ARTICLES & Conference Papers
Article published in "Voice of the Unions", February, 2004

Wake-up Call

It’s time to wake up - the unions are being deceived.

The deception starts when credit-money, bearing interest, is borrowed from a bank. Or rather, the bank claims the credit-money is borrowed. Except that it is not borrowed. Borrowing implies that the borrower has agreed to repay something owned by the lender. But how can the credit-money be truly owned by the bank when it has created the money out of nothing merely by making (at tiny administrative cost) entries in electronic ledgers? For that is what happens nowadays.

And what is the situation if, to that electronically created credit-money, interest is added - as also happens nowadays? The interest is in addition to the tiny administrative cost. Interest continues, moreover, eternally compounding, until the original sum is repaid. It can soon build to an astronomical sum. So, since the borrowed credit-money is not cash, but created electronically; and since it is not depositors’ money, interest can now be seen in its true light - as an arbitrary, continuing and unnecessary tax on the borrower which far exceeds the cost of the original creation and any cost of administration.

The addition of interest, as well as the electronic creation of the credit-money, is allowed by law. However, lending something created out of nothing and then (in addition to a tiny administration cost) adding interest is a very long way from true borrowing and calling it borrowing is akin to fraud.

When government today wants to finance a road, sewage works, bridge, fire station, or light railway, it goes to the banking system to ask for the creation of, say, £1,000,000. Yet the need to pay the interest over time easily doubles the cost to £2,000,000 or more. Moreover, to pay that doubled cost, each person in the UK now pays £8/9 each week (in interest on the National Debt)!

Which is outrageous! The unions are told there is no money for public capital investment. Yet that money could easily be created by the state via its central bank as interest-free loans. The original loan would be repayable (as borrowed money always is) but there would be no need to pay interest on top. Administration charges would be minimal because, at present, the cost of collecting money to repay the loan is virtually all borne by the borrower. Thus state-issued interest-free loans could be issued and repaid for little more than the original sum. The result would be a capital expenditure half or less the present cost.

Moreover, such expenditure cannot be inflationary. Existing bank credit-money is created out of nothing and is repaid and cancelled, and in exactly the same way the state-issued loans would be repaid (but without interest) and cancelled. And when the loans are repaid and cancelled, the capital project remains behind but the money that created it has gone!

Now consider green investment. Today there are green technologies that can provide clean, renewable energy. However, they are not commercially viable because they have to be financed by bank money bearing interest. Yet if the money were to be interest-free loans these technologies could become viable.

Ah! say the know-alls - such money squeezes out the private sector. It does not. A public capital project can, if wished, be built by the private sector, and managed by the private sector (although the finance for it would be publicly created as a loan, repayable without interest). A project can even be owned by the private sector (although that would only be acceptable if workers and unionists become the owners of the capital). Nor do interest-free loans require that the total spend be increased. If the total spend is the same as at present, you can get twice the amount of building for the same amount of money. Nothing wrong in that, is there?

Here is a possible short Motion for the House of Commons: - Public Capital Projects Financed by Publicly Created Interest-free Loans: "This House, wishing to halve the cost of public capital projects, proposes the use of publicly-created, interest-free loans."


Rodney Shakespeare invites readers to visit to discover some of the immense possibilities of interest-free money. He thinks all unionists and workers should own productive capital - it is unwise to rely on insecure, poorly paid jobs. Rodney is a MA and qualified barrister, works as a tutor and co-wrote the textbook on "Binary Economics - the new paradigm (capital ownership for everybody)". With Canon Peter Challen, his latest book is "Seven Steps to Justice".