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Money By the People, For the People

In the run-up to the General Election, Part 4 of our series "Basic Principles of Patriotic Sovereignty" looks at the vital matter of the creation of the national money supply.

We point out that a sovereign nation must have the ability to be self-funding to an appropriate extent, without the absolute need to rely upon taxation, or to borrow from private interests. We advocate the establishment of a source of publicly-created, debt-free money to free the nation from reliance upon borrowing from the corporate banking system, and other private financial interests.

Pic: The British Central Bank, Threadneedle Street, London. Courtesy of AFFG.


Principle: A Sovereign Parliament has the ability to create the National Money Supply without Indebting itself to Corporate or Private Interests.

Policy: Establish a National Source of Publicly-Created, Debt-Free Money.


History tells us that Kings of old might have seemed "all powerful" physically, but if they couldn't do anything without borrowing money from their private financial funders, then they were not in charge economically.


It is the same today. If a parliament has always to go to private interests in order to acquire money for the nation, then the parliament is not sovereign, and the nation which it represents is not sovereign. It does not have the ultimate authority.


Worse, it is dependent upon, and potentially subject-to, these private financial interests!


As we pointed out in part 3 of this series the democratic sovereignty of the individual is linked to the sovereignty of the parliament which we elect. If the parliament's sovereignty – its authority – is "fettered" in some way, then consequently our personal sovereignty is also restrained.


It is a myth – which has been running for hundreds of years – that only private interests can create and hold all the money, and that a sovereign Parliament of a sovereign nation which is meant to be representing its sovereign citizens, is somehow beholden to private investors for its money supply.


Indeed, it is ridiculous when you think about it.

A nation which has to rely upon privately-created money from the corporate banking system, or money loaned by private financial interests, in order to not a sovereign nation!


The fact is, every nation has the ability to create its own money right now – within reason of course.


Indeed, you cannot say that you live in a politically sovereign nation if it does not possess the financial independence to create its own money supply, free from the banks, or the private investors.


So that's a principle right there: A sovereign nation must have the ability to be self-funding to an appropriate extent, without the absolute need to rely upon taxation, or to borrow money from private interests.


Every nation should create for itself the ability to be financially sovereign in this way, to the best of its ability, given the circumstances it has to work with.


Please note, this is not a left-wing, or a right-wing point of view! It is just a fact, and the reason that it is not widely understood as patently obvious, and accepted as the truth, is simply down to the pervasive domination of the conventional economic view – that we have to rely upon private interests for the money supply – as constantly promoted via the mainstream media and academia.


So how does Parliament acquire money for the nation, right now?



ONE: SEIGNIORAGE REVENUE (the profit from the creation of notes and coins)

The Issue Department of the British Central Bank (BCB) – currently known as the Bank of England – sells banknotes to the private banks at face value. For example, if the Royal Bank of Scotland wants £10,000 of £10 notes, it gives the BCB £10,000 of its own money. The BCB then authorises the printing of 1,000 x £10 notes at De La Rue printers.


"Seigniorage" is the term used to describe the profit enjoyed by the BCB after it has subtracted the cost of printing and distributing this cash.


This profit is then given directly to the British Treasury. The Treasury is then free to spend it on national matters, such as public spending.


In other words, the BCB creates this money out of nothing and the public purse enjoys the profit. That is perfectly proper for it to do so. After all, we need cash to exchange, and a publicly-owned body of the State, such as the BCB, is the proper authority to be tasked with this necessity.


To recap: The BCB creates these bank notes out of nothing, sells them to the banking system, and the profits of this issue go direct to the Treasury.


According to the Bank of England's Annual Report for 1 March 2022–28 February 2023, the profit from the note issue during this period was £1,681 million. (1)


So, the important point to grasp is that in 2022-23, almost £1.7 billion came into society simply as a result of the State literally printing it. It didn't borrow it from anybody. It simply created it, and we enjoy the profit.

That's a good deal!


The only constraint on that source of revenue is demand. Bank notes are printed on demand. That is, if the public's demand for cash goes down, because of the rise in electronic methods of payment, then fewer notes are printed and there will be less seigniorage revenue.

Now, when we consider that just after WW2, almost half the total money supply was physical cash, and when we compare that with today, where, with the rise of electronic forms of payment, only around 4% is physical notes and coins – then we can see that we are being cheated out of a massive amount of debt-free public revenue. (2)



The government raises money for public spending projects through taxation.



The government also borrows money.

This is because it always fails to raise enough through taxation in any given year and so the shortfall has to be borrowed.


It borrows from investors who can be individuals, financial institutions and from the private banking system by selling "bonds" (also called "gilts"). These are basically IOUs which promise, "If you buy this bond, we'll pay it back to you, with interest, at some future date."


So the Treasury gets the money from selling the bonds to these investors.

The "National Debt" is the total borrowing which is still outstanding on previous years, and which is still to be paid back.


The "interest on the national debt" refers to the interest which must also be paid to these bond holders, when they get paid back in full.


Where does Money Come from to Pay back the Bonds?

It is us, the taxpayers, who foot the bill when the time comes for repayment.


But it also comes from even more government borrowing! Like a Ponzi scheme: The money comes in at one end, in order to pay out what is owed at the other!

That is, the government borrows more money in order to pay back what it already owes. Clearly, that's not a very good way to run a household, let alone a nation!


THE 2.8 TRILLION QUESTION: Or the £2,800,000,000,000 QUESTION: Or the £2,800 BILLION QUESTION

Now you might be thinking, "Well, if the government has the power to create money, which it does when it creates notes and coins which it sells to the private banking system, and for which we enjoy the profits, then why doesn't it just create all, or a proportion of, the money to make up for the taxation shortfall?"


You might be thinking, "Why does it borrow from the private banking system, and private investors, and add to this national debt, which is indebting us all, and which means that our taxes have to continuously rise, in order to find the money to pay these people back?"


And those would be very good questions!


In fact, it is the 2,800 Billion Pound Question, which is the projected UK national debt for 2025.


It was the question that Thomas Edison, inventor of the light bulb, answered when he said, "If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good." (3)



We've seen that the public purse acquires the seigniorage revenue on the cash issue. This is debt-free as far as the public purse is concerned.


Our proposal is that we need more debt-free money coming into society.


We are not saying that we need more notes and coins – unless there is a demand for them.


Rather we are saying, "Simply extend this debt-free seigniorage principle to the creation of non-cash money – which is the electronic numbers which represent most money today!"


If the government is creating cash money debt-free, it can and should create non-cash money debt-free – that is, the money which exists only in electronic format.


If it does this, it could slowly pay off the national debt; it could reduce the tax burden; and it could take away a lot of financial power from private interests who are simply leaching off a well-established, albeit largely unnecessary, process of money creation.


This debt-free money which Parliament created would be spent, not lent, into society.


We call it publicly-created debt-free money – to distinguish it from privately-created debt-based money created by the privately-owned banking system.


Since it is Publicly-Created money by the State, bypassing the corporate and private beneficiaries, then we can call it Money by the People, for the People – the Democratic Imperative!



Creating money in this way and spending – not lending – it into society is a perfectly reasonable suggestion.


Vincent Vickers, Governor of the Bank of England between 1910 and 1919, made that exact suggestion when he advocated in his book Economic Tribulation, that, "Any additional supply of money should be issued as a clear asset to the State; so that money will be spent into existence, and not lent into existence." (4)


In 2011, Alistair McConnachie and colleagues created the "Bank of England (Creation of Currency) Bill" in order to demonstrate how this proposal could work in practice. It is an in-depth education into this process and can be purchased at this link. (5)


Therefore, in order to ensure a financially sovereign nation, parliament and people, we advocate firstly:

1. Policy: Establish a National Source of Publicly-Created, Debt-Free Money.



So far, we've been speaking about the sovereign ability of a nation, via its parliament, to create a quantity of the national money supply on behalf of its people.


However, the ability of the individual to participate in the national economy is also crucial.


Here are some policies to protect the individual; and we encourage all political parties to adopt these as their own.


2. Policy: Ensure the Right to a Bank Account, for every British Citizen

Private banks may claim the right to "de-bank" someone of whom they disapprove. Perhaps that is their contractual right.


However, it is not possible for a person to live normally, in the digital age, without a Bank Account and without access to their money.


This means that Parliament must set up a publicly-owned Citizens Bank – perhaps via the Post Office – in order to allow any British citizen to have a current account into which they can receive money, and pay out money, physically and digitally, nationally and internationally.


It doesn't need to be a Bank which lends money, and it doesn't need to be in competition with the private banking system. For example, it doesn't need to pay interest on deposits.

But it must be available to those British citizens who need it! And it must be forbidden by law from denying facilities to British citizens.

This is a policy made necessary by the recent actions of the private banking system, and it should be promoted by all political parties as a matter of course!


3. Policy: Make it Unconstitutional for the Government to Freeze a Citizen's Bank Account

Unless there is criminal evidence of fraud, a government should not be allowed to do what Justin Trudeau did to the Canadian Truckers – which was to freeze their bank accounts because he disapproved of their politics!


Politicians need to be questioned on these matters, and publicly shamed if they believe such actions are appropriate!


4. Policy: Enshrine the Right to Pay in Cash

Many people, especially low-income people, need to operate in the cash-only economy just to survive. Even if they have electronic accounts, they do not want to "dip into it" if they can help it, because they see that as "savings".


Secondly, holding cash enables people to continue to make vital purchases if there is a temporary glitch in the electronic system which prevents you using your card; or in the worst case, where your account is deliberately frozen.


And as we've seen above, the more cash that's put into circulation by the British Central Bank, then the more debt-free profit accrues to the British Treasury which can then be spent into society. So that's another good reason.


5. Policy: Introduce a Bill in Parliament to set up a National Debt Commission to study the nature of our debt-based money system and, in particular, how money is created; to promote understanding of the link between poverty and the manner in which most money is created as a debt for the profit of the private banking system; and to investigate the policy of creating a source of publicly-created debt-free money, at no cost to the taxpayer.


Generally speaking: Encourage MPs to set up a Cross-Party Group in the Parliament to investigate and promote reform of the debt-based money system, as above, and to consider alternative public funding methods based on such proposals. Encourage MPs to use their public profile to publicise this vital subject which holds a key to the relief of debt and poverty both in the UK and worldwide.



"The net profits/losses of the Issue Department are referred to as seigniorage, and paid/claimed directly to/from HM Treasury via the National Loans Fund (NLF). The £1,681mn net seigniorage income is comprised of income and profits of £1,779mn, less £64mn expenses and a buffer withheld by the bank of £34mn."


We see that the Bank of England is quite open about the fact that the profit from its note issue – the difference between what it earns by selling the notes at face value to the commercial banks, minus its cost of printing and distributing them – goes to the Treasury. The profit goes right into the public purse as an effective debt-free input – the benefit of which is traditionally termed "seigniorage".


(2) This page from the BoE says that in 2020 "96% of money is held electronically (bank deposits). 4% of money is held physically in the form of cash (banknotes and coins)."


(3)  Thomas Edison, quoted in The New York Times, December 6, 1921, in its report "Ford Sees Wealth in Muscle Shoals".


(4)  V.C. Vickers, Economic Tribulation, originally published in Great Britain: John Lane The Bodley Head Ltd, 1941, Ch.7, p.75 and reprinted in the USA: Omni Publications, 1974, p.67.



Part 4: Money For the People, By the People: The Creation of the National Money Supply.


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