The kind of proposals that we’re advocating are neither left wing nor right wing. They get support from both sides of the political spectrum, sometimes for different reasons, and sometimes for the same reasons.
The proposal denies the commercial banks their power to create money. It is pure common-sense, and it should be welcomed by all. If you are a socialist on the left you should welcome the fairness and possibility of better public services, and if you are a capitalist business owner on the right you should welcome the easier access to cheap, affordable credit! If you believe in free markets then you should welcome the removal of subsidies for the huge corporations that we know as banks, and the removal of the distorting influence that this has. And everyone should welcome the ending of a situation where the interests of banks overrule the interests of democracy.
Those on the “right” and “left” alike ought to be equally as disgusted by the shocking waste of public money involved in borrowing our nation’s money supply from banks when it could be created debt-free. All we hear about these days is ‘cutting out the waste in public spending’. This proposal addresses the biggest, most fundamental source of wasted public money – including the £100bn in hidden subsidies given to the banking sector each year.
We are not against free market, not against lending or interest. We are against mixing the two activities of providing society with a medium of exchange, and intermediating money between savers and borrowers. We believe, that only if we give the free market a nationalised money supply, can it really work for the public benefit.
The proposed reform would bring the important advantage of separating control of how much money is in circulation from decisions on how the money is used. The way commercial banks now create money involves their controlling its use. In deciding whether to grant a loan they decide whether to invest in businesses, property bubbles or other forms of speculation. But, in a market economy which aspires to be free, open and efficient, decisions affecting the monetary order itself – including the amount of money in circulation – should not be part of the money-making process.
Our reform will not restrict the freedom of the banks to give and take loans against interest. Far from being a step on the road to any kind of inefficient, centrally planned economy, it will contribute to freer, more open and more efficient functioning of the market economy – for banks as for everyone else.
If after this reform a bank should fail, only the bank’s own money will be at stake. Customers’ money on current accounts will no longer be part of its balance sheet.
A debt-free money base, a less indebted government, a better balanced government budget, a lowered tax burden, a better moneyed civil society – all these will contribute to a higher level of net income and a larger capital base for both businesses and private households.
This will help to make them less dependent on subsidies and allowances and external capital, and better able to provide for themselves and one another.