Letter to the Kent on Sunday
Dear Editor,
It is good news that Kent County Council is finally going to set up a Kent wide Credit Union. Publicly owned and democratically controlled banking is the only way forward for banking. We have all witnessed what happens when you let profits and greed take control of an unregulated economic system and KCC has first hand experience of this with its huge losses in Iceland. Let us hope, therefore, that they have learned their lesson on how to look after public money when they open the credit union.
Of course, KCC should do a lot more good than just providing savings and loans. A fully functioning, local government run bank for the people of Kent would be useful to many and hopefully more safe that most of the high street ones.
KCC should also move many of its own investments away from unethical companies such as those that manufacture arms and tobacco, and invest in green industries. Investing in energy saving schemes, producing renewable energy, effective public transport and local food production will not just provide a more healthy return on investments but will also ensure a better future for us all while providing much needed jobs now.
Stuart Jeffery
Green Party general election candidate for Maidstone and the Weald
Green Party campaigner in Kent. Also a nurse, academic, former manager, writer, Druid, husband and father...
Showing posts with label banking. Show all posts
Showing posts with label banking. Show all posts
Monday, 13 April 2009
Thursday, 29 January 2009
Should the Government Nationalise all Banks?
Interesting piece by Rupert Read, Prospective MEP for Eastern Region:
"We’re pouring trillions of euros into banks, and they’re not doing what we want them to do. Despite our investment and a worldwide coordinated interest-rate cut, commercial banks still won’t lend much to each other, and certainly not to the rest of us. The only solution is for banks to be nationalized or, in the case of financial institutions formerly owned by their customers, permanently remutualized."
Read the full article here.
I'm not convinced he's right though. I favour localisation over nationalisation of banks in the longer term, although there is a good case for national control in the short to medium term.
Mutuals are the way forward and the more localised they are the better.
"We’re pouring trillions of euros into banks, and they’re not doing what we want them to do. Despite our investment and a worldwide coordinated interest-rate cut, commercial banks still won’t lend much to each other, and certainly not to the rest of us. The only solution is for banks to be nationalized or, in the case of financial institutions formerly owned by their customers, permanently remutualized."
Read the full article here.
I'm not convinced he's right though. I favour localisation over nationalisation of banks in the longer term, although there is a good case for national control in the short to medium term.
Mutuals are the way forward and the more localised they are the better.
Monday, 20 October 2008
Old fashioned Keynsianism?
This is from Liberal Consipracy: "Darling now appears to be promising a return to good old fashioned pump priming economics, in a manner of which JMK would have approved."
They also quote this: "We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step ~ Prime minister James Callaghan, Labour Party conference speech 1976"
The problem with both approaches is that they don't control the money supply in the right way. Darling's pumping cash into the economy is fine, but where is he getting the money from? Borrowing it from whom? If he is borrowing it from banks and other financial institutions then is he increasing the money supply or simply moving it around?
If he is borrowing the money from private companies, then are they lending from their own reserves or are they creating un-backed loans? Lending from their reserves does not increase the money supply, lending by newly created loans increases the money supply, but why would you get private companies to do this when the Bank of England can do it for free?
A plan for successful restarting of the economy and for the money to be channeled into tackling the problem areas (e.g. energy and climate change) should look like:
They also quote this: "We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step ~ Prime minister James Callaghan, Labour Party conference speech 1976"
The problem with both approaches is that they don't control the money supply in the right way. Darling's pumping cash into the economy is fine, but where is he getting the money from? Borrowing it from whom? If he is borrowing it from banks and other financial institutions then is he increasing the money supply or simply moving it around?
If he is borrowing the money from private companies, then are they lending from their own reserves or are they creating un-backed loans? Lending from their reserves does not increase the money supply, lending by newly created loans increases the money supply, but why would you get private companies to do this when the Bank of England can do it for free?
A plan for successful restarting of the economy and for the money to be channeled into tackling the problem areas (e.g. energy and climate change) should look like:
1. The power of injecting new money into the economy should be transfered from commercial banks to the Bank of England, with commercial banks banks taking on a credit broker role for customers wanting new loans.
2. Government borrowing should be transferred to the Bank of England.
3. Electronic money should be made legal tender making its creation by anyone other than govt akin to counterfeiting.
4. The Bank of England should control the amount of money it lends to commercial banks to contract or expand the economy.
Leaving the economy in the hands of private, commercial banks has got us to where we are now. History is littered with examples of failed economies where governments have simply printed money; the above plan is not that, it is about tightening the control of the money supply.
History is about to be come littered with failed economies that have followed the commercial road to monetary policy and Iceland seems to have been first.
Friday, 17 October 2008
Nationalising money
The monetary system is surprisingly simple yet is shrouded in the mystery of 'financial instruments' to make it seem inaccessible.
All money is created by debt in a method akin to double entry book keeping. When a loan is taken out the bank opens a 'loan' account for that person, debits it with a sum of money (the total loan value) and pays the money into the person's current account allowing them to spend the money. Interest is debited from the loan account each month and credited to the bank as payment, creating further money to enter circulation.
Cash is created in the same way with notes being printed and entering circulation backed by a debit in an account which is in turn backed by government securities. Whether money is created virtually as a figure in an account or as cash, it is balanced by a debit to an account. The Bank of England prints notes and puts an equivalent debit to its cash account, when high street banks need cash they debit their cash account and credit the BoE, the BoE credits its cash account (i.e. reducing the negative balance) and hands the cash to the high street bank. Cash is simply another form of credit which is created through, and backed, by debt.
**What should happen**
1. The power of injecting new money into the economy should be transfered from commercial banks to the Bank of England, with commercial banks banks taking on a credit broker role for customers wanting new loans.
2. Government borrowing should be transferred to the Bank of England.
3. Electronic money should be made legal tender making its creation by anyone other than govt akin to counterfeiting.
4. The Bank of England should control the amount of money it lends to commercial banks to contract or expand the economy.
Government borrowing should be replaced by Primary Credit - credit that forms the money supply. Primary Credit is a simply loan account created by the central bank that attracts no interest and requires no repayment (one account is debited and another credited - the credited account is the money that enters the economy). This is akin to the process by which cash is created. This Primary Credit required no interest repayment by government, which currently pays around £30 billion on the government borrowing (at 2007). Primary Credit can provide a stable constant in the monetary system.
Primary Credit would eventually provide the total money for the economy to function. Retail banks stop creating their own loans based on customer deposits (the Fractional Reserve system) and starts to act as a credit broker only, by borrowing money from the Bank of England and brokering it to businesses and people.
The level of current retail bank loans are gradually wound down as they are repaid or could be transfered to the Bank of England in one block. Either way the money supply stays constant (but could be increased or decreased at the government's request).
Electronic money becomes legal tender. Any bank lending money that it has not brokered from the Bank of England or doesn't already own would be guilty of counterfeiting.
The amount of money in the system is then easily controlled through the amount of Primary Credit. If the government increases the Primary Credit the money supply increases; if it repays the Primary Debt from a higher level of taxation than spending, the money supply decreases.
The government holds the strings on credit - banks have to borrow from the Bank of England rather than through interbank lending... any credit crunch would be the fault of the gov't and within the gift of the gov't to resolve.
I have put this on my new wiki (these are great for setting out one's thoughts).
Much of this is adapted from Huber and Roberson's book: Creating New Money
All money is created by debt in a method akin to double entry book keeping. When a loan is taken out the bank opens a 'loan' account for that person, debits it with a sum of money (the total loan value) and pays the money into the person's current account allowing them to spend the money. Interest is debited from the loan account each month and credited to the bank as payment, creating further money to enter circulation.
Cash is created in the same way with notes being printed and entering circulation backed by a debit in an account which is in turn backed by government securities. Whether money is created virtually as a figure in an account or as cash, it is balanced by a debit to an account. The Bank of England prints notes and puts an equivalent debit to its cash account, when high street banks need cash they debit their cash account and credit the BoE, the BoE credits its cash account (i.e. reducing the negative balance) and hands the cash to the high street bank. Cash is simply another form of credit which is created through, and backed, by debt.
**What should happen**
1. The power of injecting new money into the economy should be transfered from commercial banks to the Bank of England, with commercial banks banks taking on a credit broker role for customers wanting new loans.
2. Government borrowing should be transferred to the Bank of England.
3. Electronic money should be made legal tender making its creation by anyone other than govt akin to counterfeiting.
4. The Bank of England should control the amount of money it lends to commercial banks to contract or expand the economy.
Government borrowing should be replaced by Primary Credit - credit that forms the money supply. Primary Credit is a simply loan account created by the central bank that attracts no interest and requires no repayment (one account is debited and another credited - the credited account is the money that enters the economy). This is akin to the process by which cash is created. This Primary Credit required no interest repayment by government, which currently pays around £30 billion on the government borrowing (at 2007). Primary Credit can provide a stable constant in the monetary system.
Primary Credit would eventually provide the total money for the economy to function. Retail banks stop creating their own loans based on customer deposits (the Fractional Reserve system) and starts to act as a credit broker only, by borrowing money from the Bank of England and brokering it to businesses and people.
The level of current retail bank loans are gradually wound down as they are repaid or could be transfered to the Bank of England in one block. Either way the money supply stays constant (but could be increased or decreased at the government's request).
Electronic money becomes legal tender. Any bank lending money that it has not brokered from the Bank of England or doesn't already own would be guilty of counterfeiting.
The amount of money in the system is then easily controlled through the amount of Primary Credit. If the government increases the Primary Credit the money supply increases; if it repays the Primary Debt from a higher level of taxation than spending, the money supply decreases.
The government holds the strings on credit - banks have to borrow from the Bank of England rather than through interbank lending... any credit crunch would be the fault of the gov't and within the gift of the gov't to resolve.
I have put this on my new wiki (these are great for setting out one's thoughts).
Much of this is adapted from Huber and Roberson's book: Creating New Money
Thursday, 16 October 2008
John Humphries learns how money is created
Three interviews with financial experts on Radio 4 this morning. The first with John Humphries was excellent. The interviewee explained, to the astonishment of JH, that it is commercial banks that create money, not the government.
Many of us have known this for some time (I worked in banking as my first career), but it is only now that people are really starting to question what is happening in our economic system, how it works and why we are in such a mess.
Banks simply create money by lending out money deposited with them while retaining the account balances. If I pay in £100, they credit my account and can lend this money out to someone else who spending it, the money is paid in again and the cycle continues with the account balances and loans getting bigger and bigger. The process is fractional reserve banking and has been in operation for 500 years.
The fact that private banks have created 97% of the £1.7 trillion in the UK economy helps explain some of the problems. If I printed money, I'd be arrested - somehow banks get away with it. Surely it is the government's role to create money.
"The process of money creation is so simple, the mind is repulsed" - JK Galbraith
"What is the crime of robbing a bank compared with the crime of founding one?" - Bertolt Brecht
Many of us have known this for some time (I worked in banking as my first career), but it is only now that people are really starting to question what is happening in our economic system, how it works and why we are in such a mess.
Banks simply create money by lending out money deposited with them while retaining the account balances. If I pay in £100, they credit my account and can lend this money out to someone else who spending it, the money is paid in again and the cycle continues with the account balances and loans getting bigger and bigger. The process is fractional reserve banking and has been in operation for 500 years.
The fact that private banks have created 97% of the £1.7 trillion in the UK economy helps explain some of the problems. If I printed money, I'd be arrested - somehow banks get away with it. Surely it is the government's role to create money.
"The process of money creation is so simple, the mind is repulsed" - JK Galbraith
"What is the crime of robbing a bank compared with the crime of founding one?" - Bertolt Brecht
Wednesday, 1 October 2008
Nationalise or bust
The key industries that support our lives should be under government control, i.e. nationalised.
We are lucky to currently have a predominately nationalised health service (albeit one that Labour have been activity privatising) - a health service that, overall, we are proud of. Sadly the Tories privatised gas, electricity, communication and water (what is more essential to life than water?).
Of course we need to need to bring all of these back under national control, however at present Brown is working through an imaginative scheme with the industry that sits at the bedrock of our economy, banking - and he's nationalising it slowly.
While politicians make mistakes as they are (except for a few notable cases) human, they can be held to account and they should be elected to serve society. They are best placed to steer the economy in the direction it needs to go. Why should we allow organisations driven by the need to make profits to have such a tight grip on economy?
Nationalise the banks now, make them accountable to national and local government. Strip them of the profiteering. Pay their workers a fair wage for the work they do. Incentivise and motivate them to act in the interests of society. Take away the shareholders unalienable right to demand profit at any cost. Make the economy work for people do not let the people work for the economy.
We are lucky to currently have a predominately nationalised health service (albeit one that Labour have been activity privatising) - a health service that, overall, we are proud of. Sadly the Tories privatised gas, electricity, communication and water (what is more essential to life than water?).
Of course we need to need to bring all of these back under national control, however at present Brown is working through an imaginative scheme with the industry that sits at the bedrock of our economy, banking - and he's nationalising it slowly.
While politicians make mistakes as they are (except for a few notable cases) human, they can be held to account and they should be elected to serve society. They are best placed to steer the economy in the direction it needs to go. Why should we allow organisations driven by the need to make profits to have such a tight grip on economy?
Nationalise the banks now, make them accountable to national and local government. Strip them of the profiteering. Pay their workers a fair wage for the work they do. Incentivise and motivate them to act in the interests of society. Take away the shareholders unalienable right to demand profit at any cost. Make the economy work for people do not let the people work for the economy.
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