Cancel The National Debt!

The previous article posed the question: capitalism or communism? The answer was unequivocal - capitalism delivers the goods. While in the absence of exceptional circumstances there is never a shortage of goods and services under capitalism, there is a shortage of money. Indeed, there is always a shortage of money with three exceptions: one big exception and two smaller ones.

The big exception is war. No nation ever lost a war because it ran out of money. The two smaller exceptions are large scale disasters whether natural or man-made, and social disorder. Why is this so, or rather, how?

The reason is that during war-time, governments operate a cheap money policy. There will almost certainly be inflation as well as a shortage of consumer goods but there is no shortage of employment for the able-bodied. Capital goods are materialised seemingly out of thin air and destroyed then replaced in the blink of an eye.

Ten years ago, there was an earthquake in Nepal at a time we were being told to tighten our belts. That didn’t stop the British Government and others from sending aid.

So why can’t our governments operate cheap money policies all the time? Why can’t we have a war economy for peace? The bottom line is that the financial system is a Ponzi scheme. Last month, the British Government paid a staggering £16.4 billion interest on the national debt. What if it hadn’t? Way back in the 1940s, the Duke of Bedford explained how it was possible to reduce the national debt considerably by governments ordering the central bank to create sufficient money debt-free instead of borrowing it at interest.

Whenever that solution is raised, we hear the same vested interests cry it would cause inflation or even hyper-inflation, but would it? During the covid lockdowns, there was indeed a big jump in inflation, but nothing like as big as predicted. At that time, economic activity was necessarily greatly reduced; this would not be the case today.

Almost all governments are labouring under enormous national debts, so if there was a co-ordinated effort worldwide, prices would fall for all of us. That would be good news for the UK, the USA and China especially.

Additionally, our governments must cancel debt, write it off. Obviously this can be done only in a limited fashion, but it has been done before, and guess what, the sky didn’t fall. The most notable debt write-off since the turn of the Millennium was after the 2010 Haiti earthquake. This troubled island nation had no prospect of repaying its national debt, so major governments pressurised the World Bank to cancel it. Somebody had to take a haircut, but interest is money you have never had, so you shouldn’t miss it. This is what our governments, especially the British Government needs to do PDQ. The alternative is disaster. How stupid would that be just because our central bank, the Bank Of England, cannot be persuaded to enter a few digits at a computer keyboard?