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Videos on Money, Debt, Financial Crisis and Banking Reform

Why Do Banks Make So Much Money?

Why Do Banks Make So Much Money?Banks make so much money because they can create money, effectively out of nothing, by lending. Every single pound in your bank account was created by a bank, not by your government.

Watch Video (3 mins)

 

How Does Current Banking System Affect YOU?

Ben Dyson, speaking at Just Banking Conference on 20th April in Edinburgh on what does the current banking system mean for housing, debt, inequality, jobs, businesses and taxes? (19 mins)

 

Watch Video (3 mins)

Six Myths About Money & Banking – Josh Ryan-Collins

Six Myths About Money and Banking by Josh Ryan-CollinsJosh Ryan-Collins of the New Economics Foundation explains how banks create money, out of thin air, through the accounting process they use when they make loans.

Watch Video - 25 mins

Influence of Banking on Growth and Instability

Josh Ryan Collins, speaking at Just Banking Conference on 20th April about the banking system, and its influence on growth and financial instability. (25 mins)

 

Watch Video - 25 mins

“HBOS Whistle Blower” – Paul Moore on Banking Reform

'HBOS Whistleblower' Paul Moore on Banking ReformPaul Moore, former Head of Group Regulatory Risk at Halifax Bank of Scotland, whose claims about risk taking at HBOS led to the resignation of its former boss Sir James Crosby from the UK’s financial watchdog, reveals some very interesting insider experiences with the practices of bank lending, sales culture…

Watch Video - 21 mins

The Problem With The Money System

Problem with the Money SystemBen Dyson (Founder and Managing Director of Positive Money) demonstrates the Problem with the Money System in a comprehensive way.

Watch Videos (52 mins)

How To Fix The Money System

How To Fix The Money System (3 Part Video)Ben Dyson (Founder and Managing Director of Positive Money) discusses solutions to fixing the money system.

Watch Video (36 mins)

Michael Meacher MP – On Money Creation

Michael Meacher MP - On Money CreationMichael Meacher MP, the Labour MP for Oldham West & Royton, discusses key points on Money Creation

Watch Videos (30 mins)

 

Steve Baker MP – On Money Creation and Money Reform

Steve Baker MP - On Money Creation and Money ReformSteve Baker MP - Conservative MP for Wycombe and Co-founder of The Cobden Centre speaks about the money creation and presents his views on various reform proposals.

 

Watch Video (20 mins)

Toby Lloyd – Banking behind the Housing Crisis

Toby Lloyd, from housing charity Shelter speaks about the consequences of the current system of money creation by banks on rising house prices, redistribution of wealth upwards, higher inequality and a culture of unearned wealth.

 

Watch Video (20 mins)

Positive Money Podcast Episode One:  Steve Baker MP (Including Part 2)

Steve Baker is Conservative MP for Wycombe following his election in May 2010. He is a director and co-founder of The Cobden Centre, an educational charity for social progress through honest money, free trade and peace. He is Chairman of the All-Party Parliamentary Group on Economics, Money and Banking.

30 mins Podcast

Positive Money Podcast Episode Two – Professor Mary Mellor

Our latest Podcast is with Professor Mary Mellor. Mary is Emeritus Professor of Sociology at Northumbria University, and is the author of “The Future of Money, From Financial Crisis to Public Resource”, which you can buy from our bookshop.

33 mins Podcast

Positive Money Podcast Episode Three – Peak Oil and its effects on the economy with Richard O’ Rourke

In the third edition of the Positive Money Podcast I talk to Richard O’ Rourke, a Director at the Association for the Study of Peak Oil and Gas, about Peak Oil, specifically the recent under-publicised announcement that we reached the Peak of conventional oil production in 2006, and what effects we can expect the associated impacts to have on the economy.

33 mins Podcast

 

  • David Robertson

    Perhaps you might include the fact that the money created by the banks has no intrinsic value. The bank in effect is acting as an intermediary although the law has been written to give them the status of principals.

    When money is borrowed, i.e. created by the bank, it is deposited into the account of the borrower and used to purchase something which the borrower does not own e.g. a house. The money loaned is loaned against the security, the mortgage, on the house. So, the bank lends money it does not have against the security of an asset that the borrower does not own.

    The bank in every case is acting as a facilitator of the sale but in doing so acquires effective ownership of the security until the loan is repaid. It does this by creating money out of nothing. In this way the banking system as a whole is fully guaranteed by the taxpayer and authorised to remove ownership of all assets from the taxpaying public.

  • Ray

    Having watched all of the videos I initially found the first few very informative, I found much of the info in the later videos very repetitive. There were some interesting bits throughout which I feel could be condensed into less, but more informative videos. Whilst I understand the need to do away with FRB I’m still not sure what you’re proposing as the alternative if any. You say we can’t have debts, yet we can’t pay off debts (recessions etc) so what does the average person do?
    I also feel the editing of the videos are a bit ropey and let down what could be considered an excellent, informative introduction to banking and the wider economy.

    • http://www.bendyson.com/ Ben Dyson

      @Ray – we’ll be getting the videos done professionally shortly. This is a stop-gap measure. We’ve also got a documentary in the pipeline.

      • david

        do you understand what money actually is? imo, this is the key. i’ve a feeling everything will fall into place once the precise nature & purpose of money is fully understood

        is it a means of exchange? a medium? a shared agreement between the people of a country? a fundamental property of a society? a sacred power like the blood of the body?

        i don’t know myself, i must admit. i’m trying to decipher its mysteries at the moment, but its a tricky one

        but i do feel that a proper understanding will lead to some inevitable conclusions, such as the state/people must control it, vested interests will always seek to usurp it & the people must defend it. as well as – perhaps – a set of basic principles by which it always ought to be managed & protected

        maybe i’m wrong. or maybe someone has already figured this sort of stuff out

        anyway, just my 2 cents, as they they

    • James

      @David Robertson – That’s an excellent point. Few people understand this, as I also didn’t less that one year ago. This really is something important, because once it is understood, the understanding of our current situation is also.

      Debt-based credit = guarantee that debts must build up, (and fundamental control / manipulation of wealth)

  • David Robertson

    In one of the videos you make a statement that if a bank has £12.50 in reserves they may lend £1000. It is my understanding that the factor used is tier one capital which must be at least 8%. This would translate into £100 of loan capacity for every £8 of tier one capital or 12.5 times tier one capital.

    Also you indicate that a bank must begin to take deposits then may lend out against these deposits in the amount of $987.50 for every £12.50 deposits. I am sure this must be wrong. A bank must begin with capital and lend out at the fractional reserve rate of 12.5 times tier one capital. These loans then become deposits in the accounts of the borrowers. This is one simple method for a bank to increase the number of its depositors.

    However this is why smaller banks get into trouble and why larger banks gobble them up, or at least get to pick over their assets and acquire the better ones. Indeed it may well be an intentional gambit on the part of larger banks to freeze out smaller banks, such as Northern Rock, if their assets begin to exceed their liabilities by too great a measure. i.e. if they begin to cut into the big banks’ profit margins.

    This occurs because the smaller banks do not hold as many deposit accounts as the larger banks and any money created by the smaller banks ends up in the accounts of the larger banks who then refuse to lend it back to the smaller banks in the interbank market. This is always presented as a rational risk management decision but is simply a predatory move against the smaller banks. Since the taxpayer is always on the hook for any losses this is a risk free operation for the big banks.

  • William Wood

    Rather than to argue that money is created when the bank makes a loan, it might make better sense to say instead that new money is created whenever a customer makes a deposit at the bank. When a customer makes a deposit, the ownership of the money transfers to the bank which is then able to make a loan or to invest the money. This increases the money supply because now not only does the bank have the original money, but the customer has a new bank deposit which did not exist beforehand. This is more simple and clearer than to say that money is created when the bank makes a loan because new credit might not be created if the bank lends just cash to someone without a bank account.

    • http://www.positivemoney.org.uk Ben Curtis

      Hi William, banks do not lend money to people without bank accounts, whenever you borrow money from a bank an account is created or credited with the money they are lending you, simultaneously creating a deposit and a debt from yourself to the bank. The money is in fact created upon taking the loan.

      • William Wood

        Hi Ben, thinking about it some more, yes banks create money only when the loan is made.

        Making a deposit does nothing more than convert cash into bank account money, which does not alter the money supply it only changes the form of the money, the money held by the bank is now out of circulation and so has no influence on the market. When the loan is made by the bank, this reduces the reserve ratio which means that fewer of the bank’s deposits are fully backed by money in the bank. This increase in unfunded bank deposits is what causes the inflation because the money that was previously held in the bank (not affecting prices) is now out in the economy, and the customers have an unaltered amount of deposits still remaining.

        • http://www.bendyson.com/ Ben Dyson

          @William – strictly, when you pay £100 of cash into your bank, the bank does two things:

          1. It increases its ‘Cash on hand’ on the asset side of the balance sheet by £100
          2. It records a £100 liability to you in the form of your increased bank balance

          For you personally, you now have £100 less in cash, and £100 more in bank deposits. Of course, from the customer’s view, it appears that they’ve put the cash in the bank and that the £100 bank balance is ‘their cash’, rather than the bank’s liability.

  • http://www.heschel.org.il/eng/ Anders Ettinger

    Thanks- Good job!
    There is a technical glitch (lost sound) in money creation going from part II to part III.
    There is a mistake on one slide (be money instead of get money)
    As for the subject matter, it is mostly clear concise and convincing. However, there is an important point that remains very unclear. In the simplified example you choose to bring the growth in money represents growth in the productive economy- that is to say someone takes metal of little value and transforms it into a car that is of great value to someone else, and then this demand in the real economy mandates the creation of the money through the loan to purchase the car. The problem that you are hinting it (that is explained so brilliantly by C.H. Douglas) but not shown in the video is the fact that the existing money system actually enables the banking monoply to turn the productive cycle around and dictate which economic activity will take place rather than respond to genuine human demands…
    Hope this might help in adding this focus to future versions.

  • http://www.heschel.org.il/eng/ Anders Ettinger

    I have just discovered there is a second string of videos.
    Again these are generally good. One problem of inconsistency. In the early part in the simplified example you talk of a reserve requirement of 1.25 percent saying of every 1000 pounds they keep 12.5 for the day-to-day and reloan 987.5. In the second series of videos the figure all of a sudden changes without explanation to the more realistic figure for reserve requirement of 71 pounds out of each 1000.
    As for the subject matter it is a lot more problematic in the move from the micro model to the macro economic implications.
    First the government is not just another actor. You make no mention of the bond market but when government decides to issue bonds the banks create the money to buy them- so while they are still the ones making the money technically it is the government that decides what it is used for not the banks.
    Same could be said for corporate bonds, so I think the distributional question is more complex than presented.
    Secondly, I am familiar with the money as debt focus through Rowbotham and Lietaer but have never fully understood the critique and still don’t. As for the question of control, in the theoretical market model it should not exist as the market is “democratic”- if it were so obvious that the banks only win and if they lose the tax payer pays to bail them out and they still win, anyone can buy bank shares and they would only ever make money.
    As for the question of alternatives it is ultimately a political decisions over the legal framing of how we run society, and while I agree historically there seems to be a lot of pre-democratic injustice that crept through modern legislation again in a democracy that should be easily changeable by convincing argument for alternatives other than abolition of FRB. My main question would be- who said banks need to be for profit corporations rather than not for profit companies for the public good? That would require basically minimal change to their mandate but with huge potential for change while, keeping the (basically good in my mind) assumption that allows for creativity and growth by enabling economic activity to take place now through lending, in (realistic and not reckless) optimism that a good idea will offer more wealth in future if we allow it to grow to pay back with dividends.

  • http://www.simondixon.org Simon Dixon

    Great to see videos on this topic.

    Keep up the good work as we see fractional reserve banking and its destructive consequences come to an end.

    You saw it here first.

    Simon Dixon

  • http://staff.science.uva.nl/~jesshope/ Chris Jesshope

    Well done, this is an excellent storyline. As has already been said, for some, it may be a bit repetitive. I note that you did not mention that under this system the only way to pay off interest is to have perpetual and compounded growth in the money supply, hence inflation, although seen as being bad is in fact is utterly necessary. This growth is exponential and any system with a finite set of resources must eventually fail big time under these premises. This fact is already implicit in your graph of the divergence of debt and the money supply.

    I feel that there is so much vested interest in this model of money supply that all you are doing here is pissing in the wind. Having said that, it has to change and I applaud your efforts.

    • http://www.bendyson.com/ Ben Dyson

      @Chris – a few years ago I would have agreed with you, but fractional reserve banking and debt-based money is a system that will inevitably collapse, and that collapse came in 2007-2008. The system is now on life-support, with no hope of recovery, so let’s pull the plug and start again with something that works.

  • Ianj

    Perhaps you should also put the banking system in its wider context of the need for contihual economic growth and how this exponential aspect destrorys what it creates. This again is in the context of a finite system and dwindling natural resources with a growing world population and agining one in the developed world. This wider context also calls for a change in the banking system and how funds an economic system that has to stabalise.

  • http://www.legalforgery.com Bill Davies

    The great advantage of videos as being easy to understand is offset by the difficulty of refering back and in this case in finding a page again. These videos are in many ways very good indeed. I am not sure that Fractional Reserve Banking as explained in books on economics helps to explain what is actually happening. The reality is simpler to understand if you realise that the only physical restraint on the amount a bank can lend is the ratio of liquid assets held by a bank to the total amount of its deposits, the “Liqidity Ratio”. The statutory liquity ratio was set at a minimum of 32% when the Bank of England was nationalised in 1947 but was steadily reduced – presumably under pressure from the banks – to a cash ratio deposit regime in 1981 which in 1996 was calibrated to ensure that a bank had enough highly liquid assets to meet its outflows for the first week of a liquidity crisis without recourse to the inter-bank market, in order to allow the authorities time to explore options for an orderly resolution.

    This meant that there was virtually no restraint of the quantity of money banks could create apart from the demand for loans at the going rate of interest and some lingering residual caution on the part of bank management.

    I would also criticise the video on the way money is destroyed: It states that loaned money is destroyed when a loan is repaid but this would depend on the bank concerned carefully refraining from re-lending the money received as repayments in spite of these payments arriving in the form of credits on the interbank market. I can see no reason for a bank to forego this opportunity. There is certainly no reason for a bank to restrain its lending of money received as interest payments on a loan.

    If money repaid is no longer money, where did all the new money in M4 come from? Did new lending net of loan repayments really increase at about £200 billion in 2009?

  • Tim Cooke

    For the people who are new to this site (and perhaps new to the whole topic) you may wish to also watch The Secret of Oz which gives a pretty detailed history from a U.S perspective.

    Well worth a watch IMHO.

  • Conrad Jones

    Interesting videos. Thank you. Obviously a lot of time and effort put into this. Does provide much thought for concern. Our grandchildren – so long as they are not brainwashed by endless Game Shows and Gladiator reruns, will truely hate us for getting them into this debt.

    As the Bank of England holds the Reserve accounts of 44 Private Banks, and – presumably; charges fees for this service, is the Bank of England wholely behind this campaign as you portray? I cannot understand why Mervyn King would be supporting something that is against all his vested interests.

    Some Feedback (Not Criticism):
    I agree with a comment that suggested that some information was repeated. I believe that it would benefit the videos if some information was not repeated to shorten the overall length. These are videos, so it is possible to Stop, Pause and go back to view the point again. Which is the advantage of the internet age.

    Can you also include in your Videos a brief History of the success of the Scottish Banking System between 1727 to 1845 when Scottish Bank Notes were regarded as more stable than English Bank Notes. After 1845, the Bank of England took charge of the Scottish Banking System and made it as unstable as the English system.

    Reference: “Mystery of Banking” by Murray N.Rothbard. 2008.
    http://mises.org/books/mysteryofbanking.pdf
    Page 183 – 190. Please read.

    Overall, this looks like the start of an awakening of the realisation that our Banks are not acting in the National Interest.

    There’s a whole lot of other stuff related to Banking that you could also talk about which is detrimental to the Human race as a whole:

    1. IMF / World Bank Loans to Third World Countries which result in the infrastructure of those countries being taken over by pure profit motivated companies and increase the debt of those countries until they are run by outside interests.

    2. The formation of the Bank of England in 1694 – and the reason why it was formed, and who bought shares in it.

    3. The formation of the ‘Bank of England Nominees Limited’ in 1977, and why it was created and what it does behind the scenes – now that would be a must see. Is the Bank of England Nationalised AND Independent?

    4. The Federal Reserve and Goldman Sachs “partnership”.
    http://www.youtube.com/watch?v=PTUY16CkS-k

    Super effort, but to get the average Joe in the street interested – you’ll need a headline to get everybody interested in this – and not just people like me who already is.

    Thanks again.

    • http://www.bendyson.com/ Ben Dyson

      Thanks Conrad. This is a fairly technical introduction so is probably too technical for complete beginners to the subject. We have a team working on some animated videos that are aimed at people who are new to this as well, and we should have those videos up by the end of the year.

    • montmorency

      Re: “Free Scottish Banks” – Did you read the appendix, in the PDF pointed to by the link you gave?  He pretty much rejects what he himself had written earlier. Obviously the appendix in that edition was a later piece of work. In short, he says the Scottish banks were not free, and weren’t any better than the English ones.

      Interesting link and book though, for which thanks.

  • Conrad Jones

    p.s. One other thing you could mention is the origins of the 1997 Asian Crisis. Was it caused by Central Banks dumping Asian Currencies – deliberately?

    http://www.youtube.com/watch?v=c3O–_S2hq4
    - Joan Veon.

  • http://www.transitionbath.org/economy Brendan Bayew

    Nice set of introductory videos. Apart from what others have already said, I feel that the story you write could be improved by making slightly more of the fact that Interest payments mean there is not enough money in the economy and how this fuels competition between people. Interest-bearing debt creates an environment which fosters self-interest over the common good, we are all competing for the scarce resource that is legal tender.

    I’d like to recommend The Crash Course which can be seen for free on http://www.chrismartenson.com – It is US-centric but nicely ties the economy in with the energy crisis and the environmental crisis.

    Really glad that Positive Money is doing this and from a UK perspective too.

    As well as The Bank of England Nominees ltd (which has secret shareholders(!!) and is exempt from the Freedom of Information act and the Companies act and is protected by the Official Secrets act) there is also a story to be told about the relationship between the Bank of England and The Bank for International Settlements (BIS) which is the Central Banks’ Central Bank and does for national central banks what the BoE does for UK banks.

  • http://members.tripod.com/writer_on_call/ Tom Mysiewicz

    Many years agto I studied economics with one of Ludwig Von Mises direct students. If all people were as ethical as Von Mises, his ideas might work in the real world! I recently came up with some alternative currency schemes that would put money in the hands of producers and providers of needed services–not banking parasites and fictional financial instruments. You can find these ideas in my chapter in a compendium edited by Prof. Leo Rebello “World Without Wars” (war being an inevitable outcome of fractional-reserve banking). This book is downloadable on the Internet for free.

    Keep up the good work!

    • David Robertson

      I agree with your comment on von Mises. In fact this is the problem with most economic theories. They do not take into account the natural perfidy of humanity. Any economic theory must in time become a tool for the enslavement of mankind. This was always the purpose of Keynesianism and why it was embraced by the money powers.

      The Achilles heel of the von Mises theory, in my opinion, is the attachment to gold as the final extinguisher of debt and the only feasible store of value. Though this may well be true in theory the fact is that over the past sixty years 50% of all the gold in existence has disappeared into private hoards. The identity of the hoarders is not known and could well be the very ones who presently control the global monetary system. When the dust settles on this present crisis we may well find ourselves with a world currency backed in some measure by the gold in the possession of the present money powers.

      In support of this hypothesis it is well known that the gold markets have been manipulated since 1971 on the short side by two major investment banks acting on behalf of certain principals. This is a rational strategy if one is holding huge amounts of gold since it maintains the gold price at an affordable level and generates a steady income stream.

  • http://ralphanomics.blogspot.com/ Ralph Musgrave

    I agree with much of your output, but disagree on several points as follows.

    You claim that commercial banks have a monopoly or near monopoly of money creation. That as going too far. CENTRAL BANKS create significant amounts of money too. For example central bank created money in the U.S. (the monetary base) is currently around $2,000bn while M1 and M2 are around $9,000bn. See respectively http://research.stlouisfed.org/fred2/data/BOGUMBNS.txt and http://www.federalreserve.gov/Releases/H6/hist/h6hist1.txt

    In your “solutions” article you say your monetary system will be self stabilising. ( “In a positive money system, rising debt would cause people to slow down – rather than accelerate – their borrowing”). Certainly disallowing fractional reserve would bring better stability. But I don’t see, and you don’t explain, exactly how we can get even more stability. I suggest you don’t claim that stability above and beyond disposing of fractional reserve can be achieved unless you give more indication as to how to achieve this.

    Even if we ban fractional reserve, various sources of instability will still exist, e.g. outbreaks of “irrational exuberance”, or unexpected increases in demand for our exports. So I don’t see us ever achieving perfect stability.

    Still on the “solutions” article you say “The current system relies on ever-increasing debt to avoid a complete economic meltdown – even though ever-increasing debt will eventually lead to complete economic meltdown.” I don’t agree with that.

    First, I don’t see anything wrong with debt per person to rising along with increased GDP per person.

    Second, there is the case where debt per person rises above and beyond the above “increase in GDP” level. Obviously the “current system” DID rely on increased debt in the years leading up to the credit crunch. But had governments had their heads screwed on, they would for example have banned NINJA mortgages, and made up for the consequent loss in aggregate demand in other ways. In other words fractional reserve does not necessarily rely on continuous and unacceptably large increases in debt. The main flaw in fractional reserve, seems to me, is just the instability it brings.

    You say “The process of creating money should not simultaneously create debt.” Agreed. But you don’t actually say how this is to be done, far as I can see. It’s actually easy to do by having just the central bank (rather than commercial or private banks) create additional money. That needs saying.

    The pedantically minded might want to claim that where the central bank creates money, a debt IS created: a debt owed by the central bank to those holding such money. E.g. £20 notes say “ I promise to pay the bearer…..”. But this is a totally empty promise. This so called debt is not a debt in any normal meaning of the word, as Willem Buiter has pointed out. So it might be worth including this point (for the benefit of pedants).

    Re the idea that we disallow the “manipulation of interest rates”, that would be feasible if a future monetary system brings perfect stability. There would then be no need for interest rate adjustments. But (to repeat) while banning fractional reserve would improve stability, I don’t see it bringing perfect stability. I also agree that interest rate adjustments are a very defective way of regulating economies for reasons I set out here: http://ralphanomics.blogspot.com/2010/08/interest-rates-should-not-be-main-tool.html

    My preferred manipulation tool is the Abba Lerner or Modern Monetary Theory (MMT) one. But I still think interest rate adjustment is a useful additional tool. Indeed, your last point is very near to a statement of the basics of MMT: “if new money is created, the benefit of creating that new money should be spread as widely as possible, rather than going to a concentrated group of people or companies.” That is, during a recession, MMT advocates having government print money and spend it – and spend it on a wide section of the population. E.g. a payroll tax reduction is the favoured tool advocated by MMT enthusiasts in the U.S.

    Good luck!

  • http://None Bill Clarke

    The contribution by Bill Davies on the following points made me think.

    “I would also criticise the video on the way money is destroyed: It states that loaned money is destroyed when a loan is repaid but this would depend on the bank concerned carefully refraining from re-lending the money received as repayments in spite of these payments arriving in the form of credits on the interbank market. I can see no reason for a bank to forego this opportunity. There is certainly no reason for a bank to restrain its lending of money received as interest payments on a loan.”

    “If money repaid is no longer money, where did all the new money in M4 come from? Did new lending net does it have to do so?”

    When a bank makes a loan its balance in its reserve account at the B.of E. is reduced. When the loan is repaid the balance is increased. Correct? So the repaid loan is available to lend again unless the bank has to notify the B.of E.
    that it has been repaid. Does it have to do this? If not it’s still part of the M4 money supply.

    These points need clarifying.

  • Sep Joadat

    Hi Ben,
    I am fascinated by the work and awareness you are doing about eliminating fractional reserve banking. I hope you achieve this.
    My question is;
    What do you mean by “…..for every £1 I have in my account, someone else is £1 in debt”…?
    “……For someone to be above the water, someone else needs to be below it”…?
    I’m a little confused by that. I understand the rest though.
    Thanks,
    Sep

  • David Jones

    Hi Ben – firstly thanks a lot for making these videos available, they are helping clear up some misconceptions I’d picked up from over-simplified accounts available elsewhere. You wrote a few days ago that:

    “… fractional reserve banking and debt-based money is a system that will inevitably collapse, and that collapse came in 2007-2008. The system is now on life-support, with no hope of recovery…” .

    I suspect you’re correct to make this statement, but I wouldn’t feel confident making it myself – would you be able to write a few sentences motivating it? I take it you mean its final collapse is mathematically inevitable, rather than “merely” ecologically inevitable? For example, if we assume that the planet is an infinite source and sink (!) why can’t the money supply just merrily inflate forever, albeit with periodic cycles of boom and bust? Why do you think that this bust is the final one? I ask because a lot of insiders will be trying to sell the public the idea that the existing system can (and should) be patched up through regulation, so it’s important for us “dissidents” to be able to clearly point out any flaws underlying their arguments.

  • David Robertson

    [Please delete any other comments of mine. I have summed up the points I wish to make in this comment.]

    There are additional important facts worth mentioning to round out the picture and to gain an understanding of how the British public is being robbed blind and how the big banks are slowly absorbing all the smaller banks. Although the banks have been given a fiduciary role to play in society they have abused this trust in the most egregious manner and are therefore guilty of malfeasance. This point must be made clear in any effort to educate the public.

    Any bank in effect is acting as an INTERMEDIARY although the law has been written to give them the status of principals. When money is borrowed, i.e. created by the bank, it is deposited into the account of the borrower and used to purchase something which the borrower does not own e.g. a house. The money loaned is loaned against the security, the mortgage, on the house. So, the bank lends money it does not have against the security of an asset that the borrower does not own. (READ THAT AGAIN)

    The bank in every case is acting as a facilitator of the sale but in doing so acquires effective ownership of the security, AND THE UNDERLYING ASSET, until the loan is repaid. It does this by creating money out of nothing. Therefore, the banking system as a whole is fully guaranteed by the taxpayer and has been authorised to remove ownership of all assets from the taxpaying public. (THINK ABOUT WHAT THIS MEANS)

    THE PROCESS OF CONSOLIDATION:

    A bank must begin with capital and may then lend out at the fractional reserve rate of from 12.5 times to 50 times tier one capital (was 8% but has been as low as 2%). These loans then become deposits in the accounts of the borrowers. This is one simple method for a bank to increase the number of its depositors.

    HOWEVER this is why smaller banks get into trouble and why larger banks gobble them up, or at least get to pick over their assets and acquire the better ones. In my opinion it is a deliberate strategy of the larger banks to freeze out smaller banks if their assets begin to exceed their liabilities by too great a measure. i.e. if they begin to cut into the big banks’ profit margins by making too many loans.

    THE MECHANISM OF CONSOLIDATION:

    The smaller banks do not hold as many deposit accounts as the larger banks. Therefore any money loaned out i.e.created by the smaller banks usually ends up in the accounts of the larger banks who then refuse to lend it back to the smaller banks in the interbank market when it suits their purposes to withhold it. This is always presented as a rational risk management decision but is simply a predatory move against the smaller banks. Since the taxpayer is always on the hook for any losses this is a risk free operation for the big banks. (NOW YOU KNOW WHY WE HAVE HAD THIS CREDIT CRISIS.)

    In light of these facts it seems to me that the powers that presently control the banking system will not relinquish their control easily. I applaud any effort to educate the public on how the banking system works so that eventually we may see the change to a more stable system and one not designed for the personal enrichment of the few at the expense of the many. This is unlikely to occur until there is a significant minority who not only understand the situation but are also willing to act energetically in a peaceful manner to make the changes needed.

  • Adam Lewis

    Ben – A useful primer for those unaware of how banks have been granted the right by our government(s) to conjure up money from nowhere, charge interest on it, then have the tax payer underwrite any foolish lending.

    Education
    Along with First Aid, this should be a fundamental part of our children’s education. Well done for bringing this subject to the nation’s attention. Education is the key to changing the status quo. When people understand the confidence trick that the banks (supported by our elected leaders, some of whom become non-executive directors of such institutions upon retiring from public life) are pulling off they will be incredulous …

    Timing
    Hundreds of thousands of jobs are being lost, people are losing their homes, bank ‘renumeration’ is back to pre-crisis levels, lending to business is woeful (I run a small business in the UK – my bank won’t lend me money for purchasing essential plant machinery in order to grow my business), rising food and fuel prices, VAT increases etc. then perhaps, just perhaps the timing is right for a movement to insist on a fundamental reform of a wholly inadequate financial system that affects the lives of every single one of us whether we like it or not.

    See Will Huttons’ ‘The State We’re In’ book for how damaging the UK banking sector has been for manufacturing and industry. They have the power to dictate which sectors thrive and which don’t. Why?

    Money As Debt
    I would recommend Paul Grignons video’s entitled ‘Money As Debt’. He’s made a follow up video ‘Money As Debt 2′ following the entirely predictable financial crisis of 2008+ which clearly demonstrates how and why we ended up in this mess. Available on YouTube in about six, eight minute episodes.

    Please take a look as it discusses Fractional Reserve Banking, the closed-loop nature of the global banking system and explains fairly succinctly the problems inherent in the system: http://www.truththeory.org/money-as-debt-1/

    Nothing to See Here
    The status quo is quietly being maintained as the banks, regulatory bodies (next to useless compared to the resources banks have at their disposal for pushing the boundaries of financial alchemy) and politicians make a pretense of restructing the existing system, largely by insisting that the banks have a wee bit more cash in their pockets before they make future loans, hence the credit ‘crunch’. If this is the case then simply expect a similar crisis over an extended economic cycle (say another bust in 12 years, not 7 for example).

    Keep up the good work, you have my support. Spead the word.

    From acorns oak trees grow …

  • Dave

    The Money Masters (3 hours 30 mins approx) is another good DVD to get some understand about the history and role of banks.

  • Dave

    What would happen if the Government refused to pay back any loans it took out from the banks?
    Another question: Is the World Bank the world’s central bank which loans money to the central banks of each country which in turn loan money to all other banks in each country which in turn loan money to the people: a closed supply and return loop?
    One final question; should not the world of speculation (money making money) be explained also and is this world justified: the people make money out of money to ridiculous ends that nobody really knows what the hell is going on: one big con like some of the modern art and the prices paid! Insane, it is not clever, just insane!

  • http://www.makingplans.com/ Michael Gilbert

    There are many ways to come at a subject to clarify understanding, these 2 powerpoint presentations might help http://www.ces.org.za/docs/ReinventingMoney.ppt and http://www.accessfoundation.org/PDF/Tom_Greco_Transformation_of_Money_Presentation.ppt – keep up the good work

    • http://almosjustice.wordpress.com AlmosJustice

      Thanks Michael. Very useful.
      Unfortunately the second link url says’Account suspended’!

  • Tomas

    Ok. Everybody who knows anything about money knows wy have big problem with our money making system. We have to solve it or we die thru debt. You should translate your videos to many languages and put them to youtube. Because normal people in diferent countries are unable to understand this in english. I´m from czech and I cannot send this video to my friends due to this. But it could be the way to change it let people know and vote.

  • Pingback: Psychedelics: Bridging science and spirituality | Giulio Sica

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