WEBVTT 00:00:02.470 --> 00:00:08.690 NARRATOR: How is money created, where does it come from? Who benefits? And what purpose 00:00:08.690 --> 00:00:09.730 does it serve? 00:00:09.730 --> 00:00:11.810 SHOUTING: Back off you f*ing Nazi! 00:00:11.810 --> 00:00:16.109 What is the money system? What is the money behind the money system? 00:00:16.109 --> 00:00:21.369 NARRATOR: For centuries the mechanics of the money system have remained hidden from the 00:00:21.369 --> 00:00:28.739 prying eyes of the populace. Yet its impact, both on a national and international level, 00:00:28.739 --> 00:00:36.210 is perhaps unsurpassed, for it is the monetary system that provides the foundations for international 00:00:36.210 --> 00:00:39.290 dominance and national control. 00:00:39.290 --> 00:00:43.250 CHANTING: Whose streets? Our streets! 00:00:43.250 --> 00:00:49.430 NARRATOR: Today, as these very foundations are being shaken by crises, the need for open 00:00:49.430 --> 00:00:55.240 and honest dialogue on the future of the monetary system has never been greater. 00:00:55.240 --> 00:00:59.850 This economic crisis is like a cancer. If you just wait and wait, thinking this is going 00:00:59.850 --> 00:01:03.990 to go away, just like a cancer it's going to grow, and it's going to be too late. What 00:01:03.990 --> 00:01:10.720 I would say to everybody is, get prepared. This is not a time right now for wishful thinking 00:01:10.720 --> 00:01:14.570 that the government is going to sort things out. The governments don't rule the world: 00:01:14.570 --> 00:01:16.680 Goldman Sachs rules the world. 00:01:16.680 --> 00:01:19.700 "We're on the verge of a perfect storm". 00:01:19.700 --> 00:01:25.830 NARRATOR: In opposition lie corrupt and entrenched interests that lurk in the corridors of power, 00:01:25.830 --> 00:01:32.000 for whom there are no reasons to relinquish privileges that they feel are justly deserved. 00:01:32.000 --> 00:01:38.000 DAVID CAMERON: Has he got a reform plan for the NHS? [SHOUT: No!] Has he got a police 00:01:38.000 --> 00:01:41.820 reform plan? [No!] Has he got a plan to cut the deficit? [No!] 00:01:41.820 --> 00:01:58.409 SPEAKER OF THE HOUSE OF COMMONS: Order! Misorder! Order! Try to calm down and behave like an 00:01:58.409 --> 00:02:04.780 adult, and if you can't, if it's beyond you, leave the chamber. Get out. We'll manage without 00:02:04.780 --> 00:02:06.310 you! 00:02:06.310 --> 00:02:09.310 "This is the zombie banks' protected feeding station." 00:02:09.310 --> 00:02:14.830 There's no coincidence that boom and bust became a real cyclical issue around about 00:02:14.830 --> 00:02:21.090 the 1700s when William Paterson founded the Bank of England. 00:02:21.090 --> 00:02:24.490 "Eat her! Eat her now!" 00:02:24.490 --> 00:02:31.980 SPEAKER OF THE HOUSE OF COMMONS: This is intolerable behaviour as far as the public is… No, it's 00:02:31.980 --> 00:02:41.060 not funny! Only in your mind is it funny. It's not funny at all, it's disgraceful. 00:02:41.060 --> 00:02:43.310 CHANTING: Revolution! Revolution! 00:02:43.310 --> 00:02:48.400 NARRATOR: The system is inherently unstable as a result of the international power it 00:02:48.400 --> 00:02:54.920 provides to the dominant parties, for at the heart of it lies the idea of ‘How can I 00:02:54.920 --> 00:02:57.640 get something for nothing'. 00:02:57.640 --> 00:03:03.730 Statistical analysis has found that every time an empire begins to near its own demise, 00:03:03.730 --> 00:03:06.680 you'll find that its currency will be debased. 00:03:06.680 --> 00:03:11.500 There is no guide to how this whole system operates. To give you an example, a researcher 00:03:11.500 --> 00:03:16.069 at the BBC working on a Robert Peston documentary went to the Bank of England and said, "Can 00:03:16.069 --> 00:03:21.780 you give me a guide to how money is created?" And they just said, "no". 00:03:21.780 --> 00:03:27.040 NARRATOR: This documentary will investigate and explain this ever changing system, and 00:03:27.040 --> 00:04:05.300 the impact it has both on a national and international level. 00:04:05.300 --> 00:04:12.330 In 2010 the total UK money supply stood at 2.15 trillion pounds. 00:04:12.330 --> 00:04:17.720 2.6 % of this total was physical cash, £53.5 billion. 00:04:17.720 --> 00:04:27.580 The rest, £2.1 trillion, or 97.4% of the total money supply was commercial bank money. 00:04:27.580 --> 00:04:36.370 The 3% of money is created through the central bank and that money essentially, if you created 00:04:36.370 --> 00:04:42.240 a £10 note you could sell that to a bank to put into their ATM and the bank would have 00:04:42.240 --> 00:04:48.370 to repay that £10 or buy it for £10. There would be no interest charged on that money 00:04:48.370 --> 00:04:56.410 but that money is then essentially transferred to the Treasury and it's a form of fundraising 00:04:56.410 --> 00:05:07.210 for the government. It's called seigniorage. 00:05:07.210 --> 00:05:13.280 When the Bank Of England creates a 10 pound note, it cost it about 3 or 4 pence to actually 00:05:13.280 --> 00:05:20.520 print that note and it sells it to a high street banks at face value, so 10 pounds, 00:05:20.520 --> 00:05:27.009 and the profit, the difference between printing the note and actually selling it for 10 pounds 00:05:27.009 --> 00:05:33.759 goes directly to the treasury. So, in effect all the profit that we get on creating physical 00:05:33.759 --> 00:05:40.910 money, bank notes, goes to the treasury and it reduces how much taxes we have to pay. 00:05:40.910 --> 00:05:44.410 Over the last 10 years, that's raised about 18 billion pounds. 00:05:44.410 --> 00:05:52.610 NARRATOR: In 1948 notes and coins constituted 17% of the total money supply. This was one 00:05:52.610 --> 00:05:58.090 contributing factor in the government's ability to finance post-war reconstruction. This included 00:05:58.090 --> 00:06:00.169 the establishment of the NHS. 00:06:00.169 --> 00:06:10.650 In only 60 years notes and coins have shrunk to less than 3 % 00:06:10.650 --> 00:06:18.150 Prior to 1844 bank notes were created by private banks and the government did not profit from 00:06:18.150 --> 00:06:20.860 their creation. 00:06:20.860 --> 00:06:26.080 In the 1840s there was no law to stop banks from creating their own bank notes. So they 00:06:26.080 --> 00:06:33.509 used to issue paper notes as kind of a representative of what you had in the bank account. Instead 00:06:33.509 --> 00:06:37.889 of you taking your heavy metal coins out of the bank and then going and paying somebody 00:06:37.889 --> 00:06:42.490 with them you could get your paper which said how much money you had in the bank and you 00:06:42.490 --> 00:06:45.430 could give that to somebody and they could use that to go and get the heavy metal coins 00:06:45.430 --> 00:06:52.039 from the banks. Now overtime these paper notes became as good as money. People would use 00:06:52.039 --> 00:06:57.340 paper notes instead of going and getting real money from the bank and obviously as soon 00:06:57.340 --> 00:07:03.340 as the banks realised that what they were creating had become the dominant type of money 00:07:03.340 --> 00:07:08.120 in the economy, they realised that by creating more of it they could generate profits. They 00:07:08.120 --> 00:07:13.080 can just print up some new notes, lend it and get the interest on top of them. And they 00:07:13.080 --> 00:07:18.949 did that up until the 1840s. In the 1840s they pushed it just a little bit too far and 00:07:18.949 --> 00:07:26.110 that caused inflation, destabilised the economy. So in 1844, the conservative government of 00:07:26.110 --> 00:07:31.949 Robert Peel actually passed a law that took the power to create money away from the commercial 00:07:31.949 --> 00:07:36.490 banks and brought it back to the state. So since then the Bank of England has been the 00:07:36.490 --> 00:07:47.889 only organisation authorised to create paper notes. Since then everything has gone digital 00:07:47.889 --> 00:07:56.080 and what we now use as money is digital numbers that commercial banks can create out of nothing. 00:07:56.080 --> 00:08:03.210 The problem was that they did not include in that legislation the deposits, the demand 00:08:03.210 --> 00:08:11.509 deposits, held in banks by individuals or electronic forms of money which essentially 00:08:11.509 --> 00:08:17.440 what those demand deposits are. Today most of the money in circulation is electronic 00:08:17.440 --> 00:08:26.580 money, it's bank demand deposits that sit in our accounts. So in a way the legislation's 00:08:26.580 --> 00:08:35.729 got to catch up with the developments in electronic money and the way that banks actually operate. 00:08:35.729 --> 00:08:41.169 NARRATOR: Money held in bank accounts are called demand deposits. This is an accounting 00:08:41.169 --> 00:08:47.050 term the banks use when they create credit. Banks follow the same process when they create 00:08:47.050 --> 00:09:00.000 loans. All money held in bank accounts, is an accounting entry. 00:09:00.000 --> 00:09:05.989 The reality is now that most money is not paper and it's not metal coins, its digital. 00:09:05.989 --> 00:09:10.569 It's just numbers in a computer system. It's your Visa debit card, it's your electronic 00:09:10.569 --> 00:09:18.720 ATM card. It's this, its plastic. Its numbers in a computer system, you move money from 00:09:18.720 --> 00:09:25.379 one computer system to another, it's all a big database and this digital money is what 00:09:25.379 --> 00:09:29.819 we are now using to make payments with, it's what we actually use to run the economy. 00:09:29.819 --> 00:09:35.989 I think a lot of people in the UK probably think that the government or the central bank 00:09:35.989 --> 00:09:43.149 is in control of most money in circulation and issues new money into circulation, but 00:09:43.149 --> 00:09:49.540 that's not the case. It's private banks that create the vast majority of new money in circulation 00:09:49.540 --> 00:09:53.079 and also decide how it's allocated. 00:09:53.079 --> 00:10:02.499 NARRATOR: The official terminology for this accounting entry is commercial bank money. 00:10:02.499 --> 00:10:08.290 When banks issue loans to the public, they create new commercial bank money. When a customer 00:10:08.290 --> 00:10:15.779 repays a loan, commercial bank money is destroyed. The banks keep the interest, as profit. 00:10:15.779 --> 00:10:21.369 There's a lot of misconceptions about the way banks work. There was a poll done by the 00:10:21.369 --> 00:10:28.389 Cobden Centre where they asked people how they thought banks actually operated. Around 00:10:28.389 --> 00:10:32.720 30% of the public think that when you put your money into the bank it just stays there 00:10:32.720 --> 00:10:43.999 and its safe and you can understand why because every child has a piggy and you spend it. 00:10:43.999 --> 00:10:49.470 So a lot of people keep this idea of banking, it's somewhere safe to keep your money so that 00:10:49.470 --> 00:10:56.549 it's there whenever you need it. Another, the other 60% of people assume that when you 00:10:56.549 --> 00:11:00.629 put your money in that money is the same being moved across to somebody who wants to borrow 00:11:00.629 --> 00:11:06.660 it. So you have a pensioner who keeps saving money her entire life and then her life savings 00:11:06.660 --> 00:11:11.819 have been lent to some young people who want to buy a house. But actually banks don't work 00:11:11.819 --> 00:11:26.529 like that. 00:11:26.529 --> 00:11:33.499 At the moment in the UK money creation and control is largely in the hands of private 00:11:33.499 --> 00:11:43.079 banks. About 97 to 98% of money that's created is created as bank "debt money", you can call 00:11:43.079 --> 00:11:50.059 it, when banks issue money into circulation as loans essentially. This is a very poorly 00:11:50.059 --> 00:11:52.970 understood fact. 00:11:52.970 --> 00:11:59.910 It's not a conspiracy theory, it's not a crackpot theory, it's the way the Bank of England describes 00:11:59.910 --> 00:12:08.439 the process. When banks make loans they create new money. 00:12:08.439 --> 00:12:19.230 A few economists will realise the way the money system works but if you don't realise 00:12:19.230 --> 00:12:24.299 the way that money works and you think that everyone saving is going to work well for 00:12:24.299 --> 00:12:28.160 the economy. What really happens once you understand the way the money system works 00:12:28.160 --> 00:12:33.959 is that if everybody starts saving, the amount of money in the economy shrinks and we have 00:12:33.959 --> 00:12:38.709 a recession. So most economists don't have this full picture. They don't understand all 00:12:38.709 --> 00:12:46.649 the elements of the system. They rely on assumptions, on received knowledge without actually going 00:12:46.649 --> 00:12:52.999 into the details, and money is the centre of the economy. If you don't understand where 00:12:52.999 --> 00:12:59.999 it comes from, who creates it and when it gets created then how can you understand the 00:12:59.999 --> 00:13:05.679 entire economy? 00:13:05.679 --> 00:13:11.720 When the vast majority of money that we use now is not cash but its electronic money then 00:13:11.720 --> 00:13:15.569 whoever's creating the electronic money is getting the proceeds of creating that money 00:13:15.569 --> 00:13:19.329 and obviously creating electronic money is much more profitable than creating cash because 00:13:19.329 --> 00:13:25.790 you don't have any production cost at all. So while we've got £18 billion over the course 00:13:25.790 --> 00:13:33.619 of the decade in profit from creating cash, the banks have actually created £1.2 trillion. 00:13:33.619 --> 00:13:40.959 Between 1998 and 2007 the UK money supply tripled. £1.2 trillion pounds was created 00:13:40.959 --> 00:13:48.569 by banks, whilst £18 billion was created by the Treasury. 00:13:48.569 --> 00:13:52.540 A lot of people think when I say this or when you say this or when Positive Money say this 00:13:52.540 --> 00:13:58.529 that we are all a bunch of nutters. But on the 9th of March in 2009, the governor of 00:13:58.529 --> 00:14:04.429 the Federal Reserve, Ben Bernanke gave the first ever broadcast interview, the governor 00:14:04.429 --> 00:14:09.660 of the central bank of the United States of America had ever given and the day before 00:14:09.660 --> 00:14:16.709 that he bailed out AIG which is an insurance company, not even a bank actually to the tune 00:14:16.709 --> 00:14:22.000 of about a US$160 billion. So the journalist says to him: "Now Mr. Bernanke where did you 00:14:22.000 --> 00:14:25.989 get $160 billion to bail out AIG?" 00:14:25.989 --> 00:14:27.529 JOURNALIST: Is that tax money that the Fed is spending? 00:14:27.529 --> 00:14:34.799 BERNANKE: It's not tax money. The banks have accounts with the Fed, much the same way that 00:14:34.799 --> 00:14:39.919 you have an account in a commercial bank. So to lend to a bank we simply use the computer 00:14:39.919 --> 00:14:45.149 to mark up the size of the account they have with the Fed. So it's much more akin, although 00:14:45.149 --> 00:14:49.399 not exactly the same, to printing money than it is to borrowing. 00:14:49.399 --> 00:14:56.540 I found that talking on the door step from August last year around to August 2009 around 00:14:56.540 --> 00:15:04.459 to general election 8-9 months I suppose knocking on the doors, is that we tried to explain 00:15:04.459 --> 00:15:13.019 how the money system works, there's an almost in-built refusal of people to accept that 00:15:13.019 --> 00:15:21.119 such a bizarre situation could actually exist. "Ah no, it can't possibly. What do you mean? 00:15:21.119 --> 00:15:25.569 It can't...banks can't...banks don't create money out of thin air. That's ridiculous. 00:15:25.569 --> 00:15:30.519 They can't do that. They lend out their depositors' money." Most people have an idea of how money 00:15:30.519 --> 00:15:36.959 is. They are used to their own way of handling money and they try and implement their own 00:15:36.959 --> 00:15:43.660 idea of how their small household economy works into the national economy. And of course 00:15:43.660 --> 00:15:48.049 it just doesn't work out, it just doesn't work out at all. 00:15:48.049 --> 00:15:53.299 NARRATOR: By 2008 the outstanding loan portfolio of bank created credit, also known as commercial 00:15:53.299 --> 00:15:57.759 bank money, stood at over £2 trillion. 00:15:57.759 --> 00:16:05.579 As recently as 1982 the ratio of notes and coins to bank deposits was 1:12. By 2010 the 00:16:05.579 --> 00:16:14.350 ratio had risen to 1:37, that is for every pound of treasury-created money, 00:16:14.350 --> 00:16:18.999 there were 37 pounds of bank-created money. 00:16:18.999 --> 00:16:25.549 In the 10 years prior to the 2007 crisis, the UK commercial bank money supply expanded 00:16:25.549 --> 00:16:28.579 by between 7 to 10% every year. 00:16:28.579 --> 00:16:35.399 A growth rate of 7% is the equivalent of doubling the money supply every 10 years. 00:16:35.399 --> 00:16:40.839 DYSON: The amount of money they're creating out of nothing is just incredible, £1.2 trillion 00:16:40.839 --> 00:16:47.079 in the last 10 years. That money is being distributed according to the priorities of 00:16:47.079 --> 00:16:51.929 the banking sector, not the priorities of society. 00:16:51.929 --> 00:17:02.919 The banking sector itself grew from 1980, $2.5 trillion to $40 trillion by assets. In 00:17:02.919 --> 00:17:09.649 1980, global bank assets were worth 20 times the then global economy. By 2006 they were 00:17:09.649 --> 00:17:13.110 worth 75 times according to the UN. 00:17:13.110 --> 00:17:20.220 NARRATOR: As the following chart shows, total bank assets of UK banks as a percentage of 00:17:20.220 --> 00:17:28.380 GDP remained relatively stable at 50-60%, up to the end of the 1960s. After that they 00:17:28.380 --> 00:17:29.990 shot up dramatically. 00:17:29.990 --> 00:17:35.259 And the real money in the world to be made today is not by producing anything at all. 00:17:35.259 --> 00:17:40.909 It's simply by forms of speculating. Basically, making money from money. That's the most profitable 00:17:40.909 --> 00:17:49.600 and by far and away the biggest form of economic activity that exists in the world today. 00:17:49.600 --> 00:17:56.990 NARRATOR: Today, banks are no longer restricted by how much they can lend, and as such how 00:17:56.990 --> 00:18:03.470 much new credit they can create out of nothing. They are restricted solely by their own willingness 00:18:03.470 --> 00:18:05.659 to lend. 00:18:05.659 --> 00:18:11.820 DYSON: The issue with allowing banks to create money, there's two main issues. Firstly, the 00:18:11.820 --> 00:18:17.190 fact that they create this money when they make loans. So it guarantees that we have 00:18:17.190 --> 00:18:20.929 to borrow all our money for the economy from the banks. 00:18:20.929 --> 00:18:25.779 NARRATOR: As such, to have a healthy, growing economy the government needs to put in place 00:18:25.779 --> 00:18:30.850 strategies to allow for ever-increasing debt. 00:18:30.850 --> 00:18:35.940 The only way the government can create additional purchasing power is by getting itself and 00:18:35.940 --> 00:18:37.720 us, into more debt. 00:18:37.720 --> 00:18:44.350 DYSON: The second big issue with allowing the banks to create money is that they have 00:18:44.350 --> 00:18:48.830 the incentive to always create more.  They create more money if they issue a loan. 00:18:48.830 --> 00:18:53.839 They get the bonuses, the commissions and the incentives to lend as much as possible. 00:18:53.839 --> 00:18:55.899 You have to develop a sales culture.  What 00:18:55.899 --> 00:19:01.019 did they do?  They recruited an amazing guy – a lovely guy – Andy Hornby, who came 00:19:01.019 --> 00:19:07.350 from Asda, to turn the bank into a supermarket retailing operation. 00:19:07.350 --> 00:19:10.320 If you trust bankers to control the money 00:19:10.320 --> 00:19:14.630 supply, the money supply will just grow and grow and grow, as will the level of debt, 00:19:14.630 --> 00:19:19.730 until the point where it crashes, when some people can't repay the debt and then they'll 00:19:19.730 --> 00:19:22.419 stop lending. 00:19:22.419 --> 00:19:26.690 You hear politicians and journalists saying, we've been living beyond our means; we've 00:19:26.690 --> 00:19:32.809 become dependent on debt.  We need to reign in our spending and live within our means. 00:19:32.809 --> 00:19:37.679 It's not possible in the current system.  The reason why everyone is in debt now is 00:19:37.679 --> 00:19:43.029 not because they have been recklessly borrowing.  We haven't borrowed all this money from an 00:19:43.029 --> 00:19:47.799 army of pensioners who've been saving up their whole lives.  Money in the current system 00:19:47.799 --> 00:19:53.539 is debt.  It's created when the banks make loans.  So the only way, in the current system, 00:19:53.539 --> 00:19:57.600 that we can have any money in the economy – the only way we can have money for business 00:19:57.600 --> 00:20:02.090 to trade – is if we've borrowed it all from the banks. 00:20:02.090 --> 00:20:06.379 And it's the very opposite of what the Tory 00:20:06.379 --> 00:20:11.429 Party is arguing today, which is that you have to create savings before you can help 00:20:11.429 --> 00:20:16.850 the National Health Service.  And it's because economists have completely confused those 00:20:16.850 --> 00:20:21.799 things, both in monetary policy terms, but also in economic thinking, and because most 00:20:21.799 --> 00:20:27.870 people still harbour the old fashioned view that you need savings before you can invest, 00:20:27.870 --> 00:20:34.000 that we have the mess that we're in today.  Now, one of the reasons why we find it difficult 00:20:34.000 --> 00:20:39.299 to understand the banking system and credit creation is that we leave school without any 00:20:39.299 --> 00:20:45.340 money and we go and get a job working as an apprentice to a plumber. We work really hard 00:20:45.340 --> 00:20:50.299 all month and at the end of the month somebody puts money in our bank, and so for us the 00:20:50.299 --> 00:20:55.850 logic is: you work and then you get money – you get savings.  In reality you would 00:20:55.850 --> 00:21:01.559 never have got that job if credit hadn't been created in the first instance.  It's a really 00:21:01.559 --> 00:21:09.419 important conceptual misunderstanding and it isn't something that the public just is 00:21:09.419 --> 00:21:11.829 guilty of.  Economists don't understand this stuff. 00:21:11.829 --> 00:21:13.610 ANNE BELSEY: Money doesn't just come out of 00:21:13.610 --> 00:21:18.299 economic activity.  A lot of people have come across - kind of assume - that if you 00:21:18.299 --> 00:21:24.820 have got businesses, and you've got people doing things, that somehow money somehow emerges 00:21:24.820 --> 00:21:29.779 out of the process of people doing things, making things and growing things, selling 00:21:29.779 --> 00:21:34.629 things and producing things, that somehow money just emerges.  It's not. It's like 00:21:34.629 --> 00:21:36.889 oiling a car. You have to put it in. 00:21:36.889 --> 00:21:42.860 When I see David Cameron talking about how we need an economy not based on debt, but 00:21:42.860 --> 00:21:47.679 we need an economy based on savings, he just doesn't know what he's saying.  It's ridiculous. 00:21:47.679 --> 00:21:53.659 It's absolutely absurd and it shows his complete lack of understanding of how our money system 00:21:53.659 --> 00:21:54.500 actually works. 00:21:54.500 --> 00:21:59.419 You know, it's a paradox under the current system.  If we as the public go into further 00:21:59.419 --> 00:22:03.190 debt, then that's going to put more money into the economy and we're going to have a 00:22:03.190 --> 00:22:07.360 boom.  When you have a boom, it's easier to borrow, so people get into even more debt. 00:22:07.360 --> 00:22:12.360 And eventually this cycle continues. It gets easier and easier to get into debt until some 00:22:12.360 --> 00:22:18.169 people get over-indebted and then they default.  They can't re-pay their mortgage.  That's 00:22:18.169 --> 00:22:25.580 what happened first in sub-prime America.  And then it brings through a wave of defaults, 00:22:25.580 --> 00:22:30.639 which will ripple across the entire economy.  The banks go insolvent.  Then we're into 00:22:30.639 --> 00:22:37.570 a financial crisis and then the banks stop lending.  They were excessively lending in 00:22:37.570 --> 00:22:43.080 the boom and then they stop lending and that makes the recession even worse.  People lose 00:22:43.080 --> 00:22:48.169 their jobs and then they become even more dependent on debt just to survive, basically. 00:22:48.169 --> 00:22:53.379 You know we have a system where we have to borrow in order to have an economy.  We have 00:22:53.379 --> 00:22:59.719 to be in debt to the banks.  That guarantees a massive profit for the banks. 00:22:59.719 --> 00:23:01.860 NARRATOR: This is the boom-bust cycle. 00:23:01.860 --> 00:23:12.320 GORDON BROWN: "And I've said before, Mr Deputy Speaker, no return to boom and bust." 00:23:12.320 --> 00:23:19.399 NARRATOR: Net bank lending must forever increase. 00:23:19.399 --> 00:23:24.210 We are paying interest on every single pound. 00:23:24.210 --> 00:23:28.659 Even if you think the money belongs to you, somebody somewhere is paying interest on that 00:23:28.659 --> 00:23:28.820 money. 00:23:28.820 --> 00:23:35.259 The banking system has such a huge impact on the world, but only because it supplies 00:23:35.259 --> 00:23:40.350 our nation's money supply.  We have to protect them. We have to subsidise them.  We have 00:23:40.350 --> 00:23:46.889 to allow them to continue, because the disaster of a bank collapse, affects us all in a huge 00:23:46.889 --> 00:23:52.249 way.  Anyone who says that we shouldn't have bailed out the banks doesn't quite understand 00:23:52.249 --> 00:23:57.720 the nature of our monetary system.  That's like eliminating a huge chunk of our money. 00:23:57.720 --> 00:24:03.870 But also, bailing out the banks is perpetuating a system which is never going to work anyway. 00:24:03.870 --> 00:24:08.620 So whatever we do, we are always going to have this cycle until we separate how money 00:24:08.620 --> 00:24:12.720 is created and the activities of banking.  Then the banks could do as they wish.  They'd 00:24:12.720 --> 00:24:15.389 be a normal business like everyone else. 00:24:15.389 --> 00:24:22.139 There's a major democratic issue here as well.  You have these private, profit-seeking banks 00:24:22.139 --> 00:24:26.759 creating up to 200 billion pounds a year and pumping that into the economy wherever they 00:24:26.759 --> 00:24:32.960 want, basically, wherever it suits them, whether they're pumping it into these toxic derivatives, 00:24:32.960 --> 00:24:38.499 or putting money into housing bubbles, just making housing more expensive.  200 billion 00:24:38.499 --> 00:24:44.889 pounds in 2007 of new money coming into the economy, created out of nothing; and where 00:24:44.889 --> 00:24:49.960 that gets spent determines the shape of our economy effectively.  So if we are going 00:24:49.960 --> 00:24:54.200 to allow anybody to create new money out of nothing, then we should at least have some 00:24:54.200 --> 00:24:59.190 democratic control over how that money's used.  I mean, would we rather have had that money 00:24:59.190 --> 00:25:03.789 used for health care, or to deal with some of the environmental issues, or to reduce 00:25:03.789 --> 00:25:07.929 poverty, or would we rather have it to make houses more expensive so none of us can afford 00:25:07.929 --> 00:25:13.830 to live in a house. 00:25:13.830 --> 00:25:22.049 You can see it as a subsidy, a special super subsidy to the banks, for the right to create 00:25:22.049 --> 00:25:28.320 money, which should be for the benefit of the public and spent through a democratic 00:25:28.320 --> 00:25:32.700 process. 00:25:32.700 --> 00:25:37.200 Banks are the most heavily subsidised businesses in the world, specially protected by governments. 00:25:37.200 --> 00:25:43.139 While the money runs out for the rest of us, the largest private banks still thrive. 00:25:43.139 --> 00:25:50.139 This is because they get the biggest subsidy of them all: the licence to print money. 00:25:50.139 --> 00:25:52.610 Hard to believe?  Martin Wolf, the Chief 00:25:52.610 --> 00:25:56.870 Economics Editor of the Financial Times, said it recently: "The essence of the contemporary 00:25:56.870 --> 00:26:02.529 monetary system is the creation of money out of nothing by private banks' often foolish 00:26:02.529 --> 00:26:03.840 lending…" 00:26:03.840 --> 00:26:09.960 You heard that right.  Private banks create money out of nothing.  Then, they loan it 00:26:09.960 --> 00:26:15.580 to us and ask for interest on top.  If you've ever wondered why the bank buildings around 00:26:15.580 --> 00:26:20.009 the world soar higher than any palace or spire ever did, you now have the answer. 00:26:20.009 --> 00:26:23.090 But the banks don't simply print money using 00:26:23.090 --> 00:26:27.559 secret printing presses in their basements.  They don't have to.  Like so many other things 00:26:27.559 --> 00:26:31.029 these days, printing money has now gone digital. 00:26:31.029 --> 00:26:36.279 With the popular use of debit cards, electronic fund transfers and internet banking, only 00:26:36.279 --> 00:26:43.580 3% of the money in the UK is now made of paper and metal coin.  The other 97% is entirely 00:26:43.580 --> 00:26:48.769 on computers.  Electronic money is convenient for everyone, but it's especially convenient 00:26:48.769 --> 00:26:56.089 for the private banks, since they own, run and control the entire digital money system. 00:26:56.089 --> 00:26:57.970 And what do they do with this special privilege? 00:26:57.970 --> 00:27:02.649 Do they channel new money, the blood supply of the nation, towards the things we need 00:27:02.649 --> 00:27:07.729 like hospitals, schools, universities and public transport? 00:27:07.729 --> 00:27:10.519 Not if it doesn't make a profit for them. 00:27:10.519 --> 00:27:15.889 Instead, they use their licence to print money to gamble on the financial markets and push 00:27:15.889 --> 00:27:20.370 house prices out of reach of ordinary people by pumping hundreds of billions of pounds 00:27:20.370 --> 00:27:26.980 into risky mortgages.  This is exactly how the banks caused the financial crisis and 00:27:26.980 --> 00:27:33.859 now the rest of us are being asked to pay for it. 00:27:33.859 --> 00:27:36.249 If we can't afford to run hospitals and build 00:27:36.249 --> 00:27:41.629 schools, can we really afford to subsidize the financial industry?  Should we have to 00:27:41.629 --> 00:27:44.320 live with less so the bankers can have more? 00:27:44.320 --> 00:27:51.269 This is ludicrous and it's time to put a stop to it.  The private banks can't be trusted 00:27:51.269 --> 00:27:54.320 to hold the reigns to our entire economy. 00:27:54.320 --> 00:27:59.090 We need to take away the banks' power to create money out of nothing.  This will stop them 00:27:59.090 --> 00:28:03.929 from causing yet another financial meltdown and allow us to afford the crucial services 00:28:03.929 --> 00:28:11.000 that we as a society need. 00:28:11.000 --> 00:28:17.419 If you want a growing economy, under the current set-up, we have to have growing debt.  This 00:28:17.419 --> 00:28:22.190 is something very, very few people really understand, especially the politicians who 00:28:22.190 --> 00:28:32.000 are managing the economy, which is a scary thought. 00:28:32.000 --> 00:28:33.990 NARRATOR: As the money supply grows, more 00:28:33.990 --> 00:28:40.519 money is available, which can be invested in productive avenues.  However, it can also 00:28:40.519 --> 00:28:57.000 be used to gamble and drive up asset prices. 00:28:57.000 --> 00:29:00.460 NARRATOR: Inflation is a rise in the general 00:29:00.460 --> 00:29:07.169 level of the prices of goods and services in an economy over a period of time.  When 00:29:07.169 --> 00:29:13.990 the general price level rises each unit of currency buys fewer goods and services. 00:29:13.990 --> 00:29:18.129 As the money supply grows, and there is more currency available, more money is available 00:29:18.129 --> 00:29:23.990 for investment, which can lead to growth, but more money is also available for purchases 00:29:23.990 --> 00:29:30.129 of goods and speculation, which leads to inflation. 00:29:30.129 --> 00:29:38.580 Essentially, inflation is what happens when too much money is chasing too few goods and 00:29:38.580 --> 00:29:46.049 services, so there is too much money for the actual output of the economy. 00:29:46.049 --> 00:29:49.350 In the seven years between the years 2000 00:29:49.350 --> 00:29:56.649 and 2007 the money supply doubled and the essential bank, the Bank of England was under 00:29:56.649 --> 00:29:59.539 the impression at this time that they had it under control, because they were saying 00:29:59.539 --> 00:30:03.169 that prices weren't going up that much.  Of course they were only looking at prices 00:30:03.169 --> 00:30:08.549 in your local corner shop.  They weren't looking at the price of housing and housing 00:30:08.549 --> 00:30:13.039 is the biggest expenditure that most people will make. 00:30:13.039 --> 00:30:17.230 Increasing house prices, it may make you feel 00:30:17.230 --> 00:30:24.600 like you're becoming wealthier, but as your wealth increases, the effect is that your 00:30:24.600 --> 00:30:29.899 children's wealth is actually decreasing.  So in fact there is no net gain in wealth, 00:30:29.899 --> 00:30:37.039 because your children are going to have to pay even more when they want to buy a house. 00:30:37.039 --> 00:30:40.840 So in effect, there is no net increase.  They are going to have to earn even more. 00:30:40.840 --> 00:30:47.889 They are going to have to go into even more debt.  So, rising house prices do not create 00:30:47.889 --> 00:30:53.509 additional net GDP value to the economy. 00:30:53.509 --> 00:30:58.869 Actually what they do, is re-distribute wealth towards those people who already have houses 00:30:58.869 --> 00:31:04.539 i.e. wealthier people and remove it from poorer people who can't afford to get on the housing 00:31:04.539 --> 00:31:10.149 ladder, so it's another example of a very regressive policy to allow house prices to 00:31:10.149 --> 00:31:16.600 simply inflate.  It makes everybody feel kind of like things are going well and people 00:31:16.600 --> 00:31:21.149 spend money on other stuff.  They take equity out of their houses.  But it's not creating 00:31:21.149 --> 00:31:27.059 new jobs.  It's not enhancing the quality of the economy.  It's not helping our balance 00:31:27.059 --> 00:31:33.720 of trade.  It's not helping the public deficit. It's a zero sum game. 00:31:33.720 --> 00:31:39.049 NARRATOR: As of August 2011, 85.5% of consumer 00:31:39.049 --> 00:31:43.049 bank lending was secured as mortgages on dwellings. 00:31:43.049 --> 00:31:48.169 If you have somebody creating money that can only be spent on one thing, which is housing, 00:31:48.169 --> 00:31:53.450 then the price of that thing is going to go up.  Between 2000 and 2010 they created over 00:31:53.450 --> 00:31:59.080 a trillion pounds of new money - 500 billion pounds just in the three years before the 00:31:59.080 --> 00:32:03.570 crisis.  That's why house prices went up they way they were.  There's nothing special 00:32:03.570 --> 00:32:07.720 about houses.  It was just all this funny money being pumped into that market. 00:32:07.720 --> 00:32:11.970 If money is spent into the economy, a lot 00:32:11.970 --> 00:32:17.840 of money goes into houses, for example into mortgages, that's an increase in the amount 00:32:17.840 --> 00:32:24.970 of money in the economy, without a corresponding increase in activity, in output, in GDP. 00:32:24.970 --> 00:32:34.389 It's non-GDP based spending.  That's what causes inflation.  In the UK we've had it 00:32:34.389 --> 00:32:42.110 in spades.  We've had this massive housing boom.  The main cause for the housing boom, 00:32:42.110 --> 00:32:49.000 in my opinion, is the huge amount of speculative credit created by the banks, to go into houses. 00:32:48.999 --> 00:32:56.119 If houses were cheaper, they would be easier to build.  More of them would be built. 00:32:56.119 --> 00:33:02.169 There would be less huge houses, with hardly any people in them.  London would not be 00:33:02.169 --> 00:33:08.789 the centre of a kind of very rich speculative orgy, where all the richest people in the 00:33:08.789 --> 00:33:13.669 world want to get a property in London, because it's seen as a great asset.  Houses would 00:33:13.669 --> 00:33:19.169 be seen as places to live primarily, rather than seen as places to invest.  The important 00:33:19.169 --> 00:33:24.889 thing to think about is, if you are a bank and you've got to make a loan, you have choices. 00:33:24.889 --> 00:33:33.169 You can give that loan to a small business and you'll know that the risk to you of that 00:33:33.169 --> 00:33:38.360 loan failing, defaulting, is actually quite high, because that small business, the owners 00:33:38.360 --> 00:33:43.629 of that business, have limited liability, which means if that business goes bust, you 00:33:43.629 --> 00:33:50.739 as a bank get nothing back, essentially.  So that's kind of high risk, compared to loaning 00:33:50.739 --> 00:33:56.299 your money to somebody with some collateral, with a house behind them, like a mortgage. 00:33:56.299 --> 00:33:58.970 So there's a simple incentive for banks to 00:33:58.970 --> 00:34:06.330 prefer putting money into housing than into a small business. Now that's a real problem 00:34:06.330 --> 00:34:12.559 if you widen that out across a whole economy, because it means there's an incentive to put 00:34:12.559 --> 00:34:17.740 money into speculative rather than productive investment.  So again, we have to think about 00:34:17.740 --> 00:34:23.520 how we create our monetary system that is more balanced between those two kinds of speculative 00:34:23.520 --> 00:34:30.159 and productive investment.  The government is showing enormous reluctance to regulate 00:34:30.159 --> 00:34:36.109 the housing market and to again regulate the amount of money that banks put into houses. 00:34:36.109 --> 00:34:38.559 We don't decide who creates credit for what. 00:34:38.559 --> 00:34:47.000 No, we leave that to a couple of chaps in a bank to decide, basically. 00:34:47.000 --> 00:34:56.000 Now, inflation can be avoided if the amount of money that goes into the economy is regulated 00:34:56.000 --> 00:35:03.049 in a way that it doesn't exceed the actual activity that's happening in the economy. 00:35:03.049 --> 00:35:09.450 Now, the best way to do that, in my opinion, is to make sure that money is issued into 00:35:09.450 --> 00:35:17.119 the economy only for productive investment, for productive goods and services, so money 00:35:17.119 --> 00:35:25.140 goes in to help a small business to start up which creates jobs, which creates additional 00:35:25.140 --> 00:35:33.369 purchasing power which means there's no inflation. You have to have a system where credit is 00:35:33.369 --> 00:35:39.680 put into productive avenues, where credit is put into building high speed rail links, 00:35:39.680 --> 00:35:45.569 where credit is put into building houses rather than giving people money to inflate the price 00:35:45.569 --> 00:35:54.150 of houses. So it's quite simple, really in that way, and the current system is simply 00:35:54.150 --> 00:35:58.299 set up not to do that, basically. 00:35:58.299 --> 00:36:03.540 The creation of money by private banks for non-productive usage causes real inflation 00:36:03.540 --> 00:36:15.349 and as such it is a tax on the purchasing power of the medium of exchange. 00:36:15.349 --> 00:36:23.030 The figures for the UK are quite stark actually, the average median real incomes (for the bit 00:36:23.030 --> 00:36:28.970 in the middle) for most people declined over the last 8 years. There are now in quite sharp 00:36:28.970 --> 00:36:33.900 decline as we go into recession, the sharpest really since, it looks like, since about the 00:36:33.900 --> 00:36:37.569 1930s, put it that way, so real income is declining. 00:36:37.569 --> 00:36:42.180 NARRATOR: Bank created fiat currency allows the private banks to suck wealth from the 00:36:42.180 --> 00:36:48.760 economy and over time results in a gradual decrease in the standard of living. As people 00:36:48.760 --> 00:36:55.450 become poorer, they become even more dependent on debt. And this at a time when efficiency 00:36:55.450 --> 00:36:58.059 and machination have improved dramatically. 00:36:58.059 --> 00:37:05.160 If you go back to the 1960's and we were expected to, we were looking forward to an age of leisure, 00:37:05.160 --> 00:37:11.400 television programmes saying, what are people going to do with their spare time? And now 00:37:11.400 --> 00:37:19.319 we have got more people working harder than ever. Spending more than ever, which looks 00:37:19.319 --> 00:37:25.720 great, you know, everyone is spending more, but if you're not actually benefitting from 00:37:25.720 --> 00:37:30.119 what you're spending, if you having to spend the money on childcare costs on commuting 00:37:30.119 --> 00:37:38.319 costs and so forth. Costs that people didn't in the past used to have to pay because you 00:37:38.319 --> 00:37:44.980 could walk to work and one member of the family was able to stay at home and be a permanent 00:37:44.980 --> 00:37:50.559 homemaker, then you're not actually any better off. Everyone is under such enormous pressures 00:37:50.559 --> 00:37:59.950 nowadays, you know, I am conscious that my four nephews and nieces are facing difficult 00:37:59.950 --> 00:38:09.589 times. They're just going to find themselves having to work very hard just to keep a roof 00:38:09.589 --> 00:38:13.480 over their heads, to get a roof over their heads. 00:38:13.480 --> 00:38:17.420 People are getting poorer in real terms, it's because prices are always going up because 00:38:17.420 --> 00:38:23.599 all this new funny money is being pumped into the system by the banks and they're creating 00:38:23.599 --> 00:38:28.059 all this debt so at the same time as prices are going up and things are getting more expensive, 00:38:28.059 --> 00:38:33.910 we're getting further and further into debt and our wealth and the return that we get 00:38:33.910 --> 00:38:38.500 from actually working is getting less and less all the time. You can't deal with poverty 00:38:38.500 --> 00:38:43.059 when you have a financial system and a money system that distributes money from the poor 00:38:43.059 --> 00:38:49.819 to the very rich; any distribution that you try and do in the opposite direction is effectively 00:38:49.819 --> 00:38:56.809 pissing in the wind. If you look at issues like increasing inequality, one obvious way 00:38:56.809 --> 00:39:02.630 to tackle inequality is to have, say for example, a redistributive tax system. You tax the rich, 00:39:02.630 --> 00:39:08.180 you give some money to the poor. You move a bit of money down the scale. That's all 00:39:08.180 --> 00:39:13.700 very well but if you completely overlook the fact that there's another redistributive system 00:39:13.700 --> 00:39:18.000 which is taking money from the poor and giving it to the rich, then you're not really going 00:39:18.000 --> 00:39:25.400 to tackle this inequality and the way a debt-based money system works, it guarantees that for 00:39:25.400 --> 00:39:29.040 every pound of money there's going to be a pound of debt. That debt is typically going 00:39:29.040 --> 00:39:35.299 to end up with the poor, the lower-middle classes, those people end up with the debt 00:39:35.299 --> 00:39:39.109 and they end up paying interest on that money which then goes back to the banking sector 00:39:39.109 --> 00:39:46.150 and gets distributed to the people working in the city or in Wall Street. What this system 00:39:46.150 --> 00:39:51.960 does overall is it distributes money from the poor to the rich essentially, distributes 00:39:51.960 --> 00:39:59.200 money from the poorer regions of the UK back to the City of London and it also distributes 00:39:59.200 --> 00:40:05.480 money from all the small businesses, all the little factories around the UK and distributes 00:40:05.480 --> 00:40:07.849 that money back into the financial sector. 00:40:07.849 --> 00:40:14.299 We have a system, where by, the activity of actually supplying occurs under the very same 00:40:14.299 --> 00:40:20.210 roof as the same organisation that is responsible for profiting from putting together borrowers 00:40:20.210 --> 00:40:28.720 and lenders i.e. a bank. So, a bank creates our nation's money supply as well as making 00:40:28.720 --> 00:40:30.960 loans for profit. 00:40:30.960 --> 00:40:35.740 NARRATOR: The government cannot allow the banking system to fail, because if it did, 00:40:35.740 --> 00:40:42.470 over 97% of all money would disappear. This is why in the event of a crisis, the risk 00:40:42.470 --> 00:40:48.910 is transferred to the taxpayer. But even during normal times banks receive numerous guarantees 00:40:48.910 --> 00:40:51.349 and benefits beyond the right to create money. 00:40:51.349 --> 00:40:56.569 Bill, by the way, I know the Bank of America is a very big bank, it happens that I have 00:40:56.569 --> 00:41:01.400 32 dollars there myself. Just between us what assurance do I have that this money is safe? 00:41:01.400 --> 00:41:08.380 Well, all deposits up to ten thousand dollars are insured by the federal government in Washington. 00:41:08.380 --> 00:41:14.609 That's my guarantee? Yes. Have you heard that the federal government is about 280 billion 00:41:14.609 --> 00:41:18.510 dollars in the hole? 00:41:18.510 --> 00:41:23.750 NARRATOR: Banks receive large safety nets from the government. The taxpayer guarantees 00:41:23.750 --> 00:41:30.660 £85,000 as deposit insurance. And the Bank of England provides liquidity insurance, in 00:41:30.660 --> 00:41:37.990 case a bank runs out of reserve currency. 00:41:37.990 --> 00:41:41.170 It's questionable whether we're going to get out of this recession or whether we'll just 00:41:41.170 --> 00:41:47.369 keep ticking along the way the way that we are now. However if we do, then when we come 00:41:47.369 --> 00:41:51.780 out of this recession and when growth starts again, look at what happens to debt, it will 00:41:51.780 --> 00:41:55.490 rise and it will keep rising and the faster the economy is growing, the faster the debt 00:41:55.490 --> 00:42:02.109 will rise and then give it another 3 to 5 years, we'll be back where we were, the debt 00:42:02.109 --> 00:42:06.589 will become too much, people will start defaulting again. It's kind of the system that we're 00:42:06.589 --> 00:42:11.559 locked into now is that we can't grow the economy without growing the debt and the debt 00:42:11.559 --> 00:42:15.950 is the very thing that will bring down the economy. The only option going forward is 00:42:15.950 --> 00:42:21.650 to reform it, to stop banks from creating money as debt. By fixing the monetary system 00:42:21.650 --> 00:42:26.670 we can prevent the banks from ever causing another financial crisis and we can also make 00:42:26.670 --> 00:42:33.289 the current public service cuts and the tax rises and the increase in national debt unnecessary. 00:42:33.289 --> 00:42:38.039 NARRATOR: The current monetary system allows the banking sector to extract wealth from 00:42:38.039 --> 00:42:43.700 the economy, whilst providing nothing productive in return. 00:42:43.700 --> 00:42:50.630 Why is it that we've got all this technology, all this new efficiency and yet it now requires 00:42:50.630 --> 00:42:56.930 two people to finance a household whereas in the 50's it only needed one person working 00:42:56.930 --> 00:43:02.250 and the reason for that is not because these washing machines and everything are more expensive, 00:43:02.250 --> 00:43:06.990 it's because of all the debt and because it's effectively the banking sector is creaming 00:43:06.990 --> 00:43:13.319 it off from everybody else. So a growing banking sector is not a good thing. If the banking 00:43:13.319 --> 00:43:17.799 sector is growing, it's either that it's becoming less efficient or it's becoming a parasite 00:43:17.799 --> 00:43:24.770 on the rest of the economy. We can talk about the banking sector becoming 4%, 5%, 6% of 00:43:24.770 --> 00:43:30.539 GDP, what's happening to the rest of the economy? It's becoming 96, 95, 94% of GDP. We've got 00:43:30.539 --> 00:43:36.270 to get switched on to this now. If we want to have a chance of tackling any of the other 00:43:36.270 --> 00:43:38.940 big social issues, you got to figure out the money issue. 00:43:38.940 --> 00:43:46.559 The poorest in the world pay for crises even when they've not benefitted from the often 00:43:46.559 --> 00:43:52.069 reckless and speculative booms, like the housing boom in Ireland that preceeded that crisis. 00:43:52.069 --> 00:43:58.130 You know over the last 30 years, we've seen income differentials increase so that the 00:43:58.130 --> 00:44:02.420 rich have got much, much richer and ordinary people haven't, they've stayed the same or 00:44:02.420 --> 00:44:07.650 they've got poorer and one of the ways that the economy was kept going was by providing 00:44:07.650 --> 00:44:12.089 cheap credit, was by providing debt to those very people who couldn't really afford things 00:44:12.089 --> 00:44:18.720 anymore, so they kept buying and when it collapses it's those same people that have to pay once 00:44:18.720 --> 00:44:22.869 again even though in many ways there were the victims the first time. 00:44:22.869 --> 00:44:28.680 NARRATOR: As a result of the crisis the Bank of England has bought corporate debt and repackaged 00:44:28.680 --> 00:44:34.520 it at lower rates of interest. Yet the average person is being asked to pay more than ever 00:44:34.520 --> 00:44:38.480 to borrow on overdrafts and credit cards. 00:44:38.480 --> 00:44:44.530 Debts between the very wealthy or between governments can always be renegotiated and 00:44:44.530 --> 00:44:49.559 always have been throughout world history, there not anything set in stone. Generally 00:44:49.559 --> 00:44:53.559 speaking, when you have debts owed by the poor to the rich that's suddenly, debts become 00:44:53.559 --> 00:44:58.430 a sacred obligation more important than anything else. The idea of renegotiating them becomes 00:44:58.430 --> 00:44:59.799 unthinkable. 00:44:59.799 --> 00:45:05.789 NEWSREADER: Can you pin down exactly what would keep investors happy, make them feel 00:45:05.789 --> 00:45:12.049 more confident? ALESSIO RASTANI: That's a tough one, personally 00:45:12.049 --> 00:45:16.030 it doesn't matter, see I'm a trader, I don't really care about that kind of stuff. 00:45:16.030 --> 00:45:17.170 CHANTING: Pay your taxes! 00:45:17.170 --> 00:45:19.450 BANKER TO PROTESTER: "Were you born in England?" 00:45:19.450 --> 00:45:24.359 ALESSIO RASTANI: If I see an opportunity to make money, I go with that. For most traders, 00:45:24.359 --> 00:45:28.230 we don't really care that much how they're going to fix the economy, how they're going 00:45:28.230 --> 00:45:34.789 to fix the whole situation, our job is to make money from it and personally I've been 00:45:34.789 --> 00:45:39.119 dreaming about this moment for three years. If you know what to do, you can make a lot 00:45:39.119 --> 00:45:44.250 of money from this. I have a confession which is, I go to bed every night I dream of another 00:45:44.250 --> 00:45:48.809 recession, I dream of another moment like this. I dream of another recession, I dream 00:45:48.809 --> 00:45:55.000 of another moment like this. You can make a lot of money from it. 00:45:55.000 --> 00:46:00.880 GIRL: Bruno, Virginia hurt somebody real bad, you oughtta hate her . 00:46:00.880 --> 00:46:02.999 CROWD: Incoming! 00:46:02.999 --> 00:46:09.710 The way in which you can look across Europe now and see that the new prime minister of 00:46:09.710 --> 00:46:14.470 Greece, not elected, essentially imposed, Papademous, former employee of Goldman Sachs, 00:46:14.470 --> 00:46:18.510 the new prime minister and finance minister of Italy, Mario Monti, former employee of 00:46:18.510 --> 00:46:23.520 Goldman Sachs, the new president of the European Central Bank, former employee of Goldman Sachs, 00:46:23.520 --> 00:46:25.950 you see these people popping up absolutely everywhere. 00:46:25.950 --> 00:46:30.319 VOICEOVER: That's the way to change what we have, take all power and all freedoms away 00:46:30.319 --> 00:46:34.809 from the people and collect everything into the hands of one small group with absolute 00:46:34.809 --> 00:46:44.150 power. From the people, without the people, against the people. 00:46:44.150 --> 00:46:47.510 What's been interesting out of all this I suppose is the question of democracy that's 00:46:47.510 --> 00:46:51.960 been opened up very starkly in Europe, that you have a government of bankers essentially 00:46:51.960 --> 00:46:56.450 imposed on you. Its bankers who more or less got us into this mess to put it rather crudely 00:46:56.450 --> 00:47:00.760 but that's a good first approximation to it and then you say, ok, bankers are the people 00:47:00.760 --> 00:47:04.049 who therefore are going to get us out of it and incidentally there going to run your country 00:47:04.049 --> 00:47:07.670 now. There's a serious question of democracy that has opened up here. 00:47:07.670 --> 00:47:16.520 By the way, the banking crisis drove more than a 100 million people back into poverty. 00:47:16.520 --> 00:47:23.380 The mortality statistics of people who go into poverty rise hugely for a whole range 00:47:23.380 --> 00:47:29.010 of reasons, so the banking crisis isn't just about becoming poorer, it was about killing 00:47:29.010 --> 00:47:35.089 people as well. And guess what? We haven't really got to the bottom of it, we never held 00:47:35.089 --> 00:47:39.599 anybody to account and we haven't done the radical reforming job that we really needed 00:47:39.599 --> 00:47:47.130 to do because we mistakenly thought: if we destabilise the position any further, it'll 00:47:47.130 --> 00:47:53.079 make matters worse and guess who took the decisions, all the people who were there in 00:47:53.079 --> 00:47:54.520 the first place. 00:47:54.520 --> 00:48:04.049 "I think you ought to know, the business of one of these businessmen is murder." 00:48:04.049 --> 00:48:23.000 "Their weapons are modern, their thinking: two thousand years out of date." 00:48:23.000 --> 00:48:26.910 What does a progressive financial system look like? And I want to hear what some of you 00:48:26.910 --> 00:48:33.529 think. Who thinks, for example, that we should ban banks from creating money? 00:48:33.529 --> 00:48:38.559 Control over how money is created and what it's used for is, it's a democratic issue. 00:48:38.559 --> 00:48:44.299 You currently have the banking sector, profit seeking banking sector, you know, not accountable 00:48:44.299 --> 00:48:51.000 to anybody other than themselves who are creating up to 200 billion pounds a year of new spending 00:48:51.000 --> 00:48:54.220 power and deciding where in the economy that goes. 00:48:54.220 --> 00:48:59.609 Monetary reformers believe that that entire money supply should be for the benefit of 00:48:59.609 --> 00:49:06.069 the public and should never be created by a private organisation as debt. 00:49:06.069 --> 00:49:12.869 Democratising the money supply, what that means is putting the power to issue and allocate 00:49:12.869 --> 00:49:21.490 money back into hands of people and taking it away from private organisations, institutions 00:49:21.490 --> 00:49:26.490 that don't actually represent the people, that aren't democratically accountable to 00:49:26.490 --> 00:49:30.549 the people, the banks aren't democratically accountable to the people; they're accountable 00:49:30.549 --> 00:49:35.890 to their shareholders and their shareholders only. Now they're underwritten by us, by the 00:49:35.890 --> 00:49:40.210 taxpayer but they're not accountable to us. That doesn't make any sense at all. So, if 00:49:40.210 --> 00:49:47.740 you democratise the monetary system, you are subjecting it to the same kinds of discipline 00:49:47.740 --> 00:49:56.059 as the education system, as the health service and other key, publicly needed services. There 00:49:56.059 --> 00:50:02.680 is no reason that money should be viewed as any different. It is a fundamentally important 00:50:02.680 --> 00:50:09.230 service that everybody needs. I can't survive without enough money, nobody can. So it cannot 00:50:09.230 --> 00:50:16.099 be controlled purely by this small elite of big banks, as it is in the UK. We do need 00:50:16.099 --> 00:50:17.950 a different system. 00:50:17.950 --> 00:50:23.890 We believe that the activity of supplying a nation with money should be completely separate 00:50:23.890 --> 00:50:26.599 from the activity of banking. 00:50:26.599 --> 00:50:33.730 What we need to do now is update that law from 1844 to make the digital money [into] 00:50:33.730 --> 00:50:38.740 real money. It could be electronic money, but it needs to be classified as money. 00:50:38.740 --> 00:50:45.510 We just want banks to be like every other private organisation, private company in the 00:50:45.510 --> 00:50:48.529 economy to be subject to market discipline. 00:50:48.529 --> 00:50:54.369 The problem is that now we're in this hybrid model where we have no control over how they 00:50:54.369 --> 00:51:00.920 spend the money, but also we're reliant on them to create our money. 00:51:00.920 --> 00:51:05.190 We're all constantly in debt, we'll be in debt pretty much for the rest of our lives 00:51:05.190 --> 00:51:10.270 and the younger generations have it even worse than the older generations. 00:51:10.270 --> 00:51:14.279 I've just been reading a report from the United Nations environment programme and they say 00:51:14.279 --> 00:51:22.900 we need US$2 trillion a year. Two trillion - can you imagine what two trillion is? It's 00:51:22.900 --> 00:51:28.750 a lot of money. $2 trillion a year to finance the greening of the economy, to move away 00:51:28.750 --> 00:51:33.890 from poisonous carbon which is poisoning the atmosphere to alternatives to carbon. 00:51:33.890 --> 00:51:42.279 When the banks collapsed in 2007-9, we found according to the Bank of England, not me, 00:51:42.279 --> 00:51:48.650 the Bank of England tells me that we raised 14 trillion dollars in a year to bail out 00:51:48.650 --> 00:51:52.670 the banks so against that 2 trillion dollars a year to bail out the ecosystem is no big 00:51:52.670 --> 00:51:53.000 deal. 00:51:53.000 --> 00:51:58.960 This kind of model doesn't make any sense either from an orthodox free market perspective 00:51:58.960 --> 00:52:04.670 because these banks are monopolists effectively they monopolise credit creation so they don't 00:52:04.670 --> 00:52:10.170 obey the rules of any free market discipline. Yet at the same time, they are not producing 00:52:10.170 --> 00:52:18.569 socially or environmentally beneficial outcomes along any real scale. 00:52:18.569 --> 00:52:24.779 All that money does is to enable us to do what we can do and once we get our heads around 00:52:24.779 --> 00:52:30.309 that we can make money work for what we need. 00:52:30.309 --> 00:52:37.839 The power to create money is so powerful; you got to be very concerned about who has 00:52:37.839 --> 00:52:42.760 that power. If it's somebody who's going to benefit from creating the money, then they're 00:52:42.760 --> 00:52:46.630 going to have the incentive to create more than the economy actually needs. The same 00:52:46.630 --> 00:52:50.440 would probably happen if you give that power to politicians. You know you can't trust a 00:52:50.440 --> 00:52:57.670 politician to be trying to please voters and to have power over creating money at the same 00:52:57.670 --> 00:53:04.049 time. It's a real conflict of interest. The only thing you really can do is to give it 00:53:04.049 --> 00:53:09.970 to somebody who has no conflict of interest, an independent, transparent, accountable body. 00:53:09.970 --> 00:53:15.660 NARRATOR: Money could be allocated according to the needs and desires of the population, 00:53:15.660 --> 00:53:20.220 systems could be put in place to allow for direct democratic allocation of funds either 00:53:20.220 --> 00:53:26.529 wholly or partially. A framework and rules could be established to incorporate up to 00:53:26.529 --> 00:53:34.589 date economic theory into how much money should be created, and for what types of purposes. 00:53:34.589 --> 00:53:38.520 The Government would no longer be able to get access to large sums of money to pursue 00:53:38.520 --> 00:53:44.010 armed conflict, if this was not sanctioned by the populace. 00:53:44.010 --> 00:53:49.010 We would be able to see exactly what they're doing with the power to create money. We would 00:53:49.010 --> 00:53:54.140 be able to see how much they're creating and where that money is going. And that is pretty 00:53:54.140 --> 00:53:58.380 much the only way we can get control over the power to create money and stop it being 00:53:58.380 --> 00:53:58.829 abused. 00:53:58.829 --> 00:54:06.640 The Money Reform Party was established in 2005 just after the 2005 general election. 00:54:06.640 --> 00:54:13.819 The idea of the Money Reform Party was that we would have this basic core issue that people 00:54:13.819 --> 00:54:19.170 would agree with. They might disagree on other issues, that's fair enough, there are different 00:54:19.170 --> 00:54:23.990 ways of going about it but that was the idea was to go for what you might call the lowest 00:54:23.990 --> 00:54:31.539 common denominator to attract people with disparate views. Getting elected to Parliament 00:54:31.539 --> 00:54:39.079 is not the issue, it's getting the issue of money reform into the public domain, so people 00:54:39.079 --> 00:54:47.930 will begin to talk about it. 00:54:47.930 --> 00:54:52.260 Banks should not be able to gamble with your money without your permission, so what they 00:54:52.260 --> 00:54:58.490 would need to do is to offer two types of account: One is a safe, we call it a ‘transactions 00:54:58.490 --> 00:55:01.769 account'. Put your money in there, the bank doesn't lend it, they don't put it at any 00:55:01.769 --> 00:55:06.069 risk whatsoever. The other is an investment account where you put your money in for a 00:55:06.069 --> 00:55:11.849 certain period of time and then the bank takes that away and they invest it. What happens 00:55:11.849 --> 00:55:17.319 when you use these two types of account is that in the event that a bank fails, the money 00:55:17.319 --> 00:55:22.549 in the safe account is still there, it's not at risk. So you just move all the safe accounts 00:55:22.549 --> 00:55:26.539 to a bank that is still healthy and then those people who put their money in the investment 00:55:26.539 --> 00:55:31.880 account, they don't lose everything but they have to wait for the standard liquidation 00:55:31.880 --> 00:55:38.089 procedures to find out how much of the assets of the banks will be returned to them and 00:55:38.089 --> 00:55:41.750 it means that the government then never needs to bail out a bank. Banks can be allowed to 00:55:41.750 --> 00:55:43.049 fail. 00:55:43.049 --> 00:55:46.220 The system would actually be how people think it is, that when you put your money in the 00:55:46.220 --> 00:55:51.329 bank, it's really safe or at least they used to think perhaps before the 2008 crisis. There's 00:55:51.329 --> 00:55:56.789 a spectrum of opportunities there that we're just not exploring at the moment and that's 00:55:56.789 --> 00:56:01.900 what's upsetting me that we're not even experimenting when we know that the system we have now is 00:56:01.900 --> 00:56:08.470 fundamentally flawed. We've just had the biggest crisis since the second world war, since the 00:56:08.470 --> 00:56:13.680 1930's really. We know we have a system where the creators of money are underwritten by 00:56:13.680 --> 00:56:18.309 us anyway. It's kind of the worst of both worlds the situation we have at the moment 00:56:18.309 --> 00:56:22.039 which is why we need to start thinking of genuine alternatives. 00:56:22.039 --> 00:56:27.160 So when we're talking about what life is going to be like in the post reformed system, it 00:56:27.160 --> 00:56:31.369 doesn't mean that you can't borrow, it doesn't mean that you have to save up for 50 years 00:56:31.369 --> 00:56:35.619 before you can buy a house. It does mean that you might not be able to buy a house that's 00:56:35.619 --> 00:56:40.109 10 or 12 times your income but on the flip side, it means that the house that you want 00:56:40.109 --> 00:56:45.750 to buy probably shouldn't cost you 10 or 12 times your income. Houses should be affordable 00:56:45.750 --> 00:56:50.440 as should everything else. You'll still be able to get a mortgage; you'll still be able 00:56:50.440 --> 00:56:58.609 to get finance for a car. Businesses will still get investment. It just means that debt 00:56:58.609 --> 00:57:08.019 won't be so high, it won't be such a huge feature of people's lives. 00:57:08.019 --> 00:57:18.430 NARRATOR: The issue of monetary reform has historically been a very sensitive issue because 00:57:18.430 --> 00:57:24.980 of the incredible power, wealth and privileges it bestows. In an age where analytic thought 00:57:24.980 --> 00:57:30.450 and a scientific approach are held in such high esteem, there is no justifiable argument 00:57:30.450 --> 00:57:37.289 for keeping the mechanics and implications of the monetary process such a taboo subject. 00:57:37.289 --> 00:57:42.900 As democratic citizens we have the right to demand a monetary system, which is both stable 00:57:42.900 --> 00:57:45.569 and beneficial to society 00:57:45.569 --> 00:57:51.750 The banking lobby is very powerful. I suspect that they won't be in favour of these kinds 00:57:51.750 --> 00:57:57.450 of models although ultimately one could argue that's it's a much more stable footing for 00:57:57.450 --> 00:57:58.400 banks. 00:57:58.400 --> 00:58:02.369 There's this cosy relationship between the government and the banks. In the middle of 00:58:02.369 --> 00:58:07.980 the crisis, I spoke to somebody who was working in the Treasury in the middle of the crisis 00:58:07.980 --> 00:58:12.260 and he said pretty much every second person that you spoke to was working for one of the 00:58:12.260 --> 00:58:16.660 big banks. So when it comes to a decision about whether you let one of these toxic banks 00:58:16.660 --> 00:58:24.230 fail or whether you rescue it, what kind of recommendation are you going to get from somebody 00:58:24.230 --> 00:58:25.589 who works in that bank. 00:58:25.589 --> 00:58:29.329 "This is the zombie banks' protected feeding station." 00:58:29.329 --> 00:58:35.019 NARRATOR: Banks balance sheets are now 4 times GDP at 6 trillion pounds; they are holding 00:58:35.019 --> 00:58:39.869 the public hostage. Their wealth has become so great through gaming the financial system 00:58:39.869 --> 00:58:44.559 that we are at a tipping point whereby a single bank could now take down the entire economy. 00:58:44.559 --> 00:58:52.930 "Eat her, eat her now, eat her, she's a public sector worker, eat her, suck her blood, drink 00:58:52.930 --> 00:58:54.410 her dry!" 00:58:54.410 --> 00:59:01.089 It is a political issue, ultimately, because the reforms that are required can only be 00:59:01.089 --> 00:59:06.950 achieved by Parliament. We don't need a very big act of Parliament. All it has to do is 00:59:06.950 --> 00:59:14.079 basically prevent the clearing banks from creating currency based on the debt of their 00:59:14.079 --> 00:59:17.859 borrowers, that's it. You stop that. 00:59:17.859 --> 00:59:22.549 We can't let the banks go back to business as usual because if they do, then all we're 00:59:22.549 --> 00:59:29.619 going to see is more debt, more poverty, more inequality and another crisis in 5 or 10 years, 00:59:29.619 --> 99:59:59.999 which we're going to have to pay for again.