OPINION
Peter J Morgan
Peter J Morgan BE (Mech.), Dip. Teaching – professional forensic engineer, retired economics, mathematics and physics teacher
Part 13 of 18
The social conditions prevailing in the Kingdom of England and Wales at the very beginning of the 18th century were such that the parliament of the Kingdom of England and Wales consisted of rich men voted in by other rich men. Back then, women did not have the right to vote, and neither did those men who did not own a substantial amount of real estate. Only about 3% of the population could vote, compared with about 72% today.
Back then, bank IOUs were written on paper, becoming private bank notes, and bankers soon realised that the fact that their bank IOUs were being passed from person to person – as money – offered them vast opportunities to get even richer. Their fraud was that their bank notes in total promised to pay far more in gold than all the gold that bankers possessed.
Parliamentarians soon realised that bank IOUs made it easier for them to finance war. As a result, the parliament of the Kingdom of England and Wales passed the Promissory Notes Act 1704, which legitimised bank IOUs – private bankers’ bank notes and bank deposits – passing from hand to hand as currency, and the law would enforce their payment in gold if demanded. Centuries of legal attempts to prevent such fraudulent contracts were thus ended by the financial elite of the kingdom of England and Wales in 1704 in favour of themselves as capitalists, bankers, and MPs.
The Promissory Notes Act 1704 – passed just three years before the United Kingdom of Great Britain (the UK) came into existence – also made it much easier for the government to finance war. (Note that, provided the central bank is not privately owned, the government’s need to finance war – and infrastructure for that matter – can be satisfied equally well by its central bank’s creation of extra Sovereign Money, but that wouldn’t increase the profits of the financial elite who ‘own’ and control both the government and the banks! Note also that the Bank of England, when it was created in 1694, was privately owned. It was not nationalised until 1946.) By legitimising the fraud of fractional reserve banking (risk weighted lending), the financial elite thus surreptitiously legitimised their economic power to exploit the lower and middle classes. Until ‘we the people’ stop them, by electing political parties pledged to switch to a Sovereign Money system, they will continue to exploit us as the mostly ignorant – and therefore unwitting – debt slaves that we are!
When New Zealand became a British colony, and later an independent nation, the provisions in the Promissory Notes Act 1704 became enshrined in New Zealand law. Given the fact that in New Zealand the proportion of people who have the right to vote is now around 24 times what it was in England in 1704, nobody should dispute that it is now high time that New Zealand’s parliament passed legislation to stop banks being ex-nihilo funny money creators and force them to instead to become the financial intermediaries that they have always held themselves out to be – and indeed our schools, polytechnics and universities teach that they are.
It is to be hoped that once our MPs understand how the present banking system legitimises the exploitation of an overwhelming majority of the population by the financial elite, by making us unnecessarily pay interest on 98% of the money supply and driving up real estate prices. And once they understand what is entailed in switching to the very much fairer, simpler, and inherently stable full Sovereign Money system, they will vote to pass the necessary legislation to introduce a full Sovereign Money banking and monetary system.
The UK’s Bank Charter Act 1844 merely ended private banks’ (but not the then privately-owned Bank of England’s) issuing of bank notes. (The BoE was nationalised in 1946.) Unfortunately for ‘we the people’ it did nothing to stop banks issuing debt-money created ex-nihilo on banks’ ledgers, spendable via chequebooks – remember those? Few people have a cheque book anymore, as EFTPOS and Internet banking are far more convenient, faster and more efficient!
IMHO, perhaps the smartest thing for Parliament to do would be to accept that about 99% of those New Zealanders eligible to vote, including the leaders of the two major parties, almost all other Members of Parliament, and almost all of the Treasury’s and RBNZ’s staff, believe that banks are mere financial intermediaries and not money creators, and accept that all of our schools, polytechnics and universities all teach that banks are mere financial intermediaries and not money creators. Then, parliament could simply vote for New Zealand to do an overnight switch to a Sovereign Money banking and monetary system. Thus no eligible voters – let alone the employees of the Treasury and the RBNZ – would need to be re-educated about the workings of the banking and monetary system, because those very few of us who actually do understand how it presently works also understand how a Sovereign Money system works!
The convenience of EFTPOS technology has caused a continuing decline in the use of notes and coins, and in New Zealand they now constitute only about 2% of the money in circulation (the money supply), which as of December 2018 totals about $310 billion. The interest we pay to banks to ‘rent’ our money supply amounts to at least $15 billion per year, and of course, this cost is built-in to the prices of everything we buy.
This is surely ridiculous, as ‘we the people’ have the democratic power to stop banks from creating money and instead have our own RBNZ create all of our electronic money, free of debt, for next to nothing, and gift it to the government for spending, according to its democratic mandate, into permanent circulation, at a rate to just keep up with economic growth. That very briefly describes how a Sovereign Money banking and monetary system works.
At a rate of economic growth of 3%, plus the presently targeted inflation rate of 2%, the RBNZ could create approximately $15.5billion every year and gift it to the government for spending into permanent circulation, and we could enjoy a reduction of approximately $15.5billion in the overall tax take. What’s not to like about that? In my sincerely and honestly held opinion, it would be better to have the targeted rate of inflation set at zero, in order not to progressively disadvantage those whose incomes come from wages and salaries, which are eroded by inflation, with the consequences being intermittent wage demands just to keep up with inflation. With 0% inflation – the rate that I firmly believe should be the targeted rate – there could be a reduction in the overall annual tax take of approximately $ 9.3 billion.