and after EU targets “help to keep the costs of energy down”

[of "free" credit money which adds up to about £ 1.5 TRILLION sum under a straight line from 1946 values to 2006 values - the same as that held offshore in tax havens etc?]

Its a few weeks since I tried to post a rather long contribution to your blog suggesting a comprehensive and well-thought out modification to international trade that would release some of the currency advantage or purchasing power of the Western currencies while they are still high for a just investment against climate change. We need to boost those investments urgently. You asked for a briefer submission, this is about half the length. Since then banking plcs have further unravelled and a rescue plan announced to avert disaster.

Very recently shares have gone up (temporarily I believe as there is speculation and profit-taking still going on). The profit motive still exists and stocks could easily go down again (a “saw-tooth effect” where the big operators are continually manipulating the share and currency prices to the disadvantage of the smaller investors). Should big players be allowed these extra advantages and profits?

There have been no announcements that I have heard as yet (except a few months freeze on short selling). Nothing along the lines of your suggestions in June of reining in off-shore tax haven investments or serious adjustments to profiteering as yet.

Banking as a profession became over-rewarded because of the serious additional profits they enjoyed via credit money creation. That is a very large root of the excess wealth that grew unsustainably. This is without question, proven by recent events. Serious amounts of credit money were literally CREATED over many years, adding to the cost of everything without direct payment to the public purse (except corporation tax after some avoidance) by those banks.

Instead, payment (or at least part of it) on ANY money creation should, we suggest, have been to the Treasuries – that is the public purse - in each of the countries of the world where the loans arose and therefore where the money which then came into circulation was created. It should be distributed where the interest burden arises at least partly against climate change. The non-payment now on what were previously vast sums is evidenced by the crisis – what was too much money and not evenly enough spread has become too little to allow government investment without further massive loans.

The tap was turned off in the US/UK as borrowing tailed off and money ceased to be created via the credit means. The sheer extent of what was free money until 2006 is revealed by the extent of the freeze - money is not being created which formerly distorted the economy in favour of the banks and finance sector before that freeze. The outlook was uncertain for several reasons and should still be so until a correction of the underlying flaws is announced. However, now as proposed even if half of the UK banks were nationalised permanently, this might still not solve the problem as inefficiencies could creep in under government control. INSTEAD WE NEED A FREE AND FAIR MONEY SUPPLY IN AN ANTI-INFLATIONARY and EFFICIENT WAY. HERE IS THE MEANS TO DO IT.

An orderly descent of inflated property prices compared to incomes is urgently needed to ensure stability in the long term. It would be foolhardy to return to the old system of money creation as another boom/bust would result. In recent years until 2006 in the UK alone at least £50 billion of new money was created as credit by the banks in addition to their income from charges, interest mark-up on deposits. fees, investments and penalties. It would be healthy to return to a system whereby about half of the boom figure was created, some of which could, as we propose, be for investments instead of property speculation, especially into renewable energy and energy efficiency i.e. super-insulation. These investments can mow easily be justified - a Keynesian-type stimulus to avoid too sudden a slowdown in the economy. This money can be created - £25 billion in the housing market - as a construction stimulus for those efficiencies and investments by issuing loans in the normal way to be paid back by householders who have the means to pay but a new incentive to do so. This would require a generous incentive – additional subsidy. For example if subsidies were increased to improve the payback on super-insulation and renewables there would be more rapid uptake as well as less waste of energy almost immediately (see our Every Town an Eco Town paper). This would help to achieve EU sustainability of energy targets. The vulnerable can then be protected via an offset from the old revenue stream that was part of banking profits. For example for every interest bearing loan created to pay half of the new efficiency investment, a bank will create a large proportion of that credit money in the same way that existed before the credit freeze and have a revenue stream from the repayments. Banks would at the same time however, pay a proportion of the interest on any money created to the Treasury which in turn offsets the cost to the vulnerable sections of the public of the newly structured environmental tax. The reduced costs from banking alone might not only reduce inflation, but also engender a healthy spiral down of costs overall.

This new tax would operate similarly to the Environmental Tax proposal described as “interesting” by the UK Cabinet Office and published by STEERglobal in the UK’s Stern Review (2006) on Climate Change. A similar paper was requested from us by the Treasury expert and issued with the UK Treasury Select Committee Report No 14 on “Globalisation and the Real Economy” (2007).

James Robertson has suggested in line with media reports that the banks that have been so far nationalised should be returned to ordinary commercial ownership over time. He says this along with the proposal of abolition of all future credit money creation by commercial banks. The STEERglobal alternative should have value as less bureaucracy would be necessary. A charge for new money could made to the public purse at the level of the base rate of interest achieving about half of what was previously “free”revenue - “balanced economics” is the term we have coined. This would avoid the need for further nationalisations - a proper road map and direction out of the “credit mess” but maintaining the free market. This could be a permanent part of the revenue flow for environmental and other purposes (that way the UK and other countries could be saved from sinking). See the paper describing the Credit Money Banking Adjustment (CMBA) on our website: http://www.STEERglobal.org.

Any of the changes proposed will require registration of existing money held in bank accounts: “100% Registered Money as recommended by Bill Davies from the Border regions of UK/Scotland or “100% Legal Tender” as recommended by the Money Reform Party. As an additional measure a floor could be created on savings rates/deposited money and current account balances to encourage small savers, improving the currently almost non-existent incentive to save because of the current inflationary nature of money, especially in property terms. Inflation lowering of value of money is understood by most people and very low rates on small deposits, especially for low income earners, just do not encourage small savers - the very people who need to save something to get out of the poverty trap.. That way the poorer people would have a chance begin to learn the advantages of saving in a stable low-inflation economy, possibly building a cushion against unexpected events or a fund to pay their share of the sustainability investment costs (described elsewhere) that we in the UK sorely need given the proven global threats we face.

THE GLOBAL CLIMATE THREAT
As climate continues to change, it has been shown that “groupthink” has held back IPCC forecasts of the rate of sea level soon to rise. Floating ice needs to be protected from melting, as it acts as a cushion against the more severe effect of land ice melt but is fast disappearing. The UK should be announcing support for global measures to avoid inundation, rather than only planning managed retreat. UK must keep its leading role in the nations of Europe and the G8 to achieve these changes and not lose sight of them.

What do you and your readers think? Is this an adequate response to your June post in which you ask for ideas?

SUMMARISING: Divert base rate interest on new money to the public purse initially to offset any effects on the vulnerable from a new Environmental Tax.

The Environmental Tax would ideally be on imports (or greater on imports to reflect the greater environmental harm) and be VAT-style with the proviso that half of the dollar value should be returned to the producer nation for the self-same projects against climate change.

POSITIVE FEEDBACK
Note: Bill Powell who you probably know of has suggested that this is “by far the simplest way to amend bank/credit money. Credit should be returning a fair proportion to the public purse”.

He also says “A credit creation charge has some of the features of a land value tax which is long overdue”.

The present Governor of the Bank of England has alluded to the need for a more level playing field for businesses. The “free ” money created by banks as credit money should not be entirely to the banks so as not to create unfairness or disparity between rewards for the different sectors.

Another global researcher has referred to CMBA/ credit creation charge/ET as “pragmatic, relatively easily bolted on”. (JW 2008).

The Author of the Money as Debt DVD has agreed CMBA is “a plan for orderly transition”.

Others have referred to the “inefficiency” of the existing money creation system and the innovative nature of the proposals.

Kind regards, Ian

PS What is the next step - a small TV series to show all this and how the credit money grew out of control between 1946 (2X multiple of currency each year) and 2006 (20X multiple)? Our proposal is, quite simply to reduce the bank proportion back to half - a total multiple of about 10X, so the public also get 5X times the currency from credit money issued by commercial banks eventually reducing tax and inflation. If desired this could be phased in over a few years, by only applying it to new money each year ~ £3 bn extra p.a?

Do we need to put this money creation illustration in a separate post to the blog? Feel free to shorten, edit and send back for checking if you wish as I sincerely believe this could save the situation - for keeps, and for global benefit “everyone gets all of the benefit from all of the Tax/reform.

[Otherwise the danger is, as Malcolm Howard, Lecturer in Management finance at Surrey has pointed out, (Independent letter a few weeks ago) that Banks can show higher levels of losses by using revalued asset figures downwards and create a more severe impression than should really be the case on assets held for long enough. Nothing changed except the numbers and the degree of panic in the public used to manipulate opinion and increase profit from negotiations. I hope all the above is some help.]

However, the cynic in me sees a government that is frozen in the headlights of the of the monolith confronting it and, until it can find the courage to propose radical solutions that will be fought tooth and nail by vested financial interests, won’t even give itself the chance of receiving popular support. Please Mr Brown, or any other politician of any party for that matter, at least show some evidence of what you say you are doing, listening, and allow the electorate to understand how they are being ripped off.

In summary, a very good idea to pursue….but which of our political elite has the balls to even consider it, much less take on those few who view their own collossal profit as more important than the cost of that profit to the rest of society?