April 2002

Dear Colleague,       

Debt Relief begins at Home

This invitation comes to you because of your support for EDM 736 on Debt Relief and/or EDM 877 on Debt and Credit Lending.  It is hoped that you will want to take time to attend some of the next three meetings of a Parliamentary supported group, the Forum for Stable Currencies whose current programme is entitled Debt Relief begins at Home.

Prof. Joseph Stiglitz, former chief economist of the World Bank, recently gave evidence on globalisation to the Select Committee on Economic Affairs of the House of Lords and mentioned that African states would borrow money at 18 – 20% and lend it at 2% to establish reserves.  He also stated that countries that received loans have not increased their economic growth but the influence of their lenders.  Furthermore, he elaborated on the influence of the US Treasury over the IMF, the World Bank and the WTO.

Michael Rowbotham, former Secretary of the Christian Council for Monetary Justice, describes in his book Goodbye America how Third World Debt arises.  His views are endorsed by the Forum for Stable Currencies which represents over 300 Parliamentarians and citizens who have attended meetings for more than three years.  The Forum represents also a growing international network of self-help initiatives and NGOs some of which are mentioned on the back of the enclosed programme.

Every political dialogue depends on the precise definition of words.  Aristotle once said that money is a medium of exchange and not the mother of interest.  However, every Government inherits a National Debt while failing in the primary fiscal responsibility of creating a sufficient medium of exchange free from debt and putting it into circulation through public expenditure or other appropriate mechanisms.

Instead, banks have secured a virtual monopoly in the creation of credit for which they charge interest.  Under their system of fractional reserve, banks lend out much more than they have, often up to ten times more, and even much more through hedge funding. 

When money is lent to Third World countries, it is often used to buy arms that are produced in the North.  At the end of World War II, Cambridge economist John Maynard Keynes led the British delegation to the international Bretton Woods agreement where the details of the American ‘White Plan’ were hammered out: fixed exchange rates with the Dollar and the Dollar matched by gold.  Keynes said that if there is to be Free Trade, there must be a fair balance of trade between participating countries.  He was opposed to some nations becoming ‘creditors’ (exporting more than they import) and others ‘debtors’ through their trade accounts.  His Clearing Union ‘Bancor’ sought to foster trade balances by a range of fiscal measures.  If his proposal had been accepted, there would be no Third World Debt. 

But at Bretton Woods, Keynes was overridden by the USA.  The notion she might be under an obligation to expend her surplus trade revenues into other economies was completely unacceptable, and the IMF and World Bank were founded. 

To cancel Third World Debts, whilst important and appropriate, does not go to the root of money being created by banks and lent at interest to governments, businesses and individuals.  Nor does it address the coercive influence of a limited number of international players in the market place.

The discussion of the Tobin Tax surely is a sign that the time has come to consider alternative approaches in financial relations on the international and national scene.  It is hoped therefore that you will be able to accept this invitation to attend Forum for Stable Currencies meetings to discover the new ideas which are gaining more and more momentum and recognition. 

Looking forward to seeing you at one of our next meetings,

Lord Ahmed of Rotherham                                             Austin Mitchell MP