About money

Hello How money is created in your country ? Is your money "Euro" or something else ?

We have the Euro here and in general we like it. But in the 6 Counties in the North that are still part of the UK, they have the pound. Because the pound is dropping in value, a lot of people are shopping across the border and our exporters to Britain are in deep trouble.

In France, we discovered things about money I don't like, I don't know if it is the same for you, I think it should be the same because we share the same money and the same treaties.

As you know, today, money is at 85% immaterial, it is created by private banks when someone get a credit and destructed when he repay it.
In 2007, in the euro zone, the amount of money ( We say M3 in France ) increased by 12%.
In France, the amount of money increased by 215 milliard of euro.

Our economic and monetary system is not good because economy needs money to expand, but money is created by debt, so economy needs people, companies and states to have more and more debts to expand.

But it's not the purpose of what I'm saying.
In 1973, in France, our national central bank has been reformed to adapt it to the future european monetary system of which the Maastricht Treaty in 1993 was the finality.
When studying the Maastricht Treaty in 2005, we found the article number 104 ( article 101 in the Lisbon Treaty ) who prevents the european central bank and the national central banks to grant a credit to their respective governments or public administrations.

In fact, before 1973, and since 1945 exactly, the french state was able to get a credit from the central bank, in the same way people can get a credit from a private bank today, it was like this the state was creating money.

This article 104 prevents the state to create money, and only the private banks can do it since 1973 in France.

One of the consequences of this change is very important to understand.

When the state get a credit from our national central bank, it don't pay interests because our national central bank is 100% public since 1945. Was it the same in Ireland ?

But since 1973, because the state can't get a credit from the central bank anymore, he is condemn to get a credit from private agents ( banks, insurance companies or person living off his interest ) in the financial markets. The difference is the state must now pay interests when he loans money.

Our state public debt is around 1300 milliards of euro. We have calculated since 1978 ( because we have no statistics before this date ) we paid around 1150 milliards of euro only for interests.

I know it's too simple, but it is a good way to understand what I'm explaining.
Without this change in 1973, we wouldn't have to pay each year any interests, each year we are paying around 40 or 50 milliards of interests, it's our secund spending in public spending before military spending and after education spending.
Without this change in 1973, and if governments used all the money used to pay interests to repay the public debt, we wouldn't have any public debt today or only a little one.

Since 1978 our public debt greatly increased from 78 milliards of euro to 1300 milliards. Politics are saying this rapid increase is due to incompetence of successive governments but when we are thinking a little we can't understand why governments became so incompetent like this in one shot. When we are looking in other countries it seems they have a great public dept too that appeared at the same time.

Have the Ireland a great public debt too ? Did it increase like us in the same period and in the same way ?

Our great public debt is an important question in our country because it is used by right politics and particularly liberal ones to justify privatisation of public services, state spending reductions, in general rigorous politics. For exemple Sarkozy put an end to thousands of public employment in education and used the control of public spending as a justification. He is using the same justification for the privatisation of our postal service.
Moreover, control of public spending is an important part of the stability pact of the Maastricht Treaty.

So why did they prevent the state to get a credit from their central bank anymore and what justify so important consequenses ? That is the question ...

We asked it directly to the politician who did this reform in 1973, it was Valerie Giscard d'Estain, as a financial minister of the government, maybe you know him, he's the one who led the convention who have written the first treaty in 2005 we rejected by referendum, and he was a french president from 1974 to 1981.
He explained us they did this reform to put an end of inflation and to prepare the french central bank to the future european monetary system.
And control of inflation is effectivly the main purpose of the european monetary system.
So to fight against inflation we have now 1300 milliards of public debt, and we pay 40-50 milliards of euro each year to private banks, insurances companies and rich people, we privatised a lot of public services, and we reduced a lot of public employments.
Public employment reductions have a lot of consequences too, for example we have now a lot of violence development in schools because there is too few people to keep on eye on our childs when they are playing while recreations.

The next question is :
Is fight against inflation so important to justify all of this consequences ?

( Erf I must sleep, I will continue my explanations another day. I will explain what we know about the liberal ideology that is behind all of this, about inflation, about Milton Friedman etc ... )

Interesting post Sandy - here is Article 101 Article 101

1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as 'national central banks') in favour of Community Union institutions, or bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.

2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.

There are a lot more publicly owned institutions in the EU now than when this was drafted. Will that make a difference, do you think?

1,000 = thousand
1,000,000 = million
1,000,000,000 = billion (=milliard ?)

Sandy that's a great topic - money and where it comes from. You have a number of questions there that I will try to answer but I think there are much better here than me who can answer them better.

The Irish Central Bank, as far as I know, is 'public', whatever that really means.

Quote :

Since 1978 our public debt greatly increased from 78 milliards of euro to 1300 milliards. Politics are saying this rapid increase is due to incompetence of successive governments but when we are thinking a little we can't understand why governments became so incompetent like this in one shot. When we are looking in other countries it seems they have a great public dept too that appeared at the same time.

Have the Ireland a great public debt too ? Did it increase like us in the same period and in the same way ?

Quote :

When the state get a credit from our national central bank, it don't pay interests because our national central bank is 100% public since 1945. Was it the same in Ireland ?

Good question - seems like it should be true ! but I simply don't know, sorry.


Our National Debt is about 25% of our GDP I believe - "NTMA" is the National Treasury Agency - the Govt. body which spends all day calculating the interest on our debt etc.

Quote :

The national debt amounted to €45,453bn at the end of November, up from €38bn at the beginning of the year. The NTMA anticipates budget deficits of €13.4bn in 2009, €11.2bn in 2010 and €8.5bn in 2011.

The cost of servicing the national debt is also expected to soar in the years ahead, to close to €4bn a year by 2011.

http://www.finfacts.ie/irishfinancenews/article_1015516.shtml

Our national debt is going to get bigger though according to some forecasts. It could approach 40% of GDP fairly soon - end of next year. We also just bought a bank which could make that debt even bigger again. We have plenty of cake though

Our debt was pretty high during those years you mention too - late 70s and into the 80s then we paid it off. Incompetent and crony governments are blamed here too but there was also a war situation on this island during those times and wasn't the world economy relatively depressed too ? Perhaps there was a boom in other areas which affected us negatively ?

Quote :

So why did they prevent the state to get a credit from their central bank anymore and what justify so important consequenses ? That is the question ...

Yes it doesn't make sense to my mind at first glance but there must be some reason for it... I suppose the justification is that population is growing, demand is growing, demand for more complex goods is growing etc. therefore it is necessary to have a certain level of inflation and interest because we're swelling towards something, it seems.

Quote :

Is fight against inflation so important to justify all of this consequences ?

It's always a matter of getting balances between different forces right - level of employment with the social and production effects; level of consumerism with the effects of moving inventory and affecting confidence, money supply and all this malarky. I'm convinced that inflation does not apply to certain goods - music CDs, software, DVDs even books. These items are not in short supply at all are they ? Like software - it's not oil or land or food and takes no effort to replicate it to every planet, moon, sun and asteroid in the Galaxy once the initial effort gone to create it in the first place has been invested.

Technology and production methods, I'm sure, have a revolutionary effect on some goods and their prices, availability and their production. Cactus flower had a great quote here recently regarding this - I must find it.

There you go

cactus flower wrote:

This paper money won't solve a thing. There are fundamental problems of a collapsed rate of profit. We are its seems on a global basis too good at producing stuff: people don't have enough money to buy what is produced, so they borrowed to buy when credit was available. The whole thing was compounded by concentration of profits into a small number of hands - these people were simply not able to spend and recirculate as much as they were able to acquire for themselves.

Re-inflating the economy - use your imagination

There is a circle there starting with (I think) machines and production but I can't see the end of it. What do all the overlordships do with their profits ? I'll figure it out tomorrow zzZz~~

http://www.monbiot.com/archives/2009/01/20/a-better-way-to-make-money/

This link was posted by Pax on the Book Club thread. It is about different local ways people replaced money in the last depression - from rabbit tails to local non-interest paper currency that loses value if you hold onto it too long.


This thread is about the abolition of money.
https://machinenation.forumakers.com/theory-and-history-f17/the-abolition-of-money-t1606.htm?highlight=money