Banking Reform by Positive Money (Conference 2013)
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0:01 - 0:03So, let's start at the beginning.
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0:03 - 0:07Back in the 1800s through to the 1840s.
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0:07 - 0:12Banks, at that time, actually had the ability to create money.
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0:12 - 0:16The way they did this was through printing pieces of paper.
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0:16 - 0:20When you put your coins into the banks, they give you a receipt
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0:20 - 0:23and that receipt would say you've deposited £5
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0:23 - 0:30and because it was more convenient to carry bits of paper around than to carry metal coins around,
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0:30 - 0:32people used to use the pieces of paper as though they were money.
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0:32 - 0:35They'd actually spend the paper in the shop, and so long as the
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0:35 - 0:39shopkeeper knew the bank and trusted the bank
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0:39 - 0:45he'd accept the paper. So, basically the pieces of paper that banks were issuing
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0:45 - 0:49were treated as money, and they became as good as money.
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0:49 - 0:52Now, when the banks caught on to this, they realised that
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0:52 - 0:56actually if we just issue more pieces of paper,
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0:56 - 1:00with more sums of money written on them and people treat them as money,
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1:00 - 1:02then effectively we have the power to create money.
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1:02 - 1:04So, the more that we issue
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1:04 - 1:07the more we can lend, and the more we can lend, the more interest we can get.
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1:07 - 1:11So, you can imagine with incentives like these, it didn't end well.
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1:11 - 1:16They created too much money and it started to cause instability in the economy.
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1:16 - 1:19It caused banking crises, and after
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1:19 - 1:23a number of years of this happening, the government of the day
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1:23 - 1:25It was a Conservative Prime Minister,
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1:25 - 1:27Sir Robert Peel, stepped in and said,
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1:27 - 1:30Well, we can no longer allow banks to issue paper money
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1:30 - 1:32because of the problems that it's causing in the economy.
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1:32 - 1:35So, they passed this piece of legislation
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1:35 - 1:37'The Bank Charter Act'
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1:37 - 1:39which said from this point on, only the Bank of England
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1:39 - 1:41will have the authority to create paper money
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1:41 - 1:43but they missed something out,
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1:43 - 1:46because paper money isn't the only way that you can make payments
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1:46 - 1:49and with the increasing use of cheques
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1:49 - 1:53people had a way of making payments using the numbers
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1:53 - 1:56that were in the ledger books at the banks,
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1:56 - 1:58the accounting entries. So they had this way of making payments
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1:58 - 2:01without actually needing the real paper or metal money.
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2:01 - 2:06Over time as we discovered electricity, we got debit cards
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2:06 - 2:10electronic fund transfers and internet banking.
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2:10 - 2:14To the point now where more than 99% of all the money that changes hands
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2:14 - 2:17does so electronically.
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2:17 - 2:21The shocking thing is that even though our monetary system now is electronic,
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2:21 - 2:25this law has never been updated since 1844,
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2:25 - 2:29which means that it's just shy of 170 years out of date.
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2:29 - 2:33The law that actually governs our monetary system.
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2:33 - 2:36Now, the reason that banks can create money
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2:36 - 2:39is that the liabilities, the accounting entries that they create
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2:39 - 2:41are what we are using as money.
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2:41 - 2:47When you use a debit card, there's no £10 notes
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2:47 - 2:49moving from your account to somebody else's account
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2:49 - 2:52It's actually just accounting entries between the banks
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2:52 - 2:56The Bank of England explains this quite clearly.
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2:56 - 2:58They say, 'the money-creating sector in the United Kingdom
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2:58 - 3:01consists of resident banks and building societies.
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3:01 - 3:04Money-creating organisations issue liabilities that are
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3:04 - 3:07treated as a media exchange by others.
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3:07 - 3:10and those liabilities are the numbers that you see in your account.
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3:10 - 3:16Now, what this has meant is with the rise of electronic means of payment
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3:16 - 3:19is that we reached the point where,
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3:19 - 3:22[Sir Mervyn King] "Most of the money in our economy
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3:22 - 3:25broad money, comprises liabilities of banks in the form of bank deposits."
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3:25 - 3:27So, most of the money in our economy comprises
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3:27 - 3:30liabilities of banks in the form of bank deposits.
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3:30 - 3:35When we talk about 97% of the money supply being created by banks
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3:35 - 3:36this is what we are talking about.
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3:36 - 3:40This chart. The blue line is the bank-issued money supply.
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3:40 - 3:42This is cash down here at the bottom.
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3:42 - 3:47So, this is 3% of all the money that exists.
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3:47 - 3:51and then this is the 97% of the money supply
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3:51 - 3:53that is created by the banking sector.
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3:53 - 3:56and this 3% is what is covered by the law.
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3:56 - 4:00and this is the 97% that is ignored by the current laws.
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4:00 - 4:03I always found it curious that there's this
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4:03 - 4:06one part of the state, the police, which is responsible for
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4:06 - 4:11hunting down and prosecuting anybody who prints their own money
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4:11 - 4:14privately; they call it counterfeiting.
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4:14 - 4:16Yet, there's a whole other part of the state,
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4:16 - 4:19which actually has more resources and more funding
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4:19 - 4:23to do everything possible to encourage banks, private companies
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4:23 - 4:24to create money.
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4:24 - 4:29and I could never really understand why this contradiction was there
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4:29 - 4:32and why it was good for electronic money to be created
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4:32 - 4:36by the private banking sector, but bad if anybody is printing paper money.
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4:36 - 4:41Now, I stumbled across this interview with Paul Fisher on the BBC
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4:41 - 4:46[Paul Fisher] "When you start printing money, you create some value for yourself.
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4:46 - 4:49If you can issue a thousand pounds-worth of IOUS to everybody,
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4:49 - 4:51you've got a thousands pounds for nothing.
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4:51 - 4:56And so we do restrict the ability of people to create their own notes in that way."
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4:56 - 4:58[Interviewer] "You're protecting us from ourselves?"
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4:58 - 5:02[Paul Fisher] "We're protecting you from charlatans".
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5:02 - 5:06[Laughter from audience]
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5:06 - 5:09He was talking about counterfeiting, but for me the key phrase is this
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5:09 - 5:13'If you can issue a thousand pounds-worth of IOUs to everybody,
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5:13 - 5:16you've got a thousand pounds for nothing'.
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5:16 - 5:17Now, what banks do when they create loans is
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5:17 - 5:22they issue liabilities, IOUs. In the last ten years alone,
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5:22 - 5:26banks have issued more than £1 trillion of these new
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5:26 - 5:31IOUs, these liabilities. Now, the something that they got for nothing
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5:31 - 5:37was £1 trillion worth of debt, of interest-bearing contracts.
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5:37 - 5:41This is mortgages, personal loans, business loans.
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5:41 - 5:44This is debt from us to the banking sector.
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5:44 - 5:48As you've seen this morning, the total interest that has to be paid on that debt
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5:48 - 5:52is a transfer from society to the banking sector
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5:52 - 5:57of between £108bn to £217bn every single year.
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5:57 - 5:59Now, of course, some of this comes back to people
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5:59 - 6:01through the interest on savings accounts,
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6:01 - 6:05and through the bonuses, the commissions and the taxes that banks pay,
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6:05 - 6:09but it's still a huge amount of this is creamed off in the middle,
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6:09 - 6:11and it's a massive transfer of wealth,
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6:11 - 6:14and it exacerbates inequality.
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6:14 - 6:21Now, I think, the economists and the people in government who defend this system
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6:21 - 6:23and say it's something we should keep and something useful,
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6:23 - 6:27I think they do so because they believe it can be controlled.
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6:27 - 6:30and they believe it can be controlled because they are taught
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6:30 - 6:32certain stories in Economics courses about the money multiplier
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6:32 - 6:37and that the central bank has control over how much money there is in the economy.
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6:37 - 6:40We really don't believe it can be controlled
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6:40 - 6:44and this is one of the reasons why we've settled on this particular style of reform.
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6:44 - 6:48but the reason it can't be controlled. For a start this doesn't look like
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6:48 - 6:52a money supply that has been controlled. This is something that's out of control.
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6:52 - 6:56but even Mervyn King has said that the Bank of England's key role
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6:56 - 7:00has always been to ensure the economy is supplied with the right quantity of money
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7:00 - 7:03neither too much nor too little.
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7:03 - 7:07'For fifty years, my predecessors struggled to prevent there being too much, so leading to inflation.
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7:07 - 7:12I find myself in the opposite situation of having to explain that there is too little money in the economy.'
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7:12 - 7:17So, this is the most powerful man at one of the most powerful central banks in the world
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7:17 - 7:23admitting that for the last half a century, they have struggled to keep the banks under control,
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7:23 - 7:25to keep the money supply under control.
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7:25 - 7:30And if you get an admission like this, I think it really shows that the system can't be controlled.
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7:30 - 7:37The book actually goes into great detail; probably about sixty pages explaining why the mechanism that
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7:37 - 7:41economists believe can control the money supply, no longer work.
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7:41 - 7:48But, fundamentally it's because you have this battle between the desire of the banking sector
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7:48 - 7:51to create as much money as possible to maximise their profits,
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7:51 - 7:55because the more money they create, the more they lend, and the more they lend, the more interest they receive,
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7:55 - 8:00and the need of the Bank of England to protect the public interest,
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8:00 - 8:03to limit inflation and instability in the economy.
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8:03 - 8:07And, these two for the last 50 years at least,
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8:07 - 8:11it's been the profit motive of the banks that has won out.
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8:11 - 8:12So, what are the consequences of this?
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8:12 - 8:16Well, firstly we know that banks create too much money.
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8:16 - 8:19They create this money for the wrong things.
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8:19 - 8:26So, we see the majority of money, when it's newly created it goes straight into the housing market and into the financial sector.
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8:26 - 8:31Very little, about 13%, over the last ten years has gone into non-financial businesses.
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8:31 - 8:37So, this is the real economy; the jobs, shops, businesses and factories.
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8:37 - 8:43And, about 10% has gone into credit cards, and personal loans, consumer finance.
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8:43 - 8:48And this has led to financial crises. As Adair Turner said, and as we saw this morning,
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8:48 - 8:53Some of the headlines that have been coming out of the last few days are getting worse and worse.
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8:53 - 8:56Britain is experiencing a worse slump than during the Great Depression.
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8:56 - 9:01For a while, we've been talking about we're in recovery; growth has been 0.1%.
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9:01 - 9:04Now, we're back into the double-dip recession,
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9:04 - 9:07and then we're back into recovery again, and now we're back into the triple-dip recession.
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9:07 - 9:10This is a real rollercoaster.
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9:10 - 9:15Global unemployment will reach a record £200 million in 2013.
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9:15 - 9:23200 million people. Is there nothing useful for those people to be doing, given the situation we're in right now?
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9:23 - 9:30But, there's not enough money. There's not enough numbers in computer systems created by the banking sector
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9:30 - 9:32to allow those people to do something useful.
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9:32 - 9:38It's led to massive indebtedness because money is created by banks when they make loans.
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9:38 - 9:40So, as the money supply goes up, the debt goes up.
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9:40 - 9:46And an entire generation has been priced out of being able to buy a home.
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9:46 - 9:48The inequality that we discussed.
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9:48 - 9:51The instability, which is really really bad for business.
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9:51 - 9:57You'll always hear economists and lobbyists for the banks saying that the current banking system is good,
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9:57 - 10:00because it provides credit for business and helps the economy to grow,
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10:00 - 10:08but actually we believe that on net this current banking system is really harmful for the business economy and for actual wealth-creation.
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10:08 - 10:11It's very environmentally destructive as we've talked about this morning.
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10:11 - 10:14And, it's bad for democracy as well.
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10:14 - 10:19The banks now have more power to shape the economy through their lending than the whole of government.
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10:19 - 10:23But, we have all these MPs scrutinising what the government does,
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10:23 - 10:27and only about 80 board members paying attention to what the banks are doing.
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10:27 - 10:32And the reason the system's got to this point is because every time something has gone wrong with the current banking system,
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10:32 - 10:39the government has stepped in with a safety net or a new support measure to allow the system to continue.
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10:39 - 10:42And you've seen this at it's most extreme over the last five or six years.
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10:42 - 10:51Now, I want to make the point that some people assume that if the banking system is structured in a certain way,
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10:51 - 10:54it's because some wise men have sat down and designed it.
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10:54 - 11:01But the current banking system is, without getting into the evolutionist debate here,
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11:01 - 11:05there is no signs of intelligent design in the current banking system.
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11:05 - 11:07{laughter from audience]
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11:07 - 11:09It's evolved over time, and every time there's been a crisis
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11:09 - 11:14there's been some new package from the government, some new measure from the Bank of England.
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11:14 - 11:21Things like the bailouts, the funding for lending; all these different schemes to keep the system going.
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11:21 - 11:27Now, sometimes evolution works out really well, and you get something that is quite beautiful and efficient and effective
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11:27 - 11:29Sometimes it doesn't work out that well.
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11:29 - 11:34There's no prize for guessing which of these two fish represents the banking sector right now.
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11:34 - 11:42So, the thing is you know if you build your house on sand, it's going to collapse.
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11:42 - 11:44This is what we have at the moment.
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11:44 - 11:46We have a banking system that is really built on sand.
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11:46 - 11:50It doesn't matter how much reinforcement, or how much support you do.
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11:50 - 11:52It's not enough to go to the occupants and say,
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11:52 - 11:56'please tred lightly while you're inside the house, because it's a bit unstable,
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11:56 - 11:58and if you could lose some weight that would be great too.'
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11:58 - 12:05You have to wipe it away. You have to start again and build something on firm foundations from the ground up.
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12:05 - 12:08And, this is what we believe we are doing in the book here.
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12:08 - 12:11So, we have this very dysfunctional system,
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12:11 - 12:17that isn't really working in the interests of the economy or the interests of society.
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12:17 - 12:24My colleague Andrew Jackson, who's done, by far, the largest part of the work on this book, found this quote,
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12:24 - 12:28which I think really sums up part of the ethos behind the book.
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12:28 - 12:34'Our problems are man-made, therefore the may be solved by man. No problem of human destiny is beyond human beings'.
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12:34 - 12:39The monetary system is just a collection of rules and laws and computer systems.
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12:39 - 12:42And it's actually remarkably easy to change.
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12:42 - 12:49The real challenges are the things like the environmental crisis, the water crisis, the energy crises,
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12:49 - 12:54the changes that we're going to see over the next 40 years, the growing population;
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12:54 - 13:00those are real tangible problems that we need to find real practical ways of dealing with.
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13:00 - 13:04This is just an artificial monetary system.
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13:04 - 13:05It's a computer system.
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13:05 - 13:14We can't let ourselves be distracted from those big challenges by this artificial, broken, dysfunctional monetary system.
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13:14 - 13:16So, what do we do?
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13:16 - 13:19Well, I'll take you through these quickly.
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13:19 - 13:22And, then we'll go into a bit more detail on each of them.
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13:22 - 13:25The first thing is that we need to remove the power of banks to create money.
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13:25 - 13:30We need to return that power to a transparent and accountable process.
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13:30 - 13:33We have money created free of debt.
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13:33 - 13:37We create money only when inflation is low and stable.
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13:37 - 13:44We make sure that any new money goes into the real economy instead of into the financial markets and property.
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13:44 - 13:52And, we give us, as customers of banks and as members of the public, control and transparency over how our money is actually invested.
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13:52 - 13:56First one; removing the power of banks to create money.
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13:56 - 13:59I don't want to take you through all the technical details of how this is done.
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13:59 - 14:02It's explained quite simply in the book.
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14:02 - 14:08but we'll also be releasing, in the next month, a series of videos that go through step-by-step if you prefer to see things visually.
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14:08 - 14:11But, just a quick overview.
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14:11 - 14:14As I said, banks currently have the power to create money,
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14:14 - 14:18because the liabilities that they issue are the money that we use in the economy.
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14:18 - 14:24So, money-creating organisations issue liabilities that are treated as media of exchange by others.
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14:24 - 14:26We use these liabilities to make payments to each other.
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14:26 - 14:32In the current system, we're here using the liabilities of these banks to make our payments.
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14:32 - 14:36And what we do through the particular reforms outlined in the book,
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14:36 - 14:40is that we actually start using money that is created by the Bank of England.
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14:40 - 14:46So, instead of you using a promise to pay from a bank as your way of paying somebody else,
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14:46 - 14:51you're actually using real electronic money that is being created by the Bank of England.
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14:51 - 14:55What this means for you as a customer of a bank is that you have two options when you get your salary.
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14:55 - 14:59You can either say to the bank, 'look, keep it safe for me', or you can say to them,
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14:59 - 15:02'I want you to go and invest it for me. I want to get some interest'.
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15:02 - 15:07And, if you say you want your money to be kept safe, then this money will be put into a transaction account,
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15:07 - 15:10which is effectively the same as a current account now.
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15:10 - 15:12But, the difference between a current account and these new accounts
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15:12 - 15:17is that your money would actually be at the Bank of England.
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15:17 - 15:20It would actually be electronic money stored electronically at the Bank of England.
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15:20 - 15:23And, that would actually be yours.
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15:23 - 15:25It wouldn't be the banks.
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15:25 - 15:28They wouldn't be able to play with it, to invest it, to do anything with it.
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15:28 - 15:34This investment account, what you're actually doing there is you're giving your electronic money that was created by
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15:34 - 15:40the Bank of England to your bank, so that they can then go and lend it to somebody else.
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15:40 - 15:45What this does, through the fairly simple rule changes and a few accounting changes,
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15:45 - 15:52this makes banks into what people think they are now, which is intermediaries, middle-men between savers and borrowers.
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15:52 - 15:59After this reform, what banks will be doing is taking money from savers and investors,
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15:59 - 16:03and actually lending it to borrowers, doing exactly what people think they do now.
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16:03 - 16:06So, with banks no longer having the power to create money,
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16:06 - 16:09we need to return that power to a transparent and accountable process.
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16:09 - 16:17I'm sure everybody is here, because they know we can't trust banks to create money for all the reasons that we've discussed.
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16:17 - 16:21But, I guess you wouldn't trust these people either,
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16:21 - 16:27because the problem is that politicians have the same incentives to abuse the power to create money as the banks do.
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16:27 - 16:33The more of it they create, the more of an artificial boom they can create in the economy to get people to vote for them.
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16:33 - 16:36And, that's going to end up badly.
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16:36 - 16:43So, the absolute key thing that needs to be done is that you have to separate the decision over how much money is created,
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16:43 - 16:45and what that money is used for.
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16:45 - 16:50Because as soon as the same person or the same organisation is making those two decisions you have a conflict of interest.
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16:50 - 16:56So, what we've suggested is that a new committee, the Money Creation Committe,
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16:56 - 16:58which would replace the Bank of England's Monetary Policy Committee,
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16:58 - 17:04becomes responsible for deciding how much the money in the economy needs to increase or decrease by,
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17:04 - 17:09and the government would be responsible for actually deciding how to get that money into the economy.
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17:09 - 17:15The really important thing is that you make sure that this money creation committee is sheltered from lobbyists.
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17:15 - 17:22Either from the elected government of the day, who will have their own objectives for what they want the economy to do,
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17:22 - 17:24which might not line up with the best interests of the economy,
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17:24 - 17:26and from the banks as well.
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17:26 - 17:29This whole process needs to be transparent, accountable,
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17:29 - 17:32accountable to parliament.
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17:32 - 17:35We can't have George Osborne calling up the Money Creation Committee and saying,
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17:35 - 17:41'Can you put another £100 billion into the economy, because I really need a recovery before 2015?'
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17:41 - 17:45Then, you need to make sure that money is only created when inflation is low and stable.
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17:45 - 17:48So, let me show you what happens with the current system.
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17:48 - 17:51So, banks increase their lending, which means they are creating more money.
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17:51 - 17:55This starts to push prices up, and they think the economy is healthy, so they lend more.
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17:55 - 17:58And, they say, 'Wow, look at house prices. We should be lending even more'
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17:58 - 18:02And, at this point you're in a bubble, but everybody is convincing themselves that it's not a bubble.
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18:02 - 18:06And, this is more or less what has happened to the money supply over the last 40 years,
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18:06 - 18:08particularly over the last 10 years.
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18:08 - 18:14What would happen with the Money Creation Committee is that they start putting into the economy,
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18:14 - 18:18and when it starts to cause prices rises, so it starts to cause inflation, then they stop.
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18:18 - 18:25When the inflation goes down, they create money again, and then they stop again until things settle out.
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18:25 - 18:31Instead of when the banks are creating money, the more they create the more inflation there is,
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18:31 - 18:32and the more they want to create,
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18:32 - 18:38because they think, 'house prices are rising, so we can afford to lend more to people to buy houses'.
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18:38 - 18:43The Money Creation Committee actually has a responsibility to stop creating money when it causes inflation.
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18:43 - 18:47So, it's completely the opposite of what the banks will do in that situation.
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18:47 - 18:53We often get the question, 'Isn't all money creation inflationary? Isn't all money creation going to push up prices?'
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18:53 - 18:56Well, it really depends.
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18:56 - 19:01Because, if you put 40% of all new money that you create into housing and into financial markets,
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19:01 - 19:05then you're going to expect prices in those markets to go up.
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19:05 - 19:08And, we've seen that with housing. We've seen that with the Stock Market.
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19:08 - 19:13I don't know if you've seen the newspaper yesterday, but there was a weird headline.
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19:13 - 19:17First, it was, 'This slump is worse than the Great Depression',
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19:17 - 19:21and beneath that it's, 'Markets hit 4 1/2 year high.'
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19:21 - 19:23It's like why is this, why?
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19:23 - 19:27It's a symptom of where thie money is going, particularly quantitive easing.
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19:27 - 19:33If you instead put money into non-financial businesses, so into the real economy,
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19:33 - 19:36then what you're going to do is stimulate that part of the economy.
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19:36 - 19:41You know we have 2 1/2 million people at home doing nothing. They can be employed.
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19:41 - 19:47What you actually get is economic activity will increase. So, the economy will grow.
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19:47 - 19:50So, not all money creation is inflationary.
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19:50 - 19:56It can actually, if it's put into the right parts of the economy, it can help the economy to grow faster than any inflationary pressure.
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19:56 - 19:59We need to create money free of debt.
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19:59 - 20:02Now, this is one of the most fundamental points of this whole book,
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20:02 - 20:11because when 97% of all the money we are using is created by banks when they are making loans,
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20:11 - 20:16that means that the more money we want in the economy, the more debt we have to have.
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20:16 - 20:19If we've just had a crisis, and we need some new money into the economy,
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20:19 - 20:24then the only real way to get it in there is to have the banks increase their lending,
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20:24 - 20:28which is why you see such an emphasis now on, 'well, we've got to get banks lending again'.
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20:28 - 20:30Even though the crisis was caused by people having too much debt.
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20:30 - 20:34And, vice versa if we want less debt in the economy, then we have to have less money,
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20:34 - 20:37because as you repay your debts that money is effectively cancelled out.
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20:37 - 20:40It's just the reverse accounting process of money creation.
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20:40 - 20:49We what actually need is less debt, and we need more money in the economy to get out of this current crisis, this current recession.
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20:49 - 20:53That's impossible in the current system. As you see here, the two of them are tied together.
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20:53 - 20:55As the money supply goes up, the debt does up,
-
20:55 - 21:02because the money and the debt is the opposite side of the same accounting entry, the same balance sheet.
-
21:02 - 21:08So, this what we can expect to see happen if we do have a recovery now with the current system, that the debt will rise.
-
21:08 - 21:14And, eventually this is going to lead to yet another crisis, but it may be much much worse the next time.
-
21:14 - 21:18What these reforms do is they separate the creation of money from the creation of debt.
-
21:18 - 21:26So, when banks are lending, they are actually transferring existing money from a saver to a borrow,
-
21:26 - 21:28but they are not creating money in the process.
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21:28 - 21:33So, the money can be created, and that money can be used to pay off a lot of the existing debt.
-
21:33 - 21:37And, also because of some of the other changes that need to be made to the accounting,
-
21:37 - 21:46which are explained in the book, it allows us to pay off nearly a £1 trillion of household and personal debt over the course of about 20 years.
-
21:46 - 21:53Just think about how much of a complete transformation that will make for the lives of most of the people in this country,
-
21:53 - 21:58to not have this enormous debt. Personal debt is as high as it's ever been.
-
21:58 - 22:03And, these changes to the system actually allow this debt to be reduced.
-
22:03 - 22:10So, instead of having this annual interest charge on the entire money supply of £108bn to £217bn a year,
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22:10 - 22:15that could be cut down to possibly half of that, maybe even less.
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22:15 - 22:18The fifth thing. We need to put money into the real economy.
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22:18 - 22:23We talked briefly about this. There are about four options that you could use to get this money into the economy.
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22:23 - 22:29So, you can spend more on public services; put the money into the government.
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22:29 - 22:32You can cut taxes. You could pay down the National Debt.
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22:32 - 22:37Or, you could actually just divide it up between people and give it directly to people.
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22:37 - 22:43We talk in the book about the combination of these that you would probably want to use and why.
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22:43 - 22:48And actually paying down the National Debt should be probably the last priority.
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22:48 - 22:53But the important thing is that all of these things, if they are done right, will get money into the real economy.
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22:53 - 22:58Whereas what we have now is we have banks putting most of the money into housing and financial markets.
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22:58 - 23:03And, some of this money trickles out of that market into the real economy.
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23:03 - 23:09What we'd like to see is that as the money comes in, as it's created, it goes to government,
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23:09 - 23:12and then it comes into the real economy first.
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23:12 - 23:16and, then the banks need to borrow that money from people and businesses in the real economy
-
23:16 - 23:25before they can then lend it back to the real economy, back to businesses or to housing and to the financial markets.
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23:25 - 23:31One of the things we would like to see is that this flow of money into the financial markets and speculation,
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23:31 - 23:35and trading should really be reduced.
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23:35 - 23:41So, we need to give ourselves control and transparency over where our money is invested.
-
23:41 - 23:45Now, I saw this advert the other day, which really made me laugh.
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23:45 - 23:47'Ever wondered where your money goes?'
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23:47 - 23:50This is Lloyds TSB saying, 'Have you ever wondered where your money goes'.
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23:50 - 23:56[Laughter from audience]
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23:56 - 24:02I think they weren't aware of the Move Your Money campaign or how much they were falling into their trap there
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24:02 - 24:07because, no, most people don't think about where their money goes,
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24:07 - 24:10and that's because the bank never tells you.
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24:10 - 24:13So, one of the things that we would do as part of these reforms
-
24:13 - 24:19is require that if you're putting your money into an investment account, you're giving your money up so that the bank can go and invest it,
-
24:19 - 24:26that the bank will actually tell you ok, 'we're going to use for the arms trade, for the oil industry,
-
24:26 - 24:31for Tar Sands, for investing in businesses or investing in commodity speculation'.
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24:31 - 24:38Some people, we're not naive, won't care about this. They're not going to be bothered.
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24:38 - 24:45But it means that the people who do care what their money is used for, have that option to opt out.
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24:45 - 24:47To say, 'I don't want my money to be used in this way'.
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24:47 - 24:51And to choose different accounts, where their money will be used differently.
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24:51 - 24:54Is it going to be easy to get this through? Of course, not!
-
24:54 - 24:58There's going to be massive opposition. There's huge vested interests.
-
24:58 - 25:05And, some of the things that we'll hear over the next few years as these things get out into the mainstream,
-
25:05 - 25:11things like, 'It'll be inflationary'. If you allow the state to create money, that's going to cause inflation.
-
25:11 - 25:14Really this is quite an easy one to answer.
-
25:14 - 25:17Well, which of these two is most likely to cause inflation.
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25:17 - 25:24You know banks who want to create as much money as possible, because they maximise their profits by creating more,
-
25:24 - 25:30or a committee that is responsible for stopping money creation when inflation starts to go up.
-
25:30 - 25:32It's quite a clear choice.
-
25:32 - 25:38And they you'll get, 'I'll be hyperinflationary'. We'll end up like Zimbabwe or Germany in the 1920s.
-
25:38 - 25:48Well, the people making that claim, unfortunately, are very ignorant of what actually happened in Zimbabwe
-
25:48 - 25:51and what actually happened in Weimer Republic Germany.
-
25:51 - 25:58Now, in the book there's a whole appendix on Zimbabwe and other examples where there have been hyperinflations,
-
25:58 - 26:02and other examples where states have created money without hyperinflations,
-
26:02 - 26:10There's a study that we've quoted in there where they go through all 50 recorded hyperinflations in history,
-
26:10 - 26:17and found that all of them there's been an economic collapse or a political collapse or a war
-
26:17 - 26:19before the hyperinflation actually started.
-
26:19 - 26:25It wasn't just because some central bankers started printing money willy-nilly.
-
26:25 - 26:29There was some fundamental collapse in the economy, before these hyperinflations started.
-
26:29 - 26:35So, the idea that this will lead to hyperinflation is very misguided.
-
26:35 - 26:39You'll hear this one all the time. 'It'll drastically reduce the level of credit.'
-
26:39 - 26:41We actually heard it from the Independent Commission on Banking.
-
26:41 - 26:46We asked them what they meant by the word drastic.
-
26:46 - 26:51Did they mean a 10% or a 50% [decrease]? They didn't really know; they didn't get back to us on that.
-
26:51 - 26:58We also asked them if we could see their calculations or their modelling or the working out that they'd done
-
26:58 - 27:02to show it would be drastic, and funnily enough they didn't get back to us on that either.
-
27:02 - 27:07So, this is just a knee-jerk reaction without really understanding the way the system works.
-
27:07 - 27:13The savings products at the moment where people have said I don't need my money for the next 6 or 12 months,
-
27:13 - 27:19already today, there is enough money in those accounts, enough liabilities,
-
27:19 - 27:23to cover all of the investment that is needed in the business economy,
-
27:23 - 27:28and to keep people being able to buy houses without pushing house prices up.
-
27:28 - 27:34There's already enough money out there to provide finance to the bits of the economy that we really need.
-
27:34 - 27:40There might not be enough money to push house prices up at 200% in ten years.
-
27:40 - 27:44There might not be enough money to fund all this speculation in the financial markets,
-
27:44 - 27:46and I think that's a good thing.
-
27:46 - 27:49And, then you'll hear this one. 'Well, you'll kill Britain's best industry'.
-
27:49 - 27:56You know, we need the banking sector, because the taxes they pay, pay for our schools, our hospitals.
-
27:56 - 28:00If not we'd all be scratching out a living in the dirt.'
-
28:00 - 28:11It's not true. The banking sector; in the year that it paid the most tax in history, manufacturing in this country paid three times more tax.
-
28:11 - 28:18Does anybody want to take a guess at what this number represents?
-
28:18 - 28:22It's the number of workers in banking relative to the number of workers in the rest of the economy.
-
28:22 - 28:26Banking only employs one in every 53 people.
-
28:26 - 28:32So, for every one person in banking, every one person in this industry that we are protecting,
-
28:32 - 28:38by not asking them to make changes and not asking them to reform the way that they do business,
-
28:38 - 28:44there are 52 people in the rest of the economy that are negatively affected by the impacts of this banking sector.
-
28:44 - 28:51So, these reforms are really for the other 98% of the working population.
-
28:51 - 28:54for the businesses, for the people with jobs outside of banking.
-
28:54 - 29:03So, I should probably qualify this. There's nothing personal about what we're doing against banks, or the people who work in them.
-
29:03 - 29:08It's the industry that's the problem. It's the design of the industry and the effects that it's having.
-
29:08 - 29:15And, it not about the people in them. It's about changing the rules of the game, and the ways these companies can operate.
-
29:15 - 29:17And, you'll also hear. 'It's too radical',
-
29:17 - 29:22which is quite bizarre given that we're just proposing that this law from the 1840s is updated.
-
29:22 - 29:27I can't imagine the Conservatives of the 1840s were really considered to be radicals.
-
29:27 - 29:29So, the benefits of reforming.
-
29:29 - 29:34We get stable money. We get this instead of this.
-
29:34 - 29:38We get debt falling like this.
-
29:38 - 29:44Instead of house price bubbles we'll have house prices that will stay flat until earnings have actually caught up,
-
29:44 - 29:46and they become affordable again.
-
29:46 - 29:50Unemployment, I just want to give you one example of how ridiculous this current system is to wrap up with.
-
29:50 - 29:57We have 2.5 million people sat at home, doing nothing, desperately looking for something useful to do for a job.
-
29:57 - 30:02We also have things that need doing in the economy.
-
30:02 - 30:03We have schools that need rebuilding.
-
30:03 - 30:08The government has been dilly-dallying over this school rebuilding programme for the last few years,
-
30:08 - 30:13saying, 'there's not enough money. We're in a recession. We need to get our public finances under order'.
-
30:13 - 30:18And, they finally came out and allocated £2 billion for rebuilding schools in England.
-
30:18 - 30:22Now, £2 billion sounds like a lot of money,
-
30:22 - 30:26and it's so much money that they've had to borrow it from Private Finance Initiative.
-
30:26 - 30:31So, they are actually borrowing money that is created through accounting entries from banks,
-
30:31 - 30:37and paying interest on that, because they haven't got enough money of their own to fund rebuilding of the schools.
-
30:37 - 30:42Now, the reason for that, according to the BBC is that,
-
30:42 - 30:46'This arrangement will spare the Department for Education's meagre capital budget,
-
30:46 - 30:51the annual value of which is being halved over this parliament to £3.8 billion.
-
30:51 - 30:56So, £3.8 billion pounds for rebuilding schools and keeping this whole education system,
-
30:56 - 31:00the actual physical infrastructure of this, in order.
-
31:00 - 31:06Again, sounds like a a lot of money, but this green line at the top here
-
31:06 - 31:12is how much money has been put into mortgages and consumer finance over the last 20 odd years.
-
31:12 - 31:22In June 1999, the banks created £4.5 billion of new money in one month to put into the property market.
-
31:22 - 31:25Into buying existing houses and building a few new ones.
-
31:25 - 31:29In 2005, they created £7 billion in one month.
-
31:29 - 31:35In September 2007, they created £16 billion in one month to go into property.
-
31:35 - 31:42So, in the space of one week, they've created as much money as the government is willing to spend on rebuilding schools in an entire year.
-
31:42 - 31:46Now, this is crazy. If we give banks the power to create money, this is what they are going to do.
-
31:46 - 31:50They're going to put it into markets like this instead of doing things that we actually need to do.
-
31:50 - 31:56As I said before, we can't allow this system to continue working the way it is,
-
31:56 - 32:00given the real challenges that we're going to face over the next 40 years.
-
32:00 - 32:03So, this is what the book is about.
-
32:03 - 32:05It can be heavy-going.
-
32:05 - 32:11We've had to design it partly for the economists who would normally dismiss these ideas,
-
32:11 - 32:16but we have tried to write it so that if you don't have that background in Economics,
-
32:16 - 32:20if you start from the beginning, your knowledge will build up and this will really start to make sense.
-
32:20 - 32:27And, if you get to the end, then you will know more about the monetary system than 99% of professional economists.
-
32:27 - 32:31So, this is it. This is what we need to do.
-
32:31 - 32:36The pressure is really on, because of the real challenges that we are facing.
-
32:36 - 32:43The movement in this country is by far the strongest in the world.
-
32:43 - 32:49This is the biggest gathering that I know of for reforming the monetary system.
-
32:49 - 32:53So, if we don't do it then nobody else is going to push it through.
-
32:53 - 32:58So, it's really down to us. That's what the rest of this afternoon is going to be about.
-
32:58 - 33:02How we really change the system.
- Title:
- Banking Reform by Positive Money (Conference 2013)
- Description:
-
http://www.positivemoney.org/
Why our monetary system is broken and how it can be fixed?
"The financial crisis occurred because we failed to constrain the private financial system's creation of private credit and money." Adair Turner, Chairman of the Financial Services AuthorityPositive Money Founder, Ben Dyson, presenting at the 3rd annual Positive Money Conference "Modernising Money" on 26th January 2013 in London. He explains the main principles behind the monetary reform proposals which offer one of the few hopes of escaping from our current dysfunctional monetary system.
The books mentioned in the talk can be ordered here:
http://www.positivemoney.org/shop/modernising-money/
http://www.positivemoney.org/shop/where-does-money-come-from/More about the 'Modernising Money' conference 2013 here:
http://www.positivemoney.org/conference/--------------------------
If you'd like to transcribe this video or to translate it into other languages, please let us know. Email: mira[at]positivemoney.org--------------------------
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Follow us on Google+ http://www.positivemoney.org.uk/googleplusPositive Money is a not-for-profit research and campaign group. They work to raise awareness of the connections between our current monetary and banking system and the serious social, economic and ecological problems that face the UK and the world today. In particular they focus on the role of banks in creating the nation's money supply through the accounting process they use when they make loans - an aspect of banking which is poorly understood. Positive Money believe these fundamental flaws are at the root of - or a major contributor to - problems of poverty, excessive debt, growing inequality and environmental degradation. For more information, please visit: http://www.positivemoney.org/
- Video Language:
- English
- Duration:
- 33:28
DanielleMarieTexeira edited English subtitles for Banking Reform by Positive Money (Conference 2013) | ||
DanielleMarieTexeira edited English subtitles for Banking Reform by Positive Money (Conference 2013) | ||
DanielleMarieTexeira edited English subtitles for Banking Reform by Positive Money (Conference 2013) | ||
DanielleMarieTexeira edited English subtitles for Banking Reform by Positive Money (Conference 2013) | ||
DanielleMarieTexeira edited English subtitles for Banking Reform by Positive Money (Conference 2013) | ||
DanielleMarieTexeira added a translation |