Positive Money Conference London – Part-1

On Saturday, 29th 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.

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