Friday, April 18, 2014

Dr Peter Selby on money reform. London Occupy reaches Winchester. Malcolm Brown, Michael Northcott, Richard Werner

Two years after Tent City was dismantled from around St Paul's in London the ripples of Occupy London reached Winchester last week (9th April) when ex-Bishop Peter Selby delivered a paper 'An alternative to Chaos and Fear' that cut to a core problem of capitalism. This was at the Futures of Capitalism conference at the Business School of the University of Winchester, Hampshire.

Dr Selby said that what guides the religious life stems from God's own character and the outflow from that to society is mercy and justice. The religious tradition is that life is not a gamble, but as a result of a departure from faith which the structure of capitalism represents, the current view is that life is indeed a gamble and its effects are random. We have given ourselves over to the rule of money and allowed it to be given sovereign power over life - that is, to be an idol - with appalling effects on the vulnerable. William Cowper who campaigned against slavery in the 18th century was shocked at the purchase of people as slaves and found it to be wrong in principle and not merely an inconvenient way to have access to sugar and rum. Dr Selby finds that capitalism with its supposed 'free market' as we know it, is also morally wrong, and is not something to be endured and merely in need of being changed at the edges. It is unacceptable. He said that whilst the East German command economy failed it did contain some good ideas that started with concern for the poor. He referred to Psalm 82 with its exposure of favouritism to the unjust and its exhortation to prioritise the needs of the oppressed, the weak and the poor.  

He majored on the creation of money of which 99% is now made by private banks and 1% by the government. Historically it was the sole right of the sovereign to make the full 100%. He compared this with the right of the state alone to have an army - why is money so different today? With banks now having the power of money creation they have power over life, and overrule elected governments. International financial power is sovereign without frontiers, and nation states have less and less control under that empire. Thus is the creation of money the root of the capitalist problem.  Jesus said that the kings of the world lord it over others but that was not to be the way of his kingdom. God's love is to be shared to the ends of the earth bringing inclusion and law. Those who profess faith should: ' rediscover the expression of faith in God as one who offers a different economy, specifically one who replaces chaos and fear with mercy as the guiding economic reality'Dr Selby wants the churches to find ways to bring fairness.

He said that the idea that cuts in welfare to the vulnerable are necessary to prevent dependency, whilst more money for the rich through tax cuts will encourage the rich to work harder, is a crass lie and such untruths must be exposed. Another falsehood is that the power of the wealthy is the key to a reasonable standard of life for all. During the discussion he cited a case where a large donation from The Big Lottery required that it must be permanently commemorated by a fixed plaque.  Whilst such a demand brings 'gratitude in perpetuity' to The Big Lottery as an organisation, the truth behind that system is the fact that the poorest are the biggest buyers of lottery tickets. 


Rev Dr Malcolm Brown who at Church House, Westminster is the Director of Mission and Public Affairs (CofE) gave a response to the talk which he said was a prophetic voice, and asked how it should affect our conversation with policymakers? He spoke of the tension between moral principles and economics, between the coming of the Holy Spirit in the past and the full incoming Kingdom of God at some time in the future and having to live in a sinful world meanwhile.  Illustrating the current scene he referred to Charles Clore's bid for Sears in 1953 as a shock to the city establishment culture, and likened it to a person standing up on the front row of a seated crowd to gain a slightly better view, thus forcing everyone else to stand and become slightly worse off with no compensating gains. But how do you legislate between altruism and selfishness? He spoke of the campaign he was involved in (when a Southampton vicar) that banned Sunday trading - they defeated the Thatcher government - but which is now being challenged. On the current issue of capitalism he thought the only way is to engender a new moral consensus, otherwise the only alternative to free markets is authoritarianism. How do we resolve between the 'society of the strongest' and 'the community of communities'? The moral argument can be seen by those who disagree as toxic. He said that banks are a contradiction in a market system whereas credit unions are robust.  


Professor Michael Northcott agreed that the private creation of credit is a core problem and combined with the market principle it brings money supply chaos. Professor Richard Werner said that the last 50 years of economics used the wrong postulates and axioms and when its supposed aim of achieving a  'Utopian dream world' is attempted by governments, unsurprisingly it fails. As to the Dr Brown's search for a moral consensus he said we already have one! When people are asked if they would agree to a fraudulent money system based on fictional deposits (i.e. the current fractional reserve banking system as it is) they say they would not support such a thing. He asked Dr Brown if he agreed that money creation should be in the public domain? Answer: Yes.

I asked Dr Brown about his view that apart from a new consensus, the only alternative to markets is authoritarianism, in that we at Local First CIC in Winchester are pioneering a community bank which will be a full-licence bank, raising profits for the common good.  As a response to the failure of the capitalist model it is not in any way a product of authoritarianism!  Dr Brown had no problem with the vision - but who decides ultimately, who controls it?

It seemed to me that an answer to Dr Brown's worries are in Dr Selby's appeal for the churches to give a lead and at least dare to support such pioneering efforts.  After all as a vicar he gave support to stopping Sunday shop opening in 1986, why not now, as an elevated church leader give support to community banks in 2014?  

Wednesday, March 19, 2014

Bank of England concurs with Prof Richard Werner's view on money creation by banks

Richard Werner (Professor of International Banking, University of Southampton) has for a decade or two made it quite clear that banks don't receive deposits and then pass them out as loans, rather they make the loans first, out of nothing. See his short video interview: Banking and the Economy and this one: Who creates the Money Supply? 

Now the Bank of England has admitted this is just what happens and in the latest Quarterly Bulletin 2014 Q1:  Money creation in the modern economy spells it out, also repeating the message with a video from the gold vaults of the Bank.

The Guardian has an article (David Graeber, Tue 18 Mar) as the general media suddenly discover the truth about money creation.

There are those who have a vested interest in the mythical convention that it is only the banks who can lend to governments to cover public spending deficits. Those are the bankers whose huge salaries and stupendous bonuses continue on despite the disaster of the financial crisis. The new Bank of England clarity needs to be pressed further. The government need not borrow to cover debt, the government could create its own money debt free and interest free as per another video by Richard Werner

Funny thing, Prof Werner's video messages about money/credit creation have been available since 2011 (see links to the full set). You wait three years for the media to catch on to these secrets about banking and suddenly they have found the courage! The next cause is to follow the Guardian and challenge the austerity theme that the Coalition Govt. is chained to, with its poverty-promoting effects for us all.  Positive Money has been battling away at this theme for ages, and  here is a helpful explanation about the false 'truths' of economic orthodoxy from Ann Pettifor.
posted by Charles Bazlinton. Author The Free Lunch - Fairness with Freedom (about banking reform and much more). 

Monday, March 03, 2014

Rev Paul Nicolson & Prof Michael Hudson - A common answer to austerity

Rev Paul Nicolson is someone who is getting into hot water on behalf of those who live their lives in a dilemma as to whether to heat their homes or eat. At this stage of his battle he is grappling with the bureaucracy of debt enforcement about his non-payment of council tax. Even though he can pay, he is refusing to, but is making a political point to press the Council to charge higher council tax payers more, so that those on the heat/bread line can be relieved of council tax as they used to be.  

A December 2013 post gives his case and a recent update shows that the bailiffs are getting muddled about where he lives, as the Council failed to inform the Court correctly. 

But he says:
'The long term aim must be to abolish council tax and business rates in favour of land value tax.' Tenants would have no liability for any land value tax (owners would) and the sort of bother Rev Paul gets involved in wouldn't be needed due to their income boost. 

Another advocate of land value tax, particularly relating to financial woes of Ireland is Prof Michael Hudson. 
In a recent interview he says, referring to the abandonment of their native land by many Irish: 
You should establish as a basic legal principle of international law that no country should be obliged to pay foreign debts at the price of driving out 10 – 20% of its population, at the price of austerity, and at the price of committing economic suicide.
Nation states are not supposed to commit suicide. But that is what Ireland is doing.
and: 
'just read Henry George and The Land Question and you’ll get everything you need to know about why Ireland should have had the tax base on the land instead of turning over the rental income to banks – which then lent it to crooks, who stole it.'

Michael Hudson on Latvia and oppressors:
 'There is a basic motto among oppressors: You don’t know when people will begin to fight back until they actually do. So they are just tightening the screws and tightening the screws. Latvia was a cruel experiment to see how far you could reduce living standards. There doesn’t seem to be a limit.'

Monday, February 24, 2014

Mansion Tax: all-party consensus?

A mansion tax may be likely within a couple of years with Labour and the Lib-Dems both wanting one. Today in The Times 'Mansion Tax 'could hit directors' ability to get loans' (Deidre Hipwell), Lord Adonis is reported as saying that the idea is unpopular with 'anybody who is well off ' and  James Sproule of the Institute of Directors says that company directors may find the collateral value in their property is cut. This would be a double whammy against SME businesses. What is needed is a way to introduce the tax fairly so that the ordinary homeowner, at least the asset rich / cash poor ones, who will be hit by an annual mansion tax of 1% on their £1m plus value home, can cope with paying.

An accepted principle of taxation is that it is an awful lot easier to work if the tax can be paid out of  an income stream, ideally one that brings the liability - which is why income tax and VAT are so easy to work. The problem is the value of a home doesn't produce cash until a sale. To stop the outcry at the difficulties of paying the new tax each year, why not let anyone who pays mansion tax on their usual residence to set it off against their income tax bill? Even many Conservative voters would probably tolerate mansion tax this way.

Ordinary home owners would see no income reduction - including company directors guaranteeing their loans against their residence. The housing market would be damped down making homes more affordable probably right down the range, even below the £1m threshold. But company-owned houses and second-home owners would be liable for the tax without relief, raising more for the exchequer, which is always a helpful thing when embarking on the messy business of reforming tax. It would also be a wise thing that business loan collateral in property is considered more realistically. To have to rely in every business cycle on a property speculation bubble to back funding for a (non-property development) business is a little mad when such loans should be made on the strength of the business case.
Posted by Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom

Monday, February 10, 2014

Bureaucratic alchemy in a field near you - Wealth multiplied x250 times

Try this exercise for land for new housing in your area and see what treasure lies in green fields. Wealth is magicked into existence by the Local Authority's word: 'Permitted' after someone submits a planning application for new housing. Your local Planning Development Committee is regularly able to make private individuals rich through bureaucratic alchemy.  In many towns and villages, cases similar to the one below are arising and fabulous wealth creation performed for one section of society only. This case is based on a proposed development on the edge of a market town in Hampshire.

THE COMMUNITY DEAL
On a 10 hectare site (about 25 acres) it is proposed to build at a density of 32 dwellings per hectare. Under planning regulations using a Section 106 Agreement (Town and Country Planning Act) which brings benefits to local people, the proportion of 'affordable' dwellings for rent and shared equity is suggested at 40%. This will mean that the land for 40% of the 320 homes (128) will be given free by the landowner/developer to a housing association (Residential Social Landlord) and the developer will arrange to build the 128 houses and flats on it and then sell them to the RSL for an amount set by a national formula. This means a straightforward good deal for builder and community - a guaranteed sale at a reasonable price. These 'affordable homes' are let at rents set lower than market rents and will include some shared-equity homes.

Because the affordable element of the development is a zero-cost exercise (builder's costs and profits are covered by the RSL's payment for the finished homes) and given the relatively low value 'gift' of agricultural land at £25,000 per ha, these are ignored below.  But an extra 5% as a developer's cost for managing the affordable scheme has been included. This will hopefully be covered within the RSL deal, but if not take a look at the final figures below and see if the developer ought to be able to afford such costs anyway.    

The land is currently for agricultural use and its value is about £25,000 per hectare. This means that at 32 per hectare, if you bought enough for one house, 1/32 ha of land (includes a bit for roads), it is currently valued at £781. On that part of the site reserved for market price homes, 192 of them can be built and this part of the development is the one which generates the wealth.

COSTS
On the Homebuilding and Renovating webpage are figures for the cost of building houses which are based on RICS data. They date from mid-2013, so adding 5% (ref: BIS Construction +2.5% pa cost figures) to project the figures forward to 2015 (the very earliest building could start due to planning processes) and, just to be on the safe side, adding another 20%, we arrive at £1890 /m2 cost per house with an area of 120m2. Adding 5% for infrastructure and utilities costs (roads, drains, etc) is £11,340 per house (£1985 m2).
Summary of building costs:
House £226,800 + infrastructure £11,340 = £238,140.
Add finance costs:
Assuming a house takes 4 months to build, with bank interest and fees at say 9% on £238,140 borrowed to finance the building operation, this is around £7,200.  So total costs are £245,340.

SALES
Next, to find expected selling prices look on Zoopla . Choose your postcode etc, click on 'Sold prices' and on the drop down menu click on 'UK area stats'. Scroll down the page to the chart and click on 'Home values' to bring up the historical record.  The webpage header for the town gave around  £484,800 for the current average Zoopla value for all houses in the area. But a developer cannot rely safely on this figure for sales in more than a year's time, so I used the lowest price since 2010, which was £450,000.

PROFIT
So with a sale price of £450,000, less costs of £245,340 the profit is £204,660 per house which is hidden within the estate agents' price as a raised land price. This is something over £39 million profit from the 192 market price houses to be built over about 10 years - say £4m per year . The original agricultural land value of £781 will be multiplied more than 250 times to £204,660, so the 'gift' of the original land for the affordable homes is seen in proportion.

Another way to look at this gain is that the planning-inspired land value of £204,660 is about 45 % of the total 'average property price'. This is a high figure compared with earlier decades when the land value might be between 20% - 35% of the total.  Are we seeing a price bubble? With data such as high house prices cf average income figures, maybe. See The Telegraph 8 Feb 2014 (Richard Dyson). But maybe houses are becoming permanently more expensive - Chancellor George Osborne is anticipating another 10 years of house price rises see The Telegraph 7 Feb 2014 (Matthew Holehouse), so prices might just keep climbing, especially as he is not intending to throttle back one of his monetary rockets that is powering it.

Our society is again becoming more divided by housing status. To counter this, freeholders should pay a levy proportional to the value of their land. Land value tax should be a major alternative to other taxation, payable every year and not only when a developer digs up green fields. Developers obviously gain when they use their land but they do contribute benefits such as free land for affordable housing and they may pay some tax on their profits. Meanwhile ordinary residential freeholders are favoured with tax-free land value gains and young people who thought they might buy their own home sometime are being left behind, adding to the the growing group of renters.      
 
For more on developer's secrets read The Free Lunch - Fairness with Freedom. The facts above prove yet again one of the book's main messages: that the benefit arising from land use is a 'Free Lunch' which derives from democratic decision making and that by obvious principles of fairness these should fund public expenditure.
posted by Charles Bazlinton author The Free Lunch - Fairness with Freedom




Monday, January 13, 2014

Prof Richard Werner audio

The YouTube interviews with Richard Werner, Prof of International Banking at Southampton University are available on: LINK

The audio content of Banking and The Economy is available as a podcast: LINK 


Monday, December 30, 2013

Dancing to a richer drumbeat

What rhythm? What dance?
The book,  The Free Lunch - Fairness with Freedom suggests new ways to nudge society to become more equitable. But how far do we want this to happen? This is what a five year old boy did:    

A grandfather made a deal with three grandchildren. The aim was to teach a little about choice, fairness and deferred gratification. 

The deal
The offer to each grandchild was: £1 to spend now, or £2 to spend in two week’s time on holiday. Two agreed to wait. The third, age 5, took his £1 to the shop, spent it on two Moshi Monster sticker packs and gave them to his brother and sister. 

The Free Lunch - Fairness with Freedom hints at the possibilities demonstrated by the boy who chose altruism rather than mere fairness, but the book settles for what might be more generally achievable in society. Since it was written, the near wrecking of the world's financial system and a growing disparity in income levels, has shown that its message is even more urgent.    
[Note: The boy was later rewarded for his generosity with £4 for holiday spending.]
Posted by Charles Bazlinton,  author The Free Lunch- Fairness with Freedom 


Friday, November 15, 2013

QEP: Quantitative Easing for the People

Mehdi Hasan in the New Statesman 25 Oct quotes David Cameron saying in March that there is 'no magic money tree' to fund 'ever more wishful borrowing and spending'. But has he been reading colleague George Osborne who issued a Treasury briefing document around the March budget?

 ' It is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money. This would allow governments to increase spending or reduce taxation without raising corresponding finance from the private sector.'  
See para 3.34:  here.  

Hasan advocates targeting QE (called QEP) better than the old QE. 
1. 40% of the gains from Quantitative Easing have benefited the richest 5% households. Free lunches for top earners.   
2. QEP is QE for the People. Give everyone a citizen's income through the same process. Free lunches for all. 

For the general background on basic income Malcolm Torrey of Citizen's Income Trust has a short video on a new book dealing with all aspects on the unconditional basic income:  Money For Everyone 
On a podcast you can hear Dr Torrey showing how all shades of political ideology could accept a basic income. Conservative - because it would empower individuals and families to be less state-dependent. A Radical Liberal - such as Sam Brittan supports it because it would bring individual freedom (many of those with a private income do much constructive work through it - but not many have one). Labour - because of the equality it would foster.   
Anatole Kaletsky of Reuters is for it as is Simon Jenkins (Guardian) who calls it the 'People's Bonus'.

Andrew Jackson of Positive Money has a new book Sovereign Money  on money creation, just in case David Cameron wanted to get the low-down on what his Chancellor Osborne already knows. You would have thought that a low polling party like the Conservatives would jump at the empowerment of citizens through money creation, and find a way to make it work safely despite the dismissal of the idea of the above para 3.34 by para 3.35.

Hillel Steiner advocates basic income in place of means tested welfare, see this blogpost. 

I have been advocating a Citizen's Income (called Citizen's Royalty in my book The Free Lunch - Fairness with Freedom) for over a decade and this high level support is stirring music.  Website:  Look at the videos explaining money creation by Prof Werner and buy signed copies of The Free Lunch.   
posted by Charles Bazlinton

Tuesday, November 05, 2013

The State as Entrepreneur - funded by its own money creation

Ruth Benerito, a New Orleans chemist has just died aged 97 and her obituary in The Times 4 Nov 2013 bears witness to Prof Mariana Mazzucato's examination of the State as Entrepreneur and Innovator (see this blog Nov 1; Aug 24; Aug 6). In contrast to MM who showes how modern technology broke through the barrier of experimentation failure through access to a generous state budget, Benerito researched established industries and developed new technology to win similar breakthroughs. She worked in the US cotton industry in the 1950's and made cotton wrinkle-free and fire-retardant  and eventually held more than 50 patents in paper, wood, detergents and ceramics. She had worked in a government laboratory and an earlier success there was how to feed wounded soldiers intravenously. 

Just as Mazzucato has found in more recent decades, Benerito said:
'The 1950's was the golden age of science when [the government] put a lot of money into science because we were competing with Sputnik, it was a good time to be in science.' 

But cuts in government spending being a major political theme today, what hope is there? However as Mazzucato has it  (p18 of her book The Entrepreneurial State):

'Spending on useless paperwork, or kickbacks, is surely not the same thing as making a healthcare system more functional and efficient, or spending on top-quality education or ground breaking research that can fuel human capital formation and future technologies. Indeed, the variables that economists have found to be important for growth - such as education and research and development - are expensive.... the more we talk down the State's role in the economy the less able we are to up its game and make it a relevant player...' 

Her insights on the role of the State as Entrepreneur and Innovator are indeed groundbreaking to modern minds. But her acceptance that this needs to be 'expensive'  is entirely conventional. The traditional way to source the supply of money needed for the costs of State Entrepreneurial activity is only made expensive through money creation via debt issued by private banks. The alternative comes from Prof Richard Werner, who whilst agreeing that raising money as debt is indeed expensive - it leads to taxes to pay the compounding interest - says:

'But you could cut all that out if your had the government creating and allocating money through fiscal spending - government spending. The government can spend money into circulation, money that it has issued.'   
See his short YouTube interview on the subject: Debt Free and Interest Free Money 

Lord Adair Turner also highlights the role of credit creation in an economy see here.
posted by Charles Bazlinton. The Free Lunch - Fairness with Freedom 

  

Friday, November 01, 2013

TED talk Mariana Mazzucato

Prof Mariana Mazzucato continues her campaign to convince the world that the (mostly US) Government has been the prime innovator, investor and risk-taker in modern technology, as proved by the success of smart phones, the internet and pharmaceuticals.  Whilst 'garage entrepreneurs' get the glory for most of the above, their amazing success was only possible because the state funded the many failures that were the hard road to the breakthroughs from which the garage people spun their huge profits. 

What, asks Mazzucato is being done to take equity in the garage ventures so that there is public reward from the public investment?  In the US and most countries (Brazil and Finland excepted) the state as venture capitalist pays out, gets the technology to a marketable condition and hands over the spout of profit to private venture capitalists. These arrange to pay little tax, but capture huge rewards. Ordinary tax payers covered the original state investment and are taxed to cover general welfare, education, health, etc., whilst the new money-spinning machines largely escape. 

The media and some political parties slam the state as a Leviathan, troublesome and a blockage to enterprise which in Mazzucato's view is the reverse of the truth. For clear thinking watch her TED Talk here . See also this blog

The principle of what Mazzucato is calling for, is also a central theme of the book  The Free Lunch- Fairness with Freedom,  in which the case is made for the channelling of rewards back to the originators of those rewards. 
posted by Charles Bazlinton.    

Tuesday, October 22, 2013

QE origins - Werner on BBC

The BBC today has an article about the origin of the phrase 'quantitative easing' with a short voiceover from Richard Werner (the inventor of the phrase in the Japanese language) and his comments on the Bank of Japan's translation of the phrase into English. Werner has two issues with 'QE' - a minor one about the cumbersome and almost unpronounceable translation, but much more about the disregard of  his original article by central bankers to carry out something quite different but using that garbled phrase. As now explained on the BBC website.

You can see an earlier similar report on  this blog in 2010 .

I wonder what Dot Wordsworth of the Spectator thinks about ignoring an idea but misusing the term used to describe it?  Werner has it that correct practice of what he meant would have saved national economies the frustrating journey that many countries are still in. Millions of people might have been saved much financial trouble if he had been heeded. But it is never too late.   
posted by Charles Bazlinton

Saturday, October 12, 2013

Hampshire Community Banks - which one first?

In the UK some of us have been waiting for years for a community bank to roll up and open its doors and now in Hampshire it could be coming true. Alastair Fee of BBC TV South Today has this week run a series on Local Banks. This has given insight into the trials and tribulations of the unpaid volunteers who are trying to change the face of British banking to give it a truly local dimension with an emphasis on the common good. The core need is that local businesses should have far better access to bank loans so that the local economy can flourish, and the new way proposed will be through not-for-profit banks. Thus the monopoly profits now accruing to private shareholders and to top bank management and traders, through astronomic salaries and bonuses, will be captured by the people who make such a wonderful money spinner possible - the ordinary people. It is a theme of my book The Free Lunch -Fairness with Freedom that it is through the successful society that banking is possible. The common trust between individuals with their skill and productivity as they live in harmony under the rule of law, fosters the orderly background for profitable banking to happen. Thus the rightful owners of this special banking wealth are its creators -ordinary citizens:  quid pro quo. With the recent mess created by those entrusted with the banking monopoly the chance is here to be grasped for something really different.

Declaring my interest as a director of Local First CIC ('Promoting Local Banks') it is gratifying to see the wider public start to be intrigued in what could become their local not-for-profit bank.  The series started on on Sunday 6th October with ** The Politics Show  (start at min: 34>49) with an overview of the German Sparkassen local bank model in operation (also on Tuesday see BBC TV South Today/facebook - 8th Oct, Bavarian Banks) - an electrician who started his solar roof panel business within two days with a bank loan; a cinema owner who says his bank manager is friendly and trusted - 'not a gangster'. 
** Alternative link see: off-screen recording.  

On Monday 7th October it was the turn of the project for a 'Hampshire Community Bank' with our Local First team headed by Prof Richard Werner (Chair of International Banking, Univ of S'ton):   BBC TV South Today / facebook - 7th Oct Local First . Keith House, Leader of Eastleigh Borough Council gave his support and commitment to seeing the bank in place and lending within about a year. This 'Hampshire Bank' hopes to match-fund £7m raised locally with government backing to make £14m capital and lend £100m in its first year. Dr Werner said deposits should not be difficult to attract (offer a bit more interest) and he hoped people would be attracted to support the bank as a way to help their local community. Because 'banking is a highly profitable business it is a no-brainer for a local authority to invest by setting up a local bank'. Technically, banking is not difficult, the key to successful community banking is good service based on local relationships. Mike Battersby is one of the team and has decades of banking experience. Vince Cable MP, BIS Minister was seen giving his blessing, he said we need diversity in banking and he wants the government to support such experiments.

On 9th October Bournemouth Borough Council's 'bank' plan was featured. Cathy Jones was turned down by her bank for a £5,000 loan but the Council took her seriously and are lending, and up to £10k loans and £150k mortgages will be available for other local people soon. Liz Wilkinson Executive Director of Finance said 'we will do a job that the banks are not doing at all at present'. Bournemouth is using £15m from reserves (gaining only 0.8% interest), lending it out and over 10 years hoping to profit by £8m. By merely recycling the £15m rather than forming a bank with it as per the above case (£14m>>£100m loans), this is clearly not a normal fractional reserve bank envisaged by Prof Werner. But Council Tax bills will be cut and local business helped nevertheless. 

Wimborne has a group of retired people who hope to lend out sums more efficiently than banks do now, give better rates of interest and plough back profits, giving something back to the community. Martin Tidd said it will not cost millions to set this up.  Dave Fishwick's attempts to do this in Burnley have shown, if the will is there, a local 'bank' can be set up without a full bank licence. However the First Dorset Credit Union  has had its fingers burnt, Rosemary Britten related, after they had lent to new businesses, so even locally-focussed lending is not without the normal pitfalls of banking.

Clearly there is gathering expectation and growing expertise for a completely new type of bank in Hampshire and Local First CIC for one is well placed to bring community banks to birth. 
Posted by Charles Bazlinton, author of The Free Lunch - Fairness with Freedom; Director of Local First CIC
   

Sunday, September 22, 2013

Lord Turner: The Honourable Maverick for Credit Creation

Gillian Tett last week popped Lord Turner into a new category FT20Sept2013 because he is now saying things that 'maverick far-right and far-left economists have been saying for years'. The reference was to a paper delivered at a Swedish conference 'Credit, Money and Leverage: What Wicksell, Hayek and Fischer knew and Modern Macroeconomics forgot' to the Stockholm School of Economics, 12 Sept 2013 the slides are HERE. Turner's aim was to bring attention to the 'strange amnesia in modern  macroeconomics' about the role of credit creation in the economy which are highly pertinent to the 2007/8 crisis and its recurrence.

Turner shows how Sweden's Knut Wicksell (1851 - 1926) brought the insight that credit created by banks is a fundamental force in the economy, but that this was ignored in recent times to bring an orthodoxy that failed.

'Our new approach needs to be based on a return to fundamental analysis of the role which credit creation and resulting debt contracts play in our economies, an analysis which was central to the work of Wicksell, Hayek, Fischer and more recently Minsky, but largely ignored by much of modern macroeconomics'.

Lord Turner's paper can also be accessed from: The Institute for New Economics Thinking . He cites Richard Werner on his findings that explained the 'enigma' of Japan which showed that what is important is the uses to which the created credit is put. Turner suggests that only 15% of the UK's new credit creation goes to productive investment which is what affects productivity and general wealth. Much goes into asset price inflation (such as house prices) which results in wealth inequality. Besides causing economic crashes.

These findings will not be a surprise to anyone familiar with Richard Werner's work as often featured on this blog. His short interviews start with Banking and the Economy. See the series on The Free Lunch website.  Lord Turner's reference to the standard, false view of what banks do as per 'standard undergraduate textbook discussion' is the very theme that opens the above interview. Lord Turner was the keynote speaker at the first ECOBATE 2011 conference which was reported on this blog and the link to what seems Lord Turner's first mention in a speech of credit creation at ECOBATE 2011 is within this report . 

Let's take 'maverick' as a badge of honour.

Posted by Charles Bazlinton, maverick author of The Free Lunch with discussion on how credit creation could be used to provide direct wealth to each citizen.


Saturday, August 24, 2013

What's news: David Miliband? John Kay? Mariana Mazzucato?

What's new, what's news? The Times (22 August) quotes a YouGov opinion poll in Prospect magazine telling of the latest dire news on Labour leader Ed Miliband's standing with the voters: They don't know what he stands for. This is the Nth media article in recent months of the same subject and it is getting tiresome. Meanwhile Ed M stays mum. As George Eaton points out this week (New Statesman) the coalition have granted the opposition thinking time by fixing the next election date to May 2015, so why disclose your plans early? The UK's variable election timetable normally gives the ruling party the advantage of a surprise election at a few weeks notice. 

But why does The Times need to quote another journal on such a regular old chestnut when there are some fundamentally more interesting stories around? For instance in the same Prospect issue Prof John Kay is reported at an LSE lecture recently in  Two cheers for the market which is bursting with intriguing topics, including: land ownership; capital raising; capitalism; markets; JM Keynes; Apple; rent-seeking; et al. One issue he raises is that the influence of the left has become 'homoeopathic socialism' as it so wary of nationalisation, at the very time when a good dose of bank nationalisation might well be the right thing to do to draw up a new routemap for the failed economy.

Another insight, but from the FT is Mariana Muzzucato (see previous Blog) which this week carries her article Why private innovation needs government help. She continues to bang the drum for recognition that taxpayers, through government, created the gameboard that Apple and Google are now playing on so successfully to their own private profit and minimal taxes. Muzzucato claims that these hi-tech industries and others, were founded on state innovation over many years, but now 'small state' pressure ignores this. To our long term detriment what is actually happening is parasitic rather than symbiotic, where the state could very well achieve a return for its investment if it faced these facts.  She adds to the current austerity debate by saying it is not so much government spending that matters per se but whether the spending adds to productivity and innovation.

Let's also add an further insight from Prof Richard Werner that crucial productive spending need not even be debt, because: 
 'Tax payers need to repay, service the interest and repay government bonds. .... But you could cut all that out if you had the government creating and allocating money through fiscal spending - government spending.'
(extract from YouTube:  Debt Free and Interest Free Money)

Which is the real news?

Tuesday, August 06, 2013

Transforming Finance - 4 Mariana Mazzucato. The state as innovator

Prof Mazzucato exposes the myth that the private sector is the prime generator of innovation. It isn't, because the bill for the risks endured is too huge for the entrepreneurs to pay. The private sector did not create the internet - governments did. The same goes for GPS technology and touchscreens. Everything that makes a smartphone smart, rides on the back of taxpayer funded research and development. Yet the giant IT companies Google and Apple now manage to pay little tax. There is thus no payback by the venture capitalists who come in when the new technology had proved itself and was ready for mass markets. At the Transforming Finance in May in London Mazzucato gave probably the fastest speaking talk of the conference ( Her short presentation is here. ) but what she said we need is the 'real slow' telling about the state investment in technology now profitably reaped by  iPhone, green investment, etc. This can be read in her book which is now out : The Entrepreneurial State. Debunking Public vs Private Sector Myths

In the FT Martin Wolf (5 Aug 2013) rates her book very highly:
 'A brilliant exploration of new ides in business argues that government is behind the boldest risks and biggest breakthroughs'. 
Wolf says her view matters because the state is seen usually as an obstacle and is thus inhibited from taking entrepreneurial risks for the good of humanity and for prosperity. He says what has developed is acceptance of the state taking the risks and the private sector the rewards which makes the private sector parasitic.  

How to invest without increasing the deficit
But our government is hung up on reducing the deficit and, in refusing to spend for such innovation as Mazzucato implies we need, it is not doing the best for our future. Even if you accept that deficit spending is needed, Edmund Gray in a letter to The Times in March said that  Keynes showed that deficit spending is a remedy to restore demand in a recession because national economies are not like the budgets of individuals. Unfortunately Cameron and Osborne seem to think they are. Moreover in the FT on the same page as MartinWolf's review is a letter from Richard Wood which shows how to finance the deficit, if you must, with newly created money. But he doesn't say 'debt free money', which as Prof Richard Werner declares, governments can create 'debt free and interest free' to cover such productive, innovative investment that Mazzucato says that only government is capable of: see YouTube . So there is a way out of the crisis, without raising the deficit whilst recognising the unique role of the state as essential innovator.    

Wednesday, July 24, 2013

Andy Murray and spare bedrooms: Just what is going on?

One winner was Andy Murray over Novak Djokavic. What we all won was yet another splendid demonstration of fairness. With the maximisation of skill, bounded by a strictly enforced rule book, absence of umpire bias and cheating, for a short time a tennis game transported us to a fair world.

Then we are jolted back into reality where progress to fairness for ordinary people is grindingly slow and where our political umpires seem to be showing extraordinary bias against the have-nots but for the haves. A current picture of this in the UK is the 'bedroom tax' where, if people receiving housing benefit are 'under-occupying' [i.e. have a spare bedroom] their benefit will be sliced. Some people might be evicted if they cannot afford to make up the balance from their own earnings. Some may be forced out of their neighbourhood.

At the same time the government is helping the housing-haves under the Help to Buy scheme.
Ed Conway in The Times:  George Osborne wants first time home buyers to be able to afford a home, and to do this he is flooding the housing market with £12bn extra mortgage support money - so house prices are bubbling up and making homes less affordable! The deal is to be available up to £600k value hones. House prices are very high at x7 average income compared with the historic x3/x4 income and the Chancellor is perversely making them even more so. Effectively people are being egged on to get more spare bedrooms - if they are buyers. Existing home owners will see a rise in their wealth; but more people will have to rent a home and rents are rising. So much for fairness, and anyway has George Osborne not heard of the US sub-prime housing support that was a trigger for the financial crisis? What is going on?

What would bring more fairness is an extension of the planned annual Mansion Tax to be levied on high value homes. If this were to cover every piece of real estate - that is the land a building sits on - as an annual charge on its value (land value tax): house prices would drop becoming more affordable; owners would build on empty land; empty homes would be sold for occupation or rented, thus adding to the price drops and lower rents. More homes are needed and land value tax would be a way to get many of them build or used, whilst sparing many green fields.

Other links:
Shelter: Bedroom Tax explained
Rev Paul Nicolson is campaigning against the bedroom tax and the welfare benefit cap, in London.
Buy the book The Free Lunch - Fairness with Freedom new low price £8 with free p&p.
Posted by Charles Bazlinton


Wednesday, July 03, 2013

Tranforming Finance -3 Prof Tim Jackson

Prof Tim Jackson of the University of Surrey (Chair, Sustainable Development) outlined our current economic modus operandi, which promotes consumerist activity for: 'more and faster' ,  'credit supplied allowing us to buy the things we don't need, to impress the people we don't really like much, with money we don't have',  'not very green',  'with a lot of speculation'. It is short term, motivated by rent seeking and promotes bubbles. It sucks out value and resources, at a cost to ordinary people and the planet with everything sacrificed to the god of liquidity supposing that liquidity will deliver to us everything we want. It did apparently for a while but also brought us the financial crisis. 

He is not espousing a radically different model but wants it directed differently to be sustainable with green quantitative easing / green money supply which will bring targeted credit allocation focussing on protecting assets needed for future prosperity, promoting employment and enterprise.  With resource productivity taking over from labour productivity, which eliminates jobs. Slow patient capital investment is needed in assets that bring genuine prosperity. Speculative activity should become marginal.

The change will be more than just about 'green technology', but about improving public infrastructure, community spaces, ecological assets, services, education, health, social care, refurbishment, the nurturing of the time and skills of people delivering care, craft and culture.  But these will not flourish in an economy dominated by fast ruthless capital so funds are needed for a good and a green economy and intervention is needed at a macroeconomic level. 

QE needs targeting with credit allocation into green sustainable investment. This would be the complete opposite of the current austerity policy, but it has an 80 year history and he welcomed the IMF publication recently of The Chicago Plan Revisited in support of it. 

Link: video of Prof Jackson's talk at the 10th May 2013 conference in London. 
posted by Charles Bazlinton, author The Free Lunch - Fairness with Freedom now at £8 

Thursday, June 13, 2013

ABC Justin Welby and the Banking Commission Report (not...quite)

We woz robbed? Archbishop Justin Welby at packed St Paul's Cathedral last night gave very muted toots to his trumpet about the wrongs of banking as compared to what we have become accustomed to hearing from him. His was the keynote speech on: 'The City and the Common Good: Good Banks. Timing was all. The Parliamentary Banking Commission report has just been completed but before full publication all participants are gagged. Chairperson Stephanie Flanders warned us that that Welby could not speak about anything that gave away the contents so rather than a tirade on the evils of bank, bankers and banking (we woz  robbed) he mostly gave us positives as to what the wealth from banking ought to be achieving (we were enlightened), with the odd toot from the embargoed report detected.

He was shocked on returning to modern London after 20 years away. It is a brilliant centre of world finance which draws in talent but warned of a danger that like in ancient Sparta, the power centre with its ever higher property prices might result in it being 'served by its surrounding serfs' in areas away from the wealthy centre.  He quoted St Basil speaking to the wealthy (para 329): A great torrent rushes, in thousands of channels, through the fertile land: thus, by a thousand different paths, make your riches reach the homes of the poor' .  Wealth is to be held adventurously and generously, to find fresh channels for wealth to good purposes, whilst we should prick the bubble of self-regarding activity by wealth makers.

One biblical theme was from the Good Samaritan. The GS did not rush by - some did then, and today some of those in fast moving trading rooms might do now.  The event was recounted by Jesus in answer to a question: Who is my neighbour? The GS was a natural enemy of the victim and had no obligation to help. Another bible based theme was the model of the body: when one part hurts all other parts feel that hurt , with exhortations to stop fighting each other but work together for the common good, fullest participation and for 'human flourishing'. We have to recognise that humans are all fallible but we have to believe in them - Jesus offers salvation thus to humanity. Separately regulation, markets and moral sentiments are necessary but not sufficient alone to achieve the order needed, we need a combination of all. Liberty exists under authority, but what is legal is not necessarily right. There has been a breakdown of co-operation, trust and relationships. There will never be perfectly good banks because there are no perfectly good people. The differences in society cannot be eliminated without good banks.

Fellow panellist Anthony Jenkins , Barclays CEO, plugged 'moral capitalism' and the good things his bank is doing. John Fingleton (ex-Office of Fair Trading) championed strong competition, good markets and Adam Smith and criticised the banks for having to be dragged to good behaviour. He quoted JR Hicks 'the best of all monopoly profits is a quiet life'. Justin Welby gave a responsive toot that there are no efficient markets (the events of 5 years ago showed that) and another one from Adam Smith that when people of the same trade meet together they very often start to conspire against the public. 

The greatest applause from the capacity crowd for the supporting panellists came from Laura Willoughby's spirited speech as leader of the Move Your Money campaign who reported that in 2012, 2.4 m people moved their accounts from the big banks to smaller and other banks (-5% market share).  She accused banks of hiding information from customers 'it's what they don't tell you that matters'. She likened Anthony Jenkins' talk to a political election speech. She asked if regulators had been asleep or blind? 

She gave a shout for new homes for our money such as credit unions, mutuals and good banks such as Handelsbanken which have local autonomy.  We as customers are more likely to change marriage partners than change banks, we behave as hostages to them. Indeed the banks have taken the country hostage. I felt that she was tooting on behalf of what Justin Welby was not able to say and by the length of the applause the crowd showed their feeling for her analysis. Justin Welby when asked by Stephanie Flanders if our society was 'held hostage by the banks' said: 'I cannot comment'. Which was probably as big a toot direct from the still secret report as we got.
posted by Charles Bazlinton author The Free Lunch - Fairness with Freedom which 6 years before the crisis suggested solutions to the problems which the Archbishop is highlighting now.

Monday, June 03, 2013

The Missing Link in UK Banking

The colonisation of Africa and elsewhere is easy to see. The colonisation of the credit market at home less so. Fred Harrison writing on page 8  in The Silver Bullet about people's natural right of access to land and nature's resources, defines colonisation as external intervention and control so as to abuse that natural right. Land and its sources of wealth, is a natural, pre-existing resource. 

In the credit market we have a resource that did not pre-exist in nature. It arises out of the collective success of a whole nation. The community grew and worked well and this generates the ability to create credit. Credit arises variously: on the level of a supplier allowing a few weeks before goods supplied need to be paid for, or by a bank instantly creating a loan out of thin air for a customer who walked through the bank doors needing money to support a business. 

The ability to create credit does not reside in any skill of a banker. They have colonised the 'credit creating territory' that the community, and only the community, has made. Banks are granted monopoly powers by government to be the creators, gatekeepers and controllers of the credit flow back to the people who made it possible.  Unfortunately the last five or six years has shown what folly has arisen because there was too much trust by the community in banks to use their credit creating powers wisely. 

In colonising the credit creating territory, just like the historical land colonisers, success arises from an ability to control and harness the resources of credit creation at every level and direct it to the colonist's own ends.  Clearly, credit creation starts with local deposits which, after following certain reserve rules, enable massive multiplication of those original deposits in the act of credit creation. [See this video.]  But to what extent do these local deposits create local credit? It has been a complaint by small businesses through many business cycles that credit is often very scarce. Whyever so? The problem is that dealing with many small businesses needing individually-tailored loans does not really fit the business model of banks that are free to range away to large cities and even the entire world, feeding credit to large enterprises with multi-million sized loans. Why bother with talking to fifty firms, each of two persons wanting £30,000 to start to employ a third, when in a more efficient use of time one multinational firm can be dealt with and is calling for £200m for speculation?

There is a missing link in UK banking. We have virtually no locally defined banks such as exist in Germany, Switzerland, the US and elsewhere. UK credit unions are heavily restricted so that they are not able to operate as full bank, credit creators - the colonisers of the credit creating territory have seen to that.  The crushing of comprehensive, local, credit creation in the UK is as suppressive as methods of empire-building Europeans ever were in earlier centuries. Germany has Sparkassen (savings banks) which are locally defined. They are also not-for-profit, which takes care of the capturing of monopoly powers - the profits are recycled back to good causes in the local community that enables the credit creation to happen.  Monopolies, like colonials, need sorting out to produce win-win results for all parties.    
posted by Charles Bazlinton. See Banking references in The Free Lunch - Fairness with Freedom

Thursday, May 30, 2013

Steve Keen on the neoclassical blindspot about banks

Steve Keen has just posted an in-depth study on QE relating to the US. To QE Or Not To QE.  Clear, and with useful charts, but you have to pay attention. He deals with double-entry book keeping on the way  and also with Bernanke and Krugman and their 'neoclassical blindspot about banks'. He thinks that QE will not create a Great Inflation generally because of the huge proportion of private debt to GDP which is higher than it ever was in the Great Depression. He reminds of Michael Hudson's comment  “Bernanke’s helicopter is dropping money on Wall Street, not Main Street”, and on fears that QE is helping drive a stock market bubble.

More from Michael Hudson on: Restore the Happy Bubble Economy  

More on the recent Transforming Finance conference to follow.

Tuesday, May 21, 2013

Transforming Finance - 2. Lapavitsas, Chick, Dyson, Dearden

Prof Costas Laparitsas (Univ. of London) began the morning parallel session at One Moorgate Place:  The Fresh Thinking on Debt and Recovery with the theme of the financialization of more and more of life. This leads to the growing accumulation of debt for UK households. The way out of debt is general inflation, debt forgiveness, cancellation or structural economic changes. The credit money theory is not new (see Sir James Steuart) and is not the key to open all doors. Financial activity is the key factor, which leads to credit, which leads to loans. For more understanding he referred to the 'real bills doctrine'. He warned that even 'good loans' can become 'bad loans' further down the road.  A key policy should be the reversing of finacialization with public provisioning in other ways; he warned about the quantity theory of money and mused on the idea of a benevolent dictator to manage the money supply.

Prof Victoria Chick (Univ of London) commenting on the debate on austerity (enforced privation due to public debt reduction) pointing out there is good and bad debt with an illustration   (like this one)  of  UK debt / GDP from 1909 to 2009 showing that current public debt is at a low level historically, with a small uptick at around 60%  compared with pasts peaks around 250%.  Good debt pays for itself if there are productive outcomes which bring rising earnings  and tax back to government. There is plenty for government to invest in from the green agenda. Bad debt causes asset bubbles and, referring to the request to define speculation:  'like art I can tell it when I see it', and often merely involves someone who has the fastest finger on a button. She said we need to move from a cowardly state to a Courageous State as the book by Richard Murphy . However, she observed that no one does money management very well.  She recommended the targeting of nominal GDP.  Keynes did talk about the money supply, see: liquidity preference, and in 1913: that banking policy is the key to the change in economic activity. The question 'who is responsible for money?' is now never asked although it was a big issue at the foundation of the United States. The original position was that the state alone issued coins as money. Now, the banks are given the franchise to create money on the state's behalf  but the crisis has shown that the state will underpin the banks despite what they do with the privilege. A 'state of schizophrenia'. 

Ben Dyson (Positive Money) said whilst public debt is not really a problem currently, private debt is. As this debt is paid down, money is eliminated from the economy - the money supply shrinks. The falsity of the old 'trickle down theory of economics' has been exposed by the financial crisis as per the dictum: 'we are still being trickled on from a great height'.  He suggested an alternative issuing of money in the form of a citizen's dividend.

Nick Dearden (Jubilee Debt Campaign) ran a successful campaign against 'vulture funds' and is involved in lobbying for world debt cancellation, which would have beneficial wealth distribution power.  However as shown by German post-war debt cancellation growth is needed beyond that. The bailout of the Anglo Irish Bank aided billionaire bankers but left generational debt for the people. There is a social struggle on and to sort out competing self-interests we must have good answers, not only: What? but: How? He advocates a debt audit with democratic decisions on which debts should be cancelled.

From the floor: The manufacture of money out of nothing by banks is a massive ideological issue; democracy itself is being killed in the name of economics. 
Conference videos are being posted on Covi 
posted by Charles Bazlinton

Tuesday, May 14, 2013

Transforming Finance -1. Bennett, Philopponnat, Griffith-Jones, Werner, Keidal

Boom and bust is bad for the economy and environment said Craig Bennett of Friends of the Earth, introduced the Transforming Finance conference in the City of London on 10th May. He said the banks over a 5 year period paid £203 bn in tax but that the bail out cost £1 trn. One theme of the day was that the 2007/08 financial crisis showed that deregulation resulting in banks having unfettered freedom over the creation of credit resulted in privatising the gains (for banks - whilst they made them) and socialising losses (payout by taxpayers - after the system broke). Chairing the first session was FT's Pauline Skypala. 

Thierry Philopponnat (Finance Watch)   said that with an unlimited stock of money spent on a limited stock of assets,  bubbles are inevitable. Sensible productive spending gets hardly a look-in. Derivative markets amount to 12x world GDP and are obviously mostly a pure speculation play and not a hedging device. 

Stephany Griffith-Jones (University of Columbia) wanted new financial instruments to be approved as new drugs are tested before use. She said that the Glass-Steagall regulations had kept the world relatively free of crises for 40 years. Strict loan to value ratios were said to be too political - but look what happened at Northern Rock with 120% LTV ratios.  

Richard Werner (University of Southampton) said we could not ban speculation (which he defined as anything dealing in transactions not included in GDP calculations), but we could ban credit creation of the money used for speculation.  He agreed that in the UK in the 1950s & 60s credit had been directed by the Bank of England and said decades of productive growth in Japan, Korea, Taiwan and China had occurred under a credit guidance regime. QE money created by the Bank of England or the FED, stays in the central bank and does not add to circulating money unless it causes credit creation by banks. One way to end the recession, a situation arising due to shrinking credit (-1.4% currently) is for the government to borrow directly from banks.  
[This is explained in his book, New Paradigm in Macroeconomics p 302:
'halting all bond issuance by the government and shifting fundraising  for the entire public sector borrowing requirement to direct borrowing from banks in the form of standard bank loan agreements. By shifting public sector borrowing from bond issuance to borrowing from banks, crowding out of private sector activity is minimised....selling bonds to the non-bank private sector amounts to a zero-sum game, while borrowing from banks results in credit creation (a positive-sum game), that is, the increase in purchasing power in the economy...and increased economic activity. ]

Thomas Keidal (Sparkassen)   said the German locally autonomous savings banks provided for all sectors of the population bringing employment and investment and recycling profits to their own reserves and to local good causes. The resilience of the German economy largely grows from the dispersed local banks. They are not state- or municipality- owned. They thrive due to relationships between customer and bank. Not a single savings bank has needed to be bailed out - the association of savings banks does what is needed for its own if trouble comes.  He was told pre-2007 that he was in an old fashioned dying institution and he would be 'the last communist in Europe'. Now people are following the Sparkassen guidelines such as a 60% limit loan to value ratios. He warned about the bad example of the  Spanish Caja banks which copied the local idea but then were allowed to compete with each outside their areas which resulted in financial disaster.    
posted by Charles Bazlinton

Monday, May 06, 2013

Bankers are still biting the hand that feeds them

Bankers bit the hand that fed them - so why are they allowed to keep biting? Clifford De Souza, is an ex-banker and is quoted in the Financial Times that 'bankers had forgotten what decades ago used to be their prime purpose. “You wanted to get paid well but with a strong view that your job is protecting the bank.' When the world financial system was just about to tip over a precipice in 2006, the FT's Daniel Shafer reports that the average pay + bonuses package for top investment banks was 9.6x the average for the FTSE 100 company.  Now the average is 5.8x. For ordinary banks the figure was 2.0x and is now about 1.9x. With the public attuned to the chopping of  'banker's bonuses', guess what? Bankers are now asking what their base salaries will be. A head hunter is quoted as saying that not long ago they wouldn't even know what their base salary was.  


From an European investment banker: 
'The problem is that bankers control their means of production. A farmer can also keep the grain he produces but there is a limit to how much grain this guy can eat. With money, there is no such limit.'

How can this be? Why is banking such a money spinner that: 'there is no such limit' ? For enlightenment see this blogpost quoting Dr Andrew Hilton , 'banks like cement makers'.

Prof Richard Werner clearly states how we could resolve this situation in this interview. The situation is succinctly put in another (the YouTube interview on Local Banks):
'...banks weren’t told, when they were given this privilege to create and allocate the money supply: ‘Now go out and do this wisely’. They weren’t told to do that, and of course what they’ve been doing is really just look after their own interests. As it turns out, they can’t even look after themselves, just look at the banking crisis!'

The private allocation of the money supply by banks of all descriptions, given the natural inclination to human greed, ensures predation on the general public. In a fairer system the money supply would be diverted mostly to productive uses. We the public have been doubly duped. Not only do we allow the benefits of credit creation to be in private hands, but having bailed out the banks with public money once, we have signalled to bankers that risk taking in their own cause will be OK for the future. The fact that there is still any multiple in pay+bonus comparisons in favour of bankers shows that no one has changed the rules.  
posted by Charles Bazlinton. See also the book The Free Lunch - Fairness with Freedom and the section on crucial differences between two types of occupation: 'Bakers and Bankers'