I've already noted this morning that the government is intent on virtually eliminating, for all practical purposes, the right of many UK workers to strike.
At the same time the FT notes that the row between the UK and EU on the peculiarly London focussed habit of paying enormous bonuses to bankers rumbles on, with our government firmly on the side of the bankers with the EU firmly opposed.
There is no doubt that the pay practices our government is seeking to defend are profoundly anti-social in their impact and severely distort many markets. I believe the tax system should be used to curtail them. Our government argues in their favour.
No wonder so many want to quit a country dominated by such logic. That's the only sane option given the choice.
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I think Sovereign Money Creation and would help as well, or, at least seigniorage charges on electronically created bank money as the banks work at present. Plus a ‘Chicago Plan’ separation of risk from the rest of the payments system so the banks bear risk and don’t need the 85,000 ‘cover’which socialises their risk taking.
No chance of this under Tories, LINO or Clegg’s gutless brigade. Greens are for it, as far as I know.
With politicians relying on this system for their own economic ‘rent’ and support the Augean Stables of Banking will remain uncleaned.
We have a banker puppet government. Just like the USA and Europe. Bankers can hand out high paying jobs to the children and spouses of politicians.
As long as the money keeps flowing from the financial sector into the mainstream political parties no required change will happen. I agree with Simon’s comment also that sovereign money might help. Still can’t get my head around the fact that banks can create money and lend it into the system from absolutely nothing.
i’m still struggling but found this link (from another commentator on this forum) very useful:
Seven Deadly Innocent Frauds of Economic Policy
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Mosler is good – and one of the starting points for my book. The best info though is from Positive Money – http://www.positivemoney.org/ – there’s no shortcut for just buying and reading Modernising Money – https://www.positivemoney.org/modernising-money/
I know that Pettifor doesn’t like the Positive Money solution, but having read Pettifor’s reasoning, I think it’s clear that she doesn’t understand it properly. I know that’s a big claim to make of a top economist, but if she had read Modernising Money she wouldn’t have got in such a muddle. Many of her points mis-state what Positive Money propose.
I have to say I am not as yet sure Positive Money are right on this one
It’s not Anne mis-states Positive Money’s purpose. It’s about credit
And money is credit
Thanks Richard,
I know that the jury is still out for a lot of people – there’s no harm in it taking a while for people to identify the ‘best’ solution – as long as there is a solution.
From what I understand though, the fact that the majority of ‘money is credit’ is not in debate by Positive Money either. Positive Money simply state that money (what we use as tokens/measure of value in our society) shouldn’t be credit anymore. If that means that we shouldn’t call it money – ‘widgets’ perhaps… – then fine.
I’m happy to accept that there might be other solutions just as good as the Positive Money one, but I would like to reiterate that so far I haven’t heard Ann Pettifor level any genuine shortcomings at Positive Money that aren’t already covered/considered by their proposals.
In fact this summarises it quite well – http://www.positivemoney.org/2014/06/disagree-ann-pettifor/
Rest assured I do find it a very strange experience disagreeing with you Richard!
Matt
The problem with the ‘money should not be credit’ approach is that money is credit and credit is vital to the economy
Reducing available credit by making money a token then we head back to the gold standard and all that follows in terms of economic crisis
I am massively simplifying things – but the simple fact is that taking credit out of money means in effect trying to run an economy without moeny
It’s an interesting idea, but one I am not willing to try
The argument is who should control the issue of credit and for what use but to debate money whilst denying what money is (and actually, always has been – it is credit that values money, not money that values credit) is debating an issue that is more than a stage removed from reality
And I came to this conclusion quite independently of Ann
Best
Richard
Thanks Richard,
I totally agree with your first statements.
The difference then comes in the question about whether eliminating ‘credit’ (the ability of banks to create new money by making loans) would scupper the economy.
You and Ann say ‘yes’. Fair enough.
Positive Money say ‘no’, because the role of supplying funding and investment to the economy would come instead from somewhere else – from savers and lenders (including the government) directly – but indirectly from the BoE increasing money supply via a committee decision, in accordance with the stability and growth needs of the economy. (this is where any needed increase in money supply (currently done by bank credit) comes from, and what makes it different from the ‘Gold Standard’ argument you and Ann put forward).
I don’t think that we can continue to allow the banks to create and direct credit – it has such a huge impact on every area of our economy and society – and no amount of ‘regulation’ is going to persuade them to act responsibly and sustainably.
And I am convinced by the Positive Money argument that the needs of the economy for funding and investment (credit) can be met through an alternative supply (via the BoE).
There are loads of other benefits to the PM proposal, which they cover in great detail – not least the reduction in public debt. I also believe that gaining control of our credit supply is essential if we are to have any hope of living sustainably – I outline my thoughts on this in the Astronaut. It’s this latter point which I think will become more and more pertinent as the environmental crisis deepens.
I have to say that the idea that a central committee could achieve this result seems to me to be implausible
And the idea that savers fund loans is also known to be wrong – lending does
I will have to revisit Positive Money but I fear that many of the arguments are inversions of the truth
I very strongly agree BoE has a role – and a much bigger role – to take
But there’s still the fundamental issue of credit to address
I agree it may be implausible – it’s certainly at least partly unknown until someone tries it.
But I suppose it’s all relative – we currently already have an implausible system in my opinion, where the BoE attempts to control supply of credit by adjusting interest rates – this is at best an imprecise lever, and with all sorts of unwanted side-effects. Our current system also produces a cycle of booms and busts – frequent (by historical standards) financial crises, with all the associated massive economic and social consequences. It also fuels a juggernaut economy that damages the capacity of the Earth to sustain life.
As for savers funding loans – we both know that lending does (at the moment). The question is what the alternative might be, should that process of lending be shown to be an inseparable part of a hugely damaging financial system.
Plenty of work for someone to do there… Whether it’s the Positive Money solution or something else.
I think we need to think more encompassingly about the relationships between tax and money, fiscal and monetary policy, banking and industry
We see these as divides
They aren’t
They’re in flow relationships
Flows do not require rigidity
I fear the PM ideas are rigid
But you’re right – so are what we have
I am working on these issues – I do not guarantee answers yet
Thanks Richard, I look forward to hearing your thoughts once they’ve gestated!
All the best,
M
I will share
Some are flowing in to the new book
i’m also very uneasy with the idea of private banks creating credit (or money). i don’t know if you read the story around HBOS and Coorperate Jet Services a few years back…
http://www.independent.co.uk/news/uk/politics/exclusive-the-cameron-crony-the-private-jet-company-and-a-crash-landing-that-cost-taxpayers-100m-9350090.html
…but for me it sums up why; it’s not their money and so they have little to lose by lending irresponsibly, particularly now they know the government will always bail them out.
but you still need some sort of infrastructure to assess the credit-worthiness of businesses and individuals… how does positive money see this being done? individuals lending savings (p2p?) wouldn’t create sufficient new money/credit to keep the economy going (as Richard already said) and any money created by the BoE would still need a means of intelligent distribution.
Richard’s ideas RE banking reform look good to me; nationalising the payment system and ensuring all savings held under the deposit guarantee scheme are held at the BoE. that way if people want to gamble in the casino side of the bank they can, but they will lose the lot if the bank goes bust. and if it did go bust the government would have no need to bail them out as the payment scheme and everyday, low interest accounts would be safe. and if they know they might go bust, they have an incentive to assess credit-worthiness more carefully.
I believe very strongly in credit controls – let me be clear about that
That’s fundamental to what I am suggesting