Newsletter No. 47 - May 2014
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1. Growing Support For Monetary Reform
2. A Possible Tipping Point From Scotland
3. Growing Inequality - Thomas Piketty's Book
4. Practical Achievement And Far-Sighted Analysis
5. Liberation Of Work, Not Full Employment
6. A Culture of Greed
7. Political Futures - Two of Many Possibilities
8. Molly Scott Cato
9. Some Coming Events
10. A Closing Thought from Barbara Panvel and her Indian Colleagues
This newsletter is about the need to shake off the groupthink about the future from which many people in the world now suffer, and how we should set about it. It raises questions about the relation between understanding and action, and between knowledge and ethics.
Item 1 is about the recent publication of conclusions by researchers in the IMF (International Monetary Fund) and the Bank of England, and an article by a leading economics columnist in the Financial Times. They all support the need for a radical reform of the way the public money supply is created and managed.
This proposal for reform is deeply resisted and deliberately ignored by people and organisations that profit from the status quo. Most other people take the status quo for granted. They have no time to question it; and, even if they do, they may not feel able to find the extra time and energy needed to support reform actively.
So what can we do to make the reform actually happen? What situation might provide a "tipping point" that would finally defeat the obstacles to the reform, and how might we help to bring it about? (A tipping point is defined by Malcolm Gladwell as "that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire" - see www.gladwell.com/the-tipping-point.)
There may be other tipping points that could make implementation of the desired monetary reform irresistible, but Item 2 below identifies one that could arise from the Scottish Independence Referendum later this year.
Item 3 is on another aspect of thinking and doing.
(a) Do the activities of economists and journalists lead to enactment of necessary reforms that might not happen without their activity?
(b) Or may action to enact them be delayed by too much thinking and writing and talking and arguing?
That issue is raised by Thomas Piketty's book Capital in the Twenty-First Century on the systematically increasing inequality imposed by our present money system.
Item 4 instances Hazel Henderson's work as a combination of practical achievement with far-sighted analysis; Item 5 questions the assumption that work must be paid employment (following Item 2 on the liberation of work in my April newsletter); and in Item 6 Fred Harrison concludes that democracy must be a therapeutic process to escape from a global civilisation based on a culture of greed.
1. GROWING SUPPORT FOR MONETARY REFORM
Money: Signs of Progress was discussed at Item 5 in my April newsletter. Here we take that forward.
The IMF Research Department published "The Chicago Plan Revisited" - www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf in August 2012. My copy of the one-page Conclusion of its 71-page text is at www.jamesrobertson.com/imfconclusion.pdf.
It is clear that the IMF's researchers have fully validated the claims for a fundamental monetary reform proposed by many leading US economists at the height of the Great Depression of the 1930s - the key feature of that proposal being that the economy's money supply would be created debt-free by the government and no longer by banks through debt.
The report concludes that making this reform "could significantly reduce business cycle volatility caused by rapid changes in banks' attitudes towards credit risk, it would eliminate bank runs, and it would lead to an instantaneous and large reduction in the levels of both government and private debt".
In April this year the Bank of England 's researchers published in the Bank's Quarterly Bulletin (2014 Q1) the fact that the national money supply is now almost entirely created as loans by commercial banks to their customers in the form of debt to the banks themselves - see www.bankofengland.co.uk/publications/Documents/ quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf.
Also see www.youtube.com/watch?v=CvRAqR2pAgw.
Another noteworthy development is last month's column in the Financial Times by Martin Wolf, who is one of the UK's leading economics commentators. In it he suggested that private banks should be stripped of their power to create money.
Unfortunately the online version of the article - www.ft.com/cms/s/0/7f000b18-ca44-11e3-bb92-00144feabdc0.html?siteedition=uk#ixzz2zsSLLs8i - is only available to those who have registered to get free access to a limited number of FT articles.
However the blog posts below give a good summary of Wolf's article and confirm that there is now a very strong case for stripping the banks of their present privilege to create as debt almost all the money we use, at great cost to us all and great profit to themselves.
1) The New Economics Foundation www.neweconomics.org/blog/entry/sovereign-money-what-it-is-and-why-it-matters
2) Positive Money
3) Thomas Attwood ww.thomasattwood.wordpress.com/2014/04/26/martin-wolf-when-the-next-crisis-comes-be-ready-strip-private-banks-of-their-power-to-create-money/
Understanding of the need for this reform is also spreading in countries other than the UK. Stephen Zarlenga's American Monetary Institute has been making great progress - see www.monetary.org; and so have Joseph Huber and his colleagues in Germany - see www.monetative.de/mission-statement.
In the light of these recent developments, it is reasonable to ask Christine Lagarde, Managing Director of the IMF, and Mark Carney, Governor of the Bank of England, to say publicly how they view the conclusions recently published by their Research Departments. How do they advise governments to act on them?
At the same time the present Archbishop of Canterbury could be asked to tell the Church of England what he thinks about the following statement made by his predecessor Archbishop William Temple in London on 26 September 1942, 72 years ago:
"In the case of money, we are dealing with something which is handled in our generation by methods that are extremely different from those in vogue a century or half century ago. When there was a multitude of private banks, the system by which credit was issued may perhaps have been appropriate, but with the amalgamation of the banks we have now reached a stage where something universally needed - namely money, or credit which does duty for money - has become in effect a monopoly...
The private issue of new credit should be regarded in the modern world in just the same way in which the private minting of money was regarded in earlier times. The banks should be limited in their lending power to the amount deposited by their clients, while the issue of newer credit should be the function of public authority...".
From Stephen Zarlenga, The Lost Science of Money, page 571, quoting Bernard W.Dempsey, Interest and Usury (London: Denis Dobson, 1948).
It is reasonable to ask those people, who are now the leaders of the IMF, the Bank of England and the Church of England, how they respond to these developments.
Their support could certainly help the reform to happen. But we should also look elsewhere for a tipping point.
2. A POSSIBLE TIPPING POINT FROM SCOTLAND
The Scottish Independence Referendum is on 18th September this year.
It already seems to people in Scotland that David Cameron and George Osborne (the UK Prime Minister and the UK Chancellor of the Exchequer - financial minister) are behaving negatively and arrogantly towards the question of a future currency for an independent Scotland in the event of a Yes verdict. An expression of that will be found at www.heraldscotland.com/comment/columnists/a-nation-reeling-from-ransom-politics.24253345.
At present there is a comparatively high level of support in Sotland for a Yes referendum vote. But in the coming months the prospective danger of expulsion from the UK sterling currency might start a shift of opinion towards a cautious No. If that happens, what rabbit could the Scottish National Party leader, Alex Salmond, and his colleagues pull out of their hat to counteract the shift?
It could be monetary reform. Alex Salmond could announce that the present Scottish Government is preparing a feasibility study in the light of the developments at Item 2 above. The study would report on whether, after winning a Yes referendum, an independent Scotland should adopt a democratic currency with a money supply created as a debt-free public service to society as a whole, instead of the present money supply created as debt by commercial banks at great profit to themselves and great cost to society at large.
That announcement would be widely publicised; knowledge in the UK as a whole, and in other countries too, that monetary reform was being considered as a serious political possibility would become very widely discussed; and that discussion could provide the tipping point for international monetary reform; and the newly independent Scotland would start its life as a proud world leader.
It turns out that preparatory work for the study has already been done.
(1) An outstanding example is the book Moving On by Andy Anderson and Ronnie Morrison on the Campaign for a Scottish Currency. For details see www.scottishmonetaryreform.org.uk.
Click here to read an excerpt from the book. There is a button at the bottom of that page to buy the book.
3 four and five star reviews of the book can be found at www.amazon.co.uk/product-reviews/0992828406/ref=acr_offerlistingpage_text? ie=UTF8&showViewpoints=1.
(2) Mike Edwards has written an important paper on Why Our Monetary System Is Broken and How The Scottish Independence Referendum Creates An Opportunity To Fix It For Scotland which can be found at www.allofusfirst.org/commonweal/assets/File/the-uk-monetary-system-and-the-scottish-independence-referendum.pdf.
"The Scottish Independence referendum is bringing change to Scotland regardless of the outcome. Even in the event that Independence is voted against it is highly unlikely that maintaining the status quo will be an acceptable outcome. In reality, whether Independence is won or lost, change will follow.
Therefore the question we must ask ourselves is will we the people of Scotland drive the change or will we be driven by it?
The answer to this question lies in how we choose to the answer the following two questions:
1) will the people of Scotland develop a cohesive vision for the future? and
2) have we got the conviction to implement such a vision?
One key to a new vision for Scotland is implementing a reformed monetary system that works for the benefit of all. In order to ensure the implementation of this new vision, a strong coalition of people and institutions must be built to push through this reform when the opportunity arises.
If we do not develop a vision or have not got the conviction to implement it, then history informs us that established interests will work hard to high-jack this historical opportunity for their own benefit. The opportunity that Scotland has is only valuable if it is not used to further entrench benefits to the few.
Independence for Scotland (rather than more devolved powers) is the most pragmatic route available for people in Scotland to implement monetary reform - a key reform necessary to create a fairer, more stable, more democratic, and a more environmentally responsible society.
As this paper has demonstrated, money reform is the underlying structural issue that constrains change on all other issues. How we respond to this issue will shape our daily lives for years to come. Therefore, the opportunity to implement a reformed money system in Scotland is one of the primary reasons that Scottish people should consider voting for an Independent Scotland.
In a stronger economic position Scotland would be better placed to provide economic leadership and help to others. Thus Scottish Independence could be better for the people of Scotland, as well as, the people of England, Wales, Northern Ireland and other countries around the world."
(3) Positive Money has published A Scottish Currency? 5 Lessons from the Design Flaws of Pound Sterling (www.positivemoney.org/wp-content/uploads/2014/02/A-Scottish-Currency-Positive-Money.pdf).
Positive Money accepts that an independent Scotland may have to abandon the pound and establish its own currency, to regain control over its own monetary policy and economic affairs; and it points out some of the pitfalls that it should avoid if it does so.
It should limit the creation of a Scottish currency to a Scottish Central Bank, which would be concerned with the long-term health of the Scottish economy rather than the short-term need to chase profits and market share.
This would give Scotland an economy where:
The amount of money in the economy would be stable regardless of the actions of banks.
Households could reduce their debts without inadvertently triggering a recession.
The economy could be stimulated without relying on rising household debt.
The proceeds from creating money would go to the state rather than banks, resulting in a significant saving for taxpayers.
Badly-run banks could be allowed to fail without threatening the payments system or the wider economy.
These changes would give Scotland a safer banking system and an economy that is more stable and far less dependent on debt.
(4) Although the well-known economist John Kay may not have discussed the possibility of monetary reform for an independent Scotland, his recent Financial Times article on English Law Cannot Stop Scots Being Sterling Squatters - see www.johnkay.com/2014/04/09/english-law-cannot-stop-scots-being-sterling-squatters - suggests that, one way or another, an independent Scotland with its own currency need not worry too much about making use of sterling as well.
Personally, being of mixed Scottish and English blood and having spent much of my young life in Scotland and much of the rest of it in England, I would regret the two countries becoming independent from one another. But if Scotland becomes the first nation in the world with a money system that serves its people fairly, I would feel very proud of it.
Actually, once the present Scottish leaders let it be widely known that they are seriously considering monetary reform as a feature of their possible independence, that by itself could become a tipping point on a wider scale. Public pressure on the UK government and others around the world could then compel them to consider it seriously too. Monetary reform could then spread like wildfire.
3. GROWING INEQUALITY - THOMAS PIKETTY'S BOOK
Capital in the Twenty-First Century (577 pages) has been greeted as a book that will change the ways we think about society and economics. See Paul Mason's review at www.theguardian.com/books/2014/apr/28/thomas-piketty-capital-surprise-bestseller.
To summarise boldly, Piketty's message is that capitalism automatically creates levels of inequality that are unsustainable. The rate of return on capital outstrips the rate of growth, and so wealth is bound to concentrate to levels incompatible with democracy, let alone social justice. The main policy measure he proposes is a comprehensive international agreement to establish a progressive tax on individual wealth, defined to include every kind of asset. He concedes that this is a "utopian idea" but also insists that it is the best possible solution to the problem.
A storm of professional arguments has now developed, primarily about Piketty's calculations and what he concludes from them, but also against his policy recommendations. But the expert economists and journalists involved in these arguments don't seem much concerned about what should actually be done to correct the obvious inequality and injustice of the present real world situation.
This prompts us to ask:
(a) Do the activities of influential economists and journalists lead to the introduction of desirable and efficient democratic reforms that wouldn't otherwise happen?
(b) Or may their activities distract us from making necessary reforms actually happen?
The fact is surely obvious that the money system, as it works at present, systematically results in inequality and unfairness. There is no need to spend time and expense establishing that.
My book Future Money - www.jamesrobertson.com/futuremoney.htm - proposes that money system reform should allow society as a whole to enjoy the value of common resources. That means:
a) The public money supply should be created debt-free by a public agency and circulated into the economy via public spending, and commercial banks should lose their hugely profitable privilege of creating it as debt to themselves and at huge cost to the public.
b) People and organisations should be taxed (or charged) on the profit they enjoy from private use or private control of common resources. These will include taxes or charges on land-rent values and on the use or right to use other common (e.g. environmental) resources and the capacity of the environment to absorb pollution and waste.
c) Taxes should not penalise useful work and enterprise. Taxes on value added, incomes and profits should be reduced and eventually abolished.
d) A Citizen's Income - a tax-free income paid to every man, woman and child - should be introduced as a right of citizenship and their share of the value of common resources.
It would be more useful if the financial experts turned their attention to practical proposals on those lines.
4. PRACTICAL ACHIEVEMENT AND FAR-SIGHTED ANALYSIS
A very good recent example of their successful combination comes from Hazel Henderson.
Her global Green Transition Scoreboard® (Gts) tracks the private financial system for all sectors involved with green markets, showing the progress of ethical wealth building for planet, people and profits as the world makes the transition towards the Solar Age. By March 31, 2014 it had reached $5.3 Trillion. See www.ethicalmarkets.com/category/green-transition-scoreboard.
Meanwhile, her latest book is Mapping the Global Transition - From 'economism' to earth systems science (56 pages). It was launched by ICAEW ( The Institute of Chartered Accountants in England and Wales) in association with Tomorrow's Company at an event in London on 11 February this year.
The chapter headings are as follows:
2. Global Systems Shifting
3. The Bankruptcy of Conventional Economics
4. Global Transition from the Industrial Age to the Solar Age
It can be downloaded free from www.ethicalmarkets.com/wp-content/uploads/2014/02/tecpln12453-solarage-web.pdf.
I recommend it wholeheartedly.
5. LIBERATION OF WORK, NOT FULL EMPLOYMENT
Following up Item 2 in Newsletter No.46, here are two relevant aspects.
(1) Juliet Schor, Professor of Sociology at Boston College:
"It's possible for many people to take small steps-right now-toward fewer job hours and more self-sufficiency. There are challenges, to be sure, but for many, the switch from paper-pushing to gardening has been welcome. Self-providers value their newfound skills, love the chance to be creative, and are getting satisfaction and security from constructing a more self-reliant lifestyle. The ability to work for oneself is highly valued. They are nourished by connection with the earth. Perhaps most important, they are rewarded by the opportunity to live without endangering others and the planet."
(2) Adam Lent, writing recently on the RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) blog, said "The evidence proves self-employment is great. Celebrate it!":
"While acknowledging that there is a sizeable minority forced into the position, we should actually celebrate the rise of self-employment. It is a sign of a healthier economy and greater entrepreneurial spirit. It allows people to be more autonomous and turn their own ideas and vision for themselves and others into reality - something the RSA has always held dear and which we now call the 'power to create'. We know from our own research that it is this capacity to be self-determined and creative that the self-employed value enormously and which greatly outweighs the fact that they may earn less than they would in a directly employed position."
6. A CULTURE OF GREED
"The West shaped a global civilisation whose operating mechanism is a culture of greed . Societies are regulated by a statecraft that is incapable of adopting the policies needed to challenge the existential crises of the 21st century".
I warmly recommend Fred Harrison's powerful series of 10 theses under the title of Share The Rents. See www.sharetherents.org/thesis/statecraft-of-greed.
It concludes that "Democracy must be reconceived as a therapeutic process, empowering people to escape the trauma inflicted when their ancestors were ruptured from authentic cultures and natural habitats".
7. POLITICAL FUTURES - TWO OF MANY POSSIBILITIES
In Unstoppable: The Emerging Left-Right Alliance To Dismantle The Corporate State, Ralph Nader has an impassioned and potentially game-changing message for American citizens: You are not powerless.
European Elections: 9 Scariest Far Right Parties Now in the European Parliament. See www.huffingtonpost.co.uk/2014/05/26/far-right-europe-election_n_5391873.html.
8. MOLLY SCOTT CATO
Congratulations and good wishes for Molly's political future in Europe - www. neweranetwork.info/2014/05/26/news-about-molly-scott-cato-mep.
9. SOME COMING EVENTS
(1) 6-8 June, Boston, MA. Common Bound Toward a New Economy - www.commonbound.org.
(2) 21 June, Bristol, as part of the Big Green Week. Schumacher Society, Journey of the Universe. The 2014 Annual Schumacher Lectures will be on 13/14 September in Bristol - www.schumacher.org.uk.
(3) 9-11 July, Oxford , 9th Annual Green Economics Institute Conference - www.greeneconomics.org.uk/events2014/ oxfordflyer2014np62.pdf.
10. A CLOSING THOUGHT FROM BARBARA PANVEL AND HER INDIAN COLLEAGUES
There is an ancient Indian story
that Indra weaves a vital net
with a pearl at each node.
Each pearl symbolises
a single individual
emitting its own light
and reflecting the light
received from all the others.
We aim to be such a network.
Each person's contribution
can help others
and enhance the collective influence.
(Are we a vital net? 2,465 people in about 90 countries now get these newsletters.)
29 May 2014