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A case study in local
currency: Woergl, Liverpool, The Channel Islands
Money or more to the
point the lack of it, undermines the whole structure and well-being
of our society. Money or credit, like oxygen, performs the most
vital function, and like oxygen should also come into existence free
of charge to the community, to fund all Public Sector Borrowing
Requirements (PSBR). The needs of the people in health care,
education, environmental protection, social security, etc., could be
funded in their entirety for the benefit of the whole society
interest free. Tory, Labour and the Liberals are arguing about
different kinds of new taxes to help the banks collect their pound
of flesh in essentially un-earned interest. Only the Islamic Party
provides a real alternative. By proposing the issue of a local
currency to pay for public expenditure we do away with the need to
borrow from private lenders who usurp the right to issue credit
which has to be rendered a function of elected government again.
Public credit in the form
of local currency issues are not a new idea. To the contrary, there
have been successful precedents, and only the monopoly power of the
banks has prevented the public at large to benefit from those
experiences. In 1932, in the midst of the great depression, the
Austrian town of Woergl had managed in less than one year to a)
revive its economy, b) reduce its unemployment by 26%, c)build new
roads and a bridge, and d)restore self respect and civic pride
overnight. Following the economic philosophy of Silvio Gesell, the
town issued 5000 Free Shillings which were non interest bearing and
subject to a services charge (Islamically Zakat). As the money did
not pay interest, it could not be hoarded, and was therefore not
withdrawn from circulation. As it was subject to a monthly
devaluation, a kind of negative interest which was collected in the
form of stamp duties which had to be glued to the back of the notes,
everybody preferred the use of the Free Shillings and they
circulated at a multiple speed of ordinary notes. Notes which did
not carry a valid stamp duty were rendered worthless, and people
even paid their taxes in advance to spend the money in their
possession. The scheme was so successful that another 300 Austrian
towns decided to follow suit, and it was then that the Austrian
National Bank saw its monopoly threatened and prevented any further
development of this episode of public credit creation through court
action.
In 1793, Liverpool
suffered from extreme cash flow problems (very much like today), and
solved these by creating out of nothing by Act of Parliament some
£300,000 of non-repayable money which was used for public works with
great benefit to the city and its people. This issue of money by the
Liverpool Corporation not only alleviated the immediate debt crisis,
but also prevented the perpetuation of debt which would have
burdened future generations, had the money been obtained from
private lenders with the penalty of accumulating interest. As
Liverpool managed to get an act of parliament passed permitting them
to issue their own money instead of borrowing it from the banks,
this example serves as an ideal precedent for any council wanting to
solve the current shortage of funds caused by the depression created
through a policy of high interest rates. whilst most of Britain is
mortgaged to the banks whose issue of money is backed up by no other
wealth or guarantee but the future productivity of the British
nation (a marvellous hat trick indeed, charging a nation for its own
hard labour), parts of Britain have no VAT, no poll tax, no national
debt, no local government debt, no death duties, no school closures,
no money shortage, no financial famines and cash droughts, and to
top it all, an income tax at only 20 pence in the pound after
generous allowances: The Channel Islands.
In 1815 Guernsey needed a
new market hall, and built one by funding its construction out of
government issued finance free of interest. By 1822 it was paid for
and is still functioning in 1991. On the other hand in 1807, Glasgow
built a market hall. In 1956 it was demolished while still on the
books owing more than its original cost. Guernsey like the rest of
Britain at that time, was particularly hard hit, and people were
beginning to leave the island. Eventually a committee was appointed
which examined the situation and came to the conclusion that further
taxation was impossible. The alternative was to borrow money from
the banks, but this would mean paying a high rate of interest which
they could not afford, and even if they found the money the debt
would still be there - like Glasgow 1807 to 1956, and still paying.
Then somebody proposed that the states should avail themselves of
their ancient prerogative and issue their own money. At first the
proposal was turned down, but as they urgently needed £5,000 and
only had £1,000 in hand, it was finally decided to issue £4,000 in
one pound notes. The first creation of state money was so successful
that it was soon followed by others. In all, the states issued
£55,000 worth of notes which paid for the rebuilding of the market,
the schools and several other public buildings, widening the streets
and building new roads and sewers. In 1827 the Bailiff, Daniel de
Lisle Brock, was able to speak of "the improvements which are the
admiration of visitors and which contribute so much to the joy, the
health, and well-being of the inhabitants." Things had certainly
improved since 1815.
In 1830 the banks
launched a counter-attack and began to flood the islands with their
own notes. The words which the Bailiff used when he addressed the
states in 1836 are worth quoting: "No one has a right to arrogate to
himself the power of circulating a private coinage on which he
imprints for his own profit an arbitrary value. With these facts
before our eyes we must realise the necessity of limiting the issue
of paper money, to the needs and customs, and the benefit of the
community in general. Permission cannot be granted to certain
individuals to play with the wealth and prosperity of society." But
apparently the states were unable to stop the banks issuing their
notes, and eventually a compromise was reached. The states agreed to
limit their own issue to £40,000, and it remained at that figure
until 1914. After the first war this was increased to about
£200,000.
These notes were issued
free of interest, and it is significant that the great depression
never troubled Guernsey; there was no unemployment and income tax
was ten pence in the pound. Guernsey has wisely refused to surrender
its right to issue the oxygen of money since 1690, and refused to
join the EEC for that same reason. No individual or society can
afford or endure never-ending debt, and while we can't all go and
live in the British Channel Islands, there is absolutely nothing
preventing us adopting the Channel Island's system of finance for
Sheffield, Liverpool, Bradford, or Westminster. Nothing of course,
except the yes-men and yes-women who are elected on the condition
that they do not raise this particular money issue. Rothschild said,
he cared not who made the country's laws, so long as he issued the
money, and after 300 years of financial serfdom to privately issued
money, it is time to say, we've had more than enough. It requires
nothing more but the political will. Ask your member of parliament
why he lacks patriotism when it comes to financial matters.
Author: David
Pidcock
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Date
Published: Winter
1998 |
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