A Challenge to Banking
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Converting debt to equity is not a panacea for all economic
ills. It can, however, produce many positive benefits. These
benefits will not necessarily follow automatically from conversion.
Concentrated effort will be required to ensure they do. Without
conversion they will not happen at all.
Not the least of these benefits will be those brought to
the banking community itself. The banking and monetary system
will not collapse. Nor should there ever need to be the threat
of collapse again. Owners of banks will find the value of
their shares underpinned as liabilities disappear from balance
sheets and are replaced by assets of a specific value. Each
and every depositor will be able simultaneously to withdraw
his or her total deposits.
Demand for the banks' current or cheque account services
will not diminish. Longer term depositors will now have to
pay for storage: it will be a less attractive option than
exchange, so the velocity with which money moves from bank
to market-place to bank again, from one account to another,
is likely to increase. There will be a continuous flow of
money available for new equity investment.
The market-place in general will also receive benefits. Conversion
will allow the value of money to stabilise. Savings can then
retain their value. Prices need only vary according to the
supply and demand of the product being priced. Measurements
of exchange value made by different people at different times
can be validly compared. The unit of money will once more
be a valid unit of measurement of exchange value. The field
of economics can become a science.
Many of the distortions which now exist in our individual
frames of reference will be corrected. For instance, an investment,
which took an investor ten, fifteen or twenty years to recoup,
used to be considered sound. Now, too often the maximum period
envisaged is five years; even three. This short-term view
has precluded many useful businesses from being created. The
re-establishment of stable money and the emphasis on security
which will be required within equity investment programmes
will encourage people to take a longer view. More businesses
will then be considered viable and the number of new jobs
can increase dramatically.
Existing savers will also be protected. The conversion to
equity will eliminate the possibility of collapse for individual
banks and for the system as a whole. Savings will not disappear.
The nature of savings will change from just units of money
to units of money and shares. The exchange value of both the
shares and the money will have to be re-assessed. But they
will have value. If no action is taken and the system collapses,
they may end up having no value.
The changes proposed will also free many from the enslavement
of debt. Both nations and individuals can regain their dignity.
They will be free to make their own choices. No longer will
managers have to face the choice between paying interest and
disemploying some or not paying interest and disemploying
Nor shall we need to experience the stresses caused by current
economic and business cycles. There will be a steady flow
of money into investments. New investment opportunities will
continually be sought as a home for both individual saving
and business profits. Both will wish to avoid storage charges.
Growth will be dependent upon the continuing development
of new ideas and new productive capacity. Growth will no longer
be dependent upon the creation of new debt. Economic expansion
will depend upon the positive flow of new savings and new
Re-establishing the integrity of money will eliminate at
least one of the causes of human conflict. Money will no longer
secretly steal from those who save, those on fixed income
and those who enter long-term contracts.
Further, it can lead to a greater premium being placed on
personal integrity. The character traits of honest, honourable
and forthright behaviour will be in demand. Investors' security
will depend on them. Recognition of the degree of interdependence
in an equity-oriented market-place can lead to more consideration
of the needs of others, and, ultimately, to a more caring
and compassionate society.
Of course, life is never roses all the way. Many mistakes
will be made. When new paths are trodden, the way is sometimes
uncertain. Some will find it difficult to break the habitual
patterns of thought which govern behaviour in a debt-oriented
society. No doubt some readers will have already experienced
Some will be hard-pressed when the actual exchange value
of their investments becomes apparent. Yet, the conversion
process can be controlled. Collapse cannot. We should be able,
as part of the conversion process, to identify those who might
suffer unduly. Then we can be prepared to assist them and
cushion any hardship.
The case for honest money is a compelling one. Honest
money is not a thief. It does not steal from the thrifty.
It is not socially divisive. It does not promote economic
and business cycles, creating unemployment. On the contrary,
it encourages thrift. It promotes sustainable economic
growth. It rewards merit. It demands integrity.
|These are worthwhile goals. They
can be achieved. What is needed now is the will to make
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