The Crisis in a Nutshell

Introduction

Money consists of two components:

  • Cash (notes and coin), issued free of interest by the State,
  • Credit (bank accounts), issued at interest by banks.

The two together make up the money circulating in an economy, also called the ‘money supply’. After WWII, the share of Credit in the money supply was 53%. Now it is estimated around 97%.

The Problems inherent in our Monetary and Financial System

1. Regarding the Money Supply controlled by Central Banks

  • Nobody creates the money necessary to pay for interest on Credit. That means virtually everybody is borrowing, at interest, to pay off interest, besides capital.
  • The mathematics of compounding interest on interest result in exponential growth, i.e. peaks (or crises) around every 27, 54 and 81 years.
  • Governments use the ‘National Debt’ for borrowing, instead of issuing Cash themselves.
  • The National Debt was introduced by founding the Bank of England in 1694, when £1.2 million were borrowed at 8% to fight a war against France.

2. Regarding Banks

  • Instead of providing a public service, banks are profit-oriented private companies.
  • Shareholders of banks expect high returns, up to 40%.
  • Financial ‘instruments’ and ‘products’ have replaced money as a medium of exchange.

3. Regarding the Economy

  • By making more and more money out of Credit, also called debt, the financial economy is more and more disconnected from the real economy.
  • Financial institutions exerting legal enforcement to call in loans, cause bankruptcies, home repossessions, unnecessary litigation and suicides. Through the national debt, they also exploit and constrain the state’s budget, thus limiting political freedom.

The Solution at UK Level

  1. “Public Credit”, as advocated by Henry Kerby’s Early Day Motion (EDM) in 1964 and our EDMs since 2002, i.e. the Government issuing money and spending it into the economy. See our submission to the Treasury Select Committee Green Credit for Green Purposes
  2. The Treasury Select Committee organising an inquiry into the money supply. See our online petition Stop the Cash Crumble to Equalize the Credit Crunch on http://tinyurl.com/66rwd.
  3. A truly Royal Commission (with no more than a small minority of interested bankers, economists and politicians) investigating

5 responses to “The Crisis in a Nutshell”

  1. Diana Mitchell | March 7, 2009 at 11:47 pm |

    I think the present terrible problems are the result of bloated male egos. It is gross arrogance for a manager of a bank think that he is entitled to so much more that most of his employees, i.e. thinking exactly like Mugabwe, no difference.

    I have no problem with self-made men like Bill Gates or Alan Sugar having a large fortune but managers are employees of a bank – they are not all indispensible.

    Men in the same group are very reluctant to blame someone else in the group because that seems to be seen as devaluing the group itself. Men make great leaders but they want total obedience, not challenges to their authority so are not good at govering and social issues. I really do believe that this is a result of evolution – a leader needed obeience from his hunting team while women were left behind at the camps and learnt social skills to deal with living problems.

    So far I have not heard of one woman who has been given anything like the generous pension plans of the men. They never seem mentioned.

  2. Sabine McNeill | March 8, 2009 at 5:52 am |

    What a lovely comment, Diana, wise and thoughtful!

    Yes, of course, we are up against patriarchy, as it has emerged through hunting and military operations, male thinking behind male organisations and men in power positions created by men.

    They also seem little able to think holistically, i.e. for whole systems, let alone care for them.

    So we have to make up for a lot!
    Thanks for helping along!
    Sabine

  3. stablemoney | April 21, 2009 at 8:29 pm |

    A simple solution to the problem is to take away the right of banks – including the Bank that is responsible for the currency – to increase the money supply unless the bank can guarantee that some productive asset will be created to back the increase.

    This can be done by the Bank responsible for the currency when it needs more money then it issues restricted currencies that earn no interest and MUST be invested creating a new productive asset or service. See http://stableproductivemoney.wordpress.com/ for some ways to do this.

  4. Sabine McNeill | May 12, 2009 at 6:29 pm |

    Sorry not to have responded sooner!

    I guess we have to accept the fact that our interests and intentions don’t match ‘theirs’, and that it’s a miracle that ‘they’ have been getting away with what they’ve been doing for such a long time.

    Thank god, people like you are waking up! The question is: how do we put effective alternatives into action???

    Sabine

  5. Pingback: Is there really an (general) economic crisis? - Page 7 - Horizons Unlimited - The HUBB

Leave a comment