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REPUBLICAN PARTY NEWSLETTER

For a Civic and Constitutional Republic

www.republicanparty.org.uk

 

I

Issue No 52 Friday 18 December 2009

 

 

 

This week 

·        The National Debt - How We Can Get Out Of Jail

 

·        Eurozone/ IMF Revolt: Greece, Iceland, Latvia May Lead The Way.

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News Stories

Highlighting news stories important to the Civic Republican view, particularly those that are overlooked or little covered in the main media.

  

 

MONETARY REFORM

 

·        The National Debt - How We Can Get Out Of Jail

 

Following an article in last Sunday’s Observer by Will Hutton on the problems of funding the national debt, a debate on monetary reform took place in the comments. Your Republican Party correspondent took part. The following are the main contributions exploring the question of monetary reform. The major arguments concerning monetary reform on different sides are brought out

  • TheGreatGigInTheSkyTheGreatGigInTheSky

13 Dec 2009, 2:05AM

Cobblers Everyone is talking about re-arranging the deckchairs, while all the bulkheads are holed and the ship is going down. The model is broken now, the world has changed and it no good crying for what has gone. The system that has caused all these problems is bankrupt, IT'S OVER! We need a new way of doing things, and the sooner we realise that the better.

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  • ErdingtonErdington

13 Dec 2009, 4:10AM

greatgiginthesky

I agree that the whole banking system needs to be re-evaluated. Fractional reserve banking is the creation by banks of money out of thin air as a book entry as an interest free credit to the bank and a debit to the borrower at interest. Any business which enjoys a monopoly like this has us all by the balls. What gives them this right?

The Treasury should be able to raise money for itself in this fashion, so that it is interest free to the taxpayer. Banks can then borrow from the Treasury at interest if they so wish. The banks should work for us not the other way round.

  • republicanpartyrepublicanparty

13 Dec 2009, 10:36AM

HOW TO END OUR DEBT SLAVERY NOW

Trying to reduce the deficit caused by private bankers’ cosmic greed, as many here want to do makes sure that the giant financial corporations will keep us in debt slavery forever. All the comments here are designed to preserve the biggest financial injustice in human history ad infinitum.

Bear in mind, the ability of the USA to service its borrowing will last about three years. After that -bankruptcy. Britain is in much the same boat. And we are talking about budgeting this and that to survive! We are out of our minds. As for expanding public debt, this will put us even more (if that is possible) in the hands of the plutocracy of finance.

The way forward? No longer allow the private banks to create money. Return that function exclusively to the government and print sovereign fiat notes to the value of the debt. Then pay it off taxing the income with a major windfall tax. (The banks only printed the money they lent to government after all.) After that no more public debt will be created. All deficits will be financed by more sovereign notes.

I know, I know. That will produce inflation. Throw away your Milton Friedman quantity theory of money. The truth is increase in the money supply only produces asset price inflation not shopping basket inflation. The technical reason for that is the velocity of money for the former is inelastic but for the latter totally elastic. (For examples, the present stock market boom is being produced by Bank of England QE money just as the noughties housing bubble was produced by the private banks printing money.)

With the money supply controlled by sovereign money, taxes will fall and financial power will be transferred from a handful of bankers to the People and the Republic (sovereign money would be a mess without proper republican institutions).

What can you do? Subscribe to www.republicanparty.org.uk and support democratic money. Read The Web of Debt by Ellen Hodgson Brown.

  • presidiopresidio

13 Dec 2009, 11:20AM

republicanparty

"let the govt print the money"

This will solve nothing. Why should we trust the govt any more than the bankers with the money supply ‘ Look at what NuLibor have done when trusted with money ? Also, you say an increase in the supply of money "will only affect asset process but not food". What are agricultural commodities if not assets ?

The US constitution says that only the govt can issues money but the money may ONLY BE GOLD OR SILVER COIN. That will ensure that the govt cannot inflate. Gold and silver coin cannot be inflated. The value , or amount of goods the coin can buy (be exchanged for, will rise and fall IN LINE with the rise and fall of the demand for currency, it cannot be counterfeited like paper, and so will not be inflationary , even in the hands of the govt. It will only be deflationary until any prior residual inflation is wrung out. But, if you dont think we can return to 100% bi-metal coinage, as I don't think we can, then we require a compromise. I would not want to lug a bunch of coins everywhere.

What we need is a money supply out of the control of ANY one group. When a consumer makes an order with a producer, then a Real Bill of Exchange is raised. That bill circulates as money UNTIL the transaction is completed or expires after 90 days without completion. Upon which the bill is settled for gold or silver into the producers bank account, or nothing happens and in both cases the bills dies. ZERO inflation.

Under Real Bills, no cartel owns the money supply. No govt can print money willy-nilly. The amount of money always is in line with commerce. We know from Brown et al that they cannot be trusted with money. Real Bills work. They have been successfully used before. They went out of circulation when the crime was committed by the usurers to instigate the FED and the other centrl banks so that they could size control of the most important single factor in the economy : the supply of money.

  • republicanpartyrepublicanparty

13 Dec 2009, 11:57AM

We know from Brown et al that they cannot be trusted with money

- presidio

That's right. We cannot give elected politicians a free hand with money creation. This is why the process has to be enshrined in institutions guaranteed by an immutable written constitution which means a republican one. A Monetary Policy Authority with policy set by the Executive and appointed by the Legislature would do the job. That way civil and democratic safeguards are built in.

Liberarian solutions to money like the one you propose have the defect that although they may function for some kinds of exchange they cannot replace the national currency and so you still have the problem of money creation to deal with.

People who argue that the government cannot be trusted with money creation never discuss the only real alternative (which is what we have at present) which is that private banks control the money creation. You criticise the idea that politicians and civil institutions might control the matter quietly forgetting in the process that you are handing over this function to Sir Fred the Shred and his like.

  • Fomalhaut88Fomalhaut88

13 Dec 2009, 12:08PM

republicanparty :

The way forward? No longer allow the private banks to create money. Return that function exclusively to the government and print sovereign fiat notes to the value of the debt. Then pay it off taxing the income with a major windfall tax. (The banks only printed the money they lent to government after all.) After that no more public debt will be created. All deficits will be financed by more sovereign notes.

Man the printing presses!!!! Let's have control of "money creation"!!!! Let's pay off that debt, all £840,000,000,000 of it!!!! Exchange the debt for bits of paper!!!! Genius man, just genius!!!! Why has no-one ever thought of that before????? And underpinning you argument is the claim that "The truth is increase in the money supply only produces asset price inflation not shopping basket inflation". Just like it did in Harare, eh?

  • republicanpartyrepublicanparty

13 Dec 2009, 12:54PM

‘Man the printing presses!!!! Let's have control of "money creation"!!!! Let's pay off that debt, all £840,000,000,000 of it!!!! Exchange the debt for bits of paper!!!! ‘Genius man, just genius!!!! Why has no-one ever thought of that before?????

So what Fomalhaut88 prefers is that international megafinance prints the money then lends it to the government charging compound interest which is what happens now.

Of course, those who have swallowed the line that that gives us stability and ‘real’ money cite Harare or the Weimar republic. But Zimbabwe crucified its currency by stupidly trying to use it to settle dollar debts. Of course, we might have to add in the matter of corruption and dictatorship which are not quite so bad in the UK

As for the Weimar Republic no one ever points out that the German central bank under Weimar was a private bank. But the government was too late in bringing in banking regulation (sounds familiar?). The private owned Reichsbank printed the money to leading to massive currency speculation and massive shopping basket inflation.

This is what private banks do - just as in the UK private banks printed cartloads of money to produce the house price Ponzi boom.

Where on earth do people get the idea that private banks motivated by the desire for monster profit and bonuses (not to mention the desire to control the world economy and all of our lives) are somehow a more responsible agent when it comes to managing the money supply

  • presidiopresidio

13 Dec 2009, 1:40PM

Republicanparty

You dont get it. Real Bills take the money out of ANY special group control.

When two people do a transaction the real bills raised between the buyer and seller is not owned by any bank or govt. The bill is raised because of the transaction only. This is the ultimate democratic option, the people own the money. There is only as much money as there are transactions , not more, no less. That is as it should be.

  • Fomalhaut88Fomalhaut88

13 Dec 2009, 2:04PM

republicanparty :

So what Fomalhaut88 prefers is that international megafinance prints the money then lends it to the government charging compound interest which is what happens now.

Never, but never did I advocate printing money to settle debts. So let's not be too silly today, shall we?

I am one of those awful people with savings. You know, I started my own business, and I worked, and sold the work to others who traded their efforts for mine.

The net result is a figure in their bank account and mine, but it represents something meaningful, and will only buy anthing of worth as long as people like you don't equate it with bits of paper rolling off a press somewhere.

Until such times as you grasp that, it's best stay well away from printing presses, those rectangular bits of paper, and those squiggly lines in that multi-coloured ink.

  • republicanpartyrepublicanparty

13 Dec 2009, 2:16PM

presidio

This is how you explain your system

When a consumer makes an order with a producer, then a Real Bill of Exchange is raised. That bill circulates as money UNTIL the transaction is completed or expires after 90 days without completion. Upon which the bill is settled for gold or silver into the producers bank account, or nothing happens and in both cases the bills dies.

For the 50 oddmillion British who live and trade in the real world this is always going to be a tough sell. Do I want to be paid in a bill that owes its value to a volatile commodity? I don't think so

Remember the words currency and money are interchangeable. And what has currency is what everyone can understand. And currency has to be reasonably stable

You currency idea should be filed under libertarian crackpot

  • furminatorfurminator

13 Dec 2009, 2:35PM

This is what private banks do - just as in the UK private banks printed cartloads of money to produce the house price Ponzi boom.

Banks are businesses, insanely profitable ones, but businesses nonetheless. Banks lend on the basis of how many sound borrowers exist to extend credit to. A normal, boring little bank with a limited customer base and market segment can expect returns on capital of around 50%, during the boom years the IBs were making returns approaching 150% or more, it's what funded bonuses often going into the hundreds of millions. Returns of that size cannot be sustainable in the long run, particularly as they were achieved through insanely high leverage limits and shall we say a rather cavalier approach to basic accounting rules.

As this business model has collapsed (replaced by trading on equity and commodity markets using government money for the most part) the banks have taken a rather different attitude to what represents a good risk. The actual broad money supply (of which 90% is credit extended by private banks) has collapsed and no matter what the government or central bank does it is but a gnats bite compared to the trillions of dollars in debt destruction evident. Hyperinflation is all but impossible from here.

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  • furminatorfurminator

13 Dec 2009, 3:23PM

presidio

We were on a gold standard for centuries, and this entire time was replete with asset bubbles and busts, some even proportionately larger than the monster we're living through. What causes asset bubbles are the banks, and as fractional reserve banking gives them the ability to create money and then rapidly withdraw it, boom bust cycles are inevitable. We even have a name for it, we call it the business cycle.

Governments do not control the supply of currency and they never have (even going back to ancient times this was true). Banks control the money supply (read currency), and as we live in a credit money system it is the government that supplies the reserves at the behest of the bankers, not as the monetarists supposed the government replenishing the banks reserves during a downturn which must cause them to lend. If the banks see no profit in lending then they won't, no matter how much printed currency (or nowadays EFTs) the central banks dump on them. It's really that simple. We are living in a time of increasing currency scarcity. As the over valued asset are liquidated demand for currency increases, and as the debt destruction is to the tune of tens of trillions globally and yet the actual currency printing is but a few hundreds of billions, they can't keep up and never will. Like filling up a plugless bath with a thimble.

  • republicanpartyrepublicanparty

13 Dec 2009, 3:29PM

Fomalhaut88

I am pleased to hear that you have your savings in cash and not property or shares. But I am surprised that you feel someone in your position has been well served by the present system of private bank money creation.

You don’t seem concerned about the fact that under the present system the central bank is injecting £200B of freshly printed money into bank coffers. Quantitative easing they call it. The result is inflation - not shopping basket or property - but of shares. Meanwhile the present system has given you interest rates of effectively zero. Unfortunately, the share price bubble will tempt many savers to switch to shares in which case they will lose massively. The government’s QE programme is effectively rigging the stock market to lure small savers in like lambs to the slaughter

A fundamental mistake you are making is in not appreciating that when the government issues bonds it is effectively increasing the money supply, for the money to pay for these is created/printed by the private banks. If the government prints sovereign money instead of bonds the increase in money is the same. The different is that the government, i.e. you and I, don’t have to pay interest on the new money.

Yours savings will be much safer under sovereign money created by the government for the following reasons. The government will no longer have to pay interest to private banks for the new money. As a consequence taxes can come down. Because the private banks will be banned from creating money they will be unable to create asset price inflation that is out of proportion to the real economic activity. This will transfer the wealth to those, like yourself, who contribute work to the economy.

But the real interest for savers is that because the banks cannot create money they can only lend out what they have on deposit. This means that savings will be subject to greater demand than under the present fractional reserve system (where the banks can lend out ten times what they have on deposit - in reality much more). This means there will be a higher market level for interest rates. Won’t that mean it is expensive for borrowers? Yes, but, and it is an important but, they will have much lower taxes and so will be afford to pay. Also because individual and business taxes will be lower they will be less strapped for cash and so will borrow less. Lastly because asset price bubbles will not occur more money will go into investment or building up cash or other reserves.

It is true that in order to get out of the current crisis, which is biggest in 100 years so we are told, we are going to have to create a lot of sovereign money ‘ we cannot expect to get out our jail free of any bad affects. But against that there will be a windfall tax on the profits the banks make from cashing in the bonds. After that we can look forward to getting the economy prosperous for all - not just a tiny cartel. Historical parallels suggest that can happen within a very few years

The world we live in now is not just “silly” to use your word, it is crazy, up-side-down beyond belief. And it is ruining the lives of millions. We need to be prepared to rethink. And small savers in the current world should be to the forefront of that. The Brown government time and time again has shown that it favours borrow-and-spend over work-and-save. That preference is completely a part of the present system of private bank money creation.

  • furminatorfurminator

13 Dec 2009, 3:39PM

The best thing an individual could do at present is to hold most of his money in hard cash or even better foreign government bonds (German, French and US would be best). The likelihood of actual default in the UK is small but not negligible, and if we do run into that brick wall all bets are off. The chance of a significant sovereign default (Dubai was chump change) is also relatively low, but in the medium to long run I think it inevitable. The Euroland currency is about to come under enormous stress. The EU will either be forced into a true federal system with a single tax base and bond market (which is what's being planned I suspect) or the Euro currency will fall apart with the likes of Ireland, Greece, Portugal, Italy and Spain having to remove themselves or else suffer a permanent depression as they will be utterly unable to devalue their currency and will still be lumbered with high interest rates demanded by the bond market as their credit rating is flushed down the toilet. You can't expect the population of these countries to put up with this for very long, and the likes of the Greeks are not known to take well to demands for austerity. Somethings got to give here.

  • ErdingtonErdington

13 Dec 2009, 4:38PM

republicanparty

I agree with your analysis. Why should the banks have a monopoly on money creation? The privately owned Federal Reserve was the biggest swindle ever perpetrated on the American people.

Looking back through history tells us that at some point all currencies become worthless and empires come crashing down.

As for stashing cash I would say that is a dumb move in the long term, since currency inflation eats away at its purchasing power. Gold bars might be a better bet.

Mass unemployment has resulted from increased efficiency of production, whether it is by computerization, robotics, off-shoring or outsourcing. I would imagine that for the economy to become functional there has to be some form of work sharing and we all have more leisure time.

  • AmberStarAmberStar

13 Dec 2009, 5:10PM

@ Republican Party

The joy of seeing somebody else on Cif who 'gets' where money comes from!

The bank is lending money to the government [& charging commission & interest on it] which the government gives back to the banks as QE so that the asset part of the banks' balance sheets are strong enough to support fractional reserve lending.

Our pension schemes & insurance companies etc buy the gilts from banks & pay another commission (on our behalf) to the banks.

You are basically saying:
1. Cut out the middleman (the banks) & save a fortune in commission & interest; &
2. Turn the tables by having the government charge the banks for notional interest on the amount of fractional reserve 'money' that they utilise in their banking (gambling’) business.

It is logical, sensible & exactly how it should be in a democracy.

Why do otherwise intelligent commentators (e.g. Formalhaut88) think that this is a bad idea?

  • WilliamAshblessWilliamAshbless

13 Dec 2009, 6:50PM

I agree with republicanparty on the subject of debt slavery - aka money - but can't agree with him/her on politics: www.republicans.org.uk/ In particular the notion that the state should be able to control who may join a private civil institution is an appalling idea. [Just a note to you in case you're reading.]

I agree that the current banking system should just be abolished. Start again with something sensible and sustainable. Short of abolishing banking, then at least allow public institutions to compete with it, or, bypass it with something better:

http://www.youtube.com/watch?v=hxdPIOUTd2k&feature=channel_page

http://www.utopie.it/pubblicazioni/gesell.htm

  • republicanpartyrepublicanparty

13 Dec 2009, 8:19PM

@WilliamAshbless

You say that "the notion that the state should be able to control who may join a private civil institution" is an appalling idea.

So it is. Blimey! I said that? Please tell me where.

  • republicanpartyrepublicanparty

13 Dec 2009, 8:56PM

@presidio

Thou dost protest too much

Trying to base a currency on gold is a non-starter. I think you know that but you are trying to hide the fact with reams and reams of argument.

Look. Take a gold coin. Stamp on it whatever value you want and that is what it is worth. So why not use paper.

You want everybody to have their weighing scales to hand along with their online phone to the latest spot price of gold so that the value can be right

In the end ALL currencies are fiat currencies. And fiat currencies depend on one thing - the solvency of the government or other body that issues them.

In this way currencies are like shares in a company. The value of the shares depends on the solvency of the company. It is not backed by some extraneous substance that has nothing to do with the company. And shares like currencies can be traded.

The solvency of a government depends on its tax raising powers minus all the obligations it has, e.g., to the population (what they will accept without revolution), for debts, wars, etc. That is your currency.

As someone else pointed out, during the period when currencies where based on gold we had all manner of bubbles and busts.

And the killer is that gold based currencies are a way of shafting developing nations that have no gold. That was why the gold standard (and free trade) was so intrinsic to the British Empire. And of course gold based currencies could once again be used against poor nations

ALL currencies in the end are fiat currencies. Always were. Always will be.

  • presidiopresidio

13 Dec 2009, 9:04PM

republicanparty

"Look. Take a gold coin. Stamp on it whatever value you want and that is what it is worth. So why not use paper."

What was that about nuance beyond the ken ? I give up. You are beyond hope. Go ahead put a stamp on the backside of a cow and go shopping down Oxford St. Good luck. You are irrecoverable. That i why you spout printing endless amount of moneymoney. You are a paper counterfeiter, of course you cannot get your head around gold. I would not expect it.

  • pipsqueekpipsqueek

13 Dec 2009, 9:26PM

presidio. you are clinging on by your fingertips. Humanity was destroyed in this country when the upper class were never executed en mass as we will always be reminded. The Vulcan will not get my vote. Conservative tribalism is a stupid tactic if all you have got is the vulcan? Well?

  • ErdingtonErdington

13 Dec 2009, 11:00PM

presidio I would agree that fractional reserve banking is a pyramid scheme bound to end in booms and busts.

This is why I am advocating the the money supply be controlled by one entity, probably a completely nationalized Bank of England. The banks can then borrow from this bank at interest and then lend only as much as they have in assets. If they can make a profit then good luck to them. This is the situation all other businesses face. Why not banks? If they are so fucking brilliant that is.

 

 

Recommended article of the week

 

MONETARY REFORM

 

·        Eurozone/ IMF Revolt: Greece, Iceland, Latvia May Lead The Way.

 

Read Article

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If you wish to comment on these articles email

peterkellow@republicans.org.uk

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……. …….until next time