http://www.independent.co.uk/news/busin ... 95967.html
I recommend you read it all, but here are some highlights...
Consider a respectable but by no means startling growth rate in the world’s economy of 2% per annum - a figure with which the likes of Messrs Obama and Cameron would no doubt be pleased and a pittance - until one looks beyond one’s own nose, that is.
For, when 2% is compounded annually, then in 35 years - or one generation - a single incremental increase is equivalent to a doubling in today’s terms and in two generations’ time to a quadrupling.
In simple English - and allowing for inflation which is always deliberately understated by Governments – then for my grandchildren to keep pace with a two percent growth rate that is set today, they will need to increase their production and consumption – and the waste that goes with this – in absolute terms by four times as much every twelve months as we now produce and consume in an entire year.
Now imagine that growth is set at, say, 5% - half China’s current levels and the approximate rate assumed by life insurance companies and pension funds in order to meet their future obligations. In such a scenario our grandchildren are no longer compelled to grow their economies by the equivalent of four times today’s levels every year, but by over 30 times.
Increase the rate to 6% - only slightly more than what Ireland will have to pay on the loans recently required to bail out her economy - and the figure becomes almost 60 times.
It simply isn’t going to happen.
Hence the insanity of the course along which we are being steered, together with the silliness of terms such as “balanced, sustainable growth” – as the goal recently set by Mr Obama for the G-20 economic summit.
Hence too the futility of measures such as the Government’s earmarking of six Billion pounds’ worth of spending cuts – a figure which when put next to the interest payments alone on Britain’s indebtedness, forget about any capital redemption – amounts to an attempt to bail out the Titanic with a saucepan and can only aggravate matters by targeting the poorer elements of the community.
In fact the only sector that has any prospect of achieving genuine growth is indebtedness itself.
As it grows, Mammon – which recognises no value other than itself - contaminates everything.
We allow too many immigrants into a country not on account of their beaux-yeux but to suppress the wages of our own workforce and to exploit those immigrants in the scramble for short term profits - a policy known as tolerance. More and more casinos are built not because of our freedom-loving instincts but to fuel the growth that is required to feed the monster, by whatever desperate means possible. Pubs too are open all hours for the same reason. Newspaper editors have their roles reduced to formatting trivia according to the topographical requirements of advertising. The sexualisation of society occurs not on account of our liberal values but simply because sex sells. The serenity of Sunday is sacrificed to the same idol.
Human unhappiness and a state of permanent dissatisfaction ensue precisely because the twin-headed beast of economic growth and debt requires them. For of what use to this beast is the un-neurotic soul content with his lot, who values his leisure and the world’s non-monetised pleasures, who knows the meaning of enough and who believes that perhaps there should be more to this life than to consume, vote, reproduce and die?
And while a counterfeit economy is reflected in a counterfeit culture the result is decadence – the Arts themselves captured not by patrons but by racketeers; Big Brother, X-Factor and a pile of bricks in the Tate Gallery – examples of a contemporary cultural output with a true worth of nil.
All these, and many more unpleasant consequences, most notably the despoliation of our planet, are the direct result of our compulsion to grow, in itself a function of the manner in which money - or debt - is manufactured, as I have argued.
But how could it be that supposedly well-educated individuals, including politicians, financial journalists, accountants, economists and other ‘experts’, could be so blind to what the average ten year old student of elementary mathematics would grasp within seconds – that non-ending exponential growth in a limited world is simple Alice in Wonderland?
More generally though it is in the area of property that the hoodwinking has been, until recently, most persuasive and most widespread, creating an illusion of benefit that has fooled millions.
Thus, for decades while the term ‘inflationary’ has had a negative association, in this particular area at least – where it comes to our homes - an increase in prices has made us feel richer and has therefore been considered a boon, allowing us to overlook the dramatic expansion in credit and to be lied to about the true inflation rate.
But in the long run it is still a mug’s game.
Take for example the case of my own father. He bought his house in Chelsea for £6,000 shortly before I was born. Some forty years later it was valued at £2 Million - an increase of 333 times and one that resulted almost entirely not from the supply and demand of houses in Chelsea but from the supply and demand of money - or credit - able to be converted into houses in Chelsea.
But for my children to enjoy a similar rate of growth the same property would have to be worth about a billion dollars by the time they reach my age and for the process to be repeated for my grandchildren – a mere two generations down the line - a two floor property in Chelsea would need to be worth a third of a trillion dollars.
Such are the miracles of exponential growth.
But how then to make money once more our servant rather than our master?
We will need the kind of “big ideas” which the current Prime Minister has manifestly failed to pull out of the hat despite his promises to do so: specifically, the ending of fractional reserve banking – the only measure which, in a single stroke, will remove the power of the banks to create money and vest that function back again in the State where it belongs.
By banks lending only what they have on deposit, and by the elimination of the multiplier effect caused by the fractional reserve requirement, overnight the need for manic growth would be tamed.
The Basel 3 accord on Capital Adequacy ratios, therefore, will have very little long term impact, simply increasing as it does the total common equity requirements for the banks to a mere seven percent.
Politicians should be clear: the ‘banking reform’ which they like to talk about is hot air unless it incorporates the abolition of fractional reserve banking in its entirety.
Other suggestions include the establishment of a consumer price index simultaneously with the ending of fractional reserve banking, an index whereby prices would be kept constant by means of the state either producing money or withdrawing it from circulation depending upon the index’s movements, acting analogously to a thermostat. A more constant supply of money by means of this method – as opposed to the rapid shrinking and expansion of debt-based money that originates in the banks – would rein in the ‘boom-bust’ cycles that have come to define modern economies.
A move away from debt-based to dividend-generating and equity-based financial instruments, as advocated notably by Islamic economists; gold or silver-backed national currencies whereby money’s ethereal quality is given once more a sense of the real; the adoption of more truthful indices – indices for example which reflect more accurately the real inflation rate or which consider human welfare in terms more subtle than blunt economic throughput; the introduction of local currencies to run in parallel with the national currency - in the manner of LETS schemes – stimulating local economies that may not have access to outside capital and allowing wealth to remain in the locality where it is generated for the benefit of the community which generates it; taxes on speculation; de-specialisation in industry, whereby we become less dependent on the production of others and more reliant on our own; restrictions on the export of the nation’s capital by means of a two-tier currency system, in effect separating the capital and current accounts such as occurred with the Financial Rand or the Sterling Area, and preventing the sort of ruinous flights of capital that saw the Mexican Peso devalued by 40% in a matter of days in December1994 – all these are simply some of the suggestions that at the very least deserve exploration on the part of a political class blinded by a quasi-religion that has quite clearly failed.