Key to challenging power of banks is regaining control of money supply
July 10th, 2012The discovery by the Bureau of Investigative Journalism that the financial services industry spent £92m last year lobbying politicians and regulators shows how deeply entrenched the banks have become in the UK power structure contrary to the public interest. The documents show that that lobbying firepower was used to slash UK Corporation Tax (Osborne caving in to them again) as well as to de-rail government plans to set up a new corporate regulator to police quoted companies. But there’s a lot more too that they’ve secured which works against the national interest – the cut in 50p income tax, the soft touch on all the City mis-selling scandals, the watering down of the already weak Vickers recommendations, the rejection of a financial transactions tax, the wilful blindness over massive City-driven tax avoidance, the continuing failure to regulate complex derivatives that were at the heart of the 2008-9 crash, and many more. So how should they be stopped?
The key to City power is their control over the money supply which they use ruthlessly to promote their own interests to the disadvantage of the nation at large. Thatcher’s Big Bang in 1986 abolished all controls over consumer credit as well as de-regulated housing finance. The banks were then able to use the expansion of the money supply, 97% of which they are responsible for, mainly for the purpose of feeding a property boom as well as huge foreign speculation, whilst only allocating 8% of credit for the purposes of productive investment (manufacturing, construction, communications, distribution, retail and wholesale). That mere 8% allocated to business is a prime reason why Britain’s manufacturing capacity has deteriorated to the point where in 2010 the UK balance of payments deficit on traded goods reached £100bn, 6.8% of GDP, which is utterly unsustainable.
Regaining public control over the money supply, as all successful economies since the Second World War have exercised, is absolutely vital to ensure that the nation’s resources are primarily channelled into industry and exports rather than property and financial speculation. That is a pre-condition for any sustainable UK economic recovery. It is also a necessary, and perhaps even a sufficient, condition for reining in the power of the City.
Under this ‘window guidance’, which prevailed till the 1970s when the Tories replaced quantitative ceilings by the price mechanism and variable interest rates, unproductive credit creation like today’s lending to hedge funds was firmly suppressed. Equally consumer loans on any significant scale, which would trigger inflationary demand for consumer goods and draw in increased imports, were discourages and hard to get. Priority was given to productive investment (plant and equipment, key services, enhanced productivity via new technologies and R&D).
If we want to escape our economy being hollowed out by manufacturing deficits of £100bn a year as well to constrain the anti-business and anti-UK power of the City, that is the route we must now take.
July 11th, 2012 at 9:34 am
It is really heartening to see at least one person in Westminster who has a grasp of the core of the banking issue. The excessive credit creation by private banks and its misdirection towards asset speculation is what really needs to be tackled. The problem is that anyone trained in conventional economics who thinks banks are just intermediaries between savers and borrowers will miss this. Good luck in convincing Ed and Ed that your insight should the basis of the banking reform policy of the Labour Party.
July 18th, 2012 at 3:43 pm
A bank by definition is an institution which promises to repay depositors £X for every £X deposited (maybe plus some interest and maybe less a charge for expenses).
That being the case, banks will INEVITABLY lend in a conservative manner: i.e. they’ll tend to lend in exchange for good collateral, like property, rather than lend on the basis of fancy cash flow projections produced by businesses. And even property has not prooved a good bet: in Spain and Ireland in particular it was a disaster.
Do you want your bank to lose the money you deposit?
Thus Meacher’s demand for banks to lend more to industry is thus almost a contradiction in terms.
Large firms are not bothered by bank’s reluctance to lend to commerce or industry: they can access the stock exchange. As to SMEs, their access to loans would probably be improved by the sort of bank set up favoured by Positive Money, Prof.Richard Werner and Prof. Lawrence Kotlikoff. The systems they advocate requires depositors to choose between so called “safe” accounts where depositors’ money is NOT INVESTED and is thus 100% safe, and so called “investment” accounts. Money in the latter IS LOANED ON to mortgagors and businesses.
And banks could offer depositors a choice as to how their money is invested: e.g. in small firms, energy conservation firms, the arms industry – whatever depositors want. Indeed, Kotlikoff specifically advocates this “choice”.
September 17th, 2012 at 10:16 am
My evolving project may have relevance.
http://www.p2pfoundation.net/Transfinancial_Economics
October 3rd, 2012 at 9:40 am
Who dose the police officer serve?
The public that creates ALL money on its very conception? *OR*
The criminal corporation that launders a nations circulation & wealth namely the bank?
What then is the difference between a police *officer* & a police *man*?
Is it not that a police man serves & protects the public?
*OR*
Is it the police officer WHO serves & protects the corporation by extorting revenue from the public on behalf of the corporation by police *force*…police and government have been hijacked by a group of banking elite that are fascist .Gov & all of Parliament & THE QUEEN are OUR mere servants,99% of all taxs goes to bank on unnecessary gov borrowed expenditure,The expenditure debt is nothing if one compares a major chunk of national debt is only the money that local banks have already laundered out of circulation BY FRAUD via our very own promissory obligations to each other NOT TO A BANK.To loan money that money has to exist prior,NO new money ever existed until one of us walks into a bank & signs a promissory note basic logic & 2nd grade maths shows us ALL banks are laundering our monetary circulation unfortunately, most tax is a consequence this but this is not to say the queen has her hands in the pie .The queen gets a % of profits from the our federal reserve bank & the queen banks her own money in the Rothschild’s BANK OF ENGLAND ,follow the money & you will see its the banks that rob us, read our constitution sec 128 the gov serves the people for we have the last say NOT the queen..We all have to remember the mind is like a parachute,it only works if its open? If we are to point the finger at anyone it would be ourselves for allowing the theft of OUR WEALTH, regardless who steals it whether it be a queen or at the gas pump *BANKS* is how they perpetually launder OUR wealth by deception & everything else is really a symptom of this …..If your remotely interested in MPEs mandate it will be online before 21st December 2012.The information pertaining in the mandate is paramount to ones freedom which is a complete divorce from the system ,putting it to sheriffs , police , banks, government to? prove to us what consideration a bank gives up in any alleged loan to one of us WHICH THEY CANT.They can drag my ass in court but they will loose with MPE as my defense, the tables will be turned & THEY will be held for treason.
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The internet is the last light of truth and hope…it is truly of the people, by the people and for the people. We must not let it be subverted for any purpose other than the truth. And that truth shall spread to every man woman and child across the globe. No longer will those in power carry the sole means to decide for us, yet we now shall have the power to decide to tune them out.
¨The issue which has swept down the centuries and which will have to be fought sooner or later is The People versus The Banks.” Lord Acton. Historian. Politician. Writer. 1834-1902.¨
If we don´t adopt Mathematically Perfected Economy we condemn ourselves to monetary failure