of the 2002 International Conference on a Stable and Just
Global Monetary System
Islamic University Malaysia (2002)
Steps To Justice
Charman House, Hemans Estate, London, SW8 4SP, United Kingdom.
(UK) 020 7771 1107.
21, Bousfield Road, London, SE14 5TP, United Kingdom.
(UK) 020 7207 0509.
With currencies no longer backed by gold, there
is a need for a monetary system which:
focuses on the real, productive, economy
enables societies and nations to control their own
ends usury (interest).
present, most new money (in the West, 97%; plus 3% coins and
notes) is fiat electronic money created by the banking
system and issued as interest-bearing loans.
Such money has an essentially fraudulent origin, tends
to be inflationary, and can double or treble the cost of capital
rather than the banking system issuing interest-bearing loans,
a State’s central bank could issue interest-free loans
if the loans are used for public capital investment
or, (on the market principles of binary economics),
used for private capital investment which creates new owners
of capital. These
uses would back the currency with assets, break the grip of
usury, and be patently non-inflationary.
Islam and Christianity will welcome the benefits including:
basic incomes for all
ownership for all
for small business
even though they may differ on the implications for democracy
and women, they should work together in the areas where they
Interest-free loans, justice, binary economics, basic
is an urgent need for a new stable, just, global monetary
and rich-poor divisions
focuses on the
real, productive, economy
protects the environment
and other societies to control their own destiny
ends usury (interest).
a system will appeal to all religions and although Islam and
Christianity, for example, may differ on the implications
for democracy and women, people of good faith should co-operate
in the areas where they agree.
it is to be widely adopted, the new system will need to be
embodied in a new paradigm, or way of understanding reality.
That is because, at present, the conventional paradigm
of neoclassical ‘free market’ finance capitalism dominates.
Indeed, unless there is a powerful challenge from a
new paradigm, the existing neoclassical paradigm, deeply embedded
in institutions and modes of thinking, will inevitably prevail.
challenging the neoclassical paradigm it should be first understood
that the ‘free market’ is not free.
It is unfree, inefficient and unfair – unfree
because most people are in practice excluded from the acquisition
of productive capital; inefficient
because ample supply fails to generate adequate demand; and
millions of people do not receive proper reward (and often
no reward at all) as well as being excluded from the chance
to have a second income arising from capital ownership.
unfree market, moreover, is fundamentally based on ever-escalating
and unsustainable debt.
the issuance of virtually all new money is in the hands of
a banking system which both creates the money supply and
adds a requirement for interest.
Consequently, right the way round the world, individuals,
corporations, governments and societies are up to their eyebrows
the unfree market is to be successfully challenged, the new
paradigm must comprehend three key matters:
a new justice
a new monetary system
a new understanding of how wealth is created.
other things, those matters are set out in this paper.
A new justice
is a set of universal principles defining right and wrong.
Its ultimate purpose is to elevate, under God, the
dignity and sovereignty of humans.
is concerned with the structures of society.
It is not charity.
Although charity is within justice, charity offers
only expedients and not long-term solutions.
Charity can never be a substitute for justice.
main aspects of justice are social justice and economic justice
together with ecological justice.
guides us in the creation of social institutions.
Such institutions, if justly organized, provide what
is good for people, both individually and in their associations
justice commands us to work with others to perfect our institutions
as tools for personal
and social development.
Also embodied in ecological justice, social justice
requires us to maintain the environment because, without that
maintenance, all else becomes nought.
involves individuals and the social order.
Like social justice, it is sensitive to ecological
justice which is the root of the sustainability upon which
the future of civilised life depends.
justice gives moral principles to be embodied in economic
institutions determine how each person earns a living, enters
into contracts, exchanges goods and services with others,
and otherwise produces an independent material foundation
for his or her economic sustenance.
The ultimate purpose of economic justice is to free
each person to engage creatively in the unlimited work beyond
economics – that of the mind and the spirit.
justice has three principles:
is an equal opportunity to participate in the economic process
in order to make a living.
Such opportunity cannot be equal unless there is access
to private property in productive assets as well as opportunity
to engage in labor.
principle does not guarantee equal results, but requires that
every person be guaranteed by society's institutions the equal
right to make a productive contribution to the economy both
through labor (as a worker) and through productive capital
(as an owner).
principle of distribution says that individuals should receive
from an economic system what they have productively put into
it (via their labor or capital ownership).
It involves the sanctity of property and contracts
in a truly free and open marketplace.
Through the distributional features of private property
within a free and open marketplace, distributive justice becomes
automatically linked to participative justice, and incomes
become linked to productive contributions.
The principle of distributive justice is inextricably
involved with the principle of participation and breaks down
when all persons are not given equal opportunity to acquire
and enjoy the fruits of income-producing property.
principle of harmony detects failure in implementing the principles
of participation and distribution, and makes the corrections
needed to restore a just and balanced economic order for all.
The principle is violated by unjust barriers to participation,
by monopolies or by the use of property to harm or exploit
others. It opposes
greed because greed leads to the exclusion and exploitation
principle is also violated by environmental depredation since
such depredation ultimately harms all.
A new monetary system
the heart of the present monetary system lies something which
is essentially a fraud.
It is fraudulent because there is a general obfuscation
amounting to a deception; those who do the obfuscation obtain
a benefit; and those who are deceived suffer a detriment.
fraud happens because nowadays, whereas coins and notes (issued
by the government) are about 3% of the new money supply, the
remaining 97% is number money – figures on paper, or
the figures of an account held in a computer.
Number money has various names – credit, credit money,
bank money, debt money, cheque money or electronic money.
As mere figures, number money has no intrinsic value
although it represents money and, to all intents and purposes,
although it is not legal tender, it is money because it can
be exchanged for banknotes and coins.
The question then arises – If number money is not gold
or some such, where does it come from?
Where does number money come from?
the bank, would seem the obvious answer: the bank is lending
the money that other people have deposited in their bank accounts.
Except that it cannot be true that a bank always lends
other people’s deposits because those deposits are always
available to the depositors – and, if they were not, there
would be a dickens of a row.
the truth is generally that, when a borrower asks for money
from a bank, the bank just creates the money – by pressing
a computer button – and then enters the amount into the borrower’s
account, at the same time adding a demand for interest.
This is credit money,
one of the several names for number money which is an abstract
entity with no physical existence, created in parallel with
Multiplication of money
the creation of money out of nothing does not stop with the
creation of money for one person’s bank account.
When the money is removed from the account, it is spent
and eventually returns to the banking system by being deposited
in other people’s accounts.
At which point it is treated as a new deposit, a proportion
of which can be directly lent.
Even more extraordinary when the lent (newly created)
money is returned to the bank whence it came, the debt is
cancelled but the money is not.
new deposits, moreover, are generally treated as a base of
money from which many times more money can be created and
lent – thus eventually resulting in more new deposits in the
banking system allowing the process to be repeated.
So a bank starts with deposits that it lends but those
deposits circulate round the banking system and are re-deposited
by others. The
deposits are then lent again, deposited again and are
used as a base for the creation of more money.
Thus an original sum of money has been multiplied,
as if by magic, to many times (thirty or more) the original
sum. The trick,
of course, is that the system treats the deposited money as
genuine new deposits available themselves for further lending
or for being used as the base for the creation of new money.
a letter to the authors of this paper, referring to money
creation, the Governor of the Bank of England said: “The process
cannot continue indefinitely, however, because each bank has
to hold a minimum of capital against deposits in order to
meet potential net withdrawals.”
that the Governor did not say that the actual minimum is,
in practice, ineffective as a restraint and that, whether
or not net withdrawals are made, the multiplication still
goes on. Thus,
as JK Galbraith has said, money is created, by “a method so
simple the mind is repelled”.
It is, moreover, one that is almost breathtaking in
Governor was then careful to add that the banking system cannot
go on creating money limitlessly because the level of interest
rates (set by the Bank of England) influences the rate of
level does influence the rate but that cannot hide the
that the banking system creates money out of
and then, by imposing interest, claims ownership of the
money as well.
is more, governments raise money (apart from taxation) by
borrowing from the banking system which, of course, creates
the money to be lent.
It is therefore not surprising that the banking system
creates 97% of the new money supply.
The effect of interest is compounded
created the money, the bank adds interest.
Interest is usually shown as an annual percentage rate
e.g. 10% per annum.
Part of that rate can be explained as a charge for
administration costs: part, in theory, as a charge to pay
for losses the bank sustains.
is well known, the imposition of interest quickly results
in ever-larger sums being repayable.
Interest is usually compound interest.
This means that if $100 is borrowed at 10% interest,
then $100 plus $10 interest = $110 is repayable at the end
of the year. If,
however, at the end of the year, nothing has been repaid,
the interest becomes 10% on $110 i.e., $11.
The effects on a house mortgage are considerable –
typically, a borrower will eventually pay at least two to
three times the amount that was originally borrowed.
Moreover, the house itself is the collateral for the
loan and, in the event of non-payment, can be sold to cover
the loss. Since
the administrative cost of house mortgages in no way amounts
to anywhere near the sums originally borrowed, a very large
sum of money is returning to the financial system over and
above the necessary costs of the system.
the addition of interest to the original sum borrowed has
several consequences, two being:–
money is lent into existence, but the money to pay the interest
is not, more money is owed than is in the system.
Interest is paid even when we do not borrow
we pay interest all the time, even when not borrowing
price we pay contains an element, often a very large one,
examples taken from Aachen, Germany, interest on capital is
12% of the cost of rubbish collection; 38% of the cost of
drinking water; 47% of the cost of sewage; and up to 77% of
the cost of public housing.
Remembering also that the prices a manufacturer pays
to his suppliers include the suppliers’ borrowing costs
(and so on with the suppliers’ suppliers) it has been estimated
that such costs (principal and interest) amount on average
to an amazing 50% of the price of goods and services.
payment of that interest does not affect everyone equally.
are huge differences between what people pay.
In Germany, 80% of the population pay out more than
they receive: 10% receive twice as much as they pay.
This is one big reason why, in a hidden redistribution
system, the rich get richer and the poor get poorer.
is also a big factor in causing inflation.
money is borrowed, interest is added so the repayment is more
than the original sum.
So more and more has to be borrowed thereby inflating
the money supply – which explains why 97% of our new money
supply is debt-based i.e. borrowed from the banking system,
and repayable with interest.
Why should a government have to pay interest?
present position is that 3% of the new money supply is created
interest-free by the government as coins and banknotes with
the remaining 97% being created by the banking system but
with interest added.
This is an extraordinary situation because governments
have an inherent power to create money without interest yet
they have been bamboozled into giving the power away to a
banking system that always adds interest!
All of which leads to the very important question –
Why does a government, when it borrows from the banking
system, have to pay interest?
An administration charge, yes, but why interest?
If money is borrowed to pay for public capital spending
such as low-rent public housing, it might be repaid over fifty
or sixty years. However,
even if borrowed at the prime rate of interest (i.e. the lowest
rates of interest), because of the imposition of interest,
three to four times the original borrowing would eventually
be paid back. That
is a colossal charge on the public purse. Nobody
denies the right of the banking system to cover its administrative
expenses and have a reasonable profit.
A $100,000,000 governmental housing project, however,
would pay back $300,000,000 or $400,000,000 when the risk
is virtually nil (governments can raise taxes to pay off their
debt) and the administrative cost is tiny.
why does a government
have to pay interest?
Indeed, moving up to a larger scale of things, right
around the world governments borrow huge sums from the private
banking system and have to repay billions, yes, billions and
billions in various currencies.
only possible answer is that the
banking system owns the money it has created and interest
is the charge it chooses to make.
Whereon the truth is exposed – governments
have allowed the most fundamental thing of all – the money
supply – to be owned by a 97% banking system monopoly.
Essentially, in past times, kings and governments in
need of money (in the form of metallic coin) borrowed from
bankers who charged interest.
Today, when money is not metal but is created merely
by the push of a computer button, the banking system has ended
up with a virtual monopoly power to create money and
to add interest. A
power inherent to government on behalf of all – the power
to decide on money matters – now lies with the banking system
over which the government only has some influence (by deciding
A lying structure
then, is yet another aspect of the obfuscation – a banking
system monopoly of something at the centre of society (the
money supply) is not a fact that is likely to be shouted from
the rooftops. Indeed,
it could be expected that every effort would be made to sideline
enquiry, block questions and generally ensure that the truth
now that the truth is out, the situation is as in the children’s
story of The Emperor Who Had No Clothes
– an untrue situation can be supported or believed
or certainly by all the powerful, until some innocent waif
points to the obvious and undeniable, thereby, to the relief
of most, collapsing a lying structure.
the acknowledgement of the truth, moreover, the outlines of
new policy soon become apparent.
The new monetary system
basis of the new monetary system can now be seen:
a government has an inherent, existing, power to issue its
own money, it can increase the amount of new money that it
money can be interest-free.
a supporter of the Western banking system can be expected
to jump up and shout, “What about inflation?
You are proposing the printing of money as in Germany
Inflation and counter-inflation
response is simple – there can be no inflation if the money
is made repayable (and so cancellable) and is used
to create productive assets.
Put shortly, if the money is issued in the form of
an interest-free loan for a productive asset and the loan
is repaid, the money no longer circulates.
Indeed, since productive assets are, by definition,
productive and the money has been repaid (and can then be
cancelled), nothing is left except the productive asset.
Consequently, something extra has been gained and the
money which created it has been withdrawn.
In general terms, such a situation can only be counter-inflationary.
more importantly the cost of the asset will, in general terms,
be one half or even one third of what it would otherwise have
been simply because no element of interest is involved.
Interest-free loans for public capital assets
states have an inherent power to create money.
Equally, they all seem to have been bamboozled into
believing that, when in need of money, they should let the
banking system do the creation and pay it interest.
Not surprisingly, power is rapidly ebbing from states
and national governments and is going to unseen financiers
in the world’s financial centres.
the way is wide open for any state to create money for its
own spending at no
the money is repayable, and is so repaid and cancelled, there
cannot possibly be any inflationary effect.
There would, in particular, be no inflationary effect
if the interest-free loan were to be spent on public capital
of the loan, of course, would come from taxes, but taxes much
lower than they would otherwise have been.
which point the supporter of the Western banking system may
be expected to jump up (again!) shouting that state-issued
interest-free loans will reduce the resources available for
the private sector.
As everybody knows, he will add, the private sector
is a much more efficient allocator of resources than the public
supporter, however, is completely missing the point which
is that there is always a large amount of public capital spending
– things like low cost public housing, roads, fire stations,
bridges, sewage systems and water works.
When that spending is made it should be done at the
lowest possible cost i.e., without interest.
This in no way crowds out the private sector.
It only means that when public capital spending is
done, it is done cheaply, instead of expensively.
Thus if the state issues $1,000,000 as an interest-free
loan for public capital spending, only $1,000,000 needs to
be repaid instead of perhaps $3,000,000 as at present (because
of the interest which attaches to the loan).
Taxpayers will give a sigh of relief.
Islamic view of the non-inflationary creation of money
would, Islam, for example, view the non-inflationary creation
of money? The
authors of this paper have no expertise in Islamic matters
but they have been informed that while
there is the concept of an Islamic treasury (bete el mar),
a publicly accountable body, it is not clear whether this
body would have the power to create money.
the authors have also been informed that:
some Islamic thinkers take the view that banks should
not lend unless they have an equivalent of 100% of their own
money held in reserve.
some Islamic thinkers wish that Islam should return
to a monetary system based solely on gold and silver.
respect of both a) and b) the Seven Steps proposal
agrees that money should be directly related to assets and
not cause inflation.
it also argues that there must an addressing of poverty and
rich-poor divisions to fulfil the Conference aim of a just
and stable global system.
the authors have taken the informal advice of an eminent Islamic
academic who thought that Islam could well allow the state
to create interest-free loans if
they are lent for patently beneficial,
productive and non-inflationary purpose.
eminent Islamic academic also pointed out that, in Islam,
there were key requirements to keep in view including the
Resources to be mobilized into socially acceptable
Appropriate spending and participatory economic
and financial instruments to be used
An extensively relational overview relating
to participatory purpose to be kept in mind.
requirements might well be expressed in, for example, Community
and the like.
Community Investment Corporations
would be ideal financing vehicles for local infrastructure
capital assets. While
their main finance would be state-created interest-free loans,
they would also give ownership and control to the local community.
Indeed, it would also be possible to have citizen-owned
owning the assets. In
these ways it is possible to encourage to the maximum the
initiatives and empowerment of citizens.
A new understanding of how
wealth is created
proposal for the state to create and use interest-free loans
for public capital investment in an inflation-free way is
only too likely to seem impossible, or at least highly undesirable,
to a conventional Western mind.
Yet many thinkers and monetary reformers now understand
that interest-free loans for public capital investment are
possible, and not just possible, but that they also relate
to a much wider change of paradigm.
it is understood that the state can issue interest-free loans
for public capital investment, it becomes easily comprehensible
that the same basic mechanism – interest-free loans – can
also be used for private capital investment.
In both cases, public and private, repayable money
without interest is used to create productive capital.
This is patently sensible for public capital investment
and is even more sensible for private capital investment done
on market terms, because such investment, by definition, pays
for itself. In
practice, such private capital investment is not just non-inflationary
Yet – it might be asked – why should private capital
investment have the benefit of interest-free money?
That’s allowing the rich to get richer.
indeed, but it would be a completely different matter if,
on the principles of binary economics,
the interest-free loans were used to ensure that all
individuals, over time, on market principles, should come
to have a substantial independent income from their ownership
of capital. If
all really did mean all – carers, retired, sick,
unemployed, women, children and men – then poverty would be
the rich-poor gap would be properly addressed and, most importantly,
the economic base that empowers individuals and deepens
democracy would have been established.
The binary reality check
is new in binary economics but perhaps the most important
thing is its view of who or what actually creates the wealth.
This is the binary reality check which starts by observing
that the prevailing obsolete neoclassical paradigm can never
answer a very important question -
Why is it that, when
sufficient productive capacity undoubtedly exists, billions
of people throughout the world (and even whole strata within
the developed economies) still remain in poverty?
The various conventional answers are always unsatisfactory
not least because they never explain why the world is full
of people who labor long and arduously but who still have
every day, we are taught that we must work to earn our living.
The mantra is always jobs, jobs, jobs and understandably
so because, in practice, jobs are at present the only way
by which most people can earn a living.
However, the mantra ignores the facts that a lot of
people cannot labor and that jobs are not always available.
Moreover, many jobs do not pay enough for a reasonable
standard of living and, in many parts of the world, pay only
a pittance; and, everywhere, jobs are insecure.
The mantra ignores these facts because society (and
conventional neoclassical economics) says that jobs create
suppose it were true that it is not labor but rather productive
capital that really does most of the work and creates most
of the wealth. Then,
indeed, there would be a new situation in which all individuals
would have to have at least some ownership of
capital if they were to be genuinely economically productive.
said, most people probably still have some difficulty in re-thinking
who or what creates the wealth.
Nevertheless, they could start to consider why the
rich are rich and might then notice that the rich tend to
own a very large amount of productive capital that produces
a lot of valuable income.
They might also notice that in large parts of the world,
millions of people labor ceaselessly every day yet they are,
and always will be, in poverty because they own little
or no capital.
space does not permit the detailed binary analysis of who
or what really does create the wealth although some idea can
be gleaned by a consideration of the productive power of a
machine, hydroelectric power station or technological process.
Suffice it to say that binary economics clearly establishes
the significance of the productive contribution of capital
to wealth creation and so it becomes a matter of the highest
importance that everyone should have some ownership
of productive capital.
(In contrast, conventional economics, concerned with
keeping capital narrowly owned, says that it does not matter
who owns the capital).
everybody owns capital, moreover, a balanced growth becomes
economics states that the more broadly productive capital
is acquired over time on market principles, and its income
fully distributed to its new owners, the larger the economy
will grow. Binary
economics gives a capital acquisition right, to every individual.
Operating on market principles, this right enables
any individual to acquire efficient, income-generating capital
assets. The assets
pay for themselves out of their earnings.
neoclassical and binary views are in further opposition when
jobs are considered.
The conventional paradigm alleges that jobs and welfare
are enough for most people.
In contrast, the binary view, particularly in the face
of technical advance, is that jobs and welfare can never be
enough (not least because, even with jobs, many people remain
in poverty). Indeed,
economists insist that there can be never be proper market
efficiency, or substantial growth, or any hope of social and
economic justice, without the ownership of productive capital
extending widely throughout the population.
‘Binary’ means ‘composed of two’
at present, most people do not
own substantial amounts of productive capital.
People (unless they are slaves) own their own labor
but they certainly do not
own the other big factor in production – capital.
‘Binary’ means ‘composed of two’ and there are two
factors in production – capital and labor.
there are only two ways of genuinely earning – either
through owning capital and/or
though owning your own labor.
The main object of binary economics is to ensure that
all individuals have access to both ways of earning.
The result is the founding, on market principles, of
a private property system which diffuses, rather than concentrates,
capital ownership so that 100% of the population come to be
4.4 Benefits of binary economics
the beneficial consequences of that ownership are:–
A basic income for all.
The balancing of supply and demand.
A change in attitudes towards consumption.
A green growth.
obvious benefits include the provision of old age pensions;
a huge reduction in the need for welfare benefit; an income
for children, sufficient to pay for their basic needs; and
the ability to stop people getting their income in ways harmful
to the environment by giving them another means of being productive.
Basic mechanism of binary economics
briefly, the binary mechanisms work in exactly the same way
as happens at present, using existing institutions and practices
with a little modification.
Each year in the USA new capital investment is made
– somewhere around $7,500 per woman, man and child per year.
That is a huge amount and it remains huge even when
depreciation is taken into account.
Yet, each year, it stays narrowly owned, and will always
stay narrowly owned, because ‘free market’ practices are unfree
and ensure that narrow ownership.
economics, however, uses principles now well established in
USA ESOP (Employee Share Ownership Plan) legislation, but
extends the principles to cover 100 % of the population.
credit privileges and special tax advantages that the U.S.
government has given to workers who adopt ESOPs, allow workers
without savings to purchase shares on credit wholly secured
by the future profits of the company.
Because employees are directly linked to productivity
increases and profits through their ownership rights, studies
indicate that firms financed through ESOPs, when combined
with participatory management and gain sharing, generally
perform better than their competitors.
about the ESOP helps towards understanding how binary economics
enables everyone, over time, to come to individual ownership
of productive capital.
a big corporation or company wishes to expand.
It could go to a local bank for the money which would
be lent at interest.
Yet the corporation could also decide to ask a Constituent
Trust (similar to an ESOP) to put up the money – the Trust
would offer to give the money to the corporation and, in exchange,
the corporation would issue new shares to the Trust which
would then hold the shares in the name of its constituent
for employees or for
anyone, the trustees then makes a proposal to a local
bank which independently evaluates the soundness of the proposed
which point binary economics proposes that cheap money should
be available. The
state’s central bank (e.g., the US Federal Reserve) would
issue the money at a 0% rate of interest, and give it to the
local bank which would then lend it to the Trust.
So this would be interest-free loan money for market-driven
productive investment as
long as the investment makes capital owners of previously
the next five to seven years, on average, the Trust will receive
dividend income from the stock held in trust for the client.
This income is credited towards the cost of the stock
bought in the client’s name and is repaid to the local bank
which provided the original loan.
The local bank, upon receiving repayment from the Trust,
in turn repays the Federal Reserve.
The Federal Reserve can, of course, then cancel the
money or recycle it into further industrial expansion.
each share of stock is paid for in full, it is released from
the Trust and ownership accrues to the clients who thereafter
will receive the cash income from their investment in the
form of dividends or capital appreciation.
specific result of all this is that the clients become the
independent owners of a capital estate providing income.
The overall result is, among other things, an increase
in productive and consuming capacity but no corresponding
increase in the money supply, so there is no inflation; rather
A new word is needed – perhaps ‘doeflation’.
justice are forwarded.
In binary economics, the
efficiency creates the justice and the justice creates the
in contrast, neoclassical economics thinks that nothing much
better than the present can be reasonably expected and that
those who have little or no labor income (or no security of
income) are only getting what they deserve.
binary economics ensures that all
individuals can become, and remain, economically productive
(whereas conventional economics only conceives of people being
productive when they are in paying jobs).
Thus binary economics serves everybody, and not just
a few, with remarkable benefits.
Without inflation or recession, the binary economy
offers to release the full potential of technology to the
immense advantage of humankind and the environment.
It offers to lower and eventually remove the need for
redistribution, consumer debt, and deficit spending.
It offers to tame, if not eliminate, the destructive
economic cycles that have blighted history.
It will establish economic justice and, eventually,
eliminate material poverty.
a binary economy, moreover, freed from the constraints and
pains of poverty, people will have happier, more balanced
and independent lives.
They will have a greater freedom to be creative.
There will be an overall increase in our physical capacity
to do God’s work.
4.6 Small business
basic principle of interest-free loans for productive capital
investment (if new capital owners are created) can
be used for small business but possibly without the requirement
for new owners to be created.
There would still be a requirement for collateral as
security against the possible loss of the loan and it might
be desirable for eligibility for the loans to be confined
to socially beneficial businesses.
That said, the
key point is that interest-free loans could be used for small
businesses in exactly the same circumstances as today except
that the small businesses would not be suffocated by interest
A second basic income
has been seen binary economics and its provision for all of
a basic income stemming from capital ownership is counter-inflationary
– greater output and consumption, particularly for the
previously poor, but in the context of generally lowered prices.
Yet it is a generally agreed aim that the general level
of prices should be stable.
a remarkable possibility arises – of a second basic
the context is counter-inflation, prices could be raised to
a stable level by the issuance of debt-free (non-repayable)
money on the lines of the proposal made by Joseph Huber and
Such issuance would not be directly related
to productive capacity but, such is the counter-inflationary
power of binary economics, the issuance becomes acceptable
as the price of achieving a stable level of prices.
Summary of the Seven Steps
Seven Steps are set out in the book by Rodney Shakespeare
and Peter Challen.
With brief accompanying comment, they are that:
there be open, regular and public acknowledgement by state,
economists and academia that the present banking system is
an unjust monopoly that creates 97% of the money supply as
present widespread debate on monetary reform is not possible
because the subject is maginalized, even suppressed.
Therefore obtaining acknowledgement
that the present banking system is an unjust monopoly is not
something that can wait.
Rather progressive individuals and groups should agree
to put the issue to the front of their discussion and altercations
with government, academia and economists.
Once there is a widespread understanding of the main
features of the banking system, the other Steps will surely
interest-free loans (i.e. state-issued repayable loans created
free of charge beyond administrative and other necessary cost)
be used, via community investment corporations and the like,
for capital investment needed by the public sector thus enabling
such investment to be for one half, even one third, of the
disadvantage comes from introducing this Step.
It does not increase the amount of public capital spending
and is counter-inflationary.
Its great benefit is that public capital works can
be done for one half or even one third of the present cost.
Any society not introducing this Step suffers a detriment.
interest-free loans (i.e. state-issued repayable loans created
free of charge beyond administrative and other necessary cost
including loan insurance) be used, on the principles of binary
economics, for private capital investment which will create
ownership stakes and property incomes for all income groups,
especially the poor.
underlying mechanism of binary economics is to permit the
use of interest-free loans for private capital investment
if new owners of
capital are created thereby.
Binary capital requires the full payout of earnings
which could be eight or nine times what is paid out at present.
interest-free loans (i.e. state-issued repayable loans created
free of charge beyond administrative and other necessary cost
including loan insurance) be used for loans to start-up and
small socially beneficial business.
of small businesses being burdened by interest so that their
backs break, this Step gives them a better chance to survive.
Since they are the seed corn of any economy, it is
important they do so.
since the Steps above, while enhancing productive capacity
and individual productiveness, are counter-inflationary and
ultimately diminish the money supply, debt-free money (state-issued,
non-repayable money) should be issued for another individual
basic income to the extent necessary to keep a stable level
of prices. The
amount should be decided by a body free from operational control
is being manufactured on a huge scale at present by the banking
system (which, of course, then adds interest to it). So
there is nothing new in the manufacture of money.
Debt-free money, therefore, could be introduced by
itself if balanced by compensating measures in the rest of
the economy. That
said, the Seven Steps proposal sees the case for debt-free
money as being much stronger when it is allied with interest-free
loans for capital investment purposes.
women be addressed as to the role they can play in providing
two basic incomes for all individuals throughout the world.
should be pointed out to women that they can play a big role
in implementing two basic incomes for all individuals.
Such incomes cannot be a detriment to them nor, for
that matter, to anybody else.
moves be made to establish The
Abraham Society and The
Step uses the previous Steps to find a new solution for the
problems of the Middle East and Kashmir.
A solution is urgent and would be about as clear a
gain to the human race as anything could be.
What the Seven Steps will create
of the Seven Steps will create:-
involved in practices destructive of the environment can be
given another way to earn
the economic efficiency allows for the introduction of more
costly, but greener, processes.
economic status of women and a proper power balance between
solution to poverty through a guaranteed two income security
foundation for the ending of National and Third World debt
and the stimulation of economies and societies no longer
in hock to outsiders.
democracy because all individuals will have much greater
control over their daily lives.
economic foundation for the voluntary control of population
of a solution for two of the worst danger spots in the world
– the Middle East and
existence everywhere of a practical basis for a new honesty,
optimism and generosity of spirit.
The method was neatly summarized by Graham Towers,
former Governor of the Central Bank of Canada who in 1939
said that, “Each and every time a bank makes a loan, new
bank credit is created – new deposits – brand new money”.
The true, full dividend earnings of shares, in
a binary economy, could be as much as five, possibly eight
or nine, times what is paid out at present.
In order to protect the bank and the Trust against
possible losses from business failure and default by the
corporation, the Trust pays a premium to buy insurance
from a commercial capital credit insurer.
The cost of the premium is added to the cost of
the investment and charged to the client, as is the administrative
cost of operating the Trust.
The financial soundness of the privately owned
capital credit insurer will be guaranteed by new legislation
creating a state capital credit re-insurer (similar to
the USA Federal Deposit Insurance Corporation – ‘FDIC’
– which safeguards bank deposits against loss).
Although, of course, it is possible to arrange
things so that the money is held on trust for the client,
if that is appropriate; and it is also possible to arrange
things so that (e.g. for new-born children) previously
paid-up capital is used thus giving immediate income.