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really holds the gun? By Darius
Greece, for example, could issue an
electronic drachma to run in parallel with the
euro. And one could envisage the principle being
devolved below the level of the nation to local
authorities - a London guinea, a Birmingham dinar,
a Southampton shilling and so on.
recent papers written for the Foundation for the
Economics of Sustainability in Ireland, the
brilliant (and recently departed) economist
Richard Douthwaite has explored the possibility of
parallel currencies by which debt-free money could
be injected into the financial system, on a
national and on a local level.
the government in question would pay a portion of
and social welfare costs
in the newly created currency to cover its
deficit. Being entirely electronic, individuals
and companies would transfer funds in the new
currency to each other by means of mobile
telephone, Internet and telephone banking.
Companies would earn the new money by
supplying goods and services to prospective
customers, informing them what proportion of
payment they would be prepared to accept in this
new money. Likewise, employers and employees would
negotiate the proportion of wages to be paid in
the new money.
Limitations of space make
it impossible to cover the details of such a
system in its entirety but permutations would
include the government monitoring the velocity
with which the new currency circulated and adding
new units of the currency to accounts with the
greatest velocity and withdrawing them from
accounts with the lowest velocity in order to
maintain the new money's value.
some may consider my suggestions too radical, the
alternative - to keep adding to the debt pile and
to continue in our destruction of societies and
the environment to fund that pile - is far more
Actually, the moment to effect
genuine change has never been more propitious
because if the system in its current format were
to collapse, such a collapse has rarely been less
likely to lead to food shortages or any of the
other dire consequences that one associates with
economic hardship for the simple reason that the
current crisis is one that affects the virtual
economy far more than the real one.
not as if there would suddenly be fewer crops in
our fields or natural resources in the ground. Nor
would people lose their homes - in fact, under my
proposals they would be far less likely to do so.
It is the current configuration of
economic power that would be threatened, not the
amount of goods in circulation, nor the efficiency
with which we exploit resources.
banking system were to implode, huge debt
write-offs were to occur (so that effectively we
all owed less), the creation of money were to
revert to the state, and the banks now had 100%
reserves-to-loans ratios, would we all necessarily
suffer as we are being told? Quite the reverse, it
seems to me.
How far the debtors' unions
would seek to push things would be up to them,
(although it seems to me that, whatever the final
details, the end of fractional reserve banking in
conjunction with the use of debt-free money would
be the fundamental components of a new order).
Workers' unions do not necessarily wish to
destroy the companies that employ them. What they
wish for is sufficient bargaining power to ensure
that they are not completely sold down the river.
My hypothesis is that, as debtors, potentially we
have enormous bargaining power.
is an obvious retort:
Why force the issue?
Why not just allow the system to crumble
under its own weight since this is what is bound
to occur sooner or later?
it offends against the concept of free will - that
crucial element which separates human beings from
other creatures - and without which, notions such
as "freedom" and "democracy" are illusory. (If we
are cattle and all our actions are pre-determined,
then our "freedom" and our "votes" are
And second, because it
constitutes the ultimate irresponsibility,
coinciding perfectly with the mindset of our
politicians: to kick the can down the street and
to delay the evil hour for future generations. But
the longer you put off evil hours the more evil
their inevitable advent.
There will be
many, not least among the middle classes, who
would fear the idea of a global collapse of the
banking system. But they must understand: sooner
or later this will happen in any case and the
essence of my argument is that since the gun is in
fact in their hands - if only they knew - they can
have far more say in the new dispensation than if
they simply allow things to unravel on their own.
It is a fallacy - pushed by our experts -
for the middle classes to imagine that they have a
vested interest in maintaining the current order.
Writing in the mid 1990s, Margrit Kennedy
showed how the first 80% of the German population
paid out more interest than it received, with the
next 10% receiving slightly more than it paid out
and the final 10% receiving twice as much, a trend
which has intensified throughout the world. Only
very recently, for instance, in the United States
the Congressional Budget Office Report regarding
household income distribution in America from
1997-2007 has demonstrated how the income earned
by the top 1% of the population rose dramatically
at the expense of the remaining 99%.
other words, our financial system comprises an
upward redistribution mechanism that acts to the
detriment of nearly all of us. In sitting back and
doing nothing, the great part of our population
will not be "all right". Income gaps will increase
while living standards decline.
we be fooled by the argument that "education,
education, education" will protect our children
from the snare that has been set for them - a
falsehood demonstrated by the fact that an
increasing proportion of Britain's two-and-a-half
million unemployed have graduated from university.
Unless we alter radically the manner in which
money is manufactured and circulated within the
community, then in a generation Britain will be
like Egypt, a nation of taxi drivers with PhDs.
But how about if certain people reading
this essay were in the enviable position of being
able to opt out in some way? To sell assets, pay
off their debts and conduct all their future
transactions in cash? Surely in such a scenario
they would be freed from the debt trap and they
could afford to sit back and relax?
this argument is false because interest on
ever-increasing indebtedness is included in all
the prices we pay, whether or not as individuals
we have one penny of debt. Herein the evil - there
is no opt out.
In the bar of soap, in the
property, or in the car we buy, a huge proportion
of the price is made up by interest compounded
over time and which the manufacturer has had to
pass on to us. Which is precisely why the creation
of money out of nothing and the charging of
interest on that money is the root cause of
inflation and a devaluation of our purchasing
power - an inflation that is deliberately
disguised by omitting crucial factors such as
house prices, food prices and household energy
prices in its computation.
And if we do
not act now, we will miss the perfect opportunity
to effect genuine change as did the South American
debtor nations when they blinked and
"re-structured" their debts in 1982 instead of
clubbing together and defaulting en masse. And all
because they failed to realize that it was they
who held the gun and not their creditors.
In such a scenario, as occurred in 1982,
the same "re-structuring" or "re-capitalizing"
remedy, currently being engineered by our experts,
and by which the payment of debt is simply
forestalled by extending its term and adding to
the amount outstanding, will be the outcome - the
ultimate head-in-the-sand strategy.
Effectively, when something becomes "too
big to fail" but is in fact just about to fail,
its demise is delayed and the agony prolonged by
making it ... even bigger!
In this way, to
prevent their collapse the banks will be made even
larger and even more powerful before, inevitably,
they fail, to the detriment of our descendants.
Taken to its logical extreme one could even
envisage an Orwellian nightmare of complete,
global financial integration.
conclusion, to subscribe to the arguments I have
laid out there is no requirement to be some
Trotsky-ite or even "anti-capitalist". One need
only appreciate the distinction between productive
capitalism and parasitical capitalism.
is perfectly possible therefore to support the
principle that those who actually produce wealth
should be rewarded for their endeavors and that
their rewards should be made flesh in private
property that is protected by law, whilst
recognizing that the greatest threat to such a
principle is no longer a frightening Soviet-style
system but in fact parasitical capitalism, by
which we become not owners of wealth but slaves of
It is time for the middle classes to
un-learn what has been indoctrinated into them.
For the evidence shows that, contrary to
the orthodoxy, they have not been subsidizing a
lazy and undeserving underclass; they have been
subsidizing a parasitical and undeserving
For essays referred to, see here
Darius Guppy is the author of
Roll the Dice, (1996) Blake Publishing.
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