By James Gibb Stuart
William Hague won’t mention it; neither will Charles Kennedy, nor Gordon Brown nor John Prescott nor any of the other top names who will canvass our votes in the General Election likely this year.
Tony Blair alluded to it on Ask the Prime Minister (ITV, 12-12-00) but suggested he was powerless to do anything.
And though it is basically an economic problem, no financial analyst or establishment economist will mention it either. They must be aware of it. They could not fail to be aware of it. But, it seems, there is a protocol which has to be obeyed, and anyone who infringes upon it runs the risk of drastically reduced horizons.
For the rest, it remains both prudent and profitable to repeat the standard line on garbled economics and bask in the approval of their editors. As a result their chosen profession, for all its pretentious profile and computerised technology, can now offer nothing of promise or uplift in the affairs of humankind.
From this the politician tends to take his cue. For every one who knows about the Big Issue — though fears to break his silence — there are a dozen who remain in happy ignorance, seeking refuge in the rough and tumble of party bickering, name-calling, innuendo, quip and silly bantering, all because it’s safer than getting down to the real social and economic challenge that is posed by the taboo.
THE MONOPOLY OF CREDIT
So what is this taboo, this prohibited concept, so fraught with menace and so awe-inspiring that even the most principled people of affairs are reluctant to mention it, lest it should damage their careers?
Quite simply, and in a word, it is Debt!
More explicitly, National Debt; the manner in which the United Kingdom, like all other countries, gets its supplies of new money as an interest-bearing loan from the banking system!
In 1979, when I first started writing about such matters, the British National Debt was £97 billion, with an annual interest bill of some nine or ten billion just to keep it rolling. When I published The Money Bomb in March 1983, it had risen to £112 billion, with £11 billion for servicing.
In that severely boycotted publication I predicted (p.150) that if nothing was done to reform the Government system of debt financing, in ten years time “National Debt could conceivably have reached £200 billion, with a PSBR verging on £25 billion just to pay the interest …”
Those figures were a close approximation to the Debt and interest calculations against which then Chancellor Kenneth Clarke framed his 1996 budget. It was not clairvoyance, merely a simple interpretation of trends already in evidence. In 1998, according to the Abstract of Statistics (2000) the National Debt was £418 billion!
So what else was The Money Bomb saying, that the moguls of the book trade had to ban it from public counters, and reviews in London evening newspapers got wiped off the front pages before second editions hit the pavements? Essentially it was highlighting the need for Government to start creating again a proportion of its own credit, thus restoring the balance of economic power to elected politicians, and re-affirming the principle that Government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers.
C.H. Douglas called it "a monopoly of credit" in the hands of the private banking industry.
All monopolies are potentially evil. For that reason they generally encounter severe attack and criticism, save this one supreme and privileged monopoly which embraces and presides over all the others, and throughout the centuries has drawn so much power and patronage unto itself, that otherwise responsible and principled people appear afraid even to mention it, lest it should destroy them.
SOCIAL CONSEQUENCES OF THE DEBT
The idea of credit creation by Government has already been used effectively on several well-documented historical occasions.
In 1865 Abraham Lincoln himself ordered the creation of 460 million dollars to finance the latter stages of the American Civil War.
In August 1914 Lloyd George, then Chancellor of the Exchequer, printed 300 million pounds sterling to rescue the British banks from a war-induced liquidity crisis.
And from 1911 to 1923 Sir Denison Miller, Governor of the Australian Commonwealth Bank, made regular issues of debt-free Government money to preside over the most prosperous period in his country’s history.
Given that these and similar recorded instances of State-created debt-free money were successful, the next obvious question is to ask why they were not perpetuated. And the short answer is that banking opposition was already too formidable.
Lincoln was murdered in his hour of triumph, Lloyd George was forced to issue Treasury War Loan at 3.5% interest, and the Australian concept of a people’s bank did not long survive the death of its founder in 1923.
The bankers maintained that creating credit at will, without debts to be paid back or interest to be levied, can become reckless and undisciplined, resulting in inflation and a debauching of the currency. In certain conditions that can be so, and we should be aware of it. But let us also consider the consequences of following the bankers’ protocol, and accepting that all new money be created as an interest-bearing debt upon the community.
These consequences are all about us. They are seen today in the economic cut-backs that governments are adopting right across the hemisphere to meet some convergence criteria and cut their public spending.
Under natural laws, as the Bromsgrove Statement states, "Whatever is physically possible and socially desirable can be made financially possible." In other words, a just society is one that expands, produces and nurtures itself up to the limits of its skills, energies and material resources.
That cannot be allowed to happen where there is Debt. Under such a system, administrations are obliged to look not at their people’s needs, and the practical means of satisfying them, but rather at their own capacity to borrow.
Thus a thousand and one social and economic factors are bound up in this Big Issue of the Debt. Social deprivation itself, skills rotting in idleness, chronic poverty, hunger and want in the midst of plenty, all have their origins in the distortions and needless disciplines that are forced upon us by the Debt.
Governments and large corporations destroy natural amenities and indiscriminately loot Earth’s treasure house of non-recyclable energy and resources, all because of the costs and the pressures of servicing and sustaining the Debt.
DEMOCRACY DOWNGRADED BY BANKERIST CONTROL
Because Debt and the credit monopoly place us under bankerist control, rather than political control, democracy itself is downgraded, losing that independence of spirit and action to which all free peoples aspire.
Sir Robert Menzies, Prime Minister of Australia in the 1960s, said that "there can be no independence without financial independence". No people is truly sovereign which does not have control of its own money.
Our governments do not have that control when they have to borrow from the banking system to create new resources. Politicians elected under the people’s mandate find themselves beholden to bankers and financiers, who are beholden to no-one. Hence the current distrust of politics and politicians. There is a malaise at the heart of society, and politicians no longer have the means of tackling it, because they do not seem to know how to take back control of the people’s money.
GETTING TO A SOLUTION
We have diagnosed the problem as debt, spiralling, uncontrollable National Debt which costs billions per annum just to cover the interest payments. If we face up to the problem, instead of concealing it behind silence, we will need some radical departure from the prevailing practices.
We need to break the bankers’ credit monopoly, and establish a non-inflationary procedure whereby an elected government can create a proportion of its own new money.
Promptly, we are told by the banking lobby that it just cannot be, that debt-free money is vastly inflationary, and that the only “sound” money is bank money, borrowed at interest.
But ironically the facts of economic history tell otherwise. According to The Truth in Money Book (Fourth edition, p. l98), it is only within a debt-money system that chronic inflation has ever occurred, beginning with the first recorded inflation which destroyed ancient Babylon 4,000 years ago.
So our radical solution must put a cap on National Debt, end Government borrowing, restore pride and responsibility of office to our elected politicians, and do it all without causing inflation, or disruption of our markets and banking system.
THIS IS A MATTER OF PRINCIPLE, NOT TECHNICALITIES
Once it is accepted that there can be no social justice until the credit monopoly is broken, there emerges a very simple solution, which was actually propounded in The Money Bomb some 18 years ago, and is based upon an extension of the facilities provided for the banknote issue, the only act of money creation currently practised by H.M. Government.
The solution takes note of the amount needed for annual Debt interest — quoted at about £27 billion in 1998 — and suggests that for this and each succeeding year the interest figure should be met not by further borrowing, but by creation of a Debt Interest Redemption Stock which, like the banknote issue, would remain as an internal arrangement between Treasury and Bank of England.
There would be no problems about procedure, since the financial machinery is already in existence. Neither would there be any danger of inflation, since the £27 billion has to be created in any case to pay the existing bondholders. And because the Government was itself creating the money, there would be no further need for public borrowing.
Thus, presuming that the experiment was repeated year on year, the Debt itself would never get any larger, and could in fact become an innocuous part of the Treasury’s accounting procedure.
In other words, we could simply create the money necessary to pay the interest on the National Debt, instead of, at present, having to borrow even more to pay the interest!
Of course, this is one solution. Mike Rowbotham in The Grip of Death has suggested another (see the explanation in the article "The Prosperity Proposal", February 2001).
However, the essential point to grasp is that we must promote the principle that the Government can and should — through a democratically accountable State authority — create a proportion of the money supply.
It is not for us to argue over the exact technicalities, but to get that principle firmly established.
A CASE FOR PUBLIC AWARENESS
Politicians, particularly at election time, will have no desire to pursue such matters, But the electorate, if so minded, can set its own agenda.
Change will only come about when a large number of people become aware of the problem, and start demanding that something be done about it.
The options are closing. Already a choice is having to be made between national economic sovereignty and the European Central Bank. The latter, according to Articles 105-115 of the Consolidated Treaty on European Union, is an autonomous body, its governors appointed by the banks of the member states, and outwith any political oversight. (The Treaty is available for £26.50 from The June Press, PO Box 9984, London, W12 8WZ).
Would this be an end to democracy as we know it?
Would it be an end to any prospect of breaking the bankers’ credit monopoly, and restoring some political influence over the people’s money? For as we have seen, the agency which controls the money also controls the economy and the life of the nation.
That is the extent to which the Big Issue, the Debt issue, should be dominating both the economic and the political debates in Election 2001.
The Money Bomb by James Gibb Stuart is available for £5 payable to Prosperity at the address below.