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Banks, Mass Debt, and Monetary Reform

Friday 14 December 2012, 9:53AM

By Simone-Louise Lalande

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Banks, mass debt, and monetary reform – the big picture goes public.
This is an email newsletter about money. About banks, and about debt. About how our money supply is currently created by banks “out of thin air” as interest-bearing debt - except for the very small proportion of money that is distributed as notes and coins. It's about why we, as a country, need to take this huge and nonsensical privilege away from the privately-owned banks – operating primarily in their own best interests - and swap to a logical system in which our government creates and controls 100% of our national money supply and spends and lends it into the economy - making effective use of 100% state-owned banks - for the benefit of our country and its people as a whole.

Why would a government delegate the power to create - and to a large extent control - its national money supply to profit-driven, private companies, thereby putting itself in the bizarre position of having to borrow, at interest, money it could simply have created itself, debt-free?

Why wouldn't a country want a network of 100% state-owned banks – recognising, and harnessed to, the needs of the people, the greater good of the country – channelling profits from lending not into private pockets but into government accounts to be made available for public spending?

These two questions are not new. Down through the centuries, there has been heated political and public debate, mass protest movements, and wars fought over who gets to issue and control money. 100% state-issued money supplies, 100% state-owned banks – these two models are neither new or radical – right now and also looking back down through history, we can point to successfully implemented systems; we can see the obvious benefits. What is new, what is strange and hard to fathom, is the comparative silence. The drying up of the public debate about money supply and about banking in recent history.

This issue of who creates and controls the money supply deeply affects the everyday lives of you and I, and everyone we know. It impacts on our communities, and on communities around the world. It impacts on resources - who owns them, who gets to use them, and whether they are used sustainably and ethically. It shapes our individual lives and it shapes our world as a whole. And yet most people know little or nothing about how money is created and controlled. About how 'moneypower' is created from our Money=Debt system. A system in which No Debt = No Money Supply. A system which actually requires us, as a population, to be in debt in order for there to be money in circulation. A system in which if we, as a population, paid off all our debt and started saving – as we are constantly being exhorted to do - the national money supply would dry up.

This is not a 30-second “sound-bite” story, but it is an incredibly important one.

If you are concerned about the cost of the Christchurch rebuild (around $4.5 billion of government spending committed so far), about sell-offs of wealth-creating state-owned or council-owned assets into private ownership, about losing New Zealand land to foreign ownership, about unaffordable housing and ever-increasing council rates, about child poverty and rising student debt and what this means for the future lives of young people, about retirement income and good care of the elderly, about having high quality education and health care available to everyone, about providing money for research and development, about reducing unemployment and providing good working conditions, about caring for our natural environment – our precious native habitats, about having good infrastructure nation-wide, about supporting a vibrant cultural life in New Zealand, about reinstating a non-commercial public-service television channel, and about providing everything else that's needed for a stable, caring, prosperous and out-reaching society, then this issue of the national money supply – the private bankers gains and our collective losses – is something you'll want to know about.

If you're sick of hearing about the need to embrace “austerity measures” because of the global debt crisis, while private banks have received massive bail-outs, and while the global casino continues to stay open for the big-time money-junkies, read on. Then take the time to listen to and watch some on-line interviews and documentaries.

(Scroll down for the website links of on-line video and audio interviews, and documentaries - all available to stream for free.)

There's plenty of light at the end of the dark economic tunnel, the debt-tunnel, if we make some much-needed changes to our underlying economic structures. And there are plenty of thinkers and leaders – including reform-advocating economists, academics, journalists, authors, film-makers, political leaders, and former high-flying financial sector insiders turned whistle-blowers - who have paved the way in the past or who are leading the way today on this issue.

And an International Monetary Fund (IMF) report has come out recently that gives a big fat tick to getting rid of bank-created debt-money and replacing it with government-created debt-free money. This report potentially represents a huge turnaround in IMF thinking; a belated recognition that the current debt-mate situation (to borrow from chess) is globally unworkable – no way forward, no way back - and it's time to tip the board over and start again with fresh strategies. (Learn more about this IMF report at: http://www.positivemoney.org.uk/2012/08/imf-working-paper-offers-supports-full-reserve-banking/ )
The monetary reform debate has well and truly started up again. It's a rising international tide of informed opinion with a strong history behind it, and a wave of new books, films, interviews, seminars etc. in the forefront. It is a debate that is not easily dismissed by anyone with half a brain and it seems to be reaching the ears of some key decision makers. So there's good reason to feel optimistic and empowered as you read through this newsletter and check out the audio and video links, even as you see and hear things that might shock or anger you.

Unlike in the USA, where the so-called “Federal Reserve” is actually privately-owned and itself holds trillions of dollars of US government debt, we here in New Zealand – with our Reserve Bank already an arm of government and with Kiwibank well established (although currently not 100% state-owned) – are in a good position to jump-start a better economic future, with monetary reform as the logical first step.

Banks create money “out of thin air” with a simple computer entry each time they make a loan to a customer. This newly conjured up interest-bearing “debt-money” (which could be, say, a mortgage loan or an overdraft or credit card debt) has not been “earned” in any way by the banks and is backed by only a minimal or “fractional” percentage of actual bank assets held in reserve. (Hence the government guarantees, and the bail-outs when these privately-owned businesses face self-inflicted insolvency). The massive privilege this “fractional reserve” banking system bestows on private banks is at the centre of the call for monetary reform. It has been the pumping heart of a Western financial system that has increasingly put more and more 'moneypower' into the hands of fewer and fewer people – and hence more and more political power, to the detriment of people and planet - until we have now reached a situation which is globally unsustainable, a breakdown situation. Along the way, as one American speaker calling for urgent monetary reform puts it: “...millions have died, billions have been harmed, and trillions have been looted...”

The huge problems created because of the use, and misuse, of the “fractional reserve” system of creating a debt-based money supply - and the obvious solutions to these problems - are right there in front of our eyes but are not clearly visible to the vast majority of us. Most of us just don't have – have never been given - the knowledge to make the connections between this system and the current global financial crisis. We don't know how it links to the cyclic boom/bust economy, or even to our personal economic circumstances. But people are now gaining that knowledge.

This newsletter is about giving New Zealanders a “starter-kit” of information - to help join the dots and reveal the big picture. To bring the issues into sharper focus so people can see what's really been going on and what needs to be changed, by us, the people, using our voices.

Please send this newsletter to your family, to your friends, to your colleagues, to all your networks etc. Send it with your name and greeting in the subject line so it doesn't get trashed as junk mail. Share what you are learning. Add your voice to the call for positive reform in the way our money supply is created and controlled, and encourage those you know to do the same. Help this important information to go right around New Zealand as fast as possible. Help get more people in New Zealand thinking, and talking, and questioning - taking a good, hard look at this issue of money creation and control, of 'moneypower', in the past, right now, and into the future - and calling on our political representatives to make the policy changes that will provide a much better future for New Zealand. A richer future. Literally. And a fairer and more sustainable future.

New Zealand is a small country with a small population but we can certainly be in the forefront of an international change for the better. We can take a stand. We've done it before – think about women's suffrage (the first nation in the world to give women the vote), our anti-apartheid stand, and our anti-nuclear stand. We can do it again. We can lift the heavy yoke of debt-money off of our shoulders. We can say no to the bankers, and yes to the people of Aotearoa/ New Zealand.