Letter: New approach to public spending

MUCH of what Duncan Hamilton (Insight, 13 March) writes on pensions sounds fair and reasonable if, and only if, there is no alternative to the current monetary system.

As he points out, we spend 2 per cent of GDP on pensions, an enormous sum for the taxpayer to shell out. However, during 2010-2011 we will spend just under 50 billion, 3 per cent of GDP, on interest payments to banks, insurance and pension companies. This is expected to rise towards 70bn annually over the next four years.

Why are we, the taxpayers, so indebted to these financial institutions? The reason is simple. Despite a grossly unfair tax burden, we don't pay enough tax to meet the government's spending requirements, hence the need for the government to approach financial institutions for massive loans which must be repaid with interest.

Everyone else, private individuals and business people, must approach the banks, which have a monopoly on the creation and supply of money, for funds for major purchases, capital investment, etc.

The question is: why does the state not deprive private companies, known as banks, of the power to create money at the cost of universal indebtedness? Instead, why does it not annually create a non-inflationary, debt-free sum of money to be used to reduce the national debt and to be spent into the economy to improve and maintain the UK's basic services and infrastructure.

At present, the state confines itself to producing only 2.5 per cent of the total money in existence in the form of debt-free notes and coins. The remaining 97.5 per cent of the money supply is created out of thin air by the banks in the form of electronic money in the process of lending at interest. The creation of money must, therefore, be returned to the state which should exercise this power free from the lobbying of greedy and self-interested bankers and politicians. With a debt-free, non-inflationary budget provided by the state (Bank of England) the government is in a much better position to address the country's needs.

Christopher Gilfedder, Glasgow