Sat. May 25th, 2019

Wales can be a prosperous sovereign state, printing its own debt free currency annually to match its GDP

The basic message of this article really is stated in the title. That really is the basic point to be made here. Wales can be a sovereign, independent, prosperous, self sustaining nation state through the issuing of its own debt free currency to match its annual GDP (Gross Domestic Product) – which currently stands at around £62,190 billion pounds according to the 2017 GVA (Gross Value Added) balanced figure for Wales by the Office of National Statistics – GVA being a very close indicator of GDP.

In other words, if the current Welsh government declared Welsh sovereignty today, a sovereign Wales could print approximately £62,190 billion pounds debt free right now and, on top of the tax take, spend it on Wales and its people as it sees fit.

Sovereignty

The process of sovereignty is a simple matter. Yes, it is to do with love of country, people, nationhood, a sense of place, accountability and the ongoing spiritual and historical link with the past, present and future. But most people seeking to reaffirm sovereignty also know that economics are key to the nuts and bolts of real sovereignty.

The World Held to Ransom

Those studying recent and not so recent world history will know that, for many centuries if not millennia, the civilisations and nations of the world have been held to ransom, often literally, by the international bankers, financiers, monopoly/crony capitalists and transnational corporations who care not for the concept of nations, borders or autonomous peoples and countries, and who have been practising their own very special take on the magic money tree for many many years. These are neo-liberal in the sense that they want free unregulated markets and laissez faire economics for markets that they mostly control or monopolise.

Quotes:

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. – Henry Ford

The process by which money is created is so simple that the mind is repelled. So said Canadian economist John Galbraith. And he was right too.

As can be seen through much of history, whomever controls the money supply of a country is essentially in charge of that country. Sadly and nonsensically, most of the world’s countries are not really in control of their own money supply but are rather controlled or misdirected by state borrowing, by whomever controls their central bank and by the general money supply created via the private high street banks – as mentioned, most of these by now being controlled by a collection of international central bankers and globalists who care little or none for countries or for the concept of countries, nations and definable borders and cultures.

Money From Thin Air

Over the centuries this cabal, or cartel, have been crafting their well honed technique of fractional reserve lending – essentially creating the vast majority of new money out of thin air, or, to put it another way, conjuring up magic money and lending it to people with interest, with no real limit to the amount of new private money they can create.

In the present UK state, the private high street banks create 97% of the general money supply in the form of everyday loans created out of nothing and, instead of mostly being directed at the productive economy, are being disproportionately lent as mostly consumer and mortgage lendigng. This skewed over lending has inevitably helped to create an overinflated economy and a culture of credit bubbles and boom and bust, especially in regards to mortgages and the resulting bloated house price market.

The UK government and state can also be said to be an unwilling host that’s victim to this parasitic force in general. For years, rather than creating its own debt free currency, it has borrowed most of the money it needs to spend on the countries of Britain, by selling gilts or bonds as IOU’s to entities such as insurance companies and pension funds, unknown overseas sources and the Bank of England – money which it has to pay back to these bodies plus interest. This incurs compound interest and an ever increasing debt for the UK government and state which it can never realistically pay back.

But all of this debt is all utterly avoidable and unnecessary so why do governments and countries choose to bizarrely accept this present flawed situation and acquiesce to these international financial barons? Whatever the reason, there seems to be a general consensus in all the nations of Britain that the UK state, with its doomed economic situation and immoral foreign and domestic policies, is flapping about in its final death throes.

An Opportunity Looms

This brings incredible opportunities for Wales, for all the other nations of the island of Britain and for politics in general. All of this can be changed overnight. It’s time for Wales and the Welsh Britons to show the way once more. How? By a Welsh nation state issuing its own debt free currency, totally free and with no debt attached, that’s how. A system also called Sovereign Money as advocated by groups such as Positive Money and many others from all across the political spectrum.

As Cardiff’s much admired Harry White stated with his usual gusto even when he was well in to his late eighties “The banks shouldn’t create money out of thin air and charge interest on it – the state should without interest”. This isn’t a left or right thing, this isn’t a statist, socialist or capitalist thing. No, this is something far more exciting – the creation of debt free currency which would mean being freed from perpetual debt enslavement and having the freedom to prosper as a self sustaining country that can open out to friendship and trade with the rest of the world as it wishes.

So how will economic sovereignty via a debt free currency work for Wales?

In line with what groups such as Positive Money and others have recommended for a debt free, sovereign money system, in its basic form the Welsh currency, overseen by the government of the day, will be printed /created free with no debt or interest owed to anyone at its point of creation, and this money kept in a state treasury account of the publicly owned Bank of Wales. The new money will simply be placed in the central treasury account every year and, to avoid inflation, would be inline with whatever the GDP figures for Wales are for that year. If the GDP of Wales is approximately £62.1 billion (as GVA was as an indicator in 2017) then £62.1 billion will be created and placed in the account. If the GDP is £100 billion, £100 billion will be placed in the account etc.

Welsh Monetary Creation Committee

A Welsh monetary creation committee would need to be carefully chosen by the Welsh Parliament and by representatives from all Welsh areas of life including SMEs, industry, agriculture etc. The monetary creation committee would discuss and decide on the annual total currency figure to be created each year and will also need to make sure that the right amount of money goes to the real, productive economy and to SMEs in Wales which will in turn increase GDP. And this monetary committee would also be answerable and accountable to the Welsh Parliament at all times and also accountable to the people of Wales, with their meetings and discussion available for all to see and meetings preferably open to the public to attend and observe.

The debt free money created in line with Welsh GDP would either be granted to the government of the day to spend and circulate in to the Welsh economy as it sees fit or by lending it to the high street banks which would then act as brokers or intermediaries and would then lend this money on to businesses and the productive economy under the committee’s guidelines as stated above. Or a mixture of these two options could be implemented.

How this money is spent in general will also depend a great deal on the government of the day and the democratic mandate given to it of course i.e. a government who believes in limited interference, in a more mixed economy or in having more emphasis on public spending and state involvement. Higher or lower taxes would also be a matter for the government of the day of course although it’s hard to see how taxes, especially income tax, couldn’t be substantially lowered or even possibly eliminated under a successful debt free system.

High street banks and mutuals including co-operatives, community banks and credit unions will also be actively encouraged to flourish and offer competitive and comprehensive services to Welsh citizens, including catering for consumer and mortgage lending. And in the long term, all of these would be left to fend for themselves and to stand on their own two feet as capitalism in its everyday form dictates, and not be bailed out by the state if they get in to trouble.

The main difference would be that high street banks could only use real money that is in existence and could not create money from thin air when creating new loans as currently occurs.

And the drive towards a solely digital and cashless society so beloved of the globalist bankers could be reversed in Wales rather than increased, with the current 3% cash in actual coins and notes presently in circulation increased to perhaps 10% or more – allowing more Welsh citizens to buy, sell and trade freely without having to rely on tedious overbearing technology and digital tracking software as the only option available to them.

Welsh exports figures are also extremely healthy – worth £16.9 billion in 2017 and closely aligned to imports according to stats Wales. Wales also exports a great amount of the electricity that’s generated in the country to the rest of the UK state, and the vast amount of Wales’ waters and other natural resources are currently also given away without any Welsh regulation or real economic benefit to Wales as a country.

What is the current spending on Wales, how much is currently collected here and how will a sovereign Wales be much better off with its own debt free currency?

GVA of Wales as an indicator of GDP:

To get to the basics and the crux of things again – according to ONS (Office of National Statistics) figures, the GVA of Wales in 2017 was £62,190 billion (balanced). GDP figures aren’t currently officially produced for Wales by the ONS but they are normally slightly higher than GVA anyhow and GVA gives a very reliable and close estimate of GDP. GVA equates to GDP before accounting for taxes and subsidies on products (incidentally, the GERW report by the Wales Governance Centre gives a Welsh GDP figure of £61.5 billion for 2014-2015).

Therefore if a debt free money creation system existed for Wales for 2017, a sum of £62,190 billion would simply be put in the account of the Welsh treasury for the Welsh government of the day to spend in Wales as they see fit, and on top of any tax money collected.

Tax collected in Wales:

Overall tax collected in Wales in 2016-2017 was £18,948 billion (HMRC figures which includes the population split for North sea revenues) but doesn’t include council tax collected by Welsh councils. According to The Welsh Tax Base Report by The Wales Centre for Public Policy, in 2016-2017, £1.4 billion was collected in Wales in council tax and £962 million in business rates.

Therefore, approximately £21,310 tax money was raised in Wales in 2016-2017

This means that, by looking at one year (2017) as an example, together with debt free money creation, the money raised in Wales each year could be at least £83,500 billion each year.

Spending- how much does the UK state currently spend on Wales?

According to ONS figures, total managed spending on Wales in 2016-2017 was £39,334

What does this all mean? It means Wales can be a free, prosperous and a far better off nation right now

As noted, by looking at 2016-2017 figures as a guide, a Sovereign Welsh state, can create an estimated £62,190 billion pounds of its own debt free currency which reflects its GDP (or GVA in this case).

By adding to this the current tax money of £21,310 billion presently raised in Wales, this would mean that Wales would have an estimated £83,500 billion each year as basic revenue to spend on this country and its people, compared to the roughly £39,334 billion that’s currently spent on us.

This means that, by looking at 2016-2017 figures, in a sovereign state of Wales issuing its own debt free currency we would have at least £44,166 billion more available to spend on us as a country than we currently have being stuck to the UK government, or to the EU or any other union for that matter. After all, why should any other neighbouring nation or any union have to keep bailing us out and subsidising us when we can pay for ourselves?

A pegged Welsh pound. The options of fixed pegging and a dual or parallel currency

It’s also suggested that, for the foreseeable future the Welsh currency could be pegged to another currency such as sterling. This could be a parallel or dual currency system in that a, say ‘Welsh pound’, could be de facto pegged to a currency such as sterling at 1:1 parity like the Irish punt was to sterling very successfully from 1928-1978. With all the necessary and proper safeguards in place, both currencies could be accepted and be exchangeable in Wales specifically. A more flexible or free floating currency could also be considered in future of course.


Conclusion

Wales can be a rich and prosperous nation. We can throw away the bizarre outlook that has seen elements of the Welsh and British state political class openly promoting a begging cap and bowl mentality for Wales in London, Brussels and elsewhere for the last 400 years.

And we can mostly do away with the long drawn out debates about closing the deficit, balancing the books, of ‘fighting austerity’ and of lower or higher taxation because, as contentious ‘hot issues’, all of these become largely meaningless and redundant when looking at the option of a debt free currency system. And when another Welsh or UK politician or person disdainfully or genuinely asks ‘how can you afford to be independent’ we can tell them straight – by simply printing our own debt free currency.

And this I believe is exactly what Wales will need to do to become the prosperous sovereign state it deserves to be and is rapidly moving towards being.

In 2016 I registered a non left/right aligned Welsh political party, Cymru Sovereign, which has a Welsh debt free currency and Welsh sovereignty at its core – the first time for a Welsh party to do this as far as I’m aware. But the principle is obviously bigger than any party and also more important than any tired left/right paradigm that the decaying mainstream media is still desperately trying to push on us – it’s a core principle of sovereignty that should underpin any true sovereign nation state.

Wales can circumnavigate around this current system of debt enslavement which I believe is robbing all of us of our futures, and can become the prosperous nation state it really deserves to be. The rebirth of hope awaits us all.


Note to the reader:

The full version of this article by Gruffydd Meredith can be found on ‘The Sovereigner’ website. To view it please click HERE.

4 thoughts on “Wales can be a prosperous sovereign state, printing its own debt free currency annually to match its GDP

  1. Thank you Gruff for contributing this really excellent article. This is exactly the sort of thing that we seek to have on our website, serious articles tackling the economic challenges that Wales faces head-on. I popped over to the Sovereigner website as well to get the expanded version of it there.

    If I may, however, engage in a constructive debate, I’m not entirely convinced by the argument that the current monetary system is a scandal and we can (or should) create a ‘debt-free’ system in Wales. There are good reasons why even Norway, for example, that sits on a giant sovereign wealth fund that far exceeds the state’s liabilities, still creates government debt through the banking system.

    First things first: we certainly agree that it’s necessary for new money to be created every year to match the increase in the available goods and services to spend it on – the GVA. If this did not happen then there’d be too little money in circulation, and the value of money relative to goods and services would increase – causing the prices of goods and services to go down – so we’d have a 1930s-style deflation situation leading to deep economic depression.

    That extra money has to be created by someone, so it’s a question of whether that’s done by banks (with state sanction) or directly by the state. Currently all countries in the developed world do the former. When a new bank loan is made, the money is created ‘out of thin air’ and enters the economy for the first time.

    However, when that loan is paid back, it ceases to exist and leaves the economy permanently.

    Therefore the ‘free money’ that continues to circulate in the economy consists of loans that have not been, and possibly never will be, paid back: bad debts that have been written off, and government debt securities (i.e. gilts) issued by the central bank (currently in our case the Bank of England) that are generally owned by pension funds and insurance companies as a predictable source of long-term income to cover their liabilities. Without debt-based currency, these institutions would be forced to seek riskier investments, which wouldn’t necessarily be a good thing for their customers i.e. most of us.

    Now there are, no doubt, abuses around the edges; and it’s possible to argue (as I have myself, elsewhere) that this system amounts to a regressive subsidy of (mainly rich) bondholders by (mainly poor) taxpayers – as has happened every time we’ve had a Labour government which has lost control of public spending and overborrowed – but I’m still not convinced that there’s anything fundamentally scandalous or flawed about this. Crucially, the fact that the newly-created money is debt, even if the interest rate is close to zero (as is the case today), is a vital element in preventing too much of it being created and a Weimar Republic/Zimbabwe/Venezuela situation ensuing.

    As for how all this impacts on Welsh independence, I agree 100% that Wales will need its own currency from Day 1, since otherwise if there were any fiscal deficit at all then we’d be forced to borrow Sterling to cover it and that could get very expensive. However, an independent Wales (and its citizens) will still need to import goods and services from overseas, so it will either need its currency to be ‘convertible’ (i.e. overseas suppliers will accept Welsh Pounds at an agreed exchange rate relative to Sterling, Dollars or Euros) or it will need to build up a reserve of foreign currency gained by selling goods and services. No matter what, foreign governments and suppliers are bound to be sceptical of a Welsh currency in the short term, leading to a sharp drop in its value to relative to Sterling. I really think this is inevitable, but it would be far worse if the Welsh central bank (or its equivalent) were unrestrained by the discipline of interest rates.

    A sharp drop in the ‘Welsh pound’ relative to Sterling wouldn’t even be such a bad thing, necessarily: by making Welsh goods and services much cheaper than equivalent English ones, it would give a huge boost to Welsh exports and bring in precisely the reserve of foreign currency that the country would need. Nevertheless, if not handled correctly it would lead to real hardship for individuals and business that held debt (such as mortgages) denominated in Sterling, since the real value of these debts would increase sharply and make them much harder to service. Therefore, a plan for Welsh independence would need to ensure that any such debts were legally converted to Welsh currency straight away. This, inevitably, would lead to commercial lenders being reluctant to lend anything at all to Welsh customers as soon as independence started to become a realistic prospect, so a pre-independence Ein Gwlad government would need to address this. Having a credible plan for a Welsh central bank with checks and balances to prevent excessive devaluation and hyper-inflation will be indispensable.

    1. Thanks Stephen. I’d say that the main points of a debt free currency created by the democratically accountable government of the day would be that it would mean countries are not open to being held to ransom/never ending debt to individuals or groups which have no interest or concern in the well being and prosperity of that country, with these interests often only wanting to subjugate, control and/or asset strip the country of its wealth.

      The other far more exciting point is that it would mean that a country such as Wales would become far more prosperous in every sense of the world. How the debt free money is shared out would be a matter for the government of the day – it could be a central decision or shared between local authorities or banks, or even more bottom up than that. Private high street banks and community banks and mutuals would still be able to loan their own money as a debt that customers would have to pay back of course but the difference is that they could only lend money that savers gave them or that they’ve made from profits or admin/service charges etc., rather than creating money from thin air/fractional reserve lending. The high street banks/community banks could also borrow money from the government debt free created currency and act as brokers, with the caveat that they loan this on the productive economy specifically. This is broadly the sovereign debt free money system promoted by Positive Money but Wales could obviously have a bespoke version of this.

      I’ve also suggested in the article that a Welsh currency (Welsh pound say) could, for the foreseeable future, be pegged to another currency such as sterling at 1:1 parity like the Irish punt was to sterling very successfully from 1928-1978 so that both currencies could be accepted and be exchangeable in Wales specifically. In other words the Welsh pound and sterling would be accepted, exchangeable and used in Wales but the Welsh pound perhaps wouldn’t necessarily be accepted in England and elsewhere – especially to start off with – I think even the most ardent Welsh patriot has a liking and an obvious familiarity with sterling as a currency which they’d be cautious to instantly ditch.

      Like you say, this would mean that an independent Wales (and its citizens) will need to ensure that a reserve of foreign currency is kept – gained by the selling of goods and services – to pay for any imported goods – a reserve basket of sterling, euros, dollars, yen, renminbi, rupee etc. Perhaps in general also, this situation would inspire Wales to be as self sufficient in food and goods as it can be which would also increase its GDP, lower pollution levels, and boost its employment and general prosperity levels. This whilst also trading with our closest neighbours as well as the rest of the world across the seven seas like Wales has always done.

  2. Thank you Gruff.

    I can’t deny the appeal of your vision. I fully agree that for a country to control its own currency is one of the most valuable gains from independence, and one of the most powerful instruments to promote economic growth. My concern is that, out of an entirely understandable desire to ‘stick it’ to the financial elites, an independent Wales could fall into some of the economic bear traps that other countries have fallen into. We can do much better than we are doing today, but we can’t overcome the laws of economics.

    The law of supply and demand in economics is what the second law of thermodynamics is in physics – nothing violates it, and if anything appears to then you know it’s wrong.

    Forgive me if I begin by rehearsing some very basic principles for the benefit of anyone uninitiated who has persevered to read down this far. Everything in economic life depends on supply and demand. Anything – whatever it is – gains value when the demand for it exceeds the supply, and loses value when the supply exceeds the demand. As individuals and nations, we prosper when we are able to supply what other individuals and nations demand: we all need to make the stuff and do the stuff that other people want, and that they’re prepared to pay for. The role of government economic policy is to make it as easy as possible for us to do that.

    This is true of money as well. Money’s value, too, is derived from supply and demand. The supply of it is what governments and banks issue. The demand for it arises from the existence of things that people would like to spend it on. When too much money is issued, the value of money decreases, so prices go up and you get inflation; too little money, and the value of money increases, prices go down, and you get deflation. When the economy is in a steady state, a small amount of inflation is desirable to encourage people to spend their money rather than hoard it: but too much inflation, or any deflation at all, are always Bad Things.

    OK, so much for the basics. My problem with the idea of an interest-free government-printed currency is that I don’t believe any government ever has sufficient information, or for that matter competence, to print out the exact amount of money it needs to each year. It’s bound to get it wrong more often than it gets it right, and the consequences of that are serious: not enough money and you risk a 1930s-style economic slump; too much and you get hyperinflation. A regulated market system, where the amount of money issued is determined by how much people want it and what they’re prepared to pay (in interest) for it, simply has a higher chance of getting it right; it won’t do so all the time, but it will do so more often than a government will.

    Now let’s consider exchange rates. A country’s currency also varies in value according to supply and demand. If the currency is in demand because lots of stuff that people want can be bought with it, then the value goes up – this is how Sterling became overvalued in the 1980s when North Sea Oil production started to ramp up. If the supply of currency exceeds the demand because the too much of it gets issued, or because the country is failing to produce goods for export, then the value of it goes down. Of course, that triggers off a virtuous circle because if a country’s currency goes down then its exported goods become cheaper for everyone else, increasing the demand for that country’s goods and pushing the value of its currency back up again. If your currency gets too valuable, your goods become too expensive and overseas customers stop buying them, damaging your economy – again, this was Britain’s problem in the 1980s.

    Countries that rely on exporting goods need their currencies to be kept low. That’s why keeping the Euro zone together is crucial to Germany’s economic strategy, since the value of the Euro is much lower than a Germany-only currency would be. It’s also why China goes to extreme lengths to prevent its currency from increasing in value relative to the Dollar.

    For an independent country to keep its currency pegged to that of another country, it either needs to use that country’s currency directly – in which case it really can’t afford to run a fiscal deficit at all – or regulate the supply of its own currency to keep it aligned with the target. The latter is what Ireland tried to do from 1928-1978 (with Sterling as the target) and the UK tried to do from 1987-1992 (with the Deutschmark as the target), and in both cases it led to economic slump because of the overvaluation in the currency. Ireland’s ‘Celtic Tiger’ period only began after their peg to Sterling was broken, while the UK’s exit from the ERM in 1992 started 16 years of uninterrupted economic growth until the crisis of 2008.

    In summary, for Wales to prosper it needs its own, correctly-valued currency. The correct value for a Welsh currency, for now at least, would be lower than that of Sterling, reflecting the fact that we’re currently poorer than the rest of the UK. However, a lower-valued currency would be good for our economy, since it would stimulate industry and agriculture by making Welsh produce more attractive to overseas customers. This in turn would bring in the revenue we need to balance our fiscal deficit and invest in our infrastructure, that we’re denied while still inside the UK. However, I don’t believe that any government in the world can gauge the correct value for a currency better than the market can.

    1. Thank you,

      I haven’t heard any monetary experts claim any system is going to be perfect in deciding or predicting the exact correct level of money needed. This is the case with the present system which includes the Monetary Policy Committee of the Bank of England’s decision to increase or decrease interest rates – that’s not an exact science as things stand either. And the present system of high street banks creating money has no kind of real science or logic to it, and is not really decided by the market – it’s a situation where a monopoly of around five or so high street banks create money in the forms of loans – not based on how much they think should be in the economy but based solely on profit and shareholder interests – a reason why credit bubbles and boom and bust etc. keep happening.

      In other words, I don’t think the present system is a real market determined system anyhow – interest rates are decided by a Bank of England committee and the 97% of money in the economy in general isn’t really decided by the market either but decided by a small oligopolistic group such as senior members of the top (globalist minded) five high street banks in Britain (and it’s a similar situation in most other places I’d say), who currently decide on 97% of the money supply through the creation of new loans, with no objective oversight in terms of the overall economy – they decide on and have a monopoly on the amount of new lending, and therefore the amount of most of the money in the economy – and all with no real scrutiny or accountability to anyone/anything.

      I’d argue that a debt free currency would encourage more of an open and varied market approach than the current one dominated by a few high street banks because, although the Monetary Creation Committee in a debt free system would decide on how much to increase (or decrease ) the money supply to meet demand in line with inflation targets etc. (in a fairly similar way that a Bank of England committe do now with interest rates), it would be up to the new private and community banks to compete to offer the best loans and variety of services etc. to their customers, and to make profits and find new markets as they fit. The only difference is that these new banks couldn’t make up new money from thin air like they do now but would instead use real money that is in existence and that they themselves earned through the offering of their services and through the use of people’s savings etc.

      I think the level of competition, everyday capitalism and variety would therefore increase rather than decrease, and the stranglehold and monopoly of the five globalist minded high street banks and their crony/monopoly capitalism would be drastically lessened – although they could still compete for customers etc if they wanted (but not create ‘naughty loans’ from thin air!). And it could also be argued that the debt free money system and its Monetary Creation Committee would be inclusive of more people of all wealth levels and therefore more fit for purpose. And the process of creating the currency itself would also be accountable to parliament and the people, so surely a far less cronyistic and megalomaniacal system than the present one.

      Good points in terms of pegging and possibly having a lower valued pegging of a Welsh pound to sterling – that could be good for the Welsh economy and exports etc.

      The ‘Modernising Money’ book by Positive Money is a very good guide on debt free currency creation by the way. Not that any one group or movement has to be followed in everything they say in this matter but it’s a handy guide in terms of how the engineerial/mechanical nuts and bolts of the basics of it would work just the same. https://issuu.com/localmoney/docs/positive_money_-_modernising_money_

      As Positive Money also mention, the choice isn’t really between a perfect market determined system one one hand and one decided by committee on another, but the point is to have a system in place that ensures that the nation’s money and economy isn’t left at the mercy of the interests of internationalist banks and bankers who rely on having a monopoly and control of most of the markets – and who don’t care about the long term well being of a country’s economy in general. Or to put it another way, it’s unlikely that a debt free currency system could do much worse than what these globalist bankers have done thus far..

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