There is a consensus among politically-aware people, that usury is a problem for society and needs to go. It is not sufficient, however, to plan to prohibit usury. At present, money is created by the issuance of interest-bearing loans; and therefore usury cannot be banned until an alternative macroeconomic system is put in place. It behooves any dissident movement with serious aspirations to government, to devise a programme of monetary reform to be implemented upon accession to political power. The present short article is intended to initiate development of such a programme.
Under the prevailing system, money is created by private fiat in the form of interest-bearing loans. Lenders do not possess the money prior to lending it. Interest, and particularly compound interest, on these loans results in a redistribution of wealth from the poor to the rich, and from the public to an alien elite. Society cannot support the burden of these ever-increasing debts.
The replacement of fiat currency with one backed by gold or another commodity is not the answer. The availability of any commodity will not correspond precisely to society’s monetary requirements, and is open to manipulation by foreign and private interests.
Money should be created by government fiat through nationalised banks, backed by the faith and credit of the nation. Fiat money creation is not inflationary as long as it does not outpace the growth of goods and services.
Much of the money should be created in the form of interest-free credit, favouring socially-desirable projects. Government should be funded by this means. The money would be eliminated as it is repaid, thus avoiding inflation.
Since money would be created as required, by government fiat, there would be no need to link it to reserves held by the banks.
Money exists to be circulated. The higher the velocity(1) of money, the more economic activity it enables. This raises the question of whether to employ a system of demurrage(2) to encourage spending.
The currency can be kept stable by adjusting taxes.
Plans will have to be made for the transition from the existing system to its replacement, presumably involving a spell during which public and private banks co-exist.
It is intended that these ideas will be developed in subsequent articles, taking into account any feedback received.
(1) The velocity of money is the rate at which it is passed on in new transactions.
(2) Demurrage is a tax on currency holdings.
Ellen Brown ‘The Web of Debt‘
Ellen Brown ‘The Public Bank Solution’
Michael Rowbotham ‘The Grip of Death’
Kerry Bolton ‘The Banking Swindle’