Money consists of two components:
- Cash (notes and coin), issued free of interest by the State,
- Credit (bank accounts), issued at interest by banks.
The two together make up the money circulating in an economy, also called the ‘money supply’. After WWII, the share of Credit in the money supply was 53%. Now it is estimated around 97%.
The Problems inherent in our Monetary and Financial System
1. Regarding the Money Supply controlled by Central Banks
- Nobody creates the money necessary to pay for interest on Credit. That means virtually everybody is borrowing, at interest, to pay off interest, besides capital.
- The mathematics of compounding interest on interest result in exponential growth, i.e. peaks (or crises) around every 27, 54 and 81 years.
- Governments use the ‘National Debt’ for borrowing, instead of issuing Cash themselves.
- The National Debt was introduced by founding the Bank of England in 1694, when £1.2 million were borrowed at 8% to fight a war against France.
2. Regarding Banks
- Instead of providing a public service, banks are profit-oriented private companies.
- Shareholders of banks expect high returns, up to 40%.
- Financial ‘instruments’ and ‘products’ have replaced money as a medium of exchange.
3. Regarding the Economy
- By making more and more money out of Credit, also called debt, the financial economy is more and more disconnected from the real economy.
- Financial institutions exerting legal enforcement to call in loans, cause bankruptcies, home repossessions, unnecessary litigation and suicides. Through the national debt, they also exploit and constrain the state’s budget, thus limiting political freedom.
The Solution at UK Level
- “Public Credit”, as advocated by Henry Kerby’s Early Day Motion (EDM) in 1964 and our EDMs since 2002, i.e. the Government issuing money and spending it into the economy. See our submission to the Treasury Select Committee Green Credit for Green Purposes
- The Treasury Select Committee organising an inquiry into the money supply. See our online petition Stop the Cash Crumble to Equalize the Credit Crunch on http://tinyurl.com/66rwd.
- A truly Royal Commission (with no more than a small minority of interested bankers, economists and politicians) investigating
- what is wrong with the institutions that the current government created: the ‘independence’ of the Bank of England, the Debt Management Office, the Financial Services Authority