James Robertson on FTTs

Following my post on James Robertson's book "Future Money", I wrote to him to ask why he didn't mention the possibility of using a Financial Transaction Tax.

He emailed me and said that he would be happy for me to post his comments on my blog. So, here are his thoughts, together with my own comments.

 First, this is what James said.

Dear Simon,

Thank you very much for the interest and understanding you have shown in my book, and for what you say about it in your blog.

I will comment straightaway on the FTT (Robin Hood Tax).  I think it is a red herring.

(1) It would do nothing to reduce any of the many economic disadvantages, distortions and injustices that stem from allowing financial business corporations (banks) to create the public money supply as profit-making DEBT for themselves. (I dealt with some in my Chapter 3.)

Of less importance,

(2) It would be comparatively easy for the banks and any other businesses that have to pay the tax to shift its cost on to other parties (such as their customers), for example by recouping the costs from them in higher charges and interest rates.

(3) One can imagine too that people and businesses of every kind would find  ways to co-operate to change the frequency and size and pattern of their their making and receiving payments, in order to reduce the impact of the tax.

Oh well. Clearly James is an unbeliever! Here's how I reacted.

I'm happy to take your point that shifting money creation from commercial banks to public banks that can create money without debt is vital, and should even be priority number 1.

However, the fact is that the world economy is awash with trillions of dollars, pounds and euros that are being used in a very non-optimal way. That money will stay in the system causing enormous damage even if the money creation system is changed.

The FTT is actually a very easy to implement way of sponging up a lot of the excess money and moving it to more useful things.

Your proposal that alternatives such as land taxes could be enough to clean up the mess seems overly optimistic, and very difficult to apply universally. Who would get to decide what the tax rate should be for 1 acre in Mayfair, or 1 acre in the Scottish highlands? It sounds like a very hard task getting people to agree on this. It would be an invitation for lobbyists to try and get taxbreaks for their clients.

A flat rate FTT on the other hand would have no possibility of being selective - no tax breaks, no lobbyists etc. It would also be totally painless, and require no administration at all - no tax returns etc.

And FTTs have other serious advantages. For example, you can have the rate vary continuously to guarantee that the government revenue and expenditure are automatically matched. If the government was to use central bank money creation to reduce tax requirements, the FTT rate would drop automatically. Such dynamic control of the economy would be much harder to do with alternatives such as land taxes.

So, I'm still an FTT fan, despite your lack of enthusiasm!

James also had a comment on my other proposals for "Solving the Debt Crisis" and "Debt Annihilation"

On your radical propositions to get out of the debt crisis, my reaction is that your proposals are too complicated and not radical enough. They will invite objections by the "experts"; and they will not attract the commonsense people whose massive support is needed to get the necessary simple reform on to the public agenda.

Here's how I reacted

I quite agree that IF you can get a shift from the current system to public bank money creation then that would be fine. But, as I argue, the vested interests who control the system (Mario Draghi, Cameron, Osborne etc) will block all reform.

My propositions are indeed a bit complicated, but I feel that we may need to use them to bring the insane money creation mechanism out in the open. So far, I'm not sure that more than a few % of the population have a clue what is going on. Until the 99% realize what it really going on, I think that there is little hope of the revolution occuring. That's why I am proposing these 'do-it-yourself' options which may allow the present system to be "hoist by its own petard' by a relatively small group of enlightened people working to change the system.

In other words, if we want reform this year, then we need to think of more radical options than simply hoping to educate people into voting for reform. We don't even have mainstream political parties that are proposing anything radical yet (perhaps because they are all being controlled by the vested interests?). What hope is there that a new government could come in and change things anytime soon?

Incidentally, if you are interested in James Robertson's ideas for moving money creation from commercial banks to central banks who would create the money debt free for governments, I can strongly recommend the book that he wrote with Joseph Huber in 2000. The book called "Creating New Money: A Monetary Reform for the Information Age" can be downloaded for free as a pdf by clicking here.  It's a very clear statement of the idea and how it could be implemented.