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Newsletter No. 38 - October 2012

Links to other Newsletters can be found here. 


1. Two Conspiracies of Silence - and Their Aftermaths

2. Support for Monetary Reform Continues to Grow

3. Updates on my Book Future Money

4. Recommended Books

5. A Comment on Newsletter 37



There are many conspiracies of silence. These are two topical ones.

(1) The first involves Britain and has broken.

Sir Jimmy Savile (look him up on the internet) died in October last year, aged 85, publicly honoured for his long-time contributions over many years to the gaiety of the British nation and our charitable causes.

Now, a year later the headlines have been dominated by reports that he was widely known or suspected to have been abusing underage girls for many years, in the BBC and hospitals and other places that welcomed his charitable support and gave him easy access.

So far the aftermath to the breakdown of this conspiracy of silence is mainly involving:

a) inquiry, criticism and blame against those in positions of responsibility who should have spoken out and stopped this abuse;

b) further allegations about related abuse; but

c) not so much concern about whether and how the abused girls should be compensated now that most are grown up; and

d) about how child abuse should be prevented in general.

(2) The second conspiracy of silence has worldwide effects. The breakdown of this conspiracy has not yet happened, but is imminent. We will need to avoid it bringing violence and destruction.

This conspiracy has been the longstanding refusal of the 'powers that be' and all their many dependents to discuss the possible merits of monetary reform, in the following sense.

a) Why do our governments continue to give commercial banks the privilege of creating the public money supply as profit-making debt for themselves, at damaging cost to public well-being?

b) Why don't they allow an alternative to be considered that would serve the public interest better?

Henry Ford's answer to those questions, quoted by Louis T. McFadden in a US House of Representatives debate on 10 June 1932, is said to have been straightforward: "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning".

Now, eighty years later in 2012, it is becoming difficult to stop people in the 'developed' economies protesting against the way our money system works, as in the recent street 'occupations' and riots in Athens, Madrid, London, New York and other cities.

Those occupiers and rioters may not have clearly defined what practical changes they want. But - see Item 2 below - awareness is growing that there IS an alternative way of creating the money supply that will serve the public interest better than the present one in almost every respect. The only people who will suffer from our adopting it will be those who profit from the inefficiencies and injustices of the status quo.

So, when this conspiracy of silence breaks down - as it is starting to do - what will the aftermath be? We need to think about this carefully.

An extreme response might conceivably go like this. Anyone responsible for managing how the money system now works, or for giving it political, academic, or technical support - or even for failing to oppose it when we could have done - should take responsibility for the unnecessary damage it has done to the lives and well-being of millions of people worldwide - and pay for it.

But that retrospective approach could easily encourage a destructive revolution as prophesied by Henry Ford. Few people in the world would benefit from that, and many would suffer.

We will need a softer landing after the breakdown of this conspiracy of silence, if we can achieve it. A forward looking approach will much better enable us to take up the huge range of constructive tasks that we face in order to create a better future for humanity.



(1) "The Chicago Plan Revisited", IMF Working Paper WP/12/202 - In spite of its reservation that it is not to be taken as representing the views of the IMF, this research paper of August 2012, coming from the International Monetary Fund, provides dynamite of the most constructive kind.

Its abstract is reprinted below. Readers should understand that in today's electronic age the practical equivalent of what was described in 1936 as "100% reserve backing for deposits" is simpler than that sounds. It means removing the privilege of creating almost all of the public money supply from commercial banks as profit-making loans, and transferring to the central bank as a public agency the function of managing the whole money supply debt-free in the public interest. (For a fuller description see Chapter 3 of Future Money -

"The Chicago Plan Revisited


At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy."

So the IMF research appears to support the proposed monetary reform on all Fisher's four points plus the two benefits mentioned in the last sentence. The last one, that the reform could reduce inflation to zero, has special significance because opponents of monetary reform have claimed it would encourage uncontrolled inflation. See, for example, Items 2(3) and 2(6)(b)below.

(2) The American Monetary Institute held its 2012 annual conference last month, chaired by Stephen Zarlenga. For a sense of the inspiring range and depth of its activities and effective progress towards monetary reform - including presentation and discussion of the IMF research report at (1) above - see

(3) Back in Britain, the Daily Telegraph of 21st October published an important article by Ambrose Evans-Pritchard on the proposal supported by the IMF's research report -

His article mentioned that Positive Money, the New Economics Foundation, and Professor Richard Werner of Southampton University had advised the Vickers Commission on banking that a state-created money supply would have major welfare gains.

He concluded, "Personally, I am a long way from reaching a conclusion in this extraordinary debate. Let it run, and let us all fight until we flush out the arguments."

(4) The Financial Times of 17th October published a letter by James Skinner on "Start by understanding how new money is created", in reply to a call in the FT of 13th October for a debate on "ultraradical policies" for "boosting aggregate demand".

The text of the letter cannot be reproduced in full but can be summarised as follows:

- Over 97% of the money in circulation is now created by the private banking sector, for its own purposes, in the form of debt.

- So long as this system prevails, the banks will always hold on to the principal power to determine how much to boost aggregate demand.

- New money can best be transferred to both the public and the private sector through direct spending by the government, using money (not credit) placed in its account by the Bank of England to enable it to meet its democratically approved, budgeted expenditure.

- The amount of new money would be controlled by the Monetary Policy Committee, thus providing the MPC with a much more direct and efficient method of controlling the money supply than is possible through the current system of manipulating interest rates.

- It would, of course, be necessary to abolish fractional reserve banking, thus restoring to the government the significant sums of income earned from seigniorage, currently enjoyed by the private banking sector.

- The savings made through these changes, largely at the expense of the private banking sector, would greatly reduce the amount of government taxation and borrowing, while enabling the government to make direct investments, for example, in such sectors as Green Investment Bank equity and possibly even a Citizens’ Income.

In short, this letter gave FT readers a good summary of how managing the money supply and putting it into circulation needs to be reformed. Its publication by the FT suggests that the conspiracy of silence in the mainstream media is indeed now breaking down.

(5) Positive Money reported on 8th October - see - that:

it has "been around for just over 2 years, and it’s time now to move into the next phase. We’re on the verge of widespread media coverage (we’ve started getting calls from TV and radio – more about that later) and many mainstream academics and organisations, as well as the public at large, are now taking an interest in the possibility of changing the monetary system that is fuelling so many of our current economic and social problems."

In a wider review of the current crisis - - it announces Positive Money's forthcoming book, mentioning that:

"Whilst inspired by Irving Fisher’s original work and variants on it, the proposals outlined in this book have some significant differences. Our starting point has been the work, in the year 2000, by Joseph Huber and James Robertson (Creating New Money; A monetary reform for the information age, 2000), which updated Fisher’s proposals to take account of the fact that money, the payments system and banking in general is now electronic, rather than paper-based".

8th NOVEMBER EVENT. The Economic and Social Research Council (ESRC) are co-operating with Positive Money in a meeting on "Where does money come from?" in Newcastle on 8th November, organised by Gary Brooks of Positive Money. Speakers include Professor Mary Mellor, Northumbria University, and Dr Alberto Montagnoli, University of Stirling. Important - see details at

To listen to Ben Dyson's 15-minute contribution to the BBC's Four Thought programme on how he came to set up Positive Money, go to

(6) Other developments concerning monetary reform can be found at

(a) It mentions Simon Jenkins' Guardian article " We need an iconoclast to lead the Bank of England", when Sir Mervyn King retires as Governor next June -

(b) Note the traditional claim by Gavyn Davies that monetary reform would be inflationary, and then the refutation which follows.

(7) For Paul Grignon's (Canada) analysis of banking see #loan1. Its conclusion is that " When all else fails, the system can only be saved by government BAILOUTS which means the creation of NEW DEBT-MONEY "funded" from NEW TAXPAYER DEBT-AT-INTEREST. In many cases, this taxpayer debt is clearly absurd and will be forever unpayable. Compound interest will grow it to infinity, requiring ever larger debt servicing until the "debt monster" consumes its host and KILLS THE ECONOMY".

For one of Paul Grignon's recent videos see

(8) I recommend the journal New European, whose editor is Luise Hemmer Pihl of Denmark -

Her final short article in Vol. 21, No1, Spring 2012 - - comments on the general optimism in Iceland in striking contrast to countries such as Greece, Ireland and Italy, all sinking deeper into debt because their Euro membership forces them to compete with the strong German economy on the conditions set by Germany.

One of the first seven articles in this volume on the subjects of boom, bust, debt, financial crisis and the euro's undemocratic nature is mine on "A good question for modern democracies".



(1) The book is now available in USA from Chelsea Green, Green Books' partner publishers there -

(Among other details, please note their distributors in Australia & New Zealand, Canada, and South Africa.)

(2) Reviews and Comments on Future Money

The following have come in since those reported in my July newsletter.

(a) Mark Braund (see An understanding and realistic review (24.8.2012) -

(b) A conversation with Almantas Samalavicius (Lithuania) - see

Eight intelligent questions and informative answers (29.8.2012) at

(c) Conall Boyle - see

His thoughtful review essay: "Funding Citizen’s Income from money creation: The message of James Robertson’s Future Money" is at On the Contents list, click on Review essay.

It ends by encouraging "readers of the Citizen's Income Newsletter to study this book closely. There is much more detail about the environmental and humanitarian reasons for reforming the way currency is produced and how resources should be taxed".

(d) Elizabeth Haigh - see

I am delighted to have this supportive review (18.9.2012) from a distinguished practising investment director -


4. RECOMMENDED BOOKS (Very Short Notes)

(1) Philippe Godard, Une Poignee de riches ... des milliards de pauvres!, Syros, 2012, 170 pp. I warmly commend this searching and constructive commentary on a world divided into a handful of extremely rich and powerful people and a vast number of poor ones. It concludes its reflections with extracts from Rosa Luxemburg (1912), Gandhi (1945) and Francis Bois on unemployment (today). For details see

(2) Bernd Huckstadt, Natural Economy of Life: A way to worldwide prosperity and peace in harmony with nature, Gradido, 2012, 165pp. Much to agree with in this interesting book, which supports the creation of money through life, not through debt or the gold standard. What this reform will mean in practice and how we would get it implemented are vitally important questions.

For details see

(3) Fred Harrison, The Traumatised Society, Shepheard-Walwyn, 2012, 233pp. " Is there time for us to intervene in the unfolding events that threaten our civilisation? I believe that there is, but not without a popular reawakening, a democratic revolution". I look forward to studying the book further.

Details are at

(Book launch October 28 at St James’s Church, Piccadilly, London.)

(4) Financing the global sharing economy is a 169pp report, just arrived from Share The World's Resources on "how to mobilise $2.8 trillion to prevent life-threatening deprivation, reverse austerity measures, and mitigate the human aspects of climate change". It looks good. "Mobilising world public opinion to strengthen and scale up the global sharing economy must therefore be an immediate priority for campaigners and engaged citizens in all countries". See

(5) Ted Renewski (Canada), whose family has been involved in Canada's Social Credit Movement, for drawing my attention to John Medaille's 2010 book Toward a Truly Free Market. It appears to support the proposal in Future Money to combine the Georgist support for Land Value Taxation with support for monetary reform. A review of it is at

(6) Referring to my 1985 book Future Work, Lani Morris (New Zealand) has told me about The Map of Meaning, the book she co-authored for publication by Greenleaf Publishers a year ago. It looks interesting and important. See



In the short review of Richard Murphy's recent book The Courageous State at Item 4 (1), I said that I had some differences with the book. But one that I didn't mention was that the book gave too little attention to the fact that levels of tax evasion and tax avoidance could be reduced by shifting taxes on to things that could not easily be obscured. For example, land value taxation (LVT) is more difficult to escape than taxes on incomes or profits, both of which can more easily be hidden or disguised.

I have felt in the past that Richard Murphy and his colleagues in the Tax Justice Network might give more consideration to the role that LVT could play in support of tax justice. I was glad to be reminded of that by Carol Wilcox -


James Robertson

26 Oct 2012