A great deal of my research and writing for my book on political philosophy and macro-economics, NOW UTOPIA, has been within our banking system and money supply. I have a very clear understanding of what needs to be achieved and a vision for an alternative system that I am trying to put across to the British people and people across the globe. It is not, however, a subject easy to understand and that is why, it is a subject largely ignored, on the whole, by our media and yet it is crucially important to every part of our society and I am convinced that if we fix this then we fix most of our economic and social woes with it. Economists can reach degree level or further without really having to think too much about how money is produced and there is no place for work for those economists who explore alternatives to the set up we have and so not many people are suggesting alternatives or having an academic source to back up those alternatives.
Our money is largely produced by a cartel of banks in this nation when people or businesses take out a loan. It did not exist before that loan created it on a balance sheet at the bank and that is a hard notion for people to get their heads around. There used to be a ‘fractional reserve’ that the bank had to hold with the central bank (The bank of England) but there are ways around that now. NO, that money exists because of your obligation to repay that loan and as the capital is paid off so it ceases to exist. The bank, however, charges an interest which goes to the bank to pay its staff and costs and then pay its owners/shareholders. On the whole that money does not, however, ‘trickle down’ into the wider economy. Instead it is used to buy top end assets and more shares into the ownership of the productivity of working people. It goes into property, which hikes up the prices out of the reach of the lower end of the earning ladder. It hikes up share prices that mean a lesser percentage of yield from the original investment price of the share or the fundamental price based on the productivity or efficiency of the business. All those interest payments on loans must come from the wider economy from the productivity of the borrower in real cash. This means that year on year the supply of money must keep growing in order that the collective interest payments can be found in the economy as a whole. Well, simply increasing the money supply if all else stayed the same would mean that inflation would occur to de-value the money, what it could buy, as more of it came into the system. Nobody would be happy with that and so the loans are given on what would make the nation more productive. When we re-built the UK after the war and when we increased the building of better housing for the baby boomers this economic model worked fine. It worked well when people increased their consumption of household things and gadgets, just stuff that is largely made from the benefits of fossil fuel derived plastics that fill our landfills and pollute our food and water systems. The increase in productivity, GDP, also grows when the population is growing. GDP rates were a way for business investors to gage how investable a nation was but it has been increasingly used by politicians to gage how well a country is doing. The thing is that it does not show how well the people are doing in a nation only how well the owners of the process of capitalism are doing. The people of the nation are simply led to believe that if there is growth then somehow money will trickle down to them. Well, we can show that over the last 30 or 40 years this proves to be a fallacy. There is nothing about GDP that benefits the people of society and the things that society measures as being useful like having more cash at the end of the week from your wages, better schools, better hospitals, better policing etc The policy of chasing the growth of GDP has led our immigration policy being open to the world so that more bodies fuel the growth of the economy. A GDP growth of 3% sound negligible but because it compounds year on year it means that the whole must double every 23 years. In Indian where the growth in GDP is 7% this means that everything in their economy must double every 10 years. Now, just consider what this does as an economic model – populations must grow along with their increased consumption, manufacturing must increase and therefore its waste must increase. This has been a successful model up until now because of the utility we gain from fossil fuel. Fossil fuels have taken millions of years to form and yet we have used to easiest to find, the ‘low hanging fruit’ over the last 100 years and now fossil fuels are becoming more expensive to get at and therefore less utility is derived and again an increasing demand from an increasing global population moving towards increased consumption is outstripping supply and perhaps the turning point has already occurred in 2008 which saw a correction in some of the fundamentals of financial analysis. Great civilizations of the past reached their turning point in much the same way as the fundamental supply was outstripped by demand and these great civilizations like the Roman Empire and the Mayans fell unceremoniously.
Now, to you this must be sounding very bleak indeed and really it should. I am quite optimistic though because I can see a way forward. It does require a change though: a change to our money supply system and of our very understanding of sustainability within the community, within the nation and within the world. Populations do level off when they reach prosperity. In Europe, where people, and women especially, are empowered to plan their lives, choose their careers and enjoy their peak years the birthrate has dropped. What used to be the 2.4 children in the 70’s that increased the population size is now down to 1.6 births per couple in the UK and down to 1.3 in places like Italy and Sweden. This should be good news. But, those who own the process of capitalism have influenced our governments to stick to the same economic formula that’s fuels the growth of GDP because they have a vested interest in the project of growth. The result is that immigration has more than made up for the birthrate drop we have experienced because of the prosperity achieved. In the nations that had to open the floodgates of immigration more than others are seeing that the results of these sudden changes to communities in the conflicts and clashes that multicultural society brings.
My solution is that we take away the means of producing money from the banks and give it to a nationalized bank, the Bank of England, or better still a newly formed ‘Bank of the UK’. Then the money that comes in to the central bank as interest can be put back into the economy where it is most use directly in public services (thus saving on the tax bill). This is what is currently called ‘quantitative easing’. This means that there is more stability because the money supply could be controlled around other real life factors like productivity and efficiency within business and the balance of overseas trade. It can be controlled by a committee within a people’s government rather than a cartel of banks who ironically are always, themselves, armed with more information about future increases or decreases in the money supply and thus what investments will flourish.
The British tax payer has bailed out the banks when we were undemocratically forced to buy up shares of a failing bank whose shareholders had been profiteering up until that moment. They were able to take profit so that the tax payer was left holding the bill as they hailed a cab. Well, the fact that we have the majority of shares should be our starting point for having a national bank. We could merge RBS and Lloyds in an aggressive takeover like one of those 80’s ‘greed is good’ movies. We could then buy up the remaining shares in a compulsory purchase. Then we could all transfer our accounts and loans across to our new national bank. As the other banks collapse we could buy up their remaining shares as they go into receivership and simply bring those banks into the new nationalized banking group so that the jobs of the ordinary workers were safeguarded and all the time the deposits of the savers would be guaranteed by the taxpayer which they kind of are anyway. So you see that if it is us who underwrite the current system in times of failure and it is us who bring money into existence through obligation to repay loans and it is us who remain productive in society and it is us who pay our taxes which supplies government and the central bank with its dependable currency then why is it not us who own our own money supply? It has been gradually engineered to be this way across many centuries of government with a vested interest in owning the means of production.
Changing this apsect of our monetary system is only one aspect of Collective Sustainable Economics. It also encompasses a wider plan for society to live sustainably. It would require a leveling off of the population figures and that is only achievable when more women reach a prosperous and informed lifestyle. Our immigration policy would have to be reduced to next to nothing. Collective Sustainable Economics has a complete design that is far reaching into every aspect of the complex social systems. More information is available from Chapter 5 of Now Utopia.