Monetary Reform Print

What ever monetary reform we go for, we must not use fiat money ever again. Does that mean we must go back to using some precious metal or other like gold as a standard instead? I think not. When money is created it should only be created by our governments. This money should only be created on the basis of real wealth not debt. A country should only create debt free money on the basis of its real physical wealth such as oil, minerals and land and its ability to create new physical wealth in areas such as farming, building and industry.

If we do not go down this road we will always have problems. Every country in the world trades for goods of some sort whether it is a commodity or a finished good. We do not trade money for money. The ability of each nation to create any amount of money from nothing makes a farce of this. It is the exact reason why the gold standard was used in the first place to control the amount created to avoid hyper inflation and to put a value on money. Of course we need to remove the international banks right to fraudulently create money from nothing and create spiral debt. 

Of all the reforms I have seen put forward for monetary reform, only one covers what I have written so far. It’s called Social Credit It covers all the above and more. Using social credit the supply of money is kept in check and in line with production of goods and services. An Independent National Credit Office would have the job of ensuring the nation’s money supply is correct by issuing or withdrawing money as necessary in accordance with the country’s production capacity and demand. The banks will no longer have control of the purse strings of government. The government can also expand the money supply when needed by a National Dividend to the population. It is very much like the stimulus packages used lately to stimulate economies but this is issued without any debt. A national dividend would also have an important job to compensate those affected by new production methods.

As technology and new production methods expand less and less labour would be needed. Because production is no longer the result of labour only, it is a farce to believe that production can be distributed only through the reward of labour. It is the fruit of progress and not labour which is providing these great achievements. There for we must look at this in a different light. As new production methods expand, less labour is required resulting in a rising number of permanently unemployed people. It would also be true that working hours of the work force as a whole is reducing. If people only got paid by the hours they worked their wages would fall. To recognise this progress as a National Heritage for everyone, a dividend would be used to supplement these lost wages. This heritage should be shared and not lost in the hands of a few. As I said before a dividend could also be issued to the whole population when the money supply needs increasing.

This is the basis that I understand as social credit and believe it would be a great model for the world to use as monetary reform. As I have said before, any real reform must include the removal of fractional reserve banking or we are wasting our time. This reform must also deal with the removal of unsustainable debt created from fractional reserve banking.

Below is an example of social credit in action. It could easily be Ireland, Greece, Spain, Italy, United States and any number of countries now facing unsustainable debt that will default sooner or later.

The Guernsey Market House Scheme (A financial experiment)
Over 100 years ago, an economic experiment known as the Guernsey Market House Scheme was implemented on a small island called Guernsey. This island was in an economic financial mess. All trade of Guernsey was steadily going to a stand still with unemployment rife. To make things worse the sea defenses were breaking down. There were practically no roads and most public buildings were in great disrepair. Above all, a new market house was urgently needed, where the islanders could exchange their produce. It was impossible for the Government to finance these necessary improvements out of its revenue as this entire amount was required for ordinary expenses and the interest charges incurred on previous debt. The Government did indeed try to raise a loan, but because of the poor state of the island's assets, the banks demanded the prohibitive rate of 17 per cent per annum. As such necessary finance could not be obtained by further borrowing.

"Necessity is the mother of invention" and in this case the idea that was put forward that the State should issue its own money, gained ground. It was argued that, as labour and materials were both available, it was absurd for improvements to be held up simply through lack of money. As conditions became even worse, this plan was soon seen by many as the only solution. Finally, after various setbacks and considerable opposition, the adherents of State money carried the day and in 1816, 4,000 notes of £1 each were printed by the Government and paid out for the most urgent repairs. By the success of this issue the principle was established and during the next 20 years the Government authorised notes to the extent of £80,000, which were utilised in building the new Market House, schools in every parish, roads all over the island, St. Elizabeth's Cottage, etc.

These Government notes were redeemed, as the economic circumstances of the island justified, from earnings derived from the collection of market rents, customs duties, etc., and in 1836, when the scheme ended, there was a balance outstanding of £55,000 Government notes.

During the First World War, Australia also used this same principal to finance its massive costs of going to war. The People’s Bank was used to finance the war. The limiting factor was not credit; it was what the Australian people could do. If they needed to build a warship, these questions were asked. Is there enough steel? Is there a dry dock to build them? Are there enough engineers, do we have enough painters, do we have a crew to man these ships? The limiting factor is the materials, the know how and man power to do these things. Once it was shown that these resources were available the money was immediately allocated without debt. In reality the war could have been financed this way many times over if they had to, because they had so many reserves in materials.

The real cost to Australia, was in the lives lost on the battlefield and the injuries sustained but it wasn’t a financial price. In peace time, Australia continued to use Social Credit, instead of building warships they built schools and infrastructure. Indeed The Great Depression that was to affect the world later could easily have been avoided in Australia if it continued to use social credit. This was not to be and Australia like the rest of the world was at the mercy of the banks.