view from a bridge

Road map to Freedom

There are a few things we need to clear up first.
1. There is not a finite amount of money. It can, and is, invented all the time. It’s simply a promise to pay made out by the central bank. National debt is therefore largely irrelevant.
2. A countries finances are not like a households. Don’t be fooled by the rhetoric. Example, if a home owner wants to replace the windows for more insulating ones, they must first earn the money, then pay a company to come out and do the work. Money comes in and then out of the house. But if a country wants to invest more into the National Health Service, the money will go to doctors and nurses, equipment supplies, catering etc. That money stays within the country and circulates. However money paid to pharmaceutical companies abroad, will leave the country.
3. The important thing is how much money is in circulation. If there is too much, then it’s value decreases and you get inflation. If allowed to run away – hyperinflation, it can literally be a killer. If there is too little money in circulation, such as during a recession or depression, with money disappearing with dropping stock valuations or people losing their jobs and incomes, it increases in value and you get deflation. Traditionally governments have aimed to maintain a level of inflation at around 2% as this helps pay off national debt.

The current economic model states that we need a strong currency, moderate growth with good GDP (Gross Domestic Product) and low inflation. Inflation being controlled by interest rates set by the Central Bank or government. This model has led to an exponential consumption of resources, which unlike money, are mostly finite. Consequently, this model ceases to work when it hits planetary boundaries, which is already happening. Essentially, we need to turn our economic model on its head. We need to aim for a weak currency, a contracting economy with reducing GDP to incur deflation thereby balancing the inflation.

How do we do this?
Here is a thought experiment.
First, we need to take all national debt in house. The central bank has to buy up most of the debt held privately in Gilts and Bonds but not the debts held by offshore funds.
The central bank then either writes it all off or reissues it at terms of zero interest and no requirement to repay. Basically it writes a blank cheque to the government. The bank can do this, because it’s simply numbers. It doesn’t actually exit in real terms. Call it quantitative easing, debt monetization or printing money, it’s the same thing.
This substantially weakens the currency internationally because of the loss in confidence and value of the offshore funds.
Why would the bank agree to this? Because the government tells it to. It’s a question of sovereignty, if the government is truly sovereign, then it can do whatever it wants.
The government then spends however much it needs to provide everyone with a Universal Basic Income.
These measures would usually increase inflation if we were in a ‘normal’ situation, but after the Coronavirus lockdown, we are already into recession and probably sliding into depression which would normally push us into deflation. Hopefully, they will cancel each other out.

So what does our country look like in six months, a year or even ten years time?
A meaningless national debt of quizillions, or none at all – it is after all, meaningless.
No need for a benefit system as everyone is getting enough to live on.
Imports are more expensive because of our weak currency.
Exports are reasonable because of the same.
Wages will probably increase to motivate people who will be quite happy to sit back on their UBI. This pushes up prices but as less people will be working, GDP falls and the economy shrinks, reigning in inflationary pressures. Admittedly, it’s a tight balancing act but it could be maintained by adjusting the UBI.
People may feel poorer financially, but hopefully, richer emotionally. Only those who want to work and earn more, will have to. Foreign holidays and consumer goods will be expensive, but a dramatic reduction in consumption is already a necessity to maintain a habitable planet and this way, we ease our journey in a world transforming faster than we could have imagined. Realistically, the only two choices we have is a managed descent or societal collapse.
I’ll leave you with two big questions, will this work and what are the alternatives?