0:00:02.470,0:00:08.690 NARRATOR: How is money created, where does[br]it come from? Who benefits? And what purpose 0:00:08.690,0:00:09.730 does it serve? 0:00:09.730,0:00:11.810 SHOUTING: Back off you f*ing Nazi! 0:00:11.810,0:00:16.109 What is the money system? What is the money[br]behind the money system? 0:00:16.109,0:00:21.369 NARRATOR: For centuries the mechanics of the[br]money system have remained hidden from the 0:00:21.369,0:00:28.739 prying eyes of the populace. Yet its impact,[br]both on a national and international level, 0:00:28.739,0:00:36.210 is perhaps unsurpassed, for it is the monetary[br]system that provides the foundations for international 0:00:36.210,0:00:39.290 dominance and national control. 0:00:39.290,0:00:43.250 CHANTING: Whose streets? Our streets! 0:00:43.250,0:00:49.430 NARRATOR: Today, as these very foundations[br]are being shaken by crises, the need for open 0:00:49.430,0:00:55.240 and honest dialogue on the future of the monetary[br]system has never been greater. 0:00:55.240,0:00:59.850 This economic crisis is like a cancer. If[br]you just wait and wait, thinking this is going 0:00:59.850,0:01:03.990 to go away, just like a cancer it's going[br]to grow, and it's going to be too late. What 0:01:03.990,0:01:10.720 I would say to everybody is, get prepared.[br]This is not a time right now for wishful thinking 0:01:10.720,0:01:14.570 that the government is going to sort things[br]out. The governments don't rule the world: 0:01:14.570,0:01:16.680 Goldman Sachs rules the world. 0:01:16.680,0:01:19.700 "We're on the verge of a perfect storm". 0:01:19.700,0:01:25.830 NARRATOR: In opposition lie corrupt and entrenched[br]interests that lurk in the corridors of power, 0:01:25.830,0:01:32.000 for whom there are no reasons to relinquish[br]privileges that they feel are justly deserved. 0:01:32.000,0:01:38.000 DAVID CAMERON: Has he got a reform plan for[br]the NHS? [SHOUT: No!] Has he got a police 0:01:38.000,0:01:41.820 reform plan? [No!] Has he got a plan to cut[br]the deficit? [No!] 0:01:41.820,0:01:58.409 SPEAKER OF THE HOUSE OF COMMONS: Order! Misorder![br]Order! Try to calm down and behave like an 0:01:58.409,0:02:04.780 adult, and if you can't, if it's beyond you,[br]leave the chamber. Get out. We'll manage without 0:02:04.780,0:02:06.310 you! 0:02:06.310,0:02:09.310 "This is the zombie banks' protected feeding[br]station." 0:02:09.310,0:02:14.830 There's no coincidence that boom and bust[br]became a real cyclical issue around about 0:02:14.830,0:02:21.090 the 1700s when William Paterson founded the[br]Bank of England. 0:02:21.090,0:02:24.490 "Eat her! Eat her now!" 0:02:24.490,0:02:31.980 SPEAKER OF THE HOUSE OF COMMONS: This is intolerable[br]behaviour as far as the public is… No, it's 0:02:31.980,0:02:41.060 not funny! Only in your mind is it funny.[br]It's not funny at all, it's disgraceful. 0:02:41.060,0:02:43.310 CHANTING: Revolution! Revolution! 0:02:43.310,0:02:48.400 NARRATOR: The system is inherently unstable[br]as a result of the international power it 0:02:48.400,0:02:54.920 provides to the dominant parties, for at the[br]heart of it lies the idea of ‘How can I 0:02:54.920,0:02:57.640 get something for nothing'. 0:02:57.640,0:03:03.730 Statistical analysis has found that every[br]time an empire begins to near its own demise, 0:03:03.730,0:03:06.680 you'll find that its currency will be debased. 0:03:06.680,0:03:11.500 There is no guide to how this whole system[br]operates. To give you an example, a researcher 0:03:11.500,0:03:16.069 at the BBC working on a Robert Peston documentary[br]went to the Bank of England and said, "Can 0:03:16.069,0:03:21.780 you give me a guide to how money is created?"[br]And they just said, "no". 0:03:21.780,0:03:27.040 NARRATOR: This documentary will investigate[br]and explain this ever changing system, and 0:03:27.040,0:04:05.300 the impact it has both on a national and international[br]level. 0:04:05.300,0:04:12.330 In 2010 the total UK money supply stood at[br]2.15 trillion pounds. 0:04:12.330,0:04:17.720 2.6 % of this total was physical cash, £53.5[br]billion. 0:04:17.720,0:04:27.580 The rest, £2.1 trillion, or 97.4% of the[br]total money supply was commercial bank money. 0:04:27.580,0:04:36.370 The 3% of money is created through the central[br]bank and that money essentially, if you created 0:04:36.370,0:04:42.240 a £10 note you could sell that to a bank[br]to put into their ATM and the bank would have 0:04:42.240,0:04:48.370 to repay that £10 or buy it for £10. There[br]would be no interest charged on that money 0:04:48.370,0:04:56.410 but that money is then essentially transferred[br]to the Treasury and it's a form of fundraising 0:04:56.410,0:05:07.210 for the government. It's called seigniorage. 0:05:07.210,0:05:13.280 When the Bank Of England creates a 10 pound[br]note, it cost it about 3 or 4 pence to actually 0:05:13.280,0:05:20.520 print that note and it sells it to a high[br]street banks at face value, so 10 pounds, 0:05:20.520,0:05:27.009 and the profit, the difference between printing[br]the note and actually selling it for 10 pounds 0:05:27.009,0:05:33.759 goes directly to the treasury. So, in effect[br]all the profit that we get on creating physical 0:05:33.759,0:05:40.910 money, bank notes, goes to the treasury and[br]it reduces how much taxes we have to pay. 0:05:40.910,0:05:44.410 Over the last 10 years, that's raised about[br]18 billion pounds. 0:05:44.410,0:05:52.610 NARRATOR: In 1948 notes and coins constituted[br]17% of the total money supply. This was one 0:05:52.610,0:05:58.090 contributing factor in the government's ability[br]to finance post-war reconstruction. This included 0:05:58.090,0:06:00.169 the establishment of the NHS. 0:06:00.169,0:06:10.650 In only 60 years notes and coins have shrunk[br]to less than 3 % 0:06:10.650,0:06:18.150 Prior to 1844 bank notes were created by private[br]banks and the government did not profit from 0:06:18.150,0:06:20.860 their creation. 0:06:20.860,0:06:26.080 In the 1840s there was no law to stop banks[br]from creating their own bank notes. So they 0:06:26.080,0:06:33.509 used to issue paper notes as kind of a representative[br]of what you had in the bank account. Instead 0:06:33.509,0:06:37.889 of you taking your heavy metal coins out of[br]the bank and then going and paying somebody 0:06:37.889,0:06:42.490 with them you could get your paper which said[br]how much money you had in the bank and you 0:06:42.490,0:06:45.430 could give that to somebody and they could[br]use that to go and get the heavy metal coins 0:06:45.430,0:06:52.039 from the banks. Now overtime these paper notes[br]became as good as money. People would use 0:06:52.039,0:06:57.340 paper notes instead of going and getting real[br]money from the bank and obviously as soon 0:06:57.340,0:07:03.340 as the banks realised that what they were[br]creating had become the dominant type of money 0:07:03.340,0:07:08.120 in the economy, they realised that by creating[br]more of it they could generate profits. They 0:07:08.120,0:07:13.080 can just print up some new notes, lend it[br]and get the interest on top of them. And they 0:07:13.080,0:07:18.949 did that up until the 1840s. In the 1840s[br]they pushed it just a little bit too far and 0:07:18.949,0:07:26.110 that caused inflation, destabilised the economy.[br]So in 1844, the conservative government of 0:07:26.110,0:07:31.949 Robert Peel actually passed a law that took[br]the power to create money away from the commercial 0:07:31.949,0:07:36.490 banks and brought it back to the state. So[br]since then the Bank of England has been the 0:07:36.490,0:07:47.889 only organisation authorised to create paper[br]notes. Since then everything has gone digital 0:07:47.889,0:07:56.080 and what we now use as money is digital numbers[br]that commercial banks can create out of nothing. 0:07:56.080,0:08:03.210 The problem was that they did not include[br]in that legislation the deposits, the demand 0:08:03.210,0:08:11.509 deposits, held in banks by individuals or[br]electronic forms of money which essentially 0:08:11.509,0:08:17.440 what those demand deposits are. Today most[br]of the money in circulation is electronic 0:08:17.440,0:08:26.580 money, it's bank demand deposits that sit[br]in our accounts. So in a way the legislation's 0:08:26.580,0:08:35.729 got to catch up with the developments in electronic[br]money and the way that banks actually operate. 0:08:35.729,0:08:41.169 NARRATOR: Money held in bank accounts are[br]called demand deposits. This is an accounting 0:08:41.169,0:08:47.050 term the banks use when they create credit.[br]Banks follow the same process when they create 0:08:47.050,0:09:00.000 loans. All money held in bank accounts, is[br]an accounting entry. 0:09:00.000,0:09:05.989 The reality is now that most money is not[br]paper and it's not metal coins, its digital. 0:09:05.989,0:09:10.569 It's just numbers in a computer system. It's[br]your Visa debit card, it's your electronic 0:09:10.569,0:09:18.720 ATM card. It's this, its plastic. Its numbers[br]in a computer system, you move money from 0:09:18.720,0:09:25.379 one computer system to another, it's all a[br]big database and this digital money is what 0:09:25.379,0:09:29.819 we are now using to make payments with, it's[br]what we actually use to run the economy. 0:09:29.819,0:09:35.989 I think a lot of people in the UK probably[br]think that the government or the central bank 0:09:35.989,0:09:43.149 is in control of most money in circulation[br]and issues new money into circulation, but 0:09:43.149,0:09:49.540 that's not the case. It's private banks that[br]create the vast majority of new money in circulation 0:09:49.540,0:09:53.079 and also decide how it's allocated. 0:09:53.079,0:10:02.499 NARRATOR: The official terminology for this[br]accounting entry is commercial bank money. 0:10:02.499,0:10:08.290 When banks issue loans to the public, they[br]create new commercial bank money. When a customer 0:10:08.290,0:10:15.779 repays a loan, commercial bank money is destroyed.[br]The banks keep the interest, as profit. 0:10:15.779,0:10:21.369 There's a lot of misconceptions about the[br]way banks work. There was a poll done by the 0:10:21.369,0:10:28.389 Cobden Centre where they asked people how[br]they thought banks actually operated. Around 0:10:28.389,0:10:32.720 30% of the public think that when you put[br]your money into the bank it just stays there 0:10:32.720,0:10:43.999 and its safe and you can understand why because[br]every child has a piggy and you spend it. 0:10:43.999,0:10:49.470 So a lot of people keep this idea of banking,[br]it's somewhere safe to keep your money so that 0:10:49.470,0:10:56.549 it's there whenever you need it. Another,[br]the other 60% of people assume that when you 0:10:56.549,0:11:00.629 put your money in that money is the same being[br]moved across to somebody who wants to borrow 0:11:00.629,0:11:06.660 it. So you have a pensioner who keeps saving[br]money her entire life and then her life savings 0:11:06.660,0:11:11.819 have been lent to some young people who want[br]to buy a house. But actually banks don't work 0:11:11.819,0:11:26.529 like that. 0:11:26.529,0:11:33.499 At the moment in the UK money creation and[br]control is largely in the hands of private 0:11:33.499,0:11:43.079 banks. About 97 to 98% of money that's created[br]is created as bank "debt money", you can call 0:11:43.079,0:11:50.059 it, when banks issue money into circulation[br]as loans essentially. This is a very poorly 0:11:50.059,0:11:52.970 understood fact. 0:11:52.970,0:11:59.910 It's not a conspiracy theory, it's not a crackpot[br]theory, it's the way the Bank of England describes 0:11:59.910,0:12:08.439 the process. When banks make loans they create[br]new money. 0:12:08.439,0:12:19.230 A few economists will realise the way the[br]money system works but if you don't realise 0:12:19.230,0:12:24.299 the way that money works and you think that[br]everyone saving is going to work well for 0:12:24.299,0:12:28.160 the economy. What really happens once you[br]understand the way the money system works 0:12:28.160,0:12:33.959 is that if everybody starts saving, the amount[br]of money in the economy shrinks and we have 0:12:33.959,0:12:38.709 a recession. So most economists don't have[br]this full picture. They don't understand all 0:12:38.709,0:12:46.649 the elements of the system. They rely on assumptions,[br]on received knowledge without actually going 0:12:46.649,0:12:52.999 into the details, and money is the centre of[br]the economy. If you don't understand where 0:12:52.999,0:12:59.999 it comes from, who creates it and when it[br]gets created then how can you understand the 0:12:59.999,0:13:05.679 entire economy? 0:13:05.679,0:13:11.720 When the vast majority of money that we use[br]now is not cash but its electronic money then 0:13:11.720,0:13:15.569 whoever's creating the electronic money is[br]getting the proceeds of creating that money 0:13:15.569,0:13:19.329 and obviously creating electronic money is[br]much more profitable than creating cash because 0:13:19.329,0:13:25.790 you don't have any production cost at all.[br]So while we've got £18 billion over the course 0:13:25.790,0:13:33.619 of the decade in profit from creating cash,[br]the banks have actually created £1.2 trillion. 0:13:33.619,0:13:40.959 Between 1998 and 2007 the UK money supply[br]tripled. £1.2 trillion pounds was created 0:13:40.959,0:13:48.569 by banks, whilst £18 billion was created[br]by the Treasury. 0:13:48.569,0:13:52.540 A lot of people think when I say this or when[br]you say this or when Positive Money say this 0:13:52.540,0:13:58.529 that we are all a bunch of nutters. But on[br]the 9th of March in 2009, the governor of 0:13:58.529,0:14:04.429 the Federal Reserve, Ben Bernanke gave the[br]first ever broadcast interview, the governor 0:14:04.429,0:14:09.660 of the central bank of the United States of[br]America had ever given and the day before 0:14:09.660,0:14:16.709 that he bailed out AIG which is an insurance[br]company, not even a bank actually to the tune 0:14:16.709,0:14:22.000 of about a US$160 billion. So the journalist[br]says to him: "Now Mr. Bernanke where did you 0:14:22.000,0:14:25.989 get $160 billion to bail out AIG?" 0:14:25.989,0:14:27.529 JOURNALIST: Is that tax money that the Fed[br]is spending? 0:14:27.529,0:14:34.799 BERNANKE: It's not tax money. The banks have[br]accounts with the Fed, much the same way that 0:14:34.799,0:14:39.919 you have an account in a commercial bank.[br]So to lend to a bank we simply use the computer 0:14:39.919,0:14:45.149 to mark up the size of the account they have[br]with the Fed. So it's much more akin, although 0:14:45.149,0:14:49.399 not exactly the same, to printing money than[br]it is to borrowing. 0:14:49.399,0:14:56.540 I found that talking on the door step from[br]August last year around to August 2009 around 0:14:56.540,0:15:04.459 to general election 8-9 months I suppose knocking[br]on the doors, is that we tried to explain 0:15:04.459,0:15:13.019 how the money system works, there's an almost[br]in-built refusal of people to accept that 0:15:13.019,0:15:21.119 such a bizarre situation could actually exist.[br]"Ah no, it can't possibly. What do you mean? 0:15:21.119,0:15:25.569 It can't...banks can't...banks don't create[br]money out of thin air. That's ridiculous. 0:15:25.569,0:15:30.519 They can't do that. They lend out their depositors'[br]money." Most people have an idea of how money 0:15:30.519,0:15:36.959 is. They are used to their own way of handling[br]money and they try and implement their own 0:15:36.959,0:15:43.660 idea of how their small household economy[br]works into the national economy. And of course 0:15:43.660,0:15:48.049 it just doesn't work out, it just doesn't[br]work out at all. 0:15:48.049,0:15:53.299 NARRATOR: By 2008 the outstanding loan portfolio[br]of bank created credit, also known as commercial 0:15:53.299,0:15:57.759 bank money, stood at over £2 trillion. 0:15:57.759,0:16:05.579 As recently as 1982 the ratio of notes and[br]coins to bank deposits was 1:12. By 2010 the 0:16:05.579,0:16:14.350 ratio had risen to 1:37, that is for every[br]pound of treasury-created money, 0:16:14.350,0:16:18.999 there were 37 pounds of bank-created money. 0:16:18.999,0:16:25.549 In the 10 years prior to the 2007 crisis,[br]the UK commercial bank money supply expanded 0:16:25.549,0:16:28.579 by between 7 to 10% every year. 0:16:28.579,0:16:35.399 A growth rate of 7% is the equivalent of doubling[br]the money supply every 10 years. 0:16:35.399,0:16:40.839 DYSON: The amount of money they're creating[br]out of nothing is just incredible, £1.2 trillion 0:16:40.839,0:16:47.079 in the last 10 years. That money is being[br]distributed according to the priorities of 0:16:47.079,0:16:51.929 the banking sector, not the priorities of[br]society. 0:16:51.929,0:17:02.919 The banking sector itself grew from 1980,[br]$2.5 trillion to $40 trillion by assets. In 0:17:02.919,0:17:09.649 1980, global bank assets were worth 20 times[br]the then global economy. By 2006 they were 0:17:09.649,0:17:13.110 worth 75 times according to the UN. 0:17:13.110,0:17:20.220 NARRATOR: As the following chart shows, total[br]bank assets of UK banks as a percentage of 0:17:20.220,0:17:28.380 GDP remained relatively stable at 50-60%,[br]up to the end of the 1960s. After that they 0:17:28.380,0:17:29.990 shot up dramatically. 0:17:29.990,0:17:35.259 And the real money in the world to be made[br]today is not by producing anything at all. 0:17:35.259,0:17:40.909 It's simply by forms of speculating. Basically,[br]making money from money. That's the most profitable 0:17:40.909,0:17:49.600 and by far and away the biggest form of economic[br]activity that exists in the world today. 0:17:49.600,0:17:56.990 NARRATOR: Today, banks are no longer restricted[br]by how much they can lend, and as such how 0:17:56.990,0:18:03.470 much new credit they can create out of nothing.[br]They are restricted solely by their own willingness 0:18:03.470,0:18:05.659 to lend. 0:18:05.659,0:18:11.820 DYSON: The issue with allowing banks to create[br]money, there's two main issues. Firstly, the 0:18:11.820,0:18:17.190 fact that they create this money when they[br]make loans. So it guarantees that we have 0:18:17.190,0:18:20.929 to borrow all our money for the economy from[br]the banks. 0:18:20.929,0:18:25.779 NARRATOR: As such, to have a healthy, growing[br]economy the government needs to put in place 0:18:25.779,0:18:30.850 strategies to allow for ever-increasing debt. 0:18:30.850,0:18:35.940 The only way the government can create additional[br]purchasing power is by getting itself and 0:18:35.940,0:18:37.720 us, into more debt. 0:18:37.720,0:18:44.350 DYSON: The second big issue with allowing[br]the banks to create money is that they have 0:18:44.350,0:18:48.830 the incentive to always create more.  They[br]create more money if they issue a loan. 0:18:48.830,0:18:53.839 They get the bonuses, the commissions and[br]the incentives to lend as much as possible. 0:18:53.839,0:18:55.899 You have to develop a sales culture.  What 0:18:55.899,0:19:01.019 did they do?  They recruited an amazing guy[br]– a lovely guy – Andy Hornby, who came 0:19:01.019,0:19:07.350 from Asda, to turn the bank into a supermarket[br]retailing operation. 0:19:07.350,0:19:10.320 If you trust bankers to control the money 0:19:10.320,0:19:14.630 supply, the money supply will just grow and[br]grow and grow, as will the level of debt, 0:19:14.630,0:19:19.730 until the point where it crashes, when some[br]people can't repay the debt and then they'll 0:19:19.730,0:19:22.419 stop lending. 0:19:22.419,0:19:26.690 You hear politicians and journalists saying,[br]we've been living beyond our means; we've 0:19:26.690,0:19:32.809 become dependent on debt.  We need to reign[br]in our spending and live within our means. 0:19:32.809,0:19:37.679 It's not possible in the current system. [br]The reason why everyone is in debt now is 0:19:37.679,0:19:43.029 not because they have been recklessly borrowing. [br]We haven't borrowed all this money from an 0:19:43.029,0:19:47.799 army of pensioners who've been saving up their[br]whole lives.  Money in the current system 0:19:47.799,0:19:53.539 is debt.  It's created when the banks make[br]loans.  So the only way, in the current system, 0:19:53.539,0:19:57.600 that we can have any money in the economy[br]– the only way we can have money for business 0:19:57.600,0:20:02.090 to trade – is if we've borrowed it all from[br]the banks. 0:20:02.090,0:20:06.379 And it's the very opposite of what the Tory 0:20:06.379,0:20:11.429 Party is arguing today, which is that you[br]have to create savings before you can help 0:20:11.429,0:20:16.850 the National Health Service.  And it's because[br]economists have completely confused those 0:20:16.850,0:20:21.799 things, both in monetary policy terms, but[br]also in economic thinking, and because most 0:20:21.799,0:20:27.870 people still harbour the old fashioned view[br]that you need savings before you can invest, 0:20:27.870,0:20:34.000 that we have the mess that we're in today. [br]Now, one of the reasons why we find it difficult 0:20:34.000,0:20:39.299 to understand the banking system and credit[br]creation is that we leave school without any 0:20:39.299,0:20:45.340 money and we go and get a job working as an[br]apprentice to a plumber. We work really hard 0:20:45.340,0:20:50.299 all month and at the end of the month somebody[br]puts money in our bank, and so for us the 0:20:50.299,0:20:55.850 logic is: you work and then you get money[br]– you get savings.  In reality you would 0:20:55.850,0:21:01.559 never have got that job if credit hadn't been[br]created in the first instance.  It's a really 0:21:01.559,0:21:09.419 important conceptual misunderstanding and[br]it isn't something that the public just is 0:21:09.419,0:21:11.829 guilty of.  Economists don't understand this[br]stuff. 0:21:11.829,0:21:13.610 ANNE BELSEY: Money doesn't just come out of 0:21:13.610,0:21:18.299 economic activity.  A lot of people have[br]come across - kind of assume - that if you 0:21:18.299,0:21:24.820 have got businesses, and you've got people[br]doing things, that somehow money somehow emerges 0:21:24.820,0:21:29.779 out of the process of people doing things,[br]making things and growing things, selling 0:21:29.779,0:21:34.629 things and producing things, that somehow[br]money just emerges.  It's not. It's like 0:21:34.629,0:21:36.889 oiling a car. You have to put it in. 0:21:36.889,0:21:42.860 When I see David Cameron talking about how[br]we need an economy not based on debt, but 0:21:42.860,0:21:47.679 we need an economy based on savings, he just[br]doesn't know what he's saying.  It's ridiculous. 0:21:47.679,0:21:53.659 It's absolutely absurd and it shows his complete[br]lack of understanding of how our money system 0:21:53.659,0:21:54.500 actually works. 0:21:54.500,0:21:59.419 You know, it's a paradox under the current[br]system.  If we as the public go into further 0:21:59.419,0:22:03.190 debt, then that's going to put more money[br]into the economy and we're going to have a 0:22:03.190,0:22:07.360 boom.  When you have a boom, it's easier[br]to borrow, so people get into even more debt. 0:22:07.360,0:22:12.360 And eventually this cycle continues. It gets[br]easier and easier to get into debt until some 0:22:12.360,0:22:18.169 people get over-indebted and then they default. [br]They can't re-pay their mortgage.  That's 0:22:18.169,0:22:25.580 what happened first in sub-prime America. [br]And then it brings through a wave of defaults, 0:22:25.580,0:22:30.639 which will ripple across the entire economy. [br]The banks go insolvent.  Then we're into 0:22:30.639,0:22:37.570 a financial crisis and then the banks stop[br]lending.  They were excessively lending in 0:22:37.570,0:22:43.080 the boom and then they stop lending and that[br]makes the recession even worse.  People lose 0:22:43.080,0:22:48.169 their jobs and then they become even more[br]dependent on debt just to survive, basically. 0:22:48.169,0:22:53.379 You know we have a system where we have to[br]borrow in order to have an economy.  We have 0:22:53.379,0:22:59.719 to be in debt to the banks.  That guarantees[br]a massive profit for the banks. 0:22:59.719,0:23:01.860 NARRATOR: This is the boom-bust cycle. 0:23:01.860,0:23:12.320 GORDON BROWN: "And I've said before, Mr Deputy[br]Speaker, no return to boom and bust." 0:23:12.320,0:23:19.399 NARRATOR: Net bank lending must forever increase. 0:23:19.399,0:23:24.210 We are paying interest on every single pound. 0:23:24.210,0:23:28.659 Even if you think the money belongs to you,[br]somebody somewhere is paying interest on that 0:23:28.659,0:23:28.820 money. 0:23:28.820,0:23:35.259 The banking system has such a huge impact[br]on the world, but only because it supplies 0:23:35.259,0:23:40.350 our nation's money supply.  We have to protect[br]them. We have to subsidise them.  We have 0:23:40.350,0:23:46.889 to allow them to continue, because the disaster[br]of a bank collapse, affects us all in a huge 0:23:46.889,0:23:52.249 way.  Anyone who says that we shouldn't have[br]bailed out the banks doesn't quite understand 0:23:52.249,0:23:57.720 the nature of our monetary system.  That's[br]like eliminating a huge chunk of our money. 0:23:57.720,0:24:03.870 But also, bailing out the banks is perpetuating[br]a system which is never going to work anyway. 0:24:03.870,0:24:08.620 So whatever we do, we are always going to[br]have this cycle until we separate how money 0:24:08.620,0:24:12.720 is created and the activities of banking. [br]Then the banks could do as they wish.  They'd 0:24:12.720,0:24:15.389 be a normal business like everyone else. 0:24:15.389,0:24:22.139 There's a major democratic issue here as well. [br]You have these private, profit-seeking banks 0:24:22.139,0:24:26.759 creating up to 200 billion pounds a year and[br]pumping that into the economy wherever they 0:24:26.759,0:24:32.960 want, basically, wherever it suits them, whether[br]they're pumping it into these toxic derivatives, 0:24:32.960,0:24:38.499 or putting money into housing bubbles, just[br]making housing more expensive.  200 billion 0:24:38.499,0:24:44.889 pounds in 2007 of new money coming into the[br]economy, created out of nothing; and where 0:24:44.889,0:24:49.960 that gets spent determines the shape of our[br]economy effectively.  So if we are going 0:24:49.960,0:24:54.200 to allow anybody to create new money out of[br]nothing, then we should at least have some 0:24:54.200,0:24:59.190 democratic control over how that money's used. [br]I mean, would we rather have had that money 0:24:59.190,0:25:03.789 used for health care, or to deal with some[br]of the environmental issues, or to reduce 0:25:03.789,0:25:07.929 poverty, or would we rather have it to make[br]houses more expensive so none of us can afford 0:25:07.929,0:25:13.830 to live in a house. 0:25:13.830,0:25:22.049 You can see it as a subsidy, a special super[br]subsidy to the banks, for the right to create 0:25:22.049,0:25:28.320 money, which should be for the benefit of[br]the public and spent through a democratic 0:25:28.320,0:25:32.700 process. 0:25:32.700,0:25:37.200 Banks are the most heavily subsidised businesses[br]in the world, specially protected by governments. 0:25:37.200,0:25:43.139 While the money runs out for the rest of us,[br]the largest private banks still thrive. 0:25:43.139,0:25:50.139 This is because they get the biggest subsidy[br]of them all: the licence to print money. 0:25:50.139,0:25:52.610 Hard to believe?  Martin Wolf, the Chief 0:25:52.610,0:25:56.870 Economics Editor of the Financial Times, said[br]it recently: "The essence of the contemporary 0:25:56.870,0:26:02.529 monetary system is the creation of money out[br]of nothing by private banks' often foolish 0:26:02.529,0:26:03.840 lending…" 0:26:03.840,0:26:09.960 You heard that right.  Private banks create[br]money out of nothing.  Then, they loan it 0:26:09.960,0:26:15.580 to us and ask for interest on top.  If you've[br]ever wondered why the bank buildings around 0:26:15.580,0:26:20.009 the world soar higher than any palace or spire[br]ever did, you now have the answer. 0:26:20.009,0:26:23.090 But the banks don't simply print money using 0:26:23.090,0:26:27.559 secret printing presses in their basements. [br]They don't have to.  Like so many other things 0:26:27.559,0:26:31.029 these days, printing money has now gone digital. 0:26:31.029,0:26:36.279 With the popular use of debit cards, electronic[br]fund transfers and internet banking, only 0:26:36.279,0:26:43.580 3% of the money in the UK is now made of paper[br]and metal coin.  The other 97% is entirely 0:26:43.580,0:26:48.769 on computers.  Electronic money is convenient[br]for everyone, but it's especially convenient 0:26:48.769,0:26:56.089 for the private banks, since they own, run[br]and control the entire digital money system. 0:26:56.089,0:26:57.970 And what do they do with this special privilege? 0:26:57.970,0:27:02.649 Do they channel new money, the blood supply[br]of the nation, towards the things we need 0:27:02.649,0:27:07.729 like hospitals, schools, universities and[br]public transport? 0:27:07.729,0:27:10.519 Not if it doesn't make a profit for them. 0:27:10.519,0:27:15.889 Instead, they use their licence to print money[br]to gamble on the financial markets and push 0:27:15.889,0:27:20.370 house prices out of reach of ordinary people[br]by pumping hundreds of billions of pounds 0:27:20.370,0:27:26.980 into risky mortgages.  This is exactly how[br]the banks caused the financial crisis and 0:27:26.980,0:27:33.859 now the rest of us are being asked to pay[br]for it. 0:27:33.859,0:27:36.249 If we can't afford to run hospitals and build 0:27:36.249,0:27:41.629 schools, can we really afford to subsidize[br]the financial industry?  Should we have to 0:27:41.629,0:27:44.320 live with less so the bankers can have more? 0:27:44.320,0:27:51.269 This is ludicrous and it's time to put a stop[br]to it.  The private banks can't be trusted 0:27:51.269,0:27:54.320 to hold the reigns to our entire economy. 0:27:54.320,0:27:59.090 We need to take away the banks' power to create[br]money out of nothing.  This will stop them 0:27:59.090,0:28:03.929 from causing yet another financial meltdown[br]and allow us to afford the crucial services 0:28:03.929,0:28:11.000 that we as a society need. 0:28:11.000,0:28:17.419 If you want a growing economy, under the current[br]set-up, we have to have growing debt.  This 0:28:17.419,0:28:22.190 is something very, very few people really[br]understand, especially the politicians who 0:28:22.190,0:28:32.000 are managing the economy, which is a scary[br]thought. 0:28:32.000,0:28:33.990 NARRATOR: As the money supply grows, more 0:28:33.990,0:28:40.519 money is available, which can be invested[br]in productive avenues.  However, it can also 0:28:40.519,0:28:57.000 be used to gamble and drive up asset prices. 0:28:57.000,0:29:00.460 NARRATOR: Inflation is a rise in the general 0:29:00.460,0:29:07.169 level of the prices of goods and services[br]in an economy over a period of time.  When 0:29:07.169,0:29:13.990 the general price level rises each unit of[br]currency buys fewer goods and services. 0:29:13.990,0:29:18.129 As the money supply grows, and there is more[br]currency available, more money is available 0:29:18.129,0:29:23.990 for investment, which can lead to growth,[br]but more money is also available for purchases 0:29:23.990,0:29:30.129 of goods and speculation, which leads to inflation. 0:29:30.129,0:29:38.580 Essentially, inflation is what happens when[br]too much money is chasing too few goods and 0:29:38.580,0:29:46.049 services, so there is too much money for the[br]actual output of the economy. 0:29:46.049,0:29:49.350 In the seven years between the years 2000 0:29:49.350,0:29:56.649 and 2007 the money supply doubled and the[br]essential bank, the Bank of England was under 0:29:56.649,0:29:59.539 the impression at this time that they had[br]it under control, because they were saying 0:29:59.539,0:30:03.169 that prices weren't going up that much. [br]Of course they were only looking at prices 0:30:03.169,0:30:08.549 in your local corner shop.  They weren't[br]looking at the price of housing and housing 0:30:08.549,0:30:13.039 is the biggest expenditure that most people[br]will make. 0:30:13.039,0:30:17.230 Increasing house prices, it may make you feel 0:30:17.230,0:30:24.600 like you're becoming wealthier, but as your[br]wealth increases, the effect is that your 0:30:24.600,0:30:29.899 children's wealth is actually decreasing. [br]So in fact there is no net gain in wealth, 0:30:29.899,0:30:37.039 because your children are going to have to[br]pay even more when they want to buy a house. 0:30:37.039,0:30:40.840 So in effect, there is no net increase. [br]They are going to have to earn even more. 0:30:40.840,0:30:47.889 They are going to have to go into even more[br]debt.  So, rising house prices do not create 0:30:47.889,0:30:53.509 additional net GDP value to the economy. 0:30:53.509,0:30:58.869 Actually what they do, is re-distribute wealth[br]towards those people who already have houses 0:30:58.869,0:31:04.539 i.e. wealthier people and remove it from poorer[br]people who can't afford to get on the housing 0:31:04.539,0:31:10.149 ladder, so it's another example of a very[br]regressive policy to allow house prices to 0:31:10.149,0:31:16.600 simply inflate.  It makes everybody feel[br]kind of like things are going well and people 0:31:16.600,0:31:21.149 spend money on other stuff.  They take equity[br]out of their houses.  But it's not creating 0:31:21.149,0:31:27.059 new jobs.  It's not enhancing the quality[br]of the economy.  It's not helping our balance 0:31:27.059,0:31:33.720 of trade.  It's not helping the public deficit. It's[br]a zero sum game. 0:31:33.720,0:31:39.049 NARRATOR: As of August 2011, 85.5% of consumer 0:31:39.049,0:31:43.049 bank lending was secured as mortgages on dwellings. 0:31:43.049,0:31:48.169 If you have somebody creating money that can[br]only be spent on one thing, which is housing, 0:31:48.169,0:31:53.450 then the price of that thing is going to go[br]up.  Between 2000 and 2010 they created over 0:31:53.450,0:31:59.080 a trillion pounds of new money - 500 billion[br]pounds just in the three years before the 0:31:59.080,0:32:03.570 crisis.  That's why house prices went up[br]they way they were.  There's nothing special 0:32:03.570,0:32:07.720 about houses.  It was just all this funny[br]money being pumped into that market. 0:32:07.720,0:32:11.970 If money is spent into the economy, a lot 0:32:11.970,0:32:17.840 of money goes into houses, for example into[br]mortgages, that's an increase in the amount 0:32:17.840,0:32:24.970 of money in the economy, without a corresponding[br]increase in activity, in output, in GDP. 0:32:24.970,0:32:34.389 It's non-GDP based spending.  That's what[br]causes inflation.  In the UK we've had it 0:32:34.389,0:32:42.110 in spades.  We've had this massive housing[br]boom.  The main cause for the housing boom, 0:32:42.110,0:32:49.000 in my opinion, is the huge amount of speculative[br]credit created by the banks, to go into houses. 0:32:48.999,0:32:56.119 If houses were cheaper, they would be easier[br]to build.  More of them would be built. 0:32:56.119,0:33:02.169 There would be less huge houses, with hardly[br]any people in them.  London would not be 0:33:02.169,0:33:08.789 the centre of a kind of very rich speculative[br]orgy, where all the richest people in the 0:33:08.789,0:33:13.669 world want to get a property in London, because[br]it's seen as a great asset.  Houses would 0:33:13.669,0:33:19.169 be seen as places to live primarily, rather[br]than seen as places to invest.  The important 0:33:19.169,0:33:24.889 thing to think about is, if you are a bank[br]and you've got to make a loan, you have choices. 0:33:24.889,0:33:33.169 You can give that loan to a small business[br]and you'll know that the risk to you of that 0:33:33.169,0:33:38.360 loan failing, defaulting, is actually quite[br]high, because that small business, the owners 0:33:38.360,0:33:43.629 of that business, have limited liability,[br]which means if that business goes bust, you 0:33:43.629,0:33:50.739 as a bank get nothing back, essentially. [br]So that's kind of high risk, compared to loaning 0:33:50.739,0:33:56.299 your money to somebody with some collateral,[br]with a house behind them, like a mortgage. 0:33:56.299,0:33:58.970 So there's a simple incentive for banks to 0:33:58.970,0:34:06.330 prefer putting money into housing than into[br]a small business. Now that's a real problem 0:34:06.330,0:34:12.559 if you widen that out across a whole economy,[br]because it means there's an incentive to put 0:34:12.559,0:34:17.740 money into speculative rather than productive[br]investment.  So again, we have to think about 0:34:17.740,0:34:23.520 how we create our monetary system that is[br]more balanced between those two kinds of speculative 0:34:23.520,0:34:30.159 and productive investment.  The government[br]is showing enormous reluctance to regulate 0:34:30.159,0:34:36.109 the housing market and to again regulate the[br]amount of money that banks put into houses. 0:34:36.109,0:34:38.559 We don't decide who creates credit for what. 0:34:38.559,0:34:47.000 No, we leave that to a couple of chaps in[br]a bank to decide, basically. 0:34:47.000,0:34:56.000 Now, inflation can be avoided if the amount[br]of money that goes into the economy is regulated 0:34:56.000,0:35:03.049 in a way that it doesn't exceed the actual[br]activity that's happening in the economy. 0:35:03.049,0:35:09.450 Now, the best way to do that, in my opinion,[br]is to make sure that money is issued into 0:35:09.450,0:35:17.119 the economy only for productive investment,[br]for productive goods and services, so money 0:35:17.119,0:35:25.140 goes in to help a small business to start[br]up which creates jobs, which creates additional 0:35:25.140,0:35:33.369 purchasing power which means there's no inflation.[br]You have to have a system where credit is 0:35:33.369,0:35:39.680 put into productive avenues, where credit[br]is put into building high speed rail links, 0:35:39.680,0:35:45.569 where credit is put into building houses rather[br]than giving people money to inflate the price 0:35:45.569,0:35:54.150 of houses. So it's quite simple, really in[br]that way, and the current system is simply 0:35:54.150,0:35:58.299 set up not to do that, basically. 0:35:58.299,0:36:03.540 The creation of money by private banks for[br]non-productive usage causes real inflation 0:36:03.540,0:36:15.349 and as such it is a tax on the purchasing[br]power of the medium of exchange. 0:36:15.349,0:36:23.030 The figures for the UK are quite stark actually,[br]the average median real incomes (for the bit 0:36:23.030,0:36:28.970 in the middle) for most people declined over[br]the last 8 years. There are now in quite sharp 0:36:28.970,0:36:33.900 decline as we go into recession, the sharpest[br]really since, it looks like, since about the 0:36:33.900,0:36:37.569 1930s, put it that way, so real income is[br]declining. 0:36:37.569,0:36:42.180 NARRATOR: Bank created fiat currency allows[br]the private banks to suck wealth from the 0:36:42.180,0:36:48.760 economy and over time results in a gradual[br]decrease in the standard of living. As people 0:36:48.760,0:36:55.450 become poorer, they become even more dependent[br]on debt. And this at a time when efficiency 0:36:55.450,0:36:58.059 and machination have improved dramatically. 0:36:58.059,0:37:05.160 If you go back to the 1960's and we were expected[br]to, we were looking forward to an age of leisure, 0:37:05.160,0:37:11.400 television programmes saying, what are people[br]going to do with their spare time? And now 0:37:11.400,0:37:19.319 we have got more people working harder than[br]ever. Spending more than ever, which looks 0:37:19.319,0:37:25.720 great, you know, everyone is spending more,[br]but if you're not actually benefitting from 0:37:25.720,0:37:30.119 what you're spending, if you having to spend[br]the money on childcare costs on commuting 0:37:30.119,0:37:38.319 costs and so forth. Costs that people didn't[br]in the past used to have to pay because you 0:37:38.319,0:37:44.980 could walk to work and one member of the family[br]was able to stay at home and be a permanent 0:37:44.980,0:37:50.559 homemaker, then you're not actually any better[br]off. Everyone is under such enormous pressures 0:37:50.559,0:37:59.950 nowadays, you know, I am conscious that my[br]four nephews and nieces are facing difficult 0:37:59.950,0:38:09.589 times. They're just going to find themselves[br]having to work very hard just to keep a roof 0:38:09.589,0:38:13.480 over their heads, to get a roof over their[br]heads. 0:38:13.480,0:38:17.420 People are getting poorer in real terms, it's[br]because prices are always going up because 0:38:17.420,0:38:23.599 all this new funny money is being pumped into[br]the system by the banks and they're creating 0:38:23.599,0:38:28.059 all this debt so at the same time as prices[br]are going up and things are getting more expensive, 0:38:28.059,0:38:33.910 we're getting further and further into debt[br]and our wealth and the return that we get 0:38:33.910,0:38:38.500 from actually working is getting less and[br]less all the time. You can't deal with poverty 0:38:38.500,0:38:43.059 when you have a financial system and a money[br]system that distributes money from the poor 0:38:43.059,0:38:49.819 to the very rich; any distribution that you[br]try and do in the opposite direction is effectively 0:38:49.819,0:38:56.809 pissing in the wind. If you look at issues[br]like increasing inequality, one obvious way 0:38:56.809,0:39:02.630 to tackle inequality is to have, say for example,[br]a redistributive tax system. You tax the rich, 0:39:02.630,0:39:08.180 you give some money to the poor. You move[br]a bit of money down the scale. That's all 0:39:08.180,0:39:13.700 very well but if you completely overlook the[br]fact that there's another redistributive system 0:39:13.700,0:39:18.000 which is taking money from the poor and giving[br]it to the rich, then you're not really going 0:39:18.000,0:39:25.400 to tackle this inequality and the way a debt-based[br]money system works, it guarantees that for 0:39:25.400,0:39:29.040 every pound of money there's going to be a[br]pound of debt. That debt is typically going 0:39:29.040,0:39:35.299 to end up with the poor, the lower-middle[br]classes, those people end up with the debt 0:39:35.299,0:39:39.109 and they end up paying interest on that money[br]which then goes back to the banking sector 0:39:39.109,0:39:46.150 and gets distributed to the people working[br]in the city or in Wall Street. What this system 0:39:46.150,0:39:51.960 does overall is it distributes money from[br]the poor to the rich essentially, distributes 0:39:51.960,0:39:59.200 money from the poorer regions of the UK back[br]to the City of London and it also distributes 0:39:59.200,0:40:05.480 money from all the small businesses, all the[br]little factories around the UK and distributes 0:40:05.480,0:40:07.849 that money back into the financial sector. 0:40:07.849,0:40:14.299 We have a system, where by, the activity of[br]actually supplying occurs under the very same 0:40:14.299,0:40:20.210 roof as the same organisation that is responsible[br]for profiting from putting together borrowers 0:40:20.210,0:40:28.720 and lenders i.e. a bank. So, a bank creates[br]our nation's money supply as well as making 0:40:28.720,0:40:30.960 loans for profit. 0:40:30.960,0:40:35.740 NARRATOR: The government cannot allow the[br]banking system to fail, because if it did, 0:40:35.740,0:40:42.470 over 97% of all money would disappear. This[br]is why in the event of a crisis, the risk 0:40:42.470,0:40:48.910 is transferred to the taxpayer. But even during[br]normal times banks receive numerous guarantees 0:40:48.910,0:40:51.349 and benefits beyond the right to create money. 0:40:51.349,0:40:56.569 Bill, by the way, I know the Bank of America[br]is a very big bank, it happens that I have 0:40:56.569,0:41:01.400 32 dollars there myself. Just between us what[br]assurance do I have that this money is safe? 0:41:01.400,0:41:08.380 Well, all deposits up to ten thousand dollars[br]are insured by the federal government in Washington. 0:41:08.380,0:41:14.609 That's my guarantee? Yes. Have you heard that[br]the federal government is about 280 billion 0:41:14.609,0:41:18.510 dollars in the hole? 0:41:18.510,0:41:23.750 NARRATOR: Banks receive large safety nets[br]from the government. The taxpayer guarantees 0:41:23.750,0:41:30.660 £85,000 as deposit insurance. And the Bank[br]of England provides liquidity insurance, in 0:41:30.660,0:41:37.990 case a bank runs out of reserve currency. 0:41:37.990,0:41:41.170 It's questionable whether we're going to get[br]out of this recession or whether we'll just 0:41:41.170,0:41:47.369 keep ticking along the way the way that we[br]are now. However if we do, then when we come 0:41:47.369,0:41:51.780 out of this recession and when growth starts[br]again, look at what happens to debt, it will 0:41:51.780,0:41:55.490 rise and it will keep rising and the faster[br]the economy is growing, the faster the debt 0:41:55.490,0:42:02.109 will rise and then give it another 3 to 5[br]years, we'll be back where we were, the debt 0:42:02.109,0:42:06.589 will become too much, people will start defaulting[br]again. It's kind of the system that we're 0:42:06.589,0:42:11.559 locked into now is that we can't grow the[br]economy without growing the debt and the debt 0:42:11.559,0:42:15.950 is the very thing that will bring down the[br]economy. The only option going forward is 0:42:15.950,0:42:21.650 to reform it, to stop banks from creating[br]money as debt. By fixing the monetary system 0:42:21.650,0:42:26.670 we can prevent the banks from ever causing[br]another financial crisis and we can also make 0:42:26.670,0:42:33.289 the current public service cuts and the tax[br]rises and the increase in national debt unnecessary. 0:42:33.289,0:42:38.039 NARRATOR: The current monetary system allows[br]the banking sector to extract wealth from 0:42:38.039,0:42:43.700 the economy, whilst providing nothing productive[br]in return. 0:42:43.700,0:42:50.630 Why is it that we've got all this technology,[br]all this new efficiency and yet it now requires 0:42:50.630,0:42:56.930 two people to finance a household whereas[br]in the 50's it only needed one person working 0:42:56.930,0:43:02.250 and the reason for that is not because these[br]washing machines and everything are more expensive, 0:43:02.250,0:43:06.990 it's because of all the debt and because it's[br]effectively the banking sector is creaming 0:43:06.990,0:43:13.319 it off from everybody else. So a growing banking[br]sector is not a good thing. If the banking 0:43:13.319,0:43:17.799 sector is growing, it's either that it's becoming[br]less efficient or it's becoming a parasite 0:43:17.799,0:43:24.770 on the rest of the economy. We can talk about[br]the banking sector becoming 4%, 5%, 6% of 0:43:24.770,0:43:30.539 GDP, what's happening to the rest of the economy?[br]It's becoming 96, 95, 94% of GDP. We've got 0:43:30.539,0:43:36.270 to get switched on to this now. If we want[br]to have a chance of tackling any of the other 0:43:36.270,0:43:38.940 big social issues, you got to figure out the[br]money issue. 0:43:38.940,0:43:46.559 The poorest in the world pay for crises even[br]when they've not benefitted from the often 0:43:46.559,0:43:52.069 reckless and speculative booms, like the housing[br]boom in Ireland that preceeded that crisis. 0:43:52.069,0:43:58.130 You know over the last 30 years, we've seen[br]income differentials increase so that the 0:43:58.130,0:44:02.420 rich have got much, much richer and ordinary[br]people haven't, they've stayed the same or 0:44:02.420,0:44:07.650 they've got poorer and one of the ways that[br]the economy was kept going was by providing 0:44:07.650,0:44:12.089 cheap credit, was by providing debt to those[br]very people who couldn't really afford things 0:44:12.089,0:44:18.720 anymore, so they kept buying and when it collapses[br]it's those same people that have to pay once 0:44:18.720,0:44:22.869 again even though in many ways there were[br]the victims the first time. 0:44:22.869,0:44:28.680 NARRATOR: As a result of the crisis the Bank[br]of England has bought corporate debt and repackaged 0:44:28.680,0:44:34.520 it at lower rates of interest. Yet the average[br]person is being asked to pay more than ever 0:44:34.520,0:44:38.480 to borrow on overdrafts and credit cards. 0:44:38.480,0:44:44.530 Debts between the very wealthy or between[br]governments can always be renegotiated and 0:44:44.530,0:44:49.559 always have been throughout world history,[br]there not anything set in stone. Generally 0:44:49.559,0:44:53.559 speaking, when you have debts owed by the[br]poor to the rich that's suddenly, debts become 0:44:53.559,0:44:58.430 a sacred obligation more important than anything[br]else. The idea of renegotiating them becomes 0:44:58.430,0:44:59.799 unthinkable. 0:44:59.799,0:45:05.789 NEWSREADER: Can you pin down exactly what[br]would keep investors happy, make them feel 0:45:05.789,0:45:12.049 more confident?[br]ALESSIO RASTANI: That's a tough one, personally 0:45:12.049,0:45:16.030 it doesn't matter, see I'm a trader, I don't[br]really care about that kind of stuff. 0:45:16.030,0:45:17.170 CHANTING: Pay your taxes! 0:45:17.170,0:45:19.450 BANKER TO PROTESTER: "Were you born in England?" 0:45:19.450,0:45:24.359 ALESSIO RASTANI: If I see an opportunity to[br]make money, I go with that. For most traders, 0:45:24.359,0:45:28.230 we don't really care that much how they're[br]going to fix the economy, how they're going 0:45:28.230,0:45:34.789 to fix the whole situation, our job is to[br]make money from it and personally I've been 0:45:34.789,0:45:39.119 dreaming about this moment for three years.[br]If you know what to do, you can make a lot 0:45:39.119,0:45:44.250 of money from this. I have a confession which[br]is, I go to bed every night I dream of another 0:45:44.250,0:45:48.809 recession, I dream of another moment like[br]this. I dream of another recession, I dream 0:45:48.809,0:45:55.000 of another moment like this. You can make[br]a lot of money from it. 0:45:55.000,0:46:00.880 GIRL: Bruno, Virginia hurt somebody real bad,[br]you oughtta hate her . 0:46:00.880,0:46:02.999 CROWD: Incoming! 0:46:02.999,0:46:09.710 The way in which you can look across Europe[br]now and see that the new prime minister of 0:46:09.710,0:46:14.470 Greece, not elected, essentially imposed,[br]Papademous, former employee of Goldman Sachs, 0:46:14.470,0:46:18.510 the new prime minister and finance minister[br]of Italy, Mario Monti, former employee of 0:46:18.510,0:46:23.520 Goldman Sachs, the new president of the European[br]Central Bank, former employee of Goldman Sachs, 0:46:23.520,0:46:25.950 you see these people popping up absolutely[br]everywhere. 0:46:25.950,0:46:30.319 VOICEOVER: That's the way to change what we[br]have, take all power and all freedoms away 0:46:30.319,0:46:34.809 from the people and collect everything into[br]the hands of one small group with absolute 0:46:34.809,0:46:44.150 power. From the people, without the people,[br]against the people. 0:46:44.150,0:46:47.510 What's been interesting out of all this I[br]suppose is the question of democracy that's 0:46:47.510,0:46:51.960 been opened up very starkly in Europe, that[br]you have a government of bankers essentially 0:46:51.960,0:46:56.450 imposed on you. Its bankers who more or less[br]got us into this mess to put it rather crudely 0:46:56.450,0:47:00.760 but that's a good first approximation to it[br]and then you say, ok, bankers are the people 0:47:00.760,0:47:04.049 who therefore are going to get us out of it[br]and incidentally there going to run your country 0:47:04.049,0:47:07.670 now. There's a serious question of democracy[br]that has opened up here. 0:47:07.670,0:47:16.520 By the way, the banking crisis drove more[br]than a 100 million people back into poverty. 0:47:16.520,0:47:23.380 The mortality statistics of people who go[br]into poverty rise hugely for a whole range 0:47:23.380,0:47:29.010 of reasons, so the banking crisis isn't just[br]about becoming poorer, it was about killing 0:47:29.010,0:47:35.089 people as well. And guess what? We haven't[br]really got to the bottom of it, we never held 0:47:35.089,0:47:39.599 anybody to account and we haven't done the[br]radical reforming job that we really needed 0:47:39.599,0:47:47.130 to do because we mistakenly thought: if we[br]destabilise the position any further, it'll 0:47:47.130,0:47:53.079 make matters worse and guess who took the[br]decisions, all the people who were there in 0:47:53.079,0:47:54.520 the first place. 0:47:54.520,0:48:04.049 "I think you ought to know, the business of[br]one of these businessmen is murder." 0:48:04.049,0:48:23.000 "Their weapons are modern, their thinking:[br]two thousand years out of date." 0:48:23.000,0:48:26.910 What does a progressive financial system look[br]like? And I want to hear what some of you 0:48:26.910,0:48:33.529 think. Who thinks, for example, that we should[br]ban banks from creating money? 0:48:33.529,0:48:38.559 Control over how money is created and what[br]it's used for is, it's a democratic issue. 0:48:38.559,0:48:44.299 You currently have the banking sector, profit[br]seeking banking sector, you know, not accountable 0:48:44.299,0:48:51.000 to anybody other than themselves who are creating[br]up to 200 billion pounds a year of new spending 0:48:51.000,0:48:54.220 power and deciding where in the economy that[br]goes. 0:48:54.220,0:48:59.609 Monetary reformers believe that that entire[br]money supply should be for the benefit of 0:48:59.609,0:49:06.069 the public and should never be created by[br]a private organisation as debt. 0:49:06.069,0:49:12.869 Democratising the money supply, what that[br]means is putting the power to issue and allocate 0:49:12.869,0:49:21.490 money back into hands of people and taking[br]it away from private organisations, institutions 0:49:21.490,0:49:26.490 that don't actually represent the people,[br]that aren't democratically accountable to 0:49:26.490,0:49:30.549 the people, the banks aren't democratically[br]accountable to the people; they're accountable 0:49:30.549,0:49:35.890 to their shareholders and their shareholders[br]only. Now they're underwritten by us, by the 0:49:35.890,0:49:40.210 taxpayer but they're not accountable to us.[br]That doesn't make any sense at all. So, if 0:49:40.210,0:49:47.740 you democratise the monetary system, you are[br]subjecting it to the same kinds of discipline 0:49:47.740,0:49:56.059 as the education system, as the health service[br]and other key, publicly needed services. There 0:49:56.059,0:50:02.680 is no reason that money should be viewed as[br]any different. It is a fundamentally important 0:50:02.680,0:50:09.230 service that everybody needs. I can't survive[br]without enough money, nobody can. So it cannot 0:50:09.230,0:50:16.099 be controlled purely by this small elite of[br]big banks, as it is in the UK. We do need 0:50:16.099,0:50:17.950 a different system. 0:50:17.950,0:50:23.890 We believe that the activity of supplying[br]a nation with money should be completely separate 0:50:23.890,0:50:26.599 from the activity of banking. 0:50:26.599,0:50:33.730 What we need to do now is update that law[br]from 1844 to make the digital money [into] 0:50:33.730,0:50:38.740 real money. It could be electronic money,[br]but it needs to be classified as money. 0:50:38.740,0:50:45.510 We just want banks to be like every other[br]private organisation, private company in the 0:50:45.510,0:50:48.529 economy to be subject to market discipline. 0:50:48.529,0:50:54.369 The problem is that now we're in this hybrid[br]model where we have no control over how they 0:50:54.369,0:51:00.920 spend the money, but also we're reliant on[br]them to create our money. 0:51:00.920,0:51:05.190 We're all constantly in debt, we'll be in[br]debt pretty much for the rest of our lives 0:51:05.190,0:51:10.270 and the younger generations have it even worse[br]than the older generations. 0:51:10.270,0:51:14.279 I've just been reading a report from the United[br]Nations environment programme and they say 0:51:14.279,0:51:22.900 we need US$2 trillion a year. Two trillion[br]- can you imagine what two trillion is? It's 0:51:22.900,0:51:28.750 a lot of money. $2 trillion a year to finance[br]the greening of the economy, to move away 0:51:28.750,0:51:33.890 from poisonous carbon which is poisoning the[br]atmosphere to alternatives to carbon. 0:51:33.890,0:51:42.279 When the banks collapsed in 2007-9, we found[br]according to the Bank of England, not me, 0:51:42.279,0:51:48.650 the Bank of England tells me that we raised[br]14 trillion dollars in a year to bail out 0:51:48.650,0:51:52.670 the banks so against that 2 trillion dollars[br]a year to bail out the ecosystem is no big 0:51:52.670,0:51:53.000 deal. 0:51:53.000,0:51:58.960 This kind of model doesn't make any sense[br]either from an orthodox free market perspective 0:51:58.960,0:52:04.670 because these banks are monopolists effectively[br]they monopolise credit creation so they don't 0:52:04.670,0:52:10.170 obey the rules of any free market discipline.[br]Yet at the same time, they are not producing 0:52:10.170,0:52:18.569 socially or environmentally beneficial outcomes[br]along any real scale. 0:52:18.569,0:52:24.779 All that money does is to enable us to do[br]what we can do and once we get our heads around 0:52:24.779,0:52:30.309 that we can make money work for what we need. 0:52:30.309,0:52:37.839 The power to create money is so powerful;[br]you got to be very concerned about who has 0:52:37.839,0:52:42.760 that power. If it's somebody who's going to[br]benefit from creating the money, then they're 0:52:42.760,0:52:46.630 going to have the incentive to create more[br]than the economy actually needs. The same 0:52:46.630,0:52:50.440 would probably happen if you give that power[br]to politicians. You know you can't trust a 0:52:50.440,0:52:57.670 politician to be trying to please voters and[br]to have power over creating money at the same 0:52:57.670,0:53:04.049 time. It's a real conflict of interest. The[br]only thing you really can do is to give it 0:53:04.049,0:53:09.970 to somebody who has no conflict of interest,[br]an independent, transparent, accountable body. 0:53:09.970,0:53:15.660 NARRATOR: Money could be allocated according[br]to the needs and desires of the population, 0:53:15.660,0:53:20.220 systems could be put in place to allow for[br]direct democratic allocation of funds either 0:53:20.220,0:53:26.529 wholly or partially. A framework and rules[br]could be established to incorporate up to 0:53:26.529,0:53:34.589 date economic theory into how much money should[br]be created, and for what types of purposes. 0:53:34.589,0:53:38.520 The Government would no longer be able to[br]get access to large sums of money to pursue 0:53:38.520,0:53:44.010 armed conflict, if this was not sanctioned[br]by the populace. 0:53:44.010,0:53:49.010 We would be able to see exactly what they're[br]doing with the power to create money. We would 0:53:49.010,0:53:54.140 be able to see how much they're creating and[br]where that money is going. And that is pretty 0:53:54.140,0:53:58.380 much the only way we can get control over[br]the power to create money and stop it being 0:53:58.380,0:53:58.829 abused. 0:53:58.829,0:54:06.640 The Money Reform Party was established in[br]2005 just after the 2005 general election. 0:54:06.640,0:54:13.819 The idea of the Money Reform Party was that[br]we would have this basic core issue that people 0:54:13.819,0:54:19.170 would agree with. They might disagree on other[br]issues, that's fair enough, there are different 0:54:19.170,0:54:23.990 ways of going about it but that was the idea[br]was to go for what you might call the lowest 0:54:23.990,0:54:31.539 common denominator to attract people with[br]disparate views. Getting elected to Parliament 0:54:31.539,0:54:39.079 is not the issue, it's getting the issue of[br]money reform into the public domain, so people 0:54:39.079,0:54:47.930 will begin to talk about it. 0:54:47.930,0:54:52.260 Banks should not be able to gamble with your[br]money without your permission, so what they 0:54:52.260,0:54:58.490 would need to do is to offer two types of[br]account: One is a safe, we call it a ‘transactions 0:54:58.490,0:55:01.769 account'. Put your money in there, the bank[br]doesn't lend it, they don't put it at any 0:55:01.769,0:55:06.069 risk whatsoever. The other is an investment[br]account where you put your money in for a 0:55:06.069,0:55:11.849 certain period of time and then the bank takes[br]that away and they invest it. What happens 0:55:11.849,0:55:17.319 when you use these two types of account is[br]that in the event that a bank fails, the money 0:55:17.319,0:55:22.549 in the safe account is still there, it's not[br]at risk. So you just move all the safe accounts 0:55:22.549,0:55:26.539 to a bank that is still healthy and then those[br]people who put their money in the investment 0:55:26.539,0:55:31.880 account, they don't lose everything but they[br]have to wait for the standard liquidation 0:55:31.880,0:55:38.089 procedures to find out how much of the assets[br]of the banks will be returned to them and 0:55:38.089,0:55:41.750 it means that the government then never needs[br]to bail out a bank. Banks can be allowed to 0:55:41.750,0:55:43.049 fail. 0:55:43.049,0:55:46.220 The system would actually be how people think[br]it is, that when you put your money in the 0:55:46.220,0:55:51.329 bank, it's really safe or at least they used[br]to think perhaps before the 2008 crisis. There's 0:55:51.329,0:55:56.789 a spectrum of opportunities there that we're[br]just not exploring at the moment and that's 0:55:56.789,0:56:01.900 what's upsetting me that we're not even experimenting[br]when we know that the system we have now is 0:56:01.900,0:56:08.470 fundamentally flawed. We've just had the biggest[br]crisis since the second world war, since the 0:56:08.470,0:56:13.680 1930's really. We know we have a system where[br]the creators of money are underwritten by 0:56:13.680,0:56:18.309 us anyway. It's kind of the worst of both[br]worlds the situation we have at the moment 0:56:18.309,0:56:22.039 which is why we need to start thinking of[br]genuine alternatives. 0:56:22.039,0:56:27.160 So when we're talking about what life is going[br]to be like in the post reformed system, it 0:56:27.160,0:56:31.369 doesn't mean that you can't borrow, it doesn't[br]mean that you have to save up for 50 years 0:56:31.369,0:56:35.619 before you can buy a house. It does mean that[br]you might not be able to buy a house that's 0:56:35.619,0:56:40.109 10 or 12 times your income but on the flip[br]side, it means that the house that you want 0:56:40.109,0:56:45.750 to buy probably shouldn't cost you 10 or 12[br]times your income. Houses should be affordable 0:56:45.750,0:56:50.440 as should everything else. You'll still be[br]able to get a mortgage; you'll still be able 0:56:50.440,0:56:58.609 to get finance for a car. Businesses will[br]still get investment. It just means that debt 0:56:58.609,0:57:08.019 won't be so high, it won't be such a huge[br]feature of people's lives. 0:57:08.019,0:57:18.430 NARRATOR: The issue of monetary reform has[br]historically been a very sensitive issue because 0:57:18.430,0:57:24.980 of the incredible power, wealth and privileges[br]it bestows. In an age where analytic thought 0:57:24.980,0:57:30.450 and a scientific approach are held in such[br]high esteem, there is no justifiable argument 0:57:30.450,0:57:37.289 for keeping the mechanics and implications[br]of the monetary process such a taboo subject. 0:57:37.289,0:57:42.900 As democratic citizens we have the right to[br]demand a monetary system, which is both stable 0:57:42.900,0:57:45.569 and beneficial to society 0:57:45.569,0:57:51.750 The banking lobby is very powerful. I suspect[br]that they won't be in favour of these kinds 0:57:51.750,0:57:57.450 of models although ultimately one could argue[br]that's it's a much more stable footing for 0:57:57.450,0:57:58.400 banks. 0:57:58.400,0:58:02.369 There's this cosy relationship between the[br]government and the banks. In the middle of 0:58:02.369,0:58:07.980 the crisis, I spoke to somebody who was working[br]in the Treasury in the middle of the crisis 0:58:07.980,0:58:12.260 and he said pretty much every second person[br]that you spoke to was working for one of the 0:58:12.260,0:58:16.660 big banks. So when it comes to a decision[br]about whether you let one of these toxic banks 0:58:16.660,0:58:24.230 fail or whether you rescue it, what kind of[br]recommendation are you going to get from somebody 0:58:24.230,0:58:25.589 who works in that bank. 0:58:25.589,0:58:29.329 "This is the zombie banks' protected feeding[br]station." 0:58:29.329,0:58:35.019 NARRATOR: Banks balance sheets are now 4 times[br]GDP at 6 trillion pounds; they are holding 0:58:35.019,0:58:39.869 the public hostage. Their wealth has become[br]so great through gaming the financial system 0:58:39.869,0:58:44.559 that we are at a tipping point whereby a single[br]bank could now take down the entire economy. 0:58:44.559,0:58:52.930 "Eat her, eat her now, eat her, she's a public[br]sector worker, eat her, suck her blood, drink 0:58:52.930,0:58:54.410 her dry!" 0:58:54.410,0:59:01.089 It is a political issue, ultimately, because[br]the reforms that are required can only be 0:59:01.089,0:59:06.950 achieved by Parliament. We don't need a very[br]big act of Parliament. All it has to do is 0:59:06.950,0:59:14.079 basically prevent the clearing banks from[br]creating currency based on the debt of their 0:59:14.079,0:59:17.859 borrowers, that's it. You stop that. 0:59:17.859,0:59:22.549 We can't let the banks go back to business[br]as usual because if they do, then all we're 0:59:22.549,0:59:29.619 going to see is more debt, more poverty, more[br]inequality and another crisis in 5 or 10 years, 0:59:29.619,9:59:59.000 which we're going to have to pay for again.