...to address the current economic crisis. It is the brainchild of GK Chesterton Society of Ireland member Stanislaus Reynolds.
This blog is very pleased to present his plan for economic revival, Operation Black Arrow.
OPERATION BLACK ARROW
by Stanislaus Reynolds
“The Problem Is The Solution”
How To Use The Philosophies of Republicanism (Sensu Stricto) and Distributism, in Combination with an Overnight “Type 2” Euro Money Creation Event, to Help Solve Both The EU's Debt and Pensions-Crises; Help Save High Social Utility Capitalism; and Help Re-establish and Widen Trust-Horizons, Both Amongst the EU's Populations and Towards Their Political and Financial Institutions.
“The problem is the solution” - I quote David Holmgren, the Australian co-originator of a design system called “Permaculture”.
Like a lot of people I have been thinking about the economic problems that confront Ireland and Europe, especially the serious problem in Ireland of negative equity, a situation which I have been personally fortunate to avoid.
On the basis of the counter-intuitive quote given at the start above, I would like to suggest a solution - albeit a partial solution to this problem- yet a solution to which the word “republican” in its original and true sense is an appropriate description.
By “republican”, I simply mean something involving the sort of peaceable state that scruples to treat all its law-abiding and sane citizens equally and which thus avoids state favouritism, which is aristocracy. By this definition Ireland is not a republic.
Operation Black Arrow (OBA) is a solution which requires the offices of a central bank to effect, so the only “republic” that can carry it out is now the European Union itself. An even wider-scale OBA made by several central banks (which is also recommended) would need the co-ordination of the IMF. This briefing document is however written for the EU and Eurozone areas.
As designed, OBA is a form of hyper-egalitarian quantitative easing (QE). OBA, as a solution to the credit/debt crisis, involves creating money but money of a different type, a type under inherently greater governance (i.e. under greater moral and economic limitations), than ordinary money.
This money can be called “Type 2 Euros” and, as we shall see, one of its several specific functions is not to create further debt but to annihilate existing debt. In some respects it can even be seen as “anti-money”.
Paradoxically, by scrupling to make only the real living citizenry their target, these new and rather inaccessible “Type 2” QE monies are predicted to help really solve the economic problems of both the banks (who as corporations are fictitious persons in law), and of the sovereigns. Thus in the QE of OBA, as in certain heart surgeries, the financial system is to be saved by being effectively - albeit temporarily - bypassed. Notice that it is modern medicine’s ability to ensure the oxygenation of the body’s many millions of cells during any cardiac operation that is crucial in allowing such remedial surgery to be performed at all.
In essence, the European Union is a great and optimistic project involving a brave expansion and modernization of the wondrous heritage provided to the peoples of Europe by their ancestors. In particular, that inheritance has come to us from those many slow centuries of trust-horizon building, which work was, and is, at the heart of all authentic religions.
Trust is a human attribute and the maintenance and repair of the large scale trust-horizons necessary to the functioning of modern society is now, and always, of the first importance. The repair of the financial sector’s particular trust-horizon difficulties is predicted to be a semi-automatic consequence of OBA’s focus on the repair of trust-horizons for individual citizens and the citizenry in collective.
To repeat: “The problem is the solution”, and the problem behind the credit/debt crisis is that, during the economic boom, senior bankers have created (yes, literally created - “ex-nihilo”- out of nothing), vast amounts of certain symbols called “money”. The extent of the excess credit/debt money-creation was successfully disguised from almost everyone (including the bankers themselves) by the creation of multiple claims upon the underlying wealth of Europe. This underlying wealth has likely not really changed that much during the credit-fueled “boom” at all. Part of the nature of a recession is that these excess claims to wealth are rapidly extinguished, oftentimes in a savagely unfair manner. Furthermore, since one man's dispossession can lead to another's gain, incentives now unfortunately exist to sinfully exacerbate this process. These incentives are additional to the powerful fear-based positive feedback processes which are anyways operant in the recessionary parts of the “economic cycle”. Operation Black Arrow can be viewed as an attempt to short-circuit these destructive and dispossessive dynamics and so shorten the lifespan of the recessionary part of the “cycle”.
It is worth reminding ourselves at this juncture that money is a symbol used for the immediate exchange of goods and services, and as a store of wealth (where so used it is called capital). So the current monetary crisis afflicting the EU - and indeed most of the civilized world - is in essence “merely” a symbolic crisis. It follows that the solution to the problem is also to be found in the realm of the symbols.
When a banker creates the symbol we call “money”- as “credit”, he or she must also create the same amount of “debt”. The process can be usefully thought of as a type of magical, fissile, priest-craft. Fissile because the “nihilo” is being split into two: credit and debt. The attachment of “debt” gives the banker-priests and their servants considerable disciplinary control over persons upon whom “debt” is attached. Under normal economic conditions the rate of fission (i.e. credit/debt creation) is controlled by the relevant central bank, fission rates usually being an inverse function of real interest rates.
The metaphor of fission is appropriate for, if governance (i.e. moral and economic limitation) of the credit/debt creation process is less than excellent, then the possibility of positive-feedback loops developing can lead, as in a nuclear reactor, to a sort of run-away chain reaction resulting in melt-down. The situation inside an overheated ponzi-bank is in some sense the financial equivalent (and hence of course “merely” the symbolic and psychological equivalent) of a “Chernobyl”. Unlike a nuclear reactor the operatives of a bank can actually, under certain circumstances of anti-governance, (e.g. circumstances permissive of crony and ponzi-capitalism), be incentivized to permit such a run-away situation. Quad est in Hibernia demonstrandum. OBA can be seen as the swift (overnight) lowering of millions of individual debt-absorbing “control rods” into the now critically debt-overheated reactor vessel that contains Europe’s fissile finances. In OBA it is the citizens themselves that are the many control rods. Because we are dealing “merely” with symbols, not radio-isotopes, the process is a lot safer than it sounds in simile.
When a customer borrows money from a bank, typically he or she is borrowing monies which are a bundled combination of money that has very recently been created ex-nihilo and monies that were created a longer time ago and which have been already sent out into the economy, since when they have been much more validated in their “existence” by being “earned” in exchange for work, and then returned again to the bank as the bank's customers' savings.
Thus a bank will have two “types” of money to lend out, their customers' savings and money that has just been pulled - pulled by esoteric ritual - out of the stratosphere. Credit creation is a matter of some considerable secrecy...so much so that the majority in our society are quite unaware that this type of priest-craft is performed at all; or indeed that the on-going survival of our entire credit/debt-based money economy in fact depends upon it being performed, and in sufficient quantity, as well as it being performed correctly and well.
Now to explain workings of the OBA proposal: What is suggested is that all adult citizens of the Eurozone would wake up one morning to find that (almost) every one of them is 50,000 Euros “better off” than when they went to bed the night before. In this respect everyone is treated perfectly equally, as befits a republic (s.s.).
January 1st 2012 is suggested as a suitable date to be the Night of Operation Black Arrow (NOOBA).
Since the money is created “ex nihilo” by the ECB, during the night, this money is created at near zero cost to the ECB. For, unlike ordinary banks in the Eurozone, only the ECB can create money without creating debt at the same time; the process being called “quantitative easing”(QE).
But these new monies are to be “Type 2” Euros and, while they will have the same value as ordinary Euros, they have higher levels of governance and cannot -and must not- be spent like ordinary Euros. In fact they can only be “spent” in two very particular ways.
Firstly, if a citizen of the EU has a domestic residential mortgage taken out before a certain date on or before NOOBA, then the monies are used to annihilate €50K from the capital sum outstanding on the mortgage and that citizen effectively never sees the money again: The money has been “given” to him or her and spent in that way without any choice on the citizen's part. If two citizens are signatories to a mortgage then up to €100,000 could be written off.
In an economic crisis caused by the creation of too much debt, the primary objective of OBA is naturally to effect debt-annihilation; quite literally to return some excess debt to the nihilo from whence it came. Importantly, as we shall see, OBA scruples to make this beneficial debt write-off as egalitarian as possible, i.e. of benefit for almost every adult citizen of the EU, even those who are not holders of mortgage debt.
This debt-annihilation must only apply to EU citizens' home mortgages on their primary residences and may not be used to write off any other type of mortgage or debt whatsoever.
The OBA mortgage debt write-off is to be a once-off event, occurring across the Eurozone, or the whole EU area, on a given date and is never to be repeated for any future dates or debts.
Strict and punitive laws against fraudulent pre-conversion of Type 2 Euros to ordinary Type 1 Euros, and indeed any type of fraud involving the new Type 2 Euros, will need to be passed into existence by the EU parliament and national parliaments across the EU before this pamphlet's suggestion could be safely implemented.
Laws to make a tort of negligent lending will also need to be enacted in order to prevent bankers from yielding again in the future to the tremendous temptations to which they have succumbed in the past. The temptation to create too much money out of thin air is indeed a tremendous one, and one that ordinary citizens are not directly subject to. In fact laws to make a tort of negligent lending are sorely needed and needed whether OBA ever proceeds or not.
I propose that a maximum of 50% of a mortgage should be capable of being written off so that if, for example, a citizen has a mortgage with €80,000 capital outstanding, then €40,000 would be written off and €10,000 “Type 2” Euros would remain “unspent”, these would be placed in a special type of “EU Citizens ECB Escrow Account”, the contents being owned by that individual citizen. More details about these new types of accounts in a while and below. The purpose of this 50% limitation is to limit the power of OBA itself, since its action results in a reduction in the power-base of the EU's banks. Such a power-base reduction, whilst now desirable, also itself needs prudent limitation. Correctly run banks are socially useful economic institutions and their activities (tested for social utility and public morality) really do need to continue.
Of course it would be unfair to just give those citizens who happen to have mortgages at NOOBA the capital write-off, since a debt write-off is a form of wealth transfer. What about persons who do not have mortgages? For them I propose that 50,000 “Type 2” Euros also be created “ex-nihilo” on NOOBA and placed in an “EU Citizens ECB Escrow Account”, such an account to be created for almost every adult citizen of the EU.
When a citizen reaches 70 years of age then, and only then, is the ECB escrow money released to them and even then it must -and can only- be used to purchase a pension (Type 2 Euros are converted to ordinary “Type 1” Euros at that point). In this way the Type 2 monies are used to help ameliorate the looming EU area pensions crisis and indeed they do so on an on-going basis into the future.
This is the second objective of OBA: the aim here is to assist EU citizens in retaining their economic independence in old age, rescue them from the possibility of poverty when elderly, and moreover, to rescue them from poverty-anxiety concerning their old age throughout their adult lives. Such an aim is worthy and should be properly effected without half-measures.
Type 2 money does not, and must not ever, earn any interest but its value (while held in escrow by the ECB) would be adjusted over the years for inflation or deflation in order to maintain the value that €50,000 had at NOOBA.
The ordinary retirement age would still be set at 65, or ideally even lower - to facilitate job vacancy creation for the younger generation. Ordinary pension funds would probably be prohibited from considering the prospect of receiving Type 2 Euros at age 70 in their actuarial calculations, OBA monies are to be entirely additional to the ordinary monies of ordinary pensions, whether those pensions are private or state funded or indeed provided by the welfare state.
Many EU citizens will be over the age of 70 on NOOBA. Their case is a bit special. They could receive some fraction of 50,000 Euros actuarially calculated according to their age, this they would be compelled to add to their authorized pension funds or buy a pension fund with. Alternatively, if fear of inflation from the release of so much monies to pension funds on NOOBA was a factor (and it is) then it would perhaps be better for persons over 70 on NOOBA to receive a monthly pension from the ECB directly as if they had had a pension fund of €50,000 given them on the date of their 70th birthday. The €50K “en-block” escrow pension funds would then be released to the pension fund market only in the future, only for those citizens younger than 70 at NOOBA, and only of course upon their 70th birthdays.
I repeat that OBA is a republican (sensu-stricto) suggestion. All adult persons other than imprisoned criminals and those certified insane (neither of which groups are “in” normal society) are, I am suggesting, to get 50,000 Type 2 Euros, irrespective of any notions or realities of relative wealth or poverty, or indeed of ideas of “deservedness”.
Type 2 Euros are to be non-transferable, non-inheritable and cease to exist upon the citizen's death.
Type 2 Euro funds may not be considered by any EU or national state agencies in making calculations of a citizen's wealth for purposes such as assessment for taxation or welfare.
Type 2 Euro funds may not be prematurely accessed by the citizen or their state.
At age 70 the individual citizen’s ECB escrow monies are converted to type 1 Euros, released to the citizen, who is compelled to use them to purchase an approved (i.e. morally pre-tested) pension fund in the EU area markets, and so they become the source of a modest annual pension income. This income itself would of course be added to other income whose total would then be subject to normal annual income tax in the EU citizen's state of residence.
Type 2 Euros may not be traded. It is to be made illegal to use Type 2 Euros, or the promise of them being converted to Type 1 Euros in the future, to underwrite or secure any trade, transaction or loan...this is important. Remember, we are trying to “fix” a credit/debt-creation problem here, not exacerbate it.
Type 2 Euros may only be held in the accounts of real, living, human EU citizens. They may not be held in the account of any fictitious person, irrespective of the legality of that fictitious person. By which I mean that Type 2 Euros may not ever be placed in the account of any company, trust or corporation.
50,000 Euro may seem like an awful lot to create for each EU citizen. It is. Given the gravity of the negative equity situation in Ireland it is probably the least amount needed to ameliorate, much less actually fix, the dreadful circumstance for those trapped therein. The Irish situation of a sudden and huge decline in property prices might well come the way of some other EU home-owners in the future. We are trying to head off a monster of an economic recession at a mountain pass and, I suggest, it is better to arrive there swiftly and with too much firepower than too late and with too little. Also as a pension fund €50,000 is a reasonable and generous sum. A lesser sum of say €40,000 would also likely work, but rather less well - there really is a case for bravery to be made here, and a swift bravery at that.
OBA is a very focused and egalitarian form of quantitative easing, a form that carefully produces the most “bang” for the bucks being created. Current quantitative easing monies are “Type 1” low governance monies, which are just being given to - and being used by - the bankers and financiers; used at their discretion, often as a way to create even more credit/debt, the monies adventured upon markets such as derivatives. All of this is very likely actually exacerbating the problem. Also the high-level financially savant in society are better placed and much more effective at “mopping up” the current type of QE monies than ordinary folk. Thus current forms of QE are aristocratic (i.e. anti-egalitarian) in their functioning.
Furthermore, since the banks – I'm thinking of the Irish banks here especially – are at present effectively in receipt of billions in Type 1 QE “welfare” they now have a perverse incentive to maintain the situation where they continue to receive that welfare. This unhealthy situation appears to be contagious. The OBA project avoids the creation of such perverse incentives.
The OBA initiative being suggested here is not just public (rather than corporate) in its targets, it is not just strictly egalitarian in its treatment of the public, it is also to be entirely publicly visible.
A big problem with the manner in which the economic problems (e.g. of Ireland's banks) are being presently handled is that vast sums of public monies are being ceded to the banks and, apart from being occasionally told how many billions are being put in, the public have hardly a single clue as to where and to whom those monies are being used and transferred (remember a debt write-off is a wealth-transfer). “Cui bono?” as the lawyers say. This situation is most corrosive of public trust.
Should OBA ever be implemented, its workings would be highly “visible” to the public. For everyone would, so to speak, “see” that they, and almost everyone else, were the recipients of €50,000 of public QE monies. This should have the effect of enhancing the public's trust in the EU project and its institutions. A public record of all the mortgage write-offs with the names of beneficiaries and amounts written off under the scheme would be available, as would a register of those other citizens who choose to receive “their” escrow funds at 70. This is necessary because the expenditure and transfer of public monies should -with very few permitted exceptions- always be publicly visible.
The public visibility inherent to the OBA project should assist with fraud deterrence and detection and also with some projects quite unrelated to OBA such as preparation of population statistics etc.
Of course since the mortgage debt write-off is to be a once-off matter all of the younger generation (i.e. those un-mortgaged on 1st January 2012) will have to live to age 70 to get the benefit of their monies.
I suggest this pensions part of the OBA proposal should continue into the foreseeable future: Younger citizens would be given their ECB escrow account books (with €50,000 “in” them) on reaching their majority. A small public ceremony with a European flavour could accompany this event. Actually, the monies would not exist yet, they would be created “ex-nihilo” by the ECB on the eve of their 70th birthdays, but the individual citizens do not really need to know this.
Meanwhile, and even while the citizens are living their lives, and long before reaching age 70, there are several unexpected secondary benefits that accrue to the individual, to society and to the EU project itself from this “ECB escrow pensions fund” part of the OBA initiative:
Firstly, in the event that a citizen commits a serious crime (the type that one goes to jail for) then the now criminal citizen's €50,000 escrow fund is simply annihilated by the ECB. So the possession of the Type 2 capital by each citizen acts in a way to incentivize peaceable and lawful civil behaviour across the EU. Likewise, mortgage debts that have been written off at NOOBA would be re-attached to the individual citizen, and also liened against his/her property, if they were ever subsequently convicted of a serious crime in their own lifetime.
Secondly, the “existence” for each individual citizen of “their” escrow funds will very likely incentivize behaviour conducive to enhancing health and safety during their own lifetime, as citizens more actively seek to live well in order to enjoy the pension funds waiting for them at age 70. Real and significant savings on national health bills may thus be reasonably expected to occur. In short: EU citizens, in pursuit of their pension “carrot”, are likely to exercise well, look after themselves and, indeed, perhaps even to eat raw carrots.
Thirdly, by ameliorating the fear and anxiety many citizens feel regarding making adequate provision for their old age, it is likely that many people will be reassured enough to recommence spending and hence shorten the economic recession. The phenomenon of saving hard in a recession is now especially evident in Ireland where, following on the enormous annihilation of life-savings held as bank shares and in the decline in value of their primary asset (their homes), a great many Irish are now suddenly truly (and quite rationally) fearful of being pauperized in their old age. Their response has been, where possible, to save and to save hard: one in every seven Euros earned in Ireland today is now put away for a rainy day. The irony is of course that the rainy day has truly already arrived; and in a country where it really does rain a great deal (so much so that the Romans named Ireland “Hibernia, ...“Winterland” in Latin).
Fourthly, the creation of Type 2 Euros will likely cause some inflation in the Eurozone and a decline in Euro exchange rates. Both these things are essentially desirable from the overall point of view of Europe at this point in a recession. Note that, because Type 2 Euros cannot themselves be traded and are “hard” to transfer into Type 1 Euros, the inflationary effect of this large financial initiative is minimized.
Also on the macro-economic scale, the democratic annihilation of debt would allow the ECB to eventually gently increase interest rates with less pain to the public once the recession ends. One of the causative factors of the credit/debt crisis was the fact that interest rates were held far too low for far too long, thereby facilitating excessive credit/debt creation.
OBA type initiatives would also likely work in other debt-troubled economic regions such as the U.S.A., Japan and the U.K.. Indeed it could be useful, and fairer, to have synchronized “NOOBAs” in all these economic regions at 1st January 2012. I say “fairer” because it would reduce the phenomenon of “beggar my neighbour” associated with a unilateral inflationary event. “Competitive” currency devaluation relative to the other economic areas should then be minimized. Synchronised NOOBAs would be a more neighbourly way of conducting matters of debt-destruction and it is right that the egalitarianism inherent in OBA be extended, where possible, beyond the borders of the EU.
Fifthly, OBA should restore (and perhaps even extend and enhance) the EU citizen's trust-horizons as regards the EU and its operant institutions such as the ECB and the EU parliament. The EU's populations' faith in the positive project that is the European Union has been damaged by the collapse of trust-horizons associated with the debt-crisis in the Eurozone, especially by the selective and preferential wealth-transfers from public purses to certain institutions (usually banks) and from some EU nations to others. However badly needed, these transfers are perceived (probably fairly correctly perceived) as unfair and from the perspective of the EU’s periphery, and with apologies to Mr. Chesterton, the possibility of Europe’s descent into a “EUtopia of Eusurers” at times appears to loom.
For the professional politician, both at national and EU level, OBA should be relatively easy to implement since nearly all persons are not adverse to receiving monies “ex gratia”– even if they are of a novel, inaccessible type, and a type with highly limited applications. OBA acts for the public and against the oftentimes somewhat socially destructive short-term interests of international financiers. If OBA is implemented the public should correctly perceive that the political class of Europe are practicing leadership on behalf of the public. Of much more political importance than perception here however is the restoration of public trust.
I should just say that each EU citizen would of course have the right to “opt out” of OBA and so choose not to be a recipient of his/her 50K OBA monies and this right would be clearly and publicly communicated to the citizenry immediately after NOOBA along with the necessary information as to how to exercise that right in practice...this is an important point. Positive action to opt out on the part of a citizen would only be required in the case of the mortgage write-off scenario, since the Type 2 escrow pension fund would have to be applied for by each of all the other EU citizens. The most likely reason for a citizen to exercise such an opt-out would be preservation of privacy for, as mentioned above, I am recommending that all transfers of public monies should be publicly visible.
It is desirable that this plan be prepared in secrecy and that the international markets should be unaware of its existence before the date of implementation. This will prevent the markets, or any individuals or corporations, from pre-adapting or otherwise speculating upon -and against- the likely economic, bond and share-price effects etc. of such an initiative. There is nothing wrong or unfair about such secrecy: If it is implemented OBA will be just another happenstance which the markets will have to adapt to just like any other large unexpected natural phenomenon, such as an earthquake or a flood. OBA would also be a large, unexpected and yet entirely natural event.
OBA should enhance the EU Parliament and the ECB's ability to influence the member-nations of the EU to maintain high vigilance against fraud. It would do this by providing the ECB with a new form of “soft power”. It would be quietly be made clear, for example, that the continued granting (i.e. creation) of the €50K escrow pension funds to each years new “crop” of 70 year-olds is to be contingent on high levels of trust, honesty, fraud-prevention, fraud-detection and fraud-prosecution being maintained within and by each member nation. If necessary the escrow monies “tap” could be turned off for a particular nation and the ECB could basically wait until the elderly of that nation (who have built a deal of contacts and influence in the course of their long lives) agitate to get the situation “fixed”. In reality the widely understood prospect of this fraud-consequence happening should be enough to make the necessity of such an action by the ECB most improbable.
The on-going, publicly-funded, generosity inherent in the individual escrow pension fund monies part of OBA incentivises the populations of the EU to resist those policy errors and unconscious forces and tendencies which tend towards the break-up to the EU project. Populations shall also be incentivised to resist any conscious designs to such an end. As such, OBA assists the manifestation and maintenance of trust-horizons at the high and extended level which are both utterly inherent to, are necessary to, and in good part emanate from, the European Union project.
While the opportunity does exist for the EU and the ECB to make the transfer of OBA monies to a given country conditional upon certain criteria being met, most likely criteria to do with “enhanced” austerity; I feel this temptation should be resisted and that OBA should be kept strictly in the realm of generosity -a synchronised, sudden, trust-restoring -and hopefully pleasant- surprise for the many people who are fortunate to live within the EU. The exception to this is probably Ireland and any other EU country that may have been so very foolish as to eliminate property-based taxes in the past. Here the opportunity should be taken to use the popularity of OBA to “piggy-back in” the re-introduction of those unpopular (but nevertheless fair and highly economically sensible) local government funding property taxes usually known as “rates”.
I foresee that three groups of persons would likely be opposed to OBA as a proposal and possibly might attempt to frustrate its implementation:
Firstly, the banks and bankers would oppose the debt write-off and oppose it strongly since, in the somewhat inverted accountancy of banks, debts are actually counted as assets. So, the OBA debt write-off would make a major reduction in the asset and power base of Europe's banks. I do not myself see this as a negative thing. In fact the banks, though somewhat smaller after OBA would also be more stable for having some of the excess debt in the banking system written off (i.e. their capital adequacy ratios would automatically improve). Their share prices would be unlikely to actually tumble.
Importantly, the debt-write off would not be under the control of the bankers themselves at all but would be done on the instruction of the EU parliament and the parliaments of the EU countries and the ECB. So OBA is quite unlike the current situation of publicly invisible debt-write offs as in - again for example - Ireland. During OBA the democratic institutions of Europe would be asserting their command and control upon the situation...and the bankers would be requested and required to take - and comply with- parliamentary instruction.
Secondly, many among the rich would be opposed to this suggestion since it does have the effect of diluting their wealth by both printing a considerable amount of money (quantitative easing) and then what's “even worse”, subsequently distributing those funds in a scrupulously egalitarian manner. For the owners of capital I do accept that it is a genuinely bitter pill -especially in the case of those individuals and families where such capital has been accumulated in legal, honest, decent and fair enterprise- but I would point out that it does come with a sugar-coating (of €50,000) and does so for everyone, whether they are themselves among the deserving or undeserving poor, or among the deserving or undeserving wealthy.
However, I believe that the importance of resolving the debt-crisis before us, and the many benefits which accrue from effecting a gentle (and essentially non-confiscatory) re-distribution of wealth, must now override even the rather valid objections of the deservedly prosperous.
I am entirely unconcerned at the modest dilution of wealth this proposal would have upon the fortunes of those who have accumulated wealth in circumstances less than legal, decent, fair and honest and I am sure my unconcern in this regard will be shared by many.
Thirdly, persons of a socialist bent will, I suspect, be opposed to the suggestion, on the grounds that actually giving the wealthy money is too galling for words. Severe socialists tend to presume that all persons possessed of capital are, ipso facto, undeserving of it. Indeed, in their more extreme manifestation, socialists would appear to believe that only the state is “deserving” of owning wealth; ordinary humankind being undeserving of that privilege and responsibility. There is certainly a deep spiritual pessimism underlying such thinking, which OBA stands firmly in contradiction to; for it optimistically proposes that every sane and law-abiding adult citizen in the EU may be safely presumed as deserving of the custody of €50,000 of capital (albeit as Type 2 Euros) more or less immediately, and likely remains safely so deserving unless proved otherwise in a court of law or, in the case of insanity, by several of their doctors. As such OBA is, I believe, in accord with the economic philosophy originated early in the twentieth century primarily by the great English Catholic writers, G.K. Chesterton and Hilaire Belloc, which economics they termed “Distributism”.
OBA is not a socialist or crypto-socialist tactic, rather it is an intervention designed to help save and enhance the prospects of socially useful, creative, productive and distributive capitalism. As such OBA is in accord with Chesterton's observation: "The problem with capitalism is not that there are too many capitalists but too few".
This brings me to yet another benefit of OBA, a psychological one: The fact that persons who do not currently possess capital (i.e. the proletariat) shall, after the implementation of OBA, effectively be “in possession” of €50,000 albeit in Type 2 Euros. This I suggest should act in a way upon their minds so as to contradict “The Proletarian Mind” - I quote the title of an essay by Hilaire Belloc on the subject.
It is a tired cliché to speak of “a crisis being an opportunity” but this crisis does provide the opportunity to begin -in quite a safe way- the long-delayed work of re-possessing the dispossessed in our society. In fact of course the “opportunity” is always there but the crisis somehow makes it easier to “grab the chance”, so to speak. I consider this a really important benefit of OBA and, by way of further explanation of what is meant by the term “proletarian mind”, I have appended Mr. Belloc's essay (now out of copyright) below as Appendix #1. Note that Belloc understands that the casino, ponzi and disaster-capitalist’s “mind” is the other side of the coin of the “proletarian mind”; since dispossession has two faces, that of the dispossessor and that of the dispossessed. Both such types' minds are divorced from the profitable, socially useful, family and community-based capitalism, that ability to create and store wealth, which humans were fortunate to discover at the start of Neolithic Revolution.
I believe that, along with the advent of authentic religion, good, high trust-horizon capitalism is a large part of why humans are now able to form much larger group sizes than they could back in the Paleolithic or Mesolithic. This enhanced group size is usually called “society”. Without profit there cannot be a people and so this is the essential format of capitalism, albeit greatly modernized, which needs to be defended, preserved, promoted and distinguished from (i.e. understood to be quite distinct from) the several parasitic forms of capitalism now extant and presently particularly flourishing; which latter forms are characteristically innovative, dispossessive and trust-destroying. Parasitic forms such as ponzi, casino, crony, disaster and derivative capitalism European society now needs to carefully rid itself of. I say “carefully rid”, for care must be taken that the riddance itself be good; that is made without resorting to presumptuous, excessive, or cruel measures.
The great policy temptation during a period of crisis is to believe that "the solution" requires the application of even more concentrated power – extra powers usually to be grasped and applied by the state. The OBA initiative however is a solution based on quite the contrary premise and should have the effect of somewhat re-empowering (by debt-destruction and/or individual re-capitalisation) the many citizenry of Europe. Its action is to be that of slightly diluting and distributing wealth and power from the state (and super-state institutions such as the EU and the ECB) and from the rich; the rich both in their human form, and importantly from the corporations who, being fictitious persons, do not get, and indeed are not intended to get, the primary benefit from OBA. Socially useful corporations will however naturally really benefit from the restoration of economic confidence within society. As such OBA is in accord with one of the EU parliament's own excellent guiding principles: that of “subsidiarity”. Subsidiarity is of course the name of the principle that seeks to solve any given political problem as far down the power ladder and as close to the “grass-roots”, who are the citizens themselves, as is humanly and practically possible.
This pamphlet advises that one of the best attempts to solve our current debt-crisis problems is to employ the philosophies of republicanism and distributism in designing and implementing a publicly visible high-subsidiarity debt-destruction event, the fruits of which should be spread, not just amongst the property-price distressed Irish or just the citizens of the other so-called “marginal” economies being named as Greece, Portugal, Italy and Spain, but bravely amongst all the EU's citizenry as befits the action of the great egalitarian project that is the European Union.
Thus under OBA, the prudent German mortgage-holder's prudence is rewarded by a write-off of €50,000, just as the less prudent Irish mortgage-holder (likely now “underwater” in negative equity) is thrown a life-belt worth €50,000 and the non-mortgage holder is also beneficed to the same amount. So OBA gets around both the problems of moral hazard and of state-sponsored favouritism by scrupling -as far as is possible in practice- to be truly egalitarian.
In conclusion, There is the matter of the “cost” of this OBA proposal. Well, the money is to be created out of nothing, in what is really quite a spiritual “ritual” when you think of it. I am not an economist, nor even a statistician, and I would welcome those professionals’ costings of this proposal.
There are about 420 million adults in the EU so, on the back of my very amateur envelope, about 20 trillion Type 2 Euro needs to be created ex-nihilo on NOOBA. The vast majority of these monies are however “arked-off”, held long-term in escrow by the ECB. The portion of these monies actually needing conversion to Type 1 Euros at NOOBA for the purposes of the mortgage debt write off appear to be about 2 or 3 trillion Euro. The other 18 trillions remain in the virtual reality of the citizens ECB escrow bank accounts and are “only” in existence psychologically - as a trust-restoring promise to be paid at each citizen’s 70th birthday, when they are actually “really” created into trade-able Type 1 financial reality. Critics of OBA may well claim this is all a very strange and expensive sort of “cheap” psychological trick apparently designed to “merely” restore trust in the Euro money-system. Well, indeed: And I would refer all such persons to a more careful consideration of the entirely psychological and symbolic nature of our everyday fiat credit/debt money system.
In OBA the inherent “problem” at the heart of our money system (the fact that monies are just symbols created by an elite priesthood) is being used to form and become the solution.
These OBA monies are quite enormous but, for purposes of comparison, at the end of 2010 the world's derivatives market (most of which market is of very dubious social utility indeed) was "worth" 424 trillion Euros – that's 10 times the world's GDP (Source: International Bank of Settlements 18th May 2011). This is where the occult (i.e. hidden) priest-craft of credit/debt creation has surely been practiced at its most utterly reckless. The mortgage debt-annihilation part of Operation Black Arrow is most unlikely to involve the creation of more than “just”1% of the enormous monies that have already been created by the international banking system to fund that most peculiar and fabulously esoteric entity, the “international derivatives market”.
Query: Which money-creation operation has the higher social utility: the derivatives “market”? -evidently a sort of inscrutable global casino involving the less understandable quadratic equations- or Operation Black Arrow?
I suggest the answer is Operation Black Arrow, which can fix at least some of the problems caused by excessive credit/debt-creation and it is also likely to have several other protective and emergent benefits to real human society.
May I take this opportunity to thank you for taking the time to read this long document and to earnestly recommend the implementation of Operation Black Arrow.
Stanislaus J. Reynolds, Cork, Ireland, 28th September 2011
THE PROLETARIAN MIND – AN ESSAY BY HILAIRE BELLOC
The small owner of old days—farmer, craftsman, boat-owner, storekeeper—was a truly free man. He possessed the instruments of his livelihood, no one could take them away and so take away his livelihood with them. He thought as a free man. He estimated his well-being in terms of property. He did not think of property as the privileges of a few, or as an unfair advantage: he thought of it as a natural condition of life, enjoyed by most citizens. He inherited property—especially his house and land. He left it to his children. When he made a contract freely with another free man, he felt bound to observe that contract and felt it no grievance that the other party should require him to do so. He took his share of the public burden, paying, out of his own money, certain sums for public purposes; in those days sums small compared with his total earnings. It was natural that he should help to decide with his fellows how public funds thus formed should be spent. So the whole democratic system could work easily and well. His labor enriched him. It paid him to be a hard worker. If he was slack in his work he was blameworthy, not only in the eyes of his neighbours, but in his own eyes. Such men forming the most part of the commonwealth gave society its tone and spirit. Those who were not owners could become so by saving and, after serving other men, could become independent in their turn. Society was inspired politically by the Free Mind, which is in harmony with man’s nature: for all men have Free Will. But when this free man sank to be a proletarian, deprived of property, wholly dependent upon a wage, his mind gradually changed. At last he became a man with a proletarian mind. To the proletarian mind work is an evil, a burden wrongfully imposed by another. The proletarian knows that his work enriches not himself but somebody else. He cannot, by saving, in a proletarian society, acquire independence as a small owner: for in a proletarian society the small owner is ruined. An exceptional man can rise out of the proletariat into the privileged owning class, but he does so at the expense of his fellows. The mass of him can never be other than proletarian, or at least the proletarian mind gets into that mood and is fixed in it. The proletarian mind feels every incentive to spending what it earns and no incentive to saving, just as it has no direct incentive to work save for the necessity of keeping alive; and livelihood which is, in social justice, no more than his due, is not the product of his own choice and effort, but is doled out to him by another. His ideal can only be to get as much as possible for as little effort as possible. In pursuing that ideal his capitalist master sets him the example; for the owners who in a capitalist state (that is, a proletarian society) are a privileged minority.
They live by profit and by obtaining as much as possible for as little effort as possible—often with no effort beyond the gambler’s effort. The proletarian mind is not conscious of duties to the commonwealth, save, still, in one particular, that of patriotism; and even this is growing weaker with the proletariat as proletarian conditions grow more hopelessly permanent. Far worse spiritual consequences follow. The proletarian mind loses the sense of home for a proletariat has no roots. It drifts from place to place. Its habitation is “the labor market.” It inherits nothing and has no hope of handing on anything to posterity. To tell the plain truth, the proletarian mind despairs. So do the minds of its masters, for the evil we do to others bears fruit in ourselves. The proletarian mind cannot but fall into hatred of its oppressor and that hatred is enhanced by the contempt of which it feels itself to be unjustly the victim. In such a mood how it is possible for men to enjoy leisure, to keep their sense of beauty and to exercise the Arts? The whole thing is inhuman. Meanwhile, the privileged owners live in dread of falling into the proletarian condition. That catastrophe lies before them on every occasion and this dread affects especially those who think wrongfully to benefit by the sufferings of their fellow men. The proletarian mind easily adheres to the profession of democracy. It will acclaim leaders who talk of democracy. But it is incapable of democratic action. It has forgotten what it was to be free. That is why modern industrial capitalism, as it is called (but we know that its true name is “proletarianism”) more and more in one country after another accepts a despot and under whatever name the despotism is labeled looks to it for its salvation from its misery. There as never been such a mood before in the history of the world and of its nature it cannot endure, but in passing it may breed something worse still. Never before has there been a social system based upon destitution combined with political freedom: upon free citizens, lacking economic freedom. Note particularly that the worst feature in the whole affair is the lack of human bonds. To a man who has not experience of anything but the modern social injustice and who is filled with its bitterness, the strength and value of a human bond, of loyalty, affection, neighborly custom between the poorer and the wealthier man can mean nothing. But to those who have experience of such human bonds, they mean everything. It is not too late now to attempt a restoration of the old loyalties and personal contracts and long domestic familiarity which humanized and modified and made tolerable the older inequalities among men. When we come to speak of restoring better things we shall not begin by taking the proletarian mind for granted, we shall rather begin by aiming at destroying that mind and substituting for it conditions of economic freedom and the free mind of the free man.