The banking system is being held responsible for most of our social evils by the majority of 'do-gooders.' But they have no recognition that it rests on the institution of land monopoly, which is basically responsible. There are numerous independent credit unions throughout the world, which function outside the banking system. These restrict the use of credit to members and afford some relief, but the banking system must still be used outside of membership. 6. A Private Banking System. Pattern for a Better World. Graham Hart


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The business of banking in England was originally a private venture. The Bank of England ordered the minting of gold coins and coins of lesser value in silver or copper. These coins were paid for by shareholders' funds in real wealth acceptable to the gold, silver or copper smiths.

Coins were used over and over again to save the waste of labour in barter trading. A premium was charged for the coins issued, sufficient for inducement to bank shareholders, but the use of coinage to facilitate trading transactions was still much more attractive than barter.

For larger transactions the weight of coins was found to be cumbersome and risky so the bank issued banknotes upon which was inscribed A PROMISE TO REDEEM ON DEMAND WITH GOLD.

As a further refinement and convenience to customers, the bank kept debit and credit records for each customer, which were kept in balance by periodical adjustment with coins or notes. At all times bank shareholding consisted of sufficient gold to meet the cost of redeeming the notes issued, together with its administrative liabilities etc.

Marches, demonstrations, and other pressure against high interest, and in favour of increased income, are common throughout both the developed and the under-developed economies. Australian interest is high by world standards; for example, Singaporeans are offered 2.6% interest on housing units in Sydney (The Straits Times, Singapore, Saturday, August 24, 1996).
Picture by courtesy of   Henry George Institute, New York State, USA

Banks also issued credits at interest subject to mortgage security over the borrowers' assets sufficient to repay the loan in event of default of interest payments . The rate of interest was governed by free market assessment of the average earnings of capital and returns from other forms of investment.

The economic background at the time must also be taken into consideration and in particular the conditions of land tenure and public finance. The socially-generated unimproved site rental value of land, (economic rent) is natural public revenue because this arises from the presence and activity of all people in an economic community, together with public services to land.

This has never been the major source of public revenue in England and public revenue has been raised by taxation - fining people for the production, exchange, investment or consumption of wealth. This form of robbery has such an inhibiting effect on production that almost every form of social evil arises, including unemployment, poverty of the masses, crime and social disorder. This in turn requires taxes to be about double that which would be needed in a society financed by the collection of economic rent etc..

When economic rent is not collected by governments on behalf of the people it is capitalised as land price at about twenty times the rental value. Land price then becomes security for private borrowing from banks.


Governments also must borrow because of the additional revenue required to alleviate all the problems and misery they have generated.

Governments have no security to offer, however, except the promise to tax children of the next generation when they become old enough to earn an income. This form of security was acceptable to the banks.

An enormous need for borrowed funds is generated by public borrowing, which also is increased by poverty. This similarly increased the need for private borrowing .


Bank business increases correspondingly and those with the necessary funds to buy bank shareholdings, in general, are the landed aristocracy, who receive economic rent, which rightly belongs to all the people, as unearned income, plus that which arises from land price by those who speculate in land, rather than putting it to use, and so providing employment.

The British system of banking was adopted in America, Australia and elsewhere and functioned reasonably well until a major world-wide depression followed booming land prices.


The land-hungry people from Europe and elsewhere flocked in droves to increase the populations of America and Australia which caused land prices to increase enormously. When the inevitable depression followed there was a dramatic collapse of land prices, in many cases below the value of security for bank loans.

Many banks, particularly in America, became insolvent. In Australia government intervened to save shareholders and bank customers funds. This intervention was successful to a point, but at enormous cost.

One of the first moves was to repudiate the obligation to redeem banknotes with gold. Bank customers had no alternative but to accept notes of reduced value, which was inflationary.

There have been various banking systems throughout the world for long periods of time and numerous upheavals with varying degrees of repudiation.

It would only confuse a very difficult subject to delve into these. The principles of sound banking practice have been established.

Various forms of money have been used, to an extent, in other countries. Even shells of token value have been used. Anything that is mutually acceptable and convenient can be used IN AN HONEST COMMUNITY.

Australia, however, is unlikely to have honest governments in the foreseeable future and the people's understanding of honesty and morality is influenced by government standards and practices.

Under present conditions a currency of intrinsic value, as described, is absolutely essential, with the promise to redeem notes with gold, on demand, reinstated.

The problem of recurring land booms and subsequent depressions must be faced, however . This can easily be remedied by governments collecting the full value of economic rent as their natural revenue.

Land price would then disappear and no longer serve as a security for bank loans, which would have to be secured by real wealth and a reputation for honesty.

Government borrowings would then be unnecessary when the institution of land monopoly and speculation was destroyed, and in consequence the expense of financing the welfare state would be enormously reduced.

The need of private borrowing from banks would also be reduced, as full employment opportunities were restored, and involuntary poverty abolished, together with the robbery of taxation.

Although workers' strikes and other demonstrations make the most newsworthy pictures, the ruin of small business people because of faulty financial and taxation policies is just as important in gauging the economic health or ill-health of the nation and the world. Insolvency figures have been high for more than 25 years all over the world, but the groups with the monopolising capacity continue to increase their assets and power.
Picture by courtesy of  Henry George Institute, New York State, USA

The buying and selling of properties would involve the trading of the improvements only, with an obligation for property-owners to pay economic rent annually, on a pay-as-you-earn basis, instead of land price, for which funds for average people might have to be borrowed.

Banking is not a necessary monopoly, and therefore government intervention is not warranted.

The function of banks is to operate as agents between borrowers and lenders, and to issue currency of intrinsic value as required.


It is now required to define the conditions of a free and competitive private banking system in which malpractice would render a dishonest bank uncompetitive with other banks, and thus restrain dishonesty.

Approved competitive private banks should accept depositors' funds and exchange for coins of intrinsic value or notes of guaranteed value as required.

They should make loans similarly subject to appropriate security in real wealth. Land price should not be acceptable security.

In the event of foreclosure, where fixed improvement to land form the basis of security, the unimproved value of real estate where and while it exists should be returned to the debtor.

Coins should be obtained from gold and silver smiths in exchange for acceptable real wealth or from a common pre-arranged source, approved by governments, but not subject to issue other than to approved banks.

Bank notes issued by banks should bear in inscription guaranteeing to redeem with gold on demand. This is absolutely essential to an efficient banking system.

Banks should hold bullion or coins to cover such obligations. Bank shareholders' funds should be sufficient to meet this obligation, plus all administrative costs.

Banks should keep account of debit and credit entries on behalf of each customer, and adjust balances as and if required with the issue of banknotes by the party in debit.

The notes and coins issued by the different competitive banks would be of the same face value or denomination. The relative efficiency of the different banks would be registered by their share values, which would stimulate incentive to improve efficiency.

A banking system patterned on the foregoing would function as well as possible under present conditions.

There would need to be a Bank of International Settlements, owned by the Australian banks, which would account for international balances of the various countries with which we trade and export or import bullion, where this is necessary to maintain equilibrium.

Where this is not possible the value of a particular currency would adjust accordingly, regulated by market-assessed supply and demand.


A totally free and unregulated banking system is only possible when honesty is restored to governments by the collection of economic rent as the major source of public revenue, the robbery of taxation is abolished and the functions of governments are confined to matters which by their nature are necessary monopolies, in which competitive private enterprise cannot operate efficiently or effectively.

How to bring this about is the million dollar question. The obstacles are as follows:-

1. We have a legalised 60% major media monopoly whereby economic truth is either. distorted or withheld from the people, who are easily induced to vote against their own interests.

This monopoly should be reduced to 1%, because a government monopoly would be even worse.

2. Public control of education, which is not a necessary monopoly, should be abolished. Public education financed by taxation, debt and inflation commenced in England after the reign of Henry VIII, who stole the church lands and set the pattern for his nobility to steal the remainder.

This was legalised by the Acts of Enclosure which followed during the next two centuries.

In return for its land holdings the Church had provided education. The people became so impoverished by the loss of their land that they could not pay for private education, and Big Brother filled the breach.

With full employment at full earning capacity, which would result from the collection of economic rent for public revenue, the people could well afford to pay to send their children to the school of their choice. Competition and Diversity would then replace Indoctrination.

The banking system is being held responsible for most of our social evils by the majority of "do-gooders." But they have no recognition that it rests on the institution of land monopoly, which is basically responsible.

There are numerous independent credit unions throughout the world, which function outside the banking system. These restrict the use of credit to members and afford some relief, but the banking system must still be used outside of membership.

There should be no further dealings with the International Monetary Fund (I.M.F.), the World Bank, or any of their agencies.

A totally just and efficient banking system cannot be fully established until economic rent becomes the major source of public revenue, but what is proposed would fill the breach for the time being. Go to section 7

INTEREST RATE OF 2.6% further reading: Singaporeans were invited to borrow at 2.6% interest to buy Australian real estate: "Austwide PRD Realty. Sydney. Invest into your children's future. ... Own a freehold, full facilities, fully furnished apartment, from only A$99,750. ... Within 1 km: -- University of Sydney ... Attractive Finance Packages available with Interest Rate from 2.6% p.a* -- *Conditions apply. Solid investment opportunity; Sat 24th and Sun 25th Aug 1996, 10am to 7pm, Lengkuas Room, Level 2, Singapore Marriott Hotel, 320 Orchard Road, Singapore 238865, Tel: 735 5800. Austwide PRD Realty (Singapore) Pte Ltd, 321A Orchard Road #12-09 Ngee Ann City Tower A, S'pore 238873 Tel: 735 6515 Fax: 735 6650 ... AUSTRALIA, SINGAPORE, INDONESIA, KUALA LUMPUR, TAIWAN, HONG KONG. Specialists in Australian Properties. Frank View Realty Pte Ltd. ... Sydney Campus Apartments Proudly developed by: Broadway Australia PTY LIMITED, Walker Corporation (logo), Macquarie Bank (logo). Approved by North Sydney Council ..." -- Advertisement (27cm x 17cm, illustrated), The Straits Times, Singapore, August 24, 1996
Georgists world-wide and in Australasia invite you to work towards a Pattern for a Better World, and study Georgist Policy,
by selecting from Graham Hart's writings: [ 2. The True Functions of Government ], [ 3. Public Revenue ],
[ 4. Taxation & Monopoly ], [ 5. Restriction of Government Functions ], 6. A Private Banking System,
[ 7. Democratic Elections ], [ 8. Phasing in Over a Period ].

The people in this demonstration don't seem to be satisfied with the "benefits" supposedly arising from the "trickle-down" effect of supposedly modern "rational economics." Most of the pressure arises from workers and small producers and professionals being deprived of much of their earnings through taxation, site rent, and monopolies.
Picture by courtesy of  Henry George Institute, New York State, USA

Other Australian and New Zealand reformers you could contact

EarthSharing™, Victoria
NSW Henry George Homepage
Universal Basic Income, NZ
Helen's Place homepage, NZ

10 Broome Street, South Perth, W.A., 6151, Australia   Telephone [+61 8] (08) 9367 5386
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ACKNOWLEDGEMENTS: Bright yellow background colour on one or more of these pages by courtesy of the Banneker Center, USA This site was put on the WWW through finance from HGFA, the work of JCM, the advice of GANM, plus GP of Multiline Internet Server mid-October 96.


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This Page's main content by Graham Hart, created with HTML Assistant© by John Massam 1 November 1996, 8 A4 pages, last revised 10 August 1998
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Authorised: John Charles Massam, Georgist Education Association Inc., 10 Broome Street, South Perth, Western Australia, 6151. Tel.: [+61 8] (08) 9367 5386