The Chancellor has no money

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The Chancellor Has No Money

During the debate of the second, or repair, budget, the chancellor of the exchequer, Kenneth Clarke, accused the shadow chancellor, Gordon Brown, in the following words:

"I believe you're trying to deceive people by pretending there are accountancy devices which will produce money from no-where." Didn't the chancellor ever hear of money creation and fractional reserve banking? Maybe he should take tuition from the former chancellor, Reginald McKenna, who said in 1924 that "banks can, and do, create money."

Or he should listen to Anthony Nelson, his man in the treasury chambers, who admits that government, too, can create money, if it wants to: "The Government can and does finance itself to a small extent by the issue of non-interest bearing money", he wrote in February 1993 in a letter to the Campaign for Monetary Reform, "this is the aggregate known as M0, the stock of which is currently some Ł194 billion. The size of the stock of M0 is limited by the demand for this form of money." Whereas, he observes, "the money that banks create is ... interest-bearing". So the reason the government has to borrow money from banks who create it out of nothing, is that there is no demand for the money government creates out of nothing. And because we don't demand that sort of money, we just have to pay the price for it in ever increasing taxes. It seems, the chancellor and his entourage really don't get their sums right.

Author: Islamic Party of Britain

Date Published: Jan 1995

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