By Peter J. Morgan
Here is a set of six steps that constitute a solution to the present financial, economic and political problems for every one of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) as well as all other nations:
1. If the nation’s central bank is not already state-owned, nationalize it, forthwith, without compensation.
2. Understand that the most important aspect of a nation’s sovereignty is having its own currency, issued debt-free and interest-free exclusively by the nation’s state-owned central bank, and that as soon as a nation enters into a common currency agreement it is no longer a sovereign nation. Indeed, as soon as a nation allows commercial banks to issue digital currency as interest-bearing debt by making loans and creating digital currency out of nothing while so doing, it is effectively no longer a sovereign nation. It follows that at present there are no truly sovereign nations.
3. Withdraw from the EUROZONE.
4. Repudiate the ‘debt’ owed by the nation to the ECB, World Bank, IMF and commercial banks, for it was all created out of nothing in the first place.
5. Re-introduce the nation’s national currency.
6. Legislate to ensure that ALL new money – not just the coins and notes that constitute hard cash, but also digital money (the kind in bank accounts that is transferred electronically using EFTPOS and credit cards, etc.) – is created exclusively by the state-owned central bank, under the instructions of an absolutely independent monetary policy committee, at a rate to just match the rate of inflation, to ensure that the long-term average of the rate of inflation is zero.
Such legislation could be adapted from the proposed Creation of Currency Bill on the websites of Positive Money UK
( www.positivemoney.org.uk ) and Positive Money NZ ( www.positivemoney.org.nz ). This would ensure that commercial banks no longer create new digital money out of nothing every time they make a loan, and ensure the corollary that when the principal is paid back, it no longer disappears into the nothing from whence it came. Commercial banks would then have to act as financial intermediaries, which is what most people believe is ALL they do now. No bank would be too big to fail, and banks that got into trouble would be simply allowed to fail, and each failure would follow due legal process, in the same way as any other failing business, with shareholders and creditors – and not taxpayers – bearing any losses.
For the PIIGS to adopt the above proposals would not necessarily end the European Common Market. Having free trade and a single, common border, are entirely different things from having a common currency. Providing a decent living for the army of foreign exchange traders that would spring up as a result of taking the above steps is a relatively small cost to incur in exchange for the freedom and flexibility, not to mention the steady economic growth, that would ensue, free from the tyranny of the boom-bust cycles of the past. Each of the PIIGS would regain its sovereignty – something each gave up by signing the Maastricht Treaty. It would also ensure that never again would any of their banks be “too big to fail”, and no more of their banks would ever again be bailed out at the taxpayers’ expense. The people of each nation would at last, for the first time in history, be entirely responsible, collectively, for their own well-being and prosperity.
Peter J. Morgan B.E. (Mech.), Dip Teaching