Some practical alternatives to aspects of banking mentioned at this valuable 1-day event included (this does not aim to be a comprehensive list) –

In the UK

www.uk.zopa.com
peer to peer lending, with a less than 1% default rate

www.abundancegeneration.com
launching shortly, with the same founder as UK Zopa

www.bankofthefuture.com
launching in March 2012, will offer 4 different options of service and will embrace all the elements an ideal banking system would presently contain

Internationally

Hong Kong’s Octopus Card
highly successful, adopted by another province in China

Vodafone’s M-pesa (m=mobile, pesa=Swahili for money)
adopted by users for money transfers, it caught almost Vodafone’s African subsidiary by surprise to find itself become one of Africa’s largest money institutions, and aims in partnership with Citibank make this a world-wide payment service

Vodafone UK
making charity-giving via the mobile phone very easy (to charities that register with them)

Facebook Credits
nobody at Facebook is denying the existence of peer to peer banking plans

Google Points
Google does not deny working on its own payment system

Twitpay
Twitter is rolling out this service

www.PayPal.com

All above systems are however linked in one way or another linked to the banking system. The following 2 are genuinely independent –

www.bitcoin.com
genuinely has no links with banks

www.kiva.org
is another peer to peer lending system, concentrating on small loans to poorer countries

For UK readers of this blog there is an interesting offer on the table – contact your MP and ask whether s/he knows where money comes from, revealing that a survey has shown that only 4 out of 600 do and offer to provide them with a copy of the book “Where does Money Come From” co-authored by one of the day’s speakers, Josh Ryan-Collins (with Tony Greenahm of NEF), and published by the New Economics Foundation, www.neweconomics.org. If your MP has the courtesy to respond in the affirmative, NEF has offered to send them a complimentary copy of this eye-opening book (which to my mind ought to include the phrase “… really come from ….”

This Old Warhorse recommends you register with http://www.positivemoney.org.uk so that you are kept abreast of their work and have an opportunity to attend their next annual gathering – or invite them to something you are organising and for which you seek speakers.

The issue of what money is and how it may be made more relevant was briefly touched upon by speakers as the day’s focus was very much on how to remove the near monopoly powers we have given banks, which they have consistently misused to the detriment of most of the world, and about which governments simply have no idea what to do. The entire day was marked by the absence of any strident attacks on any parties, rather there was a sombre recognition that as a global society we had allowed a monster to develop that none of the parties threatened by it know how to control.

The bigger issue that this Old Warhorse considers will need to be addressed soon, but was outside the scope of this one-day event and still lies in the future, is agreement on what money is and how the currencies in which money is expressed can be given value objectively. One of the MP speakers at the event made reference to money as a commodity, which is precisely where our problem lies – we need to agree that money is a unit of measure, nothing else, and then start treating it as such. Coupled with the practical solutions offered by the event here reported on, the role of banks would quickly become redefined as a service industry to the real wealth generators of modern society.

On Saturday, 29^th October 2011, the UK pressure group, Positive Money, arranged its second annual conference in one of UCL’s lecture theatres.

This Old Warhorse was reminded of attending similar events 40 years ago, most notably the annual TOES conferences (The Other Economic Summit) timed to precede the G8 (or whatever the number then was) event.

Yet, there was a fundamental difference between then and this day – today everybody can see that disaster is heading our way unless we reform our financial and banking systems, then only the far-sighted thinkers could see what has now finally caught up with us. And today we have the internet, and, most importantly, Social Media.

It is not my intention in this blog to keep referring back to the past (when banks were controlled and bankers were paid salaries only), it was simply this contrast that struck me as I sat through a day of interesting revelations and practical proposals (all the while drugged to keep my man-cold under manful control).

The most striking bit of information was that of the 600 MPs, who are the UK’s legislators, not more than 4 can be presumed to know what money is and where it comes from; similar research conducted amongst Treasury officials, bankers and economists, reveals the same high levels of ignorance; and similar levels of ignorance are found amongst almost the entire public. This is a particularly appalling figure as only about 3% of money even remotely equates to what everybody appears to consider money to be, whereas the remaining 97% consists of simple computer entries which any licensed lending institution is authorised to make.

How come that the one measure that impacts on all our lives is so little understood, or worse still, so misunderstood?  How badly are we failing in our education! How docile we have become to allow every step of our lives to be controlled by something only the tiniest number of people understand? I knew it was bad, but had no idea how bad it has become.

The focus of the day was to highlight this ignorance and how this had made the control of banks fundamentally impossible until governments truly understood the nature of money.  The two MPs, who were amongst the speakers, had no difficulty in sharing this view.

Being a solutions-oriented event the speakers variously listed items for immediate banking reform, including the requirement to change the law that currently turns your and my money into bank-owned money from the moment we make a deposit with them.  This change in ownership perception immediately makes it easier for the introduction of genuine customer choice – s/he would opt to use the bank either as a convenient storage and transfer place for money, and / or to be an investment agent for the customer in certain approved areas.  In the event of future bank failures money in the storage accounts would still be there and would simply be transferred  to another bank; money at risk would most likely be at reduced risk as few, if any, bank customer would allow investments in some of the mad schemes banks currently participate in.

Research has shown that banks currently lend only about 8% of their money for productive purposes, and the other 92% is used non-productively.  The importance of banks with such a lending record is further questioned when their tax contributions to UK government coffers in the last financial year were at £23.8 billion in comparison to £60.0 billions from the manufacturing sector.

Recognising that even these simple and logical changes in legislation will take time to get through Parliament, the joy of this event was the presentation of schemes that can be implemented without changes in legislation having to be put in place.  A shining example of this is Hong Kong’s Octopus Card – originally designed to facilitate travel on the public transport system (London followed with its Oyster card), it quickly became accepted by local traders. Needless to say, the banks quickly complained that these pre-paid cards were effectively turning the company that ran them into a deposit taker, which had to remain the sole prerogative of holders of banking licence. Hong Kong’s Monetary Authority looked into the matter, concluded that indeed deposits were being taken and promptly awarded the Octopus company with a deposit taking licence! It is now a widely used pre-paid card that can be used in an endless choice of situations. Its symbol and the name are reminiscent of the figure eight, which in Chinese is of course a most auspicious number.

In part-2 I list some of the practical applications designed to by-pass the banks.

There we have it, all British banks are required to split their gambling (errr, investment banking) activities from their real (commercial) banking services.

First the banks said this would be too expensive and all costs would be required to be passed on to their clients; then the government said they had 8 years to implement these changes; and now the banks are saying that if this is not implemented simultaneously, on a global scale, they will be at a competitive disadvantage.

Absolute nonsense, I am older than many, but not too old to be able to recall that throughout my banking career, in the 1970s, we were required scrupulously to keep these activities apart by creating a virtual Chinese Wall between them. And investment banking then was much closer to real banking than it is today!

So, if the banks continue insulting their customers’ intelligence, and government hasn’t got the guts (and brains) to tackle them, surely the time has come for the customer to strike back – if we all stop servicing our debts to banks and credit card companies on a coordinated basis, banks and government will quickly sit down and come up with solutions. By taking this direct action we shall at least control the timing of events, rather than wait for the inevitable next crash to propel us into yet another ill-thought out knee-jerk solution.

We are continually being told that today’s high interest rates and charges are a form of insurance to cover increases in problem borrowers. Well, let’s call on this insurance.

If somebody has the energy to take on the organisation of this demonstration of customer power, then on the day the banks and government are forced into emergency talks, we need to insist that customers are directly represented. This is essential, for we have seen how time & again customer needs and interests have been studiously ignored.

I am writing this in September 2011.

Every now and then I forget that I have given up on the collective madness of our civilisation and how it permits small groups to do outrageous things to everybody else without anybody really caring, noticing or questioning what they are up to. This forgetfulness set in again when I heard that some young trader had beaten the fail-proof system of one of the world’s largest and most sophisticated banks, UBS, by losing them £1.2 billion. This the media quickly explains away as largely bad luck because he was caught mid-trade by the Swiss authorities deciding to adjust the value of their currency, plus a little bit of record falsifying.

We hear these explanations, read the newspaper lines … and move on to the next item presented by our eternally busy minds.

But STOP. What was the guy really doing?

This guy was a trader in a huge market for ETFs – Exchange-Traded Funds. They are a relatively new product that bankers have created and society has allowed them to get a way with it. An ETF is a basket of indexes, a bit like running a pool of bets in simultaneous games, races and other gambling events and placing a value on their collective outcome. Imagine! Clearly, because there are so many variables involved, it is not possible to give an exact, current valuation of such a Fund, as the components in the basket are all performing differently, often wildly differently than anticipated.

An investor buys shares in an ETF. You can imagine that the only way this can work is by some powerful computer programmes monitoring the performance of the constituents of the basket, projecting these forward and basing a current price on how the indices in the pot are expected to perform. Typically ETFs will specialize by creating baskets that contain defined indices like the Spider (SPDR) that tracks the S&P 500 index; or Currency; or Bonds; or the Auto Industry; etc. But all they are doing is betting with money, either we, society, or they, as money printing institutions, provide. Money creating money without anything of value being added in between does not reflect the laws of nature.

If you look at money as energy, as potential, or even as seed-stock, you can immediately see that you need to place it or plant it somewhere to get something of value back. Only by adding something new can it be said that value is being created. Much of today’s banking by-passes creating something new, instead simply focuses on making more and more sterile money. Only when such speculation goes wrong, are heads hung in mock-shame, and in embarrassment at being caught out – and a new financial instrument is created to make yet more money and leave Joe public even more in the dark.

Are we as a society stupid, or mad, or so brain dead, that we are not willing to start asking aloud what role we want banks to play and then enact legislation that will force them to serve the greater good, rather than a narrow, very small greedy minority. Because we did not challenge the banks in the preceding phase of this corruptive process (when the only value that banks had was that against which they had secured their lending), they have in a sense now thrown all pretence to the wind and are openly doing what does not make sense, other than to hasten the decline of this system. Understand, when I say “banks”, I mean the system that encourages how banks behave, are managed, are supervised, are expected to perform, etc. Bankers too are simply doing what they think best, most profitable, etc., in accordance with the requirements of a system we are allowing to prevail.