Our Proposals

We’ve spent the last couple of years thinking about how to address the biggest flaws in the banking system, and how to stop banks expanding the money supply recklessly. The ideas below are one way to do this. It’s certainly not the only way but we believe it is one of the best options currently on the table and would be a massive improvement over the banking and monetary system we have today.

Video (22 mins)

This 22 minute video explains the 3 simple changes we need to make to fix our broken banking system.

In Plain English

This proposal for reform of the banking system explains, in plain English, how we can prevent commercial banks from being able to create money, and move this power to create money into the hands of a transparent and accountable body. It builds on the work of Irving Fisher in the 1930s, and James Robertson and Joseph Huber in 2000.

Removing the power to create money from the banks would end the instability and boom-and-bust cycles that are caused when banks create far too much money in a short period of time. It would also ensure that banks could be allowed to fail without bailouts from taxpayers. It would ensure that newly-created money is spent into the economy, so that it can reduce the overall debt-burden of the public, rather than being lent into existence as happens currently.

The content in this paper was written in May 2010, and has been occasionally updated since then. In mid-2012 Positive Money will release, as a book, a much more comprehensive guide to these reforms, which will also address some of the common objections and misconceptions about the implications of ‘full-reserve’ banking.

Download the Paper (PDF, 1mb)

Draft Legislation

Between October 2009 and May 2011, a small team including members of the Positive Money team worked on drafting comprehensive legislation that would implement ‘full reserve banking’ in the UK. Full-reserve banking is a proposal that has been put forward by Irving Fisher in response to the Great Depression, and updated by James Robertson and Joseph Huber in Creating New Money (free PDF download). The draft legislation achieves a few key fixes to the banking system:

It prevents new bank lending from creating new money, ensuring that there will be a stable money supply
It ensures that banks that fail can be shut down, rather than having to be bailed out at the expense of the taxpayer
It democratises the investment priorities of banks by requiring them to disclose to customers how their money will actually be invested
It separates the payments system and the lending side of a bank’s business, so that poor investment practice by a bank doesn’t threaten the payments system for the whole economy
It limits the power of the Bank of England in manipulating the economy
It ensures, as much as possible, that money is created in an open, transparent manner and that this power to create money is sheltered from abuse
It takes the power to create money out of the hands of both vote seeking politicians and profit-seeking bankers.

Whilst we are not currently focussed on promoting specific legislation, the full text of the bill can be downloaded here (PDF, 3mb) and gives an extremely detailed outline of how the UK monetary system could be reformed. The same principles could be applied to other countries too with some adaptations.

Download the Bill (PDF, 3mb)

http://changing-britain.blogspot.com Changing Britain

There seems to be much conversation about how the banks need reforming. Many of you have posted comments and opinions about the failings of the banks, and some have suggested how the way that banks operate should be altered.

Also, and correctly there are some who have criticised the lack of influence our politicians have on such matters…

I really do have to disagree with the direction from which these arguments are made.

Why?

In the past, in our ‘democracy’ the majority vote empowered politicians of the winning party to follow the policies put forward during General Election campaigns.

That was the OLD way of politics, and some of you may even recall them.

However, what HAS happened over the past 30+ years is a gradual erosion of democracy to the point (2005-2012, I guess) that, on the big issues real democracy simply does not exist anymore; today that erosion of democratic choice leaves us with ..no choice.

The two main political parties are now positioned so close to the ‘centre’ of politics that in many instances they cannot be distinguished from one another.

So yes – the banking industry in broken.

Democracy has been severely undermined.

What do we do?

Do we go to the politicians once again and ask them to fix it? Do we ask the banks to fix it?

Or do we learn from experience and choose ‘another way’?

In my opinion, the way ‘back’ is not the economy (stupid!) – it is Society. I belive that the time has come for us to realise that mistakes have been made, social experiments undertaken have failed …and that it is the people – not the politicians or the bankers – that have the ability to make it right once again.

So, it follows that strengthening democracy and introducing a completely new economic model in a deliberately long-term, carefully managed way would be the ideal solution, and this is it:

changing-britain.blogspot.com

Leave your comments and get involved!

Liepa

I went to the website and read through all of it. One thing I would say is that I know only little people who wouldn’t agree that Britain (or any other country) needs a change in a value system where everyone’s more caring, people and institutions are more responsible and accountable and so on. But as much as every goal mentioned on that website seems good in nature and for the best, there is almost no information about how this dream goal is going to be implemented – what actual events are going to take place, what actual changes to what laws are needed and so on. “The only way I believe this can be done is through a dynamic vision that engages and fortifies the wherewithal within us to successfully respond to the vast challenges before us; a vision that binds us all together for decades to come. ” you say. But what exactly is that vision stripped from all the abstract “we want to live better, more equally and there should be more justice”? If anybody’s signing up for something for decades it should be clear what it’s going to be exactly. And if people will sign up for it without explanations provided it’s even worse – the joy of reading the promises will be crushed by the uncertainty of actions to be taken and arguing about suddenly emerging specific details when people do start doing things. As you said, you are drafting a document at the moment so I wish it would have some concrete suggestions and some sort of a plan with stages or something more concrete information about what you are doing and what needs to be done. I really wish the ideas you are saying could be achieved so I wish you productive and successful planning and brainstorming towards the methods of implementation.

http://pulse.yahoo.com/_QQSTXXOMTYG4UEBC4LELBY6HVY Changing Britain

Liepa – yes, (as someone else has also pointed out) the information I have provided to date lacks substance (search also for ‘The Changing Britain Vision Part 1′ on Youtube).

However, in my defence it is (very) early days… What you have read at the Changing Britain blog is only the beginning of the journey (hence the lack of substance).

I am working on the next Youtube video which will explain how The Changing Britain Vision will be underpinned by a new style of economy that combines the best of both Socialism and Capitalism.

This could possibly be viewed as the evolution of Capitalism.

I’ve created a preliminary title for this: ‘Century 21 Foundation Economics’.

In time, the contribution of others will enable The Changing Britain Vision and Century 21 Foundation Economics to be significantly enhanced, in terms of policy detail.

Please keep checking the Internet for The Changing Britain Vision – I think you will be surprised at what lies ahead.

Thanks for your comments Liepa, and for taking time to read through what I have to say.

chickensuit

What makes you think that the Bank of England can be trusted?
Mister miser

Why not do away with banks and go for a let’s system or one like in totnes http://www.transitiontowntotnes.org/totnespound/home
Or use bitcoins,
http://janusg.co.nr Stewart Goldwater

As long as the land monopoly is maintained, the few can take possession of what Nature free of charge has granted to everyone,and usury will penetrate the whole society,and we will have banks, which instead of being servants for the exchange of goods will become powerful extorters.
-Pierre Joseph Proudhon
Pingback: Positive Money - Part 2 - The Money PrincipleThe Money Principle
http://janusg.co.nr Stewart Goldwater

Mark Twain on Banking:
http://tinyurl.com/6nqbhdc
http://occidentis.blogspot.com/2011/11/debt-and-banks_17.html Cawstein

I recently made a very similar analysis to one of the problems in our ‘Late-Capitalist’ society ― that the banks are lending out 30 times as much money as is deposited with them and expect to keep the interest accrued on those loans. They are inventing money, and giving it to themselves. My solution seems extraordinarily neat compared with the admirably thorough and ‘hard-thought’ Positive Money Bill; like keyhole surgery compared with smashing the whole and rebuilding. My suggestion is simply to tax the entire profit off the banks that they make on this fictional money. You can read my analysis on:
http://twitter.com/bankersreform Bankers Reform

The solution offered by Positive Money and others appears to be too simplistic. Is it not true that the bankers now not only control national money supply but also the world money supply via the IMF and World Bank?
By changing the UK legislation alone would not be sufficient as control is now at a much higher level and therefore only changing the system at that higher level will bring about the change that is needed.

John

I believe it is essential that reform comes out of London…. London is where it all began and from there it has infected most of the world…. it was the London bankers who trapped President Woodrow-Wilson into giving them total control of the $dollar when he signed the Federal Reserve Act in 1913.

If we forced our gov’t to make the change, America would not be far behind.

It’s only people power that will do it… 5 million Brits need to make themselves felt.

Santiy2012-anything

Consider Ellen Brown’s proposal as well, please.

http://occidentis.blogspot.com/2011/11/debt-and-banks_17.html Cawstein

Where can I find Ellen Brown’s proposal? (e.g. is it on this site, and if so, how many months ago?)
My blog site url did not show up in yesterday’s post; but can be found by googling Occidentis blog for 17 November 2011

Richard

I appreciate the honesty of the statement ”The ideas below are one way to do this. It’s certainly not the only way and not necessarily the best”. I am wondering though if it is not necessarily the best, what is the best and shouldn’t that be what is being advocated. If the writers believe the proposals are the best option currently on the table then rephrasing the above statement which might be the first thing anyone unfamiliar with the ideas of positive money reads might be useful
http://janusg.co.nr/ Stewart Goldwater

Understanding and Forecasting the Credit Cycle—Why the Mainstream Paradigm in Economics and Finance Collapsed: http://tinyurl.com/8xsz9t6
http://janusg.co.nr/ Stewart Goldwater

The Eighth Annual AMI Monetary Reform Conference will be held at
University Center in Chicago, September 20-23, 2012.
http://www.monetary.org/2012-conference
Pingback: ‘Fiat Money’ or Gold Standard? « freedom this time
MG

Although I fully share your concerns and support your initiatives I am rather uneasy about the proposition of lobbying for the BOE alone to create money and control its supply. The ways the BoE and other central banks (especially the FED and ECB) have acted since this financial crisis began clearly show their primary interests have been to protect and sustain the private banking system. Some members of the Monetary Policy Commission are still employed or act as consultants to private banking corporations. The BoE declares to be owned by the government (so why does it issue credit to the gvt at an interest?) but why there are private individuals who served and are serving on the board of directors; and who are they? Further Wikipedia states In 1977, the Bank set up a wholly owned subsidiary called Bank of
England Nominees Limited, (BOEN), a private limited company, with 2 of
its 100 £1 shares issued. According to its Memorandum & Articles
of Association, its objectives are:- “To act as Nominee or agent or
attorney either solely or jointly with others, for any person or
persons, partnership, company, corporation, government, state,
organisation, sovereign, province, authority, or public body, or any
group or association of them….”

Bank of England Nominees Limited was granted an exemption by Edmund
Dell, Secretary of State for Trade, from the disclosure requirements
under Section 27(9) of the Companies Act 1976 , because, “it was
considered undesirable that the disclosure requirements should apply to
certain categories of shareholders.” The Bank of England is also
protected by its Royal Charter status, and the Official Secrets Act.Why not explore, instead, the concept of Public Banking; see http://www.publicbankinginstitute.org/and maybe even start collaborative action with Ellen Brown’s and Margrit Kennedy movements; wtih Prosperity UK. We will need to join forces with similar organisations to have any impact at all.

http://occidentis.blogspot.co.uk/ Cawstein

You may know (from my Occidentis blog) that from the same analysis as Positive Money I come to a different (and simpler solution). Let private banks continue to generate “credit” money, but tax them on the interest they obtain from it. If it is known that a given bank operates a 1:10 credit underpinning, they have to pay 90% tax on their interest income. I.e. the State farms out the job of finding credit-worthy enterprises, but retains the benefit of the money thus generated.(See http://occidentis.blogspot.co.uk/2011/11/debt-and-banks_17.html)

http://twitter.com/advocatehorace horace dalrymple

The volume of fraudulemt debt which has knowingly been granted by the banks will ulimately “fall out” of the system.When the falsehood is finally exposed, it will affect us all. It’s common knowledge that horrendous sums are involved, 52% of secured mortgage lending 2010 alone was self cert. The only reason to self cert and pay a higher rate for the priviledge is because income could not be proved, as it didn’t exist ! Credit cards were granted and still are without any proof of income, millions of borrowers have card debt which exceeds one years true income. This debt will never be repaid, as the debters just like Greece and others donot have the income and never will to service the interest or repay the capital.The banks in the meantime, have been and still are selling this fraudulent debt, describing it as a security when the face vaue is actually worth jack shit. How long can this deception be covered up for, until it affects us all ?
Admin

You may have done a lot of work in researching a better banking / economic system – but horribly miss the target, and the real controllers of the world (bankster familes) are laughing down their shirt that you are barking up the wrong tree. For it is these bankster failies who own / control the banking system, insurance, and markets for gold, oil, food, diamonds, and have the politicians in the palms of their hands. These families are the real target because it is they who desgn, plot and carry out the oconomic cycles – a crash is of benefit to them, as they come in and buy up shares and propeorty for much lower prices. It is they who flood the market with oney and then stop credit immediately or put rates up – causing a severe contraction in the market – falling values etc. The target is the controlling families operating the puppeteer show (Prime Ministers, Preseidnets, etc).

Josef Spak

Removing a few “bad apples” is no solution. Others would turn up in their place. Instead, removing the easy options of rigging the system is more sensible. Looking for scapegoats is rather controversial.

http://www.facebook.com/Searle88 Robert Searle

…Ofcourse, governments can create too much money as well as banks. Let us not forget. Moreover, people do not trust governments to spend wisely, or take seriously systems to control deficit spending. This is especially true with the American mindset.

However, to be fair with the current crisis these issues are being raised as never before. Changes via the Austerity Measures may prove helpful in restoring a degree of trust in connection with government expediture.
grahamwilliam41

So I’ve watched the 22 min video and I understand that when banks lend they effectively create money in the system (or rather create more transferable IOUs). So in the solution you propose how will bank lending be different? What will happen when someone asks a bank for a loan and how will that differ from what happens now?

Appologies if the answer to this is in the document but I’ve not had time to read them yet
http://www.facebook.com/scott.bridgwater Scott Bridgwater

Ok, you advocate for a reform of the current system, but you’re not going deep enough.. With full reserve banking, corporations would still pillage the Earth’s resources until it’s too late. Politicians will continue to lie cheat and steal from what they perceive to be ‘lower classes’, whatever that means. Heck, they’ve made a good start, we’re nearing depletion of many resources today and our freedoms have never been so at risk.. I feel you don’t go far enough as say organisations proposing entire solutions such as The Zeitgeist Movement, The Venus Project and a Resource Based Economy.

http://www.facebook.com/scott.bridgwater Scott Bridgwater

But I see positive money’s contributions as a stepping stone not a final result so I will continue to follow/promote.

M.

I am not convinced; the BoE is not independent. It is controlled by shareholders and members of the Bank of England Nominees Limited (BOEN); some whom are the financiers behind big financial corporations. Over the centuries economic booms and busts have been created by Central Banks (in association with these big banks) by the manipulation of interest rates, look also at the amount of money they have injected in the market since 2008.

From Central Banks to one global central bank of central banks; maybe the IMF or the Bank for International Settlements (BIS), the leap is short./
Kev_murtagh

Full death duties, Let everybody have a fair start in life. Tax on tv Magnolia paint and enforced one week per year with out a settee.
Really thou this generation is the most boring that has every been allowed to breath!
Get back to whats important, Fresh air, fields, Dancing, singing, playing instruments bingo, going out for a walk, chatting to neighbours. loving each other and each day.
Chenille

I find it difficult to see how any money system would work if we used the technology that we have at our disposal to create abundance. It’s really is quite easy to create an abundance of food for example. Why would we not do that if we can? Money needs scarcity. We can produce abundance. I think a Resource Based Economy is a better solution.
clive

Where your proposals will fall down will be in the implementation, rather than there being anything wrong with the actual ideas. It will greatly matter who implements these proposals and what they use it to finance.

I get the impression that you would implement monetary reform in a liberal-conservative, “Neo-Keynesian” way.

That might temporarily solve the debt crisis, but it would not solve another problem that is also an underlying cause of the recession, the fact that capitalist expansion is coming up against the limits of planetary sustainability. The aims of Keynesianism are to create maximum wasteful “economic growth”, for capitalist profit, and unachievable and unnecessary “full employment”. We live on a finite planet that cannot sustain the ever escalating resource depletion and pollution that this would entail. In reality Keynesian always starts off by advertising itself as a sustainable “New Deal”, or “Green New Deal” (to generate extra “renewable” electricity to feed into the grid, to fuel wasteful “economic growth”) but it always ends up financing militarism and wars.

Because it would be unsustainable, monetary reform implemented in a Keynesian way, to increase capitalist profit, will only lead to further recession in the longer term.

Both Mussolini and Hitler used debt-free money to finance the build-up of their armaments industries (and to build roads, drain swamps etc). This got them out of “recession” in the 20s and 30s and created “full employment” (compulsory authoritarian wage-slavery) but it also led directly to WW2 and the destruction of Europe. I expect to see fascists campaigning for monetary reform soon (if they aren’t doing so already).

The only sustainable way to implement monetary reform would be to do it in a libertarian eco-socialist way. Debt-free money should only be used to finance public spending on necessary welfare, sustainable infrastructure, welfare and unconditional basic income for all, in a society where working hours are reduced, rather than increased.

It should only be used to finance public services that actually benefit the public. The public services should not be financed, in a Keynesian manner, to act a vehicle for generating capitalist profit, or to create unnecessary, bureaucratic, repressive, or wasteful wage-slavery.
Jonathan James Harrison

Does positive money support and encourage the use of bitcoins?

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