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The Magical Isle of Guernsey
Topic Started: Dec 16 2010, 08:21 PM (1,413 Views)
Bill Still
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I'm writing a new book that includes a refutation of Ron Paul's last book. Thought I'd give you all a peak at the first chapter. If you see anything wrong or think of something to add, please let me know.


No More National Debt
Beyond Ending the Fed
by Bill Still

Chapter 1 – The Magic Isle of Guernsey

Once upon a time, there was a little island in the English Channel – much closer to France than to England – called Guernsey. Yes, that’s where the Guernsey cow came from. Guernsey cows are famous because their milk has a golden color due to an exceptionally high content of beta-carotene, a source of Vitamin A. And you thought this was to be a book about money? Hold on, we are getting there.

Despite the fact that island of Guernsey has only 30 square miles and a population of only 65,000 people and very little in the way of natural resources except cows, their per capita income is $40,000 per year, 9th highest among the 200 or so countries of the world. What gives? Guernsey has used a money system since 1817 that can serve as a model for the rest of the world to use to escape the ongoing great depression of 21st century.

Despite its proximity to France, Guernsey is actually a British Crown Dependency and, to its credit, has never joined the European Union. After the Napoleonic Wars, Guernsey was in dire economic straits. The island’s road were mere cart-tracks, only 54-inches wide. In wet weather they were virtually impassable. There was not a vehicle for hire of any kind on the island. There was no trade, nor much hope of employment among the poor. The sea was washing away large tracts of land due to the sorry state of the dykes.

Guernsey, like most nations at that time (as well as today) had borrowed heavily from banks. The States Debt was £19,137 with an annual interest charge of £2,390, but the gross national revenue of the entire island was only £3,000, leaving only a paltry £610 per annum to run the entire island. In other words, interest paid to banks consumed 80% of the GDP, thus reducing the populace to a state of pitiful serfdom.

In 1815, a Committee of well-respected, public-spirited elders was assembled to finance the building of a Public Market near the main harbor, Saint Peter Port, so the farmers could more easily sell their products for export. The cost of the new facility would be £6,000. In addition, fixing the dykes would cost an additional £10,000.

Further taxation of the impoverished island was impossible. Borrowing the money from the banks would result in even higher interest charges that could never be paid. The Committee made a historic recommendation to remedy this dire situation.
The Committee recommends that the expense should be met by the issue of States Notes of 1£ Sterling to the value of £6,000 … and that these notes will be available not only for the payment of the new market, but also for Torteval Church, roads to construct, and other expenses of the States….

The Committee argued that there was little to fear from inflation because the local banks already had £50,000 of their money (Notes) in circulation. As a further protection against inflation, the overly-cautious citizens of Guernsey placed redemption dates on the notes of April 1817, October 1817, and April 1818. In other words these notes were good for payment of taxes and good as regular money in circulation until the expiration date was reached. At that time, the notes would no longer be legal tender and the State would destroy them.

In this manner, without increasing the States’ debt, it will be possible to finish these works, leaving sufficient money in the Exchequer for other needs.”

Once the good citizens realized that these notes would work without the skies falling on the gentle island, additional issues took place in 1820 and 1821. By 1821, some £10,000 of Guernsey Notes were in circulation, all created without debt.
[It was] the most advantageous method of meeting debts, from the point of view both of the public and the States finances. Indeed, the public seemed to realize this fact, and, far from being averse to taking the notes, they sought them out eagerly.
The citizenry clearly understood that these Guernsey Notes were clearly government financing in the public interest. They also realized that if there were to be any inflation as a result, at least it was better than no money at all, and at least they would all shoulder the inflation equally.

In 1824, another £5,000 notes were issued for the markets, and in 1826 £20,000 to erect Elizabeth College and certain other schools.

By 1829, £48,000 worth of Guernsey debt-free Notes were in circulation, and by 1837, over £55,000.

In the Billet d’Etat it was a frequent subject for congratulation; and it was stated over and over again by eminent men of those times that without the issue of States’ notes, important public works, such as roads and buildings could not possibly have been carried out. Yet by means of the States’ issue, not only were these works accomplished, but the Island was not a penny the poorer in interest charges. Indeed, the improvements had stimulated the flow of visitors to the island, and with increased trade, the island enjoyed its new-found prosperity.

In 1826, however, the first signs of opposition by the banking community began. A complaint was lodged with the British Privy Council that Guernsey had no right to issue debt-free notes. However the Guernsey (also known as the “States”) Financial Committee explained the situation to the satisfaction of all, the matter was closed.
The next year, 1827, surprise, surprise, a new commercial bank opened, called “Old Bank”. They began printing up their bank notes in such quantity that the island became flooded with money. A few years later, Guernsey feared that inflation would set in – or worse – that their own debt-free money experiment would be blamed for the inflation somehow. So a Committee was appointed to confer with the banks. The result of these meetings remains a mystery to this day; £15,000 of Guernsey Notes would be withdrawn from circulation and the government would heretofore be limited to issuing a grand total of only £40,000 of their own notes. This agreement remained in force for the next 70 years.

In the wake of World War I, the banks came under severe restrictions on how much money they could issue. All bank money was being directed towards the war effort. But Guernsey was under no such restriction, probably because its experiment was unique, and perhaps forgotten.

Guernsey made good use of her opportunity. By the end of the war, in 1918, Guernsey had issued £142,000, and 40 years later, that had grown to £542,765. Today, private bank notes no longer exist. British money circulates side by side with State Notes.

Naturally, there is a greater demand for the States Notes; no sane citizen of Guernsey wishes to have his taxes increased to pay debt charges! To enlarge on this theme: In 1937 the States Note money, about £175,000, cost the States only £450 for printing and handling. A loan of the same dimensions would have cost about £11,383 annually. So can you blame the Guernsey taxpayers for preferring their own money since, under their sensible and benevolent financial system they pay hardly any income tax.

During the entire experiment in Guernsey, from 1817 to date, there has at no time been a threat of inflation from the creation of States Notes. At all times, the States were very careful in the issue and cancellation of notes according to their ability and requirements.

In other words they carefully controlled the quantity of their money in circulation.
Any visitor to Guernsey is immediately impressed by the vast difference in prices between the island and the mainland in Britain. Thanks to the exceptionally low taxation and import duties, Guernsey enjoys low prices, plenty of money, and a high standard of living. In fact, Guernsey can afford to leave worries about inflation to the debt-ridden mainland!

Fortunately, the Guernsey experiment is not an aberration. It has been tried time and time again, always with success. The bankers, however inevitably attack these in-the-public-interest, debt-free government issues of money. Debt-free money is in everyone’s interest except bankers’. Typically, they will use their money and influence to create some financial emergency, then bribe sufficient politicians to convince them to vote for legislation giving them a monopoly an issuing all the nation’s money as a loan.

This will be a recurring theme in this book. There is a way for citizens and their governments to take back the money-creation power of the banks. Yes, bankers are experts with money, but they are experts in maximizing their profit and rarely have much interest in the public interest. Freeing your government from borrowing money from bankers is the first, and most important step for national freedom and prosperity. It is also THE most important step to limiting governmental overspending. If a government cannot borrow, it MUST live within its means.

Guernsey printed a small amount of additional money to create infrastructure projects in the public interest. Debt-free, government issued money -- where the quantity is properly controlled -- has worked to promote low taxation and maximize freedom for the majority of a nation EVERY TIME IT HAS BEEN TRIED.
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KillTheEmpire
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Very interesting to read Bill. I didn't even know about this. This will be a most useful example for future discussions. I certainly understand why you made this chapter 1. Perfect! Anyone seeking a monetary solution should be easily sucked in by this information. This would make a good teaser chapter too. I will do some research on this to see if I might find some other interesting tid bits.

Reading the Wiki page: "Guernsey issues its own sterling coinage and banknotes. UK coinage and (English, Scottish and Northern Irish faced) banknotes also circulate freely and interchangeably." It's interesting they manage with the other currencies circulating as well. :huh:

I was about to pack my stuff and leave the U.S, but I read on that Wiki page, that the "EU is forcing Guernsey to comply more and more with its rules." Ghouls and Vampires they are! :angry:

Edit: Seems lots of people know of Guersey, but me, even though it's in the film, and I've obviously heard about it before... :rolleyes:
killtheempire.blogspot.com
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Johnrap
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That was an interesting read. I'd buy the book.
If my post doesn't make sense it probably just means I'm wrong. Feel free to correct.
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Oak
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Guernsey is usually portrayed as an unscrupulous tax haven for the bankers and wealthy to squirrel away cash while simultaneously mooching off of the UK taxpayer and saving themselves money on infrastructure or defence.

Interesting to see someone show the other side of things or highlight what is overlooked normally.

It seems that someone will try to destroy or belittle these systems by hook or by crook.
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Trevor
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It's too bad these economic solutions from the past are erased from our collective memory by those who print the money to control public education.
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Oak
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Indeed. Just as people here have pointed out before with the politicians offering up their contituencies to those who fund them, the people who finance the rest of government have far too much influence on education and "offical" or "authoritative" opinion, allowing them to prevent the very idea of better alternatives taking root.
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ProprietaryState
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I understand from the post that paper State Notes have displaced paper commercial bank notes. I'm not clear about bank deposits. Does Guernsey have fractional reserve banking? If so, I'm not sure how it's different than the US. No one here uses paper commercial bank notes either. It's the commercial bank deposit money that's the problem. I assume I'm missing something.
"There is a third form of society, and it is the only one in which sufficiency and security can be combined with freedom, and that form is a society where property is well distributed and so large a proportion of the families in the State severally own and therefore control the means of production as to determine the general tone of society; making it neither Capitalist nor Communist, but Proprietary."- Hilaire Belloc, The Restoration of Property
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Bill Still
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Well, there is a lot I'm still missing on the Guernsey situation. I'm in email contact with someone in the government, but I've been unable to make contact with the correct people -- yet.

I have confirmed that the States Notes continue to circulate alongside the British Pound and are exchanged one-for-one
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Oak
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Is it someone in particular you were trying to get in touch with or simply some of the islanders used to being in the economy there?
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Sean.Twyman
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So how can I introduce the Guernsey currency method to Michigan?
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Oak
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On the subject of the book, I'm rather looking forward to it. I think it'll be a good read for myself and it should also be very informative for everyone. Perhaps reaching an audience that videos might not.
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inflationtax
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Can I order this book. However, I don't see why they need to issue debt free money.

Suppose Guernsey has $100,000,000 in money supply and they collect $10,000,000 in taxes. I think if the officials go to the public and say they need $1,000,000 a year in additional taxes to pay for a bullet train. The voters will approve it if they see the present taxes are not wasted on overpaid unionized teachers, fireman, and policemen. The first thing voters will do is say, hey officials, why should we raise our taxes when teachers make so much, why don't you start a voucher system and save tons of money. Why don't you cut the pay of officials.

If government officials are allowed to make money or bonds, they are allowed to spend beyond their means. They have no reason to make hard choices.
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Oak
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A bullet train on Guernsey? LOL Better with a bicycle or a boat for all the land there is.
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