Monetary
Justice
Economic
Democracy
True
political democracy can only be built on the foundation
of true economic democracy. It is the duty of democratic
government to secure the results the people want from
the management of their public affairs as far as such
results are physically possible and morally right.
Whatever
is physically possible is financially possible through
appropriate democratic and just transformations of
society’s economic institutions.
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Money
is created out of nothing!
It
is not widely understood that, at present, around 97%
of the new money supply is fiat credit money created out of
nothing by the private banking system which then adds
a demand for interest of which administration cost is normally
but a component. Government creates the remaining 3% as coins
and banknotes.
Thus
the inherent power of government to issue money has, in practice,
become a private banking monopoly. Which might not matter
too much if the monopoly
were being used to serve the purposes of the whole of society
and large amounts of interest were not involved.
But
the banking monopoly (contrary to the daily propaganda issued
by banks and governments the world over) is not
used to serve the purposes of the whole of society. It does
not allocate resources in
the most efficient way; it does not
allocate resources in the fairest way; it is anti-democratic,
and it always tends towards inflation.
The
addition of interest, moreover, is generally a worldwide device
for shifting wealth from the poor to the rich. The way the
interest mechanism works is complex but interest is a considerable
part of every price that we pay! So, even though people may
get part of their income from interest, they still lose overall.
Generally, 80% of the population loses as a result of interest;
10%, on balance, neither loses nor gains – and the last
10% most definitely gain!
Servitude
of nations
Furthermore,
country after country is being oppressed by the banking system
which, demanding billions of dollars of interest forever,
thinks nothing of crushing a society and its people. The complete
imbalance of power between the banking system on the one hand
and countries, corporations and individuals on the other happens
because the world has been bamboozled into thinking that newly-created
money has to be borrowed from the banking system with interest
added. That interest, particularly in the case of poor countries,
soon compounds to become astronomically large. The result
is that the total debt becomes unrepayable.
The
situation is then considerably worsened by corrupt elites
who finagle the borrowed money into Swiss bank accounts, leaving
the repayment of principal and interest the responsibility
of their impoverished, politically crushed populations. And
this essentially happens because countries do not yet understand
that they do not need to
borrow money for their capital investment with interest added.
Instead, governments can create their own money – with
no interest added!
Mother
of all ‘stings’
The
really extraordinary thing about the situation is that it
is an obscene fiction – the Western banks doing the
lending never have the money in the first place because the
lent money is created out of nothing by pressing computer
buttons! The obscenity becomes particularly perverse
because the debts are imposed on impoverished populations
by banks who practise predatory lending. Such lending happens
when a bank, knowing that the likelihood of full repayment
within a short period is most unlikely, still goes ahead
with the lending. It does this because, in that way, it can
batten on to the borrowing country for, not years, not decades,
but generations!
This
results in the situation of the Pakistan haris –
debt-slaves whose original debt (maybe a hundred or more years
before, to pay for a funeral) would have been a few dollars
but because of poverty, unrepayable at the time. Then, with
compounding interest over the years, the debt becomes larger
and larger and the obligation to repay an ever-increasing
amount is passed down from father to children for generation
after generation.
Another
version of predatory lending occurs today when the banking
system lends large amounts of credit (repayable in dollars)
to a country’s corporations and institutions. Then the
hyping begins – Hooray! What a splendidly burgeoning
tiger economy! (And it is burgeoning because of all the newly
lent credit). A flood of hot, reckless money soon follows.
A
crisis then happens and there is a run on the local currency
(and its devaluation) as repayment in dollars becomes impossible.
The crisis is probably deliberately engineered so that the
international vultures can move into the country and buy up
the assets of corporations at distress (and devalued) prices.
Yes,
deliberately – that was the case with Malaysia in 1998.
There was no reason for the run on the Malaysian ringgit:
it was the result of corrupt conspiracy. Fortunately, the
Malaysian government, showing extraordinary courage, resilience
and new thinking, imposed currency controls and resisted the
demands of the IMF. A mere two years later, the IMF had to
admit (it was a grudging admission) that Malaysia had got
things right………..
All
of which tells us the truth – a mother of all stings
is going on. A truly successful sting happens when those who
are stung do not realise that they are being stung! That is
the situation today because countries do not yet realise that
they do not have to borrow at interest for their capital spending
but can create the needed interest-free money for themselves.
Until
they realise how money is actually created and that they can
create it for themselves, no country or society can ever be
free and will always, economically, politically and socially,
be in hock to others.
Interest
is not necessary!
However,
once it is understood that, today, all dominant monetary systems
are fiat systems, (yes, creating money out of nothing), then
all the lies and propaganda that at present govern the world
are soon exposed for what they are – lies.
Thus,
contrary to the lying propaganda put out by the banks and
governments, the addition of interest
is not generally necessary (although administration
charges and some other possible cost may be). This is a subject
of the greatest importance to Muslims whose religion forbids
the imposition of interest.
Financial
savings are not necessary for capital investment
To
take another crucial example, the propaganda always says that
financial savings are necessary before capital investment
can be made. That’s another lie which results in only
the rich being able to invest.
The
truth is that, since money is nowadays created out of nothing,
financial savings are not
necessary before investment can be made. There may be a need
for some form of security against the possible loss of the
investment, but that’s another matter. And there may
be a need to pay a higher price for different physical materials,
or use different physical materials, or even wait because
of a labour shortage but, again, those are other matters.
Furthermore,
it is already possible, lawfully, for communities to create
new currencies which have no interest attached. See Complementary,
Community and Ecological Currencies.
Debt
Cancellation
Because
countries right the way round the world have allowed themselves
to be bamboozled into believing that money always has to be
borrowed from someone else, a disastrous situation has arisen.
Many countries now have astronomical levels of debt –
a debt that that is often illegitimately created because,
in the first place, there never was a reasonable prospect
of the debt being able to be repaid. Thus interest on the
debt compounds for evermore. That’s the cynical way
the banking system lives off the poor.
So,
if the poor of the world are to have lives imbued with the
five Justices, they must be allowed a
fresh start by having existing debt cancelled. Anything
less, would be a betrayal of hope and decency.
Negative
effects of the debt-based money system
Any nation, therefore, should realise the consequences of
its failure to understand how it is ripped off, controlled
and impoverished. Consider this list:–
1.
Goods and services are needlessly expensive
The cost of borrowing is in the price of all goods
and services. This includes the borrowing costs of
the suppliers (and the borrowing costs of the supplier’s
suppliers) as well as the borrowing costs of government
(which make for unnecessarily high levels of taxes
all of which, in one way or another, are included
in the price of a good or service).
2.
Consumers are impoverished
Separately from having to pay for the cost of borrowing
in goods and services, consumers are impoverished
by the cost of their own borrowing be it for a mortgage
or a credit card. People have to borrow when they
have insufficient income.
3.
Inadequate demand
As a result of the above, the economy has inadequate
demand with consequences for jobs and prosperity.
4.
Effects on business
The inadequate demand holds down wages, causes job
losses, encourages cheap imports and leads to jobs
going abroad.
5.
Inflation
Interest, and the effects of interest, is the biggest
cause of inflation. This is usually ignored because
people have been conned into thinking that nothing
can be done about interest. When interest rates go
up, there may be a temporary lessening of inflation
as demand is reduced but, in the long run, increased
interest rates mean increased inflation.
6.
Effects on international trade
Exports bring in foreign currency which, for the exporting
nation, does not have debt, and interest, attached
to it. But when a nation imports, the money used to
pay for the imports usually does have interest attached
to it. Therefore exports are not mere opposites of
imports but, somehow, in order to pay the added interest,
every nation must export more than it imports –
which is impossible.
7.
Third World debt
The funds of the International Monetary Fund (IMF)
are created out of nothing whereon interest is added.
A nation in financial difficulties, therefore, soon
ends up repaying (if it can) much, much more than
it originally borrowed! Today, the poorest nations
borrow and then have to export everything in an endeavour
to repay the interest, rather than paying for their
own needs. Inevitably, they then have to cut back
on their own health and education programmes with
disastrous long term effect.
8.
National debt
In the UK, the National Debt is around £400
billion (and £26 billion in 1960) with an annual
repayment of interest of around £20-25 billion.
This is such an appalling – and yet, quite unnecessary
– sum that little else can be said except that
the total National Debt, and the interest payable
on it, can be expected to rise steeply, if not exponentially.
9.
Insufficiently productive consumers
The debt-based money system inevitably ends up concentrating
the ownership of productive wealth. A widespread ownership
is essential for prosperity and a deepened democracy.
10.
No secure income
The system does not, and cannot, have a secure income
for all individuals.
11.
Money is used for speculative purposes, not production
Most money today is not created for the purposes of
production and new wealth. Rather it is used for speculative
purposes building unsustainable bubbles which, when
they burst, cause disaster for millions of people.
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Ignorance
The
negative effects of the debt-based money system will continue
while, around the world, people are ignorant of how they are
deceived. Yet people of good faith who understand the deception
and who understand how money is created out of nothing and
interest added have a responsibility to others to press for
change. They should, for example, ask why the example of the
New Zealand in 1935 is not being followed today. At an interest
rate of only 1%, hydroelectric projects and public housing
were financed. Why not today?
Furthermore,
apparently small things – like the existence of tax
havens, for example – might not seem too important.
Yet, such havens are often the means by which corporations
(using fictitious expensing) deny tax revenue to their host
governments and manipulate prices to the disadvantage of suppliers
and others. Another example which people often think unimportant
is the 100% borrowing allowed for the acquisitions of real
property and companies, resulting in inflated asset prices
and the dangers of a speculative collapse in which everybody
suffers.
The
Emperor has no clothes!
Acknowledging
the undeniable truth that money today is created out of nothing
reminds us of the child’s story of The Emperor Who
Had No Clothes. Yet, as is well understood, the child’s
story is also profoundly true of adult life – untrue
fact can be supported by everyone, or certainly by all the
powerful, until some innocent waif points to the obvious and
undeniable, thereby, to the relief of most, collapsing a lying
structure.
From
the acknowledgement of the truth, moreover, the outlines of
new policy soon become apparent. Some of that new policy is
set out below. To understand it, please remember:–
•
Money is society’s money and its creation, and
the full benefits of that creation, should not be
a privilege granted only to the few.
•
As a universal and fundamental right, every
citizen must be allowed to play a full part
in economic production which, in practical terms,
means being allowed to participate
in the ownership of future productive assets. The
issuance of credit for capital investment must be
democratised so as to spread widely the ownership
of self-financing productive assets.
•
There is a sharp distinction between:–
i) credit
extended for producing wealth, and
ii) credit extended for consuming wealth (today people
are bombarded with invitations to borrow, at interest,
of course).
The former
is designed to increase the productive power of the
borrower (a good thing) while the latter creates artificial
purchasing power that has historically weakened and
enslaved the borrower economically (in the long run,
a very bad thing).
•
The wealth gap between rich and the non-rich must
be narrowed.
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Differential
interest rates
In
referring to interest-free money, it should be understood
that associated with the issuance would be a small cost for
administration expenses and, in certain circumstances (private
sector wide ownership), a possible cost for loan insurance.
That said, in the Justice economy, there will be two broad
types of interest rate:–
a) interest-free
(as qualified by the paragraph above) for Justice
purposes
b) interest-bearing
for those parts of the economy not covered by the
Justice proposals.
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Debt-free
money, of course, is money that has no interest attached to
it and is not repayable.
So
Monetary Justice demands that the state:
1.
End the monopoly of the private banking system
In
practical terms, this means increasing the proportion of the
new money supply that is issued directly by the state (with
relative decrease issued by the banking system) and then using
the increase for specific purposes including those of the
private sector. The newly created money can be either repayable
or non-repayable.
At
this point it should be noted that a common trick of the lying
propagandists is to allege that any proposal for monetary
reform (as in the GJM) means the endless printing of non-repayable
money with a resulting huge inflation. “Like Germany
in 1923!” they scream.
However,
the first main GJM proposals are for the
issuance of interest-free (plus administration cost) repayable
and cancellable money for use in capital investment and so
there will be no inflation. Rather, there will be counter-inflation
as newly productive capital assets come into existence while
the money that helped create them is repaid and can be cancelled.
The essential point is that using state-issued repayable interest-free
money for capital investment results in a cost one half of
that at present.
Such
investment can either be:
• public capital investment, or
• private capital investment
N.B.
Over time, in the Global Justice economy, interest-free money
will come to replace interest-bearing money and not be in
addition to it. Since it is replacing, it cannot be inflationary.
The
Seven Steps form the theoretical and moral basis of the GJM.
The Seven
Steps are:—
•
There must be public acknowledgement that the present
banking is an unjust monopoly that creates 97% of
the money supply as interest-bearing debt.
•
State-issued interest-free loans (plus a small cost
for administration expenses) should be used for public
capital investment thereby halving the present cost.
•
State-issued interest-free loans (plus a small cost
for administration expenses and a possible cost for
loan insurance) should, on market principles, be used
for private capital investment if such investment,
using the mechanisms of binary economics, creates
ownership stakes and property incomes for all income
groups, including the poor.
•
State-issued interest-free loans (plus a small cost
for administration expenses and a possible cost for
loan insurance) should be used for loans to start-up
and small business.
•
Since the Steps above are counter-inflationary and
ultimately diminish the money supply, debt-free non-repayable
money should be issued for individual secure incomes
to the extent necessary to keep a stable level of
prices.
•
That, in addition to the Steps above, the position,
role and economic position of women in the world be
specifically addressed.
•
That the Steps above be implemented as the only possible
long term solution to get peace in areas such as the
Middle East, Kashmir and Iraq.
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N.B.
Over time, in the Global Justice economy, interest-free money
will come to replace interest-bearing money and not be in
addition to it. Since it is replacing, it cannot be inflationary.
2.
Issue repayable, interest-free money for public capital investment
Every
day, a colossal and absolutely amazing rip-off takes place
and only the brave few (such as the GJM)
have the courage to protest about it.
It
happens because all governments require money for their own
capital investments – things such as hospitals, schools,
roads, bridges etc. Yet, at present, instead of governments
creating their own money for these purposes (and then getting
it repaid and cancelled) they borrow from the banking system
which just creates the money out of nothing and
then adds, over the years and decades, seemingly endless amounts
of interest!
This
causes a horrific level of National Debt. In order to repay
the Debt (or, rather, to try to stop it increasing exponentially),
vast amounts of interest have to be annually paid –
and such amounts are a large proportion of the income tax
we have to pay. What a rip-off!
Yet
that rip-off is not necessary (although the defenders of the
present system like to claim that it is). Public capital spending
can, and should, be financed by state-issued, interest-free
money (which, in practice, only has a tiny administrative
cost). It is only lack of political will (because the political
system is controlled by vested interests) which prevents the
use of such money
Please
note that the proposal does not mean that the government necessarily
has to construct the public capital investment, nor manage
it – in both cases, that can be done by the private
sector, if wished. It only means that the capital cost is
much, much cheaper.
Moreover,
the GJM does not propose an increase in the total amount of
public capital spending. However, since public projects will
become hugely cheaper, the same amount of money will buy much,
much more! Get it?
The
proposal also has regional implications. Thus the Alberta
(Canada) Social Credit Party sees the virtues of local Treasury
Branches providing a strong Alberta-based alternative to out-of-province
financial institutions. In this way, the benefits of the financing
go to local people rather than outsiders. People such as Dr.
Shann Turnbull vigorously promote this sensible idea.
In
sum, the purpose of the first GJM proposal is simple –
state-issued repayable interest-free money
(plus a small cost for administration expenses) reduces the
cost of public capital investment to one half, even one quarter
of what it would otherwise have been. Malaysia is believed
to be experimenting with such money.
3.
Issue repayable, interest-free money for private capital investment
if new owners are thereby created.
Just
as state-issued, repayable interest-free money can be used
for public capital investment, so it can also be used for
private capital investment. Whereon an objection arises –
if interest-free money is allowed for private capital investment,
the existing rich would become astronomically rich. Which
is true.
However,
the GJM proposal has a big difference – the use of interest-free
money (plus a small cost for administration expenses and a
possible cost for loan insurance) for private productive capital
investment would only be allowed if it
results in new owners of that capital. Generally, this
would take place only in large, well-established corporations
(e.g. in the USA the 3000 largest corporations) not new or
small businesses.
And
new owners – millions and millions of them – are
what the GJM demands. Every person
– in work, out of work, female, male, old, a student,
a baby – should have a first secure
income coming from the ownership of an independently
owned capital estate (paying out its full
earnings, after retention for research, development and depreciation).
The first secure income will start small (for a baby) and
then, gradually, over time, on market principles, as new productive
investments are added, get bigger ……… and
bigger…….AND
BIGGER!
The
mechanisms for achieving this are those of Binary Economics.
It uses a trust mechanism similar to those of existing ESOPs
(Employee Stock Ownership Plans) but without their disadvantages,
and with safeguards against abuse. The existing banking system
would administer the money. Over time, on market principles,
everybody comes to a proper ownership
of productive capital and its income.
Market
principles include a requirement that a project should be
able to pay for itself and, in practice, there will often
be a need for a substitute for collateral. Binary Economics
provides that substitute with Capital Credit Insurance. See
Binary
Economics — the new paradigm, Robert Ashford
& Rodney Shakespeare, obtainable from Amazon.com
Again,
the proposal has regional implications. Local Treasury Branches
would ensure that the benefits of the financing go to local
people rather than outsiders.
See
also the website of the Center
for Economic and Social Justice Washington, D.C.
4.
Issue repayable interest-free money for farms, small and start-up
business
Farms, together with small and start-up businesses, are the
seed corn of an economy. They, too, should benefit from interest-free
loans (plus a small cost for administration expenses and a
possible cost for loan insurance) rather than pay huge interest
charges as at present.
For
any large interest-free loan, collateral (i.e., some form
of security to be put up against the possible loss of the
loan) would still be necessary. See Binary
Economics. But
the key point is that interest-free loans could be used for
small businesses in exactly the same circumstances as today
(e.g. the money being administered by the present banking
system) except that the small business would not be suffocated
by interest payments. As with public and private capital,
the overall effect would be counter-inflationary.
Farms, small and start-up businesses would not be subject
to a wide-ownership requirement.
5.
Issue non-repayable, debt-free money for a second secure income
Since
interest-free repayable money for public, private (wide ownership)
and small business capital investment is counter-inflationary
there will be increased wealth but lowered prices. In order,
therefore, to maintain a stable level of prices, the issuance
of debt-free money will become necessary. Such money has no
interest attached and is not repayable.
Looking
at things from another viewpoint, that of Social Credit, the
economic system always has an insufficiency of demand. Social
Credit proposes a National Dividend to correct that insufficiency.
However,
whichever way the situation is viewed, a
second secure income becomes possible (in addition to any
income a person gets from labour).
The
use of debt-free money is discussed in Creating New Money,
James Robertson & Joseph Huber.
6.
Use interest-free money for green capital investment
Windmills
and solar energy-generating systems are examples of investment
projects that can, and should, be done with interest-free
money. However, while, as at present, all such investment
has to be made with interest-bearing money, the projects have
a borderline, or no, viability.
With
interest-free money, however, they become economically feasible.
Getting such technologies into operation is now environmentally
urgent. Indeed, unless it happens within about five years,
it may be too late.
There
is hope, however, because some mind-bending alternative energy
and other technologies are now on the verge of practical possibility.
Examples are the MEG Motionless Electromagnetic Generator
and various processes for using hydrogen obtained from water.
It is utter madness not to give these
new technologies a chance to save the planet. The use of interest-free
money would be that chance.
Unfortunately,
at present, vested interests and fossilised mindsets have
induced a deep paralysis.
7.
Encourage complementary, community and ecological currencies
Perhaps
the main difficulty preventing the spread of complementary,
community and ecological currencies is the cost of administering
them. At present, this has to be done by volunteers. However,
if Global Justice secure incomes are introduced, that problem
will be largely, if not completely, solved. See Complementary,
Community and Ecological Currencies.
8.
Keep wealth local
If
credit is issued locally, the benefit of that issuance and
its repayment stay locally – put simply, wealth stays
locally and is not ripped off elsewhere.
9.
Cancel the debt of poor countries
If
the poor of the world are to have lives imbued with the five
Justices, they must be allowed a fresh
start by having existing debt cancelled. Anything less
is a betrayal of hope and decency.
10.
Review of tax havens
Too
often, tax havens are centres for allowing corporations to
rip off others through fictitious expensing and other forms
of white collar crime. A review of the situation is urgently
required.
Remember
– the world has the technology and productive resources
to eliminate misery, poverty and injustice and save the planet
(particularly if the MEG Motionless Electromagnetic Generator
and other new alternative energy sources become commercially
viable).
So
let’s demand the Five Justices!
Monetary
Justice
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Social
Justice
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Economic
Justice
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Environmental
Justice
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Peace
Justice
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