11 Jul 2002 @ 19:57, by Martin Oliver
In most industrialised countries, the vast majority of money is created by the banking sector as a debt in the form of loans. A small remainder is issued by governments in the form of notes and coins, as a debt-free injection into the economy.
In 1921, Henry Ford and Thomas Edison held a press conference in Alabama to propose a new way of paying for a dam scheme. They were suggesting that for such large public works, the US government should abandon its usual practice of borrowing from banks or the private sector, and instead create the money itself, interest-free.
Money would be lent to the project without interest, and repayments removed from circulation (which would prevent the possible problem of inflation associated with 'printing money'). This option would save future generations the burden of interest repayments.
In the 18th century, apparently the States of Pennsylvania, New York, New Jersey, Delaware and Maryland all printed and issued interest-free paper money, becoming prosperous as a result.
A US group called Sovereignty was working for ten years on a similar Bill for interest-free public works money (HR1452) to be put before the US Congress. For more details, see:
[link]
In 2000, ex-UK government economic advisor James Robertson and Professor Joseph Huber jointly produced a short book based on similar ideas called 'Creating New Money', for the UK's New Economics Foundation (NEF).
They suggest that the value created by issuing new money should be a common rather than a private resource. Interest-free money could be put into circulation by governments as public spending. Under this system, the money supply would ideally be regulated by an independent and democratically accountable central bank.
If the right to issue money is reserved only for the government (a key term referred to is 'seignorage', the prerogative of the State to issue money), the authors foresee increased public revenue, lower interest rates, lower inflation, and greater economic stability. A good summary of their ideas is at:
[link]
The NEF is a radical think-tank that works to generate simple solutions to complex social, environmental and economic problems, and their site is worth checking out:
[link]
In the UK on June 26th this year, MP Austin Mitchell tabled Early Day Motion 1515, proposing that the government should experimentally create interest-free and repayable loans for all public capital investment (e.g bridges, roads, hospitals, public housing, etc). Through bypassing interest payments, the overall cost of such projects would probably be cut by between a third and a half.
As of Thursday 11th July, 17 MP's had signed their names to this Motion. If it receives enough support, it will go to a vote.
Working along similar lines is the Forum for Stable Currencies, a loose network of UK Parliamentarians and concerned citizens that meets regularly at the House of Lords in London. Their site is at:
[link]
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