The real deficit is in thinking

Solving the UK's economic problems should be like solving most crimes.  You follow the money!

If you are interested in learning more about a solution [which has worked before] then please visit this website:  www.positivemoney.org  [Link opens in new window]

Full reserve banking please

Please sign this petition which is for the G8 meeting 17-18 June 2013
End the debt based money system [petition]
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Do you believe that the high street banks have the right to create money?

I had a meeting with Martin Horwood MP in November 2012 to ask the question, 
"Do you believe that the high street banks have the right to create money"?  Neither he nor his team were able to answer this question, except to explain the legal basis for notes and coins i.e. for 3% of the money supply.  I then recieved the following letter from Rt Hon Greg Clark MP.

 

This is my response to this letter:

Thank you for the copy of the letter dated 30 January 2013 from Rt Hon Gregg Clark MP to you, in response to my question:

“Do you believe that the high street banks have the right to create money?”

I broadly understand the economic theory of Fractional Reserve Banking. But I have also have seen its real and catastrophic failure, as demonstrated at Northern Rock and indeed throughout the banking sector from 2007/2008 to the present day.

Further, I note the quote from the Independent Banking Commission’s interim report.  This remains just an opinion, as the Commission have been unable to provide their economic modelling to substantiate this statement, as requested by Positive Money.  

The “benefit” of Fractional Reserve Banking, is where I fundamentally disagree with Mr Clark.  A basic understanding of the reasons behind the Bank Charter Act of 1844, will lead to an entirely different conclusion.  In addition, it is a generally accepted view that the unrestrained lending capacity of the banks was what caused the current and continuing crisis, in the first place.

Sir Mervyn King, Governor of the Bank of England said on 19^th October 2010:

“The Bank of England’s key role has always been to ensure that the economy is supplied with the right quantity of money – neither too little nor too much.  For fifty years my predecessors struggled to prevent there being too much, so leading to inflation.  I find myself in the opposite situation having to explain that there is too little money in the economy.”

The Austerity policies of the Government are inevitably reducing the amount of money in the Economy, the exact opposite of what is, according to the Governor of the Bank of England, required right now.

The statement in the fifth paragraph, “the current system does not permit the uncontrolled expansion of the money supply”, is demonstrably untrue.  I attach a graph which shows the money supply [M4] from 1963 to 2011 [Source: Positive Money/Bank of England].  Ben Dyson, Director of Positive Money, said in his opening statement of the 2013 Conference:

“This [see attached graph] does not look like a money supply that has been controlled … this is something that is out of control”.

In fact, an almost identical letter to the one from the Rt Hon Gregg Clark is in Ben Dyson’s opening statement to Positive Money’s Conference 2013.  Ben Dyson explains the problems with this “copy and paste” response from The Treasury.

I would strongly recommend that you start talking to Positive Money, the New Economics Foundation and the few MPs who understand their research, like:

Michael Meacher MP

Steve Baker MP

This YouTube video is a good introduction to Positive Money’s research: http://www.youtube.com/watch?v=Rd9Pf3Bqp20 . 

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The current banking system was not designed and so, like in the 1840s, this is a great opportunity to analyse and understand what has gone wrong, rather than attempting to fix something that is fundamentally flawed.  Banking reform remains necessary because the system is still at its very heart, broken.  In addition, austerity policies are a choice which is entirely unnecessary, it’s not like there is nothing to do.

Unfortunately, the Government seems intent on trying to get the banks back to ‘business as usual’, rather than to act on the fundamental problem that caused the crash in the first place.  The banks changed from making money for their customers, to making money from their customers.

Lastly, I am again disappointed that my question was not actually answered.  Is it really acceptable to have no legal basis for 97% of our money supply?

Yours Sincerely

I confidently predict that the "deficit in thinking" will remain firmly in place and the destruction of this great nation of ours, at the hands of the Government, will continue apace.