What is the MAJOR, DECISIVE DIFFERENCE between left-wing and right-wing?
Right-Wing does not care where money comes from.
Next major revolutionary insight: WE LIVE IN A F*** ECOSYSTEM! Money is an ecosystem as well… so maybe we should learn to think in EcoSystems… monoculture (Euro Zone) is a pretty bad ecosystem – it collapses easily.
We – mankind – can not pretend to continue business as usual – regardless environmental and social costs. Because then – the whole f*** ecosystem called planet earth and it’s climate are doomed to destruct.
ISBN 85694 239 1
Guernsey Historical Monograph No. 23 General Editor: J. Stevens Cox, F.S.A.
1981 – HOW GUERNSEY BEAT THE BANKERS by EDWARD HOLLOWAY – The story of how the Island of Guernsey created its own money, without cost to the taxpayer, and established a prosperous community free of debt
MOUNT DURAND, ST. PETER PORT,
A NOTE ON THE WRITER, EDWARD HOLLOW AY.
He also edits a quarterly journal— Britain and
He became interested in economic and monetary
policy in the depression years of the 1930s and founded
the Economic Reform Club and Institute in 1936.
Holloway has made a special study of economic
questions particularly in relation to monetary policy and
also international trade and payments.
Over the years he has lectured to hundreds of audiences including fifth and
sixth forms at many of the leading public schools, the
RAF, Navy etc.
He is joint author of “Money: The Decisive Factor”, published in 1959.
Other publications include “The Case for an Atlantic Free Trade Area” in 1967,
“Inflation and the Function of Monetary Policy in Britain” in 1971 and “Honest Money: The Case for a Currency Commission” in 1976.
He sponsored a ‘Programme for National Recovery’ in
This programme was supported by 19 economists
and industrialists and resulted in the publication of live
research reports which have played a significant part in
changing the climate of opinion in the sphere of economic
and monetary policy.
This pamphlet, “How Guernsey Beat the Bankers”, is a
reprint of one issued in 1958 by the Social Credit Movement.
It tells how the Guernsey States from 1819-1836 manipulated the issue of notes to allow a number of
public works to be carried out — including both the
construction of the Guernsey Market and the rebuilding of
Elizabeth College — without increasing public debt.
The details are contained within the pamphlet itself.
The author, rightly, saw this as an anticipation of the idea of social credit.
As such, for the very different audience that will read it now, a very brief background to the ideas and history of the Social Credit Movement in Britain may prove helpful.
The Movement’s origins lay with the economic theories of Major C.H. Douglas, who early this century wrote a number of books explaining that the then current economic
problems were caused by the arbitrary control of the money supply by the banks and bankers.
He proposed that money backed by gold or paper should be replaced by notes backed by the real wealth of nations, their goods, plant and machinery.
A consequence of this would be that the parasitic role of bankers in the economy would be removed and the economy would as a result expand.
Social Credit ideas have never become widely accepted although in the 1930s they gained some currency.
In 1929 a Social Credit Party was established in Britain under the leadership of John Hargrave. The 1930’s was a time of political upheaval, and the Social Credit Party’s paramilitary Greenshirts added another hue to the colourful street demonstrations of the decade, with the marching and countermarching of Moseley’s Blackshirts, the red shirted Independent Labour Party and the khaki of the communists.
At their peak in 1933 the Greenshirts could call on 10,000 supporters for their demonstrations in Britain’s cities.
At times the personification of their campaign of ‘out with the Vipers’ (i.e. the bankers) took on an anti-semitic flavour.
The beginning of the end for them came in 1936 with the passing of the Public Order Act which banned political uniforms.
Deprived of the presence that came with the impact of marching uniformed ranks they, along with their colourful counterparts, faded from the scene.
All that remains in Britain now is a small group of enthusiasts.
Elsewhere in the English speaking world the Social Credit Movement has had a fitful existence.
Both New Zealand and Canada have elected Social Credit M.P.’s to their national parliaments.
At provincial level in Canada they have had strong support in Quebec, and in Alberta formed the government.
Even in these areas they are now in decline.
The announcement by the Chancellor of the Exchequer
in his budget speech that he intends to set up a committee
to inquire into monetary and credit policy is bound to focus
attention on the workings of our financial system.
Over the years there have been many interesting monetary
experiments undertaken in various parts of the world.
These have mainly taken place in small communities but
they are none the less of interest.
For example there was the experiment in the island of Guernsey in the period following the Napoleonic wars.
There ware also experiments in the towns of Swanenkirchen in Bavaria and Worgl in the Austrian Tyrol which took place in the years of depression following the 1914-18 war.
A depressed and unproductive community was changed in
a comparatively short while into an active prosperous and
The story of the island of Guernsey is particularly
interesting from our point of view for it is a relatively easy
matter to see for oneself the actual buildings which were
created — as a result of these experiments.
For example the Market House and Elizabeth College were two
examples of the result of the sensible money policy adopted
by the island Parliament in the early part of last century.
Other improvements included better roads, a modern
sewage system; all of which were constructed without a
debt being incurred by the community.
These experiments have a considerable bearing upon
our present monetary policy which, as is being
increasingly realised, is in need of considerable revision.
We make no apology therefore for re-telling the story of the
successful monetary experiment in Guernsey.
THE GUERNSEY MARKET SCHEME.
Our story opens in the year 1815. It was a year of
considerable difficulty for the people of Britain but the
people of the little island of Guernsey were particularly
hard hit. The effects of the Napoleonic wars had resulted in
a state of despair on the part of the island community due
to the acute economic distress then prevailing.
The following extract from a document presented by the States
(as the island Parliament is called) to the Privy Council
speaks very eloquently on the state of affairs:
“In this island, eminently favoured by nature,
nothing has been done by art or science towards the
least improvement; nothing for the display or enjoy-
ment of local beauties and advantages; not a road, not
even an approach to the town, where a horse and cart
could pass abreast; and the deep roads only four feet six
inches wide, with a footway of two or three feet, from
which nothing but the steep banks on each side can be
seen, appeared solely calculated for drains to the
waters which, running over them, rendered them ever
yet deeper and narrower.
Not a vehicle, hardly a horse kept for hire, no four-wheeled carriage existed of any
kind, and the traveller landed in a town of lofty houses,
confined and miserably-paved streets from which he
could only penetrate into the country by worse roads,
left the island in haste and under the most unfavour-
“In 1813, the sea, which had in former times
swallowed up large tracts, threatened, from the defective state of its banks, to overflow a great extent of land.
The sum required to avert the danger was estimated at more than £10,000, which the adjoining
parishes subject to this charge were not in a condition to raise.
The state of the finance was not consolatory, with a debt of £19,137 and an annual charge for
interest of £2,390, the revenue of £3,000 left only £600 for unforeseen expenses and improvements.
Thus, at the peace, this island round itself with little or no trade, little or no disposable revenue, no
inducement for the affluent to continue their abode, and no prospect of employment for the poor.”
What a tale of woe.
Small wonder that the people were depressed and any that could were making their way to the mainland.
As often happens in communities when there are major difficulties, a committee was appointed in 1815 to consider in particular the overcrowded state of the market, of which it was said that “humanity cries out against the crush which it is difficult to get out of, and against the lack of shelter for the people who, often arriving wet or heated, remained exposed for whole hours to wind and rain, to the severity of the cold and the heat of the sun.”
The committee examined the situation, and came to the conclusion that further taxation was impossible.
The alternative was to try and borrow money from the banks.
But this entailed the payment of a high rate of interest, which they could not afford, particularly in view of the fact that these interest payments would continue for years and would eventually mean that, although the original sum had been repaid in interest charges, the capital sum would remain as a debt.
Fortunately for the people of Guernsey, they had at that time among their leaders some honest men of keen
intellect, who put forward the revolutionary suggestion that the States should take advantage of their ancient
prerogative and produce their own notes to finance the rebuilding of the market.
At first this proposal was turned down.
But later in the same year the proposal to issue State notes was agreed to, for a different purpose.
The finance committee reported that £5,000 was wanted for roads and a monument to the late Governor, while they had only £1,000 in hand.
It was agreed that the remaining £4,000 should be raised by the issue of State £1 notes,
1,500 of which should be payable in April 1817,
1,250 in October the same year,
and 1,250 in April 1818.
“In this manner” they said, “WITHOUT INCREASING THE DEBT OF THE STATES, we can easily succeed in finishing the works undertaken, leaving moreover in the coffers sufficient money for the other needs of the States.”
A SUCCESSFUL VENTURE.
How wise they were is proved by the event.
The success of this first creation of State money was so great that it was rapidly followed by others.
In June 1819 the question of the market became ever more acute, and it was agreed to finance the rebuilding of it, not in the orthodox manner by raising a loan, but by the State creating the necessary notes “interest free”.
The following comment made by the finance committee at a later date shows how successful the venture had become.
It was at the time when a further issue of notes was made to diminish the interest-bearing debt to the States.
The finance committee declared:
“The States could increase the number of notes in circulation without danger up to 10 000 in payment of the debt and the committee recommends this course as most advantageous to the States’ finance, as well as to the public, who, far from making the slightest difficulty in taking them, look for them
And so the story went on.
On 29th March 1826 a further issue was authorized to re-build Elizabeth College, which had been founded in 1563 by Queen Elizabeth, and some
The Bailiff of that time — Daniel de Lisle Brock — in his address to the States Assembly expressed his belief that the creation of this new money was a great benefit to the States, and caused no inconvenience because of the great care with which it was issued.
Various other creations of new money took place for projects of re-building, widening the streets of St. Peter Port, reconstructing some of its buildings, making new roads and public works of many kinds.
The experiments continued over a period of 20 years, by which time the people of Guernsey had developed from a depressed unhappy state to a position of prosperity and happiness.
The following brief quotation shows how improved was the situation as a direct result of the wise and statesmanlike action of the Island Parliament.
Daniel de Lisle Brock, to whom, it seems, much of the credit must go, said in 1827:
“To bring about the improvements which are the admiration of visitors and which contribute so much to the joy, the health and well-being of the inhabitants,
the States have been obliged to issue notes amounting to £55,000.
If it had been necessary and if it were still necessary, to pay interest on this sum, it would be so much taken from the fund earmarked to pay for the
improvements made and to carry out new ones.
To talk of joy, health and well-being is a very different story from the position in 1815, when it was little or no trade, little or no disposable revenue, and no prospect of employment for the poor.”
But this happy state of affairs was not to the liking of everyone, and opposition to the idea of the Island States creating their own “debt-free” money
had been growing over the years, particularly among the banking interests on the island.
A new bank, called the Commercial Bank, was founded in 1830.
This institution, together with the old bank, failing to prevent the growing prosperity of the islanders, began to issue notes at its own discretion, flooding the island with paper money.
Reference has already been made to the care exercised in deciding the quantity of money to be issued by the States, and now Daniel de Lisle Brock sought to restrain the private banks from this anti-social activity.
There remains on record his spirited speech to the
States meeting held in September 1836 on this subject,
and the following two extracts are of particular interest:
“No one has a right to arrogate to himself the power
of circulating a private coinage on which he imprints for
his own profit an arbitrary value.
With these facts before our eyes we must realise
the necessity of limiting the issue of paper money to the
needs and customs, and the benefit, of the community
in general. Permission cannot be granted to certain
individuals to play with the wealth and prosperity of
In spite of all, however, the banks finally won the day.
Despite a careful search of the records, no explanation of
what actually happened can be found — merely an
exchange of letters between representatives of the banks
and the Bailiff of the Island.
In this, the former suggested that the States should cease to make further issue, should withdraw £1 ,500 from circulation, and have no more than £40,000 in circulation.
To this proposal the Bailiff agreed.
Having read the account of his fighting speech to the States, it is difficult to understand what combination of forces caused him to give way.
But at least it can be said that the inhabitants of the island benefited materially from the monetary experiment which took place, when the island Parliament created its own money — ‘interest free’ over 150 years ago.
Although the original experiment came to an abrupt end in 1836, there was a further development in 1914, just after the outbreak of the first world war.
The demand for an increase in the supply of money was then so great that the Royal Court passed an Ordinance making State notes and those issued by the Banks legal tender.
But the Banks were prohibited from increasing their note issue, and all additional notes were issued by the States.
There was a great demand for these States notes, and they first had to be printed locally by two firms in the island:
the Star Company and the Guernsey Press Company,
who were able to provide what proved to be very serviceable five shilling and ten shilling notes.
These were later replaced by notes printed on proper bank-note paper with the customary watermark.
The local banks have now been absorbed by the Big Five, so that there is no other local note issue, other than that of States notes which circulate alongside the more familiar Bank of England notes.
Readers who would be interested to follow up the ideas contained in this pamphlet are recommended the following publications:
Inflation — is there a cure? by Edward Holloway.
Expansion or Explosion by Antony Vickers. The Bodley Head.
Economic Tribulation by Vincent Vickers (one time Director of the Bank of
England). The Bodley Head.
Great Britain & World Trade edited by Edward Holloway.
All the above are obtainable from the Economic Reform Club & Institute 2a Queen’s Parade London N 10
Memories of Edward Holloway (1906-1985) by Jim Bourlet
Edward Holloway was my predecessor as Hon Secretary of the Economic Research Council a position he held from 1954 to 1985 when he unexpectedly died at the age of 79.
He had been a founder member of the Economic Reform Club (the original name for the embryo economic think tank which later became the ERC) in 1932.
His autobiographical account “Money Matters” (published posthumously in 1986) gives a vivid account of the personalities and enthusiasm which accompanied these events.
Suffice to point out that in 1932 Edward was a young man co-ordinating a group of senior and much older statesmen whereas when I first met him in 1969 he was an older man whose experience I greatly respected but whose circle of colleagues I could by then only partially share.
At that time I was involved in the debate on Britain’s proposed entry to the EEC.
Trade issues were central to this debate and so my first introduction to Edward was at the Commonwealth Industries Association after which he invited me to become an ERC member.
Economic Research Council dinner meetings were mostly held, during the 1970s, at the St Ermin’s and Washington hotels.
“Political correctness” had not yet inhibited the pleasures of cigar smoking with coffee during the speaker’s after dinner address and Edward always enjoyed a Hamlet – a little tradition which I seem to be the only member to keep up to this day!
Afterwards I often drove Edward back to Victoria Station for him to collect the late train back to Brighton.
Those short drives were a moment of reflection and relaxation as we discussed the speaker’s points, commented on the turn-out and concluded whether it had been a good meeting – or just an ordinary one.
These were the times when I most wanted to understand what, after so many years of thought and experience, he understood (and I didn’t), what was wrong with the monetary system (which the textbooks didn’t reveal) and what the associations which he had been central to forming and maintaining, needed to achieve.
My curiosity was not simplistically rewarded because Edward was gentle and indirect rather than forceful – preferring to show with a kindly smile, his approval when one mentioned a point with which he agreed.
He had a keen intellect but this never lost him friends.
Indeed his ability to draw in to his orbit a great variety of forceful characters was quite remarkable.
Central to his concerns was monetary policy.
The period 1920 to 1935 had witnessed the return to the gold standard, the reversal of that policy, the mismanagement of monetary affairs (Keynes argued that interest rates had been kept ruinously high in relation to the “natural” rate which would have balanced investment and savings at the time) by the Bank of England, embarrassingly high profit levels by the commercial banks – and all this amidst high unemployment, underused industrial capacity and widespread hardship.
“Money” – its definition, creation and reward had to be the central concern for London’s first economic think tank with the Economic Reform Club’s members drawn from the ranks of top bankers, politicians and businessmen.
Money, of course, is simply tokens of transferable debt.
Any debt owed by an individual, an organisation or a whole community which has a high likelihood of being discharged can be passed to a third party in settlement of a transaction or hoarded to accumulate rights to future goods and services.
Overall indebtedness must grow, by definition, if the supply of money is to increase and that increase is the precondition for increased transactions and thus increased economic activity and employment.
What happened in the interwar years was that private individuals and private firms chose to reduce their debts (or failed to increase them sufficiently) thus contracting the money supply whilst the government failed to increase community indebtedness on a sufficient scale to offset this.
Deflation followed when a slow-down in the velocity of circulation compounded the initial mistake.
Edward’s reaction slow-burned in cold fury, leading him to organise meetings, establish organisations, stand for Parliament, give lectures in schools and universities and to devote his retirement years to the cause to the very end.
John Maynard Keynes he respected but felt that he had befuddled the main issue.
At the same time he saw Irving Fisher as mechanistic, and so he preferred the contributions of often lesser known writers such as Frederick Soddy (though not Major Douglas), as interpreters of monetary processes.
Edward knew that the first task was to gain widespread agreement on what constituted money creation.
Bank lending to private individuals does, of course create debt and thus money.
It seems almost incredible to us now that it took a mighty political effort to persuade the government to set up the Radcliffe Commission which, in 1959, insisted beyond argument that banks do indeed “create” money.
Edward played a key role behind the scenes in all of that, and the result marked, I suggest, the highest achievement of his career.
But beyond this basic point, the Radcliffe Commission’s report was somewhat disappointing.
The report needed to go further on the issues of “seignorage“, on non-interest-bearing current account balances, overall control of interest rate and credit policy, the circumstances when increased government indebtedness is appropriate and the justifiable rate of interest which might be payable on government bonds.
Notes and coins are produced at trivial cost and we keep these tokens of debt which “promise to pay the bearer on demand…” in our pockets without claiming interest payments.
The benefit handed to the government is equal to the interest payments we have foregone or, put another way, the face value of the notes and coins.
This benefit or value is called seignorage.
(from Old French seigneuriage “right of the lord (seigneur) to mint money”)
If, in a community, individuals are prepared to increase substantially their holdings of notes and coins, a government can boost “national” income almost costlessly by printing more money.
Edward noted events in the Channel Islands when the local authorities there had succeeded in this way and wanted the matter to be more clearly understood here in London.
Beyond this, which organisation should gain the benefit from individuals’ preparedness to forego interest payments on sums held in non-interest-bearing bank current accounts the government or the bank?
Edward tended to the view that this benefit should normally accrue to the bank to offset their costs for their various services.
What was of greater concern to him was that, if the banks created money through their ability to issue loans to individuals and companies against their credit worthiness, then their collective influence on the overall sums is highly significant in political terms.
He railed against the ability of the banks to exercise monopoly control of the power to “liquefy the nation’s credit” which gave them the ability, during the upswing of the credit cycle, to irresponsibly generate a boom, and the ability, during a downswing of the credit cycle to deepen a depression.
Fredrich Hayek sought to remedy this through greater competitive forces within the banking industry.
Edward, being that much less of a free marketeer, advocated more enlightened and more hands-on central bank guidance.
This issue remains unresolved.
Nonetheless, it can be said that we have moved towards the solutions advocated by both camps.
Hayek would be pleased today to count the vastly increased number of banks, the diminished influence of Britain’s “big 5” (now I suppose “big 3”) banks, the internationalisation of competition in banking and the encroachment of other firms even supermarkets into banking territory.
(My comment: There might be competition between banks – but not between currencies. There is usually just ONE currency used in ONE country not many that follow different rules – unfortunately – experiments to do so – like the Wörgel (Austria) were prohibited by the Central Bank – check out Bernard Lietaer)
Edward would be pleased to see the independence of the Bank of England and the freedom of action (and transparency) of the Monetary Committee, a body chosen for their expertise rather than allegiances, now has in deciding the key issue of money’s price (interest rates) in the marketplace.
So far so good, but when is it appropriate for governments to substantially increase state borrowing?
Certainly not, Edward told me, when interest rates are high because there is no need at such a time, plenty of reflationary “ammunition” exists in the potential to reduce interest rates, and if full employment exists at these rates, government borrowing would simply be inflationary.
On the other hand, if interest rates have reached rock bottom then the government may need to borrow and spend.
That then raises the question of what rate of interest the government should pay to the banks which purchase the bonds.
Edward’s view was that since government bonds are totally secure, interest payments on them to bank holders should be very little more than the deposit interest rates which the banks pay to balance their books in fact a margin close to the administration costs involved.
In this way, he was prepared to argue that the exchequer could save substantial taxpayer expenditures.
Edward died in 1985.
One might say that this was at the beginning of “the long boom” during which he could, had he lived, have spent his retirement in the observation that much seemed temporarily well.
I think however, that he would now be concerned.
Concerned that prospective excess government borrowing must fuel an unsustainable upswing in the credit cycle and concerned lest Britain fall for the superficial attractions of abandoning the pound sterling in favour of the euro.
And where did all this leave Edward in terms of party allegiance and in his views on other issues?
The Economic Reform Club and then later the Economic Research Council, he steered along strictly non-party political lines.
I have, through the ERC known as many members of the one party as of the other as well as (remembering that Edward stood as a Liberal candidate for Parliament) politicians of other views.
Heads of industry and leaders of Trades Unions have addressed our meetings and we have been supported as much by maverick MPs on both sides as we have been by those following the party line.
The ERC has every right to pride itself on this long history of independence from any party label.
And it has also avoided any label for economic doctrine.
It is not just in favour of free market economics, nor just an advocate of macro-economic balance.
It is not, taking the longer term, “monetarist” in the 1980s sense.
Its guidance comes from an open minded, common sense, networked approach to economic problems a home of sanity with a long run reputation for integrity, interest and companionship in pursuit of solutions for problems we can’t always pretend to fully understand. (very good point! Only God knows it all.)
On other policy issues I found Edward to be shall we say an “antiextremist”.
His sympathy for Commonwealth countries and his correspondence with war veterans associations, his appreciation of the complementary nature of inter-continental trade, his bitter distaste for the dishonesty of many of the arguments used by the Europhiles inclined him to resist Britain’s ignominious collapse under Edward Heath’s obsession, into the EEC.
But for all that, issues concerning money dominated our conversations.
On one occasion I remember saying to him that I had bought some gold coins.
Through a smile he said that “it is a good investment, but I hate you for it”!
So many memories.
On another occasion I found myself at a party at his home in Brighton.
It was a summer occasion out on his lawn which was as neat and trim as only a lawn on chalk country can be and I remember the occasion for the guests such as John Biggs-Davison MP and the gentle atmosphere of Edwardian elegance.
if you checkout the latest youtube videos from the club:
it seems all about “growth” and “jobs”.
Don’t ask for meaning.
Growth is not always great – think about cancer or the destruction of the environment – growth of portions of depressed population with or without meaningless work. (the most useless work gets paid best – ask London’s Ex-CityBoy)
You really should check out Bernard Lietaer – and consider keeping your open mind despite all the brainwashing you encountered at TV, university and school.
You should consider training your consciousness and connect more dots and come up with better insights and solutions than ranting about old paradigms for happiness – growth and jobs.
What about sustainability? Growth – regardless environmental and social costs?