The Solution Begins With Glass–Steagall
If Positive Money is not the answer, what can we do? The solution is actually not that hard.
We must begin with full Glass–Steagall [repealed in 1999] style banking separation now, today. Not this ring fencing nonsense being pushed by Mervyn King and George Osborne.
Article | December 2, 2011 - 12:00pm | By Mike Robinson
An analogy suggested to me, which I think is perfect, is to compare the financial system to a ship. Naval architects invented watertight compartments in order to stop the ship sinking when holed. Full separation of retail and investment banking is equivalent to the watertight compartments, and is the only way to guarantee the ship won’t sink. The ring fence idea is not watertight: there’s a gap at the top, just like with the “unsinkable” Titanic.
Shipbuilding, by Charles Mabey, 1878; old National Provincial Bank of England,
15 Bishopsgate (corner of Threadneedle Street), City of London
15 Bishopsgate (corner of Threadneedle Street), City of London
If we were to separate the retail and investment banks in this way, the next step should be to look at the legitimacy of the “national” debt outstanding. I think we would find ourselves in the position that we could class 95% of the debt as gambling debt which we do not honour; and as a result of Glass–Steagall, we could do that quite safely without risk to the economy or the retail banking sector. The investment banking sector would be permitted to sort out its own problems at this point. This is their biggest fear.
Then, as Positive Money demands, we look at how money is created, and (re)claim that process as a sovereign act. Then perhaps, with the correct consideration about how that was done, we would find we have no shortage of money to rebuild the nation.
Since, as a result of writing off illegitimate national debt, we are now free of all the interest payments to City of London parasites, we can use our new sovereign capability to create interest-free money to rebuild the nation, beginning with the real economic infrastructure we need to support a healthy economy – power, water, transport, plus health and education. This new credit would be issued in the form of loans to companies in the private sector, at a very low interest rate – repayable to the nation, not to a private bank. This credit would only be used for very large-scale productive activities, which become the driver for the wider real economy.
There will still be some pain for us – the small matter of a £2 trillion hole in the public sector pension pot, and a similarly-sized hole in the national pension pot that we are all entitled to tap into. This money was stolen by the Blair/Brown governments. We also need to protect private pensions, currently invested in the global casino and losing money hand over fist; and savings.
Somewhere in there we need to shut down this parasite called the “Bank of England” which, as already discussed, is nothing whatever to do with England or Britain. Instead we would set up a national bank operating in the national interest, with full oversight and accountability.And finally, we need to sort out the retail banking sector itself. For this we need a Lawful Bank.
The Problem With Positive Money
Positive Money bills itself as “a simple solution to the debt crisis”. With a cursory glance, it might appear to be making some of the right noises. On closer inspection, however, there’s just nothing there.
Article | December 2, 2011 - 11:46am | By Mike Robinson
Positive Money states that it wants three things:
1. Make banks ask our permission before they gamble with our money.
Positive Money suggests that banks offer two main types of account: a “bombproof” safe account, where money will not be lent to third parties and where money is immediately available; and an “investment account”, where customers can elect to have their money invested in return for an interest payment. They say that this “simple change” will give us “absolute protection” from having to ever bail out another bank.
2. Banks should tell us how they’ll use our money.
Positive Money argues that we should have the right to tell the banks how they invest our money. They claim this imposes limits on what banks can do with our money; they would be unable to gamble on financial markets at all without consent, and we could opt out of certain sectors, such as the arms trade.
3. We should remove the bankers’ licence to ‘print’ money; and use any newly created money for public benefit.
Positive Money rightly highlights the fact that commercial banks are currently using the fractional reserve banking system to create new money. They rightly point out that this is not a good thing. They argue that bankers have incentive to create as much money as they can in order to pay for bonuses and commissions.
But they argue that politicians can’t be trusted to do the job of money creation either: because, they argue, we would all end up with £1000 cheques as a bribe just prior to election time.
Positive Money argues that we should take this responsibility away from everyone, therefore, and hand it instead to the Monetary Policy Committee of the Bank of England – a body that they call “independent, accountable and transparent”.
Is That It?
It’s hard to see how Positive Money sees any of this as a solution. They are not proposing any fundamental changes at all. The first two proposals will do nothing to prevent banking bailouts, and do no more than offer the banks an alternative marketing strategy, as they sell their speculative activity in new ways. People will not stop saving money, and they will not hold their savings in the “bombproof” account at zero interest.
But the most nonsensical proposal here is handing over responsibility for money creation to the Bank of England, the bankers’ bank.
The Independence and Accountability of the Bank of England
The Bank of England is certainly independent, despite being wholly owned by the nation; the Bank’s shares are held by the Treasury Solicitor. However, the Bank is operationally completely independent from government, with no oversight or accountability outside of the notional requirement to keep inflation below 2%. In the event inflation exceeds 2%, the only sanction the government has at present is to require a letter from the Governor explaining why he’s such a naughty boy.
Paul Jenkins: HM Procurator General & Treasury Solicitor (2006- )
Juliet Wheldon: HM Procurator General & Treasury Solicitor (2000-06)
Anthony Hammond: HM Procurator General & Treasury Solicitor (1997-2000)
It might come as a surprise to many people that the “Bank of England” has many customers other than the British government. It wholly owns a subsidiary company, Bank of England Nominees Limited. This is a nominee company: it does not trade, but holds financial “assets” on behalf of Bank customers. The Queen’s financial assets are held by BOEN; but so are assets of other heads of state, private bankers and other governments.
The point of a nominee company is to hide trading activity. Say, for example, the Queen wants to sell her stockholding in M&S (if she has one). When that trade is done, the perceived owner is BOEN, and not the Queen – and trading activity is hidden.
At present, the nation has no way of knowing who the Bank’s customers are, what services it provides to them, or what holdings they have. This is just one of the Bank’s many Freedom of Information Act exemptions. So the Bank, which we might think has loyalty to the nation, may well have more loyalty to a foreign power, or a Rothschild.
We can’t know.
The Bank’s employees are not government employees. Yes, the nation is the only shareholder; but every Bank employee is a Bank employee, not a civil servant.
Mervyn King (Governor of the “Bank of England”, Chairman of the Monetary Policy Committee) and George Osborne (Bullingdon Club's UK Chancellor of the Exchequer)
The Bank’s Ability to Create Money
If that is not enough to convince you of the irrationality of Positive Money’s argument, this should be the clincher: the Bank of England already has the ability to create money!
Since 1844, the Bank has had the monopoly on printing pounds sterling. They do this upon receiving an instruction from the Treasury. However, only 3% of currency in circulation is issued in this way – and trading activity is hidden.
The other 97% of currency in circulation is issued as debt by commercial banks, with interest attached.
So the Bank, rather than operating in the national interest as is implied by the name, in fact acts as a broker between the government and private bankers who lend the nation its own national currency at interest. It does this by issuing gilt-edged bonds.
The Bank of England is not the bank of “England”. It is the bank of the City of London, operating in the interests of the City of London, covered in a veneer of nationalisation. Every central bank in the world operates in the same way. The central banking system, run by a banking oligarchy, considers itself sovereign over and above the nation state. Handing such an institution full control of our money supply would be an insane act.
“Bank of England” headquarters, Threadneedle Street, City of London
http://www.ukcolumn.org/article/problem-positive-money
http://www.ukcolumn.org/article/solution-begins-glass-steagall
