A National Bank will help us get some of the way towards a solution to our current problems. It will introduce a significant investor into the economy whose primary motivation is the progressive improvement in the standard of living of the citizens through the financing of businesses, infrastructure, major projects that require long term funding and services that would otherwise not be provided by the private sector.

The engine of the economy are the businesses large and small that create the wealth that our overblown State needs to keep going. At present we suffer under an oppressive taxation system which has as its sole end the funding of extravagant and wasteful Government programs These range from the damaging to the disastrous. From scrapped voting machines to disincentives and welfare traps that keep workers from entering the labour market. From unnecessary expenditures in the public sector due to "year end syndrome"; to bailouts of private banks.These extravagances include the pay rates of public employees which exceed the market rates for such labour by 30-40% on average. These extravagances include the employment of four hundred thousand people to do work that should be easily done by half that number given modern computer technology. And the list goes on and on.... It is surely true to say that a system which will incentivise profligate waste needs to be radically overhauled if we are to prosper as a society. Get the numbers right and change the ratio of public employees in the economy and we can have a public sector that does not weigh the economy down as at present.

Whatever the number of public employees, the State has to pay for them and so it needs taxes. The key is the removal of taxation from the dynamic component of the economy allowing businesses to build up and thrive as they seek to satisfy the needs of the consumers both here and abroad. We should not be putting up barriers to employment such as high minimum wage thresholds and taxing employers on workers hired.

So I seek the abolishment of a number of taxes, including; VAT, PRSI, PAYE, and Corporation Tax. The taxes we require to run our State should come from two sources only: property tax and the dividend provided by the National Bank.(another  important factor concerning the National Bank, is that the State can avoid the interest component of the costs of large projects. These interest charges can amount to as much as fifty percent of such costs.)

This is how we build the skeleton of a strong economy. The brains, heart, muscles and sinew are provided by the people. Government should just get out of the way and provide credit and a sound money. The people will do the rest.

I am standing in the election this of 25th Feb. as an "Independent" candidate. I have become so frustrated listening to the collective nonsense of the major parties that I decided to " put up or shut up". I have ideas which will help us recover more quickly from this depression and which will also give us a better future. 

Platform

Our banks are killing us. We must get them into examinership and see what comes out of it once and for all. If there is no possibility of saving some of them then they should be wound up. This has always been the normal outcome of such matters but today we find with cross-border banking institutions that the tentacles of debt reach into other countries and the governments of these countries do not like it if another member of the Eurozone brings down a number of their local banks. Understandable really! However given that all these banks operate under the aegis of the ECB and are supposedly regulated by same and since the ECB is responsible in large part for the expansion of the money supply which precipitated the various bubbles then it follows that the solution to the problem should encompass all the participants. But it does not. The solution as far as the ECB is concerned is to isolate countries and leave them hang out to dry. This is what has happened Ireland, Spain now and Portugal a few weeks ago. In each case the collective structure of the Eurozone has been conveniently abandoned and each of these countries left to face its fiscal problems alone. Money borrowed by the government here in order to sustain banks that should not be sustained is debt which falls on Irish taxpayers. As of now the situation is not sustainable. Dr Michael Hudson the economist has a saying; "Debt which cannot be paid will not be paid".  This is true for us now, so we must act in order to rescue the situation.

The true nature of the Eurozone becomes clear. We have long known and suffered under the obvious dis-coordination of the Eurozone Monetary regime which suits the Germans and French and no one else. In this regime there is a persistent mispricing of credit as far as the periphery nations are concerned. When, during our inflating bubble period we needed constraining interst rates of 5% or more we were given interst rates of near zero. When in the depths of recession and in need of relief from higher interest rates, what did we get? Rising interest rates in order to cool down of the German economy. Perfect discoordination.  Added to this we now find that, as stated, the ECB imposes punitive and egregious terms on States in order to avoid what should be dealt with in a collective fiscal reconfiguration.

I can only conclude that the ECB is not fit for purpose. That the entire idea of the Euro has turned into a disaster for us. What to do? My answer is a planned and orderly withdrawal from the Euro and a restoration of the Punt (or whatever we wish to call it). Our own curency restored. There are many advantages should this happen. The first is the restoration of an interst rate that accurately reflects the price of credit. We cannot achieve this in the larger Eurozone and have paid a heavy price for not being able to do this. The second is that we can pitch the foreign exchange price of the new currency at a marginal advantage to ourselves. A devaluation of 10% would help our competitiveness and reduce our debts. However the third reason to move away from the Euro and restart our own currency is the most important and this is because with our own currency we can instigate the changes in our fiscal, banking, taxation and regulatory regime that will give us a chance of a bright future which will not occur otherewise if we stay in the Euro.

The changes I advocate now are not entirely dependent on our exiting the Euro but would be far easier to achieve and at a more rapid pace than were we to remain in. For the sake of argument I will assume that the new currency is set up. The Goveerment will then have too quickly enact three pieces of legislation. The first is the establishing of a State owned National Bank. The second is the replacing of existing statute pertaining to the banking industry and a substitution of new laws governing the legallity of Fractional Reserve lending as practiced by banks for two hundred years or more. The third is  a group of changes that apply to the tax code.

The National Bank is an idea that requires some explanation for most people. The banks is owned by the State and is also the sole source of credit in the economy outside the banks and other private lending institutions such as credit unions. However, as part of the new regime in banking, fractional reserves on deposits will be forbidden and as a result banks will have to come up with other ways to make money from their customers.  A digression is necessary here in order to explain how banks create new money out of debt. Not many people know how this works. So, lets consider an accounting ledger with an asset column and a liabilities column - the double entry system, we can quickly get to the nub of the matter. To illustrate the idea, lets see what happens when someone is given a loan by a bank.. From the banks perspective what happens is that an asset was created by dint of the promise to pay back the loaned amount with interest by the customer. This asset for the amount of the loan was entered in the assets column of the ledger. In the liabilities column the same amount was credited to the customer. The sum of the two columns cancel one another and the net position is  zero. The customers account  is credited  with the loan amount and she/he is free to spend the money. So what has happen is that this loan has created new money which circulates in the economy. The bank did not draw down deposits or some of its profits in order to give the customer the loan. It did not have to borrow the money. All it needed was the widespread use of the same method by other banks and a double entry system of accounting to create new money. The expansion of new money (credit) in the economy is largely as a result of this phenmenon. This is the secret of banking.

The importance of this phenomenon cannot be underestimated. The credit expansion by banks in the economy due to the fractional reserve methodology were banks loan out the bulk of the depositors funds as loans and retain only a small fraction "in reserve" leads to inflation and booms (always followed by busts). Interest rates are meant to check the demand for credit and stop overheating in the economy. In Ireland unfortunately we do not have control over Interest rates. With the establishment of a National bank we will eliminate the fractional reserve in banks and get control over the most important interest rate in the economy.

The operation of a National Bank will use the same methodology but will do so on a larger scale. The customer is likely to be business, a private bank or the government itself. The same double entry accounting applies as it did in the previous  example. The loan amount is credited to the customers account electronically. The  money lent is new money now in circulation in the economy. If the client was a bank, The NB might charge 4% on the loan and the private banks lends it out at 6 or 8% The NB will itself lend to private businesses at higher rates similar to those offered by the banks. Finally at the end of the loan term the money is repaid with interest to the NB. Now it has its original capital plus interest earned. It recirculates these funds back into the economy as more loans and after paying for its expenses returns the remaining profit as a dividend to the Government.  The NB will operate as one large scale agency that creates new money in circulation from loans advanced. By virtue of the fact that the NB can effectively create new money on each of its loans the implications for our economy are enormous.