From �WHAT MATTERS� e-mail newsletter No.54, February 19, 2002:

The Six-Policies Manning Plan for Monetary and Economic Reform

Hope springs eternal in the human breast - thank God. Perhaps the most hopeful monetary reform statement I have read is that of Lowell Manning, who was for many years the convenor of policy for the New Zealand Democratic Party, which is of similar nature to the green parties in Europe. He is a retired civil engineer, with formal qualifications in psychology and sociology also.

Below is a slightly shortened version of Lowell Manning's submissions to an Independent Review of the Operation of Monetary Policy conducted by the New Zealand Treasury Department in 2000. The six "primary instruments of monetary policy" set out in the submission have since been developed into what I call the Six-Policies Manning Plan for Monetary and Economic Reform.

The Six Policies involve:

1.�� A commitment to zero balance current accounts through a judicially applied foreign exchange transactions surcharge

2.�� A debt and interest-free, public service money supply linked to fundamental reforms of the banking system and the encouragement of local exchange currencies

3.�� Tax reform, including a domestic transactions tax, by which tax collection will become automatic, almost costless, and strictly neutral

4.�� A universal, basic income, as a national dividend payable to every citizen, regardless of means and income

5.�� A commitment to building up a strong network of local exchange currencies, to quickly enable everyone who wishes to take part in worthwhile economic activity to do so

6.�� The adoption of measures of economic and cultural wealth that are appropriate to the drive for sustainable living standards - unlike the Gross Domestic Product and Consumer Price Indexes.

The Six-Policies Plan is presented as a complete social package. Here is Lowell Manning's explanation of how the policies together offer the prospect of a well-structured economy: "Each of the six policies is a powerful stand-alone policy, but the sum of the six is vastly more powerful than the parts.� For example, policy 4 is hard to introduce without policies 2 and 3. While universal income is now being very widely discussed around the world, I believe my proposal is the only one so far that provides seamless integration with existing 'social welfare', and the ability to fund it properly without significant tax increases."

For a summary of the Six-Policies Plan (1,700 words) or the Plan in detail (16,400 Words), please E-mail Lowell Manning direct - [email protected] or [email protected]

I think it is useful to constantly let politicians, economists and entrepreneurs know about hopeful proposals like the Manning Plan, if only to give some meaning to the otherwise hopeless predicament they find themselves in, as peons to bureaucratic protocol and corporate vested interests.

In friendship,

Boudewijn Wegerif
What Matters Programme

Folkhogskola Vardingeby

Slightly abridged - Summary of Submissions to the Independent Review of the Operation of Monetary Policy, of the New Zealand Treasury Department

By Lowell Manning - September 28, 2000

The present monetary policy is based on fallacy. I am not suggesting any malice on the part of past governments, the Reserve Bank, or their advisors, but I believe the country cannot progress while its monetary policy is operated on the basis of denial.

As long as monetary policy is based on 'real' growth as the Gross Domestic Product increase minus Consumer Prince Index inflation, we are subtracting one invalid, unreliable measure from another invalid measure, producing a completely meaningless outcome. In this case, two major wrongs create chaos.

In New Zealand, as elsewhere, nearly all money is created as interest-bearing debt. Taken as a whole, the interest charges on that money can only be funded through the creation of further debt. The interest passes to the beneficiaries of the banking system, that is, depositors, shareholders, employees and contractors. A small portion also goes to the government as taxation. In this process real wealth is transferred from the borrowers to the beneficiaries.

The money supply therefore has to increase exponentially to accommodate the interest payments unless total productivity increases at the interest rate, or unless all the wealth accumulating to the beneficiaries is redistributed to the borrowers. In practice there is no evidence to support such productivity increases or wealth redistribution. This means the debt system is inherently inflationary. If the overall interest rate on the money supply is, say, 6% and there is real productivity growth of, say 2%, then there is 4% inflation built into the economy.

For many years now, monetary policy has been specifically directed to avoiding rather than addressing the fundamental truths:

(a) The monetary system is inherently inflationary by an amount equal to the interest charges across the whole of the debt-created money supply less increases in productivity, (probably around 5% over the past year or two, but in double digits in other years when interest rates were much higher)

(b) The interest charges represent a continual drift of wealth to those that already have real wealth from those that don't, that is, to the rich from the poor. The total drift is of the same order as inherent inflation rate.

(c) The use of high interest rates to "kill" inflation is the absolute, diametric opposite of any coherent anti-inflation policy. High interest rates increase real inflation by an amount equal to the interest rate rise minus any further productivity increases that can