2: Proposed Monetary Reform Motion to Autumn Conference
(I published a version of this proposed motion, with comments and replies, in the January issue. There has been little further response, and time is short for finalising it in time for submission--by 14 June. Please send me your views urgently, and/or offer your support as signatory to the motion—a minimum of four are required.
The essential aim is to commit the Party to the principle of having the national money supply spent into existence by the State, replacing the present supply of debt-money created by the commercial banks and in the process eliminating the debts it has generated.
--Brian Leslie, 12 Queens Road, Tunbridge Wells, Kent TN4 9LU)
Delete all EC662-663, and replace with:
EC662 Today, nearly all money is created by the banking system, in the form of interest-bearing loans to government, private individuals and corporations. Under the present banking system, this gives enormous profits and power to commercial banks and financial institutions to influence and control the economy as a whole. These commercial banking institutions work to a purely commercial agenda in which the desirability of making loans (and thereby creating money) is assessed only in terms of its financial viability to themselves. This form of money creation, as interest-bearing debts, also causes the mushrooming of debt throughout the world, which is a root cause of the destructive nature of the present world economy, by its creation of desperate competition for ‘jobs’ and profits, and conflict over over-used resources.
EC663 Formerly, most money was created by governments, and spent into circulation. This not only gave those governments the “seigniorage”—the value of the money created, less its cost of manufacture—but also meant that once issued, it could continue to circulate indefinitely as a medium of exchange, without being also an interest-bearing debt. With the rise of banking over the last 3-4 centuries, the banks have increased their share of money creation to the point where now only about 3% of our money supply—the notes and coins—is created by our government.
EC664 Reform of this situation is urgent. To this end, the banking facilities of the Central Government will be provided by a reconstituted Bank of England, as a trustee-governed, non-profit-making Central Bank. A Currency Commission will constitute a new department of the Bank of England, and will possess the legal right to create, or cancel, national currency.
EC665 The Currency Commission will be responsible for the creation and regulation of the money supply on the basis of an ongoing monitoring of the national economy. It will be required to maintain the money supply, as a circulating medium of exchange, sufficient to meet the needs of society, and at the level needed to avoid undue inflation or deflation, or for beneficial expansion or contraction of the economy. It will be publicly accountable and open to scrutiny, and ultimately answerable to parliament. The money the Commission creates will be spent into circulation (in the form of credit or cash, as required), in the form of public expenditure or grants, or paid directly to the public in the form of a public dividend or as part of a Citizen’s Income (see EC730-733). If/when it is required to withdraw some money from circulation for cancellation, the Commission will have power to require the Treasury to supply this to it for this purpose.
EC666 The Currency Commission will also monitor and, where judged necessary, take steps to regulate the exchange of Sterling with other currencies, or make market interventions to ensure that stable and sustainable economic conditions are maintained.
EC667 In consequence of the above, commercial banks must be restricted in their ability to create money. This may be achieved at a stroke, on a given date, by making all current accounts as from that date the property of the depositors, managed by the banks, and no longer part of the banks’ assets; at the same time making it illegal for banks to lend out more than they have on deposit or reserve. Existing liabilities to their current-account customers at that date will become liabilities to the central bank, to be redeemed as outstanding loans are repaid. (See the detailed proposals in “Creating New Money”, by James Robertson and Joseph Huber).
EC668 Alternatively, the change-over may be made more slowly, by progressively increasing restrictions on lending by re-introduction and increases in the statutory reserve requirements, or by increasing restrictions on borrowing, for hire-purchase, mortgages, etc.
EC669 With this alternative, the extent of lending and borrowing money into existence could be used as a guide for managing the money supply. Given the natural inclination to avoid debt where possible, the general level of borrowing may become a useful indicator of the adequacy, or not, of the general level of money supply.