The Magic Isle of Guernsey By Bill Still
There is a great deal of confusion about how money should be created and managed today in a sovereign nation and whether anything can fix our current worldwide economic problems. I believe this confusion is deliberately generated by those who stand to profit from the current system- a ‘debt-money’ system that is killing the economy of every nation on earth.
The simple fact is that a nation’s money should be created in the public interest. Unfortunately, that is not the case today in almost every nation on earth. Money creation is given over to private banks through the deception that it is being created in the public interest by national central banks such as the Federal Reserve, Bank of England, Bank de France, Deutsche Bundesbanke, etc.
Many believe that the only solution is a return to gold-backed money. I do not agree. I think this is yet another deception and I believe world monetary history proves this incontrovertibly. To me, the main point to remember is that it is not what backs the national money that is important; what is important is; Who controls the quantity!
Despite the nationalistic- sounding names of these central banks, don’t be deceived; they do not create money in the public interest. Every dollar, every pound, every euro is created as an interest bearing debt- primarily owed to – and the quantity controlled by – the commercial banking community.
The reason solution is two-fold:
1. Forbid government borrowing- no more national debt. Nations do not have to borrow. Nations can create their own money.
2. Forbid fractional reserve lending. This is where banks can lend out 10 to 12 times the money they actually have. Banks must go to “full-reserve lending”
In other words; the only way to end this worldwide spiral of depression is for every nation to return to a debt-free money system. Without the money power firmly in it’s control no nation can really be sovereign. In fact, creating money in the public interest is the very definition of sovereignty.
Fortunately, this is not a new or radical idea. It has been used hundreds of times throughout history, but every time it has been employed, it has been attacked mercilessly by the big banking class who lose profits whenever the idea of money creation in the public interest surfaces. So, this is a timeless struggle and nothing less than survival of the human species is at stake, because the debt the current system is generating is the primary cause of the world’s hunger, poverty and misery, and is quickly
destroying sovereign democratic governments and returning humanity to a nouveau-serfdom system from which it will soon be unable to escape.
Debt-free money creation has been going on in the tiny island of Guernsey for 200 years. Lets take a look.
Despite the fact that the island of Guernsey has only 30 square miles and a population of only 65,000 people and very little in the way of natural resources except cows; their per capita income in 2018 was £52,531 per year, 9th highest among the 200 or so countries of the world.
Guernsey has used a money system since 1817 that can serve as a model for the rest of the world to use to escape the ongoing depression of the 21st century.
Despite it’s proximity to France, Guernsey is actually a British Crown Dependency and, to it’s credit, has never joined the European Union. After the Napoleonic Wars, Guernsey was in dire straits. The island’s roads were mere cart tracks, only 54-inches wide. In wet weather they were virtually impassable. There was not a vehicle for hire of any kind on the island. There was no trade, nor much hope of employment among the poor. The sea was washing away large tracts of land due to the sorry state of the dykes.
Guernsey, like most nations at that time (as well as today) had borrowed heavily from the banks. The States Debt was £19,137 with an annual interest charge of £2,390, but the gross national revenue of the entire island was only £3,000, leaving only paltry £610 per annum to run the entire island. In other words, interest paid to banks consumed 80% of the GDP, thus reducing the populace to a state of pitiful serfdom.
In 1815, a committee of well-respected public spirited elders was assembled to finance the building of a public market near the main harbor, Saint Peter Port, so the farmers could more easily sell their products for export. The cost of the new facility would be £6,000. In addition, fixing the dykes would cost an additional £10,000.
Further taxation of the impoverished island was impossible. Borrowing money from the banks would result in even higher interest charges that could never be paid. The committee made a historic recommendation to remedy this dire situation.
The committee recommends that the expense should be met by the issue of State Notes of £1 sterling to the value of £6,000…. and that these notes will be available not only for the payment of the new market, but also for Torteval Church, roads to construct, and other expenses of the States.
The committee argued that there was little to fear from inflation because the local banks already had £50,000 of their money (notes) in circulation. As a further protection against inflation, the overly cautious citizens of Guernsey placed redemption dates on the notes of April 1817, October 1817, and April 1818.In other words these notes were good for payment of taxes and good as regular money in circulation until the expiration date was reached. At that time, the notes would no longer be legal tender and the state would destroy them.
In this manner, without increasing the States’ debt, it will be possible to finish these works, leaving sufficient money in the Exchequer for other needs.
Once the good citizens realised that these notes would work without the skies falling on the gentle island, additional issues took place in 1820 and 1821. By 1821, some £10,000 of Guernsey notes were in circulation, all created without debt.
[It was] the most advantageous method of meeting debts, from the point of view both of the public and the states finances. Indeed, the public seemed to realise this fact, and, far from being averse to taking the notes, they sought them out eagerly.
The citizenry clearly understood that these Guernsey Notes were clearly government financing in the public interest. They also realised that if there were to be any inflation as a result, at least it was better than no money at all, and at least they could all shoulder the inflation equally.
In 1824, another £5,000 notes were issued for the markets, and in 1826 £20,000 to erect Elizabeth College and certain other schools.
In the bill d’Etat it was a frequent subject for congratulation; and it was stated over and over again by eminent men of those times that without the issue of States’ notes, important public works, such as roads and buildings could not possibly have been carried out. Yet by means of the States’ issue, not only were these works accomplished, but also the island was not a penny the poorer in interest charges. Indeed, the improvements had stimulated the flow of visitors to the island, and with increased trade, the island enjoyed its newfound prosperity.
In 1926, however, the first signs of opposition by the banking community began. A complaint was lodged with the British Privy Council that Guernsey had no right to issue debt-free notes. However the Guernsey (also known as the ‘States’) Financial committee explained the situation to the satisfaction of all, and the matter was closed.
In the next year, surprise, surprise, a new commercial bank opened, called “Old Bank”. They began printing up private bank notes in such quantity that the island became flooded with money. Soon Guernsey feared that inflation would set in- or worse that their own debt-free money experiment would be blamed for the inflation. So a committee was appointed to confer with the banks. What
went on in these meetings remains a mystery to this day; but the result was that £15,000 of Guernsey Notes would be withdrawn from circulation and the government would be limited to issuing a grand total of only £40,000 of their own notes. This agreement remained in force until World War 1.
In the wake of World War 1, the banks came under severe restrictions on how much money they could issue. All bank money was being directed towards the war effort. But Guernsey was under no such restriction, probably because it’s experiment was unique, and perhaps forgotten.
Guernsey made good use of her opportunity. By the end of the war, in 1918, Guernsey had issued £14,000, and 40 years later, that had grown to £542,765. Today, private bank notes no longer exist.
British money circulates side by side with State Notes.
Naturally, there is a greater demand for the State Notes; no sane citizen of Guernsey wishes to pay debt charges! To enlarge on this theme: In 1937 the States Note money, about £175,000, cost the States only £450 for printing and handling. A loan of the same dimensions would have about £11,383 annually. So can you blame the Guernsey taxpayers for preferring their own money since, under their sensible and benevolent financial system they pay hardly any income tax.
During the entire experiment in Guernsey, from 1817 to date, there has at no time been a threat of inflation from the creation of State Notes. At all times, the States were very careful in the issue and cancellation of notes according to their ability and requirements.
Today, Guernsey remains an island of prosperity. As author Ellen Brown puts it:
“Guernsey has an income tax, but that tax is relatively low (a “flat” 20%), and it is simple and loophole free. It no inheritance tax, no capital gains tax, and no federal debt. Commercial banks service private [lending], but the government itself never goes into debt.”
When it wants to create some private work or service, it just issues the money it needs to pay for the work. The Guernsey government has been issuing it’s 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.
Guernsey’s ability to look after its own fiscal affairs has meant that it has been able to foster a favourable tax climate. This has led to many offshore banks, fund managers and insurance companies establishing here. Whilst the traditional industries of flower growing, fishing and dairy farming still playing an important part, contributing both to the varied economy and to the islands character.
Guernsey also has its own stamps and currency, and while the British pounds can be used on the island, Guernsey pounds cannot be used in the UK.!
But the question may arise, what keeps them from printing too much. They watch inflation closely, and the calculations are all completely transparent, run by a committee of citizens, and open for all to see on their website.
That’s all they care about; Is this causing inflation? They expand as much as they want as long as it causes no inflation. They don’t care about theory. Born out of desperate need, they found out the secret of money and have gone quietly gone about using it and thereby have a high standard of living and very low taxes.
Fortunately, the Guernsey experiment is not an aberration. It has been tried time and time again, and when the quantity is controlled in the public interest, always with success. The bankers, however inevitably attack these in-the-public-interest, debt -free government issues of money. Debt-free money is in everyone’s interest except bankers’. Typically, they will use their money and influence to create some financial emergency then bribe sufficient politicians to convince them to vote for legislation giving the bankers monopoly on issuing all the nation’s money as a loan, thereby stripping the nation of its ability to issue its own money debt free.
During the depths of depression of the 1930’s, the majority of economists in the US discovered this monetary reform solution. In 1936, Frank D. Graham, professor of economics at Princetown University offered his perspective in the American Economic Review:
“What we need is not control of banking but a government monopoly of the supply of money, with commercial banks left to lend on short-term…out of capital funds, debenture borrowings, and real time deposits. Such a system… is a [n] indispensable prerequisite to regulation of the money supply on which all attempts to bring greater stability into our economic system, through monetary means, must inevitably be based. We are certainly not likely to get stability so long as the supply of money
remains even partially in the hands of those who have no responsibility for the total issue and no motive to do other than increase it as far as law, and a merely selfish prudence, will permit.
There is a way for citizens and their governments to take back the money-creation power of the banks. Yes, bankers are experts with money, but they are experts in maximizing their profits and rarely have much interest in the public interest. Freeing your government from borrowing money from bankers is the first, and most important, step for national freedom an prosperity. It is also THE most important step to limiting governmental overspending. If a government cannot borrow, it MUST live within its means.
Debt -free, government issued money- where the quantity is properly controlled in the public interest – has always worked to promote low taxation and maximise freedom for the majority of the nation.