Why Voting Can't Fix It

If the money system is the problem, voting looks like the fix. You elect people who will stop the money creation, and if they won’t, you elect someone else. The fix doesn’t work. The government and the central bank keep creating more money and credit, so each pound buys less. That expansion, the debasement, is the survival requirement of the system each new leader inherits, and a better person in the same seat inherits the same requirement.

A leader who does stop the expansion itself, no new money and no more standing behind the banks, triggers the crash the system has been expanding to avoid, takes the blame for it, and is replaced by someone promising rescue. That leaves two doors. Stop now and take a deflationary depression, a slump where prices and incomes fall but the debts fixed in pounds don’t, so defaults spread. Or keep going and take widening inequality, rising control, and an eventual currency failure. Governments pick door two almost every time. Door one’s costs are immediate, certain, and land on whoever chose it. Door two’s costs are spread thin across millions of people, arrive after a delay, and come with no bill naming the policy, so the vote punishes the government and never the way money is made.

Why we can’t just elect better people

A candidate who means to stop the debasement has to get past two filters, one on the system side and one on the voter side.

On the system side, most money is loaned into existence. A bank makes a loan, and new money appears. The loans are debts fixed in pounds, and the amount owed doesn’t change when prices change. Technology keeps cutting what it takes to make things, so under a money nobody can add to, prices would fall. A system built on those debts can take a slow fall that comes with better tools. In that fall it’s the cost of making things that drops, and pay drifts down slowly behind it, so the money to meet a fixed payment is still there. What it can’t take is a sudden fall in the prices credit pushed up, houses first, because then the losses spread through the banks. Houses come first because people buy them with borrowed money. So every time a sudden fall in the prices credit pushed up threatens, the system is rescued with new money, and the rescues keep getting bigger. On day one, whoever sits in the seat faces the same choice. Keep the rescues coming, or let the losses spread through the banks. Both the honest chancellor and the cynical one back expansion, because the requirement comes with the job. That’s what “incentives beat intent” means.

The funding side makes it worse. The promises politicians get elected on can’t be paid from taxes alone unless a binding rule holds the promises down to what taxes raise. The clearest numbers are American, and the mechanism is the same here. In 2019 every American corporation together earned about 2.4 trillion dollars in profit before tax, while in 2020 alone America’s stock of money grew by about 3.7 trillion dollars.¹ Take every dollar of profit in tax and you still couldn’t cover what was simply created. Taxes still pay for much of what the state does. Money creation is how the gap gets paid for. So a leader who gives up money creation has to break the promises or raise visible taxes. Visible taxes are choices citizens can see and contest. Taxes on the scale of what was being created would crush the economy. Switzerland and New Zealand have a rule that holds the promises down to what taxes raise, and holding the promises down is the first of those two options, taken before the promise is made, rather than a way round them.

On the voter side, politics selects for promises of more money. Offer people a rise from £50,000 to £52,000, or a cut to £48,000 while their cost of living falls by more. The bigger number wins the offer, even when the smaller number leaves the person better off. Voters are used to rising pay, so a platform that offers a smaller number and a lower cost of living sounds mad to them. The same preference decides elections too. The promise of a rising cash number has survived every change of government for the state pension, and not for working-age payments, which have been frozen in cash for some years and raised by less than prices in others.² So the filter doesn’t go away when voters understand it, because the bigger number still wins the offer. It works on the candidate before they ever reach office.

You, reading this in Britain, have never had a vote on the money itself. Elections decide who spends. The unit has never been on your ballot paper. That’s why democracy without a vote on money is theatre. Changing governments changes who benefits from the expansion, not whether the system needs it. The need to expand comes with the seat, so each new government inherits it. Changing the shop manager doesn’t help if the till miscounts the money. You fix the till, or you move to one that can’t be rigged.

What happens to the leader who stops it

Say a chancellor and a central bank governor announce the end of the expansion together. They’ll create no more money, rescue no more banks, and let savers and borrowers set interest rates between them.

The announcement is what sends prices down, and the slump starts there. People holding assets priced on continuing support try to sell before it ends, because being early out of a falling market beats being late. Declaring you’ll never rescue the banks causes the bank run today, not someday, because once confidence breaks, the credit that rests on nothing but a promise to pay can collapse to nothing.

Then rates rise toward the level savers and borrowers would set between them, what lending would actually cost, with no central bank buying to hold rates down. A firm that borrowed at 3% has to borrow again at 9% or not at all, so it cuts staff or fails. Mortgages reset and house prices fall. The sudden fall in prices and incomes hits the fixed debts, defaults roll through the banks, unemployment spikes, and pension pots shrink as the bonds inside them fall.

Then the political bill arrives. The crash is immediate, certain, and has one address, the person who stopped. The benefits build up over years, and nothing attributes them to whoever stopped. Savers and borrowers set interest rates between them, and nothing dramatic happens when life simply gets cheaper. A falling price level does get printed and reported each month.³ Two more of the forms that the gain takes, savings that keep their value and the crisis that doesn’t arrive, carry no announcement at all. People weigh immediate certain pain far above distant uncertain gain. So the leader who stopped loses to a candidate promising rescue, and the rescue is the biggest expansion yet. The ones watching take the lesson that letting a failure run costs you the job. So the rescue is now built before it’s needed, and it’s created and used even when rates are being raised and the bonds that the central bank bought are being run down.

The trap has already shown up in miniature. Time after time, a hint at reducing support has been enough. Markets convulsed and the support came back.⁴ And the counterexample people reach for, Paul Volcker, the American central bank chief who pushed interest rates to nearly 20% around 1980 and broke that era’s inflation, can’t be repeated.⁵ Back then the debt was mostly private, owed by households and firms, so the pain landed on borrowers while the state stood behind the system. What people reach for in him is that rate, held far above inflation. Rates can still be pushed up for a stretch, and they were from 2022 to 2024.⁶ What has changed is who owes the debt and the cost that was accepted. In 1980 the federal government owed about a fifth of all the debt that American households, governments, and firms outside finance owed between them, and today it owes about two fifths of it. Unemployment reached 10.8% then against about 4% now. Today the state itself is the biggest debtor. Raising the price of credit while the state keeps standing behind the banks is a different act, and several officeholders have done that and kept the seat. Crushing rates now would blow up the government’s own interest bill, trigger losses across the banks, and force the next rescue. So instead the system falls back on financial repression, holding interest rates below inflation in most years so debts shrink while savers quietly pay.

A system whose rules can be bent selects for people willing to bend them and removes the ones who won’t. That happens whether or not anyone means harm. Argue with the system, not the souls in it.

The two doors

Door one is to stop the expansion and let the market clear, which means letting prices fall, with no support, until real buyers set them. In a system where total debt is about three times what the world produces in a year, that’s a deflationary depression. That means bank failures, mass bankruptcies, unemployment, and savings inside the system wiped out by defaults. Under a money nobody can add to, the natural direction of prices is down, because people keep getting better at making things and competition passes the saving on.⁷ The bomb goes off when the prices credit pushed up fall suddenly onto a mountain of debts fixed in pounds. The debt structure explodes, not the cheaper goods.

Door two is to keep going. With the inflation target fixed at 2%, the bigger the fall in prices technology would deliver, the bigger the dose of new money it takes to cancel it. What the tools can do has been improving faster than it did before AI, and that should reach what it takes to make things, with a delay.⁸ So each crisis needs a bigger dose than the last, and each dose buys less. The consequences compound. Asset owners pull away from wage earners, savers get pushed into speculation just to stand still, trust decays, politics hardens into us versus them, and the state reaches for more control to hold the structure together. The control takes the form of financial surveillance, capital controls, pressure on speech, and eventually programmable state money. Capital controls are rules stopping you moving your money out of the country or into certain assets. Programmable state money is money with rules built in about where, when, and on what it can be spent. Door two ends, historically, in a currency failure and a reset, the failing money replaced with a new one under new rules, sometimes through war. Weimar Germany is the standing example. Printing to meet obligations destroyed savings, desperate people reached for a strongman, and liberty went down with the currency.

Door two keeps winning because its costs are diffuse, delayed, and deniable. The debasement never sends a bill with its name on it. Nothing you can point at says “this is what took my pay rise”. Door one’s costs are concentrated, immediate, and attributable. So door one almost always loses, the dose grows, and the exit gets harder. Depression now versus repression later, and later wins vote after vote.

The exit was never either door. Both doors leave the lever in the room. The lever is the power to create money. Door one is a promise not to pull it, made by the same government and central bank that could pull it, and the next chancellor and governor can withdraw the promise. Only a change at the base takes the lever out. That means a money nobody can create more of at will, where new units arrive on a fixed schedule up to a hard cap.

If the unit can’t be created at will, productivity shows up as falling prices for everyone wherever competition is open. Where competition is blocked, the falling cost of making things still doesn’t reach prices. Holding the unit’s value down is a transfer from savers to borrowers, and it needs the power to create the unit, so removing that power ends it. That’s the transfer somebody decided on, and it stops. What doesn’t end is a change in what money buys that nobody announced. Under a hard unit it runs the other way, from borrower to saver, and it has no author to argue with.

Without the power to create the unit, the unseen way of paying for things goes with it. A tax, a spending cut, a default on lenders, and a seizure each name, in the law or the decree that does it, who bears the cost and how much. Creating money names an amount too, and so does suspending the rule that fixes how much there is, each in a dated act with an author, but the amount is money made or a promise ended, and neither names who pays or what their share is. Taking away the power to create the unit takes away the one route that names no payer and needs no promise to be broken first. Visible means a named payer, whether or not voters notice. Accountability rises, because the stealth option is off the table. A government can then only promise what taxes will cover or lenders will fund. What it can’t fund now can still be pushed into the future, but only as far as lenders will carry it. Mobility disciplines that choice over time, as capital and people move to friendlier places.⁹ Most families can’t relocate easily, but their savings can move.

The way to take the exit is to move your savings into the new money, and leaving one at a time isn’t new. People have moved their savings into another country’s money for decades, without asking anyone and sometimes against the law.¹⁰ What’s new is where the savings go. Nobody can expand it, and the state whose money you left can’t convert it back, because nobody who could be told to hand it over is holding it for you. It still doesn’t avoid the reset, and no path from here is painless. What it can avoid is the war or revolution that past changes of money have often run through, and it’s the only path that can, because nobody has to win anything to take it.

Leaving reaches savings first, because wages, bills, and taxes stay in the unit. It reaches more of a household’s money only as far as a person moves their earning and spending too. In Great Britain the slice it can reach without going through a regulated firm is about a seventh of household wealth, and the 35% held in private pensions can be reached only through a regulated transfer or by drawing the pension down from age 55, which becomes 57 in 2028.¹¹ Leaving isn’t the only lever politics doesn’t reach. Leaving the country and holding another state’s cash are two more. What this one has that those lack is a destination with no issuer to instruct. That’s why it can work where politics can’t.

A vote changes nothing until a majority agrees. Leaving needs no majority and no permission from the network the new money runs on. The first step needs either a licensed firm or a willing person, and a state can price the first and outlaw the second. So what the first step needs is someone to deal with, not a permission, and what a ban sets is the cost of finding them. Each saver who moves shrinks what the next expansion can reach and adds to the network that the rest can join. What shrinks is the pool that the expansion draws on, the savings within its reach, and with it how far the state can push, because each push sends more savings out of reach. The transfer from savers to borrowers then falls at a higher rate on whoever stays, and much of what stays is pension money.¹² The state’s take holds only while the pool will bear the rate, and after that the state has to shrink or go bust.

On this path, the earlier the move happens, the smaller the gap that has to close later between propped-up prices and the prices real buyers would set, so the reset costs less. When the old money falls fast against the new one, the gain goes to whoever already held the new one, borrowed money pours in, and the loss lands on whoever arrived last on borrowed money. On the other path the dose has grown with each downturn, and the level of support has never come back down to where the rescue started.¹³ Support was pulled back part of the way across 2022 to 2024 without a crash, but the dose is what a downturn gets, and faster technology makes the next one bigger than the last.¹⁴

The argument isn’t that politics is useless. Politics can protect the exit. It can protect the right to hold your own keys [to control your savings yourself, with no bank in between]. It can write sane rules, and it can reduce harm at the margin. What it can’t do is fix the base from inside, because the seat itself carries the requirement to expand, whoever sits in it.

The case for trying anyway

“A gradual taper [winding the support down slowly] avoids the crash.”

With total debt at about three times what the world produces in a year, even a small withdrawal of support exposes fragile credit built on the earlier rounds. Rates and purchases can be pulled back part of the way for a time, as they were from 2022 to 2024.¹⁵ But each place the pull-back strained got new support within days, the Bank of England’s in September 2022 and the Federal Reserve’s in March 2023, and the promise to step in was never withdrawn.¹⁶ And announcing the path is itself the event.

“Once voters understand, democracy corrects it.”

Understanding doesn’t remove the voter-side filter, because a near and certain rise in the number still beats a distant gain in what the money buys, and because in the United Kingdom the unit has never been on your ballot paper. The vote route has been tried and lost rather than left closed. Electorates have voted on which unit to use, on who may issue notes, and on the rules for creating money.¹⁷ The Swiss made note issue the federal government’s alone in October 1891. The United States fought the 1896 presidential election on the coinage rule, at a turnout not matched at any presidential election since.¹⁸ The Swiss rejected a gold reserve rule in 2014 and a sovereign money rule in 2018, each by about three to one.¹⁹ Each time, the money stayed somebody’s decision. What no electorate has been asked is whether the unit should be nobody’s decision at all. Understanding has one route it can take on its own, which is what a person does with their own savings. That route is slow and uneven, because habit keeps people in the old system until pain or learning builds up enough. But once someone takes it, they rarely go back. They exit, not to fix the system, but to stop their own savings paying for the expansion. The fix is what those exits add up to.