A Very Successful Fiat System

2008-2-24 14:35:00

Blayne wrote:

"Fiat currency systems have ended in disaster in every case."

JJ:

Not so fast.

Many of the colonial fiat systems were going fine and only ended because the British government didn't want them to have their own money and put a stop to it.

Lincoln's greenbacks ended, but not in disaster, but to satisfy the big banker's interests. The non interest bearing greenbacks have saved us many billions in interest.

Whenever fiat money has been under control of the people banking interests rise up and put a stop to it. Stephen talked about going to an Island and starting with nothing and creating a money system. Actually this has already basically happened and is a powerful testament to the fiat system under control of the people. This is also one case where a viable fiat system has been allowed to continue. This is probably because it has transpired on a small island that the powers-that-be must feel is not a threat to their power base.

Here is the story of a money system similar to what I would use if I were in charge of things.

  

The Remarkable Island of Guernsey

The island state of Guernsey is located among the British Channel Islands, about 75 miles south of Great Britain. In 1994, Dr. Bob Blain, Professor of Sociology at Southern Illinois University, wrote of this remarkable island:

"In 1816 its sea walls were crumbling, its roads were muddy and only 4 1/2 feet wide. Guernsey's debt was 19,000 pounds. The island's annual income was 3,000 pounds of which 2,400 had to be used to pay interest on its debt. Not surprisingly, people were leaving Guernsey and there was little employment.

"Then the government created and loaned new, interest-free state notes worth 6,000 pounds. Some 4,000 pounds were used to start the repairs of the sea walls. In 1820, another 4,500 pounds was issued, again interest-free. In 1821, another 10,000; 1824, 5,000; 1826, 20,000. By 1837, 50,000 pounds had been issued interest free for the primary use of projects like sea walls, roads, the marketplace, churches, and colleges. This sum more than doubled the island's money supply during this thirteen year period, but there was no inflation. In the year 1914, as the British restricted the expansion of their money supply due to World War I, the people of Guernsey commenced to issue another 142,000 pounds over the next four years and never looked back. By 1958, over 542,000 pounds had been issued, all without inflation.

"Guernsey has an income tax, but the tax is relatively low (a 'flat' 20 percent), and it is simple and loophole-free. It has no inheritance tax, no capital gains tax, and no federal debt. Commercial banks service private lenders, but the government itself never goes into debt. When it wants to create some public work or service, it just issues the money it needs to pay for the work. The Guernsey government has been issuing its own money for nearly two centuries. During that time, the money supply has mushroomed to about 25 times its original size; yet the economy has not been troubled by price inflation, and it has remained prosperous and stable.

"Many other countries have also successfully issued their own money, but Guernsey is one of the few to have stayed under the radar long enough to escape the covert attacks of an international banking cartel bent on monopolizing the money-making market. As we'll see later, governments that have dared to create their own money have generally wound up dealing with a presidential assassination, a coup, a boycott, a war, or a concerted assault on the national currency by international speculators. The American colonists operated successfully on their own sovereign money until British moneylenders leaned on Parliament to halt the practice, prompting the American Revolution. England had a thriving economy that operated on the sovereign money of the king until Oliver Cromwell's 'Glorious Revolution,' which let the moneylenders inside the gates. After 1700, the right to create money was transferred to the private Bank of England, based on a fraudulent 'gold standard' that allowed it to duplicate the gold in its vaults many times over in the form of paper banknotes. Today governments are in the position of the disenfranchised king, having to borrow money created by the banks rather than issuing it themselves."

"Web of Debt," by Ellen H. Brown, Pages 101-102, Copyright 2007

The experience of Guernsey belies the philosophy of the gold standard only people that fiat money cannot work. It obviously has worked in this case and worked well for almost two hundred years so far.

This also illustrates that you do not need an enlightened people to make fiat money work. If done right and the money issued corresponds to expected increase in goods and services then it can work until the end of time.

I'll bet the people on the Isle of Guernsey are glad they did not waste decades of time digging up or accumulating gold to store in vaults to use as a money base.