National Banks Started on Saturday 14 January 2012
As a self confessed layman in world financial matters I
needed to know more about the present mayhem in world finance and so, with the
aid of Google Search, I again set about trying to understand the reason, or
reasons, responsible for the mayhem.
One would have thought that after a gestation period of a
couple of thousand years, or more, the world should have ironed out most of the
major bugs and arrived at a stable well proven way of controlling the extremely
dangerous weapon called money. The
present problems with the Euro, massive debts to countries and banks and severe
fiscal “miscalculations” have occupied top economic experts for well over a
year and still there does not seem to be a solution.
With names like National Banks, Central Banks and Federal
Reserve the first nasty shock, to laymen like me, is to find out that the
majority of these banks are owned by private individuals / organisations and
not by countries
.
Several centuries ago a system used in England involved a
“Treasury”. In normal times taxes of
various sorts were paid in to the Treasury and the Treasury supplied money to
the Government to run the country. On a yearly basis, well in advance,
Government would publish a Budget, this was often designed to produce a surplus
to ensure that the Treasury was always well funded.
In times other than normal, different factors such as wars,
financial “Bubbles”, plagues and famines could severely strain the system. Government could issue “I owe you” pieces of
paper for what they needed, raise special taxes or borrow money from any source
willing to lend it to Government at an agreed rate of interest. If the type of
currency was a precious metal planning had to take account of the fact that
there was not enough of it available!
Somewhere along the way the role of the Treasury changed and Government
borrowed more and more money from private sources and paid more and more
interest to these private sources, this practice has pertained to date.
Following various leads on Google I chanced upon an article
which I found extremely interesting. The article, by Loren Collins was entitled
“The Truth about Tytler.”. The author did his very best to attribute the
various quotations to the correct person.
To any reader who is interested in what follows I would suggest that
they track down Loren Collins’ article as it is quite long. I have quoted parts
of the article, maybe out of context
and/or position, for, in my opinion, they open a line of thought that can
easily be applied to many situations developing in current economic and
political matters.
I quote, “Two
centuries ago, a somewhat obscure Scotsman named Tytler made this profound
observation: “A democracy cannot exist as a permanent form of government. It
can only exist until the majority discovers it can vote itself largess out of
the public treasury. After that, the
majority always votes for the candidate promising the most benefits with the
result the democracy collapses because of the loose fiscal policy ensuing,
always to be followed by a dictatorship, then a monarchy.” - Elmer T Peterson.”
Again I quote, “The average age of the world’s greatest
civilizations has been 200 years,” and
quoting even more. “Great nations rise
and fall. The people go from bondage to spiritual truth, to great courage, from
courage to liberty, from liberty to abundance, from abundance to selfishness,
from selfishness to complacency, from complacency to apathy, from apathy to
dependence, from dependence back again to bondage.” Unquote, but again I stress
that Loren Collins goes much deeper into the matter and his article is very
worth reading. In the “order of events” quoted in this paragraph it is
interesting to postulate as to where the populations of various democracies are
at this time and maybe even more interesting to wonder where countries
participating in the “Arab Spring” slot into the “order of events.”
I feel that democracies need to consider very carefully the
establishment of basic “National Treasuries”. All Government imposed taxes and
any other Government income is paid
into the National Treasury which, in turn, passes money to Government as per
the accepted Budget. Neither Government nor the National Treasury can borrow
money from the private sector. With the system running correctly there will be
no question of National Debt for there will not be any. If due to unforeseen
circumstances the Treasury, on paper, runs out of money then more will be
printed or “created”. The “world” will quickly judge the “worth” of the
country’s currency and that will be reflected in the exchange rate, black
market or otherwise. A major problem to going down such a route is that an
honourable way must be found to pay the holders of a country’s bonds, bills,
Gilts or whatever other name applies to the facility extended to the
investors.
.
To emphasize the gravity of the problem facing the Euro I
feel two events act as good indicators. The first is that a few weeks ago the
American Federal Reserve stepped forward and put its shoulder to the wheel in
support of the Euro. The second is that a few days ago Germany issued several
billion Euros in short term Bonds earning a slightly “negative” rate of
interest. Investors were prepared to lose a small amount of money rather than
risk losing much more by leaving it wherever it was!!
Voters, political parties and candidates for election should
be made very aware of Tytler’s profound observation regarding the effect of
a loose fiscal policy as shown in paragraph eight of this article.
In my opinion countries/governments borrowing money from
private investors is a farcical situation.
The method is used in most of the world and it will take firm and
concerted action to break free from it.
Frederick W Gilling
Monday 16 January 2012.
Posted as a blog at 17:20 hrs GMT on Tuesday 17 January 2012
