Citizen Journalist - Speak Truth To Power

Global Politics, International High Finance, Propaganda

Saturday, 6 February 2016

This is the "index" - The article with an index to all the other articles on it.


Money and Finance

Governments CAN Just Create Money Out of Nothing
This is about Fiat Money, Quantative Easing, Fractional Reserve Banking and Monetary Reform

Governments SHOULD Just Create Money Out of Nothing
Previous governments HAVE just created their own money out of nothing - especially CANADA.
Quantative easing for the people - Social Credit

Financial Warfare
The US is attempting to conquer the world by just printing money. (Assumes that you have read the previous blog article called Governments Can Just Create Money out of "Nothing"")

How Big Is The US debt?
The US Government and US Bank Assets

How Big Is a Trillion?
You need to read this article to understand the financial articles such as "How Big Is The US Debt?"

Global Warming

Will Brighton Be Swallowed By The Sea?
Global Warming, Climate Change and the Level of the Sea in the English Channel.

Sustainable Happiness is no laughing matter
My government has taken direct political control of happiness

IPCC Reports are Politics NOT Science
The IPPC reports are written by politicians not scientists

Hide The Decline
There WAS a decline and it WAS hidden

Hide The Incline
About the North Pole

Global Warming
A political lie - a scientific hoax

The Power that Catastrophic Man-Made Global Warming Alarmists have over the Main Stream Media
David Bellamy, Johnny Ball. Peter Simpson - all victimised.

How much the Global Warming Catastrophists Will Cost Britain
The Climate Change Act

Sustainable Development :- Agenda 30 takes over from Agenda 21
Sustainable Development :- Totalitarian Dictatorship


Martin Luther King Killed by US Government::- Proved in a US Court Of Law
Politically - my most important blog article

The King family statement about the limited investigation
The King family speak

The Evidence-Based History of What Happened to President J F Kennedy.
Douglas Horne And The Assassination Records Review Board.

Which European Empire will we secede from? The one with 28 countries or the one with 47 countries?
About the coming (2016) referendum

The European union is just a puppet of the USA
Historian evidences that USA were founders of EU and the Bilderburger group

Canada and Australia Admit Genocide
Canada and Australia publically admit genocide

British Tortured Kenyans and Murdered Them
The British government admitted torture in a British Court of Law

Recent British War Crimes
More, recent British war crimes

Tony Farrell - ex UK policeman fired for his opinions about 911
Tony Farrell - ex UK policeman fired for his opinions about 911

American Imperialism - What the current wars and the future war(s) are really all about
Political satire

The United Kingdom is NOT a democracy
Examples of ways in which the UK is not a democracy

You may ignore Politics but Politics does not ignore You
My very first Blog article. This explains the aims of this Blog.

War is Not Peace
A short ironic poem about how "Britain makes war in a loving and peaceful way."


My Video Documentaries
Some amateur documentaries that I made.

Prize-Winning UK Journalist admits CIA own the worlds media
A Journalist called Nick Davies has written an interesting book called "Flat Earth News."

Other Stuff

Astrologers are lying liars
Astrology criticised by an amateur Astronomer


   April 4th is a date that connects George Orwell and Dr. Martin Luther King.

April 4, 1984” is the date that Winston Smith (of George Orwell’s novel "1984") wrote on the first page of his secret diary. He knew that the surveillance state in which he lived and worked - called “Big Brother” in the novel - would probably punish him or even execute him if his act of defiance in writing a truthful diary was ever discovered.

April 4, 1968 is the date of the execution of Martin Luther King, Jr. by American Deep State assassins within (or hired by) the US government.

Martin Luther King often said:-

It may well be that the greatest tragedy of this period of social change is not the glaring noisiness of the so-called bad people, but the silence of the so-called good people.”


You can email me at:- bob.dobby.dobbs at

Wednesday, 29 April 2015

Governments Can Just Create Money out of "Nothing"


In my opinion the two most important facts about money are:
  • Some people can just create it out of nothing and
  • It usually has no intrinsic value
These facts are so important and so little known that I'm going to try and convince you - gentle reader.

But first I'd like to present a table that summarizes what follows. Skip-over it if it seems too difficult. It will make more sense after you've read the rest of this article.


Commodity money Money that is actually made of something intrinsically valuable such as gold or silver, (even cigarettes can be used as this kind of money)
Receipt moneyMoney that is NOT made of something intrinsically valuable, but which can be redeemed on demand in terms of something that IS intrinsically valuable
Fiat moneyMoney not redeemable in gold or silver etc but which is deemed legal tender by law
Debt moneyThe promise of some fiat money.
Credit - which is "the promise of some Fiat money."
"I.O.Us from a bank" that are "Promises-to-pay" rather than actual hard cash.
Money that banks can create out of nothing, but only if they can find borrowers for it. (Banks can't create any money that isn't a debt, so the money that they create is always a debt.)
Fictional "loan money" which consists only of numbers in bank accounts
"Cheque Book" Money - eg Cashiers Cheques, Bankers Drafts.
Fractional moneyDebt money created several times over, reduced each time by a small fraction.

"Quantative Easing" - The government can just create money out of nothing!

If a government wants money it can just create it out of nothing. The UK government has just (2008) done so, calling the process "Quantative Easing."


This quote from the Guardian:

"What is quantitative easing?

The Bank will make its £75bn of purchases with what is known as, "central bank money", in other words, rather than raising new funds by borrowing from the financial markets, the Bank will create the money to pay for them at the stroke of a pen."


Or this quote from the Daily Telegraph 08 Jan 2009 (talking about "Quantative Easing"):

Where, one might ask, does the central bank get the money to buy all these securities? The answer is that it just waves a magic wand and creates it. It doesn't even need to turn on the printing presses. It simply increases the size of banks' accounts at the central bank


Or this quote from a Governor of the Federal Reserve Bank - Ben Bernanke on November 21, 2002

"But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. "


Or this quote from an employee of the Federal Reserve Bank from "How To Spend $1.25 Trillion" by David Kestenbaum and Chana Joffe-Walt - The National Public Radio, July 11, 2011

"The Fed was able to spend so much money so quickly because it has a unique power: It can create money out of thin air, whenever it decides to do so"



Another name for money that the government can just print is "Fiat" money - so called because it is created by government "fiat." It is money because the law says so - not because it is either "commodity money" or "receipt money". (see the Table headed "Different Kinds Of Money" shown above)

"Legal Tender" is Fiat Money

Governments have the power to create money out of nothing - to just print money! They get away with this because:
  • they have the power to write laws and
  • the law-courts are obliged to do what the law tells them to do.
The government can decree what courts of law are obliged to regard as "legal tender." These law-courts are then obliged (by law) to regard this "legal tender" as being adequate recompense for goods and services.

For example:

Suppose Person A is owed some rent and they take Person B to court to get it.

If Person B can show the court that they are willing to hand over to Person A some bits of coloured paper called "legal-tender" as payment, then the law-courts will consider Person A to have been repaid and the dispute to have been settled.

Person A is left with no legal alternative except to accept the bits of coloured paper known as legal tender as sufficient payment.

The law courts are obliged by law to consider legal-tender as legal repayment even though legal tender is just bits of coloured paper. Thus it is primarily the law that makes bits of paper valid payment for goods and services rendered. It is the law that gives "legal tender" the power of legal tender.

The government can create money "out of nothing." It can just print money and use the power of the law to force it to have value. More exactly - it can force courts of law to pretend that it has value. The value that you think Fiat currency has is really just a LEGAL FICTION"

Fiat Money Definitely Has No Intrinsic Value (Unlike Commodity Money)

It seems to me that most people believe that fiat money has an intrinsic value. Worse than that, they appear to me to think that fiat money actually was "value" But surely fiat money has no intrinsic value. It's just bits of coloured paper - you can't eat it, or wear it, or live in house made of it. The value of fiat money is only what you can buy with it. It is the goods or services that it can be exchanged-for that have the intrinsic value. In itself fiat money is worthless, valueless bits of coloured paper. It only has value when it is exchanged for something else.

The point I am trying to make is that most people seem to think that something valuable lies inside (or upon) the bits-of-coloured-paper-that-is-money. That fiat money has an intrinsic value.

However, fiat money has NO intrinsic value. If you cut it open you only find more coloured paper. Its value is entirely extrinsic.

This is such an important point that I am going to repeat it. It is an illusion that fiat money has an intrinsic value. (Only commodity money does) It is a shared collective hallucination. The intrinsic value that people think money has is made of the same thing that dreams are made of - solid imagination.

We have all been conditioned to think that the value of goods and services that we supply is the value contained in the amount of money that we can get in exchange for them.

But this is the exact opposite of the truth!

The truth is that WE give money its value - by our willingness to accept it as payment for the goods and services that WE supply in exchange for IT. The value of fiat money lies in the goods and services that it can be exchanged for - the goods and services that WE supply in exchange for IT.

Worse than our false belief that money has intrinsic value, is that we have been conditioned - right from school age when we were taught a subject called "economics" - that money-value is the primary value.

We are taught that things are ONLY really worth the amount of money that they can be exchanged for. We are conditioned to think that the primary measure of an objects value IS how much fiat money it can be exchanged  for.

We are taught not only that money IS the primary evaluation of an object's (or person's) value - but money SHOULD BE the primary evaluation of an object's (or person's) value.

I've often wondered who benefited from this bizarre point of view. Is it just a coincidence that it:
  • empowers people who have lots of money (ie the rich) and
  • dis-empowers people who have only a little (ie the poor)


Banks can also create money - here are some quotes that I hope will convince you of that:-


"That is, banks extend credit by creating money"
Paul Tucker - Deputy Governor of the Bank of England - from a speech at the "Monetary Policy and the Markets" Conference, London 13 December 2007


"The process by which banks create money is so simple that the mind is repelled."
John Kenneth Galbraith, former professor of economics at Harvard , "Money: Whence it came, where it went" - 1975, p29


"Do private banks issue money today? Yes. Although banks no longer have the right to issue bank notes, they can create money in the form of bank deposits when they lend money to businesses, or buy securities. . . .. The important thing to remember is that when banks lend money they don't necessarily take it from anyone else to lend. Thus they 'create' it."
Congressman Wright Patman, Money Facts (House Committee on Banking and Currency, 1964)


"Of course, they [banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts."

Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion (Federal Reserve Bank of Chicago, Public Information Service, 1992, page 6.


"[W]hen a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The money is not taken from anyone else's deposit; it was not previously paid in to the bank by anyone. It's new money, created by the bank for the use of the borrower."

- Robert B. Anderson, Secretary of the Treasury under Eisenhower, in an interview reported in the August 31, 1959 issue of U.S. News and World Report


"Banks actually create money when they lend it." As the Federal Reserve Bank of Dallas explains on its website:


"Each and every time a bank makes a loan (or purchases securities), new bank credit is created — new deposits — brand new money."
Mr Graham F. Towers, Governor of the Central Bank of Canada - (pp. 113 and 238 of Select Standing Committee on Banking and Commerce, Minutes of Proceedings and Evidence Respecting the Bank of Canada, Ottawa - 1939


"By far the largest role in creating broad money is played by the banking sector...When banks make loans they create additional deposits for those that have borrowed the money." ‘Interpreting movements in Broad Money’, Bank of England Quarterly Bulletin 2007 Q3, p377. Available at:


The actual process of money creation takes place primarily in banks ... bankers discovered that they could make loans merely by giving their promise to pay, or bank notes, to borrowers. In this way banks began to create money.

Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion (Federal Reserve Bank of Chicago, Public Information Service, 1992


Here's a direct quote on the subject from The Right Honourable Reginald McKenna P.C., British, a former Chancellor of the Exchequer (1915-16) and Chairman of the Midland Bank. This is taken from his book "Post-War Banking Policy" (1928)

"I am afraid the ordinary citizen will not like to be told that the banks or the Bank of England can create or destroy money. We are in the habit of thinking of money as wealth, as indeed it is in the hands of the individual who owns it, wealth in the most liquid form, and we do not like to hear that some private institution can create it at pleasure. It conjures up a picture of an autocratic and irresponsible body which by some black art of its own contriving can increase or diminish wealth, and presumably make a great deal of profit in the process."


Here's the Bank of England on the subject:-

"... banks extend credit by simply increasing the borrowing customer's current account, which can be paid away to wherever the borrower wants by the bank 'writing a cheque on itself'. That is, banks extend credit by creating money."
from this PDF file


And here's the central bank of Germany :-

"4.4 Creation of the banks money
Money is created by “money creation”. Both state and private commercial banks, central banks can create money. .....

Money creation by commercial banks
The commercial banks can create money itself, the so-called bank money."

From a booklet published in August 2009 by the central bank of Germany "Deutsche Bundesbank”
( ) (Translated by Google )


The Credit River case

If you are still not convinced that banks can create money out of nothing - then you ought to know that it has been proven in a court of law.

It seems unbelievable that banks create the money that they lend and yet a judge and jury became convinced that they did. In the case of The First National Bank of Montgomery vs. Daly (1969) , defendant Jerome Daly opposed the bank's foreclosure on his $14,000 home mortgage loan on the ground that there was no consideration for the loan. Daly, an attorney representing himself, argued that the bank had put up no real money for his loan.

To everyone's surprise, The Bank President Mr. Morgan admitted that the bank routinely created money "out of thin air" for its loans, and that this was standard banking practice.

"It sounds like fraud to me," said Presiding Justice Martin Mahoney amid nods from the jurors.

In his court memorandum, Justice Mahoney stated:
Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, . . . did create the entire $14,000.00 in money and credit upon its own books by bookkeeping entry.
That this was the consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date.
The money and credit first came into existence when they created it.
Mr. Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note.
The court rejected the bank's claim for foreclosure, and the defendant kept his house.

To Daly, the implications were enormous. If bankers were indeed extending credit without consideration (without backing their loans with money they actually had in their vaults) and were entitled to lend then a decision declaring their loans void could topple the power base of the world. He wrote in a local news article that:

"This decision, which is legally sound, has the effect of declaring all private mortgages on real and personal property, and all U.S. and State bonds held by the Federal Reserve, National and State banks to be null and void. This amounts to an emancipation of this Nation from personal, national and state debt purportedly owed to this banking system. Every American owes it to himself . . . to study this decision very carefully . . . for upon it hangs the question of freedom or slavery."

You can study the case file at:-

[ Please also note:- The decision was later overturned by a higher court]


Fractional money is money created by the banking practice known as Fractional Reserve Banking. Banks are legally allowed to loan out money that has been deposited with them. Banking law says that they need only keep a fraction as a reserve. (Hence "Fractional Reserve")

This money that is loaned out usually becomes a deposit in another bank, and then it too is loaned out (less a fraction). Thus the same amount of money can be loaned out many times. Each time it is loaned out - new debt-money is created out of nothing.

A fractional system that kept 10% in reserve could create 9 times as much fractional money as was originally deposited. It could turn 100 units (dollars/pounds) into 1000 units thus creating 900 units out of nothing! (See "Addendum 02" of this Blog Article)

This process is sometimes called "Deposit Multiplication"


An interesting feature of the fractional reserve system relates to the bank-practice of asking for a downpayment - part of the loan to be paid in advance.

Suppose a customer wants to borrow $100,000 and the bank asks for a downpayment (deposit) of $10,000 (i.e. 10%). After the customer has provided the deposit, the bank is then in possession of 10% of the loan that it wants to make. Now, it can legally create the other 90% out of nothing.

It can then lend this $90,000 to the customer. The customer now owes $90,000 plus interest.

The bank created this money out of thin air and was able to do so because the customer provided the reserve required. The bank provided nothing - not even the reserve - the customer did!

The customer paid $10,000 for the privilege of owing the bank $90,000 plus interest.

The customer paid for the shackles by which the bank enslaved him.


What follows is from a briefing paper supporting Early Day Motion 854 tabled in the House of Commons on March 10, 2003 by David Chaytor MP (Bury North) entitled "Publicly created money and monetary reform."

"It is commonly assumed that the government creates all money. This is not true. In fact the only money that is at present created by the government is notes and coin. According to the Bank of England there were £29.6 billion (i.e. thousand million) worth of notes and coin in issue in the UK in November 2002.

But since most transactions involve payments from one bank or building society account to another these have also to be considered money for all practical purposes, and they are.

In November 2002 the total value of such deposits exceeded £1,000 billion (or one trillion) for the first time, reaching £1,001 billion in that month. It can be seen by comparing the figure for notes and coin and the figure for all cash available in bank accounts that the government creates 2.95% of all money. Commercial banks create the rest. "

What the above text reveals is that I was 97% wrong when I thought that money was cash (or coin) In fact only 2.95% of the money in the UK in 2002 was banknotes and coins. The rest of it was bank credit (that is to say "debt money").

To repeat what I have just said:- The fiat money made by the government amounts to only 3% of the total amount of money in the UK. The vast majority of money in the UK is NOT fiat (cash or coin) it is "Debt Money" and "Fractional Money".

To say that again in a slightly different way. The banks issue most of the money in the UK. The government issue only a tiny percentage of the money. The government issue money as cash and coin. The banks issue money as Bank Credit.

What, then, is this "bank credit" made of? If it isn't made of paper like banknotes and it isn't made of metal, like coins, what is it physically made of?

The answer is - literally NOTHING. It is made of imagination - the same stuff that dreams are made of. The same stuff that "The Emperors New Clothes" were made of. The same stuff that "air guitars" are made of.

The nearest that Bank Credit comes to having a physical reality is as numbers written in bank accounts:-

"Money exists simply as a bookkeeping entry at a bank" says The Story of Money, 8th printing, 2005, Federal Reserve Bank of New York, Page 17

Do the numbers in these bank books represent anything that is physically real? No!

Bank Credit exists in the same way that dragons and unicorns do. Entirely in peoples' imagination.

Bank Credit is:- a legal fiction; a cultural artefact; a social convention; a faith-based substance. If you currently believe that Bank Credit is physically real it is because you are currently sharing a collective hallucination.

Most money is just imagined into existence! More exactly, the banks can just imagine it into existence - but if anybody else tries to do that they get arrested for fraud! Once it has been imagined into existence by the banks the rest of us use it when we pay our bills without directly using cash or coin. We use it when we make payment using a cheque, credit card or debit card.


Although bank credit has no PHYSICAL reality, it does have a psychological reality. It is an "IOU." ( "I Owe You".)

Bank Credit is an IOU from the bank. It is not itself cash ("real" money) - It is an IOU for some cash  - a PROMISE to pay some ("hard") cash at some un-specified future time. - it is a promissary note.

However, because this promise-of-some-cash-in-the-future is accepted as payment by retailers as if it were hard-cash-here-and-now , they make it - effectively - cash. Bank Credit can be spent like "real" money and so - to most intents and purposes - it is money.

It is Bank CREDIT that is given in payment when you use a CREDIT card.

It is Bank Credit that is given as payment whenever you don't pay by cash or coin.

Perhaps we shouldn't call this stuff money. Perhaps we should call it "Bank Credit", measured in units called "Credits" rather than "money" which is measured in units called "pounds" or "dollars."

Or maybe we could call it "Promise" - because that is what a "Credit" is - a promise from a banker. "Promises from a Banker" could give us an imaginary substance called PFAB (pronounced "per-fab").

Or maybe we could call it "Trustme" (as in "trust me") - because that is also what a "Bank Credit" is - a request from a banker to trust a banker. "Trust me, I'm a Banker" could give us an imaginary substance called TMIAB.(pronounced "ter-me-ab")

If we called it "Credit" or "Promise" or "Trustme" or "IOU" we could more easily distinguish it from hard cash.

Most of the money in the world is IOUs issued by banks.

And most of those IOUs are fraudulent because Fractional Reserve means that banks can issue far more IOUs than they have cash to back them up with. Banks are legally allowed to issue IOUs for far more than they actually own. They are allowed to owe what they don't actually own. They are allowed to promise what they don't actually possess. If anyone else does that they are guilty of fraud.

Money is created out of thin air like this when the private banking system lends to the government.

That's right. When your government borrows money, most of that money is imaginary, created out of thin air by the banks.

Most of your countries' National Debt is Fictitious!

When governments borrow money, they issue Treasury Bills (also known as:- exchequer bonds, government stocks, government securities or gilts ) in return. These are also basically IOUs - promises by the government to repay the loan by a particular date, and to pay interest in the meantime. (Another "Promise" - but this time from a government.)

Treasury Bills are mostly bought  by banks - (but they can also be bought by individuals and investment funds.)

When banks buy Treasury Bills they are allowed to create the required money at the stroke of a pen out of nothing.

Banks are allowed to create credit out of nothing by lending it into existence to the government in very much the same way as they can lend it into existence to individuals.

The government now has new money in the form of Bank Credit. (Chiselled out of rock-hard "Promise," hewn out of solid "Trustme" and cleaved from boulders of "IOU")

Under this system the National Debt is:- "Bank Credit issued to the government"

Your National Debt is:-

Things which are:- "Promises from a Banker"
given in exchange for
Things which are:- "Promises from your Government"

As Congressman Wright Patman, Chairman of the House Banking and Currency Committee, wrote in a 1964 treatise called "A Primer on Money:"
“The Federal Reserve Banks create money out of thin air to buy Government Bonds from the U.S. Treasury . . . [creating] out of nothing a . . . debt which the American people are obliged to pay with interest.”
and he also said this in 1941:-
“When our Federal Government, that has the exclusive power to create money, creates that money and then goes into the open market and borrows it and pays interest for the use of its own money, it occurs to me that that is going too far. I have never yet had anyone who could, through the use of logic and reason, justify the Federal Government borrowing the use of its own money… The Constitution of the United States does not give the banks the power to create money. The Constitution says that Congress shall have the power to create money, but now, under our system, we will sell bonds to commercial banks and obtain credit from those banks. I believe the time will come when people will demand that this be changed. I believe the time will come in this country when they will actually blame you and me and everyone else connected with this Congress for sitting idly by and permitting such an idiotic system to continue. I make that statement after years of study.” 

Wright Patman:- excerpts from September 29, 1941, as reported in the Congressional Record of the House of Representatives (pages 7582-7583).

The government constantly tells us that there isn't enough money to pay for public services because (it says) it knows that the cost of borrowing any money that it needs has to be passed on to the taxpayer.

So, it sells off state assets and gets the private sector to fund public services instead.



If the government created money as fiat money it wouldn't have to borrow it from the banks as debt money (Bank Credit). If the government can just print money as fiat currency why borrow it from a bank as bank credit? Especially when the bank that creates that bank credit out of nothing has the cheek to ask for it all back, plus interest.

As Thomas Edison - the famous inventor of Menlo Park said:-
"If our nation can issue a dollar bond [ie a TREASURY BILL] it can issue a dollar bill [ie cash or coin]. The element that makes the bond good, makes the bill good, also.

The difference between the bond and the bill is the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way.

It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people."

Thomas Edison, The New York Times (6 December 1921)

And, if the government did create money rather than borrow it:-
  • it wouldn't have to pay any interest on it
  • it wouldn't be in debt to anybody.
  • it wouldn't have to sell off any assets or offer them as collateral
Once the government created this money it could SPEND and LEND it into circulation.  Something that has been done in Canada, Australia and NewZealand.

It would get it all back in tax anyway. Of which more later!

Thi above video is of Richard Werner, Professor of Economics with a Chair in International Banking at the University of Southampton saying that the government should create money directly and not borrow it from the banks.


From 2002 to 2008, eight Early Day Motions (EDM) were put forward by MPs seeking to address the problem of fractional reserve banking. Despite these EDMs gaining signatories including such well known politicians as Nicholas Winterton, Peter Bottomley, David Chayter, Bob Marshall-Andrews and Austin Mitchell, none of these attempts at reform won the backing of the leadership of the major political parties.


EDM 854 - (2002-2003) Publically Created Money and Monetary Reform
EDN 323 - (2003-2004) Public Credit for Public Purposes
EDM 327 - (2004 -2005) Use of Public Credit for Public Works
EDM 743 - (2004-2005) Interest Free Money
EDM 390 - (2005-2006) Publicly-Created Money
EDM 408 - (2006-2007) Public Credit for Public Purposes
EDM 265 - (2007-2008) Green Credit for Green Growth;
EDM 1449 - (2008-2009) Taxing the Profits of Credit Creation.


Starting Up A Loan Account

The parliamentary briefing paper goes on to say:-

"Do banks really create money?

The simple answer is "yes" .... Is this credible? A lot of people find this hard to accept but it is actually quite possible, because double entry bookkeeping allows it to happen. What happens is that when a bank lends money they open two accounts for that person.

To lend money, all a bank has to do is make an entry of, say, £1,000 in the current account, thus creating cash the person can spend. This is what people think of as a "credit" balance.

The other side of the accounting entry is in the loan account. This will be marked as being overdrawn by £1,000, and that will show that the money is owed back to the bank. This is usually thought of as a "debit" balance

The trick of using two accounts has meant that cash has been created out of nothing, and the bank's books still balance.

The fact that there never was cash, and that the balances have been created out of nothing, is proved by adding them up.

A positive £1,000 and a negative £1,000 when added together come to zero. And yet by using this trick banks have created money, and have created for themselves the right to charge interest"

The creation of the current account IS the creation of the IOU that is the "Bank Credit."

The creation of the loan account IS the depiction of an IOU from the customer to the bank.

The opening entry in the current account is (mostly) fraudulent. Legal but still fraudulent. If, however, the customer has committed any deception on his side of the bargain the bank will likely have him prosecuted for fraud!

Starting Up a Deposit Account

When a customer deposits a bag of hard cash - the bank issues him an IOU. For some reason people accept these IOUs as payment, which makes these IOUs - effectively- money.

As Hawtrey says:-

"....the banker creates the means of payment out of nothing, whereas when he receives a bag of money from his customer, one means of payment, a bank credit, is merely substituted for another, an equal amount of cash.

Economist Ralph George Hawtrey, Currency and Credit (1919), p. 20

Those IOUs are then likely to be deposited in another bank. This next bank can, in turn, create some new IOUs based on that IOU. These IOUs refer to the previous IOU and mean "IOU another IOU" - "I promise you a previous promise." These IOUs can then be lent out.

The banking system is thus legally allowed to issue many IOUs for the same hard cash! In a fractional reserve system with a 10% ratio - the Banks could collectively issue IOUs up to a total of ten times that original deposit of real money/hard-cash.

As Fisher says:-

"Thus, our national circulating medium is now at the mercy of loan transactions of banks, which lend, not money, but promises to supply money they do not possess."

Irving Fisher - Professor Emeritus of Economics, Yale University in "100% money:" p 7.


In the USA some kinds of account have NO reserve requirements

As the New York Federal Reserve Bank explains on its website: (

"Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit.

If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000).

In contrast, with a 20% reserve requirement, the banking system would be able to expand the initial $100 deposit into a maximum of $500 ($100+$80+$64+$51.20+...=$500).

Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity. "

The New York Federal Reserve Bank goes on to say:-

"In practice, the connection between reserve requirements and money creation is not nearly as strong as the exercise above would suggest. Reserve requirements apply only to transaction accounts, which are components of M1, a narrowly defined measure of money. Deposits that are components of M2 and M3 (but not M1), such as savings accounts and time deposits, have no reserve requirements and therefore can expand without regard to reserve levels."

And as Steve Keen notes - citing the Federal Reserve Table 10 in “Reserve Requirement Systems in OECD Countries”, (

"The US Federal Reserve sets a Required Reserve Ratio of 10%, but applies this only to deposits by individuals; banks have no reserve requirement at all for deposits by companies.

So huge swaths of loans are not subject to any reserve requirements"

In the Euro - zone  the Reserve Ratio is Two Percent

"Since the reserve ratio is currently two percent in the Eurosystem"

From a booklet published in August 2009 by the central bank of Germany "Deutsche Bundesbank”
( ) (Translated by Google )

This means that a deposit of 2 euros of fiat money will allow the banks to create 100 euros of debt money via the Fractional Reserve system.

More of :"In the USA some kinds of account have NO reserve requirements"

In June of 2001, the fractional reserve requirement was $37 billion for the entire U.S. banking system.

In June of 2001, M3 was $7605 billion.

Therefore, in total, the reserve requirement was 37/7605, or .49%, or less than half of 1%.

The reason why it is so low is that for the first $6 million of deposits at a depository (your local branch) the reserve requirement is zero.

Then, for the next $6 million to $45 million, the amount is 3%.

Then, for amounts larger than $45 million, it is 10%.


Therefore, since the vast majority of deposits are small ones, the effective reserve requirement is close to zero, or , more exactly, 1/2 of 1%.
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Tuesday, 28 April 2015

Global Warming

Dr Andrew Russell at the "Skeptics In Pubs" meeting in Brighton UK, Sept 2010

I was not convinced that the AGW alarmists were deliberately lying until I saw a government scientist give a presentation here in Brighton UK in Sept 2010. His name was Dr Andy Russell - and he gave a presentation that was so slickly misleading that I seriously suspect he had been coached by some Public Relations firm.

It was just like watching the "Babies In Incubators" lie that was told to justify a war. That particular government liar had also been slyly coached by a Public Relations firm, and I suspect that Dr Russell was as well. He is - after all - putting the official government position to the public, so probably gets government training in "presentation ."

I went to hear him speak with a fairly open mind - and - had he simply put his case clearly and fairly he would probably have convinced me. But his presentation was so distorted and blatantly propagandist that I am now pretty sure that the AGW alarmism is mostly fraudulent.

To give one example - when he was supposed to be characterising credible skeptics he named Sarah Palin (a US politician) as his prime exemplar of people skeptical of AGW alarmism.

When I challenged him with the counter-example of the 31 THOUSAND scientists who have stated in writing that they quite explicitly disagree with the AGW catastrophers he admitted that he had heard of them.

So - although he was supposed to be characterising credible skeptics he didn't mention them at all. Even though he knew about them.

He also knew about the UK court case in which Al Gore was shown to be lying about AGW - but he didn't mention the skepticism of the judge either.

So - although he was a scientist supposed to be characterising skeptics he didn't mention:-
My general point here is that he is a scientist talking about science who doesn't mention any scientists.

He chose instead to mention one dumb american politician (Sarah Palin) but somehow forgot to mention another even dumber (Al Gore - the "Convenient Liar").

His entire presentation was deliberately misleading and included slick (and sly) conflations, diversions and evasions. I actually accused him of dishonesty and he didn't deny it.

Another example was when he spoke about the infamous "hide the decline" statement. First he said that "no decline had been hidden" - but I interrupted him to point out that a decline had been hidden - a decline shown in proxy data (tree ring data). At which point he contradicted what he had just said and admitted that a decline had been hidden.

I could give many other examples:-
I could go on and on.

But instead I'll just repeat - his entire presentation was deliberately misleading and included several very sly conflations, diversions and evasions. It was carefully designed for his target audience - desperate catastrophists.


His audience was mostly desperate catastrophists. One of whom actually asked Dr Russell how long we all had (to live). Many people here in Brighton seriously believe that we are all gonna die real soon!!

The "Cult Of The Hot Air" is very strong here and these catastrophe-cultists routinely use lying and bullying to quash dissent. I can testify to that from personal experience - I've been bullied and victimised for being skeptical!

But, it is this very lying and bullying that - to me - reveals the intellectual weakness of their case. Cultists try to convince with threats instead of evidence - whereas if their case was intellectually strong then they would engage in calm and rational discourse and wouldn't need to lie and bully.

One type of cultist bullying is to call skeptics "deniers." People who are skeptical of the catastrophists hysterical claims of immanent world-wide disaster are called "deniers" in the sense of Holocaust Deniers.

To the cultists - people who ask for empirical evidence are not being skeptical they are being HERETICAL. The Church of Climatology tolerates no heresy - skeptics who ask cultists for empirical evidence are firmly refused and then called "deniers".

Yet these catastrophe-cultists deny a climate change called the Medieval Warm Period.

One feature of the Hockey Stick" graph)graph is that it denies that the Medieval Warm Period climate change occurred. It is a blatant example of Climate Change DENIAL. Yet, for the catastrophers, that piece of denial of climate change does not make them Climate Change "Deniers."

(The Medieval Warm Period was hotter according to 910 scientists from 541 institution in 43 countries.

The alarmists have to deny it was warmer then than it is now because that warming cannot be blamed on man-made carbon dioxide. The solution for the catastrophists is - to deny the Medieval Warm Period. ( Michael Mann’s ‘hockey stick’ deliberately rewrote history to eliminate the Medieval Warm Period (MWP) because it contradicted the false claim the world was the warmest ever))

In fact - since they also deny the "Little Ice Age" climate change we can properly call the catastrophists DOUBLE DENIERS.

(The Little Ice Age finished about 300 years ago and the world has slowly been warming since then. This current warming trend began long before cars and power stations were invented - which means that modern heavy industry cannot plausibly be blamed for global warming. The solution for the catastrophists is - to deny the Little Ice Age!!)

And - since they deny that denying a climate change make them "climate change deniers" - that makes them TRIPLE DENIERS.

So - if you are skeptical of the catastrophers and they brand you as a Climate Change "Denier" - point out their hypocrisy and it's underlying rationale.

It won't stop them from lying and bullying because their position is political not scientific.

Its political nature means that it is mostly about lying and bullying rather than the truth-telling which science is about. And, although most of them appear not to realize it, their destructive political program is controlled and funded by people with a profound hatred of humanity.

So fierce is their hatred of all humanity that they have recently issued a propaganda documentary that glamorises the MURDER OF CHILDREN who are skeptical about the AGW catastrophe.

The monstrous fascism of the imagery has to be seen to be believed, but be warned - this film contains scenes that most viewers may find distressing. It is not suitable for children.

Later in the film some women are murdered - but it's the child killing that thrills the cultists.

The Guardian Newspaper gives all the support it can Nothing wrong in murdering women and children - not for the Guardian!!

The film depicts outright, blatant fascism - instantly executing people without a trial. It is clearly intended to convey the message that if you dissent from a political program you will be executed. Whether you are a man, a woman or even a child - you will be executed. Instantly!

This is ECO-FASCISM - that special kind of fascism that the Guardian, the Green Party and the BBC approve-of. One of the special kinds of child-killing of which the Guardian/BBC/Green Party explicitly approve.

It is terrorism - using fear to further a political policy.

[The British Terrorism Act of 2000 defines a terrorist act as:-

“the use or threat of action designed to influence the government or to intimidate the public or a section of the public” and

“the use or threat of action made for the purpose of advancing a political, religious or ideological cause

So this is definately Terrorism as defined under that Act.]

As Voltaire said:-
"Those who can make you believe absurdities can make you commit atrocities."
Of course, since it is a policy that the UK government sponsors - this terrorism will not be criminally prosecuted. Indeed the makers of the film - "10:10" take their name from an official UK government program for reducing carbon emissions. So they probably got - not only their funding from the UK government - but also their instructions as to what to put in it.

( Yes - I do think that civil servants instructed a Public Relations firm to make a film which showed women and children being murdered because of their failure to conform to a government policy. Skeptics like me notice a distinct bias in government-run media )

To every policeman in the UK I say :- shame on you! To the Crown Prosecution Service I say - shame on you for not prosecuting Global Warming terrorists.

I formally report here that I am terrorised by its content and complain here that you do not follow your own laws.

As more evidence of terrorism I cite:- The Daily Telegraph on 11 Mar 2007 :-
"Scientists who questioned mankind's impact on climate change have received death threats and claim to have been shunned by the scientific community.

"They say the debate on global warming has been "hijacked" by a powerful alliance of politicians, scientists and environmentalists who have stifled all questioning about the true environmental impact of carbon dioxide emissions.

"Timothy Ball, a former climatology professor at the University of Winnipeg in Canada, has received five deaths threats by email since raising concerns about the degree to which man was affecting climate change.

"One of the emails warned that, if he continued to speak out, he would not live to see further global warming.

"Western governments have pumped billions of dollars into careers and institutes and they feel threatened," said the professor.

"I can tolerate being called a sceptic because all scientists should be sceptics, but then they started calling us deniers, with all the connotations of the Holocaust. That is an obscenity. It has got really nasty and personal."

"Last week, Professor Ball appeared in The Great Global Warming Swindle, a Channel 4 documentary in which several scientists claimed the theory of man-made global warming had become a "religion", forcing alternative explanations to be ignored.

"Richard Lindzen, the professor of Atmospheric Science at Massachusetts Institute of Technology recently claimed: "Scientists who dissent from the alarmism (of "Global warming" caused by man) have seen their funds disappear, their work derided, and themselves labelled as industry stooges. "Consequently, lies about climate change gain credence even when they fly in the face of the science."

"Dr Myles Allen, from Oxford University, agreed. He said: "The Green movement has hijacked the issue of climate change. It is ludicrous to suggest the only way to deal with the problem is to start micro managing everyone, which is what environmentalists seem to want to do".

"Nigel Calder, a former editor of New Scientist, said: "Governments are trying to achieve unanimity by stifling any scientist who disagrees. Einstein could not have got funding under the present system.""
Once again, Voltaire was right when he said:-

"It is dangerous to be right when the government is wrong."
A recent report from the BBC suggests fewer and fewer people in the UK believe the "Hot Air Cultist" catastrophists. Official figures show that UK household emissions of carbon dioxide (CO2) increased by more than 3% this year.

I suspect that these child-killers are getting desperate, and desperate child-killers are dangerous child killers.

To you "HOT AIR" cultists I say - YOU are the deniers! How dare you deny that your lies have already killed children - how dare you deny the children your malicious dishonesty is going to kill!!!!

Here is by far the best commentary on both the child-murdering Hot-Air cultists and the eugenics program that funds and promotes that cult:-


By far the easiest-to-understand documentary exposing the faulty reasoning of the Man-Made-Global-Warming (AGW) catastrophists is (IMHO) by Professor Bob Carter - an Australian geologist, paleontologist and climatologist. He entirely demolishes the AGW alarmist position in the following short lecture.

The documentary clearly shows what is wrong with just selecting the data from the last one thousand years - (as in the famous "Hockey Stick" graph) - because whatever extrapolation you make depends on how much of the earlier data you choose to include.

If you cannot watch it all then please, please, please, at least watch from 07 minutes 34 seconds to 08m40s


The best formal scientific refutation of Man-Made Global Warming (AGW) is given (IMHO) by Dr. Richard Lindzen - the Alfred P Sloan Professor of Meteorology And Atmospheric Sciences at MIT. He was also a lead author of chapter 7 of the IPCC 3rd assessment report.

Lindzen is (IMHO) the scientist who best uses empirical observation and mathematical (and logical) argument to disprove the Man-Made Global Warming Catastrophists

To summarise his research very briefly -
The IPCC (AGW catastrophists) claim that man-made carbon-dioxide is causing a "greenhouse" effect which in turn causes a rapid increase in global temperature. Dr Lindzen examined the temperature measurements from a satellite called  ERBE (the Earth Radiation Budget Experimental Satellite) and used them to put the case that the effect of carbon-dioxide is much less than a quarter of what the UN IPCC models say it should be.

Just as importantly he puts the case that the increase in CO2 has caused an INCREASE in the heat energy lost to space. Not the DECREASE that the AGW catastrophers insist upon. (he says that the satellite measuring the amount of energy radiating into space say that MORE energy is being radiated into space not less, which is what the "greenhouse" theory says should be happening.)

A conclusion that has since been duplicated by:-

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Sunday, 26 April 2015

How Much The Global Warming Catastrophists Cost Britain

The Climate Change Act 2008 and the Stern Report

This article examines two financial assessments of the Mitigation option chosen by the UK government:-
  1. The Climate Change Act (2008) and
  2. The Stern Report (2006)

There are basically two ways of dealing with the "planetary emergency" that Man-Made Climate Change is claimed to be:-
  1. "Mitigation" - which means STOPPING climate change before it happens by reducing carbon dioxide.
  2. "Adaptation" - which means ADAPTING to climate change as and when it happens
Adaptation is much cheaper than Mitigation and yet the UK government always chooses the much more expensive option of Mitigation. I believe that the proper debate should be about whether adaptation is better than mitigation.

The Climate Change Act 2008

In 2008 the UK Government passed a law called the "Climate Change Act" which committed the UK  - by law - to ensure that the net UK carbon account for all six Kyoto greenhouse gases for the year 2050 is at least 80% lower than it was in 1990.

The law contained a summary of the financial impact, which estimated the annual cost to be between £14.7bn and £18.3bn. Thus, we in the UK have legally obliged ourselves to spend a total of  £734 billion to reduce our emissions of carbon dioxide by 80 per cent by 2050.  (But, for a quibble about the exact amount, see also :- Challenge to that calculation of £734 billion)

The financial impact assessment also claimed that the benefits would be greater than the costs.

However, the benefit it considered was the benefit to the whole world, not the benefit to just Britain. Thus  its cost benefit analysis compares apples to oranges.

None of these "benefits" were directly related to the UK; instead they were simply calculated from the “Social Cost of Carbon” (SCC) for the whole world, as originally calculated by the Stern Review.

This SCC is no more than a theoretical guess at the “avoided global damage cost of emissions”.  A theoretical guess at the benefit for the whole world, not the benefit for the UK

To say that again in a slightly different way.  UK politicians decided to spend £734 billion of UK money because that is less than the cost to the whole world  if we don't spend it.  It isn't less than the cost to just Britain.

We are spending £734 billion in order to save the whole world from spending more than that. 
We are currently (2011) cutting public spending so much that we are closing fire stations, schools, hospitals, magistrates courts, coast-guard stations etc - but we are going to spend (at least) seven hundred billions in order to save the entire rest of the world from spending more than that. 

Aren't we kind!

The information about the cost/benefit analysis being so un-balanced is from:-


Here is a very revealing documentary on the same topic:



Here is a another documentary about costs versus benefits:


Peter Lilley – (an MP who was elected to the Select Committee on Energy and Climate Change in 2012 and who also has a degree in Physics from Cambridge University) gave a speech during the Energy Bill debate in the House of Commons on Monday 18 Jan 2016 that is well worth a read. This is the text, lightly edited
Mr Peter Lilley (Hitchin and Harpenden) (Con):
…Wherever we are on the spectrum on global warming, from sceptical to alarmist, we can surely all agree on one thing: that we should try to achieve the targets to which we are committed for reducing CO2 at the least cost to our constituents, - because it is ultimately they who bear it either through their [household] budgets or their jobs. So when the Secretary of State found that subsidies were proving unnecessarily generous to achieve our targets and we were achieving them ahead of time, so that without changing those targets she could reduce those subsidies, I assumed the whole House would be in universal agreement with what she was proposing; even I, for once, was on her side. But it was not so: there were calls from the green lobby and the Opposition to keep subsidies higher than necessary for longer than necessary to achieve the targets to which we are committed.

Above all, we have created a framework that commits us to load higher costs on UK consumers and businesses via the Climate Change Act 2008 and all its ramifications than any other country in Europe. Despite all that, we will ensure, because of the way the system works, that we do not reduce the amount of carbon dioxide emitted into the atmosphere by one molecule more than would be the case if we were doing the same as the rest of Europe.

Let me explain why that is so. At Paris all the countries of the world agreed to make commitments on what they were going to do in future to curb the growth of their CO2 emissions. The only exceptions were the countries of Europe, who put in a total figure for the whole of Europe and are now to allocate that figure among the member states. Because we are committed to doing so much more than the average in Europe—indeed, than anybody else in Europe—all that does is to reduce the amount by which the other countries in Europe will have to reduce their emissions. So we have increased the burden of costs on British households and business, reduced the burden of costs incurred by our partners in Europe, and not reduced the emissions of CO2 by a single molecule.

That is an extraordinary thing to achieve. 

It puzzles me that the political class is committed to such perverse policies. Then I found a possible hint of an explanation, when someone mentioned to me, Madam Deputy Speaker, a book that I am sure, like me, you have not read but have heard about called …  “Fifty Shades of Grey”. The surprising popularity of that book demonstrated that sadomasochism, or the infliction of pain and the submission to pain, are far more widespread tastes than we had previously thought.

It seems to me that in the political sphere there is a similar belief that it would be popular to inflict pain or submit to pain by green policies. We might say that what we are suffering from in this country is “Fifty shades of green”.

The trouble is that Members who are committed to this doctrine measure the success of their policies not by what they will achieve, but by what they will cost; and not by how effectively they will reach a given destination, but by how onerous are the burdens they can place on Britain, British households and British business.

That pain is very significant. The Committee on Climate Change worked out the costs of climate change policies in 2014-15, and it came out at about £250 per household. [Interruption.] The right hon. Member for Doncaster North (Edward Miliband) may disagree with the Committee on Climate Change, which he helped set up; if so, please intervene—but of course he cannot sustain his position. That figure is set to double by 2020, to double again probably by 2030, and to double again by 2050. That is the direct effect on household budgets both through their energy bills and the cost of more expensive products because energy prices feed through to product costs.

There is also the cost on jobs. We have lost the aluminium industry already, and earlier today we were seeing the serious the impact of job losses in the steel industry. Of course, the basic reason why there are job losses in the steel industry is that there is a worldwide glut of supply, but the reason that falls excessively on this country is that our industrial energy costs are higher than those anywhere else in Europe. That is why we are suffering disproportionately at the moment. I am reliably informed by my right hon. Friend the Member for Wokingham (John Redwood) that we are importing bricks. I recently had lunch with a businessman who said that 7% of his output comes from the UK but that 28% of his energy costs were in this country.

 … My appeal to the House is that we start looking at this whole business in a rational way. Let us take all the targets to which we are committed as a given. Like the hon. Member for East Antrim (Sammy Wilson), I think they are unnecessary and unwise, but let us take them as a given and seek the least costly way of achieving them. Let us seek to achieve them in a way that will place the fewest burdens on British households and result in the fewest job losses and the least destruction of industry and output. Let us not measure our success by how much pain we can inflict and how much harm and burdens we can submit to, as we have done through the 50 shades of green up to now.

[End of quote from Peter Lilley in 2016]
Here's another good article on the topic from Peter Lilley MP from Tuesday, 25 November 2008 . It is called:-
"Coughing up to curb climate change"
Peter Lilley is a Conservative MP and former Trade Secretary. He was one of only three MPs who voted against the Climate Change Act which was piloted through Parliament by then Labour Energy Secretary Ed Miliband.  He was elected to the Select Committee on Energy and Climate Change in 2012. Peter Lilley has a degree in Physics from Cambridge University


The STERN Report

The Stern Report was a report on the Economics of Climate Change written in 2006 for the Prime Minister and the Chancellor of the Exchequer of the United Kingdom.  It ignores the Adaptation option and considers only Mitigation.
"Stern systematically downplays or ignores possible trade-offs between adaptation to (ADAPTATION), and prevention of (MITIGATION), climate change"
What follows below are two important reviews of the Stern Report. 
  1. One from Richard Toll - an economist.
  2. The other from Richard Lilley - an MP who was elected to the Select Committee on Energy and Climate Change in 2012.
I (personally) believe that the proper debate should be about whether it is :-
  1. cheaper to try to prevent global warming today or
  2. cheaper to wait and then adapt to its imagined net-adverse consequences the day after tomorrow
I (personally) believe that it is 1000 times cheaper to adapt later than to mitigate now.

Stern, however, argues firmly in favour of expensive mitigation.


by Richard S.J. Tol October 30, 2006

"The Stern Review of the Economics of Climate Change (Stern et al., 2006) is a report to the Prime Minister and the Chancellor of the Exchequer of the United Kingdom. A team of 23 people, led by Sir Nicholas Stern and supported by many consultants, worked for a little over a year to produce a report of some 700 pages on the economics of climate change."

"the Stern Review argues that "the benefits of strong early action outweigh the costs"

"In this commentary, I review the impact estimates in the Stern Review and assess the cost-benefit analysis in that report before reaching a conclusion."

Economic impacts of climate change

Let us first examine the Stern Review conclusion that climate change will cause economic disruption now and forever. The "now and forever" is preposterous. ,,, But the "forever" part is ...problematic. It assumes that society will never get used to higher temperatures, changed rainfall patterns, or higher sea levels. This is a rather dim view of human ingenuity. It contradicts what we know about technological progress, adaptation, and evolution.

The Stern Review highlights several impacts of climate change.

One is water. The work here is based on Arnell (2004). The Stern Review states correctly that Arnell (2004) does "not include adaptation" and is therefore severely biased.

Food is another highlighted impact. Climate change would hamper agricultural productivity in some parts of the world, particularly Africa. This would be a problem in today's world. However, in all of the socio-economic scenarios used by the Stern Review, African economies would grow rapidly. This is inconsistent with famine.

Middle-income countries would import food (global food production is not threatened by climate change) rather than starve. Furthermore, it is hard to imagine rapid economic growth without substantial improvements in agriculture productivity; at present, African agriculture is particularly inefficient.

For health, the Stern Review makes the same mistake: It worries about people dying of diarrhea and malaria, diseases that can be controlled at little expense.

The Stern Review extrapolates the increase of damage due to weather-related natural disasters. It uses the estimates of Muir-Wood et al. (2006), ignoring the opposite (and peer-reviewed) conclusions by Pielke et al. (2005) and Pielke (2005).

For water, agriculture, health and insurance, the Stern Review consistently selects the most pessimistic study in the literature.

For refugees, the Myers and Kent (1995) are the highest, and the Stern Review duly highlight that "some estimates suggest that 150-200 million people may become permanently displaced". Myers and Kent (1995) was not peer-reviewed. Norman Myers is a known alarmist.

For sea level rise, the Stern Review only quotes the "millions at risk" from Nicholls and Tol (2005) " this metric ignores adaptation, which is very effective against sea level rise "note that Nicholls and Tol (2005) do report impact measures with adaptation too.

In the chapter on the impact of climate change on development, the Stern Review quotes the works of Nordhaus (2006) and Sachs (2001) "who find that a tropical climate negatively affects economic development. The Stern Review ignores the work of Acemoglu et al. (2001) and Easterly and Levine (2003), who argue that climate has at most a minor, indirect effect in the (distant) past " and the climate-change-specific studies of Fankhauser and Tol (2005) and Tol (forthcoming), who show that climate change will have a limited effect on development. In their poverty projections, the Stern Review mistakes the income-loss-equivalent-welfare-losses of the PAGE2002 with actual income losses.

Cost-benefit analysis and emission reduction targets

The Stern Review overestimates the impacts of climate change, and therefore the benefits of emission reduction. Its estimates of the costs of emission reduction are largely inspired by the Innovation Modeling Comparison Project (Edenhofer et al., 2006; Grubb et al., 2006; Koehler et al., 2006), a group of models that make overly optimistic assumptions on technological progress and the costs of emission abatement (see Weyant, 2004, and van Vuuren et al., 2006, for more mainstream estimates). High benefits and low costs together imply that the Stern Review recommends more stringent emission reduction than the standard cost-benefit analysis (Azar and Lindgren, 2003; Keller et al., 2004, 2005; Maddison, 1995; Manne et al., 1995; Nordhaus, 1991, 1993, 1994; Nordhaus and Boyer, 2000; Nordhaus and Yang, 1996; Peck and Teisberg, 1992, 1994; Tol, 1997, 1999, 2001, 2002).

The Stern Review does not, in fact, present a formal cost-benefit analysis. Instead, it compares the magnitudes of the costs of abatement (around 1% of GDP) to the costs of climate change (5-20% of GDP) and concludes that the latter justifies the former. There are two mistakes here.

Firstly, the costs of climate change do not equal the benefits of emission reduction â€" any abatement will only slow climate change rather than avoid it altogether â€" therefore, the benefits of emission reduction are smaller than the costs of climate change (Tol and Yohe, 2006).

Secondly, marginal costs should be compared to marginal benefits, rather than total costs to total benefits.6 The Stern Review is silent on marginal abatement costs. It does report marginal damage costs though. For instance, it says "the mean value of the estimates in the study by Tol [2005] was about $29/tCO2" but omits that Tol (2005) concludes that "it is unlikely that the marginal damage costs of carbon dioxide emissions exceed $50/tC [$14/tCO2] and are likely to be substantially smaller than that." The Stern Review does report that "the current social cost of carbon [€] might be around $85/tCO2”, but it does not provide any more detail â€" except that this number is preliminary and results from PAGE2002 (Hope, 2006). $85/tCO2 equals $314/tC, and is therefore an outlier in the marginal damage cost literature (Tol, 2005).


In sum, the Stern Review is very selective in the studies it quotes on the impacts of climate change. The selection bias is not random, but emphasizes the most pessimistic studies. The discount rate used is lower than the official recommendations by HM Treasury. Results are occasionally misinterpreted. The report claims that a cost-benefit analysis was done, but none was carried out. The Stern Review can therefore be dismissed as alarmist and incompetent.



by Peter Lilley MP - Tuesday, 4th September 2012 

Indeed, Stern's conclusions, that the costs of a crash programme to reduce emissions are far outweighed by the benefits, contradict even the Intergovernmental Panel on Climate Change (IPCC) which said: "costs and benefits are broadly comparable in magnitude" so it could not establish "an emissions pathway or stabilisation level where benefits exceed costs".

Describing future centuries as "now".

Stern suggests losses from global warming will be at least 5% of GDP "each year now and forever". This is simply untrue. The cost of his crash programme to reduce emissions does indeed start now and in the decades to come. But the impact of global warming which he wants to mitigate will be largely in the very distant future. Even on Stern's questionable calculations, it will be the next century before the cumulative benefits of (entirely) preventing global warming would exceed Stern's low estimate of the costs of (partially) limiting it. Stern justifies his claim by saying losses from global warming centuries ahead are statistically "equivalent to" losses "now and forever". He calculates the "now and forever" figure by taking high losses reached centuries ahead and projected to infinity, then discounting and averaging them with the negligible losses for many decades to come

Hidden economic assumptions.

Since Stern projects the impact of global warming to infinity, the rate at which he discounts them to the present is crucial. Stern rejects discount rates normally used to compare future costs and benefits '" including the rates specified by the Treasury Economic Service which he headed. Instead he adopts an ultra-low rate without explicitly disclosing it in his 700-page report. His low discount rate and infinite time horizon mean that over half the projected losses this generation will be paying to avoid will not occur until several centuries hence.

Stern justifies his ultra-low discount rate as being rational and ethical '" arguing that discounting for time is irrational and we should value the well-being of future generations as much as our own. Since discounting to infinity at a zero rate would put an infinite value on even the smallest reduction of emissions, he discounts time at 0.1% per annum (pa) to allow for the risk of extinction (for reasons other than climate change).

Cherry picking unreliable studies.

Stern draws heavily on non-peer reviewed and alarmist literature to paint an exaggerated picture of the key risks of global warming:

a) Hurricanes and storms.

A World Bank study shows that Stern's forecasts of damage to infrastructure from more powerful storms are up to 100 times too large - being based on extrapolating a non-peer reviewed paper which attributed much of the growth of insurance claims (which is mainly the result of more properties being built in storm- prone areas) to greater prevalence of more powerful storms. There is scant evidence of this. The IPCC is uncertain, citing models indicating that the number of storms may decline but intensity may increase.
b) Food and famine.

He neglects scope for adaptation (citing a study showing a 4 degree Celsius rise could cut yields of one crop variety by 70% but assumes farmers will not switch to another variety whose yields would increase '" a fact he withholds). He says a 4°C rise would cut world cereal production by 10%. But he accepts that meeting the bio-fuels target will absorb 10% of the world's arable land. In any case this is insignificant given the massive scope to boost output by using existing agricultural techniques more widely.
c) Water supplies.

Higher temperatures mean more precipitation overall. But Stern highlights the number of people forecast to suffer increased water stress, although twice as many will enjoy reduced water stress.

d) Rising sea levels.
This is the most iconic fear aroused by global warming but the IPCC says it will take millennia for higher temperatures to melt the ice-caps. Meanwhile the oceans are set to rise at a rate similar to the average of the last 18,000 years. A World Bank study suggests that even Bangladesh can prevent projected storm surges at a cost of barely 1% of its GDP.

e) Disease
Stern relies on a study which arbitrarily assumes 2% of all deaths from diarrhoeal diseases, malaria and malnutrition are the result of climate change and that this will double for each 1°C rise in temperature. But these are diseases of poverty and invariably disappear as countries experience economic growth.

[[End of "What is Wrong With Stern" by Peter Lilley]]

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