Our politicians, the economists who advise them, and the journalists who report their words and deeds tell us over and over again that our country is “living beyond its means” and the government will “run out of money” unless it “balances the books”.
We’re told that government spending is restricted to the amount of money that the government raises through taxation and the amount it can “afford” to borrow. This paints a picture of money being gathered by the Treasury (from taxes and loans) before it can be spent on public services. Government is portrayed as the breadwinner of the family, forced into making “hard choices” about how much we can afford to spend on what, telling us – the children – that some of us will have to go without shoes because there’s no money to pay for them.
This picture is a work of fiction. The claim that government spending is restricted by the amount of money it can raise from taxes and borrowing is a big fat lie and I’m tired of hearing it.
The government can always spend as much money as it likes because it has the power to create money out of thin air. This is true of any government that operates in a country with a fiat currency (like the UK and the USA) and could be equally true for governments operating in a currency union like the EU, if systems were in place to make it work.
The reason that our governments rely on taxing and borrowing to fund their spending is that they have gifted the power of money creation to private banks. When a bank makes a loan it creates money out of thin air and writes it into your account. When the principal of the loan is repaid the money disappears back into thin air. This means that the banks have almost absolute power over how much new money is added to the economy, where it gets spent, and how quickly it gets destroyed.
Our governments can choose at any time to take back from the banks this power to create and destroy money. If they did, the following things would happen.
Firstly, bankers and their shareholders would no longer be able to make themselves rich and powerful by creating money and giving it to themselves, which they are currently able to do by various indirect means, most of which involve you and me getting deeper into debt.
Secondly, we would no longer have to bear the burden of paying interest on 97% of the money in the economy. In the UK, households and businesses currently pay approximately £260 million to the banks every day as interest on money that was created as debt. That’s £260 million being sucked out of the productive economy every 24 hours – more than the UK government spends on education.
Thirdly, there would no longer be any financial restriction on government spending. Governments would be able to create and spend as much money as they like without having to account for it through taxation or borrowing. They could build whatever infrastructure they want, fund whatever programmes they desire simply by creating and spending whatever money was required.
Some of you will be horrified, justifiably, at the prospect of governments being allowed to create and spend without limit. So why aren’t we horrified at the reality of private businesses (banks) being allowed to create as much money as they like and distribute (lend) it to whoever they like while pocketing vast sums of it as interest? That’s what’s happening right now. That’s how our money system works. It’s why we’re all in so much debt and why so many of us live in, or in fear of, poverty. Why on earth do we accept this?
Giving any select group of people – politicians, bankers, or anyone else – the power to create, distribute, and destroy the money that we need to keep our productive economy functioning is beyond stupid – it’s insane. Allowing a clique of self-selecting individuals to control our money will always result in an economy that’s distorted in their favour. Whether driven by personal gain or political ideology they will use our money to get what they want at the expense of those who are not part of their gang.
Personally, I think that giving government the power to create and distribute our money is the lesser of two evils: we have some influence over our politicians but absolutely none over the extortionists who run our banks. But there is another option that’s far more attractive than either of the evils. We can remove control of our money from both the bankers and the politicians and keep it for ourselves.
Imagine a citizens’ bank that has absolute control of the currency with a set of principles written into its constitution to which its officers are bound by law to comply. Imagine a set of principles that spell out what we need our currency to do for us and how this is to be achieved. Imagine this citizens’ bank as a not-for-profit institution, owned by all of us in common, dedicated to ensuring that our money is used as a tool to make the productive economy work for the benefit of us all.
If we take control of our money and put it to work for the common good we can make sure that no-one ever has to go to bed cold and hungry regardless of their age, health or circumstances. We can make sure that productive people always have access to the money that they need to be productive and their customers always have money to buy the stuff that’s produced. We can create a financial environment in which a free market economy can thrive, backed up by whatever services we decide are best provided communally.
We can also kiss goodbye to the big fat lie of the country “running out of money”. We might run out of food if we don’t encourage our farmers to be productive. We might run out of fuel if we continue to waste it as we’re currently doing. But please, if you hear anyone saying that we’re running out of money, tell them to shut up and educate themselves. We can create and distribute as much money as we need to make our economy and public services work for all of us. So why don’t we?