5 Mar 2009
Bank of England now controlled by Major Douglas
proposal is very simple - and heretical. It is that the government - or rather the Bank of England - creates the money
Hugo Chavez looked carefully into printing cash and decided it was too radical, Professor Mervyn King and his amigos in the Monetary Policy Committe have today decided that such a policy must be pursued to prevent the recession morphing into a depression.
I have studied this idea in some detail, mainly from an interest in the far right associations of those who developed it.
In the 1920s and 30s Major Douglas, amongst other often quite fascinating economic ideas, argued that money was a social construct and that rather than banks creating it in the form of debt, the 'community' could make money and solve economics problems.
Unfortunately (and this is not the case with Mervyn King and friends) Douglas was a raving anti-semite obssessed with banking conspiracies, 'Jewish' plots. He quoted the Protocols of the Elders of Zion and his ideas directly flowed into the policies of Oswald Mosley, the National Front and others on the loony anti-semitic far right.
Modern followers of social credit have often been unprepared to criticise his racist excess and I have had a lot of stick for point them out.
Douglas's racism is not the issue today. The Bank of England is to magic £75 billion out of nothing. Its easy. They print the cash and use it to buy back bonds they sold earlier to banks to borrow money.
There are some technical issues. If you print money this can create inflation...however a bit of inflation would be welcome to the economy, even if our currency crashes our dwindling British exports will revive.
Money is neutral...i.e. it is not key to reviving the economy, print more money and the real issue is confidence, as Keynes (who praised Douglas but largely ignored Marx) argued, if confidence is low the money may not be spent.
However the present economic crisis is linked to banking failure so credit droughts are making life tough for business, in these circumstances money is more active!
Is it utopia? No, we need to move to an ecological economy and this involves rather more fundamental and complex changes, as a socialist I would also argue that people are not simply exploited by banks, they are exploited by a whole capitalist system of which finance is an essential part but a part not the whole.
Of course...money cannot just be printed in most circumstances...people would lose faith in the currency and it would crash beyond what is beneficial!
So yes printing money is possible at present, it would be good to use some of it to fund renewable energy and creating eco homes for all, etc...but its part of the solution at best.