Chapter 64 - The Solution

The solution has many areas and includes:

Component One - Glass-Steagall

The most urgent component is a procedure to prevent collapse of our money system. The simplest and most well proven procedure is the Glass-Steagall set of rules. Glass-Steagall was an arrangement where banks must declare whether they are an Investment Banks or a Commercial Bank. An Investment Bank engages in speculation with its client’s money. A Commercial Bank works in the real economy. Many people blame the 1999 scaling back of the Glass-Steagall Act for the 2008 financial collapse.

Commercial Banks deal with ‘commerce’ and tend to be local in nature. These ‘high street banks’ lend into the local area. This meets the needs of local business which in turn helps local employment and development. The Commercial Banks also operate the payments system between their clients and the clients of other banks. This payments system has become an indispensable component of life in the modern civilization.

Investment Banks are speculative in nature. They invest their client’s money to make money for the client. The also use their own money to ‘make money from money’. In reality, ‘their own money’ means their client’s money. Much of the money-making activities comes from trading in derivatives. Their traditional profit was obtained from the commissions from investing money on behalf of their clients. Unfortunately, investment banks have started to invest the bank’s money for the profit of the bank. This puts the bank and the money of its clients at risk. These investment banks tend to get heavily involved in ‘Derivatives’. Goldman Sachs alone has a ‘Derivatives’ exposure of $44 000 billion dollars which is greater than twice the magnitude of the U.S. Money Supply. [1] This expansion into derivatives places them somewhere between financially unstable and prone to collapse.

Glass-Steagall would bring a complete separation of commercial banking from investment banking. This would ensure that the activities or a collapse of any investment bank would not harm the commercial bank system. Never forget that the Commercial Banks are essential to modern civilized life because they operate the payments system which has become the lifeblood of the Real Economy. The risky activities and financial gambling carried out by investment banks would harm no-one but themselves and their risk-taking clients.

 The influence of Glass_Steagal. Image by Andy Chalkley Createive Commons Attribute

Implementation of Glass-Steagall would maximize the chance that the payments system and the savings of the common people would survive a collapse of the Investment Banking System. Government protection would only support the Real Economy and the system of Commercial Banks. This would also encourage commercial banks to return to the past practice of investing in the local economy. Investment funds would then tend to stay in the Real Economy. Local funds would support small businesses, family farms, and manufacturing enterprises.

Financial bubbles tend to be fuelled by excessive investment by the speculative activities of the investment banks. By removing support for failed investment banks, the citizens would not need to bail out errant speculative banks and there would be a greater tendency for investment funds to go to the more secure local economy creating jobs and local development. Without Glass-Steagall, there is a tendency for Commercial Banks to invest in the same risky speculative financial gambling carried out by investment banks for perceived greater returns. Unfortunately, this takes investment money away from the local Real Economy. In the event of a financial crisis, the close nature of the commercial and investment banks has caused the government to bail out all big banks for fear of bringing down the Real Economy. Separating the two banking areas and supporting only the commercial banks would cut the tendency of investment banks to rely on taxpayer-funded bailouts to survive their risky investments. The commercial banks would invest in the local economy and local investment in local industries and businesses would become a more reliable area for investment. Currently, a crash of any one major investment bank could bring down local banks. A crash of one investment bank could destroy the money system of the world. This is not a scenario that one would like to contemplate. Previous historical collapses have caused population falls of the order of twenty-five percent and more. Our only proven and politically available solution is a Glass-Steagall separation of banking. The world Derivatives situation makes a collapse ever more likely.

Additional Restrictions

A restriction is needed banking licenses. The restriction is that banks may not trade for their own profit. The banking license only allows for trading for profit for its clients from which it earns commissions and fees. Any existing investment section should be hived off into a separate company that should not be owned by the bank. Banks may own assets as part of their business but should not trade these assets. Some time limits to ownership should be instituted so that asset purchases are not purchased for short term profit.

Component Two - National Public Bank

A public bank is a bank that is owned and operated by the government on behalf of the people. National, state and regional public banks are also recommended, as well as a National Development Bank. With a government public bank, all departments, including the taxation department operate their finances through the national bank. The great advantage of a public bank is that any money owed by the government is owed to a government bank. All interest accrues to the government and the money was created at no cost to the government. This makes the debt somewhat irrelevant. Government debt is owed to the government. If the government bank does not wish to pursue the debts, the debt can just sit on the books and the interest can simply accrue. In some instances, lent money can be treated as a grant. This might be a loan at zero percent with no time conditions. Another benefit of your National Public Bank is that where the government needs increased funds for special purposes including infrastructure and defense financing, the loans are financed by the National Public Bank. This puts a brake on profligate spending by adding a second level of analysis by banking personnel. Your National Public Bank assists common-sense by analyzing proposed government infrastructure projects to ensure that the projects are a worthwhile investment for the nation and not vote-catching splendors. Because the government owns the National Public Bank, the government owes the money to itself. The debts are somewhat irrelevant. Any profit from the paying of interest accrues to itself. Thus, usury has not occurred and unpayable debt has not been created. Unpayable debt does not occur because there is also a movement of money between citizens and government in the form of taxation. The government, through the National Public Bank, can direct the spending to where it is most beneficial for the nation.

Another valuable contribution of the Public bank is to counteract the cyclical nature of private bank lending. Private bank lending tends to be cyclical as shown in this next graph. It is not clear whether this so called ‘business cycle’ is naturally occurring or malicious. It is quite likely to be related to the lending for speculative purposes. Speculative lending tends to follow boom and bust patterns often referred to as “bubbles”:

Ireland change in Private Loans by banks. Graph by Andy Chalkley

A public bank does not display this cyclical lending pattern. It can also crank up its lending when the private banks cut back on lending. This steadies the Money Supply.

Component Three - National Development Bank

The role of a National Development Bank is to provide financing to promote economic and social development at all levels in a nation. The financing ranges from very large infrastructure projects all the way down to SMEs and micro enterprises. The National Development Bank helps by providing large amounts of financing to growing and productive sectors of the economy. Government projects should include bridges, railways, ports, canals, solar energy and even include communications networks such as the internet. Projects should generally be judged on their enhancement of national business efficiency and competitiveness. A good National Development Bank will also ensure the local government has adequate access to credit to enable the building of local infrastructure. The National Development Bank also ensures that money is available for business start-ups at all levels from the family that wants to create a rooftop, beehive, to the inventor that want to use mirrors to heat buildings. (I heat my house with mirrors.)

Component Four - State Public Banks

State banks finance the operations of the state. All state departments operate through a state public bank. State banks also support local regional credit unions and local banks. The usual example I give is as follows: Imagine that you are starting a new state. A migrant moves into your state and walks into the state public bank. He asks for $10 000 to buy a sausage machine so he can earn a living. Our State Bank says to him “If we lend you $1000 000 at two percent interest, will you build a sausage factory?” By this means, the state will have a sausage factory, a significant employer and food for all the other migrants moving to the state. All the state did was lend money that it created at no cost. It gained significant state development. It is the best way to develop a state. Do not forget that business needs money before it earns income. The sausage factory starts to produce five million in sausages each year. The government each year collects around: One million in sales tax, around two million in income tax from factory employees and farm employees, around one half million in company tax and so on. This is annually government tax collection against a one-off loan of one million which cost nothing to create and will be paid off over the next few years. You might see that the original two percent interest is somewhat irrelevant.

It must be written into the charter of a public bank that they are not allowed to lend for speculation. This includes lending for speculation on land and property. The State Public Bank must lend in a manner to assist homeownership, farm business, small business, medium business and large business. This must include business start-ups, small business entrepreneurship, and business expansion. Farm and business innovation should be assisted. Ethical statements in their charter must ensure that they may not lend for any business or activity considered harmful to the health of the nation or harmful to the environment.

Component Five - Community Banks

These Community Banks can be backed and financed by the State Bank. They assist in providing finance to local businesses and individuals. Their local nature gives the a unique insight into the financing needs of the local community.

Component Six - Micro Credit

Imagine a school child comes up with an invention. The child is too poor to make his quadcopter aerial surveillance unit with a temporary stun gun for tracking feral cats. These feral cats are not native and devastate the local native fauna. The local council has a children’s bank to help. The council officer arranges for an old retired machinist to volunteer to make the parts and a retired electronics guru completes the quadcopter. A retired businessman sets up a business and the young man starts selling aerial surveillance to the council for spotting and stunning feral cats in bushland. The system is sold or licensed worldwide producing great local employment and status. The electronic tracker locates the stunned cat to check that it is a genuine feral cat. ‘Problem solved’ as we say. This can only happen with the availability of local microcredit and support services available to anyone in the community. It is possible to word this into the charter of the National Development Bank or into the charter of the State Bank.

Component Seven - Alternatives

Alternative Currencies

Alternative currencies are currencies that have restricted usage in a local area or in a restricted environment. They are also called Complementary Currencies. Alternative currencies aid local business by allowing local currency to flow freely around the local district. Never forget that the value of a twenty dollar note is not the face value of the note but is the sum total of all the transactions enabled by the note. Money flowing around a local community aids the local community. National currency does not always spread evenly throughout the nation, creating a money shortage in some areas. Local money can be useful to fill this shortage. Local money can only be used locally. It does not affect the nation but encourages local trade, thus filling up the local void.

Alternative Currencies also act as a buffer when a national currency collapses. To this end, the currency may be linked to the national currency but better is to link it to some other measurable value which might be hours of work or energy or any commodity that has a meaningful value. This value could even be a dozen eggs or a loaf of bread or a combination of items. In the event of a collapse of the national currency, the Alternative Currency needs to be decoupled from the national currency. Legislation needs to be added to facilitate any local area creating its own local currency.

Gold and Silver

Legislation should be enacted to enable Gold and Silver to be used as money at their current exchange value. These metals need to be made legal tender. This has some similarity to the local public mints enabled by past sovereigns.

In the preparation for a financial collapse, a mechanism needs to be in place so that some continuance of trade occurs using gold and silver coins. Persons should be encouraged to own precious metal in defined weights that can be used as payment at their current value. It is not a perfect solution as gold has a habit of being hoarded by the affluent. A spread of silver coins in society would make society less vulnerable in times of collapse.

Component Eight - Encourage Home-Ownership

End Taxpayer Subsidies to the Rich.

The present taxation system effectively creates a taxpayer subsidy to the speculators and the well off. The current tax system allows rental property purchasers to charge the interest on borrowed money against their tax at their maximum taxation rate. House owners do not get this generous concession. The purchasers of rental properties buy these properties so that they can get a gain from the rise in the value of the property along with the rental income. They pay tax on the rental income but not on the property appreciation. The tax on the appreciation of the property is deferred until the property is sold. If the property is held indefinitely, the tax on the profit is deferred indefinitely. When they do sell the property, they get a discount on the tax masked as a ‘Capital Gains Tax’. Regular businesses have to evaluate the value of their assets annually in a process called depreciation, yet speculators avoid such action. The net effect is to raise the price of property out of the reach of young home buyers. The well off investment purchaser can out bid the young at auction due to the tax advantages available to the speculative purchaser. We must either stop negative gearing or revalue the properties each year. Most businesses have to delay tax deductions on purchased items through a process called depreciation. This is unfair on businesses as the money has already been spent. They may own the asset, but the asset is not spendable income. The same issue occurs with trading stock. Inventory is not spendable income, yet it is not deductible in Income Tax calculations. Investors are treated much more favorably. They get a tax advantage and their asset is not valued, revalued or appreciated by a mathematical formula as with depreciated assets. The effect is to give a significant advantage to investors that is not available to home purchasers nor business operators. This means that a purchaser subsidized with a government tax perk can outbid young couples and families. The young are seriously disadvantaged in the housing market because they don’t get the tax perks available to the speculator. The inability of young home buyers to purchase creates a host of downstream problems. The disenfranchised feel a lack of belonging to the community. They are more likely to become welfare dependent. They live in unstable home arrangements. They are less able to support themselves into old age. Libya had a clever system. Persons were not allowed to own more than one house. This method could be incorporated into the land title conditions or local council bylaws. (Written on the train from Lviv to Kiev.)

The current system is interesting because the land was originally provided for all living things to share. Ownership was instituted. This allows a form of legalized bullying. Those that do not get ‘titles’ are excluded from that which was created for all to share. Those that monopolized the land charge rent from the use of that land under rules put in place by those with influence over the nation-state. The ethical sharing of that which was provided by nature was overruled by the nation-state. Less influential citizens of the nation-state no longer get a share of that which was provided for all to share. Land is popular. Where employment is available, rents rise to the maximum people are prepared to pay. The limit on what they are prepared to pay as rent rises to take the bulk of their income leaving them with just enough to feed the family. Land is thus monopolized by the sum of the group called ‘landlords’. When land is transferred for money, credit is created for the purchase by a bank. The bank creates credit and debt in equal quantities in a zero-sum double entry accounting arrangement. It is thus able to create as much money as is required by potential purchasers. Thus the bank creates as much money as the real estate market can absorb. Thus the money to purchase is rented to purchasers. The value of property is limited by the earning power of the borrowers. The price of the property rises such that the borrower is only left with sufficient to feed the family. In both situations, rent or interest rises to take the bulk of the income of a region where businesses are making money and employees are employed.

Land Ownership for All

All people born in a country have the right to reasonable land ownership in line with their needs for a reasonable price. The most effective way is to keep the house prices down. As most houses are bought using bank loans, it is the loan process that determines the value price of land. The price rises to the amount a bank deems the buyer is capable of paying interest from income. House and land prices are dependent upon:

House prices rise to take the bulk of a person’s income as interest. Buyers will bid the house prices up to the limit of affordability. This means that it will take the bulk of their affordable income. A better destination for their money is a Land Tax in a government bank account. Land Tax will reduce speculation and land prices. It will allow the reduction in the magnitude of the economy-damaging Income Tax and Sales Tax.

Transfer Fees and Stamp Duties

Remove land transfer levies. They are counter-productive to the efficient use of land.

Downsizing

The downsizing by elderly persons assists the availability of housing for the young. The downsizing should not be inhibited by taxation. The stored value held in the house value is important for the upkeep of the elderly and removes much of the need for state help.

Component Nine - Recognize that Debt Cannot be Cancelled

Recognize that debt cannot be cancelled without collapsing our payment system. This is commonly known as Jubilee. The concept of Jubilee is that debts should be cancelled under certain circumstances. The concept goes back to the Jubilee as described and practiced in biblical times. Debts were cancelled each fiftieth year with a great celebration and, at the same time, various other freedoms were reinstated. The big Jubilees included the freeing of debt slaves and more. To show why Jubilee will not work in the modern money system I need to recall some national banking figures.

The reason that a Jubilee cannot work is because a Jubilee demands that all debt is cancelled, wiped, erased, on a Jubilee day. This creates a problem as the debts are listed as assets on the bank balance sheet. To wipe the debt would be to wipe out the banks. The assets of the banks would disappear causing a collapse of the money system. Much as many like to curse the banks, the modern world actually needs their fabulous money payment system. Just watch the efficiency of a teller in a bank and compare this to the bumbling inefficiency in handling money is the average small and medium business. I cannot think of any business activity that matches the efficiency of the bank payment system. It is quite an outstanding marvel of the modern world. We cannot operate without banks. We do not wish to kill the banks. They have brought a level of sophistication, innovation, and efficiency that is only going to come from private organizations. Government organizations tend not to be innovative and progressive and tend not to be efficient with small transactions. They tend to be slow to take up innovation and technology.

Repayment of Debt

Debt cannot be cancelled but it can be repaid with fresh government money. To pay off debt to banks using existing money is an impossibility as there is insufficient existing money to do so, and any attempt to do so would destroy the circulating medium. However, the government could create fresh money and use this to pay off the government portion of the debt. There are three ways of doing so:

Component Ten - Education.

Component Eleven - Stop the Bias Toward Corporations

Component Twelve - Control the Banks

Bank of England 2014

“Is it difficult to believe that the Central Bank with the blunt instrument of interest rate control can control private corporation lending habits. As inflation continues to flourish, their control appears to be a carefully controlled myth. ...

Creating money in the form of cash notes is illegal and called counterfeiting, however creating money that is equivalent to cash and lending it to people is apparently legal.” [2]

Component Thirteen - Forex

Betting against your currency is a hostile act. The Foreign Exchange Market is also known as Forex, FX, or simply the ‘currency market’. It is a global decentralized market for the trading of currencies. Participants can exchange, buy, sell, and speculate on currencies. They can even speculate using borrowed money in a process commonly called ‘leverage’. Leverage allows a participant to enhance profit and loss. Leverage can be as high as two hundred to one. For some, the betting on Forex has become a form of entertainment. To many, Forex trading is the ultimate form of gambling. For big operators, it is a way of making massive profits at the expense of clients and nations. A major problem for nations is that speculation of their currency on the FX market can be deadly to the nation. The foreign exchange (FX) is a market for the exchange of currency and was remarkably easy to rig. Market manipulation and insider trading are difficult to detect. Banks colluded for many years to manipulate exchange rates for their own financial gain at the expense of their clients. Trade on the foreign exchange market runs at about $5 300 billion each day. In 2013, Bloomberg News reported in 2013 that currency dealers said they had been front-running client orders and rigging the foreign exchange benchmark WM/Reuters rates by colluding with counterparts and pushing through trades before and during the 60-second windows when the benchmark rates are set. To arrange the rigging, the banks had set up sophisticated communication channels through electronic chatrooms with names such as ‘The Cartel’, ‘The Bandits’ Club’, ‘One Team, One Dream’, and ‘The Mafia’. The losses to the clients is unknown and most likely beyond comprehension. This activity has parallels to Jesus driving the money manipulators out of the temple.

Any act by a bank that is hostile to their client’s interests should be declared to be committing a crime.

New Messiah says: “Ban derivatives.”


New Messiah says: “Ban short selling.”


New Messiah says: “Ban speculation on Forex.”


New Messiah says: “Stop banks from betting against their clients.”


Component Fourteen - Government Debt

Ban the government from contracting debt from private interests. The current problem is that the government uses privately created ‘Bank Credit’ to pay its bills. It does not use its own Cash Currency. Until such time as it creates digital money, the government needs to create a government-owned public bank. This public bank will create Bank Credit for the use of the government and the people. Bank credit is the product of double-entry accounting and is only created with matching debt. However, the debt is less relevant when it is owed to the government.

Never forget that the government has the authority to create the money of the nation so government debt is entirely unnecessary. It is lunacy that a nation should have to pay interest on its own currency.

New Messiah says: “A government should never be in debt for its own currency.”


New Messiah says: “It is lunacy that a nation should have to pay interest on its own currency.”


New Messiah says: “The government should create the money and credit of the nation.”


The Government is Capable of Creating Digital Money

Digital money can be in two forms. One is debt-based money. The other is debt-free money. One is a digital balance which is suited to debt-based money, the other is in the form of Digital Units created in the same manner as Cash Currency. This is debt-free money.

Government has always created money in individual units. We have always known them in some physical form. The physical form is typically coin or paper notes. This might be numbered or un-numbered. The government is capable of creating units ranging from one dollar to one billion dollars with digital serial numbers as is the practice with Cash Currency. I usually explain this method in this manner: The government prints notes in many denominations right up to one billion dollars each with its serial number. It photographs each note as a jpeg in the same way a photograph is stored in a camera. The note is stored in a vault. The image has the digital serial number attached. The jpeg file is unique as is the serial number. Jpeg files are almost always unique. Attached to the jpeg note is a transaction history. To pay for an item, the file is transferred to the new owner with an addition to the transaction history. The transaction history can be updated on a network of remote computers in the same way that domains are updated on the internet. The computers slowly communicate with each other updating ownership records. To effect a transaction between two people, the file is given to the new owner with a request to update the ownership records. Similar happens with car registration and land title records. A land title is transferred at the time of signing the documents, but the records get updated a few days later. Currently, banks use a balance system. The balance is the amount of Cash Currency the bank owes you. Even if it can’t give it to you, it owes it to you. Payment to a third party is effected by requesting that part of your balance be transferred to the third party. When you write a check, the check requests that part of your bank balance is moved to a new owner. The balance system should not be considered as money as it is a measure of money owing and even allows fractions of a money unit such as $0.0000123. This is not a money system, this is a credit system listing amounts owing.

The government would spend its freshly created digital units by giving its digital units an encrypted serial number and a digitized image of a known compression algorithm. Each digital unit is owned by its current holder. A record of transactions is attached to the digital unit. A network of independent computers will hold updated ownership details as fresh information comes in. This is much like the domain name settings for web pages. Verification of ownership can be checked by anyone who wishes to do so.

When I create a domain name in my computer business, I apply for the name at my domain registrar. If the name is available, they ask for some details including the ip address of my server. I pay the fee. They send me a certificate to say that the domain name is mine. On their name server, they put an entry for my domain name and its server ip. This domain name and ip address slowly propagates itself around to all the name servers in the world. If I create the website for the domain within the hour, the website may be available if the domain information has propagated to my local domain name server. If may website is move to a new server, the change of ip is slowly propagated around all the domain name servers in the world.

It would work the same way with digital currency. Numerous servers would hold the ownership details of every digital note. Updates would slowly propagate around all servers to update the data. This is true digital money unlike the fake credit masquerading as digital money. If I purchase a drink flying over the Indian Ocean, I transfer ownership details of my digital note to the airline. On touchdown they send update details to any local digital money server. The local digital money server slowly updates the data in all the digital money servers around the nation or world.

Component Fifteen - Nationalize the Central Bank

Nationalize the central bank. Ensure that the central bank is both owned by the treasury and under the control of the treasury. Ensure that the central bank and the treasury are not stacked with temporary appointments from the private banking industry. Only under such circumstances can the treasury be sure that the money-issuing is not a puppet of private corporations. Some central banks are owned by the government and some are owned by private banks. Ownership does not necessarily indicate control. My daughter’s car is owned by me but I have no control over it. Central banks exist to legitimize the debt banking system which is supported by political parties that benefit from doing so.

Component Sixteen - Only the Government Should Create Money

Government will move to create its own money in the Treasury. This money is spent into circulation on government expenses and public projects. The treasury also ensures that the banks have adequate money to lend. The treasury lends large quantities of money to the banks at a very low interest rate. The banks on-lend the money to their clients. Commercial Banks are far superior at evaluating risk in the business arena. All money created at the treasury has serial numbers. This includes digital money. Gone are the days of having fractions of cents.

In a money system, it is generally considered that there should be an adequate volume of money circulating. However, it should not be forgotten that business needs money before it can make money. It is crucial that adequate credit is available to existing and potential business persons. This is done through the Commercial Banks which we often call ‘high street banks’. The treasury will grant access to unlimited new money for business purposes which will be loaned at the discretion of the high street banks. High street banks are very skilled at determining the risk involved with lending to business. The lending to business will be augmented by national development banks and state development banks. Lending for speculation will be eliminated.

With a combination of the treasury and the national public bank, treasury bonds are progressively purchased back thus eliminating the bulk of the national debt.

It is entirely inappropriate for a government to issue interest-bearing bonds to individuals when the government has the authority to create the money. It is inappropriate to borrow money and even more inappropriate to pay interest on money that the government has the authority to create. It is idiotic for the government to borrow its own money.

It is necessary to recognize that the needs of business are different to the needs of citizens. Businesses need money before they can create income. The money that the government spends does not provide the capital needed for business. If the Money Supply were limited to a government injected supply, it would tend to be inadequate and erratic. This was true in years gone by, when sovereigns had a monopoly on the supply of money. Sovereigns spent lightly for public purposes but created and spent rapidly for military purposes. The supply under such circumstances does not match the needs of the citizenry and even less so for traders. Some alternative method of local money expansion is needed. Sovereigns often enabled local mints to issue coinage on an as needs basis from precious metal. Witness the era of cathedral building. The modern equivalent is the high street bank (aka Commercial Bank) which extends credit, which acts as money, on an as needs basis. Unfortunately, this creates unpayable debt. The needs of business are catered for by this lending, but when applied to consumer items and houses, the unpayable debt becomes insurmountable. Money needs to be fed into the Money Supply in sufficient quantities to prevent citizenry scurrying to the moneylenders for their need for money.

This includes currency and digital money. The government will create and issue paper and coin currency through the treasury. The government will create digital currency through the treasury. This will consist of paper notes with serial numbers in denominations of $1, $10 through to $1 billion. These will be stored in a vault. Each will have an image of known compression algorithm, and a digital signature recorded on the treasury computer. These will be spent into society and the ownership transferred to the recipient. Ownership of a note is recorded in transactions attached to the digital cash (‘dash’). Ownership data is primarily attached to the digital note but also recorded on a network of authorized computers nationwide. This network of computers gradually updates ownership as information arrives.

This also means that lenders can only lend out money that exists. This effectively means that the reserve requirement rises to one hundred percent. The banks then only lend money that exists. They may borrow digital notes from a National Public Bank. This enables the central bank or the National Bank to have some control over the volume of money in the nation. It also allows some control over where it is lent. Loans for asset driven speculation can be curtailed. The curtailment of speculation will reduce boom-bust bubbles. Loans for business development can be augmented.

Positive Money

The Proposals of ‘Positive Money’ are similar to this. Positive Money is an organization with a significant presence in the UK. Positive Money proposes that only the government should create money. Their reasoning is slightly different to mine. Their main line is that only the government should create the money of the nation because that is the rightful place for money to be created. They don’t mention that the loans that the banks make will still create more debt than the total of this government money and that the aggregate of these debts will be unpayable and uncollectible. However, it is still appropriate that ‘only the government should create the money’, rather than the free-for-all of current bank lending practices. Current practice inflates the Money Supply which alters the value of assets including land, dwellings, and shares. zzz reread These asset inflations cause bubbles and crashes. The current system also inhibits the growth of business as credit to business is restricted and rents and land prices are pushed up. These high rents make business uncompetitive against businesses in other countries that have more plentiful land and are yet to succumb to the usury of land.

Component Seventeen - Taxation

 The influence of taxation rate on the taxation collected. https://stats.oecd.org/Index.aspx?DataSetCode=REV and LibertyWorks.com
Taxation Australia.
Taxation Components USA.

Component Eighteen - Be Business Friendly

Create a business-friendly environment for existing small and medium-sized enterprises (SMEs) and potential entrepreneurs. Businesses operate by circulating money. They don’t hold money they bring money in and pass it on. It is easy to bleed money from money when it is moving. It is difficult to remove money from a stash because it is visibly missing. Business is always at the receiving end of bad tax policy. It is business that feeds, entertains, and clothes the nation. SMEs consider taxation matters to be a burdensome item. Tax compliance costs are high on businesses. Hoarders are treated as heroes and the tax authorities treat businesses as potential criminals. Yet it is the businesses that feed, employ, clothe and house the nation. The tax department fails to realize that healthy businesses produce healthy tax returns.

Bureaucratic Obstacles

Business owners should not be frustrated by unnecessary bureaucratic obstacles. Compliance with regulations can be costly. Although all businesses all compete against the same bureaucratic obstacles, the obstacles will give an advantage to business in foreign countries. Occasionally bigger companies will surmount the bureaucratic obstacles more easily than small business. Besides the triplicate forms, the manner of the government compliance workforce is important. Some government compliance officers are actively hostile to small business. Some nearly-impossible-to-fire unionized government bureaucrat can be almost impossible for a fresh young entrepreneur to deal with. We then have a tyranny of regulatory compliance. In 1835, Alexis de Tocqueville described a state which had descended into ‘soft despotism’ where a country had been overrun by “a network of small complicated rules”. We need a bureaucracy with officers that are not hostile towards businesses and their owners. Besides the red tape, the attitude of the bureaucrats should be helpful to business. Alexis de Tocqueville also said “It covers its surface with a network of petty regulations--complicated, minute, and uniform--through which even the most original minds and the most vigorous souls know not how to make their way past the crowd and emerge into the light of day.”

Maintenance of Business Standards

A nation and its citizens need greater opportunities for small business ownership.

Maintenance of Business Standards

Under free enterprise, businesses attract customers by being good at their business. In business, I always say: “Give the customer more than they expect.” I am here in Lviv, Ukraine. Last night I was invited on a bucks night by some lads in the hostel. There are bars and restaurants everywhere. To get business, the venues give full entertainment. Each venue that we visited had a totally different theme and the staff played roles. The masochism bar had customers on their knees and where they were whipped bareback. The theatre pub had an ingenious four floor modified layout with an orchestra playing everything from Beetles to Deep Purple with full public involvement. Business thrives with competition. Industry supported, business supported restrictions, sometimes with price maintenance masquerading as gouging, are not good business environments. Let business do what business is good at: producing goods and services. Control is necessary, but a bureaucrat is unlikely to know what tricks a business will get up to. I was always impressed with the Painters’ Registration Board in Perth, Western Australia. I was their computing consultant. I thought it was a classic quango. Officers were ex-painters and knew the tricks. It was complaint driven. Complaints were followed by an inspection. The painter was called and, if necessary, given the opportunity to remedy. If there was no satisfactory outcome, a tribunal was held. A department with a few ex-painters lifted the painting quality throughout the state. Painters knew they would be held to account by people who knew what they were talking about.

Being unfriendly to business is not good for the economy. The people should not be administered as if they are sheep who need to be protected by the state acting as the shepherd so that they can be sheared of their fleece or slaughtered for their meat. The state should not be allowed to create ‘sheep-like minds’ in the minds of the citizens such that they can be controlled as sheep.

Component Nineteen - Alter Depreciation

Depreciation is the systematic reduction in the recorded value of an asset. Depreciation hampers the expansion of business. Depreciation delays the tax deduction of money that has already been spent. An expanding business is thus very short of money and has to run to the money lenders. Depreciation should be made optional.

Component Twenty - Ban Derivatives

They perform no useful purpose. They add risk where none existed. They are financial crash waiting to happen.

Component Twenty - Encourage young entrepreneurship

As a high school teacher, I claimed that we were teaching inappropriately. We were teaching “If you get a question like this, you answer it like this.” We are not teaching people to think. I went to a British Grammar School. I had to pass an exam at the age of eleven to get there. In exams, I was always given questions, the likes of which I had never seen. I had to think ‘outside the box’.

Our current education system d8scurages creative thinking. It teaches to the students to follow past patterns. It discourages entrepreneurial thinking.

Every local council should run a swap meet or local market. There should be stalls available to casual small time entrepreneurs. Schools should have stalls available. Every school child should have the regular opportunity of making something and selling it on a market stall.

In Breakpoint and Beyond: Mastering the Future Today, by George Land and Beth Jarman there is a paperclip study example. Primary children are given a paperclip and asked “How many things can be done with a paperclip.” Primary students were highly inventive and leaned towards genius levels. Inventiveness declined dramatically as children progressed through the education system.

Support young people in creating their own businesses. Avoid creating a hostile environment where it is difficult for youth to achieve entrepreneurial success.

Component Twenty - Encourage entrepreneurship markets

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Crowd-Funding.

Greater flexibility in the Money Supply may be provided by crowdfunding techniques for local projects. For example: a local farmer wishes to purchase butter making equipment. The farmer could apply to a local organization by means of an advert and local people can lend through the local crowd-funding organization to the farmer. The butter making machine would enhance local output and local employment. By this method, local money is invested locally. The interest rate could be zero. But this is acceptable as a Demurrage Tax would not be applicable because the money is being used.

Component Twenty-One - Be Prepared for Financial Collapse

Component Twenty-One - Limit the War Machine

Abandon any non-nation-state armies. They are not controlled by any nation. This includes Nato and the United Nations army.

Component Twenty - Encourage Ethics

If you look up ‘Ethics in Finance’ you will read about scandals and fraud. What is happening is that is is accepted that you can defraud people of money provided that you do it within the law. Scalping people is fine provided that it is legal. Greed overtakes many in the financial industry. Some areas such as insider knowledge are difficult to define and police. A person in the industry is almost certain to be privilege to information that influences the price of a security that is not available to small time investors. These are grey areas. However, the whole concept of trading for profit to make profits where no product is produced in the real economy is wrong. The act of ‘making money from money’ goes against the original intention of money. Money enables trade. Anything other than trade for goods and services goes against ethics. No useful service is provided to humanity by the major part of the finance industry.

It takes a group of ten workers around ten weeks to build a house. Land was provided by god or nature for all living things to share. Why should it take a young couple a lifetime to pay off a house? Why should they have to pay for a home in the first place. They are the productive youth of the nation. They deserve a fair share of the nation. Moses declared that the lending of money and expecting more in return to be wrong. His mean spirited beliefs led him to allow the mistreatment, defrauding, and killing of foreigners. Jesus put an end to this approach by telling people to be good to each other. Jesus made a strong stand against those that were ‘making money from money’. Mohamed took the rules a little further. Mohamed was a trader. He recognized that businesses needed money before they could make money. He made rules along the lines that the lending for businesses was acceptable but the lending for consumption was not acceptable. Muslims are supposed to give Zakat (usually 2.5% of the wealth, given annually) but also give Ushr (Tithe) (10% of regular income). This cares for the less well off. Zakat is the compulsory giving of a set proportion of one’s wealth to charity. Mohamed made strong rulings on the hoarding of the circulating medium. He said that “On your demise, your hoarded wealth will be heated and burnt onto your forehead”.

When I refer to ethics in the money system, I am going right back to the original concept of money. Money was invented by one of our ancestors for the purpose of trade. Humans live by trading with each other. Anything beyond that has to be questioned. It is not a matter of rooting out a few cases of corruption. The whole concept of ‘money from money’ is a corruption of the use of money.

New Messiah says: “Do the right thing.”


Component Twenty - Ask where the money came from

Imagine if the Greek people asked the IMF where the thirty billion came from. This money did not come from the ECB. There is no money trail. There were no truckloads of money moving from ECB to IMF. There were no truck movements from IMF to Greece. If the IMF were to show its books, it would show that there was no thirty billion sitting in a vault. Nor was there thirty billion sitting in an account. The thirty billion was an account entry matched by another account entry of thirty billion. Under the rules of double entry accounting, the account entries balance. By the stroke of a pen, Greece receives thirty billion in credit at the same time as gaining a debt of thirty billion.

The main problem with exposing this logic is that it would expose the virtual nature of the arrangement. This might trigger a default. The Jubilee people might rejoice but the money system might collapse. The Greek people can live with debt. They can live with unpayable debt, but they cannot live with collapse.