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Local Currency on the Island of Guernsey
Summer 2009
Have you ever wondered about that fateful moment in human societal evolution when one inventive person simply threw it out there that a stick with a couple of scratches on it or a mark on some bark would represent something with actual value? (basically what our money is today)
Fiat currency has no real value but, as long as there is a consensus among us that it does hold some value, that it’s all that is needed to give it power. This following true story is about an island in the British Channel called Guernsey.
The islanders had a problem which led to a very simple and effective solution. The quandary was that the islanders needed a new market place building. However, years of war and British empire building had left the island broke; they had no bank and therefore, no money. The following excerpts are from How Guernsey Beat the Bankers by Edward Holloway:
“Our story opens in the year 1815. It was a year of considerable difficulty for the people of Britain, but the people of the little island of Guernsey were particularly hard hit. The effects of the Napoleonic wars had resulted in a state of despair on the part of the island community...
As often happens in communities when there are major difficulties, a committee was appointed in 1815 to consider in particular the overcrowded state of the market of which it was said that ‘humanity cries out against the crush which it is difficult to get out of; and against the lack of shelter for the people who, often arriving wet or heated, remained exposed for whole hours to wind and rain, to the severity of the cold and the heat of the sun.’
The committee examined the situation, and came to the conclusion that further taxation was impossible. The alternative was to try and borrow money from the banks. But this entailed the payment of a high rate of interest, which they could not afford, particularly in view of the fact that these interest payments would continue for years and would eventually mean that, although the original sum had been repaid in interest charges, the capital sum would remain as a debt.
Fortunately for the people of Guernsey, they had at that time among their leaders some honest men of keen intellect, who put forward the revolutionary suggestion that the States should take advantage of their ancient prerogative and produce their own notes to finance the re-building of the market.
At first this proposal was turned down. But later in the same year the proposal to issue State notes was agreed to, for a different purpose. The finance committee reported that £5,000 was wanted for roads and a monument to the late Governor, while they had only £1,000 in hand. It was agreed that the remaining £4,000 should be raised by the issue of State £1 notes. ‘In this manner’ they said, ‘WITHOUT INCREASING THE DEBT OF THE STATES, we can easily succeed in finishing the works undertaken, leaving more over in the coffers sufficient money for the other needs
of the States.’
A Successful Venture
How wise they were is proved by the event. The success of this first creation of State money was so great that it was rapidly followed by others. In June 1819 the question of the market became ever more acute, and it was agreed to finance the rebuilding of it, not in the orthodox manner by
raising a loan, but by the state creating the necessary notes ‘interest free.’ The following comment made by the finance committee at a later date shows how successful the venture had become. It was at the time when a further issue of notes was made to diminish the interest-
bearing debt to the States.
The finance committee declared: ‘The States could increase the number of notes in circulation without danger up to 10,000 in payment of the debt, and the committee recommends this course as most advantageous to the States’ finance, as well as to the public, who, far from making the slightest difficulty in taking them, look for them with eagerness.’”
And so the story went on.
“Various other creations of new money took place for projects of re-building, widening the streets of St. Peter Port, reconstructing some of its buildings, making new roads and public works of many kinds. The experiments continued over a period of 20 years, by which time the people of Guernsey had developed from a depressed unhappy state to a position of prosperity and happiness.
The following brief quotation shows how improved was the situation as a direct result of the wise and statesmanlike action of the Island Parliament. Daniel de Lisle Brock, to whom, it seems, much of the credit must go, said in 1827, ‘To bring about the improvements which are the admiration of visitors and which contribute so much to the joy, the health, and well-being of the inhabitants, the States have been obliged to issue notes amounting to £55,000. If it had been necessary, and if it were still necessary, to pay interest on this sum, it would be so much taken from the fund earmarked to pay for the improvements made and to carry out new ones.’
To talk of joy, health and well-being is a very different story from the position in 1815, when it was ‘little or no trade, little or no disposable revenue, and no prospect of employment for the poor.’
But this happy state of affairs was not to the liking of everyone, and opposition to the idea of the Island States creating their own “debt-free” money had been growing over the years, particularly among the banking interests on the island...”
“Reference has already been made to the care exercised in deciding the quantity of money to be issued by the States, end now Daniel de Lisle Brock sought to restrain the private banks from this anti-social activity. There remains on record his spirited speech to the States’ meeting held on September 1836 on this subject, and the following two extracts are of particular interest.
‘No one has a right to arrogate to himself the power of circulating a private coinage on which he imprints for his own profit an arbitrary value.’
‘With these facts before our eyes we must realise the necessity of limiting the issue of paper money to the needs and customs, and the benefit, of the community in general. Permission cannot be granted to certain individuals to play with the wealth and prosperity of society.’ ...”
“It can be said that the inhabitants of the island benefitted materially from the monetary experiment which took place, when the island Parliament created its own money- ‘interest free’ over 150 years ago.”
Download How Guernsey Beat the Bankers here
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October 15, 2009
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