In my article last week about currency I introduced the idea of a full-reserve currency as opposed to the present fractional reserve currency. I explained that most currencies in the capitalist world are fractional-reserve currencies and that they are all based on a central fraud. Banks operating a fractional-reserve system work on the basis that they can lend out more money than they take in from savers.
Now we all know that you can’t get more beer out of a jug than the amount you put into it, no matter how much you might want to. Money of course in exactly the same, you can only get out of the jug, what is put in. A fractional-reserve currency is one where you can retain only a fraction of the money put in, but lend out more than was put in. Now like beer in a jug that is constantly being refilled at a steady rate, you can for a while drink more beer from the jug, than is being put in, but at some point, when the jug is empty you can’t continue to do that, you are forced to stop. The neo-liberal banks believe that they can keep taking out more money from the jug than is being put in and that they can do that forever, mainly by increasing National Debt. That is why we had a major crisis in banking in 2007/8, now as the situation has not changed since then, we will have another bank crisis soon if we carry on in the same way.
The good news is that this difficulty with the fractional-reserve banking system is not ‘inevitable’ it is a ‘problem’ we can avoid, and in a new country like Scotland with a new currency and a new banking system it would be simple to avoid it. All we need to do is to establish a full-reserve banking system under Government control and regulation. Such a system would not take out more money than it put in, it would balance the money in and the money out and the jug would always remain half full for the optimists and half empty for the pessimists. This idea of a full-reserve banking system is not magic, it is just simple logic, and using money for its real economic purpose to oil the wheels of the economy and not as a commodity or as a means of extracting wealth without making it.
The present currency arrangement makes the super-rich much richer; but it strangles real growth in the economy, making the vast majority of us poorer in real terms. Now the ‘experts’ and the media will tell you that we can’t have a full-reserve currency, that such a financial idea would never work. However the so called ‘expert’ and the media will be owned by the super rich so they will tell you only what the wealthy elite want you to know. First of all this ‘expert’ advice is factually wrong the Mutual Building Societies were full-reserve banks and they worked very effectively in the UK for years. You do not need the ‘experts’ to tell you what to do, you just need to observe and to think about the situation. If the current financial system was so effective why do we have millions of young people out of employment and with low incomes, why do we have low demand for goods and services? Why are the banks loaded with money but businesses can’t sell their goods?
An independent Scotland which established its own full-reserve currency would be able to use this (without paying interest to any of the super rich) to invest in the Scottish economy and build a modern efficient economy with full employment for all its people and high living standards for the whole community not just the super rich.
This is our objective and it is well within the reach of the ordinary people all we need is to use our own judgements, to have confidence in ourselves and our ability to make sensible judgements for ourselves and our families and to demand that these issues are addressed in a meaningful way.
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