5 Oct 2015

BIS Transactions in 2014 - Country by country breakdown

In my last post, I listed the 50 biggest players in the $11 quadrillion of financial transactions listed in the latest version of the Bank for International Settlement's annual Statistics on Payment, Clearing and Settlement Systems.

In this post, I have broken down the figures according to country, and I have provided the figures for all years since 2006.

As you can see, the number one country is the US, with nearly $3.2 quadrillion in transactions - the highest total ever, with the exception of the bumper year of 2007 when US transactions exceeded $3.4 quadrillion.

Next comes CLS - which isn't even a country -  with nearly $1.3 quadrillion.

Germany is next on the list. But for some reason, it's transactions dropped a lot from a very impressive $1.46 quadrillion in 2013 to less than $900 trillion in 2014 (hence the blue colour). I'll try and analyse what happened in a later post.

The UK comes in at number 5, but here again, the figures simply cannot be serious.  When you can see that transactions in the UK exceeded $2 quadrillion in 2008, the current total of just under $800 trillion is obviously wrong and easily explained in part by the fact that LCH.Clearnet Ltd, which did $641 trillion in 2014, is mysteriously invisible to people at BIS. They similarly seem unable to find anything about transactions on the London Stock Exchange - also "nav" for several years, despite publishing data on the web. Oh well.....

Then we have the EU, whose large scale transfer system such as TARGET2 handle very large number - in the case the BIS figures didn't have the numbers for 2014, which is why I used the figures for 2013.

The new kid on the block at number 6 is China. Their transactions have quadrupled from a mere $134 trillion in 2006 to $727 trillion in 2014.

Other impressive numbers are provided for Belgium which, despite it's relatively small size, managed to handle $565 trillion last year. It's a shame that BIS don't report figures for Belgium's neighbour Luxembourg. I bet that with outfits like Clearstream operating from Luxembourg, the numbers are probably mouth-watering - at least for anyone interested in introducing a Financial Transaction Tax. According to Clearstream's website, "For 2014, Clearstream processed 43.65 million international transactions, an increase of 6% compared to 2013." Unfortunately, I haven't been able to find the value of those transactions. If anyone knows, do send me a message.

It's interesting to note that two of the countries that you might have thought would be very active in financial markets, namely Switzerland and Singapore, are actually quite modest, clocking up a mere $45.9 trillion and $15.5 trillion respectively. I suppose that could be because the BIS's policy of only reporting "selected" players may mask much of the activity in such countries.

I suspect that there is probably only one way to find out. Politicians should decide that ALL financial transactions should be reported - wherever they occur. Is it really too much to ask? 

2 Oct 2015

BIS Financial Transactions for 2014 - over $11 quadrillion

Note added Saturday 3rd October: Revised and corrected version.

On the 30th of September, the Bank for International Settlements published their preliminary figures concerning the Statistics on payment, clearing and settlement systems for 23 countries. You can download the data as a 593 page pdf file or alternatively, as two separate excel files.  One of the excel files gives comparative tables for the 23 countries in US dollars, which makes it easier to add the numbers together. The other one provides the detailed information country by country, but using the local currency of each country in turn.

Using the comparative tables, I have extracted all the data concerning financial transactions to produce an enormous excel sheet containing all the different numbers. This involves extracting the numbers from Table 8 (Payment transactions by non-banks), Table TRS3 (Trades executed on selected exchanges and trading systems: value of transactions), Table PS3 (Payments processed by selected interbank funds transfer systems : value of transactions), Table CCP3 (Transactions cleared by selected central counterparties and clearing houses, and Table CSD3 (Transactions processed by selected central securities depositories). All the figures are given in billions of US dollars.

The complete table includes over 230 different entries, and is frankly rather boring to read. But in the following table, I have presented just the 50 biggest entries for 2014, together with the corresponding data since 2006 when available.  There are a few numbers in red. This refers to data that is not yet available ('nav') and in that case, I used the number for the previous year. The Total values at the end include all the numbers I could find.

The value for total transactions in 2014 comes to over $11 quadrillion.

The number is down by about $300 trillion on 2013, but $11 quadrillion is still a very large number. And, with a minute transaction tax of (say) 0.1% would raise trillions in tax revenue that could be injected into peoples pockets in the form of a debt-free Basic Income (for example). But I digress.

For me, the really interesting thing is to see who the biggest players are.

I'm delighted to see that BIS is now providing information about the transactions handled by the multinational entity CLS - the world leader in Foreign Exchange. It is worth extracting the relevant numbers directly from the BIS document. Here they are:

In 2014, CLS handled over 204 million transactions, with an average value of over $6.2 million. That means  a total of $1.278 quadillion (yes, the numbers are in US billions, except for CLS, where they decided to use trillions of US dollars as the measure.

Number 2 on the list is the GSD - Government Securities Division  of the DTCC (Depository Trust and Clearing Corporation) based in the US which also handled over $1 quadrillion in 2014.
It is followed closely by another US based system - Fedwire, which handled $884 trillion.

Number 4 on the list is the European Union's TARGET system. The BIS didn't have the numbers in their report despite the fact that the numbers are provided month by month on the European Central Bank's website. It seems reasonable to suppose that the number will be close to the value in 2013.

And so it goes on.

But, while the $11 quadrillion figure is impressive, it is seriously underestimated. For example, my favourite London based outfit, LCH Clearnet Ltd, which I reported had handled over $641 trillion in 2014, doesn't even get a look in. It has been "nav" since 2009. And what about the Options Clearing Corporation, which handled over 4 billion transactions last year, generating $1300 billion in premiums. They might easily be handling several quadrillion every year in transactions. But it too is  nowhere to be seen in the BIS report.

I suppose that BIS do say that they are only reporting "selected" exchanges and trading systems, "selected" interbank funds transfer systems, "selected" central counterparties and clearing houses, and "selected" central securities depositories. Isn't it about time that someone, somewhere started compiling ALL the data on financial transactions?

If the full details were known, it would be even clearer that taxing those transactions would be a very intelligent alternative to the counterproductive and inefficient taxes that we currently use.

6 Sep 2015

The 50 biggests banks in 2014 : $65 trillion in assets - $758 billion in Capital

I really like the list of the worlds 50 biggest banks provided by the www.accuity.com website. Now that their table is based on the bank balance sheets for the end of 2014, it is possible to get a clearer idea of what is going on by copying all the numbers into an Excel sheet. And here are the results.

As you can see, the total assets held by those 50 banks total very nearly $65 trillion.  That's a very substantial proportion of the roughly $80 trillion value that you get by adding up all the figures for Money Supply of all the economies in the world.

But the amount of capital they have is only about $758 billion. And that means that the banks have 86 times more assets than they have capital. So much for the myth that banks always keep about 10% in reserve...

Those ratios vary enormously from bank to bank. For example, the Norinchukin Bank in Japan only has 24 times more assets than capital. But the winner is the Wells Fargo Bank, which has assets that are a staggering 2953 times larger than their assets. I have no idea how they are allowed to get away with it.

It's very interesting to compare the current table with the numbers the first time I blogged about this in 2013. At that time, based on bank balance sheets that mainly dated from the end of 2011, total assets were very close to the current values - $64.2 trillion, as was the figure for total capital, namely $785 billion.

But behind those headline figures the whole picture has changed. Back in 2013, the biggest bank in the world was DeutschBank with $2.8 trillion in assets. But since then, they have got rid of over $737 billion worth of assets and have dropped down to number 8. Barclays, which was number 4, has offloaded over $304 billions worth and dropped to the number 6 slot. Likewise, Credit Agricole SA which was number  6 has reduced its assets by over $311 billion and dropped down to number 10.

At the same time, you can see that Chinese banks have been buying up assets like crazy, so that now 4 of the 5 largest banks in the world are now Chinese, with the Industral & Commercial Bank of China Ltd now being  the biggest bank there is. It is the happy owner of well over 3.3 trillion dollars worth of assets. Aren't they lucky.

Now, frankly, I haven't really got a clue (as I am sure some kind reader will point out). But I just wonder why the destablising of the entire global economy that we have witnessed over the past couple of years might not be explained by the fact that Chinese banks have somehow been convinced to buy up trillions worth of assets from the Western Banking sector. 

Of course, I would never wish to suggest that the Bankers in charge of the worlds 50 biggest banks could possibly not be working for the general good of the world's citizens.

14 Aug 2015

Paul Mason : Postcapitalism - A Guide to Our Future

I've just finished reading a remarkable book by Paul Mason that came out on the 30th of July. It's called "Postcapitalism - A Guide to Our Future" and I believe that it could be a very significant contribution indeed.

Paul Mason is currently Economics Editor at Channel Four News in the UK, a post that he previously held on the BBC's Newsnight program. Given that his origins include being a member of the Trotskyist Workers' Power group, it is actually quite surprising to find him in such a high profile media position. It actually goes against my assumption that the media are controlled by financial interests. I will have to start watching Channel Four News!

The book gives a very radical and innovative view of history, and offers a vision of a postcapitalist society that really does seem to be within reach.

He argues that Neoliberalism is broken, and that
 "This is the real austerity project : to drive down wages and living standards in the West for decades, until they meet those of the middle class in China and India on the way up". 
He argues that :
"Postcapitalism is possible because of three impacts of the new technology in the past twenty-five years.
First, information technology and reduced the need for work, blurred the edges between work and free time and loosened the relationship between work and wages.
Second, information goods are corroding the market's ability to form prices correctly. This is because markets are based on scarcity while information is abundant. The system's defence mechanism is to form monopolies on a scale not seen in the past 200 years - yet this cannot last.
Third we are seeing the spontaneous rise of collaborative production: goods, services and organizations are appearing that no longer respond to the dicates of the market and the managerial hierachy. The biggest information product in the world - Wikipedia - is made by 27,000  volunteers, for free, abolishing the encyclopaedia business and depriving the advertising industry of an estimated $3 billion a year in revenue."
"By creating millions of networked people, financially exploited bu with the whole of human intelligence one thumb-swipe away, info-capitalism has created a new agent of change in history: the educated and connected human being".
"The main contradiction today is between the possibility of free, abundant goods and information and a system of monopolies, banks and governments trying to keep things private, scarce and commercial".
Mason's analysis includes a historical approach that includes a lot of discussion of the significance of thinkers such as Karl Marx. Much of this was very new for me, but I was literally gob-smacked to discover that Marx had foreseen the situation where the costs of production could drop to almost nothing - the "economics of free stuff".

Marx had written a whole collection of his personal notes known collectively as the Grundrisse that were not read in Western Europe until the 1960s, and not translated into English until 1973. In one part, written in Feburary 1858, which has become known as the Fragment on Machines, Marx had "imagined an economy in which the main role of machines was to produce, and the main role of people was to supervise them".  As Mason puts it:
"Marx drops a bombshell. In an economy where machines do most of the work, where human labour is really about supervising, mending and designing the machince, the nature of the knowledge locked inside the machine must, he writes, be "social".
 "In this model, scribbled on paper in 1858, but unknown to the left for more than 100 years, capitalism collapses because it cannot exist alongside shared knowledge".

Marx "imagined socially produced information becoming embodied in machined. He imagined this producing a new dynamic, which destroys the old mechanisms for creating prices and profits.... And he imaged information coming to be stored and shared in something called a 'general intellect' - which was the mind of everybody on earth connected by social knowledge, in which every upgrade benefits everyone. In short, he had imagined something close to the info-capitalism in which we live."
"Furthermore, he had imagined what the main objective of the working class would be if this world ever existed: freedom from work".
Later on in his book, Mason proposes a number of ways that we could, as a society, move towards this ultimate utopian goal. Amongst the proposals, one that he describes as "the biggest structural change required to make postcapitalism happen: a universal basic income guaranteed by the state". 

Mason notes that
"The basic income, as a policy, is not that radical. Various pilot projects and designs have been touted, often by the right, sometimes by the centre-left, as a replacement for the dole with cheaper administration costs. But in the postcapitalist project, the purpose of the baisc income is radical: it is (a) to formalize the separation of work and wages and (b) to subsidize the transition to a shorter working week, or day, or life."
"A basic income paid for out of taxes on the market economy  gives people the chance to build positions in the non-market economy. It allows them to volunteer, set up co-ops, edit Wikipedia, learn how to use 3D design software, or just exist. It allows them to space out periods of work; make a late entry or early exit from working life; switch more easily into and out of high-intensity, stressful jobs."
"Under this system, there would be no stigma attached to not working. the labour market would be stacked in favour of the high-paying job and the high-paying employer.
The universal income, then, is an antidote to what the anthropoligist David Graeber calls "bullshit jobs": the low-paid service jobs capitalism has managed to create over the past twenty-five years that pay little, demean the worker and probably don't need to exist."
It all makes perfect sense to me. And it's good to see that Mason is obviously also a clear supporter of putting money creation in the hands of the state:
"the state (via the central bank) would have to take on the task of creating money and providing credit, as advocated by supporters of so-called "positive money"
He has a whole pile of detailed arguments to back his vision, quite a few of which involve numbers that I too think are absolutely fundamental.

For example, when talking about the amount of money "printed" by Central Banks in an attempt to keep the current system from falling to pieces, he says that he calculated that "the combined amount of money printed globally, including that pledged by the ECB, at around $12 trillion - one sixth of global GDP"

And there is a graph that I would have liked to generate myself - a graph of how world money supply (measured by M0, M1, M2 and M3)  has swollen since Nixon took the dollar off the gold standard in 1971.

The good news is that this graph confirms my own number for the current size of the world money supply in 2014 - namely around $80 trillion.

He also uses one of my favourite facts - namely the fact that "the global debt of banks, households, companies and states has risen by $57 trillion since the crisis" (he quotes the figures from the Kinsey report that put global debt at nearly $200 trillion at the end of 2014.

There's also a beautiful graph showing how income for the vast majority of us has stagnated over this period since the early 1970s, while the revenue of the 1% has gone through the roof.

As Mason says, this cannot be sustainable.

I've only just skimmed the long list of subjects that Paul Mason discusses in his book. I learnt a huge amount. And I must say that I find his whole vision of a new utopia very attractive. Indeed, I think that many of my own proposals for IOU based cooperation with Owe'm or the introduction of parallel state-run currencies like the N-Euro fit beautifully with this. I wonder if he would be interested in presenting something on Channel Four News about them!

8 Aug 2015

N-Euros with IOUs! The next stage....

During my discussions with Steve Clarke and Ciaran Mundy at the Bristol Pound, I talked about the two different Cyclos-based systems that I have set up  - the OWEM IOU based system that I set up last year and my more recent N-Euro system.

One comment that they made concerned one problem they saw with my OWEM system. Suppose I send you an IOU for £20 because you mowed my lawn, but after one year, the debt is still outstanding. What could you do to recover the debt? My standard response would be to say that you would be well advised to never mow my lawn again, because I can't be trusted! You will have done some work for me, for which you have got nothing in return - either from me, or from someone else for whom I may have done something.

This is not a total catastrophe when the sum involved is just £20, but with larger sums it could become a real problem and discourage people from joining in.

So, my second reaction was to say that it might be possible to include a mechanism that forced the IOU to be paid off with "real" money, once some predefined period has elapsed,  if and only if the IOU has not be cancelled out in the meantime.

Obviously, before you could implement such a system, you would want to have both the IOUs and the "real" money in the same system. And that got me thinking.

Maybe I should combine the IOU features of OWEM with the more classic money transfer mechanisms that I have already put into the N-Euro system?

So that is what I have done! With a bit of fiddling around in the configuration of the N-Euro system, I have now arranged things so that anyone signing up to the N-Euro system is systematically provided with two separate accounts - a standard N-Euro account, and an N-Euro IOU account. 

Here's a screen shot of my N-Euro account where you can see the status of my two accounts.

As you can see, my basic NEuro account has a balance of N€ 120.00, and my NEuro IOU account is currently at N€-85.00. You can also see that the total IOU value that I could use is N€ 9,915.00 simply because the administrator of the N-Euro system (i.e. Me!) has arbitrarilly decided to set the upper limit for emitting IOUs at N€ 10,000. I am a very generous person.

The next screen shot shows why I am currently at N€-85.00. It's because I have sent IOUs to various Citizens and Businesses that I created within the system and the overall balance is now N€-85.00.
Obviously, all these numbers have just been made up for illustration. But hopefully you can see the point. By having two different accounts - one containing "real" NEuros, and the other keeping a tally of the IOUs, it is easy for people to know where they are. For example, I'm currently at 120-85 = N€ 35.00.

A next stage could be to set a limit to the duration of any particular IOU such that, at the end of the period, the N-Euro system would make an automatic transfer between the two "real" N-Euro accounts and cancel out the IOU.

This sort of mechanism would probably not be too difficult to implement within the Cyclos system.

Think a bit about how this could work. You could start by giving every citizen a basic allowance of real NEuros of say N€ 100.00. Most of the time, you wouldn't need to use your actual N-Euros at all - they would be just there to implement a mechanism that would be used only if all else fails.

Those who have heard about the OWEM system will know that one of the really neat aspects of such a system is that in many cases IOUs will simply cancel out on their own.

Let's go back to that £20 IOU that I sent you for mowing my lawn. The simplest ways to cancel the IOU would be for me to either provide services or goods to you worth £20 - for example, I could lend you my car for a couple of hours, or give you 10 kg of cherries from a tree in my garden. At that point, you send me an IOU for £20 that cancels the debt.

But the IOU can also be cancelled out via other people. Thus, suppose I send you an IOU for £20 because you mowed my lawn. But I give 10 kg of cherries to my neighbour (worth £20) and my neighbour lends you his car for a couple of hours. We are all quits, and no actual money has been transfered anywhere. It was all done with IOUs. The trick is to find loops in the IOU network. But the whole thing becomes even more interesting when there are loops involving tens or even hundreds of people, possibly including plenty of people who have never met, and probably never will. The N-Euro software will be able to do all that IOU cancellation automatically.

And, if in the end, as a last resort, it is necessary to make an actual money transfer, then the N-Euro software could look after that too.

I suspect that with just a very modest amount of base money injected into the system, the amount of economic activity that could be built upon that could be very significant indeed.

I've been talking about N-Euros here, but I should stress that you could do exactly the same thing with any monetary system - Euros, Dollars, Pounds, Bristol Pounds, Bitcoins.... you name it, Cyclos could do it.

I've still got some development work to do to get this fully functional. And above all, I need a few more people signing up for N-Euro or OWEM accounts so that it can actually start doing something useful. Paying Citizen1, Citizen2 and Business1 gets a bit tedious in the end. How about having  some real transactions with some real people?   You can sign up here for N-Euros, or here for OWEM.

Bristol Propects - another scheme for reforming money

My last post talked about how the Bristol Pound is remarkably close to providing a true alternative to conventional bank created money. Bristol City Council can pay their staff with them, and anybody in Bristol can pay their taxes with them. Unfortunately, they have to purchased with conventional sterling - money created almost exclusively by the commercial banks when they make loans.

But last Monday, Steve Clarke (Bristol Pounds director) and Ciaran Mundy told me about another interesting scheme they are setting up. The scheme is called  Bristol Prospects and aims to  help small and medium sized companies in the region who either have excess capacity and want to make new sales, or need the provision of easily accessible and low cost credit. These two groups of businesses will be bought together in the Bristol Prospects network and will offer each other ‘mutual credit’. It sounds quite close to the WIR Bank system that has been running very successfully in Switzerland since its creation in 1934.

In the Bristol Prospects system, there are two ways that  businesses can obtain credits. If a business is capable of running at a profit, but is short of cash, it can obtain Prospects directly following a centralised vetting process. Alternatively, businesses supplying the Bristol City Council can have invoices paid with Prospects. In both cases, the Prospects are provided for a limited period of 120 days, with the idea that they can be used to stimulate trade between different partners. The Credits can be spent with any other business on goods or services in the network at the same value as sterling.

When Steve and Ciaran were telling me about the Prospects idea, I was intrigued to compare the idea with my own OWEM proposal. With OWEM, anyone can extend  credit to anyone else, whether an individual or a business by accepting an IOU. One interesting feature of the system is that whatever happens, the net amount of "money" in the system is always zero. If I send you an IOU for £20, my account is as -£20 and your account is at +£20, but the overall system is still at zero. This means that the amount of credit in the system can increase almost without limit. As long as people are prepared to accept IOUs from other people for providing work or services, things can progress with no money at all.

We didn't have enough time to fully compare the relative advantages and disadvantages of the Bristol Prospect scheme and OWE'M, but I believe that both provide a way to inject interest-free credit into an economy. That has to be good news.

I also made the suggestion that an OWE'M style IOU system could be included in the Bristol Pound system as an alternative way to increase the amount of Bristol Pounds that are effectively in circulation. Again, we didn't really have enough time to fully explore this possibility, but I think it could be very interesting.

Bristol Pounds - Debt free money creation at last??

I have been pushing for the introduction of a parallel official currency that might be called the N-Euro. And a Cyclos based banking system using the N-Euro is now up and running, with a dedicated information site at N-Euro.info.

One key feature of such currencies is that they could be pegged to the level of the conventional Euro, and its value guaranteed if a local, regional or national authority accepted it for the payment of taxes or other official fees.  The other key feature would be that the same official authority could use it to pay its staff, or to pay for pensions or other benefits.

With these two key features in place, the stage would be set for bypassing debt-based money creation by commercial banks. The authority could simply pay its workers for the work they do by effectively printing the tokens themselves. There would be no need to go and borrow those tokens from Commercial Banks, and no interest to pay! Simple!

So imagine my pleasure when I discovered that those two key features have already been implemented in at least one complementary currency - the Bristol Pound, launched in September 2012.

It turns out that, as of april 2015, you can now use Bristol pounds to pay your local council taxes in Bristol. You can also use them to pay business rates, as well as gas and electicity bills, and you can buy train tickets to London if you want. Several hundred local businesses will accept payments in Bristol pounds, and payment can be done by simply sending an SMS with the following format: "pay" "your PIN" "trader name" "value". Easy. There's an App that you can use which even hides the fact that it is working via an SMS.

The whole thing is built on Cyclos - the banking system developed by the Social TRade Organisation (STRO) that I have used for my own OWEM and N-EURO systesms.

But it doesn't stop there, because it turns out the Bristol City Council can pay its own workers in Bristol Pounds. Indeed, Bristol's mayor (George Ferguson) is paid entirely in Bristol Pounds, and a fair number of the council's staff receive some proportion of their pay in Bristol Pounds.

Brilliant! Could it be that the people at the Bristol Pound have succeeded in doing something that has not been done since Abraham Lincoln decided to print $400 million "Greenbacks" which he used to pay his soldiers and buy munitions, enabling him to win the American Civil War. That really annoyed the Commercial Bankers, who had offered to lend him the money he needed at interest rates of between 24 and 36%. Unfortunately for the bankers, Lincoln effectively told them to get stuffed - "I'll print my own!" he said. And it worked brilliantly.  But we all know what happened to Abraham Lincoln. Of course, any suggestion that he may have been taken out by the Bankers is pure speculation. (If you want the full story, you can consult the text of the R.E. Search's 1935 book "Lincoln : Money Martyred").

So, have Bristol done it? Have they succeeded in creating their own parallel currency that doesn't require the money to be created as debt by Commercial Banks?

Unfortunately no. The only way that the people at the Bristol Pound managed to get their scheme through the rules and regulations imposed by the FCA (the Financial Conduct Authority) was to have a scheme where every single Bristol Pound has to purchased with an ordinary Pound - one that has been created out of thin air by one of the UKs Commercial Banks.

Specfically, they had to set up a system with the Bristol Credit Union which has the authorisation to swap Bristol Pounds for "real" Pounds. The Credit Union is then required to swap them back when required and on demand. It is that which gives the Bristol Pounds their value.

So, sorry folks. It was a false alarm. No -  the Bristol Pound people have not been allowed to repeat Abraham Lincoln's coup. It's a real shame.

Last monday I spent a fascinating couple of hours talking with two of the people behind the Bristol Pound. Steve Clarke (Bristol Pounds director) and Ciaran Mundy were kind enough to share their vision for the currency they launched three years ago. They are acutely aware of the fact that despite the fact that the Bristol Pound has the two essential features that I want to see in the N-Euro, it really hasn't really changed anything fundamentally. We are still totally dependent on Commercial Banks to create 97% of the money in circulation as interest bearing debt.  They are so close, and yet so far.

But, while talking with Steve and Ciaran, I came up with what might just be a way to break the system.  It turns out that about £800,000 worth of "real" pounds has been swapped for Bristol Pounds that are held with the Bristol Credit Union. But, not surprisingly, the Bristol Credit Union doesn't just put all the notes into a big safe. Instead, it lends most of the money out - at interest.  Like conventional banks, it just has to keep some percentage of the money in case some of the  people with Bristol Pounds want to swap them back for "real" Pounds.  And, like all conventional Banks, they just keep their fingers crossed that everyone won't want to swap the £800,000 of Bristol Pounds that are in circulation on the same day. If they did, they would be very embarrassed, because the money wouldn't be there any more.

So, if the Bristol Credit Union is lending out the money that people have deposited with them, what would stop them lending the money to Bristol City Council? Let us suppose that they lend 90% of the money to the Council (keeping 10% in reserve), and that the Council then promptly used the money to buy some more Bristol Pounds - 90% of £800,000 or £720,000 worth. There would now be £1,520,000 of Bristol Pounds in circulation.  And then the Credit Union could lend 90% of the £720,000 (i.e. around £650,000) to the Council again, and the Council could get yet another £650,000 pounds worth of Bristol Pounds. It could use all these wonderful  Bristol Pounds to pay its staff and provide public services. The Bristol Pounds could circulate in the local economy. And if the Bristol Credit Union decided to impose a 0% interest rate on the loans, everyone (except the commercial bankers) would be very happy.

Does this money multiplication idea sound weird? Actually, the money multiplication process is how commercial banks are supposed to operate anyway. So, in principle, there is nothing to stop it happening.

But here again, we discover that the Banking regulations have been neatly set up to stop this happening. As Steve and Ciaran explained to me, the Bristol Credit Union cannot lend more than some fixed percent of their money to an institutional body like the Bristol City Council.  Yes, the rules of the Financial Conduct Authority have been well written to prevent anyone except Commercial Bankers from creating money.

However, don't tell anyone, but there may be around that one. Suppose the Bristol Credit Union lent the £720,000 to some group of individuals, who then independently decided to lend the money on to Bristol City Council. After all, if an invidual felt like lending to the council at 0% interest, surely it's their right to do so? If the group of individuals who lend the money to the Council  agreed not to ask for their money back, the system would be safe.

Why shouldn't the Bristol Credit Union do this? After all, that sort of shenanigans is what commercial banks do all the time. Remember that, at the height of the financial crisis, Barclays allegedly lent £6 billion to Qatar which was then used to buy shares in ... Barclays. Since, as a commercial bank, Barclays could simply create the £6 billion out of thin air, this illustrates beautifully the nature of our money system. Money creation is in the hands of a priveledged few, who are able to use this priveledge to rake in hundreds of billions of taxpayers money in the form of interest payments on public sector debt every year.

I sincerely believe that systems like the Bristol Pound (and perhaps the N-Euro) are perhaps one of the simplest ways to end this madness. I can see no reason why Bristol City Council, or indeed any other official authority, should not be able to introduce parallel currencies that could be used by citizens and businesses - without debt, and without interest to pay. We would all be better off - with a few exceptions. Namely, those who currently control the money creation process and get to charge us all interest.

26 Jul 2015

Global Household Debt at the end of 2014 - Over $39 trillion

In my last post, I used the Bank for International Settlements data on credit to the non-financail private sector to show that Private sector Debt had exceeded $100 trillion at the end of 2014. For most of the countries, the dataset allows that Private sector Debt to be divided between "Non-financial corporations" and what is described as "Household and NPISHs" where NPISH refers to "Non profit institutions serving Households". The exceptions are Argentina, Brazil, Malaysia, Russia and Saudi Arabia.

Nevertheless, the Figures for Household debt for the remaining 34 countries makes for fascinating reading. I've compiled the figures for debt at the end of 2014 in the following table. At the top of the table I give the data for 12 of the 19 Eurozone countries individually, as well as the number for the entire Eurozone. I provide the numbers provided by the BIS (in Local Currency Units), but I also use the dollar exchange rate to calculate the amounts of household debt in millions of dollars.

As you can see, you can find debt levels for households including nearly 4.3 billion people on the planet. That's a fairly substantial proportion of the total population that was estimated to be 7.2 billion in 2013. Together those 4.3 billion people have accumulated over $39 trillion in personal debt - averaging $9113 per man, woman and child.

The table includes population sizes for each country, and this allowed me to calculate per capita debt levels for each country.

The winners are the Swiss who have managed to rack up over $102,000 of personal debt each. They are followed by Norwegians, with nearly $86,000, the Danes with $77,000 and the Australians with nearly $72,000 each.  Luxembourg's residents each have over $64,000 of debt, and the Dutch $55,000.

And so it goes on. An important figure concerns the USA, where the average debt level is nearly $42,000 per person, followed closely by the UK at nearly $40,000 each (over £24,000).

It was relatively reassuring to see that my compatriots in France are relatively frugal with $18,400 in personal debt each (€14,700). But the most sensible people in Europe are, would you believe, the Greeks who each only owe around $13,000 (€10,300).

So, would anyone like to estimate how much interest we collectively pay on this $39 trillion of debt? Again, using a 5% interest rate is just guesswork, but that would already mean around $2 trillion a year.

Oh, and remind me once more where the Banks that lent out this €39 trillion get the money from? Was it from the man in the moon? Or someone on Mars? No, they just created all of it out of thin air with the wonderful magic money tree that they all have in the back of the bank.

So, how hard are they working to earn the $2 trillion a year in interest? Are they working at all?

Is anyone out there still trying to understand how it is that 1% of the worlds population owns half the world's wealth? I would have thought that the answer is blindingly obvious. It is all a direct result of the totally insane way in which we have given commercial banks a monopoly on the ability to create the monetary tokens that we are all forced to use.

Methinks it is time for a change.

25 Jul 2015

Global Private Sector Debt at the end of 2014 - over $100 trillion

The Bank for International Settlements compiles data about the level of Private (Non-financial sector) debt for 39 different countries every quarter. The latest set of data (published as an excel file on the 8th of June 2015) covers the period until the end of 2014.

It's a pretty complicated set of data, but I have extracted the main numbers in the following table which provides information for 39 countries. 12 of them are in the Eurozone countries, but BIS also provides a figure for the entire Eurozone - only 7% of the debt is held by the other 7 countries. The table also includes another 27 other countries, and I have converted all,the debt values into dollars using the exchange rate for 2014 from the World Bank.
You can see that Private Sector Debt is highest in the US, where debt had reached $25.5 trillion, followed by China with $19.8 trillion, and Japan with $7.9 trillion. Then comes a series of European countries - France with $4.8 trillion, the UK with $4.7 trillion, Germany with roughly $4.0 trillion and so forth. I was surprised to see that even countries like Canada and Australia have private sector debt levels of €3.5 trillion and $2.8 trillion respectively. That's huge, given their relatively small populations.

Total Eurozone Private Sector Debt stands at €16.6 trillion (over $20.7 trillion dollars).

Altogether, the total (Eurozone debt, plus the other countries) exceeds $102 trillion. And that's just 39 countries. Incidentally, I think these numbers are really correct - they certainly fit with the figures provided in a recent report by the McKinsey institute which reported figures for global Household and Corporate Debt of $40 trillion and $56 trillion respectively.

Let's assume that the Banks that created all that debt are charging interest at around 5% interest per annum - a round number which is probably not that far off the mark. After all, remember that Credit Card companies will happily charge  you 15-20%. That would mean that around $5 trillion in interest charges are being sucked out of people's pockets every year. Not far off $1000 for every person on the planet. Given that many of them don't earn anything like that much, you can begin to see the scale of the racket.

And that's without counting the 5.5% of all the taxes that we in Europe pay that goes to feeding the parasitic banking sector because our governments have agreed to borrow trillions from them as well. To be precise - over €12 trillion in the European Union, over £1.6 trillion in the UK, over €18 trillion in the US.  McKinsey puts the Global figure for Government debt at $58 trillion.

Would anyone care to explain to me why this system, in which Commercial Banks have been given the right to create debt by lending money they don't have and then charging everyone - citizens, businesses and governments interest, is a good idea?

It is certainly a good idea for the 1% at the top of the system who rake all this money in. It is an unmitigated disaster for the other 99% of us.

Our governments should be creating our money supply debt free and allow us to get the parasites off our backs, because the current system is clearly a total disaster.

14 Jul 2015

5.5% of all European Government Revenue goes to pay interest charges

Jim Crawford asked me for a Table with Interest Payments as a percentage of tax revenues for European Union countries. Here are the numbers, using figures from the Eurostat Database :

As you can see, the €356 billion paid out last year in interest payments on Public sector debt amounts to 5.5% of total government revenue. But the slice of taxpayers money going to pay those interest payments varies enormously between different countries. The Irish are top of the list with 11.6% of their tax revenue going to pay interest charges, followed by Portugal, Italy, Spain, Hungary and Greece. Even the UK manages to hand over 7.1% of its revenue in interest payments.

France and Germany are actually quite a long way down the list, but it is the Scandinavian countries who get off the most lightly, with Denmark, Finland, Sweden, Norway and Estonia all near the bottom. The notable exception is Luxembourg, who only uses 0.8% of its revenue to pay interest charges.

Overall, this distribution can explain why some countries seem perfectly happy to see countries like Greece forced by creditors to impose draconian austerity.

13 Jul 2015

Euros, N-Euros and Complementary Currencies

The Eurozone is in crisis. The feuding between the 19 members has now come out into the open, and the longterm prospects are looking grim, despite the apparent agreement signed overnight by the Eurozone ministers.

Personally, I'm actually a big fan of Euros, so I would be sad to see them disappear. I love being able to go to any of 19 countries in Europe, and make payments with a universally recognized currency. I pay €100 for a restaurant bill in Germany, Italy or Spain, and my bank account is debited by €100 - not €100 minus the exchange rate and the 2.5% "international charge" imposed by nearly all credit cards.  I see the Euro as something not unlike the International Bancor currency proposed by John Maynard Keynes during the second world war.

But even if I like the idea of a transnational currency like the Euro, does this mean that Euros should be the only official currency for the 19 countries? My answer to that is a clear No.

I see no reason why we should not have Euros for international trading, but some other Euro-pegged currency at the national level. And that is precisely where I think that the N-Euro proposal makes so much sense. Governments should be able to produce their own National N-Euros electronically, and debt-free. Those N-Euros can be used to pay public sector workers and pensions locally, and also  used to pay local taxes. However, they would have no validity for making international payments. This is important, because it means that Germans should not be able to object if the Greek government produces N-Euros locally. There is no way that Greek N-Euros could possibly devalue the value of the International Euro, or the ones used in Germany (if the German government decides not to have its own N-Euro system).

The fact is that these government-backed N-Euros would lie somewhere between the International Euro and the huge number of complementary currencies that have sprung up in the past couple of decades. I was interested to see that the list of complementary currencies has now expanded to 280. The Complementary Currency website keeps a track of them.

However, when I looked at the nature of these different Complementary Currencies, I was unable to find any where they had the official backing needed to give the currency true value.  Here is a table of the different types of currency (some are not included), but there is no sign of that critical government backing, anywhere.
There's probably a very good reason why no government has yet been able to back one of these complementary currencies. As soon as they did, it would immediately become clear that the use of the "official" currencies like the Dollar, the Euro and the Pound Sterling, all produced by Commercial Banks as interest-bearing debt, was a complete scam. There is simply  no reason why governments should be forced to borrow "money" from commercial banks, money that those banks create out of thin air, forcing taxpayers to pay literally trillions in interest charges. Remember that 86% of all European Government borrowing over the past 20 years has been used to pay interest charges on public sector debt. Keeping that gravy train on the rails will motivate the Bankers and complicit politicians, journalists and economists to do everything in their power to keep the status quo, even it is obviously a total disaster for 99% of the population.

The introduction of an N-Euro system, or an equivalent, would put an end to this insanity. I don't expect this to be easy. But there is a chance that, following the decisive vote in last week's Greek referendum, and the humiliation of the Greek people by the Bankers friends among the Eurozone finance ministers, there may be enough anger to get the system changed. I'm keeping my fingers crossed.

12 Jul 2015

N-Euro.info is Go!

Having set up a Cyclos 4 based alternative currency called the N-Euro a couple of days ago (which you can find at http://www.n-euro.com, I have now set up another site called N-Euro.info which is aimed at providing a place for finding out more about the idea. This is what it looks like right now, although I expect that it will evolve a lot in the coming weeks.

I encourage you all to sign up on the site if you are interested (just go the register menu item on the left). And I've also set up a Forum so that everyone can discuss the pros and cons of the system. 


N-Euros versus Credit and Debit Cards

One of the reasons why I'm really pushing the N-Euro idea is that I think that it could easily become the prefered method of payment for both citizens and businesses.

Why? Because currently we are all paying very substantial amounts to the Commercial Banking system to be able to use Credit and Debit Cards. The N-Euro solution would eliminate those costs.

According to the ECB's press release in September 2014 :
The number of cards with a payment function in the EU increased in 2013 by 3.0% to 760 million. With a total EU population of approximately 508 million, this represented around 1.5 payment cards per EU inhabitant. The number of card payments rose by 9.6% to 43.6 billion, with a total value of €2.2 trillion. This corresponds to an average value of around €49 per card transaction.
And according to a report in the Financial Times in December 2014 :
Retailers across Europe pay banks about €13bn a year to handle transactions, and 70 per cent of this charge is accounted for by interchange fees between banks handling the process.
I suppose that €13 billion in fees on transactions worth €2 trillion implies that the "Financial Transaction Tax" is only about 0.7%.  However, any restaurant owner or shopkeeper knows that they have to pay VISA and Mastercard something like 3-4% of the value of each transaction. I bet that means that big players like Amazon pay way less than ordinary businesses. Yet another illustration of how the whole system is rigged in favour of the big players.

Add to that the fact that the Credit Card companies typically slap on an additional 2.5% or more as an "International Fee" for multiplying the value of the payment in one currency by the current exchange rate. It's obscene when you know that the banks themselves do over  $5 trillion in foreign exchange EVERY DAY, effectively for free.

Methinks it's high time this racket was stopped.

Now, suppose that my dream of government backed N-Euro currency system came true. Every citizen and every business in the Eurozone would have a free account in a huge database that could be run using the Cyclos 4 Pro system.  Cyclos proposes a PRO version with a price list. Here it is:

They are clearly geared up to handle millions of users if necessary. It might be interesting to hear what price they would charge for a system that included the entire Greek population. And as they say:
Non-profit organisations and companies with a social mission (e.g. philanthropy projects, environmental innovations) can apply for the social license. ou are a charitable organisation.
Personally, I think that the N-Euro project is pretty philanthropic in objectives.
So, in addition to the software costs, there would be cost of setting up the servers to run the system. Currently, hosting companies like OVH will offer very low latency servers capable of handling up to 3 Gbps (Billions of bits per second) for a few hundred pounds.  I can't believe that the costs of providing enough hardware to handle the payments of a population can be that much - assuming that we don't have to cater for High-Frequency Traders in the City.

Do you really think that the total cost of this would justify charging businesses 3-4% for providing this "service"? I don't think so. Most intelligent people would happily switch to paying via a free, government backed payment system, and cut out the banks completely.

Last night I emailed Yanis Varoufakis to see whether he might be able to get an N-Euro system set up in Greece. Given last night's refusal by the Finnish and German ministers to allow them to have support from the ECB, it may be just the right moment to change the whole system.

11 Jul 2015

N-Euros or Bitcoins?

In response to the crisis in Greece, I have made a number of suggestions for ways to break the stranglehold.  In particular, a few weeks ago I suggested that the Greek government could introduce a government-backed "Bitcoin" pegged to the Euro. It turns out that the ex-Greek Finance Minister Yanis Varoufakis talked about the possibility of using a Bitcoin-like system in the Eurozone in February 2014 on his blog in a piece called "BITCOIN : a flawed currency blueprint with a potentially useful application for the Eurozone" as well as an earlier piece called "Bitcoin and the dangerous fantasy of "apolitical" money".

But, in the last few days, I have have been pushing an alternative idea - namely, I've been arguing that Governments should introduce a parallel debt-free Euro that I have called the "N-Euro" - see my post "Greece : Bring in the N-Euro now!" And as of yesterday, there is now a Cyclos 4 based alternative that actually exists  at www.n-euro.org. I'm just waiting for the first official partner to contact me, and we can start the ball rolling!

Please note, that these proposals are not linked to N-Euro - the Estonian Rock Band who were active from 1999 till 2008 (!!). My apologies for any confusion. And my apologies to any fans who try clicking on the links on the bands wikipedia page - they will get a shock. (I guess that the band neglected to keep the www.n-euro.com domain name active).

Before going any further, I just wanted to explain my change of heart. Why not use a Bitcoin style Crytocurrency? After all, they do provide a real alternative to the conventional Banking system which relies of the use of monetary tokens created for profit by commercial banks.

The problem with Crytocurrencies like Bitcoin is that, even if they are backed by a government (such as the Greek Government), ownership can be transferred to literally anyone with no controls. Thus, if the Greek Government were to create 1 billion Bitcoin equivalents, that were given a value of exactly €1 because they were accepted for paying Greek taxes, there would be nothing to stop some unfriendly players in the financial markets buying up the vast majority of the stock (by proposing to buy them for €1.10, for example), and thus render the system unworkable. Yes, the Greeks who sold their Greek government bitcoins for €1.10 would have got some "real" euros in return. But, as we have seen, having "real" euros on your bank account doesn't actually help when the International Banking Mafia have the power to Blackmail your government by forcing Banks to close and refusing to allow people to draw out their Euros in cash.

Would the Banking system try to disrupt an official Greek government Bitcoin system? You bet they would.

So, one of the really great features of having a Government backed N-Euro system, such as the one I have just set up using Cyclos, is that the Government gets to control exactly who is allowed to use the currency. Essentially, if you don't have an official account on the system, you don't get to play. And if anyone is caught out trying to manipulate the system by buying up the N-Euros on individual citizen's accounts by offering them €1.10 (which they certainly could), all they would get is a bigger number in their N-Euro account. But, as everyone knows, all money in bank acounts is just numbers - a series of 0s and 1s on some hard disk somewhere. And the Government would be perfectly entitled to say, sorry, we have just decided to remove all the N-Euros from your account. It's our banking system, and we set the rules. (Boy, would that be fun!).

So, that's why I'm now 100% convinced that this is the way to go. As soon as any authority with the power to raise taxes, anywhere in the Eurozone, decides to try out the N-Euro system, then the revolution will be underway. Within months, the scam that is at the heart of the entire financial system, namely the right of Commercial Banks to create our money out of thin air  as interest bearing debt will be in broad daylight.  And Europe's taxpayers, who have been paying trillions of Euros to rent our currency from the International Bankers will be able to say, quite rightly, we want our €6.7 trillion back

9 Jul 2015

N-Euros are Go!!

I've been pushing the idea of a parallel debt-free Euro, called the N-Euro (New Euro, or National Euro) for a couple of years now. I had the original Eureka moment at 4am on the 17th September 2012. I followed that up with another post when I generated a 13 minute Youtube presentation.

Very recently, I have been suggesting that N-Euros might be a solution for the Greeks.

The idea is that governments could decide to pay some proportion (say 50%) of all public sector salaries, pensions and other benefits using this alternative currency - thus avoiding the need to borrow more classic euros from the Commercial Banking system, or being forced to accept intolerable conditions for getting help from the European Central Bank. They would guarantee that the new currency had value by accepting them for paying taxes or other charges.

So, to help get the ball rolling, I've done quite a bit of the work for them by setting up a basic N-Euro framework using Cyclos 4 - a free banking system developed by the STRO (Social Trading Organisation).

You can actually try the system out by going to http://www.n-euro.com where you will be greeted by the following welcome page. I hope you like it.

For the time being, there's not much you can do with it. Feel free to register, but you will find yourself with an N-Euro account credited with precisely 0 N-Euros. And you can't send anything to anybody.

To get the system off the ground, I'm looking for any administration somewhere in the Eurozone who would like to try it out. Essentially, it would be some sort of organisation (a local council, a municipality, a regional government, or who knows, maybe Alexis Tsipras!) that currently
a) pays citizens salaries, pensions or benefits in Euros
b) collects some form of tax or charges

Suppose you are the head of a local government that charges businesses and resisdents taxes. If you agree that you will accept N-Euros in payment for those taxes instead of conventional Euros, then you are ready to go!

From that point, you could decide to pay some proportion of salaries or benefits using N-Euros, which would immediately save you money, because you wouldn't need to have that money available.

Clearly, you will also need to be able to set up accounts for as many citizens and businesses as possible in your locality. This should be easy for people that are currently on your payroll or receiving benefits, but it would be even more useful if you could get other people to join in too.

Suppose that you managed to get everyone in your city to sign up - citizens and businesses. N-Euros would enter the system via the N-Euro accounts of people working for the local authority. But they could then be used to make payments to other local businesses, who would very probably be happy to take them instead of conventional Euros because they know that they are worth 1 euro each, and can be used to pay taxes.

That really is all you need to establish parity between N-Euros and Euros! Simple!

There are plenty of advantages of using this Cyclos-based N-Euro system.
  1. It's totally free to run! People will be able to pay the bill in a restaurant with no cost at all. If you are the restaurant owner, would you prefer N-Euros (which have no transaction costs) or conventional Euros paid for with a credit card, and where VISA will charge you 3-4% for handling the transaction. The people at Cyclos already have versions that run on iPhones, iPads and Android devices. You can make payments by SMS, and they are introducing PoS (Point of Sale) systems too.
  2. There is no possibility of cheating. If someone does not have enough N-Euros on their account to make the payment, it simply won't go through (because I've set the system up so that negative values are not permitted).
  3. For the local authority, N-Euros can be produced for free! Obviously, there have to be controls over what can be paid for using the N-Euros. I think that you  would need to have some sort of elected body to check that all the N-Euros generated by the Authority were justified. This would be the case if they were used to pay part of the salary of people working for the Authority. Any payment that would not be approved the committee could be made illegal.
  4. Since the authority can control both the creation of N-Euros (via payments made to citizens) and their withdrawal (by paying taxes), it would easy for them to control the total quantity of N-Euros in circulation. If at any point it was felt that there were too many N-Euros in the system, it would be very easy to add a financial transaction tax that would remove a small percentage every time a payment was made.
  5. There is abolutely no need for paper N-Euros or coins. Everything is entirely handled by the software. Indeed the only place they can exist is in the database of the computer. They cannot be moved to offshore taxhavens, or hidden under mattresses.  
  6. They cannot be used for illegal activity. Since there would be a public record of every N-Euro payment, you would be very foolish to try and organise anything criminal using N-Euros. Obviously, only people with administrator status would normally be in a position to find out about specific transactions, which should provide sufficient confidentiality for most people. If anyone really needed to guarantee confidentiality, they should use some other payment mechanism (like paying cash in conventional Euros).
Could the system be built up from small local implementations? I believe the answer is yes.

Let's suppose that one or two different local authorities decided to use the N-Euro system. In the initial stages, we could set them up internally with two different currencies that were kept separate. There might be one N€ for Toulouse (my local city) which might be called the N€Toul, and a separate one for Bordeaux (a city about 150 km away) which might be called the N€Bord. Initially, people in Bordeaux and Toulouse would not normally be able to make payments to people in the other city. However, once the systems were functioning well, the two cities could decide to merge the two currencies together.

Do this process of creation and merger enough times, and you might end up with an N-Euro that worked everywhere within the Eurozone!

Could it work? Well, I suspect that there's only one way to find out. We need to start trying it out - and the sooner the better.

If there are people who are interested in getting involved, feel free to contact me. I'll probably set up a BaseCamp project for discussing the proposal.

6 Jul 2015

Greece : Another way to solve the Greek debt problem

OK. So the Greeks owe their creditors €317 billion (the figure at the end of 2014).

How on earth could they pay off that debt?

Well, those of you who know my blog will maybe remember that back in May 2012, I proposed a way to cancel all goverenment debt in just 10 easy stages

All you need is the following list of ingrediants
  • 1 cooperative bank
  • 20 cooperative individuals (volunteers please)
  • €1000 to start (I'm happy to put up the money)
  • A network of taxhavens so that the flow of money cannot be controlled (conveniently, they are already in place)  
Essentially, the Bank uses the wonderful fractional reserve banking system to lend out roughly 10 times more money than it has capital. The person borrowing the money (lets call him A) then hands the money to another person (B) who then reinvests the sum in the Bank. The bank can then lend out 10 times more money to person C, who then gives the money to person D who reinvests in the Bank. Keep doing this a few more times, and you can generate arbitrarilly large amounts of money.

When there is enough "money" in the bank, it can loan the Greek Government the "money" which can then be used to pay off the entire €317 billion. The Greek government signs a document saying that it promises to pay the entire sum back with interest of 0% after, say, 1000 years. It's as simple as that.

Actually, the Basel Banking Rules state that the Risk Weighting of Greek Sovereign Debt is 150% since it is classed as CCC- (S&P) Caa3 (Moody's) and CCC (Fitch) which means that our friendly Bank would have to keep a bit more money as capital reserves. Instead of having to maintain capital of around €31 billion, it might need say €45 billion. But that's not really a problem.

Does this sound ridiculous? You bet. But it is this insane system that got us all into this mess in the first place. Where do you think the Banks found the €12 trillion that has been lent to European Union governments? Where do you think the Banks found the £18 trillion that has been lent to the US government? Who are we borrowing all this "money" from? The Martians? 

Not convinced? Take a look at the numbers at the National Debt Clocks website. At the time of writing, the total stood at $61.142 trillion. By the time you read this it may well have increased a lot.

No, all this "money" that our Goverments have been borrowing is stuff that has been created out of thin air by Commercial Banks. The Greeks now have the possibility of pulling the plug on this insanity. Go for it, Greece.  I'll chip in the first €1000 to get the bank off the ground. And no, I won't want the money back with interest.

Greece : Bring in the N-Euro now!!

In my last post, I gave the Greek people a big thankyou for voting a very solid "NO" to the blackmailers at the ECB and within the Eurozone. I suggested three different approaches that they could take in the coming weeks.

But I neglected to mention what I think is probably the simplest and most radical solution to any attempt by the ECB and the Eurozone to break the Greek peoples resolve.

It's my proposal, dating from September 2012, to replace the Euro with the N-Euro - a purely electronic currency, that could be totally independent of the conventional banking system. I also produced a Youtube presentation on the subject - "The N-Euro Solution". Here's my talk in case you are interested - only 13 minutes!

I also mentioned the N-Euro idea in my recent talk to the Toulouse School of Economics in February this year. That's also available in a Youtube presentation - called "Fixing the Economic System" although it's quite a bit longer - about an hour. The bit about using the N-Euro starts around  49:37.

Since 2012 things have moved on.  I've discovered that there is a wonderful system for developing alternative banking systems called Cyclos 4. Developed by the STRO (Social Trade Organisation) they have done a fantastic job putting together a truly solid and professional package that can be configured to run a wide range of alternative currency projects. I note that the STRO has made its own proposal for the Greek Crisis - called "DigiPay4Greece" - there's a pdf about it that you can download.

I used Cyclos to develop my own Owe'm system that allows Citizens to create their own credit by sending the equivalent of IOUs to each other without the need for any money at all. (In passing, I note that Owe'm could also be used by people in Greece - please feel free to try it out!).

Cyclos 4 really is very good.  It's built around industry standard secure software, and they are ready to handle systems with tens of millions of users. It runs on Macs and PCs and there are versions that run beautifully on iPhones and Android devices. The latest version (Cyclos 4.4) includes SMS payments and Point of Sale (PoS) systems. Everything you could really want.

So, Alexis Tsipras. Why not set up a Cyclos based system now? Open accounts for every Greek Citizen, and start paying your pensioners and public sector workers with N-Euros instead of Debt-based Euros on loan from commercial banks. Since the Greek government can produce as many N-Euros as it wants, debt free, they would be showing the entire world that we don't need to rent our money from Commercial Banks.

Peg the value of the N-Euro to the Euro by allowing Greeks to pay their taxes in either conventional debt-based Euros, or the new debt-free N-Euros, and the system will be ready to fly.

Greece would still be able to stay in the Eurozone. After all, Greece would certainly still need to find some "real" Euros to buy imported goods such as petrol and gas, and of course pay the interest on its public sector debt (at least until the time when we all get a debt jubilee).  In addition, Greeks will want to travel abroad and buy things with a Euro credit card - after all, who wants to be ripped off by the Banks who charge 2.5% on top of merchant fees just for converting one currency into another. That' one reason why I am personally a big fan of the Euro.  But every year, millions of people go to Greece on holiday with lots of Euros (and dollars) to spend. I for one intend to go next year to support a brave and valiant people who deserve our support.

Go for it Greece. Tell the International Banking Mafia where they can get off....

5 Jul 2015

A personal thankyou to the Greek people

The financial system has declared war on the Greek people. They have been forced to close their banks by the European Central Bank, led by ex-Goldman Sachs banker, Mario Draghi, despite the fact that the ECB's primary function is to make sure that the banks stay open.

But the Greek people have stood up to the Bankers and their defenders at the head of the ECB and the European Union.  Even the IMF has admitted that debt forgiveness should be part of the deal. But that was never on the table.

The Greek people have a fight on with the Financial System. And they have just said "NO!" to blackmail with a majority that should be at least 60% of the vote. 

But the fact is that Greece's fight is everyone's fight.

As I have been saying loud and clear, Europe's taxpayers now own the Banking system over €12 trillion. We have borrowed no less than €7.8 trillion in the last 20 years, of which at least 86% (€6.7 trillion) was handed over in interest charges on public sector debt. In the UK at least, nearly 98% of those interest payments go directly to the financial sector.

In the last three months, my own government in France has borrowed another €51.6 billion.  Remember this is the same François Hollande who,  in January 2012 said : "je vais vous dire qui est mon adversaire, mon véritable adversaire. Il n’a pas de nom, pas de visage, pas de parti, il ne présentera jamais sa candidature, il ne sera donc pas élu, et pourtant il gouverne. Cet adversaire, c’est le monde de la finance".

Here's a translation : "I will tell you who is my adversary, my real adversary. He has no name, no face, no party, he will never be a candidate, will never be elected, and yet he governs. This adversary, is the world of finance".

Spot on François! But what have you done since being elected president to take on "your real adversary"?

Fortunately, the Greek people have had the courage to say no. And they deserve enormous respect.
The Bankers and their minions will fight like crazy to keep their racket going. A racket that means that Commercial Bankers have complete control over lending to our governments, and which has allowed them to suck trillions of taxpayers' money out of the system. Thanks to the brilliant Maastrict and Lisbon treaties, our central banks are prevented from lending directly to governments.

But it doesn't have to be that way.

First, the Greeks could create an alternative cryptocurrency (similar to Bitcoin), pegged to the Euro, and given solidity by being acceptable for paying taxes. This could be set up within a week or so, and used to pay pensions and public sector salaries. It would totally bypass the conventional banking system, and demonstrate once and for all that we don't need the Bankers debt-based money system.

Second, the Greeks could say that they will be happy to pay back (with interest) any creditor who could prove that they lent money that actually existed before the loan was made. Since the Commercial Banks that bought up Greek bonds use the standard opaque accounting system that hides the fact that most loans are made with money created out of thin air, they might have an exceedingly tough time demonstrating that they actually lent "real" money. I for one would just love to see them squirm trying to prove that we actually owe them anything! Can we have our €6.7 trillion back please?!

Finally, they could push for a solution that would not just work for the Greek economy, but for all the heavilly endetted nations in the Eurozone. It would involve diverting the €60 billion that Mario Draghi is currently printing every month for his friends in the financial sector, to paying off Eurozone public sector debt directly. By making payments that depended simply on the populations of each Eurozone country, it turns out that Germany would get out of debt only a few months before the Greeks. And the Greeks would be out of debt before the likes of France, Austria, Italy, Belgium and Ireland.

So, let me say it once more. Thank you Greece. This victory might just turn out to be a turning point in the history of humanity. I certainly hope so.

4 Jul 2015

Eureka - How the Bank of England could fix the system for good

I think this may be it. The solution....

Here's what needs to happen.

1) The Bank of England should introduce a modest financial transaction tax on all sterling-denominated electronic transactions

2) The money raised by the tax should be used in two ways
  • To progressively buy back the entire stock of gilts that are not already held by the Bank of England (£1214 billion)
  • To provide the UK government with enough funds to cover the public sector borrowing requirement
That's it. Simple.

Let's see how this might work. Suppose that the Bank of England were to set the rate of the financial transaction tax at 0.05%. To calculate how much revenue would be generated, we would need to know the volume of sterling-denominated transactions. This is actually not trivial. I have estimated UK transactions at over £2 quadrillion a year in 2014. However, a substantial proportion of those transactions are certainly in other currencies, especially the dollar and euro. I'll assume that the volume denominated in sterling is about 25% of the total - i.e. £500 trillion a year. With the tax set at 0.05% this would generate around £250 billion a year.

The Government is currently expecting to have to find roughly £100 billion to cover the public sector borrowing requirement, but this is supposed to drop over the next few years. So lets assume that there will be at least £40 billion per quarter for the buy-back program. At that rate, it would be possible for the Bank of England to buy back the entire stock of gilts by about 2022.  The following graph (modified from the one I published earlier this week), shows how this could happen.
In the graph I have simply assumed that the Bank of England buys up the stock of gilts uniformly, until in 2022, there are no gilts left in the hands of the financial markets.  From that point on, the 4.4% of GDP that UK taxpayers have been forking out every year to pay interest on government debt since 1694 would be history. But of course, the precise sequence of buy-backs could be done in another order if needed. It might be a good idea for the Bank of England to buy back gilts preferentially from particular players. For example, if we conside the £1214 billion currently in circulation outside the Bank of England, £24.9 billion (2.1%) are currently in the form of gilts held by households. Allowing these "households" to cash in their gilts first might be particularly useful, because those households are more likely to  spend their cash in the economy that other players. The same argument applies in the case of Public Corporations, Local Government and Private Non-Financial Companies which together hold about £3.5 billion in gilts. But this is a mere 0.3% of the total.

Most of the gilts are currently in the hands of Insurance Companies and Pension Funds (£468.3 billon), Foreign Investors (£333.4 billion), Other Financial Institutions (£159.7 billion), Monetary Financial Insitutions (i.e. Banks, £157.9 billion), and Foreign Central Banks (£66.3). Frankly, for me, I don't think that any of them deserves special treatment.

There are a number of points about this potential solution that merit attention.

First, the Financial Sector, which holds 97.7% of all the £1214 billion currently owed by UK taxpayers, should be happy. Over the next few years, they will receive exactly the same amount that they contribted in the first place, so surely they will be in no position to complain. I note that this freshly minted Bank of England cash can be spent on anything - including bankers bonusses if they want.

Second, the standard complaint that Central Bank Money creation leads to inflation falls flat on this occasion. Since the money used by the central bank to buy the gilts has been removed from circulation by the Financial Transaction Tax, there is strictly no way that this procedure could produce inflation.

Thirdly, this procedure will produce a massive reduction in the the amount of money that needs to be paid out in interest payments. In the last 20 years, UK taxpayers have handed over £653.6 billion in interest payments on public sector debt. That's over £10,000 for every man, woman and child in the country.  This money will be saved in future, and could be spent on more useful things, including health, education, housing, renewable energy, transport and so forth.

Finally, it should be noted that the mechanism doesn't require anything too radical (apart from the introduction of a Financial Transaction Tax). The fact is that we are already used to the idea that Central Banks buy back government bonds on the secondary markets. It's precisely what the Federal Reserve, the ECB and the Bank of England have been doing for some years now. The only real difference is that here I am proposing that they don't just buy back some modest proportion of the bonds. Instead, they simply have to bite the bullet and buy up the whole lot. 

But there are a number of other somewhat more indirect benefits of such a scheme.

Firstly, by showing that the sky doesn't actually fall in when you introduce a financial transaction tax, the path will be cleared for a radical reform of the tax system. You may well be aware that for over four years I have been arguing that it should be possible to replace the vast majority of taxes by a universal flat rate transaction tax. Once it is clear that the UK government can indeed use an FTT to raise money, there would be nothing to stop it going on to scrap other taxes. As I have argued, Income Tax, which raised £163.2 billion last year, could be replaced by an FTT of well under 0.1%.  Likewise, VAT, which raised £111 billion, could also be replaced by an FTT well under 0.1%, as could Corporation Tax, which raised a relatively modest £42.3 billion. Getting rid of these antiquated taxes would be a really good move.

Second, if the scheme works, it should also become clear to everyone that, in fact, Central Banks can perfectly well inject money into the economy directly. In the current scheme, I was careful to avoid the standard complaint that Central Bank money creation could lead to hyper-inflation by ensuring that the exact same quantity of money would be removed at the same time. But it will rapidly become clear that there is actually nothing to stop the Central Bank buying up a larger quantity of gilts than can be purchased directly with the revenue generated by the FTT.

Third, once the gilts have all been reabsorbed, and the interest payments brought to an end, the FTT would still be in place, and the Bank of England would still be able to raise revenue. At this point, this money could be given directly to the UK government to finance public sector spending, including spending on pensions, health, education and so forth. 

Finally, don't tell anyone in the Banking sector, but the fact is that this scheme would actually break the entire basis on which the entire current financial system is built. Instead of being perpetually in debt to a Commercial Banking system that lends the government money that it creates  out of thin air, and then sits back an collects the interest, the UK's democratically elected government would finally be able to break free of the stranglehold of the banks. The Government of  the 1%, by the 1% and for the 1% would cease.