Things are rapidly getting worse – at least for the ‘99%’! Inevitable; misguided politicians; or conspiracy?
The recent moves of the government to cope with the demands of 'austerity’ are so clearly, cynically punishing the poor victims of the ‘economic’ system, and not the ultra-rich beneficiaries, and so giving rise to growing levels of protest; while at the same time, ‘unemployment’ is denying thousands the option to ‘earn a living’.
But why austerity? True, we continue to overuse and waste the once-abundant resources provided by Nature, and need to reduce resource use drastically; but this is not seen as the problem. The problem is, how to pay off our debts – a purely monetary problem.
The Occupy movement has done a good job of waking people up to the the fact of the gross inequality of wealth which has been growing rapidly worse over recent decades, and the banks are being identified as largely responsible for the crash of 2007-8 and the continuing ‘recession’, but it is still difficult to persuade people – especially ‘economists’ – that the root cause of this is the way virtually all of our money is created, and destroyed, by the private banks as they first make loans, draw interest on them, and then cancel the money their loans have created, as they are repaid, requiring that more money-and-debt must be created, by the making of further loans – if they can hope for repayment, and customers can be persuaded to take on further debts.
The alternative way of introducing money into circulation, by creation by a State body, for the government to spend it, so introducing it debt-free, used to be the main way of doing this, and in those days, to be in debt was something to be ashamed of. The growth of the debt-based alternative grew slowly but gradually faster over the last few centuries, until the banks’ ‘deregulation’ by Thatcher and Reagan in the late 1970s allowed it quickly to become over 97% of our money supply, accompanied by an inflationary growth of both the total in circulation, and of debt and extremes of inequality.
The need to stop the private creation of the national money supply has been recognised and urged over recent centuries by many, including several US Presidents; Abraham Lincoln famously issued the ‘greenbacks’ to fund the northern side in the civil war, so avoiding the huge interest burden the bankers sought to impose with their hoped-for loans to the government. In recent years, a number of groups have developed to promote this fundamental change: in the USA, the American Monetary Institute, and in this country, Positive Money have both been rapidly gaining support, while the re-examining of ideas promoted in the 1930s but not then activated, by a researcher working for the IMF, has found them to be be fully applicable today, with great benefits, even beyond those originally claimed. This is impressing many previously opposed to the change.
Positive Money has produced a valuable range of material promoting the change to a fully debt-free money supply, but their latest book, Sovereign Money: Paving the way for a sustainable recovery, argues for Sovereign Money Creation (SMC) by the state, injecting (some) new money and spending power directly into the real economy as a way to make the recovery – i.e. renewed growth of GDP – sustainable!
This is a cynical pandering to conventional thinking about ‘economics’, to get a first step accepted toward the full reform their other publications advocate. I have my doubts about the advisability of such a move.
Another approach gaining support around the world is to promote state-owned banks serving their communities as well as their governments, so able to direct their lending to socially needed projects, and returning to the state the interest-income, less the cost of their operation. This is clearly a big improvement on state use of private banks; and where the ‘state’ is not sovereign, so not empowered to create-and-spend its own money and stop the banks’ debt-based money creation, it is as far as it can go toward reform, but it leaves in place the continuing lack of debt-free money to replace all the debt-based money.