12-year old Victoria Grant explains why her homeland, Canada, and most of the world, is in debt.

April 27, 2012 at the Public Banking in America Conference, Philadelphia, PA.

It’s been a very busy two weeks: the new documentary 97% Owned has been viewed over 65,000 times in 14 days. Below is an invitation to a very special cast-and-crew screening (with only 40 seats available) on June 26th, and there are screenings and meetups in Sheffield, Bristol, Powys and North Yorkshire.

In his blog, Simon writes:

If I was appointed to advise the new Greek parliament tomorrow, here is [...]]]> What I would tell Greece to do tomorrow if they asked – Simon Dixon presents three simple solutions for the financial crisis at the EBBF conference conference in London on excellence in banking.

In his blog, Simon writes:

If I was appointed to advise the new Greek parliament tomorrow, here is what I would advise them…

Firstly, get out of the Euro and default on any foreign debt. It is beyond control and the ECB (EG Big Germany) will take all your sovereignty and tell you how to run your country while stripping up all your countries assets and advise further austerity.

Once you have done this, time to re-build.

The Greeks are now faced with the perfect opportunity to be a pioneer for sustainable banking.

So second thing is, replace all the toxic debt based money created by banks, with debt free money.

Simply put, a newly appointed independent monetary authority creates debt free number money on a server.

You are simply replacing one form of money with another form, but without the interest.

This cannot be used to pay foreign debt, as the money will leave the country and not cause the necessary stimulus.

Now time to reform the banks by using some of this debt free money and lend it (once off) to all the Greek banks, equal to the amount of money they have created through loans.

This is followed by a legal Act that makes it illegal for banks to create money and they are forced to hold 100% reserves.

As bondholders money starts to reach the economy aa the government does not need to borrow anymore, people pay down their debts and the banks gradually repay this money back to the Greek treasury and this makes it’s way back into the country as the country reduces taxes for everybody.

Now we foresee banks to separate current accounts and investment accounts for their customers as described in the video and there is no liability on Greek taxpayers to bailout the banks again.

Society decides where they are going to direct their savings and the economy rebuilds itself sustainably based on the values of the Greek people, not on the values of the banks.

The Greeks are now more sustainable, more stable and more equal.

Mr Podsnap was well-to-do and stood very high in Mr Podsnap’s opinion. Beginning with a good inheritance, he had married a good inheritance, and had thriven exceedingly in the Marine Insurance way, and was quite satisfied. He never could make out why everybody was not quite satisfied, and he felt conscious that he set [...]]]>  

Mr Podsnap was well-to-do and stood very high in Mr Podsnap’s opinion. Beginning with a good inheritance, he had married a good inheritance, and had thriven exceedingly in the Marine Insurance way, and was quite satisfied. He never could make out why everybody was not quite satisfied, and he felt conscious that he set a brilliant social example in being particularly well satisfied with most things, and, above all other things, with himself.

Thus happily acquainted with his own merit and importance, Mr Podsnap settled that whatever he put behind him he put out of existence. There was a dignified conclusiveness – not to add a grand convenience – in this way of getting rid of disagreeables, which had done much towards establishing Mr Podsnap in his lofty place in Mr Podsnap’s satisfaction. ‘I don’t want to know about it; I don’t choose to discuss it; I don’t admit it!’ Mr Podsnap had even acquired a peculiar flourish of his right arm in often clearing the world of its most difficult problems, by sweeping them behind him (and consequently sheer away) with those words and a flushed face. For they affronted him.

Charles Dickens, Our Mutual Friend. 1865

Consumers and homeowners who borrowed too much during the economic boom must “accept responsibility” for their part in the financial crisis, a cabinet minister has said. The defence secretary Philip Hammond claimed banks were not the only ones responsible for the crash, adding that those who took out loans, spent on credit cards and accepted large mortgages were “consenting adults”. Hammond said the banks “had to lend to someone”.

The Guardian, 3 May 2012 

Philip Hammond with personal assets estimated at £7.5m can certainly claim to have thriven ‘exceedingly’ but blaming the financial crisis on feckless consumers shows the wilful ignorance of political leaders in refusing to recognise the reality of banking and the monetary system.

Just suppose that we all take Phil’s advice and seek a life free from debt in saving for purchases rather than borrowing, settling credit card bills every month, renting rather than buying (only those with Hammond’s  levels of assets can afford to buy without a mortgage) and pay off rather than take on more debt. What could be better than a clean slate and fresh start? There is only one problem: such a strategy would bring about economic collapse. This is because – and it is a truth that Podsnappian politicians refuse to acknowledge – virtually all the money supply in developed countries originates as loans issued by commercial banks.

When the debt overhead exceeds capacity to pay, the dynamic leveraging of growth goes into reverse. And this is the source of the financial crisis. Total demand is incomes plus the change in debt. So when households start to repay debt, unemployment, bankruptcy and repossession grow. This has nothing to do with reckless borrowing.  It is built into the monetary system. Only when commercial banks are forbidden to create money and it is issued debt free by governments will the problem be addressed.

Until then politicians and central bankers deserve the scathing comment of Michael Hudson on the latest crop of European ‘technocrats’ as bank lobbyists tunnel-visioned enough to act as useful idiots on behalf of their corporate handlers.

Bristol Festival of Ideas
Sat 19th May 2012

3.30pm-4.30pm: What if… we could create money as well as banks?

Virtually all the money in circulation has been lent into existence by commercial banks. When the [...]]]> If you are around Bristol on Saturday 19th May, you may be interested to attend:

Bristol Festival of Ideas
Sat 19th May 2012

3.30pm-4.30pm: What if… we could create money as well as banks?

Virtually all the money in circulation has been lent into existence by commercial banks. When the government in effect franchised the creation of money to the banks it failed to keep an eye on what they did, or agree a proper ‘quid pro quo’ for the privilege.

Speakers:

• Josh Ryan-Collins, nef, co-author of the book Where Does Money Come From?: A Guide to the UK Monetary and Banking System
• Mark Burton, member of the Bristol Pound Team
• Ruth Potts, founder of bread, print & roses

More info & Tickets:

Sign up via the Bristol Festival of Ideas website at http://www.ideasfestival.co.uk/?p=3297

Positive News, 5th May 2012 published Ben Dyson’s article:

There is real momentum building in the movement to reform our privatised, debt-based money system.

It’s been two years of hard work since we launched Positive Money, and encouragingly, we’re now seeing more and more economists recognising and talking about the ability that [...]]]>  

Positive News, 5th May 2012 published Ben Dyson’s article:

There is real momentum building in the movement to reform our privatised, debt-based money system.

It’s been two years of hard work since we launched Positive Money, and encouragingly, we’re now seeing more and more economists recognising and talking about the ability that banks have to create money.

Even the chairman of the Financial Services Authority is at it. At this year’s annual conference of the Institute for New Economic Thinking, referring to money existing digitally as numbers in our bank accounts, Lord Turner stated: “Banks can create credit and private money.”

He continued: “It is the case that before the crisis we not only failed to have policies that controlled the credit boom, but that we made it worse through catastrophic policy mistakes, justified by poor economics.”

When some of the most senior economists in the country recognise that banks create money when they make loans, and that this was at the centre of the crisis, then we are getting much closer to addressing the root problem.

Earlier this year, Positive Money and the New Economics Foundation presented to members of the National Assembly for Wales, at an event that was set up by both Labour and Conservative assembly members – an encouraging sign that politicians realise that reforming money is too important to use as a political football.

Assembly members Julie Morgan and Darren Millar are now establishing an all-party group focussed on money and how alternative money systems could provide a stimulus to the local economy in Wales.

Meanwhile, around the country, 70 individuals have been training to become speakers for the Positive Money campaign and will be presenting at events nationally to help spread the word as quickly as possible. When money drives almost all activity on the planet, it’s essential that we understand it, and our newly trained speakers will help to bring that understanding to everyone who is concerned about the social and economic challenges we’re facing today.

There is increasing evidence that people are starting to ask key questions about the monetary system that underlies our society. Questions like: “Where does money come from? Who decides how it gets used? And what impact does that have on the world we live in?”

Fortunately, there is a new documentary that answers these questions. Released on 1 May 2012, 97% Owned reveals how money is at the root of our current social and economic crisis. Featuring frank interviews and commentary from economists, campaigners and former bankers, it points to simple and effective ways to change our monetary system. These changes would lead to a healthier, more stable economy with less debt, less poverty and less inequality.

97% Owned can be watched online for free at: positivemoney​.org​.uk/​9​7​p​e​r​c​ent

A lot of students like me (and a lot of people in general) are opposed to tuition fees and the coalition government’s decision to dramatically increase them next year. This is not merely for selfish reasons. In my view, tuition fees are bad news chiefly because they turn university from an education into an [...]]]>  

A lot of students like me (and a lot of people in general) are opposed to tuition fees and the coalition government’s decision to dramatically increase them next year. This is not merely for selfish reasons. In my view, tuition fees are bad news chiefly because they turn university from an education into an investment.

We badly need individuals who can think in new ways to solve today’s diverse problems – many of which are being caused by “business as usual”. Universities are one place where such individuals can be nurtured; but not if courses devolve into glorified job training centers at the behest of students themselves, anxious to graduate into the kind of structured careers that can repay their debts. There is such a thing as society, and tuition fees are bad for it.

When government spending falls, private 'lending' has to take up the slack.

But let’s put ourselves in the position of the government for a minute. The financial crisis lead to bank bailouts and a recession that reduced taxation revenue. The Labour government had to step in to cover the shortfall, significantly increasing the UK national debt. Along with a lot of the electorate, the coalition government are worried about the prospect of the national debt growing further – we are currently paying about £40bn annual interest on it. If not from more government ‘borrowing’, the money to pay for higher education has to come from somewhere else. It can’t come from other vital parts of the welfare state – these are already under-funded. More student debt might look like the “least worst option” for the coalition and much of the electorate.

Don’t get me wrong. I’m not writing an apology for the government here. They should be far more worried about UK private debt (over 400% of GDP, one of the highest figures in the world!) than UK national debt (only about 60% of GDP, one of the lowest figures in the world). And they could be funding higher education through taxation. Public pressure is mounting to close down tax havens and levy a financial transaction tax and this is good.

But there is a parallel approach we can take, one that most students don’t even realise is there and one that doesn’t rely on the “generosity” of the super-rich or on international collaborations to work. Also, I think it will end up being more effective anyway, by using pre-distribution (James Robertson’s term) rather than redistribution via bureaucratic taxation measures. So what is the approach? To describe it, we must begin with a question. Fellow students, have you ever asked yourself Where does money come from?

Most of us think that the government / the Bank of England issues the money supply and it’s true that notes and coins are minted there. But what about the numbers in your bank account? Are they money? Most of us would say, yes of course, that’s my money in the bank. But who created these numbers? The answer is that private banks did, when they issued something they misleadingly call a ‘loan’. I’ve written about how it works here and how banks do not lend money, they create it. In fact banks create and allocate about 97% of our nations money supply this way – here is some proof, straight from the horse’s mouth.

So banks create and crucially allocate most money – the word “allocate” means they decide who the new money is given to first, according to whether or not they think it will make them a profit. This gives them a lot of control over the economy and where money is scarce and abundant within it. If that concerns you, good! It’s one reason why there seems to be less and less money available to fund not-for-profit state projects like the NHS and higher education.

Let me explain. In the 1960s, when univerities were almost entirely publicly funded (see top graph), cash and coins made up about 20% of the nation’s money supply. Since then, the percentage has gradually fallen and today is less than 3% – with the other 97% being digital bank deposits. So what? Well, when the government creates say a £10 note, it charges banks the face-value of £10 for this. The note only cost a fraction of this face-value to mint, so the government gets to pocket the rest, a source of income called seigniorage.

The government also gets to decide where this seignniorage income is allocated – it can stimulate the not-for-profit sector (health and education) as opposed to bank ‘loans’, which go to whatever is most profitable to banks. The fact that this debt-free part of the money supply has fallen from 20% in the 1960s to 3% today is one reason why the state is chronically short of money to fund health and education, and has to rely increasingly on the private sector.

In the 1960s, the government would receive seigniorage on about 20% of the money created above. Today banks create this 20% instead and receive interest on it - no wonder we're so short of money for education! (a slide from Ben Dyson's talk: http://www.youtube.com/watch?v=9K5dao1lUQ0&list=PL32339BDA75B6BFC8&feature=mh_lolz)

The important point with seigniorage is that it proves that governments (or alternatively, students!) don’t need to go into ever more debt to fund higher education. Instead we could create new digital money free of debt, and allocate this to different sectors of the economy (universities in this case). As famous inventor and monetary reform enthusiast Thomas Edison once put it:

“If our nation can issue a dollar bond, it can issue a dollar bill. … Both are promises to pay; but one promise fattens the usurer, and the other helps the people.”

Here’s how it could work:

Allocating government money in a locally responsive way (a slide from Ben Dyson's talk: http://www.youtube.com/watch?v=9K5dao1lUQ0&list=PL32339BDA75B6BFC8&feature=mh_lolz)

Money could also be extracted from the economy above via taxation and destroyed. That might sound strange to you: we have been conditioned to think of taxation as the source of income for the government. But a nation creating its own money has no need for taxes as a source of income. Today’s government only needs to take so much tax because they have handed the power to create money over to private banks, without the people’s consent or awareness. So if you want to pay less tax, take this power back!

Let’s now consider two common objections to the above ideas: conflict-of-interest and inflation. Firstly, if you’re worried about the government both creating and allocating the money supply then you’re in good company and probably these functions should be separated. An independent and publicly accountable body can decide how much money the nation needs. Then the government, based on its election manifesto, will decide how to allocate this money (and banks will merely lend out the deposits of savers, in the way that most of us mistakenly think they currently do). Consider this too: if you don’t want the government both creating and allocating the money supply, surely you don’t want a cartel of private, profit making firms called banks doing so either?

The same goes for inflation. If you’re worried the government will create too much money this is another argument for separating who allocates the money and who decides the quantity. Provided the government allocates new money to productive parts of the economy, goods and services can grow with the money supply and there needn’t be inflation. Or excess money could be extracted via taxation, as mentioned earlier. Consider this too: if you don’t want the government creating as much money as they think is good for their short term re-electability (and to hell with the economy), why on Earth would you want private banks creating as much money as they think is good for their short term profitability (and to hell with the economy)?

Private banks can cause inflation and financial crises, by creating new money for speculative bubbles. "Banks don't have to cause crises... But they almost always do." - Prof. Steve Keen

Hopefully you’re still with me! We’ve discussed that banks create and allocate digital bank deposits, that these increasingly constitutes the entire national money supply and that this is an important reason the government can’t find any pennies down the back of the sofa to spare for the health and education of its citizens.

But today’s system of money creation by private banks is not a law of nature! If we build enough public pressure this system can be changed to one where money is allocated for the social good by an elected government responsive to the public will; not by an “industry” that only considers its own profitability and will thus tend to gorge itself on speculative bubbles whilst starving health and education of vital funding. They caused the current crisis this way, by pumping new money into property, inflating house prices to the point where students in particular cannot afford them. So, if you ever want to move out of your parents’ house, perhaps we should stop private banks creating the money supply!

How can students help? You can join Positive Money, a London based monetary reform NGO, and support their campaign to take the power to create money from banks and put it where it belongs, in public hands. Money is social – we all agree to accept it and as we found out during the financial crisis, we ultimately back it. Rather than allowing private banks to create the national money supply as debt and charge us interest for its use, we the people should enjoy a “free-lunch” of seigniorage on money creation – since it is our money. Rather than watching huge sums of our money move into financial speculation instead of social services, then struggling in vain to claw enough of it back via taxation (“redistribution”) we could make sure our money is allocated as we wish to begin with (“predistribution”).

You can try to educate your MP. Most politicians are completely ignorant of how money is created and have never seriously asked questions like: Where does money come from? Why are we all in so much debt? If we are all in debt, who are we in debt to? How do we get of debt? How can getting into more debt be the answer to that question?! The current system of money creation, as interest bearing debt by private banks, presents our politicians with two choices. Either:

1 - Have more money, but also more debt (deficits).

2 - Have less debt, but also less money (recession).

We would like to have less debt and more money. But with “our” current monetary system, that option is practically impossible! It will only be possible when we decide to start creating money free of debt:

Creating debt-free money (green line) to get out of debt (red line) (a slide from Ben Dyson's talk: http://www.youtube.com/watch?v=9K5dao1lUQ0&list=PL32339BDA75B6BFC8&feature=mh_lolz)

Perhaps David Cameron ought to understand all this? After all, he has a 1st class honours degree in PPE from Oxford University. Unfortunately, mainstream economics courses pay little attention to how money is created and allocated to the economy. This blind spot of mainstream economics for money and debt is a big part of the reason why we are in this mess today. As economist Steve Keen (winner of the Revere Award, for “the economist who first and most cogently warned the world of the coming Global Financial Collapse”) puts it:

“The whole idea that you can model capitalism without including money and debt in your models – and that’s 99.9% of neo-classical models include neither money nor debt – is a bit like trying to model how a bird flies by assuming that it doesn’t have wings. It’s just ridiculous that it’s left out.”

Another vital thing you can do is tell your friends about who creates and allocates money and what this means for power, democracy and the future of the welfare state. Spread the news via social networking! If Kony2012 showed anything, it was that social networking gives the power to rapidly bring an issue to mass awareness. Many made the criticism that the Kony2012 campaign lacked substance or adequate understanding of the underlying issues, but I think Positive Money has spent enough time building substance and understanding behind its campaign demands. It now needs mass awareness and students can definitely help here! If as many people watch the brilliant new documentary 97% Owned as watched Kony2012, we might be onto a winner!

The campaign to give the power to create money to the public, where it belongs, will only succeed with a significant increase in public understanding and support. Politicians can’t do it on their own. Only a handful of them understand the problem anyway and those that do will have to challenge powerful vested interests. They won’t be able (or willing?) to do this without public backing. In my view, who gets to create and allocate the money supply is the critical issue for power and democracy in our times. So students, start making some noise - let’s democratise money!

BBC News – Today – The Today Lecture 2012: Sir Mervyn King.

The lecture offered little to excite but the answers [...]]]> Here is a transcript of what Mervyn King, governor of the Bank of England, said on the BBC Radio 4 annual Today Lecture on Wednesday night

BBC News – Today – The Today Lecture 2012: Sir Mervyn King.

The lecture offered little to excite but the answers he gave to questions from the audience and from listeners afforded encouragement and despair in equal measure to this audience member.

The full programme, including the audience questions, can be heard here

BBC iPlayer – The Today Programme Lecture.

Asked by an activist from Occupy the London Stock Exchange whether the £325bn of quantitative easing could not have been more usefully directed towards building social housing, Mervyn King replied:

The way you describe it makes it very clear that this is a political judgement. I don’t take a view either way on how money should be spent. That has to be a matter for the elected government. What our job to do is to ensure that there is enough money in the economy to help the wheels of the economy turn. How that money is spent should be determined either by the private sector or by the government. It should not be for the Bank of England. We weren’t elected to do that job.

This, of course, is exactly the position taken by Positive Money; that the Bank of England should be responsible for issuing the nation’s money supply, but that the decision over how that newly-created money should be spent should be taken democratically, either by government, parliament or some decentralised means.

But then consider this question sent in by a listener:

Do you feel any remorse about inducing the house-price bubble by way of loose monetary policy you upheld for ten years before the crash?

His reply?

We debated this long and hard on the Monetary Policy Committee, as to whether house prices were at an unsustainable level, and we concluded they weren’t, that the fact that interest rates around the world had become so low meant that it was quite natural for house prices to be higher and the extra borrowing that was being taken on by the younger generations, who were taking on mortgages, was actually balanced by the extra financial assets that the older generation, selling houses, had saved. So if you looked at the household sector as a whole, it didn’t look as if there was any excessive borrowing.

Doesn’t it make you want to scream?

And on the final question concerning interest rates, his view was:

Two years ago, the interest rate at which the government could borrow was the same as that which Spain and Italy were paying. That’s just two years ago. That was about 4%. Now the interest rate at which the UK government can borrow, ten year government bond yields, is down to about 2%, and that in Spain and Italy has gone up towards five and a half, six percent. That shows, first that it’s important to have a really credible plan that markets believe in, that you will deal with these deficits, not too quickly, not to destroy growth, that you will deal with it, and secondly, that unlike Spain and Italy, we have our own currency.

No mention of the contribution due to a central bank paying over the odds to persuade pension funds to part with government bonds in exchange for £325bn, driving up the price and reducing yields, which the pension funds promptly spent buying new government bonds, driving up the price and reducing yields, because, actually, pension funds are required by law to hold a certain proportion of government bonds.

It’s still possible that King ‘gets it’, but finds that rule number one of central banking – “Don’t spook the market!” – muzzles him while he’s in office. Or maybe it is less encouraging; what if his apparently hostile criticisms of the banks in the past, which have seemed to support the Positive Money position, have just been random noise?

With his term as Governor ending in June next year, it will be interesting to see what happens once he can speak freely.