Folly of relying on corporate banking sector for money supply into society

The fact that we need to "stimulate lending", that is to say, stimulate indebting people, in order to provide our economy with new money, demonstrates the reality of our debt-based economy and the folly of relying upon the corporate banking sector for the supply of money into our society ("So what if nothing works?", 9 January).

The real solution lies in enabling the Bank of England to take responsibility for creating our money supply directly and publicly, free of debt, rather than relying on the corporate banking system to create it out of nothing as a debt for its own private profit.

This reform, promoted by the Bromsgrove Group in the UK and the American Monetary Institute in the United States, will only work if the money is created debt-free and invested directly into society.

The corporate banking system will then compete to attract this money into its savings accounts and build up its capital reserves in this way. This will be done at the same time as private banks are either forbidden from creating money completely, or have severe credit controls imposed on their ability so to do, thereby ensuring that inflation is not possible.

ALISTAIR McCONNACHIE

Bath Street

Glasgow

With uncanny prescience, Karl Marx wrote in Das Kapital (from his doctrine of the theory of surplus value – in an updated translation): "Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism."

Evidently, Gordon Brown and Alistair Darling are now putting this lesson into practice. Perhaps they are also familiar with the work of another gloomy German, half a century after Marx, Oswald Spengler's Decline of the West?

VIVIAN LINACRE

Marshall Place

Perth

Your editorial (Debate & Opinion, 9 January) demands a common fiscal strategy. Well, of course, but that applies in normal times. What we are enduring now is the result of ignoring the simple fact that a national economy, as with a household one, must remain in balance or it topples. We have toppled into an abyss created by "experts" who chose to ignore the other simple truth which is that bubbles burst.

Unless the government wisely dictates how the money it creates is spent, that money is frittered away; benefiting only the importers and the bankers who still choose to richly reward themselves despite their proven negligence.

We got ourselves into this sorry state by abandoning monetarist principles of balanced budgets. We will not escape our condition until this hard lesson is learned and practised. The sooner we start, the sooner we succeed.

TIM FLINN

Beech Cottage

Garvald, East Lothian

Criticism by the government of the banks for insufficient lending is wrongheaded and shows a lack of understanding of the economic situation. The reason banks cannot lend more is because they have no more money to lend. The banks desperately need additional capital to offset their growing bad debts and just to be able to continue existing levels of lending. Rather than spending on goods manufactured in other countries, we should be saving more so that the banks can rebuild their capital bases and start lending again to UK house buyers and UK industry.

ALAN BLACK

Camus Avenue

Edinburgh