This is a copy of an article written by Boudewijn Wegerif who sadly has passed onto Valhalla I hope.

Draft Introduction for
“SAMLADE PENGAR”
DECEMBER 31, 2001

SAMLADE PENGARis the Swedish for “Collected Money”.
This is the name of a planned, collected volume of the four issues of the Swedish journal for monetary reform PENGAR(= “Money”) produced between October 2000 and June 2001. See also What Matters E-letter 37 Here*

When we produced the four issues of PENGAR, which are here drawn together into one volume, the now raging “war on terror” had not yet been declared, and we were not in the situation in Sweden of the EU requiring the bank accounts of three Swedish citizens to be frozen, on the say-so of the Treasury Department of the United States, without any evidence of the bank accounts having been used to fund “terrorists”.

One of the three Swedish citizens whose bank account was frozen is a member, therefore part-owner of the members’ owned, interest-free bank JAK, the sponsor of PENGAR. (See www.jak.se, English section – Here*)

So JAK found itself in the incredible position of being unreasonably required to not allow a member access to his own money savings. JAK executives were not even allowed, by EU decree, to lend their own money to this member to tide him over till his account is open again. The bank was forced to treat one of its members as an outcast, therefore.

The member thus outcast has his roots in Somalia and is a devout Muslim. He joined JAK because of its interest-free banking practice. He has not been found guilty of any crime.

ALL MEMBERS OF JAK ARE EFFECTED

When Oscar Kjellberg, the CEO of JAK, Simon Goldin, as editor, and I, as consulting editor, launched PENGAR, we had in mind a journal of monetary reform that would show that another world of economic fair play is possible. And I think we achieved that in the four issues we produced between October 2000 and June 2001. We have laid a solid foundation for those in Sweden who want to learn about and promote monetary and economic justice for all.

In SAMLADE PENGAR we have drawn together the insights of the leading monetary reformers in the world, and others not so well known, about how money works – or rather, why today’s money does not serve us well, and what kind of monetary system could do so.

We celebrate this achievement under a cloud, however. There is no getting away from that. Every member of JAK, every citizen of Sweden and of every country in the world, is effected by the wrong of the September 11 attacks and the wrong of the “war of terror” that George W. Bush then declared. This war is not just a war against a particular “terrorist” network, it is a war against the higher reason in all of us, that knows that the due process of law is not being followed, that the root causes of the attacks are not being addressed and that civil rights are being compromised.

In the close to home example, it is not just the right of access of a fellow member of JAK to his savings account that is being denied, but the right of all 21,600 members of JAK to come to his assistance.

When George Bush announced “our war on terror” in a speech to Congress on September 20, he said that the war would not end “until every terrorist group of global reach has been found, stopped, and defeated.” He then went on to say, “Freedom and fear are at war. Freedom and fear, justice and cruelty, have always been at war.” In that speech, and subsequently, he made clear to the world that so far as he and the oil and armaments and bank men who encircle him are concerned, there will be no end to wars of terror.

And indeed, yes, it is now absolutely clear that there will be no peace on Earth until the political and entrepreneurial leadership of the world is made subject to reason – the reason of morality and, pertinently here, the reason of hard economic facts.

USURY – A ROOT CAUSE OF WAR

PENGAR has a role to play in making the facts known. Particularly the facts about usury – that is to say, the money lending at interest, for profit, which is forbidden amongst one’s own people if one is a Jew, doctrinally forbidden by the Roman Catholic church, and forbidden to Islam.

In the last two hundred years at least, since the beginning of the Industrial Revolution, the secular countries of the West, now North, have to all intents and purposes ignored the Biblical and Church injunctions against usury. The word usury has even been redefined as the charging of excessive interest, greater than that allowed by law.

Herein, I suggest, lies a root cause of the September 11 suicide attacks on the World Trade Center – built for usurers out of the proceeds of usury, as traditionally defined – and on the Pentagon, which is there to organise the military protection of usurers.

C.S. Lewis, the lay theologian and author of the Narnia books that young people delight in, thought much about the causes of World War Two and wrote in 1943:

“There is one bit of advice given us by the ancient Greeks, and by the Jews in the Old Testament, and by the great Christian teachers of the Middle Ages, which the modern economic system has completely disobeyed. All these people told us not to lend money at interest; and lending money at interest . . . is the basis of our whole system.”

This system today enables a hundred families or so to have greater wealth than half the rest of the world.

Economic historian Michael Hudson expressed the hard economic fact of the matter succinctly in an E-mail I had from him the day after the Bush declaration of his, not my, war on terror: “The savings of the population’s wealthiest 10 percent find their counterpart in the debts of the remaining 90 percent.”

THE HISTORY OF USURY

It is useful to know when, where and why usury began.

For this Michael Hudson’s E-mail of September 21 is very helpful. In it he reaches deep into the history and nature of debt. He is well qualified to do so. See, for example, my review of his booklet, The Lost Tradition of Biblical Debt Cancellations, in the June Nr 4 issue of PENGAR, page 26. (The English original, CLEAN SLATE, is posted Here*)

The subject of Michael Hudson’s E-letter is The Debt System verses The Credit System. Seen in a balance sheet there is no difference: credit is a debt. But in the eyes of a social historian or anthropologist there is a great difference.

For several millennia the motivation in giving credit was to show open-handed generosity and strength, amongst equals, according to Hudson. “Often, in Southeast Asia, families would exchange identical amounts of crops, just to consolidate the circle of payments and mutual dependency.”

Giving credit in this way reinforced social solidarity and co-operation. Those who were giving credit were saying, “I believe that you will do the right thing, and restore balance between us.”

However, once the giving of credit became interest-bearing – that is, contractual at a specified calendrically defined rate of return – the motivation changed by degree to self-interest, control and dominance over others. Till now debt has come to mean, “I will take your property if you do not pay me my fee, which is a first charge before all others in your everyday life – a fee that I realize is set arbitrarily, with no reference at all to your capacity to pay.”

Hudson traces the beginning of the charging of interest on credit to around 3,000 BC. “It was at this point that impersonal economic relationships began to replace person to person relationships.” but this was not the motivation of the first creditors.

AN EQUITABLE SHARING OF GAINS

In the first Assyrian debt and credit records one finds a reasonable attempt at fairness. This is how Hudson explains what happened:

“The initial creditor appears to have been the large public institutions, the temples and palaces of Mesopotamia. It was in these institutions that the economic surplus was produced and concentrated – in the workshops where textiles were woven by war orphans and widows, where metals were cast and from whose planners trade colonies were planted.

“They consigned their output to merchants, and soon found out that merchants traded their textiles and other goods at a profit, and then sought to keep on using the proceeds to make one trade after another, for as long as they could without reimbursing their consigners.

“In this situation, it appears that interest – doubling the original consignment after five years – was designed to provide an equitable sharing of gains between the public temples and palaces and their administrative officials who acted in their own private or semi-private capacity as traders.”

However, what was begun in fairness soon turned foul, as the charging of interest came to be applied to farming.

“Initially land, too, was part of the public domain,” writes Hudson. “It was consigned by the public authority to ‘entrepreneurs’ to sublease to cultivators, who by degrees started to apply interest when the crop ‘quota’ could not be met.

“And, of course, the debts grew at interest, and when the debtor could not afford interest, he had to take out a new loan, each time adding the interest to his debt. And creditors for their part took their interest from each project, loan or investment, and sought a new outlet. The idea was for their savings to double in five years, and then double again so as to quadruple in another five years, and so on until their savings multiplied 64-fold in thirty years.

“We know that they thought this way, because we have schoolbook exercises calling for the scribal student to make such calculations c. 2000 BC.”

USURY NOW ESTABLISHED

The epoch of the Free Lunch had arrived. From Mesopotamia usury spread to other regions, “much”, writes Hudson, “like a new biological species transported into new environments where no indigenous checks and balances had been developed. Predatory parasites were unleashed on a world, which, until that time, had elevated open-handed generosity as the way by which the social peer-support system aimed at imbuing status on its practitioners.”

As I show in the article CLEAN SLATE, for some 2,000 years the rulers in Mesopotania and surrounding areas held out against the spread of usury, by means of the regular cancellation of debts and redistribution of forfeited property, but by 600 BC, money came to count more with them than the loyalty of their people.

The Jewish prophets and the Greek philosopher Aristotle railed against usury, but “Money has the potential to fulfil any worldly purpose, so it becomes itself the absolute purpose,” as Aristotle put it. Calamitously, the first Christians decided, and quite rightly, as we shall see. Through several hundred years in Christian Europe, there was a determination to live free from usury and usury’s self-interest. However, to no avail.

“It is quite natural, even unavoidable, to prefer money over all else and make it the chief object of one’s desires,” wrote the German philosopher Schopenhauer, in the early 19th century. Not many people today would disagree

Usury is now established as the driving force in economic life. What is now called money is inextricably linked to debt enslavement.

TOTAL POWER OVER THE ECONOMY

Very few people are aware of the extent to which governments everywhere have given private bankers the right to issue money into the economy, in the form of loans, created as if out of thin air, with interest attached.

Only the production of coins and notes, for circulation through the banking system, remain the accepted prerogative of government, and these represent but a small part of the money in circulation and in savings accounts, and an even smaller part of the total debt burden Banks have been with us since ancient Babylon, but never before with such total power over the economy as they exercise today.

In The Pound Sterling, a study of the history of money, Sir Albert Feveryear writes that sixty percent of all money in the 18th century was still in the form of gold and silver coins. By the mid-nineteenth century, the bank credit component of money supply – i.e. the debt, as we have defined it above –had risen to around 60 percent.

In almost all countries today notes and coins represent less than 10 percent of the checkable money in use or available for use at relatively short notice, and less than five percent of the total government, enterprise and householder debt.

In Sweden, notes and coins represent about 9 percent of the “money” available for use, mainly through checking accounts, and under 3 percent of the total of household, enterprise and government debts, of now some three trillion kronor ($286 billion), excluding overseas’ debts and pension funds. The government debt represents about half the total.

The debts, being subject to compound interest, never stop growing. If you visit the website www.amark.com/stats/money.asp – Here* – you can watch the national debt of the United States growing by over $6 million dollars a minute – to $8,351,354,599,532.01, when I last took a look at 4.32 pm on December 19, 2001. In the US the currency and notes, at about $563 billion, represent around 11 percent of the money in use and readily available for use and, as in Sweden, about 3 percent of the total debt, which was $19,147 billion i.e. $68,000 per person in October 2001. (This debt figure from Federal Reserve statistics may include overseas and other debts not included in the Swedish debt figure, so is not strictly comparable.)

The US debt has grown 25-fold in forty years from 1961. In the same period, the money- measured economy grew 18-fold. This is the pattern through the whole world – debt always grows faster than the economy that it feeds off.

THE SHAME OF DEBT OPPRESSION

The debt growth is fastest in the Third World because of the high interest rates that are imposed. From 1973 to 1993 the Third World debt was compounding at 20 percent per year, from $100 billion to $1,500 trillion, of which only $400 billion was actually borrowed money. The debt is now $2.3 trillion.

The August 2000 Jubilee 2000 Campaign news update included this quotation from President Obasanjo of Nigeria: “All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid about $16 billion yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors’ interest rates. If you ask me what is the worst thing in the world, I will say it is compound interest.”

There is a terrible shame, a terrible guilt attached to the debt oppression in the world. It is not without significance that the word for guilt is the same as the word for debt in northern European languages – “skuld”.

Where has the debt come from? On the last page of the last of the four issues of PENGAR, you can read how the Nobel laureate in chemistry in 1921, Frederick Soddy, answered that question: “This money comes into existence every time the banks ‘lend’ and disappears every time the debt is repaid to them. So that if industry tries to repay, the money of the nation disappears.”

Soddy was disgusted at the way the banks work: “Starting with nothing whatever of their own, they have got the whole world into their debt irredeemably, by a trick.”

For a good description of how the banks have managed this, by what is called the multiplier effect, turn to Simon Goldin’s interview of the banker turned monetary reformer John Tomlinson, in PENGAR 3, page 12.

MONEY “OUT OF NOTHING”

The take over of the economy by bankers began in earnest with the formation of the Bank of England in 1694, on the strength of a loan of £1.2 million in gold and silver to the Government of William of Orange. The loan was to enable him to pursue his war against France. A condition on the loan was the right to issue a further £1.2 million in “Bank of England” notes for lending to private borrowers.

The founder of the bank, William Paterson, was perfectly frank in acknowledging that he was after “the privilege to make money”, through what came to be called fractional reserve banking. Indeed, the Bank of England’s charter includes the written condition: “The bank hath benefit on the interest on all monies which it creates out of nothing.” (The Grip of Death by Michael Rowbotham – Jonathan Cape, page 189).

By 1696 the Bank of England had issued no less than £1,750,000 worth of notes against a cash reserve of £36,000. (Source: Restrain the Red Horse – The Urgent Need for Radical Economic Reform – by Alan D. Armstrong, Towerhouse Publishing, Argyll, Scotland).

Some 300 years later, in 1999, the top thousand world banks had registered assets of $35.5 trillion of which 95 percent at least will have been interest-earning debt assets, on a capital base of $1.7 trillion.

Two-thirds of the incredible debt wealth of the thousand banks was concentrated in the top hundred banks and almost a quarter of that, $5.6 trillion, in the top ten banks. This figure suggests that just ten banks can lay claim, theoretically speaking, to one year of money measured economic activity in Japan. (The figures are drawn from the annual listing of the world’s top thousand banks in The Banker magazine.)

There are two points to make here.

THE BANKS ARE AT THE BRINK

Firstly, the banks are as much in crisis as the majority of their customers. A good percentage of the debt assets are roll-overs from one year to the next. Even paying the interest on debt is proving impossible for many debtors, as was noted with regard to Third World debt, and debtors who manage their debt servicing are doing so at a heavy cost.

To put the c. 100,000 million kronor annual interest on Sweden’s national debt in perspective, for example, in recent years:

# The sales value of the Volvos and Saabs produced has not exceeded 40,000 million kronor a year;
# The income from forestry, another major industry, has not exceeded 30,000 million kronor a year; and
# The income of Sweden’s 90,000 farmers has not exceeded 20,000 million kronor a year.

To compound the banking crisis, there is the issue of derivatives. A financial derivative is a form of credit based on an underlying security, called the margin, which normally represents about five percent of the value of the derivative. For specially privileged speculators the margin may be as little as one percent of what is called the “notional value” of the derivative, on which the profit or loss is made – with the losses paid out of the “margin”

In October 1991 the 359 U.S. commercial banks reported derivative positions with a nominal value of some $7 trillion. This figure grew to a little over $50 trillion by October 2001, with most of the $43 trillion growth ascribed to J. P. Morgan and Chase Manhatten.

Between them, these megabanks have reported derivatives contracts with a notional value of $30 trillion and a credit exposure of over $328 billion. This credit exposure margin is almost 750 percent greater than the banks’ combined capital holdings.

To what end? Well, the combined J.P. Morgan Chase earnings from derivatives trades was around $400 million a month through the third quarter of 2001.

A tidy sum, representing a return of almost one percent per month on capital. But at a tremendous risk.

SPECTACULAR LOSSES

Derivative programmes have served a useful purpose in the financial market, to cushion the blow of currency and interest rate fluctuations. However, through the 1990s they became the favourite instruments of casino capitalists.

In ‘When Transnationals Rule the World’, David Korten writes: “When they are employed wisely, derivatives make the world simpler, because they give their buyers the ability to manage and transfer risk. But in the hands of speculators, bumblers and unscrupulous peddlers they are a powerful, leveraged mechanism for creating risk.”

There have been spectacular “winnings”, and equally spectacular losses – In 1995 rogue trader Nick Leeson caused the bankruptcy of the long established Barings Bank with losses of $1.5 billion; in 1998, The Long Term Management Fund had to be bailed out by other banks to the tune of $3 billion to avoid domino effect losses through the entire financial market; and now a far worse situation seems to be unfolding with the bankruptcy of the energy giant Enron, which financial analysts link to irresponsible derivative trading. J. P. Morgan and Chase Manhattan have credit claims on what is left of Enron of well over $3 billion.

There is a detailed examination of the potential derivatives disaster in “J.P.Morgan off Derivatives Market Hook?” Here*. See also my article Justice for Gold (Guldkartellen inför rätten – PENGAR 3, page 25) in which I describe how derivatives have been used by what is called the “gold cartel” to suppress the price of gold. The longer, original English version is posted Here*

With many others I am certain that there is an illegal, anti-trust scam to suppress the price of gold, and that this scam is basic to maintaining an over-valued dollar, and with that the now crisis-ridden banking industry as a whole. The bullion departments of J.P. Morgan and Chase are two of the main players in the gold cartel, which, we have evidence to believe, operates with the active support of the US Treasury Department, the Federal Reserve and other central banks. For more information on this, begin at www.gata.org – Here*.

THE CARROT AND STICK TO GROWTH

The second point to take into account when judging the bankers’ dominance over the economy, is that without the carrot and stick of the fractional reserve banking system there would have been no industrial revolution – for good as well as ill – through the 19th into the 20th century.

So long as bank created debt money is being loaned into the economy, mainly to support long term, debt-free capital investments in infrastructure and expanded production, the ill of usury is not immediately manifested. But then comes a fever for unearned income, leading into speculative mania, followed by depression. At which point there is a willingness to examine the nature of money and to consider reforms for a healthier economic attitude and life style.

Many people became wise to the ill of the fractional reserve banking system after the 1929 Wall Street crash. During the early 1930s, there was a strong following for -

# The demurrage, negative interest money concept of businessman Silvio Gesell, formulated at the turn of the century already and explained in several articles in PENGAR 2;
# The basic citizen’s income and other monetary reform proposals of engineer Major C.H. Douglas, taken up in PENGAR 3; and
# The hundred percent reserve “Chicago Plan” promoted by Nobel prize winning economist Irving Fisher and Laughlin Currie of the U.S. Treasury, and described by Simon Goldin in an article on page 35 of PENGAR 4.

As you will read in Simon Goldin’s article, there was a moment in March 1933 when the bankers were ready to give up their usurious right to eat into the economy. The opportunity was there for President Franklin D. Roosevelt to adopt the Chicago Plan and make the “New Deal” substantive. In essence, the Chicago Plan economists were advising the federal government to take back from the private banking system the ability to create and destroy money through increases and decreases in loans.

Under their proposal, the 12 Federal Reserve Banks would be nationalised, and each commercial bank would choose to become either (a) a checking bank, which would accept deposits, clear cheques and maintain 100 percent reserves of government paper or (b) a savings bank, which would accept long-term deposits and make private sector loans and equity investments.

DEFICIT SPENDING CHOSEN INSTEAD

The adoption of the Chicago Plan would have gone a long way to curtailing usury, by bringing fractional reserve banking to an end. However, Roosevelt chose instead to lead the U.S. through the depression into World War Two with bank borrowings, under the deficit spending theory of economist John Maynard Keynes, who believed that the deficits would be made up out of extra taxes on the economy when the economic cycle was on the up and needed dampening down again.

However, once the practice of deficit spending was adopted, there was no slowing down for half a century.

After Pearl Harbour, few in the United States dared question the need for massive debt creation to finance the war on Hitler, and at that war’s end, few dared question the need for even greater debt creation to finance the reconstruction of Europe and Japan.

Then came the consumer revolution and the opportunity, with the dissolution of colonialism, to develop a third class world of cheap produce and raw materials suppliers to the ever-richer, feverishly greedy first class world.

And now? – Was the attack on the World Trade Center on September 11 a signal, and the collapse of the Argentine economy in December another call on the money rich countries, and the U.S. in particular, to now acknowledge their enormous debt to the 85 percent of the world’s people who for the most part live in poverty?

In PENGAR 3, page 23, we publish a satirical letter by the South American Indian, Guaicaipuro Cuautemoc, calling for the repayment of the 185 tonnes of gold and 16 million kilos of silver that he claims were forcibly taken on loan, not plundered, from the American Indian territory by Spain in the 16th century. It can be argued that the money rich North owes its economic development to this infusion of gold and silver and the fractional reserve banking that it supported.

Guaicaipuro Cuautemoc does not ask for repayment at the 20 percent a year interest rate that has been charged by the banks of the North on their dollar and linked currency loans to the South – no, a modest 10 percent a year over the 300 years will do, he writes, repayable in kind, of course – that is, in gold and silver.

In his editorial to PENGAR 3, Simon asks, “Who will pay the debt of the under-development on which our over-development is based?” Hardly the USA.

PROPPING UP THE MARKETS

The question is all the more relevant today. How long can the U.S. and its allies deny basic economic freedom to the majority of the world’s people through the determined propping up of the world markets with unbacked dollars, even with the threat and application of military force?

A trillion dollars have been loaned into the U.S. economy in the last year alone. Many of these dollars have gone out of the U.S., in pseudo-payment (as explained below) for a shortfall between exports and imports of over a billion dollars a day. Most of the remaining dollars have been used to bolster up the stock and property markets in the hollow belief that there will one day be a pay back out of speculative gains.

Now the foreign exchanges of the rest of the world are awash with well over a trillion dollars, and there are hundreds of billions of dollars in corporate and private foreign hands.

These dollars all represent IOUs against American goods and property. In a recent offering at the James Joyce table of the financial website http://www.lemetropolecafe.com – Here*, the owner-editor Bill Murphy, writing as “Midas”, includes this excerpt from the subscribers only Privateer Newsletter:

“At the end of November 2001, Japan’s foreign exchange reserves stood at $403.88 Billion. Seven years ago they were only one quarter of that. The difference was lent to the US Treasury with Japan, in its turn, now holding US Treasury debt paper. In September 2001 alone, Japan took up $26 Billion in US Treasuries. China holds just over $200 Billion and the two strategic dependencies of Taiwan and South Korea hold about $100 Billion each. Add the rest of South East Asia and total Asian LOANS to the US Treasury come in at around $1 TRILLION. Asia, including China, has been good to the US Treasury, which otherwise would have had to place its $ 1 TRILLION in debts either inside the USA itself or in Western Europe, which certainly has enough US Treasuries already.”

Today’s dollars have no intrinsic value in themselves. Like other currencies, they are instruments of credit, representing an acknowledgement of debt, redeemable through the purchase of goods or property in the market place. This is generally known, of course, but what it means is not fully appreciated.

In the words of the Mexican economist Hugo Salinas Price, “It is essential to recognize that the U.S. trade deficit of $400 billion a year, is really A TAX ON THE WHOLE WORLD, for the benefit of the U.S.” (His emphasis added in the article What Really Killed Argentina, posted at www.plata.com.mx – Here*

The hard economic fact of the matter is that the U.S. is not able to export goods in sufficient quantity to balance its imports and pay off the massive accumulation of debts for past imports. Nor will the U.S. home market ever generate enough trade to bring internal debt growth to a manageable level. Therefore, the U.S. is bankrupt in trade terms.

At some point soon the world will turn against the dollar and the purchasing power of the dollar will be reduced to next to nothing. Since all the countries of the first class world, including the European Union, have been complicit in building up the dollar debt pyramid, all the now monetary rich countries will be drawn into a severe financial crisis as the dollar crashes.

The bottom line issue here is whether it is possible to put the failed U.S. economy into receivership, and in a way that will bring healing and recovery to all economies.

A RETURN TO BRETTON WOODS?

As noted at the start, the usury that is now totally out of control is rooted in the well-meaning decision of Temple keepers in Mesopotamia in 3000 BC.

Another noted important and well-meant decision that went wrong was that of the Roosevelt administration in 1933 to adopt the Keynesian principle of deficit spending instead of the hundred percent bank reserves Chicago Plan.

This wrong choice was then compounded by the decisions made at the Bretton Woods meeting in New Hampshire in 1944.

The purpose of the 1944 Bretton Woods meeting was to lay the foundation for a post-World War 11 global economy. Forty-four countries were represented and most of the participants were sincerely intent on seeing the world united into a web of economic prosperity and interdependence that would preclude a third World War.

Yet what came out of the meeting was the creation of “an open world economy unified under U.S. leadership” – an open world economy that would “ensure unchallenged U.S. access to the world’s markets and raw materials,” writes David Korten in When Corporations Rule the World (Kumarian Press and Berret-Koehler, 1995).

Forty-three of the forty-four countries at the Bretton Woods meeting agreed to exchange their currencies for dollars on demand at a fixed rate. The U.S., as the lead country, guaranteed, in its turn, that it would exchange those dollars on demand for gold at the rate of $35 an ounce.

The World Bank and IMF were instituted to be the instruments of this purpose. The agency GATT followed soon after, to regulate tariffs and terms for the economic ‘reconstruction’ and ‘free trade’ that was to be ‘assisted’ by World Bank and IMF direct loans and, more importantly, by the IMF laying down the conditions for larger loans from commercial banks.

In the agreements reached at Bretton Woods there was no obligation on countries with export surpluses to SPEND the surplus in countries with a trade deficit. Instead, the surplus accumulated, in dollars as the agreed international reserve currency.

When the U.S. itself started over-spending globally to finance the Vietnam War in the late 1960s, the Bank of France stood by its right to redeem dollars for gold.

There are claims that the 1968 students’ revolt, which almost led to the President, General de Gaulle, being overthrown, were encouraged by US operatives intent on forcing France to hold on to its excess dollars. Be that as it may, the redemption of dollars for US held gold continued – until, on 15 August 1971, the then U.S. President, Richard Nixon, delinked dollars from gold to stop the flow.

From there on out the Central Banks of the world went on receiving world trade dollars – in ever increasing quantities – without any possibility of redeeming them for gold or U.S. exports.

In Hugo Salinas Price’s words, “once the U.S. was freed of the commitment to redeem dollars, they embarked on an unrestricted credit expansion. Dollars in the hands of foreign central banks were like checks that are never cashed.”

Inan article headed Why are the Americans Smiling? Årice has a graph illustrating how foreign central bank reserves grew from $49 billion in 1948 (of which $15 billion were in dollars and $34 billion in gold @ £35 an ounce) to almost £1,400 billion in mainly dollar “paper reserves” in 1998, with a steep increase beginning in the early 1970s. The gold in addition to the “paper reserves” held by central banks, excluding the FED, in 1998 was valued at a little over $200 billion, at the then market price of round $300 an ounce.

The rank injustice shown up by the graph is well described by an American, with the pseudonym “Atocha”, at nyc.indymedia.org/front.php3?article_id=15283&group=webcast – Here* : “My how modern imperialism has evolved. We no longer send armies to plunder and loot foreign lands of their gold and silver. Now, we send bankers . . . We demand that foreigners pay for the ‘reserve’ of our computer entries (with no intrinsic value) with their natural resources, their finished goods and their labour. And our trading partners who use the dollar as a ‘reserve’ asset must accept this ‘exchange’ thankfully and humbly, even while we plunder and impoverish them to pervasive hunger.”

The whole world is now suffering the meanness, violence, madness and badness of the free reign of usury that has come out of Bretton Woods.

Having so obviously chosen a wrong way at Bretton Woods in 1944, this would seem like the right place for sensible representatives from all the countries of the world to now come together to agree the right alternative way forward.

A MONETARY REFORM “OVERVIEW”

For a comprehensive overview of monetary reform possibilities, delegates at an alternative Bretton Woods would do well to read SAMLADE PENGAR. In particular, Simon Goldin’s interviews with -

# Margriet Kennedy, who is world renowned for her book Interest and Inflation Free Money (Pengar utan ränta och inflation – 1988);
# Bernard Lietaer, the world’s foremost authority on complementary Currencies and author of The Future of Money;
# Michael Rowbotham, who has established himself as the leading monetary reformer with his books The Grip of Death and Good Bye America.
# Joseph Huber and James Robertson, co-authors of Creating New Money: A Monetary Reform for the Information Age, which has created ripples amongst parliamentarians and Treasury bureaucrats in Britain.

The interviews with Margriet Kennedy and Bernard Lietaer in PENGAR 2 are linked to articles about Silvio Gesell, whose demurrage, negative interest rate proposals from almost a hundred years ago inspired both of them. And articles about the basic income and other social credit proposals of Major C.H. Douglas in the 1920s and 30s, which were the starting point for Michael Rowbotham’s enquiries, follow on the interview with him in PENGAR 3.

Of immediate interest to delegates at the proposed alternative Bretton Woods may be the PENGAR 1 and PENGAR 4 interviews with James Robertson and Joseph Huber, whose book Creating New Money offers an update of the Chicago Plan. As noted earlier, the Chicago Plan, with which the economist Irving Fisher was associated, is also featured in PENGAR 4. It is of particular interest because of its having been so nearly adopted by the Franklin D. Roosevelt administration in 1933.

Of course, there are other monetary reformers to consider also. If we were to produce another issue of PENGAR, I would most certainly want to feature Thomas Greco, whose book Money: Understanding and Creating Alternatives to Legal Tender, has just been published (Chelsea Green, White River Junction, Vermont – October 2001).

Another helpful book on the route to change is To Restrain the Red Horse by Alan D. Armstrong (Towerhouse, Dundoon, Argyll, Scotland – 1996).

The editorial policy in PENGAR has not been to favour one monetary reform approach over the others. Rather, it has been to give readers a framework within which to shape their own understanding and approach to the money issue.

At the same time, we have not been shy to present “Our Viewpoint” (“vår utgångspunkt”) on the inside front cover of all four issues of PENGAR.

Submitted on Tuesday, January 27th, 2009 at 1:04 am