Chapter 10 - A Room Full of Happy People

Example: The Treasury creates issues the money and the new money is spent into society through a National Public Development Bank.

There are ten people and myself in a room and you are one of the ten. You represent the people of the nation and I represent the Treasury. I will create money and spend this new money into society. I pay you to build a bridge. I contract others to build roads, hospitals and schools. I spend $1000 into society. The nation has new infrastructure and there is no debt. This is a debt-free society. We now have a system where the government creates the money of the nation and spends it into existence in a manner that does not involve debt. The people are not indebted, the businesses are not indebted and the government is not indebted. This is by far the best money system. This is close to the system that is currently used in China. This is the system that made Australia the most prosperous nation in the world between 1911 and 1923. In 1911, the Andrew Fisher government, using the brains of King O'Malley, set up the Commonwealth Bank of Australia, which spent the nation's money into society. It built the Trans Australia Railway, effectively at no cost to the people. It was quashed in 1923. It is of note that Australia soon after went into the Great Depression. The Great Depression ended and money suddenly became plentiful so that we could have another war.

I will give you two practical systems that will keep your nation debt-free:

In the first system, the Treasury creates the money as cash folding notes and its digital equivalent, digital money tokens. The digital money tokens are a digitized form of cash currency printed notes. The Treasury spends cash and digital money into society and taxes the money back out of society.

The second system involves a Public Bank. This bank is owned and operated by the government. The Public Bank lends to the government on an as-needs basis. The National Debt is thus owned by the government and is irrelevant. The government owes money to the government.

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Both these systems have been used many times through history with startling success. Chapter 12 gives many examples of debt-free banking systems.

Guidelines for Implementation

Do not allow the total debt in the nation to exceed the volume of money.

Ensure that expenditures increase the efficiency of economic activities.

Run a National Public Bank to finance and organize all your government expenditures. All national government enterprises will be required to run their income and expenditure through the National Public Bank. This National Public Bank will connect to the payments clearing system of all banks in the nation. Your National Public Bank need not run Main Street branches.

Operate a State Public Bank in each state of your nation. All state enterprises are required to do their banking through the State Public Bank. A State Public Bank tends not to create unpayable debt as all proceeds go back into the public purse. The State Public Bank effectively finances the state using the assets of the state. The model for this is the state Bank of North Dakota and the original Commonwealth Bank of 1911 and various other state banks.

Government borrowing should be from the National Public Bank. All loans should be scrutinised for acceptability by the National Public Bank. Borrowing for current expenditure should resisted. Borrowing for infrastructure should be encouraged where the infrastructure aids efficiency.

Never borrow overseas for money that could be borrowed internally. Avoid allowing corporations to borrow overseas for money that could be borrowed locally. Your nation is capable of producing all the money it needs to carry whatever project wishes to carry out provided that this does not exceed the capacity of the workers of your nation.

Remember that improved health, improved education and improved infrastructure all improve the efficiency of the nation. Improved higher education helps to keep the nation at the cutting edge of technology. Improved high school education improves employment and reduces the need for prisons. Better facilities and local amenities improve local communities, reduce crime and improve health.

Control how the banks lend into society. Where the bank first extends credit, completely influences the major economic activities of the nation. If they lend to owner occupiers, you will have a peaceful nation of owner occupiers caring for their houses. If they lend to real estate investors, you will have a nation of disenfranchised young people living in unkempt rented accommodation. If the banks resist lending to small business, there will be scrappy, cost-cutting small business and this will give the corporates an advantage. If the banks play difficult with your farm sector, you will have plenty of farm suicides. If the banks give loans for financial speculation, your nation will soon be treading on thin ice. You must consider lending controls on banks to ensure that they lend to appropriate sectors of the economy.

If you have full employment in the nation, you do not need to build new government buildings. If you do not have high unemployment, you need to enhance your freight and port infrastructure.

The money should be spent evenly across the regions otherwise people will migrate to where the money is being spent, which is usually the cities.

Money should be spent on infrastructure to make industry more efficient. When industry is efficient there is high employment and reduced welfare expenditure.

Adequate money should be spent on health. A healthy nation is more productive.

Adequate money should be spent on education. Better educated people are more efficient and productive. Tertiary education should be free within limits.

The government needs to ensure that new money created by banks, is spent into society in appropriate areas.

The tax system is particularly harsh on start-up and expanding business. Generally, businesses like to expand. Taxation tends to inhibit this and push businesses to borrow or sell off ownership in the form of shares. Business 'Income Tax' is inappropriately named because it is a 'Profit Tax'. Purchased assets are depreciated over many years. The expense is incurred from income but the deduction is not available for any years. This restricts business expansion and pushes business into debt to expand or to sell off ownership in the form of shares. Shareowners reap the benefits of the business without the day to day problems. Expanding businesses are good for the nation and need a tax delay to encourage them to expand and employ.

Taxation and usury can become such a problem that business moves to countries and regions that are less harsh.

The tax of a nation is mostly taken from Circulating Money which is the lifeblood of a nation's business and from business profit, which is the money that would be used for expansion. Taxation of Circulating Money should be minimal. Hoarded money tends not to be taxed.

Land tax is minimal so that the affluent can tax land privately as rent. Land tax is a very efficient tax as it taxes that which is provided by nature for all plants and animals to share. If a business can pay rent to private individuals that have monopolised the land or mortgage fees to those that monopolise the money supply, the business can pay tax for the use of land. Land can become rented from the government instead of rent of interest. This would allow a reduction of income and sale taxes. It will have many beneficial effects but will be unpopular with the affluent who wish to monopolise land and extract rent on land they cannot use themselves. People should not have more land than they can use. Land was created freely by god or nature for all to use as needed.

The idle assets of the affluent tend to be lightly taxed. The burden of taxation falls on the productive sector of the economy. Hoarded money should be taxed. Wealth should be taxed rather than income. Inheritance and death taxes should be implemented. A very small Transaction Tax of less than 0.1% should be implemented on all transactions including financial transactions. This is $1 in $1000.

It is prone to take over by private individuals and corporations. The private corporations and individuals, then implement a usurious debt system. Individuals and governments will struggle to pay the interest. Everybody will have to work very hard to pay the debts and nations will desperately sell-off their mining rights, agricultural products, utilities and land to pay interest to corporate entities.

To run the system on a sustainable basis, the government needs to remove excess money tokens from society to avoid an oversupply of money tokens. For an expanding and healthy economy, the government will create and spend slightly more money tokens than it taxes out of society. The logic is that, in a well-functioning economy, the volume of goods and services available to be purchased will increase slightly each year. For these goods and services to be purchased, either money will have to flow faster or there will have to be more money tokens in society. Thus, a government needs to ensure that there is a mildly increased volume of money tokens each year. Thus, in a correctly functioning economy, government expenditure should mildly exceed taxation. The percentage required is not easy to determine. One might expect it to be in the range of 2% to 15%. More on that later. It is more of an art than a science.

When the government spends money into society, money is plentiful and the economy thrives. However, businesses need money (capital) before they can start or expand. Businesses take money through the door and spend it back out immediately on wages and fresh stock. They keep a small percent as profit which they use to feed the family. They need to purchase sausage machines and meat before they can start to earn income. Government spending does not meet these needs. Money or credit is needed for business to operate and expand. Commercial Banks provide this service. A national public development bank and a series of state development banks would endure capital was available to business at all levels.

The money creation process coupled with usury is a lucrative business. The human tendency toward self-interest, causes political interference to end this government money creation system in favour of private interests. The English Revolution enabled private interests to take over money creation in England. The French Revolution was largely funded by London banks to gain control of money creation and lending. (Napoleon Bonaparte 1815: "When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, ........ financiers are without patriotism and without decency; their sole object is gain.") The Russian Revolution involved bank finance. (Edward Griffin writes in 'The Creature From Jekyll Island': "The Bolshevik Revolution was not a spontaneous uprising of the masses. It was planned, financed and orchestrated by outsiders. Some of the financing came from Germany ... . But most of the money and leadership came from financiers in England and the United States.") There is a constant pressure to remove money creation from government into private hands.

Private organizations, individuals and corporations are not allowed to counterfeit money. They are not allowed to counterfeit cash notes nor are they allowed to counterfeit digital equivalents to cash. When money is lent or credit is given, the loan documents must contain the serial numbers of the digital notes or the cash notes that have been lent. They can only lend money that exists.