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AlistairMcConnachieonWHERE'STHEMONEYTOCOMEFROM?

WHERE'STHEMONEYTOCOMEFROM?

ByAlistairMcConnachieandfirstpublishedinaSovereigntySpecialReport,freewiththeMarch2002issue.

AlistairMcConnachiepublishedSovereigntyfromJuly1999toits120thconsecutivemonthlyissueinJune
2009,andhecontinuestomaintainthiswebsite.
AlistairMcConnachiealsopublishesProsperityFreedomfromDebtSlaverywhicheducatesaboutthe
natureofourdebtbasedmoneysystemandAForceForGoodwhichadvocatesthemaintenanceoftheUnited
Kingdom.
TofindoutmoregototheaboutwhoisAlistairMcConnachiepage.
YoucanbuytheComplete10Year,120BackIssueSetofSovereigntyworth162.50foronly89inc
p+p,a45%discount.ChequespayabletoSovereignty,at268BathSt,Glasgow,G24JRorgohereandclick
"BuyNow".

Underinvestmentisaprobleminbothruralandurbanareas.We'realwaystold,"There'sno
money"tofundvitalinvestment,grantsandsubsidies.
Whatthisreallymeansisthatthegovernmentdoesnotwanttoborrowanymoremoneyfromthebanking
systembecauseitwouldhavetoraisetaxesinordertopayitback.
Fewpeopleseemtoaskwhyasovereigngovernmenthasto"borrow"moneyinthefirstplace.Andfrom
wheredoesthebankingsystemgetthemoney,anyway?
HOWGOVERNMENTSCREATEMONEYFORNATIONALNEEDS
Everyyearthegovernmentfailstocollectenoughmoneyintaxestopayforallitsspendingrequirements.
Thereforeithastoborrowthemoney.TheamountrequiredisknownasthePublicSectorBorrowing
Requirement(PSBR).
TheNationalDebtisthetotalstilloutstandingonallpastyears'borrowingrequirements.
Thegovernmentborrowsthemoneythisway:Itprintsandsells"giltedgedsecurities",alsoknownasstocks,
bondsandTreasurybills.Thesearesimplypiecesofpaperwhichpromiseanadditionalreturntothebuyer,
sometimeinthefuture.Thesecuritiesareauctionedseveraltimesayeartomeettheshortageofgovernment
revenueasitarises.Theyareboughtbyindividuals,insurancecompanies,pensionfunds,trustfunds,and
banks.Thegovernmenttakesthemoneyithasraisedbythesesales,andspendsitonitspublicprojects.
Whenthenonbankingsector(individuals,insurance,pensionandtrustfunds)buygovernmentsecurities,
thensavedmoneyisbeingrecycledbackintotheeconomythroughgovernmentspending.
However,whenbanksbuygovernmentsecurities,thenentirelynewmoneywhichhasbeencreatedoutof
nothingbythebanksspecificallyforthesepurchasesisspentintotheeconomybythegovernment.
Thesesecuritiesarebecomingdue,or"maturing"regularly.Servicingthesesecuritiesisknownas"paying
theinterestontheNationalDebt."Thegovernmenthastofindthemoneytorepaytheminfull.
Ofcourse,thegovernmentdoesnothavethemoneytorepaythemthatiswhyithadtosellsecurities
inthefirstplace.Therefore,howdoesitrepaythem?Answer:Itraisesthemoneytorepaytheprevious
securitiesbysellingevenmoresecuritiesandbyputtinguptaxesevenfurther!
Thatistosay:Thegovernmentisraisingmoneyitdoesn'thave,byprintingbitsofpaperandsellingthemto
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AlistairMcConnachieonWHERE'STHEMONEYTOCOMEFROM?

banks,whichbuythemwithmoneytheydon'thaveeither,butwhichtheycreateoutofnothing!The
governmentthenexpectsus,throughourtaxes,topaybackthebankswiththerealmoneythatwe'veworked
for!
Theobviousquestionarises:Whydoesn'tthegovernmentsimplyjustcreatethemoneyinthefirstplace?
Whydoesthegovernmentindebtthepopulationtothebankingsystem?
Whydoesn'tthegovernmentviaaStateinstitutionjustprinta1000note,insteadofa1000security?
Thatway,insteadofborrowingthemoneyfromthebankingsystem,andforcingustopayitbackin
ourtaxes,itcouldsimplycreatethemoneyitself,spenditintosocietyandnotneedtoaskforitback.
IT'STHEPEOPLE'SMONEY
Clearly,ifthegovernmentcanissueasecurityforanyamount,thenitcanissuethesameamountofmoney
directly,withoutrecoursetoanybanks.InventorThomasEdisonputitthisway:"Ifournationcanissuea
dollarbond,itcanissueadollarbill.Theelementthatmakesthebondgoodmakesthebillgood.
"...Itisabsurdtosaythatourcountrycanissue$30,000,000inbondsandnot$30,000,000in
currency.Botharepromisestopaybutonepromisefattenstheusurer,andtheotherhelpsthe
people."(TheNewYorkTimes,December6,1921.Articletitled"FordSeesWealthInMuscleShoals")
THEPROSPERITYPROPOSAL
Wemustestablishtheprinciplethatthegovernmentcancreatedebtfreemoney,withoutborrowing
fromthebanks,andwithoutindebtingthetaxpayers.
Abasicpolicytohelpachieveouraimsistoensureaproportionofthemoneysupplyiscreateddebt
freebythegovernment,andspent,notlent,intotheeconomy.
Bytakingthecreationof,atleast,somemoneyoutofthehandsofthebankingsystem,itwillgosomeway
toestablishingtheprinciplethatIt'sthePeople'sMoney,nottheBanker'sMoney.
Somepeoplewonder:"Surely,thiswillbeinflationary?"
Inflationiscausedbydebtswhich,whenassumedbyindividuals,leadtodepressedincomesanddemandsfor
higherwages,andwhenassumedbycompanies,leadtopriceincreases.Ourproposalwouldnotresultinany
suchinflationarytendencies.
Forexample,saythePublicSectorBorrowingRequirementrequired10billiontopaytheEducation
budget.Thismoneywaspreviouslytoberaisedbyborrowingevenmore,atinterest.
Thisdebtwouldhaveworkeditswaythroughtheeconomyandcausedinflationarypressuresforexample,
thetaxincreasesnecessarytorepaythedebtwouldleadtodemandforhigherwages,whichwouldleadto
higherprices,andsoon.
This10billionhastobecreatedanyway,anditispresentlydonebymethodsproventobeinflationary.
Ourmethodofcreatingthismoneywillbenomoreinflationarythanthepresentmethodoffunding,
andindeed,itwillbelessinflationarybecausetherewillbenodebtandinterestobligations,workingtheir
waythroughtheeconomyandcausingtherepaymentdemandswhichpushinflation.Debtfreemoneycauses
noinflationarypush.
Inflationcouldresultiftoomuchdebtfreemoneycameintosocietytoofast,leadingtoeverythinglosing
its"paper"value.
However,wearepresumingamonetaryauthoritywouldbeestablishedtoensuredebtfreemoneywas
createdinameasuredmanner.

FurtherreadingonthissubjectcanbefoundattheProsperityjournalwebsite
http://www.sovereignty.org.uk/features/articles/root4.html

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AlistairMcConnachieonWHERE'STHEMONEYTOCOMEFROM?

A12issuesubscriptiontothe4pagemonthlypublicationProsperity:FreedomfromDebtSlavery
is15payabletoProsperity...at268BathStreet,GlasgowG24JR
SeealsobooksbyMichaelRowbotham:
TheGripofDeath:Astudyofmodernmoney,debtslaveryanddestructiveeconomics(JonCarpenter,1998)
GoodbyeAmerica!Globalisation,debtandthedollarempire(JonCarpenter,2000)

OtherarticlesfromtheSpecialReportonlocalisingagricultureare
here,hereandhere.

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