Robin Hood wrote:Government loans ....are a whole new ball game!!!!
This would need to be preceded by revisions to the Bank Charter Act 1844 to include the cancellation of the inferred right of commercial banks to create electronic currency; the implementation of a Glass Steegal Type Act, to separate the commercial bank (
Which is what I think we are talking about here?) from the Investment Banks. The latter should be cast off on their own to sink or swim, with absolutely no backing from tax payers, if they screw up. There would also need to be revisions to the Bank of England’s Charter that would enshrine the privilege to create ALL currency as their exclusive right.
The Central Bank should now be declared a department of Government that supplies currency to both the Government and private commercial banks. It would be a service to the treasury and would be responsible to Parliament and thus the people. It would not be run just by bankers, as it mainly is at the moment, but by eminent economists, academics, representative of Commerce and Industry, Government and banks.
As I see it ......... the CB would create currency, on demand for both the Government and the private banks, just as the commercial banks do now! But there the similarity ends .... I have already described how I believe the CB would cooperate with the private banks to provide personal and business loans but how the CB deals with the Government has one significant difference ............. they gift the currency to the Treasury as an investment ......... not lend it. How can they do that? .... simple!
They do just what the banks do now! They type in a number on their computer and ‘SEND’ it to the Treasury account! When the treasury spends it into circulation it becomes currency and is now part of the economy. But it is free of debt and interest. It never has to be repaid .... it is now a perpetual currency and will circulate ad infinitum. This is just what Paphitis was describing (
although he didn’t know it!) when he described his $100 note being used over and over again and formed the basis of $1m in transactions.
When the Treasury spends it, the currency will go to everyone, from major contractors and suppliers, to their employees, to their grocer and even to the unemployed on benefits! They all spend and as a result generate direct taxes such as VAT and duty. It all goes back to the treasury eventually, to be re-spent over and over again ............ just like Paphitis $100 note and just like Paphitis $100 note .......... it is not inflationary!
But they are only able to do this because the money was not borrowed and thus the tax money collected is not required to repay loans, and the banks compound interest, by taking this new currency out of the economy, simply so that banks can write the sum off on their accounts, to keep the books straight.
Now all the Government agencies have to do is to balance their imports and exports, because buying imports will take currency out of the economy and convert it to a foreign currency and exporting goods and services will do the reverse. Aim is for at least a zero sum balance. The foreign currency is held by the Treasury and converted back to local currency.
This re-assignment of currency creation also has very significant impact on the National debt. Not the obvious that we would no longer be creating debt but we could actually pay off the existing national debt. The CB transfers to the treasury and from there to each commercial bank a sum equal to the National Debt owed to the bank. The bank follows the same protocol as it does now ........and writes the debt off on their books. The currency enters the economy for micro-seconds and is then destroyed by the bank. Debt to banks eliminated and not a cent permanently enters the economy.
What happens to the banks? ..... they take a drop in assets and thus their income ...... their problem not ours!
Let me apply this to a current situation as seen through the eyes of a ‘leftie’ - Port Talbot steel work’s and I
will take a few liberties with the law .........
The new PM (
By this time we have taken Cameron out of No. 10 and put in a clone with real balls!!) calls TATA’s boss .... by telephone and says “You, my office now!”
They meet and the PM gives him a cheque for the estimated scrap value of the plant and his air ticket home (economy).
The Government now owns the plant .... lock-stock-and-barrel. They sit down with the unions , the management and the PM tells them what he plans to do. The clone does a Putin on them ......... he makes a decision, tells them what he proposes and gives them the opportunity to add their ideas. No meetings of Cobra or jet-setting to get the approval of every Tom , Dick and Harry to get them on side and to get their approval ......... he just puts the plan agreed into action.
If I were that clone .......... I keep the plant operating for the time being. I would use the engineering expertise we have in country, to redesign the plant to the highest standards currently available as two or more production streams. Then, shut down say one stream of the plant and demolish it, using the current operators and hired contractors. Again using the available staff, issue a contract to private UK based industrial companies with the expertise to manage and to build the new plant. When the whole plant is complete as one of the most advanced and efficient plants on the planet ......... I put it up for sale to UK companies and make sure it remains in UK hands.
Costs a lot of currency to do this ...... but what the hell we create it ourselves anyway!
We can either use it to prop up a community that has maybe now a hundred thousand unproductive people in need ,or we use it to provide for the future. All the money spent goes back to the treasury ..... so the same Paphitis '$100' note goes around and around .......... at the speed of light! Nobody looses their home because they have no job and cannot afford the mortgage; no children have to pull out of a University because Mum and Dad have hit unforeseen hard times; no small businesses need to close because their primary customer has closed down ..... their business could even see an upturn, with the help of a (0%) bank loan, as they adapt to provide for the new plant; the schools all stay open; the hospitals are not jammed with people suffering from the stress related conditions caused by a monumental change to their lives and a community survives to look forward to a future.
And, all that just because we changed the way currency is provided for the state. Amazing what a bit of imagination can dream up............. init?
