The TUC March for the Alternative that made its noisy but good-natured way through London on March 26th called for an alternative to the Government's spending cuts. Unfortunately, none of the organisations associated with this march has an alternative.
The usual suspects
Certainly, there are calls for a clamp down on tax avoidance (which is entirely legal) and tax evasion (which is alrewady illegal), but the most difficult task for our often derided and comp[aratively poorly-paid civil servants is to extract more tax from wealthy companies who are able to afford clever specialist accountants to get around whatever rules are imposed. In opposition, every political party calls for such a clampdown, only to fail in government.
Nor can denuding our armed forces of resources offer us the means of paying for our other public services. The defence of the realm is the first responsibility of any government, and Britain has been a player on the world stage for too long to assume a role akin to that of the Swiss. As a consequence of our history, we have responsibilities to fulfil
The problem of debt-based money
Furthermore, neither of the above approaches deals with the central problem facing both the British economy and most other developed economies, a problem of which few are aware, including most economists and politicians.
The central problem stemming from the Government's determination to reduce its borrowing is that such a measure will reduce the amount of money in circulation within the British economy in comparison with the amount required. The amount required grows annually at an exponential rate as more new money has to be borrowed into existence each year to pay the interest on money borrowed into existence during previous years.
Someone has to do the borrowing, whether Government (£900 billion), private business (£500 billion) or private individuals or households (£1,500 billion). It is noticeable that no one seeking an alternative seems to be suggesting that government borrowing should continue to grow exponentially, and there is opposition to increased private borrowing in the form of increased student debt. With debt-based money, the alternative to ever increasing borrowing, by whomsoever, is economic recession.
This is a situation that neither the Coalition Government nor the coalition against the cuts are addressing, because neither side is aware of the problem.
Ending the bankers' money-creation scam
Money reform would address this problem of debt-based money and also provide sufficient funds both to maintain public services and to reduce government debt.
Money reform is simply this. A law would be passed that prohibited the clearing banks (the likes of Barclays, HSBC, LloydsTSB, RBS, etc.), or any other private body, from creating credit based on their borrowers' debts. In other words, banks would no longer be able to lend money that they did not have. They would no longer be able to create the nation's money supply in a process that requires ever-increasing indebtedness. This would, of course, reduce bank profits, down from billions to mere millions, and bankers would revert to being well-paid businessmen, rather than being the Masters of the Universe.
The shortfall in the nation's money supply would be met by increasing the amount created by the only other (legal) creator of the nation's money supply - the Bank of England, a publicly-owned Government agency.
Currently, the Bank of England creates just 2.6% of the nation's money supply, in the form of the notes and coins. The £2 billion or so of extra cash that it creates each year (in addition to old notes and coins being withdrawn) is almost wholly extra income for the Government's coffers. Printing up a £20 note costs a few pence. This is free money for the public purse, derived from the new money that the economy requires.
A public money supply
Money reform would simply increase the proportion of the nation's money supply created by the Bank of England from 2.6% to 100%. This need not be in the form of notes and coins, but could consist of credits in a Bank of England computer. In the process we could expect to see the revenue due to government grow from around £2 billion per year to some £100 billion per year, at least for about 10 years, until the economy had an adequate stock of permanent money. This money would not require anyone to be in debt.
This sum of extra government revenue would enable the deficit to be paid off in about 18 months, whilst the entire National Debt, which has been growing exponentially for over 300 years, could easily be paid off within a decade, all without spending cuts or tax increases.
Reducing inflation
A further benefit would be the stabilisation of inflation at a point closer to zero than it presently is. The Government's oft-quoted inflation target stands at 2%. Few people ever ask why it is not 0%. The reason is that with a money supply based on debt more new money has to be borrowed into existence each year to pay the interest on money borrowed into existence during earlier years. Debt-based money requires inflation.
With a money supply created debt-free by the Bank of England, not only would inflation be unnecessary, with one single body controlling the money supply and being charged with a 0% inflation target, such a target would be more readily achieved than at present, with money creation being determined by the clearing banks' pursuit of profits.
Certainly, money reform will not protect us from inflation shocks derived from external sources such as oil price increases, but it would better enable us to invest in technology that would reduce our dependence upon foreign oil.
The Financial Services (Regulation of Deposits and Lending) Bill
The distance between this idea being promoted on a blog and becoming law is not perhaps as far as many might imagine. No new legislation would be needed to enable the Bank of England to provide us with our money supply The only legislation required would be that to prevent the clearing banks (or anyone else) from creating money.
As I write (27th March 2011), such a piece of legislation is currently before Parliament. It is called the Financial Services (Regulation of Deposits and Lending) Bill. It is a private member's bill and, lacking Government support, it is unlikely to become law, if only because few politicians are aware of how crucial it is to our economic well-being.
Yet, the mere fact that such legislation stands before Parliament means that the concept will be credible to our legislators when its full benefits are drawn to their attention, even more so, given that the movers of this bill are Conservatives.
Real reform or posturing
Such an origin might ring alarm bells in the minds of many who oppose the Government cuts, but such legislation can only hope to be passed with support from the Government benches. A rallying of support for such a bill is therefore entirely possible from across the political spectrum, but support will only be effected by those interested in real reform. This is how real reform is achieved.
Of course, real reform will not interest those who are secretly delighted by the programme of cuts, which gives them the opportunity to dress all in black or in some other political imagery of their own deluded fancy, in order to posture and strut and create mayhem on the streets of London.
