An essay on money and how it is co-opted by banking.
GUERNSEY'S MONETARY EXPERIMENT
by Louis Even
Guernsey is a small island located in the English Channel. An
Anglo-Norman population. This island is located closer to the French
coast than to the English one.
At the close of the Napoleonic wars, the island, like several other
countries, was in pitiful condition, both physically and financially.
Sea walls, roads, markets were needed. There was no manpower shortage.
But there was no money to pay for these works.
The money used by the people on the Island was the money from England,
the pound sterling. But, like after any war, the financiers were
calling back the money advanced to finance the slaughter, and the
pounds sterling were very scarce everywhere.
The Island had an autonomous government, "the States of Guernsey." So
it had the rights inherent in all sovereign government, among other
rights, that of regulating the volume of money in circulation in the
country. But, no more than any other country, the States of Guernsey
had thought of exercising this sovereign prerogative.
An intelligent governor
The Island was especially in need of a new market house, and a
committee was set up to take care of it. The committee went to see the
governor to explain the situation to him :
"We need a new Market, but we have no money to build it."
"With what material are you going to build a market?" asked the
"With stone and wood."
"Do you have it in the island?"
"Certainly, and in plenty."
"Do you have workers?"
"Yes again. But it is money that is lacking."
"Could not your parliament issue the money?" asked the governor.
A new idea!
This idea had never occurred to the committeemen, who had never
analysed the money question. They knew where to get money when there
was some: but they never wondered where money begins or can begin.
The method of taxing when there was money was quite familiar. But the
method of infecting the money that is lacking, and of taxing only
after, was something new to our administrators.
ISSUES OF NATIONAL CURRENCY
An estimate of the cost was prepared and the States printed the money
required, which was paid to those who either worked on the project or
furnished materials for it.
As the new currency was paid out into circulation among the people,
exchanges were being expedited. The wage-earners went to the
shopkeepers, the shopkeepers went to the producers, the producers
bought enough to increase their production.
The currency was accepted everywhere. The government took measures
against inflation by decreeing hat money would be withdrawn by taxes,
so it does not accumulate. And, in fact, the money was retired on
schedule by taxes. But, as the increasing activity required a
corresponding volume of money, other issues were brought out by the
government for other works.
On October 12, 1822, the new Market House was completed and opened. Not
a penny of public debt on this public enterprise.
THE BANKERS INTERVENE
At the time of the original issue, there was no bank upon the Island.
This explains, without doubt, why there was no opposition to the issue
of State money.
But ten years after the first issue, the Island had become so
prosperous, thanks to the activity allowed by a sufficient volume of
money, that the banks of England had an eye on this island.
English bankers set up branches in the island and brought the
population around to orthodox rules. "It was unsound." They said, "to
let the government finance its enterprises without getting into debt."
The bankers did everything to stop further issues, to introduce the
system of interest-bearing loans to the government, and to withdraw
from the island the State money that had been paid out into
There was some resistance, but the bankers won their point, with their
usual methods; and on October 9, 1836, the States of Guernsey had
abdicated their sovereign prerogative over the control of the volume of
money. From then on, the amount of the national currency decreased
gradually, and was replaced by money issued by private bankers in the
form of loans getting the island into debt.
Nevertheless, there is still about 40 000 pounds sterling ($200 000) of
national currency outstanding at this date in the Island. (According to
Gertrude M. Coogan in Money Creators, published in 1935).
WHY A FINANCIAL PROBLEM?
As we can see, with natural resources, workers, and a bit of common
sense, there is no financial problem.
But when shrewd exploiters want to regulate economic activities
according to their power and their profit, there the financial problem
Of course, minds in search of arguments to justify the present regime
will say that Guernsey was only an insignificant small island; that the
control of the volume of money by the representatives of the people is
good for a small country, but not for a big country.
All right. Take note of what these gentlemen object to you today. Next
week, these same gentlemen will tell you that the money problem cannot
be solved properly in a small territory or a province, but must be
brought to a federal or even an international level!
It was not Social Credit yet in Guernsey from 1820 to 1836. No doubt
that the development of that time and that place would not have allowed
to go as far as to give a dividend to consumers. But it was already a
non-debt-bearing national currency, issued in accordance with the
possibilities in front of the needs.
The issues of national currency by the States of Guernsey caused
neither inflation nor idleness. They created activity and prosperity.
But these issues did not make any slaves, and that is why the bankers
And see also this from
http://www.monetary-reform.on.ca/archives/6d.shtml, in relation to the
bogeyman of "inflation":
In 1816, they [i.e., the people of Guernsey] decided to issue £6,000 of
their own "interest-free" Guernsey State Notes. This was in addition to
the current supply of English pounds which two main banks were
circulating on the island already.
By 1837, £50,000 had been spent into circulation by the government for
the primary purpose of local projects such as the sea walls, the roads,
a new marketplace, a church and a college. This £50,000 more than
doubled the money supply. But there was no inflation.
In 1914, while the British restricted their own money supply, Guernsey
issued more ... another £140,000 over the next four years. By 1958,
over £500,000 of interest-free money was in circulation on Guernsey and
still no inflation.
By 1990, there was a total of £6.5 million in circulation issued
interest-free. There was no public debt as in the rest of Britain which
was still paying for its war debts. And yet on Guernsey, prosperity was
very much evident everywhere.
When Dr. Jacques Jaikaran visited Guernsey in 1990, he reported on the
state of the Guernsey economy in his book *The Debt Virus*:
There were about 60,000 permanent residents; the average family owned
3.3 cars; their unemployment rate was zero and their standard of living
was very high. Also, there was no public debt and a surplus of public
funds was earning them interest. The Guernsey Treasury increased the
money supply by 50% over a 3 year period and this increase did not
cause any inflation. The price for a gallon of gas in the UK was about
$5, but the price in Guernsey was about $2. Contrary to the teachings
of economics in all higher institutions, inflation, it was claimed, was
not related to the volume of money, but rather to the size of the