears in reports to have defrauded it of $billions; but no-one is prosecuted or investigated for such alleged crimes – at most the financiers seem to apologise and pay cents in the dollar in fines. This enormous economic injustice is leading to widespread discontent, such as the Occupy Wall Street movement brutally harassed by the police. The whole economy becomes entangled in the controlling power of such debt – from getting a degree to buying a house or even paying for Christmas on your card at exorbitant interest rates. Bank Debt – used as a form of money and issued globally by on-lending without control or external accountability –has been created in trillions of currency units. It is now an instrument of domination. Governments have been replaced by nominated bankers who then impose policies of national asset-stripping, and who seek to control national budgets through the euro and the IMF when they cannot do so directly.

The leading global institutions are financial beggars on horseback, they have no real assets – the IMF, the ECB, the great banking houses. Their supposed wealth is the undertaking by duped debtors to repay. Why (apart from millions in bonuses for making the fraudulent and criminal loans) were they lending five or seven times the value of a family income and property on mortgages? Since the default seemed inevitable? It is because a failed loan, once securitised, is an appreciating paper asset. As the interest and other charges accrue the loans can be bundled up and passed round profitably (the toxic, or rather fraudulent, imaginary paper assets), then finally dumped on governments and pension funds to loot our tax-money and savings. With unlimited credit-creation at their command, these bankers can speculate on a host of wild ventures as long as enough people buy in; when their gigantic Ponzi scheme (“the global economy”) collapses, the losses are transferred to the tax-payer by our eBay politicians; but while all goes well at first the bankers pocket the proceeds with wealth beyond imagining.
Meanwhile the Bank of England (and other central banks) announce “quantitative easing” (money creation) to help with the crisis and keep interest rates low (0.5%). This robs savers of their income (pensions are reputed to have lost £45 billion through reduced interest), and transfers their money as free cash for the banks to speculate with yet again. Banks and large corporations become cash-rich, while the tax-payer is pressed to guarantee funds for new house building and is exposed to usurious interest rates on credit cards and short-term loan sharking. As inflation rises (5% + in UK?) above the interest earned on savings the actual rate of return to citizen savers is negative. The supposed benefits of lower mortgage rates is off-set by the accompanying austerity – job losses, reduced incomes, business collapse, destruction of the welfare state and social benefits - as state funds are switched to cover bankers’ failed bets and criminal activities.

The old liberalism with which I am familiar sought to curb the power of mere money: to limit or abolish the power of the Lords and to open land ownership to the people, reviving the spirit of the free English yeoman. Smallholdings and allotments were made available to all by action through their local councils (1908 Act). State Pensions were introduced, the Cheap Food League sought to keep living costs down and end the power of the landed interest to charge famine prices; the poor were to be relieved of burdensome taxation by increasingly progressive income taxes on the wealthy, and by (under the impulse of the Single Tax debate) taxing away the unearned economic rent that accrues to mere land ownership as such; and when (as in the 1930’s and now) private investors lost their nerve and credit got locked up in financial holdings the State was to be prepared to invest directly in productive industrial capital and stimulate spending to encourage full utilisation of labour and equipment. Out of these policy ideas grew the 1945 Labour Party’s national concordat backed by the achievements of the Trade Union movement: the great battle against idleness, ignorance, poverty and disease to be fought as vigorously as the war had been. This meant welfare reforms including child-allowances and free health services that ushered in our post-war prosperity; and the control and support of industrial power; and the euthanasia of the rentier, and limits to foreign exchange speculation; All of which has been steadily unpicked by the neo-cons since the 1980’s just as the basic rights of union organisation have been eroded: the very rights the old Liberal Parity helped establish in law 100 years ago!i.e. what is lawful for one is lawful for many.

So how can that reforming impulse be taken up again? When the power of Money cuts across party lines so voters have no immediate electoral remedy. Handbooks on campaigning stress that MP’s are only one, and not always the most significant, influence on government executive policy.

Participative democracy and individual empowerment is a beginning of a wider national renaissance.

We can look to our history to suggest ways. Radical reform of Parliament has never come from within. Indeed, the sorry tale of parliamentary resistance to action over the present Expenses scandal, and subsequent attempts to circumvent the changes, give no hope in that respect. Nor do the short prison terms for a few of the nastier offenders amount to much.
As in the past we need to organise radical agitation across the country to protect us from Parliament as an institution, not of course from the hard-working individual MP’s Resistance to reform agitation has already resulted in extended sentencing, hostile propaganda, large finance-industry subscriptions to the police (in USA for example) and subsequent brutality against the peaceful exercise of once-recognised democratic rights. It will require courage and persistence akin to the Arab Spring to change the terms of our political debate and organise a sensible return to our historical roots in defence of citizens’ rights.

In the unreformed parliament prior to 1832 the more notorious nabobs –the British representatives of the East India Company who went briefly to India to make fortunes through graft and exploitation- were impeached.

· We could begin by pressing for similar show trials to discourage that spirit of peculation, whether operative during or as a reward after holding office. Mr. T Blair, currently said to be an associate of J P Morgan bank, and of dodgy dossier and so higher oil-price fame, would make an exemplary beginning. His latest exploit is reputed to be £12.5 million payment for replacing Borat as the public face of Kazakhstan.
· The completion of Lloyd George’s work by an uncompromising abolition of the House of Lords
· The completion of the campaigns against Placemen by abolishing all additional payments to MP’s for serving in or supporting the Cabinet and its Executive power.
· Above all we need to take back the People’s right to make laws, by removing all legislative functions from the political parties in the House of Commons. There must no residual power of the Executive to act or not act on laws passed by the People; the Parties should exist only to implement our laws by administrative supervision. Such Participative Democracy empowers us as citizens (the 99%) to take control of our lives. It is a return to the recognised principle of separating executive from legislative functions. Power should be returned to the localities, and budgets voted on clause by clause in a referendum; popular legislative initiative should be built in to any proposal for a new law, and any financial proposals should trigger automatic plebiscites. We need to build on the precedent of the Great Debate at Putney in Cromwell’s time, but with the outcome binding on the Executive. The traditional constitution of the Liberal Party provides a starting-point for action: localities, federations and regional and sectional conferences controlling the power at the center – a scheme that could be rolled out across the country.
· Agitation needs to target ending the current systems of Court procedure. Poorly drafted Parliamentary statutes and the vagaries of legal interpretation and judge-made law mean England lives under Dogs Law: we only find out that what we have done is wrong after we are charged! Some of our best brains are devoted to cooking up pre-digested pots of “evidence” which are then fed to the Court, at enormous cost, while making every attempt to kick out the other side’s versions. The resulting absurdity and delay results in, for example, proof of a case of Alzheimer’s disease from which the accused, found not guilty as a result, afterwards showed the only known case of spontaneous recovery. Instead of “evidence” Court officials should be directed to discover the truth by independent investigation – “Hercule Poirot law” with its inquisitorial procedures could appoint English investigative magistrates who initiate proceedings at home and abroad on the submission of a complaint.
· Return the control to citizens over use of armed force: by the abolition of a paid standing army, to be replaced by a trained national guard in which all citizens have a right to contribute (in a purely civil role if they so desire) and must participate in if they wish to retain their civil rights.
· Reassertion of Britain’s commitment to international law as a check on arbitrary executive power: NATO was changed by Executive action from a defence pact to an aggressive alliance operating outside its original agreed area, and now acts in disregard of international law (in the Middle East, for example) and we should withdraw from it. Foreign war can be used to repress domestic reform as effectively as can police action, so removal of unsupervised treaty and conflict decisions from the cabinet is a legitimate reform goal.




Control of the money Supply and its Productive Use

Along with returning the legislative power to the people, it is even more important to resume national and social control of the power to issue money, removing it from the banks now too large to be allowed to exist.

People generally seem no longer to distinguish between Finance Capitalism and Industrial Productive Capitalism. Not one penny paid trading a firm’s stocks and shares (“the markets” “the Share Index”) goes to the firms named. Financial capitalism trades in promises, selling grain that does not yet exist and striking off-setting bargains, or flooding the market with promises to supply government bonds in the future without actually having any so as to bring the price down and raise the interest rate on that price. Most of these contracts are arranged not to be fulfilled: no actual cocoa, wheat or silver is delivered, for example, but the price is manipulated by “expectations”. There is no free market price discovery in financial markets, competition is most feared. Otherwise surpluses would be cleared by price cuts: commercial landlords would be forced to charge lower rents and businesses would benefit, and housing shortages would be solved by prices falling to become affordable, rather than being propped up by government guarantees of rates purchasers can barely afford.

The key to the confusion is Monetarist misrepresentation of Investment as if it were just buying promises, rather than building productive equipment and resources for ventures which could succeed. It is the confusion between “investment” as putting money on a horse which may win or lose (either way the only result is a transfer of funds between winners and losers, with a broker rake-off) with genuine investment in the construction of the race course, stables and stands. As a result Monetarism treats attempts to increase resource-availability as “throwing money at the problem” and financiers attempt to grab a bigger slice of the national cake by growth through acquisition rather than by baking a bigger cake we all may share.

It is easy to see that we are interested in the real level of economic activity (Y) and the employment level (N). This changes with changes in effective demand (spending). This demand is made up of consumer spending (C), and other positive spending which boosts it, such as Government Spending (G), boosting by Exports(X) and by real Investment (I). This Investment means spending on equipment and construction, and acquiring stocks of goods. It does not mean scattering currency through hand-outs between government, banks and big corporations where it is either hoarded or spent on driving up the prices of land and property in the interest of the super-rich.

Against this there are negative effects that cut back effective demand and economic activity. These are imports (I) (which switch demand overseas), taxation (T) that reduces our spending power but can be off-set by government transfers from the wealthy to the poor (which are often a large part of so-called government spending); and savings (S).

So “bringing down the deficit” by cutting G and raising T to get a “balanced budget” wipes out jobs and growth; and this is made worse if T exceeds G to take out more of our spending-money and use it to rescue bankers who have made foolish loans. Current monetarist propaganda criticises imagined government profligacy, but is always silent on the constant misjudgments made by banks. Banks have made the economy lurch from crisis to crisis: from the property slump of 1971 on via the Arab oil-surplus recycling crisis, the sovereign debt fiascos, the company bond market collapse, the dot.com collapse and so on, and now back to the house-price and fraudulent mortgage assets crisis that brought the global economy to disaster 2008.

Since any country’s exports are another country’s imports claims for an export-led recovery only means exporting your unemployment, which will lead to retaliation and further troubles. Most serious, our economic system has no automatic balance. It will not “return to normality” having paid for the bankers’ mistakes and crimes – there is no “long-run equilibrium” – just a race to the bottom amidst cut-backs and despair. Every year a man stands idle is a loss gone forever. Even simple notions about supply equaling demand through market forces in the long run are unreal: there is no long-run framework of stability in a world dominated by political, technical and environmental transformation that gives a harbour for the economy to return to.


The sustained political drive for a “balanced budget” (G = T) means citizens cannot use tax and spending for national economic revival and social welfare. It is bad enough that the tax burden is so unequal and that the wealthy monetarists prevent us from raising the top tax rates and ending tax evasion; but worse still when what tax payments we do manage are filched to pay for bank fraud and failed speculation, stealing real assets and cash from industrial and technological development, pension schemes, social support and health and welfare and creating unemployment through “austerity”.
Policy designed to balance the budget (eliminate deficit finance) combined with repayment of debt is equivalent to a huge increase in S, in withdrawals, and that means strong downward pressure on real household income and strong multiple downward pressure on employment. Commentators with roots in current finance and banking shy away from facing this, though the depression it causes is now upon us.

It is also difficult to see why the money that we can so readily create for ourselves at no cost (“quantitative easing”) should be given to banks for free, and then borrowed back at exorbitant interest rates as now happens. Why should a country have to borrow costly money internationally that is created out of thin air by financiers? We can cover funding by Budget Deficit Bonds that can be issued to citizens domestically and made even more acceptable by being accepted for tax-payment and other debt-settlement purposes at certain maturities.

The Reform Impulse and bank reorganisation

Under traditional control banks might lend four times their liquidity reserves, and keep 4% as cash. Under self-regulation (i.e. no regulation since rules can be adjusted to accommodate their contingencies) the global banks have expanded credit money exponentially, with no real assets to back all this lending. This was done for short-term profit and bonuses, but the result is like a gigantic international pyramid-selling scheme. It works so long as hopeful newcomers put fresh cash in to meet the promised payouts. But you can’t loot the same savers twice, so the system crashes when as it runs out of sources of new real injections of funds, the stage we are now apparently reaching. The credit-rating of Goldman Sachs and J P Morgan has been reduced, and the search for new cash is becoming desperate. The “toxic” (often illegal) “assets” have been used to raise cash from pension funds, and local governments, and now claims on Sovereign debt sap national reserves and steal national assets, so Italy’s gold reserve is up for grabs, even China is asked to dib in.
But no system of reform or subsidy can save the global financial system. To grab quick profits and annual bonuses bankers have created unsustainable $trillions in debt money the world can neither service nor repay. No amount of austerity and sacrifice can save this system. Peek-a-boo accounting, the shadow banking system with its huge further debts, the corruption and theft in the system make collapse inevitable as central banks create ever growing dollar Debt Mountains. The dollar and the euro play a game of “chicken” since the first to go will be the loser, while China holds its exchange-rate low hoping to win the currency war against the devaluing US dollar.
The hope is that once reform agitation has driven home consciousness of that point (aided by everyday experience of increasing hardship) policy to deal with banks is set free from fear of precipitating a crisis that is coming anyway. Popular fear of the unknown nature of reconstruction through change is the major obstacle to immediate reform.

So Reform discussion needs to target publicly the reality of bank insolvency – HSBC, Barclays, Citibank - banks across Europe and USA: it is not a matter of tiding them over a temporary short-fall, of “getting through the debt crisis” by cutting our flesh to the bone. The US Federal Reserve reportedly gave banks $7.3 trillion (mostly secretly) which landed the tax-payer with worthless risk paper in exchange: even before the Bush slush-fund! Their current cunning scheme is to join with other nation’s central banks and inflate the debt-bubble even further until it bursts, probably around mid- 2012. The danger of this needs to be clearly explained to the general public. The banks are bankrupt and need to be and will be closed down; the task is to survive what the Bank of England now admits is a great coming financial crisis.

Reform means the complete re-balancing of the UK economy away from financial and forward to productive economic structure, reversing 30 years of market-centred disinvestment, growing import dependency and creation of a warehouse economy.

· Reform starts by implementing the Democratic support for splitting “investment banking” (i.e. trading in promises) away from a separated retail banking organisation which handles deposit taking, payments systems and real investment, though this will not return control to customers and protect us from over-charging and excessive transaction costs.
· Penalties should be imposed for contumacious emigration on leading bankers who attempt to leave; criminal proceedings might be undertaken by an inquisitorial tribunal against their deception, fraud and loan-pushing so as to recover cash and confiscate personal assets which can be shown to be proceeds of crime and false accounting. Resort to civil proceedings against banks should end and criminal cases should be started instead – civil action seems to result in penalties of only pennies in the pound and no admission of liability. International arrest warrants outstanding against certain Icelandic bankers reportadly living in London could be acted upon, instead of apparently being ignored. A turnover tax on financial dealings (the Tobin tax) could be imposed to stop shady micro-trading (i.e. millions of split-second computer bids used to raise transaction costs for the benefit of brokers).
· Agitation in support of setting up alternative banking arrangements is urgently needed to stop the big banks holding us to ransom again: the restoration of an independent free Giro Bank system for making payments, and for savings; promotion of local banks with four or five branches in their area borrowing at 4%, lending at 6% to credit worthy customers; and restoration of the Building Friendly Societies with controlled interest rates –this is especially important because when the crash comes mortgages could then be transferred to the newly developing Building Society sector at a discount rather than be left to be snapped up by foreign hedge funds. Indeed, home owners could be given the right to make this transfer anyway, prior to a bank crash. Also, Government could establish support for Credit Unions with reserves held in the Giro Banks or other traditional bank; and set about the removal of banking nominees and personnel from governorship of the Bank of England, which should now be charged with a duty to look to employment and industrial growth targets as well as inflation.
· Measures to regain control of money-creation and link pensions and welfare payments to the growth of the money-supply. The banks’ cash-reserve ratio should be raised to 25% or more of deposit liabilities or much higher in cases where speculation is detected, and exchange control reintroduced to prevent money-laundering, drug fund movements and fund switching in fraudulent accounting. Local authorities could be given the right to create fiscal deficits in the interest of local industrial and small-scale business development; and for backing voluntary schemes and participative democracy with agreement by prior plebiscite.
· Councils should have powers and duties to back Local Exchange Trading Schemes (LETS) including acceptance of LETS credit-tokens for services and tax-payments. Councils should also provide administrative support for local Time Banks where citizens can record their time worked for other registered members and so have a right to get back equivalent skilled time in return for their own banked efforts. In this way a range of local services could be traded without resort to cash (time is money!) and local facilities improved.
· Trade Unions could be pressed to establish a broker firm to indulge in uncovered forward selling of shares in the big banks so as to crash their price and take them over for a song, which might offer a quick route to reform: the broker should arrange insurance and liability swaps to escape costs if it fails – as long as all this is still technically legal. CEO’s should be banned from receiving and holding shares in their companies as this promotes share over-valuations and excessive dividend payments; and company law should be reformed to make service of customers and employees rather than maximisation of share values their over-riding duty. – this suggestion amounts to no more than an implementation of the stake-holder concept.
· Tax and regulatory reforms should be promoted to extend non-interest banking systems in England: increased funding for research in this might be given to St. Cross College, Oxford. Under such systems a bank participates in the risk of a business venture, taking a (limited) portion of any surplus, and losing if the venture fails. Stocks of goods are invoiced to the bank and charged out at a mark-up to the shop or small firm. In this way small business can be encouraged and the proprietors are not forced by demands for collateral security to put their houses and futures at mortgage to the lending bank - a far more humane system, supportive of new initiatives, and preventing the current UK bank practice of removing limited liability from small businesses by demands for collateral security. Research could be commissioned on the phasing-out of interest all together (3), and especially on consumer and until-pay-day loans to the poor and hard-pressed.
· Individuals could be given the right under anti-monopoly legislation to initiate criminal proceedings against any suspected common offer or price-fixing conspiracy they consider themselves to have suffered from, with penalties up to three times the offending firm’s capital. Non-competitive bank charges, along with interest rate “harmonisation” would be targeted along with monopoly generally.
· Citizens should be encouraged to withdraw their cash from the big banks and seek inflation-resistant assets – metals, food stocks, gold: the VAT on silver (now the poor man’s gold) should be removed.
· Discussions could be undertaken to create a new currency group to replace the US dollar now used for international payment, commodity pricing and for valuation of the direct barter exchanges.
The US reneged on its debt in 1971 when the dollar ceased to be convertible into gold, following the failure of US efforts to hold down the dollar price in the London Gold Pool (it had attempted this by shipping over large amounts of gold). As a result the dollar issue (as paper) has rocketed, it has lost 60% of its buying power in the last decade, and doubts have arisen whether USA could ever meet the resulting $15 trillion debt. France protested in 1971 that an un-backed dollar gave unprecedented power to USA: America can buy internationally traded goods and services with freely-created currency of no intrinsic value. France sent a warship to get its own gold back from New York. Perhaps a standard for exchange could be negotiated along the lines of the Maria Theresa Silver Thaler as a reference, a coin which operated as international money for decades. Perhaps even revive it? Or develop a gold payments system?


No quick solution, but plenty of ways to get out from under!
Rebalancing the UK economy will mean we have to reverse 30 years of de-industrialisation and gross reliance on the “financial sector” and free market ideology. It cannot be spontaneous because we start from a very low base. It will need steady government investment in five or six promising areas and a far more pragmatic economic approach in my opinion. That will require far more discussion of the Liberal Democratic future in and after this current National Liberal Government.

A lot of this is well known - but our national conversation seem strangely muted in the face of the monetarist failure and de-industrialisation. We hear about the contribution of the City to UK national product, but never a mention of how that is minute compared to the unemployment, destruction if services and of welfare as a result of foolishly trying to take its losses on to our national tax burden! It was the City's private, not our public, sector that failed.




(1) Financialisation: "the increasing dominance of the finance industry in the sum total of economic activity, of financial controllers in the management of corporations, of financial assets among total assets, of marketised securities and particularly equities among financial assets, of the stock market as a market for corporate control in determining corporate strategies, and of fluctuations in the stock market as a determinant of business cycles" (Dore 2002)

Dore, R (2000). Stock Market Capitalism: Welfare Capitalism: Japan and Germany vs. the Anglo-Saxons. Oxford: Oxford University Press. ISBN 0-19-924061-2.

(2)Palastr, G: The Best Democracy Money Can Buy: Robinson, London
ISBN 1-84119-714-9

(3)Pound, Ezra Canto XLV
“Usury: a charge for the use of purchasing power, levied without regard to production; often without regard to the possibilities of production (Hence the failure of the Medici bank). “With Usura no picture is made to endure nor to live with, but it is made to sell and sell quickly…thy bread is dry as paper ..and no man can find a site for his dwelling ..wool comes not to the market .. it stoppeth the spinner’s cunning ….

[Millennium3]

This thread has developed into one of thoughtful comment.

A common view is beginning to take shape.

[Millennium3]

We seem to have developed a new form of democracy - one where the people have no say!