BELIZE CITY, Tues. Oct. 29, 2019– Money, something every human being wants. Some more than others. Before, I go any further, I must confess that I was mistaken about the subject of money. I, like 90% of the population, believed the myths, the lies, of the neo-liberals that money started as a means to solve the problems created by barter. In fact, in my 1995 book – ABC’s of Economics, I wrote and argued for the myths. I was wrong, and I apologized for my mistake. And for those who don’t believe that private commercial banks, not credit unions, create new money out of thin air by creating a debt or loan, they should check the Bank of England. Money creation in the modern economy — Bank of England, March 2014 publication.
The myths are based on the origin and nature of money. The first myth is that money emerged from a previous market economy based on barter. And secondly, that money was originally made from precious metal – silver and gold. These falsehoods led to assumptions even current today, that money is connected to and generated by the marketplace. And that money today and in its original form, is always in short supply – we all hear the saying – money does not grow on trees. Therefore, the neo-liberals claim that public spending is a drain on the wealth-creating capacity of the market, so public spending must always be limited as much as possible. Because money is made “solely” in the private sector, the public sector will drain that money, thus “austerity” is justified to make the public sector small. Money then becomes a technical, market, transaction function with no social or political force.
But the truth is very different. The school fairy-tale is completely false. I too was a victim of that falsehood. Evidence from history and anthropology showed that bartering was not widespread, and precious metal coinage emerged long before market economies. And there were many different forms of money. In Belize, the form of money before the European invasion was corn. The Lele people in the Congo used woven raffia cloths as money. The Yap people of the South Pacific used discs of stone as money. Alexander the Great around 335BC used silver as money to fund his large mercenary army rather than giving them a share of the spoils. In China, paper was the form of money from before the 9th century.
Money’s control was a major power of rulers: a sovereign power. Money was created by and spent into circulation by rulers. What the market economy did introduce was a new form of money: money as debt.
But basing money supply on debt creates many problems. In today’s Belize, money creation as debt is about 70% of total money supply. Dangerously high. Money creation based on repaying debt with interest implies constant growth in increasing productive capacity, if money creation is for the productive sector of the economy. Pressure on natural resources supply could become a problem. But humans through technological progress can change types of raw materials. But today, money creation is not for productive investment. Instead, it is for casino gambling – pure speculation. In Belize it is mainly real estate speculation.
Basing money creation on debt is also socially discriminatory because not all citizens are in an equal position to take on debt. Recent history has shown that this always favours the rich. The rich get richer at the expense of the poor.
The problem for the economy is that the money supply depends on the capacity of the different sectors of the economy to take on more debt. Our modern world has shown that countries which depend on private bank-created debt have exhibited debt bubbles, credit crunches, and general collapse.
Neo-liberal economics always create an impossible task for the private sector. It has to create all new money through bank-issued debt and repay it all with interest. It must also completely fund the public sector and must generate a profit for the investors. But we all know when that great wonder – compound interest is added to bank-created debt the total debt will become so large that the economy of production and consumption will never be able to repay the sum of interest and principal. In ancient times unpayable debt required a Jubilee – a clean slate to return bondservants to free men and creditor seized (foreclosed) land back to original owners.
But when the privatised bank-led money supply collapses as in the 2007-2008 crisis, the money creating powers of the State comes back to the front for all to see. The Central Banks, the Fed, the Bank of England, and the Bank of Japan created, out of thin air, new money known as quantitative easing to bail-out, to save the major private banks.
The question then becomes: if the State, as represented by the Central Bank or the National Bank, can create money out of thin air to save the private banks – why can’t it create money to save the people, to create employment or end poverty?
Today, most of what we call the “economy” is really two completely different systems. First, there is the real economy of current production and consumption, wages and industrial profits. The second, or FIRE sector (finance, insurance and real estate) consists of land, monopoly rights and financial claims that yield rentier returns in the form of interest, financial fees, economic rent (unearned income), and monopoly gains. In other words, the FIRE system is pure “free loaders” – they don’t work but wait until the producers work and produce goods necessary for life, then, because of the political power of the FIRE system, they extract what they claim as their share of the bounty. They are parasites.
In Belize, as in nearly the entire Western system, the relationship between the banks and real estate is dominant. Banks don’t lend for production (factories and farms), except if to buy out a going concern at distress prices. In fact, over 60% of bank loans in Belize, and some 80% in England, and the United States, are real estate loans.
Real estate as a subject is not taught in schools; but the books and teachers of economics pretend that banks lend money to industry, to factories. Just plain fakery. Banks, real estate and monopolies are today called “industry”. The result is that the mass media (which is owned by the FIRE system) report “industrial profits”, which is something people have no trouble with, but nearly 60% of the industrial profit is rent and monopoly rent (unearned) by the FIRE system. The financial sector’s strategy to dominate labour, industry, and government is to disable the “brain” of the economy — the government by propaganda such as government is wasteful, inefficient, and corrupt.
The problem for 65% of mankind today is the FIRE sector of most economies. The FIRE sector is pure overheads, but because of the power of the neo-liberals they literally get away with murder. In real life, borrowers go bankrupt and banks foreclose on the collateral, leaving the debtors without homes, and their livelihoods. The rich buy the houses at distress prices and are rented back at inflated prices to the debtors, who are then forced into wage peonage to survive. When the banks themselves go bankrupt, the government (as the Fed, Bank of England, and European Central Bank) bails them out with quantitative easing. Thus the “market corrects”, but only with government intervention. This intervention just comes at the end of the cycle to rescue the creditors, whose ability to buy politicians gives them the upper hand.
The inability of economies to sustain compound interest and a rising rentier overhead for any length of time is at the root of today’s political fight. At issue is whose interest must be sacrificed in the face of the incompatibility between financial and the “real” economy. Finance has converted its economic power into political power to reverse the classical drive to tax away monopoly rent and financial income. The recent $90 million tax give-a-way for the rich land owners in Belize is classic of this fight. Instead of carrying their share of society burdens, the rich have managed to shift the burden to labour and small farmers, while the big boys get government bailouts instead of them writing off loans or granting Jubilees.
What this growth of unpayable private generated debt conjured out of thin air is doing, is changing the distribution of property ownership unless government intervenes to cancel debt and reverse expropriation. A more palatable solution is the government’s bank, such as the National Bank of Belize.
Cancelling debts is politically easiest when the government of Belize as the National Bank of Belize is the major creditor. Why? Because the government is cancelling debt owed to itself. This argument is why government should be the main supplier of money and credit as a public utility.
Close to this is the matter of putting money in a savings account in a commercial bank in today’s Belize. Most, in fact the vast majority of savers, believe that after putting the money in the savings account that it is still their money. NO. It is no longer your money. You have legally become an unsecured creditor to the bank. If the bank fails, you will most likely lose every single cent you put in that account. Belize is not the United States. There is no insurance for depositors of money in any commercial bank in Belize. But if you put your savings in the National Bank of Belize you cannot, by definition, lose your money because the National Bank of Belize is owned by the people and government of Belize. And who has the ultimate authority to create money? The government, through the Central Bank of Belize.
Belizeans, have we forgotten? Did not the Barrow government a couple years ago cancel, write off, give a clean slate – a Jubilee to home owners worth millions of dollars? And does any reader remember or can say when any private commercial bank in Belize granted any Jubilee to anyone worth even a million dollars? Belizean citizens, money creation is a sovereign power. No private person or corporation has sovereign power.
Regardless of what we feel about the Rt. Hon. Dean Barrow, he has given to the people of Belize the means of their financial freedom – the National Bank of Belize. Those who insist that this national bank should be closed should be treated as traitors to the nation-state of Belize. Whatever the problems with the current National Bank of Belize, the problems can be fixed. We don’t need to add financial freedom to our political freedom: we already have it. Let us as patriotic Belizeans cherish our National Bank – it is the means to Belize’s economic freedom, its economic independence.
The PUP have a Creed/Philosophy:
Section: (f) “That the creation of money and the control thereof in all its forms, including the national currency, is and remains the sole responsibility of the people through their duly elected representatives: “
Section: (g) “That it is the sacred duty of government to intervene in the economy of Belize in order to create full employment and the eradication of poverty.”
These are from Rt. Hon. George C. Price, who was a true Christian trained in the Church’s tradition of Jubilee. Section (f) of the PUP Creed is saying that the elected representatives of Belize shall be the only ones who can create new money in all its forms, including minting coins and currency notes and creation of money as debts. No independent nation-state can allow private individuals or corporations, especially foreigners, to have this power to create debt.
Plus, Mr Price always reminded us that we should remember the word sacred in Section (g) which makes the duty to create full employment and the eradication of poverty a moral imperative … a must.