23 Feb 2013

More on irresponsible Money Creation by Commercial Banks

Here's (yet) another graph showing what's wrong with the current system. It shows the % annual increase in the UK's M4 since 1983. M4 is essentially a measure of how much money creation has been going on - money creation that is almost entirely in the hands of commercial banks. I took the numbers in Table A2.1.1 from the Bank of England's Statistics pages, and plotted them in a graph.

It shows the year on year percentage increase in the volume of money. As you can see,  from 1983 to 1990, the banks were merrily increasing the money supply by close on 15% per year. There were dips around 1993 and 2000, but most of the time it has been increasing by around 10% a year. But then, following a super peak of 17.8% in Februay 2009, it has collapsed completely, and net money creation has been negative since October 2010.

That is the real reason for the current crisis. It isn't that governments have been spending too much. It is because the banks have completely reversed their strategy of generating massive amounts of new money (read debt) every year. Instead they have taken huge amounts of money out of the economy by destroying the money that everyone needs to function. Since 2010, every time anyone pays back the money they owe, most of  that money has simply been disappearing in a puff of smoke. It doesn't get reinjected back into the economy. It doesn't even get used to pay the bankers's bonuses. If that was the case, it wouldn't be so bad - at least the money could be recycled via the Maserati dealers.

No, the current system means that when there is a recession, the money simply disappears from the system. And indeed, if governments, businesses and inviduals actually paid back everything they owed, there would be no money left at all!

This, more than anything else, shows the complete insanity of a system built on the idea that the size of the money supply should be left in the hands of commercial banks. Giving them that priviledge to create the money supply also means that when they decide to remove money from the system (as they are currently doing), there is virtually nothing that can be done - except throwing money at them via quantitative easing, and praying.

Consider the alternative - the alternative proposed in Andrew Jackson and Ben Dyson's book on "Modernising Money". With that alternative, the money supply is maintained at a sensible optimal level by an democratically accountable, but independent "Money Creation Committee". If such a committee existed today, the negative growth rates that the UK has seen for the money supply since 2010 would never happen.

Come on you bankers! Explain to the rest of us why your system is so good! Explain to us why it is in the public interest that you have been removing money from the system since 2010, and why you are so much better at managing the money supply than the sort of independent Money Creation Committee proposed by Positive Money.  Go on, I defy you.

1 comment:

  1. Swiss Bank
    Accounts .---April.

    Is your monies safe
    in these accounts ---- definitely NOT.

    Would you get your
    money back if every body decided to withdraw all their accounts –
    NO WAY.

    Economic Experts
    say that there would only enough money to repay 50% of their clients.

    Are you going to be
    in the 50% --- that loose your money.-- Get it out NOW.

    2012 -- - June.
    -- Published in Anglo INFO .Geneva.--- USA Trust Fund Investors were
    sent false and fraudulent documents by Pictet Bank.Switzerland. in
    order to collect large fees. ( Like MADOFF) ---Even after the SEC in
    the USA uncovered the fraud Pictet continued to charge fees and drain
    whatever was left in these accounts. Estimated that $90,000,000
    million lost in this Pictet Ponzi scheme.

    2012 - - - July.
    -- De – Spiegel. -- states – Pictet Bank uses a letterbox
    company in

    and a tax loophole involving investments in London to gain

    millionaires as clients.

    - - - August ---- German Opposition Leader accuses Swiss Banks of
    "organised crime."

    the fines that crooked Swiss banks have incurred in the last few
    years exceeds £75.Billion.

    is also calculated that the secrecy " agreements" with
    regards to tax evation by their clients will cost the banks another
    £450 Billion.( paid out of your monies.)

    banks are panicking --- the are quickly restructuring their banks
    ---- from partnerships --

    " LIMITED COMPANIES." ----- this will probably mean that
    in the future --- they could

    you only 10% of your monies " if you are one of the lucky ones"
    ---- and it be legal.