I note the British Bankers' Association, which has one of the most extraordinary records in blocking any progress towards a modern value added economy in the UK, has said that if George Osborne even threatens to take powers to split up banks that do not comply with ring-fencing requirements he might produce sometime later this decade then the cost of capital for banks will increase and so the amount of money they might lend will fall.
Very politely the one thing to do now with the BBA is to do what has always been the right course of action with the BBA, and that is ignore it.
As a matter of fact BBA members are not lending to business, and won't do so. If they'll lend on anything its for mortgages for those already on the property ladder, which does nothing for growth at all. But to argue that the banks are even a component in a crisis of their making is almost absurd.
The answer on banking now is threefold. First RBS must be nationalised.
Second it must become the Green National Investment Bank we so badly need. Until we have such a bank, willing to both lend and take equity, business will not get the funding it needs.
Third, other banks must suffer the regulation they've always needed and deserved, and that would include mandatory splitting. The concept of a ring fence is absurd: it can't and won't work. Anyone will be able to work round, under and over it. Pretending otherwise for a few years is a lie. Let's get on with creating the banking system we need now. There is no need to wait.
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Do you think that being in possession of a bank with the power to create money as debt as the private banks do would be a better solution than nationalising the money supply?
The benefits to government in owning a bank would be to collect the profits of creating money as debt which would help public services. However, would the people be better off with at least a debt free supply of money which circulates permanently and gets spent rather than lent into the economy on public services?
Does government need to be a banker? Would people be better off if it took control of the money supply on their behalf?
I feel this is a very important reform, as private, business and government debt is growing exponentially. We cannot get growth without increasing the money supply, but under the present system this means borrowing from banks. Would borrowing from government be just the same?
A debt free money supply would enable growth without creating more debt. It would feed from the public sector to the private sector and help to pay off debt to the private banks.
This makes a lot of sense. There may be ‘unintended consequences’ as there often are with changes. What we need is a proper debate so we can judge. I, and others, sometimes call for this in the readers’ comment columns of the Guardian and Independent, hoping the journalists will take it up and examine it. But they don’t. Neither do the BBC journalists -who air all sorts of other minority opinions. Some suggest this is deliberate policy imposed by the owners of the papers and Directors of the BBC.
It might also be because those in power have been educated in the ‘modern’ form of finance and owe their position to being an advocate of it or who espouse it to enhance their creditability with those in power and by whom they wish to be taken seriously.
The adoption of such a system would imply a massive transfer of power so the ‘muzzling of the media’ view looks equally likely. I feel it would be a transfer of power to the many from the few and very desirable if it could work.
I would be interested what the much better informed people who comment here think.
I like your thinking Sandra. I believe debt-free banking has been (and still is in certain parts of the world) practised without too many problems. We also have the recent example in your own country of Quantitative easing being used. The latter is a somewhat different process, but I think has a similar effect – debt-free growth.
As I think Richard has suggested a number of times in this blog, QE could be used to finance growth. An economist in Australia, Bill Mitchell, has a similar line of thinking. Essentially a nation that controls its own currency isn’t strapped to the same norms as most households.
During the First World War, the Commonwealth Bank of Australia lent money to the Australian government, so that it finished the war debt-free. Needless to say the private bankers put a stop to this in the decades that followed. Hell, we can’t have sovereign nations in control of their own futures, now can we? 😉