Letter to the Editor

Responses invited!

I watched Paul Grignon’s "Money as Debt" today. Thought it was excellent.  It presented a very watchable and clear explanation of why our present monetary system is unacceptably lethal.  It also presented a strong case for an alternative system based on the government spending money into existence that would be both more equitable and sustainable .  However, like many advocates of monetary reform, it didn’t offer any real solutions as to how the transition from one system to the other could be achieved either practically or politically.  The allusions to conspiracies centred on a "a few powerful men" are not helpful – even if they are grounded in truth: the power of such men is only as strong as the system of conventional values and beliefs that prevail in our society. Change that mindset and the reality of our world changes.

Thinking about what needs to change, I am intrigued by the question "How big should the stock of money be?"  The current levels of money supply in many countries - in the order of 100% of GDP plus – are, to my mind, grotesquely excessive.  For example, my personal money supply – my bank balance – doesn’t need to be more than a month’s salary – i.e. 8% of my net income max.  As most people and businesses operate on a monthly cash flow cycle, this suggests that the overall money supply doesn’t need to be much more than 20% of GDP – so what is the rest of the money supply doing?  Answer - it it is probably inflating asset values and fuelling speculative trading in financial instruments and derivatives – creating a massive burden of debt on the productive economy in the process.  I suspect that to be truly effective, monetary reform cannot simply substitute government issued money for debt-based money over a period of time: it needs to find a way of reducing the money supply by cancelling debt – e.g. by declaring a jubilee – but in a way that the productive economy and the vulnerable members of society are insulated from the consequent monetary deflation.  Ideally the impact of debt elimination should be borne solely by the overblown financial markets.

In other words, how can we eliminate the debt that fuels the speculative bubble without damaging the real economy and the savings of ordinary people?  Any thoughts?


 Andrew Waldie

[I can now supply copies of Money as Debt at £3 each, plus 50p p&p - Brian Leslie]