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HomeFarming NewsOpinion: The money system and rural Ireland
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Opinion: The money system and rural Ireland

Tadgh Quill-Manley, who serves on the general council of the Munster Agricultural Society and the general committee of the Dunmanway Agricultural Society, discusses the money system and rural Ireland.

The money system 

Much has been said of the decisions by banks such as Bank of Ireland, AIB and Ulster Bank to close many of their branches across the country.

Several representatives of the business sector have decried the closures and its impact on trade in localities.

The loss of direct employment and the threat of consequential, indirect unemployment due to a downturn in the local economy (as a result of a combination of factors, such as reduced consumer spending from loss of direct employment, reduced local lending, aforementioned reduced trade by banking in another town, and the loss of livelihoods due to unviable businesses and those that can only afford to operate with reduced staffing numbers) are, of course, reasons for genuine concern.

Additionally, difficulty in using online banking among the elderly, disabled (where they could avail of human assistance in a physical bank branch) and rural dwellers (due to relatively poorer broadband quality), have been highlighted as challenges in using such a necessary service.

Developments like these have unquestionably contributed to the decline of rural Ireland over recent years.

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A national predicament

National predicaments with finance are things that many of us and the generations who came before us have experienced. It threatens to tear apart the very fabric of our society and can lead to the rise of extremist elements.

Of course, their lack of understanding of the banking system leads to their ‘revolution’ being completely impotent.

We have seen a lot of rhetoric from politicians once again, from all sides, concerning re-thinking how we do things post-pandemic.

However, the one big thing that would act as a catalyst for good has not been discussed at all: the design and control of our systems of money and credit. Unfortunately, not even these mass bank branch closures have sparked any form of deliberation. The is not merely a problem with the political process in this country.

First of all, there is the common error of conflating money and banking as one and the same. A lack of knowledge regarding the most basic principles of banking is a dilemma that pervades society.

For example, a 2010 study by ICM Research showed that over 90% of people believe in the false notion that banks do not create money.

In the same way that money is created by banks (typically by issuing loans in the form of deposits), when it is paid back, it is destroyed.

Only 3% of all money exists as legal tender. All mainstream economists define money as nothing more than a unit of account and as a medium of exchange, its only, true, proper use.

Balancing the books 

However, many electors and public representatives liken government spending to a household budget and place emphasis on the concept of “balancing the books,” a phrase our current Tanaiste uses

Angela Merkel used the term “Swabian housewife” to justify tightened government spending to the German electorate.

This ignores the fact that unlike a household (or a business), which is a currency user, the government is instead a currency issuer, meaning that a State can never go bankrupt. They also proliferate the idea that money is in itself a commodity of intrinsic value, another false notion.

This view continues from the time when it was so, and this incorrect assessment is fostered by the suggestion that money is inseparable from gold. A government must first spend money into existence, and then utilise taxation as an instrument for creating a common medium of exchange (the currency of that country).

By making the population a debtor by means of taxation and legally obliging them to pay off that debt in a specific form, the common medium of exchange is born.

Deficit vs inflation

Some of those who are aware of the ability to create money wish to see the practice prevented because it will cause spiralling deficits and inflation, pushing many into poverty. This is another myth created by a lack of understanding of the monetary system and credit creation.

It is possible for governments, like banks, to create money. Having left the gold standard in 1914, the UK generated its own money to pay for WWI.

This was not based on debt, such as bank loans and bond issuances, and was able to pay off war debts in 1918 by issuing more money, which was immediately destroyed through debt repayment, leaving no change to the money supply.

This was notably different to Weimar Germany, the currency of which was still pegged to gold. Subsequently, it could not issue new money.

What they did to pay for war debts and reparations instead, however, was rapidly devalue the currency, reducing the burden of the debts, which in turn lead to the hyperinflation and woes that ultimately sparked the birth of Nazi Germany.


On the matter of increasing government outgoings, deficits are not evidence of overspending; inflation is. At 240%, Japan has one of the highest debt-to-GDP ratios in the world.

Yet, it has one of the world’s lowest inflation rates, which is only one-third of the euro’s inflation rate, despite the EU having the strictest financial rules in the globe.

Regardless, Modern Monetary Theory outlines that there is little threat of inflation on the basis that expansion of the money supply is directed towards economically productive activity, such as producing full employment.

The problem is not the issuing of money, per se, but the spending of money that matters. If there is any threat of inflation through increased economic activity, it can be controlled by taxes on wages and profits, along with amendments to consumer protection and competition law in the event of collective price increases, attributable to greater activity and prosperity.

This counters the view held by believers in the quantity theory of money, which includes many decision-making figures in central banking, who believe that a certain amount of unemployment must exist to keep inflation at bay.

A non-self-liquidating system

Upon realising that money can be created, the question “but should we?” will undoubtedly arise.

Major Clifford Hugh Douglas said that answer is “yes” to sustain current trade activity alone. In the 1910s, Douglas noticed that the total weekly costs of goods produced was greater than the sums paid to individuals for wages, salaries and dividends. This was in contrast to the now-archaic (but still prevalent) idea that the price system is self-liquidating.

As industry must use more of the money, it re-coups from the public in sales and the provision of goods and services than it pays out to them, the gap between prices and incomes must be filled by debt, which must be paid back in itself.

Eventually, this would lead to insolvency, mass unemployment and poverty.

These leads to the development of a financial industry based mostly on debt and debt servicing, turning money into a commodity in itself, which is incorrect for the format in which we use it.

Douglas proposed that new money be created by the government and issued as a ‘national dividend’ to consumers to compensate for this. His theory became known as ‘Social Credit’.

John Maynard Keynes

In the 1930s, John Maynard Keynes argued that inadequate aggregate demand caused by unemployment and wages too low to match the productive capacity of goods and services would create economic stagnation and even depression.

He suggested that the government could create money to finance business operations and ‘living wages’ following the onslaught of the Great Depression.

Keynes is regarded as one of the most influential economists of all time. His theories are evident in programmes at State and EU level, administered by Pobal and Local Development Partnerships.

Despite the limited presence of these schemes, local economic activity has been boosted where they have been implemented

However, what has been done so far only scratches the surface of what is possible and are actually based on debt and taxation from workers and small companies rather than new money.

Critics of the current order of the financial system are typically written off as part of an extremist faction that is not in touch with reality. However, this neglects the fact that the adoption of Keynesian ideas by several countries after World War II staved off the potential spread of such movements.

The name’s bond, state bond

If the government can create money (as they have done in the past) and use it to benefit society as a whole, then why doesn’t it?

The government, upon realising that the river called ‘money’ does not flow sufficiently strong, would surely have installed a proper drainage system to enable it to flow through every town and village in the country, quenching the thirst of every cash strapped family, disadvantaged person and creative entrepreneur who resides in them?

The problem lies with restrictions that are currently in place – which are rarely discussed.

We are a member of the EU and the eurozone and, as such, are bound by the Maastricht Treaty, which ultimately created the ECB.

Article 101 EC of the Treaty prohibits the direct financing of government expenditure by the nation’s central bank, removing the power of money creation from individual states, subjecting them to ‘market discipline’.

The state cannot directly raise debt either (including bonds) and must sell bonds on the secondary market, leaving a major aspect of the financial system at the control of private investors.

National debt wiped clean by a keystoke

EU States could have their national debt wiped clean by a keystroke from the ECB, but the bond markets in non-EU cities such as London and New York yield large profits for these interests.

The current EU rules, in theory at least, ensure that when government spending exceeds taxes, it must borrow funds from the market, run up a debt and/or increase taxation.

Hence, when an economic downturn occurs, austerity ensues. The emphasis on private finance and debt by the ECB currently is an ideological one.

Nobel Prize-winning economist Joseph E. Stiglitz claimed that the heads of institutions such as the ECB in the EU and the Federal Reserve in the USA are victims of ‘cognitive capture’. They honestly believe in an economic philosophy that is, in practice, possibly inferior to others. Consequently, the solution to our problems must be done at a European level.

It is up to our representatives in the EU to lobby for a change in Article 123 of the TFEU and see our member governments return to their rightful place, that of currency issuers.

Reviving national industry

In wearied industries in the state, this could mean widespread, positive changes. For example, despite the massive decline in the percentage of the workforce engaged in agriculture over the decades, reinforced by an incredibly urbanised Irish society, harnessing the power of a state-controlled money system could spawn an Irish equivalent to the industrial revolutions in many other countries during the 18th and 19th centuries.

With changes to both our monetary and fiscal policy, depressed areas of commerce could become a source of numerous employment opportunities.

Rather than depend on imports for many of our goods, we ought to embark on a brand new, national scheme that sees the productive capacity of these otherwise jaded, national industries realised.

The state could use this as an opportunity to fund ‘earn and learn’ apprenticeships with honours degrees, along with a ‘job guarantee’ scheme, as has been suggested by world-renowned U.S economics professors Stephanie Kelton and Larry Wrandall Ray.

What about those currently employed by private financial institutions, such as banks? Will they lose their jobs? Well, to those who still have one, no, they would not find themselves in unemployment. The only difference to before is that the state would have ultimate authority over the money system rather than financial institutions, as they are not one and the same.

Developing the locality

In facilitating economic prosperity from a strictly localist outlook, the EU Regional Development, CAP and Social Funds could be bolstered, along with stronger government grants to support small business.

Our diminishing post offices (with the An Post company being owned by the state), could become a beacon for local banking, and the state could boost credit unions in attempts at filling the gap left by mainstream banks, and, in the interests of parishioners, offering themselves as a more democratic model that is directly concerned with local, rural needs, in keeping with St. John XXIII’s 1961 encyclical ‘Mater et Magistra’.

In this document, also known in English as ‘On Christianity & Social Progress,’ John XXIII stated that “the common good also requires that public authorities take cognisance of the peculiar difficulties of farmers”.

“They have to wait longer than most people for their returns, and these are exposed to greater hazards. Consequentially, farmers find greater difficulty in obtaining the capital necessary to increase them.”

Continuing, he added that “for this reason, too, investors are more inclined to put their money in industry rather than agriculture“.

Indeed, as a rule, they cannot make the trading profit necessary to furnish capital for the conduct and development of their own business.

It is, therefore, necessary, for reasons of the common good, for public authorities to evolve a special credit policy and to form credit banks which will guarantee such capital to farmers at a moderate rate of interest.”

I would like to conclude by stating that the river called ‘money’ will be plentiful for individuals, families, communities, local business, and essential services if this can be achieved.

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