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ARTICLES

BANK REFORM

The following message is from Paul Hellyer, an ex-Canadfian Liberal Party Minister and long-time Money Reformer. He was a founder member of the progressive and economically nationalist group the Canadian Action Party. Whilst still a member he now concentrates on Monetary and Banking reform.


Like you I am a long-time monetary reformer. Most of my adult life and much of my fortune has been dedicated to this worthy and now desperately urgent pursuit, but with little to show for it to date. The meltdown of 2007-08 and the current global sovereign debt crisis offer a unique opportunity to raise understanding of the issue to a new level of public consciousness that conceivably might result in some action being taken.

One of the problems has always been that nearly every monetary reformer has his or her own preferred solution. We are hoping that we could form a united front in support of what I call the 34% solution, i.e. 34% government-created money and 66% bank-created money.

This would mean abandoning the “capital adequacy” system, which has proved to be a “capital inadequacy” system and reverting to the partial reserve approach of earlier years, and raising the reserve requirement of banks at an agreed rate until they reach 34% of deposits.

Although this is an arbitrary number it is the product of considerable thought. It should be high enough to allow governments to balance their budgets. Implementation would permit the retirement, on an orderly basis, of very significant amounts of sovereign debt.

About the only issue on which Milton Friedman was right is that 100% reserves is a political non-starter. It won’t fly now, or ever. On the strength of that reality I have long supported the 50% solution. When a bank chief economist with whom I collaborated complained and said that meant that banks would have to call loans, I took the most recent annual report of his bank to prove that was not correct. But they would have had to sell all of their other assets. So I concluded that a leverage of three to one, rather than two to one, would be more palatable for such a large and well-established industry.

The three to one enjoys the additional argument that it is the maximum leverage most banks will allow when considering loans to industry – and even then only if they have a guaranteed cash flow. So banks shouldn’t complain about having to live by their own rules – but they will! A reduction from twenty to one to three to one will produce outrage such has seldom been heard.

In reaction to the global warming crisis I have published my 13th book entitled Light at the End of the Tunnel: A Survival Plan for the Human Species. It sets out the three essentials for human survival. One of them, of course, is monetary reform. So Chapter 9 and the ending of Chapter 8 are dedicated to monetary reform and the 34% solution. The book is available at www.authorhouse.co.uk

So on behalf of our small but rapidly expanding group, I implore you to join us in this noble campaign to educate both the grass roots citizens and their political leaders on the most important subject on their agenda. It should be a fun campaign that is close to our collective heart.

Respectfully,

Paul Hellyer

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