By:Najma Sadeque – Published in Pakistan Today 27 August 2012
There isn’t just one kind of money banking
Colonialism everyone understood. But the most deceptive method of continuing appropriation of global wealth was perfected by the global ‘banksters’. Once in a while, the locals got wise.
Guernsey, a tiny island in the English Channel, separates England from France. Its currency was the British pound sterling. During the early 19th century, England and France were constantly warring. War being an expensive undertaking, country-governments were borrowing heavily from the big bankers who controlled the financial scene across Europe and England. The bankers, then as now, cynically financed both sides to maximize profits, and stopped lending to small borrowers to divert every bit to war lending.
Public works ground to a standstill. Unemployment soared. Then a realization struck the authorities. Lack of money need not be a hurdle – it was merely a medium of exchange. What they needed most – raw materials and labor – existed in plenty. They just had to be facilitated.
So why couldn’t they create their own money instead of depending on England which had stopped helping? After all, the island enjoyed autonomy with all the rights of sovereign government. And that is exactly what they did, fulfilling under pressure a long-felt need, because a bank didn’t even exist on the island.
The Guernsey government issued its own money. People bought, sold and paid their bills with their new money. The government carried out all necessary public works and paid government employee salaries. It also controlled inflation by exacting a small amount of tax to withdraw any excess money. Employment soared and the economy boomed.
Similarly, about 80 years ago, unemployment was high and economic conditions pretty bad in Europe. Many governments, both national and local, were deep in debt. Public works stalled, and dependent workers were left penniless. Money and jobs were hard to come by.
But in a tiny town of 4000 in Austria, the mayor had a bright idea. With the permission of the local government, he created the town’s own money. The tokens known as scrips were issued in the same denominations and equivalent value of the official currency, in ones, five and tens. The local government put it into circulation by paying workers and bills. Building and repairs of roads, drains and bridges were back in full swing. Jobs reappeared. Declared official, the scrip bought all their food and other needs from local shops, and paid bills and taxes.
The sole restriction was that the scrip could be spent only within the town, not outside it. But the key advantage was that all economic activity and all benefits from earning and buying, accrued only to townspeople and the town.
Within a decade Geurnsey became so prosperous English banks aggressively intervened. They set up branches and began to influence local representatives mostly unfamiliar with private banking machinations. Guernsey Island was strong-armed into ceding its sovereign right over its own currency. Private banks took over with interest-based loans. The island was never the same again.
In the case of the Austrian village, the Austrian National Bank feared that successful local currencies would threaten central control over the country’s money, and put a stop to its self-reliance.
Both schemes were obviously too successful, imitated by others including in America. Many local US currencies appeared in America until 1933, when New York bankers persuaded President Roosevelt to declare them illegal — the same kind of monopolistic bankers that caused the global financial crash of 2008.
Even the US has no independent, sovereign state bank. Finances are in the hands of the Federal Reserve, a private consortium. The US is the only country that prints endlesss paper money without having to prove it can back it up with anything tangible. Why? Because they say so…. at the point of a gun. Saddam and Gaddafi were punished for rejecting dollars for oil, but China is too big. And Iran: who knows?
This in simplified manner reflects a parallel situation that prevails worldwide. Just because most have state banks and unique currencies, people believe their countries are sovereign. But weak nations heavily in debt to foreign powers are never quite so. They are dependent countries, allowed to play-act at independence in exchange for financial and economic subservience.
Yet most foreign debts are unnecessary. Foreign currency loans are needed only to purchase technology, goods and expertise lacking in one’s own country. Otherwise, paper money without any tangible backing no longer represents real wealth, although it is pretended to do so. They are just symbols of purchasing power granted to or appropriated by the authority, and in recent decades, excessively and unduly. They create psychological economic dependence of borrowing countries on foreign lenders. Yet none of it is needed for local payments, investments and purchases. They also weaken or thwart local technologies, initiatives and self-employment.
Consequently, as long as development is overly based on foreign loans and investment, the masses will be thwarted in development. This is because inflated interest or profits will revert to foreign lenders, not recycled into local works without creating unbearable tax burdens for the people. One’s own natural resources, labor, indigenous technology and strengths will be undermined and underpriced.
As long as the public are encouraged to harbour the illusion that foreign money, particularly western, represents the only real wealth, and is something way beyond being merely a medium of exchange, people will remain locked in debt, deceit and deprivation.
Had some of our previous finance ministers possessed the imagination – and the integrity and concern – for people’s rights and upliftment, they could have created local money delinked from foreign exchange to accord real value to local goods and services, and spur local economic activity. Towns and villages could have carried the initiative further. Unless they grow, neither can the economy and people’s standard of living.
There isn’t just one kind of money banking; there are several of the kinds not practiced here, adjustable to local or national needs. It’s just that the limited minds in charge in our country haven’t been working in the public interest.