Chapter 10 - The Repair.

The Cure

There are two possible repair procedures for Italy.

  1. More Money. This is the illogical approach. This means borrowing more bank credit.
  2. Make the money move. We might call this a “Velocity Repair”.

The banks have failed to maintain their credit component of the Money Supply. Credit comprises 90% of the Italian Money Supply. In 2000, the banks provided 600billion [666.3-66.8] in credit to form 89.9% of the Money Supply. In 2008, the banks provided 1153billion [1293-140] in credit to form 89% of the Money Supply. By 2012, the credit provided by banks had fallen to 1099billion [1263.4-164.5]. This severely depleted the Money Supply. When the banks encourage citizens and businesses to use their virtual money and then they curtail the volume of that credit, it puts the businesses in crisis. Not only do they lack operating credit, the volume of money that is actually circulating falls. The banks are the poorest performing entity in Italy. They have failed in their duty to the nation. The Cash Currency created by the ECB had not fallen. The Cash Currency has increased from €140 billion to €165 billion during the same time. We are talking about an utter failure of the banks to maintain the level of credit in the nation. A worse behavior by private banks could not be wished on any nation. You would not even be this cruel to your enemies. Only Moses from the old testament was this cruel.

Moses: “... and thou shalt lend unto many nations, but thou shalt not borrow; and thou shalt reign over many nations, but they shall not reign over thee.” [Deuteronomy 15:6]

And the heartless giving away of other people’s land:

Moses: “But of those cities that shall be given thee, thou shalt suffer none at all to live. But shalt kill them with the edge of the sword, to wit, the Hethite, and the Amorrhite, and the Chanaanite, the Pherezite, and the Hevite, and the Jebusite, as the Lord thy God hath commanded thee. Lest they teach you to do all the abominations which they have done to their gods: and you should sin against the Lord your God.” [Deuteronomy 20:16 to 18]

The chances that Italy will manage to get the banks to resume lending is small. They are using illogical arguments to avoid doing so. Anyone that argues that the debts need to be repaid when there is not one country in Europe that can repay its debts is a fool. The bailouts are a pretense that the banking establishment is saving Italy. Money is a freely created commodity. Money can be created in any quantity at no cost. The bailouts are saving the banker’s money system. Without the bailouts, the money system goes down. That is not the fault of the Italian government. It is not the fault of the Italian people. It is the fault of the bank’s failure to maintain their component of the Money Supply.

A graph of Money Supply for the Italy. The debt can never be repaid. Graph by Andy Chalkley. Creative Commons Attribute
Money Supply for the Italy. Graph by Andy Chalkley. Creative Commons Attribute

It is the fault of the banks creating an impossible contract. It is the fault of the banks creating unpayable debt. The banks collectively create credit which they require to be repaid with more credit than was issued.

This leaves us with the second option. The cure for Italy is to get the money that exists in the nation to move by any means possible. Italy has taught us many things through the centuries. Italy has a money shortage that is not a shortage of money.

To get the money to move faster, various actions are helpful.

Money can be created in any quantity at no cost. The value is not in the money. A nation is not richer when it prints more money. It is richer when that money flows rapidly.

Italy has far more money than it needs. The problem is that most of this money is sitting idle. It must be made to move by any or many of the ways that I have mentioned.

To make money move, tax the non-use of money rather than the use of money.

And by the way, if you do escape the euro, you will be given only one choice: a debt based Lira. Your debt will follow this pattern:

A graph showing money and debt at ten percent increase each year and ten percent interest rate. Graph by Andy Chalkley. Creative Commons Attribute

You will not be given a choice of debt-free-money. You will be given a choice between a debt-based Lira or a debt-based Euro. You will not be offered a debt-free Lira. A debt-free Lira is a money system where the Lira is created by the Italian treasury and spent into circulation relieving the need for excessive taxation. A government public bank would lend at a low interest rate and fund the government and business.

So don’t try to fix the debt situation. Just make the money you have move.

If you do want a debt free system, you will need the treasury to create all the Lira for the nation. This will include paper Lira and digital Lira. The government will spend the money into circulation and tax the money back out of circulation to prevent oversupply. This will take a lot of engineering. Current problems can be solved by increasing the flow of the money that exists in Italy by adjusting the tax.