From James Robertson: Newsletter No. 53
Why is the world controlled by people who behave with less benign and positive motives?
Why and by whom are large numbers of people compelled to migrate from their own countries to others, with many of them and their children being drowned on the way?
Why does what we call ‘wealth’ create such wide inequalities and injustice between people,
why does ’wealth’ creation require and result in the destruction of the resources of the planet on which all of us depend for our survival?
Why is so much ‘wealth’ spent on competing to create ‘arms’ with which nations or individuals can damage or destroy one another?
Why do so few of our political and business leaders seem to recognise that our species is facing the possibility of suicide before of the end of the present century?
What should we be doing to avoid that happening?
The whole newsletter – and others – can be read by visiting www.jamesrobertson.com/newsletter.htm.
We now turn from the three described in the last post by Max Hastings, as being without ‘a scintilla of decency’ to another working, like Professor Bailey, for the common good.
A brief summary of James Bruges‘ thinking on monetary reform
You may find it hard to believe but that’s how money is created – out of thin air – not for the needs of the country, but for the benefit of banks.
It’s so cynical, when I first heard it I could scarcely believe my ears. However, the governor of the Bank of England has confirmed it.
Martin Wolf, chief economics commentator of the Financial Times, put it like this in 2010. “The essence of the modern banking system is the creation of money, out of nothing, by private banks’ often foolish lending.”
OK, it’s a bad system, but it’s what we have and to change it would be difficult. Or would it?
The campaign for monetary reform has set out in detail how the change would take place.
A Money Creation Committee would increase or reduce the money supply on a monthly basis to keep inflation at 2%, making sterling the most stable currency in the world.
How would it affect you and me?
- Household debt – yours and mine – stands at a staggering £1,500 billion, equivalent to ten-years’ worth of income tax revenue. It is the nation’s money, which the banks have been allowed to create out of nothing, so it belongs to the nation.
- Premiums would return to the government, which would use this revenue for welfare, schools and hospitals.
- Half of it would be distributed as a citizen’s dividend with the requirement that you must first eliminate your remaining debts.
- Household debt would drop dramatically, austerity measures would no longer be necessary and your mortgage would diminish.
Banks would, once again, provide us with a useful service and my fury would evaporate.
*The New Economics Foundation has published “Where Does Money Come From?” which is now a university textbook. James Robertson has written “Future Money”. Positive Money has an engaging website with videos and has published “Modernising Money”. The full, updated text may now be seen here: http://neweranetwork.info/reports/why-austerity-james-bruges-21-3-2013/
On Wednesday the FT reported that the governor of the Bank of England wanted to inject more money into the economy and that the BoE has so far bought £375bn-worth of ‘gilts’ – gilt-edged securities – mainly held by insurance companies, banks and pension funds.
The Treasury spent many years abruptly dismissing any increase in government issued money as inflationary – sending its juniors to monitor the seminal parliamentary meetings sponsored by MP Austin Mitchell and organised by Sabine McNeill (Forum for Stable Currencies). At one of these the writer sat with a very sceptical young investment banker who afterwards admitted he was won over by a presentation by James Robertson.
QE? Sterling would collapse!
Below can be seen the now-sidelined argument that this would create inflation and sterling would collapse, committed to paper by Anthony Nelson, then Economic Secretary to the Treasury in John Major’s Government, who became Minister of State at the Treasury, Minister for Trade and Industry, before passing through the revolving door to become Vice Chairman of Citigroup.
Earlier this month, the voice of sanity, MP Caroline Lucas, wrote:
This week, the Bank of England is expected to announce a new batch of quantitative easing to the tune of £50bn or more. A new report from the Green New Deal Group and Southampton University economics professor Richard Werner, who coined the term quantitative easing, is calling for such cash to be injected into green investment to support badly needed renewable energy and energy efficiency projects. Rather than handing the money over to the banks, who then sit on it, green QE would put money into the wider economy – creating thousands of new jobs, improving energy security and tackling climate change at the same time.
In other words, as MP Austin Mitchell’s 2008 EDM also advocated, use this money to create real work in the real economy – the unproductive financial institutions can do without it!
Professor Prem Sikka points out that shareholders are traders and speculators rather than owners:
“They barely hold shares for more than three months and do not have a long-term interest in the business. They have been utterly ineffective at curbing corrupt practices at banks, as evidenced by the tide of scandals.”
An appalling account of ‘serial offences’ in the banking sector follows.
Professor Sikka continues:
“If the government is serious about changing the predatory culture of banks then it needs to change the whole system of corporate governance. The market pressures for higher returns should be checked by turning all banks into mutuals and co-operatives. Employees, customers and borrowers have a long-term interest in the business of banks and should be empowered to elect and remunerate directors. Directors need to be made personally liable for the cost of criminal practices. At the moment banks are fined, but executives walk away with a stash of profit-related pay, with virtually no penalties. All major banking contracts should be publicly available so that we can all see the shady dealings.
“The banking regulators have frequently come from the finance industry and are too close to banks. They act only after the stench of scandal has become too strong, and frequently they have been part of what a US senate report described as a “cover-up”. This inertia should be checked through annual hearings by the Treasury committee.
“All policy meetings of the banking regulators should be held in the open, and information in the regulator’s possession – including background papers – should be made publicly available.”
Could his beneficial proposals incorporate those of James Robertson?
(1) transfer to nationalised central banks the responsibility for creating, not just banknotes as now, but also the major part of the supply of public money consisting of bank-account money held and transmitted in electronic form . . . make an agency of the government responsible for directly creating and maintaining the public money supply in the public interest.
(2) prohibit anyone else from creating money out of thin air as profit-making, interest-bearing loans to their customers – leading to a more competitive market for facilitating loans between lenders and borrowers than today. That will bring commercial banks into line with ordinary businesses which don’t get given their main materials for free.
Professor Prem Sikka: http://www.aabaglobal.org<http://www.aabaglobal.org/
James Robertson: http://www.jamesrobertson.com