Positive Money UK’s Submission to the Independent Banking Commission
Positive Money UK, nef (the new economics foundation), and Professor Richard Werner of the University of Southampton, have recently made a joint submission to the Independent Commission on Banking.
What did Positive Money UK recommend?
They have recommended the implementation of full-reserve banking for the UK, with power over the issue of the nation's money supply kept out of the hands of both vote-seeking politicians and profit-seeking banks. It is a proposal that could be implemented quickly (comfortably within 12 months) and that would have huge benefits for the economy as a whole. It may not be perfect, but it would be many times better than any banking system that we have had in the last 500 years. Download the submission below and let us know what you think.
Download the ICB Submission here (PDF, 1.1mb)
Will they listen?
Is the Commission really independent? Will they be sufficiently radical to address the real problems, or just patch up the existing system? The signs so far are pretty encouraging.
Firstly, one of the members of the Commission is Martin Wolf, Chief Economics Editor of the Financial Times. Here's what he had to say about private banks creating money:
“The essence of the contemporary monetary system is creation of money, out of nothing, by private banks’ often foolish lending.”
Martin Wolf, Financial Times, 9th Nov 2010
Martin Wolf has also been promoting John Kay's (not to be confused with our own John Key's) Narrow Banking proposals and Laurence Kotlikoff's Limited Purpose Banking, both ideas which would abolish money creation by private banks. And guess who the other main proponent of these ideas is? None other than the then current Governor of the Bank of England, Mervyn King, whose take on the current banking system is pretty clear:
“Of all the ways of organising banking, the worst is the one we have today. ...eliminating fractional reserve banking [money creation by private banks] explicitly recognizes that the pretence that risk-free deposits can be supported by risky assets is alchemy. To work, financial alchemy requires the implicit support of the tax payer...For a society to base its financial system on alchemy is a poor advertisement for its rationality.”
(Mervyn King, 2010, p17)
So if the top person at the Bank of England, alongside one of the most respected economists in the UK, both believe the current banking system is 'a poor advertisement for rationality', we might hope that the Commission's final recommendations do not simply involve patching up the existing system.
But most encouraging of all is the fact that the Commission's remit already includes two proposals that would eliminate money creation by private banks. Those of Kay and Kotlikoff both make it impossible for commercial banks to create money out of nothing through their "often foolish lending".
These two proposals were a late addition to the Issues paper, and we believe may have been added at the request of either Martin Wolf or Mervyn King himself. Fingers crossed that the Commission will be radical and take on board the points outlined in our submission: