Ineptocracy - the cause of the deficit?

Ineptocracy - (in-ep-toc'-ra-cy) -
'A system of Government where the least capable to lead are elected by the least capable of producing, and where members of society least likely to sustain themselves or succeed, are rewarded with goods or services paid for by the confiscated wealth of a diminishing number of producers'.

The above definition of Ineptocacy could easily be read in two ways ... a dig at the poor and/or least able ... or a dig at the ultra-rich who misuse power and add no value, but gain wealth from ponzi ('money for nothing') schemes (eg counterfeiting money/gambling) and/or from the backs of hard working people who are actually adding all the value (but paying most of it back in tax - e.g. income tax, national insurance and 20% VAT) ... whilst the ultra-rich accumulate more wealth, more tax cuts and pay accountants to find any possible avoidance scheme so they can avoid paying any tax at all! **

The biggest problem by far is in fact the latter ... tax needs to be applied to non-productive ways of generating wealth (gambling, land, housing) as a matter of urgency ... and income tax for those adding real value reduced ... these actions together would both remove the black hole in the countries finances and reward producers who add real value!

Can this be done? ... of course e.g. by introducing a land value tax! ... However, those currently in power would never allow this to happen as it is not in their interests to do so ... as they want to be able to continue to make money from nothing ... and off of the backs of others ... and will fight tooth and nail to be able to continue to do so!   

Ignorance is not bliss ... and Poweromics is evil.

** We've started flushing out companies avoiding tax (e.g. Starbucks), but we need to expose all the individuals involved in this practice too ... starting with those with their grip on Power!

Tax Cuts for the 'Rich', Debt Slavery for the 'Majority' and Wage Slavery for the 'Poor'

The Government has openly demonstrated that we are definitely "not all in this together" again today, as it delivered a "budget for multi-millionaires" ... 'cloaked' with a great deal of spin.

First of all the Government coalition, mostly made up of multi-millionaires (e.g. Osborne, Cameron and Clegg), are taking more money away from the elderly, hard-working and poor (by removing more of their tax related benefits/allowances) ... and giving it to the rich (i.e. by cutting the 50% top rate of tax for incomes over £150,000).

In trying to justify removing the 50% rate, the Government used the argument that rich people, prior to its initial introduction (2009-10), had 'moved' a total of £16-18bn of their income into a previous tax year to avoid paying the increased rate. However this is effectively little more than spin, as this was a one-off opportunity for them to be able to avoid the tax increase (and one they couldn't use again). Worse still, the rich will be able to effectively defer pay into the future in order to avoid the 50% tax rate again now too ... what spin and hypocrisy, and what a failure of opposition/media if they fail to properly point this out (nb Ed Balls has attempted to do this today, but he's unfortunately 'damaged goods' and his attempt was also poor)!

The second argument the Government used was they that are balancing this tax cut by imposing increased stamp duty on the purchase of expensive properties ... but for rich people not looking to buy lots of expensive properties (e.g. Osborne, Cameron and Clegg!) this is great ... as they will not be subjected to this tax at all and will therefore be the big winners - receiving a massive windfall/tax cut (worth £3bn annually).

Not surprisingly absolutely nothing is being done to introduce a tax on land (i.e. a Land Value Tax - a yearly rent on land - not a one off sale tax on property), which is by far the best way of taxing wealth/ unearned income (as by design the ultra-rich cannot avoid it) and a way of progressively moving away from taxing work/jobs. Failure to do this will mean people continue to see effective cuts to pay/allowances, the slashing of public services, and debt slavery for the vast majority (e.g. due to the high costs of housing and the introduction of tuition fees).

And what about the poor? ... well any benefits/support are being slashed ... and people are being driven to work for large private corporations for no extra pay (or lose their benefits) ... which effectively means they are being made to work for £1.50/hour - a small fraction (less than a quarter) of the national minimum wage (which should effectively be illegal)! 

And for the poor it's wage slavery, and if they (and/or indeed the 'middle-class') choose to protest ... well, as raised in previous posts, this Government is looking to arm the police with tear gas, water cannons and tasers, in readiness for potential riots (i.e. turning the police into a para-military force in order to protect themselves, and their rich friends)!

What an unfair, undemocratic, and immoral place the UK is turning into ...

NB Given the lack of democracy, and the level of dictatorship, shown by the Government ... with their pushing through of damaging NHS reforms, with no electoral mandate and despite outright opposition from every professional group, ... doctors are now saying that they are going to stand for election against these immoral hypocritical politicians, due to an absence of any real alternative for people to vote for ...

Removing corrupt monetary and economic systems

Extracts from an excellent article by James Roberston, which uncovers the corrosive effects of current (immoral) monetary systems and some of the 21st century (ethical) alternatives available ...     

"More and more we are starting to see the corrosive effects of current monetary systems. They are being increasingly blamed for: 

• Systematically transferring wealth from poor people and countries to rich ones,
• The money-must-grow imperative that compels people to make money in socially and environmentally damaging ways,
• The diversion of economic effort and enterprise towards making money from money and from the rising values of existing assets, instead of from providing valuable goods and services,
• Systematic bias in favour of people, organisations and nations who should be managing the system efficiently and fairly on behalf of all,
• Eroding the credibility of political democracy, and
• Fuelling opposition to globalisation in its present form, thereby threatening world peace and security.  

Such insights all point to the fact that the workings of the money system now need to be changed ...

The starting point is to note that at the national level a government's principal operational functions include i) control of how the money supply is created and managed, ii) control of how public revenue is raised by taxing and charging and borrowing, and iii) control of how that public revenue is spent.  

Given the above, in a democratic society one might expect that all the money created as additions to the national money supply backed by the state would be created by an agency of the state, that it would be spent into circulation on public purposes, and that it would be created debt-free.  

What actually happens, however, is quite different. In the UK, for example, less than 5% of today's national money supply is created debt-free by the Bank of England and the Royal Mint as banknotes and coins - over 95% is created by commercial banks writing it electronically into their customers' bank accounts out of thin air as profit-making loans.  

It has been estimated that UK commercial banks make over £20 billion a year in interest from creating this electronic bank-account money, whereas the issue of banknotes and coins brings in public revenue of less than £3bn a year.  It has also been estimated that additional public revenue of about £45bn a year would result from a reform that i) prohibited commercial banks from creating bank account money, as they are prohibited from creating banknotes and coin, and ii) gave the Bank of England the task of creating it and passing it as debt-free public revenue to the government to spend into circulation.  

The following are further arguments for a reform along these lines. 

(1) The official-currency money supply is a public resource. The value of creating it should be a source of public revenue. To allow it to be captured as private profit is both economically damaging and unfair to particular sections of society. 

(2) Creating money as interest-bearing debt is systematically inflationary.  A debt-based money supply means that more money than has been created is always needed to pay back the debt involved in its creation - not only the "principal" (the sum borrowed) but also the interest payments on it while it is outstanding.  That is why the main objective of monetary policy now has to be a target level of inflation - within a bracket of, say, 2% - 3% a year. 

(3) Creating money as debt is pro-cyclical.  It tends to amplify the volatility of the business cycle instead of damping it, because banks want to lend more and bank customers want to borrow more when the economy is booming, and less when it is depressed. It thus contradicts the anticyclical aim of monetary policy. 

(4) If the great majority of new money entering circulation is channelled into the investment and spending priorities of commercial banks and their customers, it creates economic distortion in favour of speculative investment in the value of existing assets, and against productive investment to produce new goods and services.  For example it encourages speculative investment in land - one reason for the spectacular rise in house prices compared with other prices and wages and salaries in many countries in recent years.  

(5) One inevitable feature of an economy in which money is almost entirely created as debt is greater total indebtedness - higher levels of debt for citizens, companies and government which causes; i) Social damage and injustice as it artificially widens the gap between poor and  rich.  It increases the flows of money from poor to rich, since the poor have greater need to borrow money and the rich are better placed to lend it; and ii) Environmental damage and destruction.  When the money needed for all transactions has to include a sum to pay the interest arising from the way it was created, organisations and individuals are compelled to convert natural resources into money more rapidly than they might otherwise need to.  

(6) Allowing commercial banks the privilege of creating, free out of thin air, the main resource they need as input to their business gives them a subsidy enjoyed by virtually no other industry.  It protects the big, established commercial banks from competition from smaller, more enterprising, efficient and customer-friendly potential new entrants to their various lines of business, including the country's main system for making and receiving payments.  This reduces the economic efficiency both of the wider financial services industry and of the economy as a whole.  

(7) How money is now created and what the effects of that are, should not remain veiled in mystery. Widespread failure to understand how the monetary and financial system now works is a serious impediment to its improvement.

Fractional Reserve Banking - 'Creating money out of thin air'

The Bank of England can currently only influence how much new money the commercial banks create, by regulating interest rates, thus the price of borrowing, thus bank customers' demand for loans, and thus the amount of new money the banks create.  It is time now for the obvious next step - to make the Bank clearly responsible on behalf of the state for actually creating the required amounts of state-backed electronic bank-account money, just as state agencies create new banknotes and coins. 

As far as public revenue is concerned, existing taxes are also becoming less viable.  For example: 

• National economies in a competitive global economy have to reduce taxes on incomes, profits and capital to attract investment capital and highly qualified people - both being increasingly mobile. 

• Ageing societies will be unable to support growing numbers of "economically inactive" people by taxing the work and enterprise of fewer people of working age.  

• Internet trading is making it more difficult for governments to collect customs duties, value added tax and other taxes and levies on sales, and easier for companies and rich individuals to shift earnings and profits to low-tax regimes and tax havens.

• Tax avoidance by big corporations and rich individuals is reaching crisis proportions. Estimates are that tax havens cost £255bn annually to governments worldwide, and hold assets of $11.5 trillion ($11,500bn), causing serious distortion of economic priorities and supporting criminal money laundering.

Shifting a large part of the tax burden on to the value of land and other common resources which cannot be moved abroad will probably be national governments' most effective response to these problems. 


As well as becoming less viable, existing patterns of taxation are now positively perverse: 

• By heavily taxing employment and rewards for work and enterprise and lightly taxing the use of common resources, they systematically encourage inefficiency in all kinds of resource use - under-use and under-development of human resources, and over-use of natural resources (including energy and the environment's capacity to absorb pollution, including carbon emissions); and  

• By taxing the value added by most people's positive contributions to society (VAT), and failing to tax value subtracted by those who make most profit from common resources, they systematically skew the overall burden of tax in favour of a rich minority. 

These facts argue, on both economic and ethical grounds, for a "tax shift" on to the use of, or profits from, the value of common resources.   

Common resources are resources whose value is due to nature and to the activities and demands of society as a whole, and not to the efforts or skill of individual people or organisations.   The site value of land is the most obvious example. The value of a particular land-site, excluding the value of what has been built on it, is almost wholly due to the activities and plans of society around it.  For example, in the UK when the route of the London Underground Jubilee Line was published, properties along the route jumped in value.  Access to them was going to be much improved. A public policy decision and subsequent investment of public money, gave owners of those properties a £13bn windfall financial gain.  They had done nothing for it; they had paid nothing for it; they had been given a very large free lunch. By contrast, the UK Treasury raised £22.5bn for UK taxpayers in 2000 by auctioning twenty-year licences to use the radio spectrum for the third generation of mobile phones.  The governments of other European countries also raised significant sums that way. 

Local government in the UK, including the Greater London Authority, has been exploring whether rail and road transport developments could be financed out of the increases in property values which they generate.  In 2004, the  Vice Chair of Transport for London summarised some of the arguments for land value taxation:  

"With income from LVT … the government could provide new public transport infrastructure; abolish economically damaging property taxes such as council tax, business rates and stamp duty; raise personal allowances so that millions of lower-paid workers pay no income tax at all; and reduce VAT rates to help consumers and businesses. The tax would improve earned incomes; cut the cost of tax collection; provide affordable homes; reduce urban sprawl; avoid property-led business booms and slumps; and minimise the need for constant changes in interest rates to control land prices"

Pressures for a shift to environmental taxation have recently risen along with awareness of global warming and other threats too - including world shortages of energy, food and drinkable water, and worsening pollution of the oceans. 

In addition to land-sites, the electro-magnetic spectrum, the national money supply, and the environment's capacity to absorb pollution and wastes, important common resources include: the value of unextracted energy; limited space available for road traffic, airport landing slots, etc; and water for extraction, for fishing and for waterborne transport. The annual value of these and other common resources is very great, and rises along with the world's economic growth.  

The overall structure of public spending programmes needs more searching scrutiny by politicians, the media and the public than it now gets.  Two examples illustrate this. First, $1.5 to $2 trillion a year is estimated to be spent worldwide on perverse subsidies which encourage economically, socially and environmentally damaging activities (Myers, 1998).  These include the subsidies from rich-country governments to their farming and agricultural sectors, which - combined with tariffs against imported food - devastate those sectors in poorer countries and expose the hypocrisy of rich-country support for free trade.  But there are many other examples of perverse subsidies. Sustained national and international determination is needed to reduce them year by year.  

Second, support for a basic income (or Citizen’s Income) continues to grow, especially in Europe but elsewhere too. It would be paid to all citizens as of right, out of public revenue. It would include state pensions and child allowances, it would replace many other existing social benefits, and it would eliminate almost all tax allowances, tax reliefs and tax credits.  It would recognise that, in a society of responsible citizens, some of the public revenue arising from the value of common resources should be shared directly among them.  Politicians and government officials now channel huge sums in contracts and subsidies to private-sector business and finance, as well as to governmental organisations, to provide citizens with public services.  Much of that public money could be given directly to citizens to spend for themselves in a market economy made more responsive to their needs by the other reforms proposed.  It would especially help poor people who would not benefit from reductions in income tax but would have pay the new environmental taxes. 

The state should carry out its three main operational monetary and financial responsibilities in ways that will distribute the value of common resources among all citizens and reduce or even abolish taxes on earnings and profits from providing useful goods and services.  This will create a new framework of prices which reward the market economy for delivering outcomes which combine economic efficiency with social justice and environmental care.  The state will then be able to let the market economy operate more freely, with less intervention, than now.  

Business people and everyone else too, as citizens, will experience greater freedom at the personal level. A Citizen's Income will allow them, if they wish to do so, to reduce the amount of money they must earn by working as employees.  Then, with more time and energy to supply themselves and their families with some of the goods and services they now have to buy, they will be able to further reduce their need to spend money if they want to. As consumers, employees and savers they will be in a stronger position to influence - and choose between - the people they have to deal with in those capacities.  

Overall, attention will shift to creating well-being for people and the Earth; to enabling people to develop their capability, rather than reinforcing their dependency; and to conserving the Earth, rather than transforming its resources as rapidly as possible into money. The fairer sharing of the value of common resources will help to decentralise power and wealth - both by giving a fairer deal to people in their own places and by requiring rich and powerful people and corporations and nations to bear their full share of the environmental and social costs of centralisation. The new framework of monetary and financial incentives will automatically harness self-interest to common interest within and between nations. 

Together such reforms offer the prospect of  the democratic state performing its monetary and financial functions more purposefully and effectively, thereby being able to allow the market economy to operate more freely.  They will also make it financially easier for people to reduce their present degree of dependence on goods and services and jobs provided by big corporations and the state, and for both people and organisations to act in ways that conserve, not squander, natural resources ..."

-----

Robertson's excellent article goes on to look at this on an international level too (and I would recommend reading it in its entirety). Expanding upon this we clearly need to look at the barriers to such reforms ... including the vested interests and misuse of Power by the small minority in Power and quietly wielding Power (i.e. 'the Invisible Hand'). 

The current 'economic system' is designed to ensure the small minority in power 'profiteer' heavily from it, whilst adding no value themselves and at the expense of everyone else (i.e. Poweromics) ... and they will wield all of their power to resist any changes to this. 

For instance Governments (including the UK) are in the 'hands' of these people, either through infiltration (i.e. they are also part of this small 'elite' group), conspiracy (nb the current Conservative party gets the majority of its funding from this group), or by way of threat (e.g. due to indebtedness and/or by threats by this small group to move their accumulated wealth/ support elsewhere).

However Ignorance and Apathy are also to blame ... as those misusing Power will continue to do so for their own self-interest and gain ... until more and more people realise what's going on and start to demand change! ... and it is at this point people will start to see how the media, political and judicial systems are also designed to support this small minority too!

Are we really 'all in this together'?

Government announces tax free saving and inheritance plan for the ultra rich

The Government, with the use of a clever mix of smoke and mirrors and spin, is telling us it wants to sell off 15% of our national forest-land to private owners ... and says it is needs to do so to cut the deficit, but the real reason could not be further from the truth ... !

In reality this move is being done so the super-rich can profit from it, and at the same time have their tax bill reduced ... by expanding a unique tax free investment/savings loop-hole only available to them ... as investments in land are free from capital gains tax ... and are uniquely free from any inheritance tax too (which is why many ultra-rich landowners, bankers and football players have been quietly 'cashing in' and buy more land).

This carefully crafted move exposes the 'double standards' that currently exist and the real hypocrisy lying behind the 'We are all in this together' spin, as this move comes at the same time as ordinary hard-working people are being disproportionately forced to pay higher levels of tax as a result of the recent VAT hike!  

As I have said on this blog before, one of the most fair/just taxes we should be introducing as a country is a Land Value Tax, in order to replace unfair property taxes, to reduce VAT, to reduce tuition fees and to reduce the tax on jobs. The loophole on inheritance tax should also be closed too (so why have the Government, and indeed the last Government, failed to do such things ... well it's obvious really isn't it - i.e. just follow the money ... and look out for all the self-interest and greed).

Vince Cable (Business Secretary) understands the importance of introducing a Land Value Tax, as he held a summit on the subject in the House of Commons recently, so it's a disgrace that this Government, which he and the Liberal Democrats are a part of, are now actively pushing such immoral/unjust changes through ... especially after the immoral tripling of tuition fees and the scrapping of the EMA. Vince Cable must not care or he has become quickly corrupted - see my Homer Simpson post earlier. (NB Today his department also come under fire from the CBI, saying it needed to be 'less of a talking shop' and 'more of an action-oriented growth champion').

It's clear the Liberal Democrats are providing a convenient smoke-screen for the Conservatives, who are taking every opportunity to quietly reward their ultra-rich families/backers (e.g. landowners, bankers) ... and the quicker this smoke screen is removed the better!

It is worth noting that any potential benefit gained from selling off land is going to be short-lived, as any one-off revenue claimed will be quickly offset by large reductions in capital gains tax and inheritance tax bills for the ultra-rich (for generations to come). 

This proposal highlights how 'ignorance is not bliss', because it's young people, pensioners and hard-working taxpayers that are having to pay for these tax cuts to the super-rich, whilst also bailing out bankers (who are still paying themselves obscene bonuses)! 

A sign of things to come (2) ... ?

As Christmas draws closer and the New Year fast approaches are we starting to see the writing on the wall ... and sign of things to come ...? 

Sterling devalued 25% (e.g. even against collapsing currencies like the dollar!), inflation running way above target (e.g. with petrol now heading towards £6/gallon!), interest rates set to go up, unemployment starting to increase again (before the real cuts start to bite), VAT set to rise to 20%, and the top civil servant (Sir Gus O'Donnell, Cabinet Secretary) quietly drawing up a "Plan B" for if/when the UK falls into recession again next year ...

Yet bankers (whose self interest/greed created this crisis) are celebrating and pocketing their Christmas 'bonuses', as a result of debt slavery (e.g. Fractional Reserve Banking) and corrupt profiteering/gambling using your money (where they take all the profit and you/taxpayers take all the losses) ... nb they are not focused on helping/investing in businesses, but continuing to speculate on the stock exchange, commodities, currencies and bonds instead ... forcing countries to the brink financially (e.g. Ireland) and pushing up food prices around the world so millions of people can no longer afford to eat (nb the same bankers also want to be able to speculate/trade in fresh water in the future too)!

Whilst the European Union is trying (and failing) to fiddle around with bankers pay (restricting bonuses will only elevate their basic pay), it has done nothing to stop Fractional Reserve Banking or Casino banks (investment banks) from speculating gambling using your/taxpayers money (commercial banks) ... much of this crisis was brought on by repealing the Glass-Steagall act (which was brought in after the last Great Depression) and nothing is being done to reverse this!

The banks have stolen the future from future generations, through high levels of tax needed to service (and eventually pay off) all the bailouts/debt, through the removal of EMA and the tripling of tuition fees, doubling of youth unemployment and further debt slavery as young people try to pay for a roof over their head (nb the bankers are aided and abetted here by a few very wealthy landowners who profit heavily from restricting the use of land ... instead of being taxed for the land they own)! 

If we really want to get out of this mess, we need to i) stop the corrupt practices of banks, ii) invest in education, innovation, enterprise and business, and iii) introduce a Land Value Tax, to replace the current Property Tax and to reduce the tax on jobs (income tax/national insurance) ... 

As the toxic mixture of ignorance and apathy continues to reduce ... Poweromics will be increasing exposed and challenged.

A nation ... held back by vested interests?

Here's just one fundamental reason for introducing land value tax ... "In a world of internationally mobile capital and people it is counterproductive to tax personal income and corporate profit to uncompetitive levels ... but a progressive alternative is to shift the tax base to property and land which cannot run away and represent, in Britain, an extreme concentration of wealth" (Vince Cable, Business Secretary, 22nd September 2010).

But there is one fundamental reason why they will not do it ... and that's the self-interest/greed of a very small minority, who own the vast majority of land, and wealth, in the UK.  Over 69 per cent of the UK is owned by 0.6 per cent of the population, or more pertinently 

• 158,000 families own 41 million acres of land, whilst
• 24 million families live on the four million acres of the urban plot. 

No other country in Europe, apart from Spain, has such an unequal concentration of land ownership. The single wealthiest landowner is the Duke of Westminster, who owns hundreds of acres of prime real estate and land in Belgravia and Mayfair ... and the "cousinhood", a secretive network of 6,000 aristocratic families and their relatives who, through intermarriage, continue to own much of the land of the British Isles, still exert influence and control through the political parties, the House of Lords, Oxford and Cambridge, the Crown and the armed forces.

And, contrary to popular belief, there is no shortage of available and uncultivated land in Britain - the landowners' estates are vast and, in areas such as the Cotswolds and parts of Scotland, say, omnipresent. What Britain suffers from, especially in the south-east of England, is a shortage of land on which houses are allowed to be built (e.g. the "green belt" around London massively inflates the prices of property in London ... which the Duke of Westminster has profited very well from). 

As a result, the urban plot becomes ever more congested, land values and property prices continue to grow - because scarcity of land attracts a premium value - and our young people, many of them debt-burdened from their university years or struggling to find work in a recession, cannot afford to buy a flat, let alone a house. This forces them into the twilight world of short-term rents and disreputable landlords.

Given that there is a direct correlation between land scarcity and high house prices, why isn't land reform more urgently debated today? Why are our political and media elites so reluctant to investigate new ways of taxing unearned income, especially at this time of extreme austerity, when Britain already has the fourth-highest marginal tax rates?

Because those same people, who sit in the shadows (but quietly wield their power) also exert   influence and control over most politicians and those in mainstream media too ... n.b. it is also massively inflated house prices that allow bankers to profiteer from driving young people and families heavily into debt, whilst allowing 'speculation' to continue (at taxpayers expense) from money 'created' out of thin air too (resulting in the 'growth' of 'financial services' using 'fractional reserve banking') ... so not so hard to answer really ... however, they do not control the internet (although they a trying to do so)!

Reforming the Banking System ... Simple

Here's how a simple reform to the banking system could save us £200 billion each year...

Every year up to £200 billion of new money is created and spent into the economy. Most of us would assume that this new money is created by the government, or at least an agent of the state. In reality, this new money is created by the private banking system as debt, and lent into the economy. Between 2000 and 2009, £1,225 billion of new debt has been created by the banks.

Read that again: in the last 10 years, the banks have created up to £200 billion per year, lent this into the economy as mortgages, personal loans and credit cards, and are now living off the interest*. This is what laid the foundation for the debt crisis that is crippling government and society right now.

If you find this hard to believe, ask an economist. They'll call this process the 'money multiplier' or 'credit expansion' but they really mean the following: private companies (banks) create money, lend it into the economy, and collect interest on it. With the exception of the loose change in your pocket, this is where all our money comes from now - the creation of money as debt by private companies. Ever wondered why we are in so much debt?!

There is no good economic or practical reason why governments permit the banking sector to create new money while the government itself cannot fund adequate healthcare or education for its people. The banking system only works in this way because the law that makes it illegal to print your own £5 notes has not been updated to apply to the digital, electronic money that now makes up £97 in every £100. This loophole, in conjunction with a fundamental flaw in the design of the banking system, means that every single loan that is taken out actually creates brand new money. (In computing terms, making a loan is more like 'copy and paste' rather than 'drag and drop').

So when David Cameron says that 'there is no money', what he means is this: "we've handed the keys to the printing press to private corporations, and now we are dependent on the banking system to issue the nation's money supply". So to pay off the debt we need money, but we can only get money if we go into debt. Good luck solving that one Dave!

But there is a way to change this. There is a way to avoid the tax rises and spending cuts that currently seem inevitable. In fact, there's even a way to do the opposite - cut taxes and increase spending at the same time - and end the recession in one fell swoop... and here's how we make it happen: 

Put simply:

* Make a few small tweaks to the banking system to prevent commercial banks creating new money every time they make a loan.

* In place of the banks, set up an independent agent of the state (such as the Royal Mint or the Bank of England) which would be responsible for creating the additional money that the economy needs each year to keep running smoothly.

* Add the newly created money to total government revenue, where it can be used in the same way as tax revenue, or can be used in place of tax revenue to reduce the tax burden.

Doing this would open up a huge range of options. The money that was previously used to generate huge profits for the banks will now come first into the hands of the elected government. It can then be used to raise the income tax threshold, reduce regressive taxes that hurt the poor, increase investment in public services and infrastructure by up to 30%, fund interest-free lending for government bodies or local councils (saving 70% compared to PFI), or a combination of all of these.

So this is how a simple reform to the banking system can avoid cuts in public services and save us up to £200 billion a year (i.e. 30% of the tax bill - the equivalent of removing income tax and council tax completely). There are a far more benefits on doing implementing such a reform too.  If you're thinking that it's easier said than done, there's a 20,000 word manual on exactly how it can be done, plus a fully drafted model bill at The Proposed Bank of England Act ... and  if your head is now spinning and you need a plain-English explanation of how this monumental con-trick works, and why it's destroying the economy, you'll find it here and support from James Robertson's recent newsletter too.

The current financial system doesn't work - that should be obvious to everyone. But so far no-one is looking at the root of the problem. That needs to change. Head to one of the sites above, sign up for the newsletter and they'll keep you updated as the campaign picks up speed...

Adding such reforms to the implementation of a Land Value Tax would go a long way to fixing our broken system and introducing simpler and fairer systems** - e.g. where 'adding real value' is what's rewarded.  Will those in 'Power' do it ... well the small but highly influential minority (who are benefiting greatly from the current system - and practicing 'Poweromics') will fight 'tooth and nail' to ensure the current systems remain, so they can continue to profit from them (at the expense of society as a whole).  

There is currently a 'lot of talk' about 'liberty' and importance of providing 'power to the people' but whilst banks, and those in position of power, avoid such reforms they seeking to continue to deliberately control people's lives and hold society to ransom, the antithesis of real liberty and the actions of people devoid of any moral values (i.e. Practitioners of Poweromics).

The idea nothing can be done is so wrong ... the idea that the few people who are really in 'power' won't 'allow it' to be done is far closer to the truth! ... and this is set to continue for a little while longer yet ... until more people realize this that is ... which is continuing to accelerate - thanks to those who still have a moral compass and an interest in things that go beyond just them themselves (hence my links to their good work too).

* a subsidy that costs each of us over £4,000 every year!

** Leonardo Da Vinci once proclaimed "Simplicity is the ultimate in sophistication" - a saying dear to my heart (as well as Leanomics) ... e.g. if your proposed 'solution' turns out not to be 'simple', you should take a little more time ... and look a little harder!

Masters or Servants?

Nick Clegg, the Liberal Democrat party leader, unveiled five proposals to control "the bonus culture" in the City. Clegg said there should be "no rewards for failure" and called for a "top-to-toe" overhaul of the British banking system (including an end to "morally obscene" salaries and bonuses).

"The problem started with the banks so the solution must start with the banks too," he said at the party's daily news conference yesterday, and he said the public should feel that "never again are your everyday savings held "hostage" by people in the City.

The Liberal Democrats' five-point plan to reform the banking system would:

1. Limit cash bonuses to £2,500 annually, with any bonuses in excess of this figure to be paid in shares which could not be sold for five years
2. Ban board directors from receiving bonus payouts
3. Extend the Financial Services Act so loss-making banks were not allowed to pay bonuses
4. Ensure the names of all banking employees earning more than the prime minister were published
5. Lead to directors of banks being fined if their institution broke the industry's code of practice

These five steps would "transform the culture of greed which continues to disfigure the banking industry in this country" and ensure the banking system became "the servant, not the master", Mr Clegg said.  

The party's Treasury spokesman, Vince Cable, said the UK was "still in a major economic disaster" and that "The country is now poorer than it was before the banking crash and what we need to be focusing on is how we prevent it happening again” (echoing many of the posts on this blog).

Mr Clegg said it would reveal a "new approach" to a financially-stable economy, based on equity not debt, "where we learn as a country to build things again, not just bet on things on computer screens in the City" … from a leader who may well yield significant influence/power in a few weeks time this is good to hear, but he will need to think more carefully about the steps needed to successfully transition from an outdated and flawed economy (Poweromics) to a 21st century value adding economy (Leanomics) … and just like President Obama made clear, we must ensure the banks pay taxpayers every penny back (and make sure investment banks are separated from commercial/high street banking too).

In my humble opinion, Vince Cable appears to be the closest to identifying what a successful 21st century economy needs, having also hosted sessions promoting the introduction of a Land Value Tax (to replace unjust/unfair taxes) for instance. The Liberal Democrats also want to completely overhaul the archaic (19th Century) voting system, so MP’s properly represent (and are held accountable to) the people they are supposed to serve. 

If you’re relying on others to help you – good luck – you’ll need it. Labour are relying on spin and clearly cannot be trusted e.g. this week Brown stood up to tell us there will be no more income tax rises … but he said that last time, and watch out for National Insurance everyone, which is just another name for the same thing (n.b. they’ve given no guarantees on this one and Brown has also raised it before) – why did the press (e.g. the BBC) not ‘press’ him on this…?  As for the Tories, Cameron has said he wants to give people ‘power’ (e.g. by letting parents set up their own schools – more of a gimmick than a practical solution), but at the same time has no desire/interest in changing how MP’s are given power or wield (e.g. profit from) power.  Instead the Tories want to slash public spending, change inheritance tax laws to favour the rich … and would vehemently oppose changing/removing unfair taxes and replacing them with a Land Value Tax (as the Tories represent, and are heavily backed by, all the rich land owners/bankers profiting heavily from land without adding any value at all). 

The election provides an opportunity to allow a little more common sense to filter into our Economic/Political System (e.g. values, fairness, justice) and if this happens our failing economy may actually start to turn around.  If it does not it will simply continue its downward spiral (don’t be fooled by any apparent ‘recovery’ – as the Government simply postponed all the ‘pain’ until after the election) until the situation gets so dire that people finally decide to do something about it – but at this stage it’ll probably be too late to successfully turn things around (NB I do not support any political party and like most people hold the vast majority of MP’s in contempt – however I do care about people’s future, the state of the economy and the level of democracy in the UK).

Let’s see what the next few weeks hold …

Economic Justice: Land Value Tax

The Coalition for Economic Justice recently organized a House of Commons Seminar on Land Value Tax, hosted by Vince Cable MP. The seminar was aimed at parliamentarians and policy makers and saw a packed house. It examined the advantages of land value taxation, how it might be introduced and how transitional problems could be dealt with.

"Sir Sam Brittan (Financial Times) said the case for LVT was clear and simple. But perversely, people find this difficult to grasp; they expect complexity in taxes. Being a tax on unearned value increment, LVT was no disincentive to Labour or Capital. As a temporary expedient, pending the full introduction of LVT, he advocated the auctioning of planning permissions.  

Ashley Seager of The Guardian cited instances where public expenditure had led to massive increases in property (i.e., land) prices. In one case, the building of a school had led to such a big increase in local property prices that teachers in the school could not afford to live in the area. As the land of this country is provided free of charge by nature, “rising property prices do not raise national wealth one single penny”. They serve no useful economic purpose and are an obvious target for taxation. 

Professor Iain McLean (Politics, Oxford University) explained how, as a member of the independent expert group set up by the Calman Commission, he was looking at LVT as a way of financing public services in Scotland and Wales. LVT would replace council tax, business rates and stamp duty. 

David Triggs (Henry George Foundation) in the opening address also highlighted “The challenge that confronts those interested in establishing a just and equitable division of the fruits of production lies essentially in recognising that land values impound that part of the value created which is attributable to factors external to the individual, e.g., the country’s infrastructure, the system of governance, law and order and the density of population. It is manifestly unfair to tax the individual on what he produces while those community-created values are provided tax-free to the benefit of the landowner. These land values, arising essentially from location, should be the primary source of taxation.”  

Fred Harrison (Land Research Trust, and author of 'Boom Bust: House Prices, Banking and the Depression of 2010') reinforced this message. He showed how failure to collect location value led to diminished opportunity and life expectancy at the marginal location. James Black (a sixth-former) said LVT made common sense to the young and the opportunity should not be missed". 

This seminar was the first step in a campaign to interest parliamentarians in the formation of an all party parliamentary group on Land Value Taxation.  However a lot more work will be needed due to counter the huge vested interests of those who currently accumulate great wealth without adding any value, and who will resist the introduction of such a tax using all their influence, power and wealth.