Seigniorage could make the States millions
THE whole of Guernsey will have seen the photo of deputies protesting against GST on the front page of the Guernsey Press [Friday 6 January], or heard about the opposition to GST. While most will be in agreement, a demonstration alone is politically and practically insufficient to address the £80m. deficit in the States of Guernsey budget.
I would ask these deputies – what do you propose instead? What alternative do you have in mind? This may sound tough, but you are hard-headed politicians, and well paid to consider such things. What you debate and legislate, good or bad, affects the lives of the citizens of these beautiful islands. We have the right to ask you this question, do we not?
Last September I wrote to all States Deputies with a discussion document proposing that we consider de-pegging the Guernsey pound from sterling by taking control of our own paper (fiat) currency and backing it with gold and silver (specie). This will provide risk diversification, a currency stability with real tangible assets, a proven hedge against weakening sterling and the rampant inflation hitting UK and all the other paper currencies worldwide.
Seigniorage is defined as: ‘Revenue or a profit taken from the minting of coins (or printing notes), usually the difference between the value of the bullion (or base metal) used and the face value of the coin’. The profit goes to the government or jurisdiction which mints the coins and prints the paper currency.
A recent and direct example of this seigniorage profit occurred on 30 September last year as the UK Treasury made all old £20 paper notes invalid completing the transfer to plastic notes. A profit of over £6bn with just that one deleted £20 note series. Cumulatively with the withdrawal of all paper notes the total seigniorage profit is estimated at nearly £20bn to UK government.
But there is a more honest and more equitable way to create substantial government revenues from seigniorage.
Simply ratify as legal tender a gold/silver backed Guernsey pound currency that actually genuinely ‘Promises to pay the bearer on demand in gold and silver bullion coinage’, just as we used to throughout the 200 years of the British Empire and the industrial revolution.
An honest, secure and stable currency for over 200 years.
History proves this works no matter what the multitudes of highly regarded, highly-paid economists believe, or bankers are prepared to admit.
A scrupulously-managed Guernsey gold/silver backed currency that offers free exchange to real precious metal coins would make tens, even hundreds of millions for the States of Guernsey via seigniorage.
I earnestly ask each of you to take time to consider and discuss this course of action.
If you would kindly take time to read my discussion document again, perhaps you will have something of value purpose and depth to say to the crowds at your GST protest rally on Sunday 22 January.
ANT ALLENBY
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