The Neoliberal Religion 5

Cutting the deficit will not be possible (without money reform)

As promised, our new Government has immediately announced its intention to cut the deficit that it inherited from Labour. This initiative was applauded by the Governor of the Bank of England and, if Mrs Gillian Duffy is to be our Everyperson, it will no doubt be accepted as inevitable and even desirable by a sizeable section of the British people. At the same time, our new Minister for Banks and Business, Mr Vince Cable, has announced his intention to force the banks to increase their lending.

Both of these two announcements indicate that the new Government, as well as the old one, the Bank of England, and a sizeable proportion of the British people have no understanding of the money supply, nor of the way it impacts upon the economy.

We have had recessions before, of course, and each one was ended by a cut in base lending rates. This reduced the cost of borrowing, inducing companies to borrow to invest in their businesses and consumers to borrow in order to buy the products of those businesses, so causing the economy to resume its upward path again.

Bank base rates have been at 0.5% for well over a year. They have never before been so low, and they have never been kept low for so long. Yet, few people are borrowing. There has been no net increase in borrowing by private households or private businesses for the past year. Such borrowing that is occurring is simply matching the amount of old debts being paid off.

This level of borrowing is not enough to get the economy to grow. Indeed, it is not enough even to prevent the economy from sliding into recession. Look at the figures. Total UK debt (excluding inter-bank debt) is about £3 trillion. Half of this, £1.5 trillion, is household debt, mostly mortgages. Nearly another trillion is Government debt and the remainder is business debt. Most of this debt is low risk, low interest stuff, say 5% to 6% on average. This means that to create enough new money to pay the interest on this debt, new borrowing had to increase during the last year by at least 5% or 6% of £3 trillion, a figure of around £160 billion.

If this figure seems familiar, it is the amount of the Government's deficit on its budget for last year. In other words, only government borrowing created enough new money last year to pay the interest on all the nation's outstanding debts. If this figure is cut by any significant amount, there will be insufficent money to meet the interest on all our debts and we can expect a rise in bankrupticies, unemployment and house repossessions, causing a double-dip recession, if nothing more serious.

To get the country out of recession, net borrowing will have to be far greater than £160 billion, maybe £260 billion, which is why the government wants to get the banks lending.

To put it another way, they want to get the rest of the country, private households and private businesses, to increase their borrowing on a massive scale. But with such massive levels of debt already, who can afford to borrow the extra hundred billion that will be needed each year? And remember, as the debt rises so the level of new borrowing to pay the costs of the debt will rise as well, year after year after year. If net borrowing had to increase by £160 billion this year, it will need to increase by £170 billion next year, and by £182 billion the year after that, rising ever higher at an ever increasing rate – exponential growth.

This madness can only be ended by reforming the nation's money supply so that for our economy to function we do not have to have the nation's total debts rising exponentially year on year. We need a money supply that is not based on people being in debt.
Anne Belsey

MRP Leader

“Mankind's greatest failing is its inability to understand the exponential function.” Albert Einstein.
Posted by Money Reform Party at 07:52 0 comments
Wednesday, 23 December 2009




Wonderfully irrelevant Copenhagen

So the Copenhagen conference ended with the sort of fudged semi-commitment that might have been predicted. I am not worried. I do not set much store by such conferences.
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I am particularly unimpressed by 'legally binding international treaties'. They are legally binding upon whom? Who gets arrested and banged-up if the treaty obligations are not met? If Britain, or the USA, or China, or any other major developed or developing nation fails to meet its treaty obligations will they be faced by a gun-boat from the Maldives or Tuvalu or Bangladesh sailing in to impose those obligations? I don't think so.
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Treaties will not save the planet.
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Only changes in human behaviour will do so, and only then if the behaviour is seen as preferable to that which currently pertains. In other words, a less carbon dependent economy has to be more desirable than the present highly carbon dependent one.
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Let me set out my views on climate change. I accept that there is a strong possibility that the world's climate is changing in a way that will be highly detrimental to human civilisation as it presently exists, with a large proportion of the world's population living a few metres above present sea levels. Should sea levels rise, then those people will not simply allow themselves to drown whilst the rest of us, living at higher levels, happily continue driving our SUVs (through the flood waters?) and jetting off to ever more sunnier climes.
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I am also prepared to accept that human behaviour is a contributing factor in this change, releasing carbon that has been locked up in the Earth's fossil fuels for millions of years, over and above the carbon emissions released into the atmosphere by the rest of the biosphere and by the chemistry of the world itself, and that it behoves humanity to reduce or eradicate such emissions as much as possible in order to prevent ourselves squabbling (with nuclear weapons) over fast diminishing resources, whether farmland or oil, but the truth of this issue is irrelevant.
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For Britain, the dispute over climate change is irrelevant.
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If Britain were a country rich in fossil fuels, it would make economic and security sense to pursue a policy of continued dependence upon such resources, but our reserves of these commodities are fast running out. (Okay, so we still have a lot of coal, but extracting it is difficult, unpleasant and dangerous. I grew up in a mining area. My very first job introduced me to the crippling effects of pneumoconiosis – 'miners' lung'.)
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Instead, Britain, being an island, is perfectly situated to take advantage of renewable energy. We are surrounded by tides, some of the strongest in the world, which flow whatever the weather, and by waves and wind, and if we need to dig holes in the ground, let us do so to create geothermal energy. We need renewable energy for energy security, if for no other reason.
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More particularly, would it not be a grand thing to create an economy where we simply do not need to use such amounts of energy as we presently do and still enjoy a higher quality of life; where the normal trip to work is a ten minute walk, not a half hour drive through traffic jams; where we don't keep having to make new stuff to replace stuff that, at two or three years old, is 'out-of-date' or 'life-expired'; where parents have time for their children so do not keep having to quieten them with this year's latest fad; where grand-parents live in walking distance of their grand-children and not half a world away as a consequence of someone's oh-so important career; where businesses are not so immersed in debt that they have to keep increasing production and their customers' consumption in order to stave off bankruptcy; where governments do not have to keep coming up with new reorganisations of the nation's public services to mask the inevitable unravelling of society as a consequence of the pressured lives that so many people lead?
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The world needs to chill out, but to do so it needs to remove the great driver of our increasingly frenetic and decreasingly productive society and economy – debt.
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We cannot hope for a sustainable economy, whether for environmental, economic, social or security reasons, unless we have a sustainable money supply, one that does not require its own constant expansion, and the expansion of consumption along with it.
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Before we can even think about protecting the environment, we have to reform the money supply.
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The money supply is not some natural phenomenon over which we have no control, like the weather or the amount of oil reserves that are still left to be exploited. The money supply is entirely man-made. It is the one factor in our economy over which we, collectively, have total control, and don't let economists kid you otherwise.
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Money is the driving factor in all our lives or, rather, the lack of it compared to our financial commitments is the biggest factor in most of our lives. The bonds of debt are stronger than the metal chains of slavery.
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Bind someone into high levels of debt, through the lure of all the goodies that our modern technology can provide, and you have an obedient and compliant worker, willing to work long hours for low wages, to travel great distances simply to get to work, to expend enormous amounts of time and effort in securing and maintaining employment (and to condemn their fellow citizens who are less successful in this game of musical chairs), to suffer high taxation and ever increasing prices as more and more of their nation's wealth is creamed off by those who still create the money supply - unbelievably so after the shenanigans of the past two years.
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We must end the absurdity of a money supply created by private interests, based upon the debt-bondage of the working population.
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Removing this pressure from peoples' lives is akin to turning off the water at the mains before fixing the plumbing. It is an essential first step without which no other steps can be undertaken. Furthermore, a money supply created by a public agency would create the means to pay for all the renewable energy projects that we need to give us energy security into the future. We have the technology, and it can be improved as we use it and develop it.
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Britain should not be arguing the case for 'legally binding international treaties'. Instead, we should be quietly leading the way towards an ever more prosperous, debt-free economy and an ever more contented society based upon an ever reducing need for the world's finite resources. The fewer our needs, the more luxuries we can have. For example, the car that is no longer needed as an everyday necessity can become the luxury used merely for social occasions, for days out and visiting friends.
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It may be that only Britain can take the lead in money reform, and so provide an example for the rest of the world to follow. We still have our own currency, making money reform easier within Britain than in Europe. We do not have the USA's perverse antagonism towards government involvement in the economy. We still have strong links with a diverse range of countries around the world - the Commonwealth - amongst whom we could create a genuine Commonwealth of Nations, sharing resources and technology in a mutually beneficial and co-operative manner, rather than engaging in the divisive and destructive 'beggar thy neighbour' approach of the World Trade Organisation.
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Despite our modest size as a nation, we have led the world before. We can do so again.
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Anne Belsey
(Leader of the Money Reform Party)
Posted by Money Reform Party at 04:09 0 comments



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