Tuesday, 23 March 2010

When will this robbery in broad daylight be brought to a stop? We MUST change the way we create money

At root, the economic and financial problems we are experiencing in the world today are a result of the way we create money currently. We agree to pay the Federal Reserve/Bank of England/European Central Bank/etc — all privately owned corporations, in spite of their deliberately misleading names — a fee ("interest" or "the coupon") every year in return for their "money" that they create out of nothing at our government's request. When the expiration date of that created money comes around (the maturity date of the government bond that it was exchanged for at the time of creation), the money is simply removed from the system and this is what causes the "bust" in our economic cycle ("monetary deflation", followed by resultant consumer/producer price deflation that must follow as surely as night follows day, which in turn is followed by job losses as sure as day follows night).

It is a built-in feature of the money system at the moment that we will have booms (as the money supply is grown, "monetary inflation") and busts (as the money supply shrinks, "monetary deflation"). It is also built into the system that the busts will be in proportion to the level of the boom that precedes them. This should tell you that the current bout of money creation that our Western governments are inducing is indeed stimulating a sizeable "boom" over the last year, but that this boom will be like all others before it that were brought about only as a result of the issuance of more money-from-nothing, there IS going to be a proportionate bust later when the money supply not only is no longer experiencing massive inflation, but it rolls over into the phase where the bonds reach maturity and the money created in return for them is removed from the system. In other words we are pre-programmed to experience monetary deflation and economic bust again after this round of money printing has played out. You can put the dates in your calendar if you like, just ask the Treasury what are the maturity dates of the bonds they issued to get the money from the Central Bank. It is simply inevitable.

You cannot spend your way to prosperity, and you certainly can't do it by spending money that is made up out of nothing and without any constraint on the amount. Gordon Brown will tell you otherwise, hell he is even on record proclaiming that he had actually abolished boom and bust! Pray tell, what is it that he supposedly has done which could possibly do anything of the sort? The man has been for over a decade in charge of the finances of one of the "richest" federations of countries in the world, the United Kingdom, and yet he is an economic illiterate if he truly does believe what he says. He has done nothing in this time but ask the Bank of England to create ever-increasing volumes of money, in exchange for the future of every citizen of the nation. He has been lucky enough up until recently that he had a tail wind from other parts of the global economy, but that tail wind is switching around to come back in our faces currently. He is like a weather-vane that has been sitting facing one way in the wind for so long that it has rusted into place, he is unable to change direction. It is a case of print or die, as far as Mr Brown is concerned. He does not appear to understand that the more money he asks for, the bigger will be the bust that follows.

Over the last year or so the governments of many nations, but none moreso than the UK, have asked the Central Banks to issue massive amounts of this money-from-nothing, in exchange for an unprecedented wall of government bonds that are being issued in order that they can go out and spend the money to "save the world". These bonds are going to transfer an unprecedented amount of the future toil and wealth of each and every taxpayer — plus their children, and grandchildren — via the interest payments that will be made, to the benefit of the shareholders of the Central Banks.

When will this robbery in broad daylight be brought to a stop? We have to stand up and demand a better monetary creation mechanism, one that doesn't involve the payment of compounding interest, before it is too late. The governments of the world all have it within their power to return the ability to create money back where it belongs, their own Treasury department.

There is truly no good reason that they cannot create the money themselves, without charging themselves (and therefore ultimately taxpayers) any interest for doing so, and with no expiration dates. They certainly would need to have a credible mechanism that will prevent over-issuance, but that is a minor detail that could be easily addressed I feel. If Mr Brown really did want to abolish boom and bust, this is exactly what he would do.

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