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     Money without Debt



A case study in local currency: Woergl, Liverpool, The Channel Islands

Money or more to the point the lack of it, undermines the whole structure and well-being of our society. Money or credit, like oxygen, performs the most vital function, and like oxygen should also come into existence free of charge to the community, to fund all Public Sector Borrowing Requirements (PSBR). The needs of the people in health care, education, environmental protection, social security, etc., could be funded in their entirety for the benefit of the whole society interest free. Tory, Labour and the Liberals are arguing about different kinds of new taxes to help the banks collect their pound of flesh in essentially un-earned interest. Only the Islamic Party provides a real alternative. By proposing the issue of a local currency to pay for public expenditure we do away with the need to borrow from private lenders who usurp the right to issue credit which has to be rendered a function of elected government again.

Public credit in the form of local currency issues are not a new idea. To the contrary, there have been successful precedents, and only the monopoly power of the banks has prevented the public at large to benefit from those experiences. In 1932, in the midst of the great depression, the Austrian town of Woergl had managed in less than one year to a) revive its economy, b) reduce its unemployment by 26%, c)build new roads and a bridge, and d)restore self respect and civic pride overnight. Following the economic philosophy of Silvio Gesell, the town issued 5000 Free Shillings which were non interest bearing and subject to a services charge (Islamically Zakat). As the money did not pay interest, it could not be hoarded, and was therefore not withdrawn from circulation. As it was subject to a monthly devaluation, a kind of negative interest which was collected in the form of stamp duties which had to be glued to the back of the notes, everybody preferred the use of the Free Shillings and they circulated at a multiple speed of ordinary notes. Notes which did not carry a valid stamp duty were rendered worthless, and people even paid their taxes in advance to spend the money in their possession. The scheme was so successful that another 300 Austrian towns decided to follow suit, and it was then that the Austrian National Bank saw its monopoly threatened and prevented any further development of this episode of public credit creation through court action.

In 1793, Liverpool suffered from extreme cash flow problems (very much like today), and solved these by creating out of nothing by Act of Parliament some 300,000 of non-repayable money which was used for public works with great benefit to the city and its people. This issue of money by the Liverpool Corporation not only alleviated the immediate debt crisis, but also prevented the perpetuation of debt which would have burdened future generations, had the money been obtained from private lenders with the penalty of accumulating interest. As Liverpool managed to get an act of parliament passed permitting them to issue their own money instead of borrowing it from the banks, this example serves as an ideal precedent for any council wanting to solve the current shortage of funds caused by the depression created through a policy of high interest rates. whilst most of Britain is mortgaged to the banks whose issue of money is backed up by no other wealth or guarantee but the future productivity of the British nation (a marvellous hat trick indeed, charging a nation for its own hard labour), parts of Britain have no VAT, no poll tax, no national debt, no local government debt, no death duties, no school closures, no money shortage, no financial famines and cash droughts, and to top it all, an income tax at only 20 pence in the pound after generous allowances: The Channel Islands.

In 1815 Guernsey needed a new market hall, and built one by funding its construction out of government issued finance free of interest. By 1822 it was paid for and is still functioning in 1991. On the other hand in 1807, Glasgow built a market hall. In 1956 it was demolished while still on the books owing more than its original cost. Guernsey like the rest of Britain at that time, was particularly hard hit, and people were beginning to leave the island. Eventually a committee was appointed which examined the situation and came to the conclusion that further taxation was impossible. The alternative was to borrow money from the banks, but this would mean paying a high rate of interest which they could not afford, and even if they found the money the debt would still be there - like Glasgow 1807 to 1956, and still paying. Then somebody proposed that the states should avail themselves of their ancient prerogative and issue their own money. At first the proposal was turned down, but as they urgently needed 5,000 and only had 1,000 in hand, it was finally decided to issue 4,000 in one pound notes. The first creation of state money was so successful that it was soon followed by others. In all, the states issued 55,000 worth of notes which paid for the rebuilding of the market, the schools and several other public buildings, widening the streets and building new roads and sewers. In 1827 the Bailiff, Daniel de Lisle Brock, was able to speak of "the improvements which are the admiration of visitors and which contribute so much to the joy, the health, and well-being of the inhabitants." Things had certainly improved since 1815.

In 1830 the banks launched a counter-attack and began to flood the islands with their own notes. The words which the Bailiff used when he addressed the states in 1836 are worth quoting: "No one has a right to arrogate to himself the power of circulating a private coinage on which he imprints for his own profit an arbitrary value. With these facts before our eyes we must realise the necessity of limiting the issue of paper money, to the needs and customs, and the benefit of the community in general. Permission cannot be granted to certain individuals to play with the wealth and prosperity of society." But apparently the states were unable to stop the banks issuing their notes, and eventually a compromise was reached. The states agreed to limit their own issue to 40,000, and it remained at that figure until 1914. After the first war this was increased to about 200,000.

These notes were issued free of interest, and it is significant that the great depression never troubled Guernsey; there was no unemployment and income tax was ten pence in the pound. Guernsey has wisely refused to surrender its right to issue the oxygen of money since 1690, and refused to join the EEC for that same reason. No individual or society can afford or endure never-ending debt, and while we can't all go and live in the British Channel Islands, there is absolutely nothing preventing us adopting the Channel Island's system of finance for Sheffield, Liverpool, Bradford, or Westminster. Nothing of course, except the yes-men and yes-women who are elected on the condition that they do not raise this particular money issue. Rothschild said, he cared not who made the country's laws, so long as he issued the money, and after 300 years of financial serfdom to privately issued money, it is time to say, we've had more than enough. It requires nothing more but the political will. Ask your member of parliament why he lacks patriotism when it comes to financial matters.

Author: David Pidcock
Date Published: Winter 1998


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