Whilst most people were probably on holiday, I spent much of last weekend at a ‘get together’ in scenic London SE1 with Positive Money. Or PoMo as many of the staff seem to call it.
I do think that PoMo is to be admired for – uniquely – promoting grass roots groups throughout the country to think about money. That can only be for the good and I suggest my often critical remarks which follow should be considered in that light.
They have their PoMo proposals, which although they have recently been somewhat refined, both I, and a significant number of attendees still think pretty ill-considered.
Nevertheless, they run an excellent thinking workshop – it really was exemplary. I’ve long been challenged for my outlook in all areas – yet in some respects I was surprised to be further challenged. It didn’t lead to a change of views but it certainly lead to a better clarification of them!
So, I would particularly recommend the work of the always enthusiastic – indeed ever ‘positive’ – Rachel Oliver, for whom, whilst indicating that any motivation and all thoughts are an advantage, nonetheless remains challenging, stays humble, and, especially, avoids false bonhommie and zealotry. (I’m particularly allergic to the last two!) She was distinctly impressive.
Which brings me to the actual proposals.
Or, as ‘PoMo’ says, “Our vision” (For the full details see the image above – click and click again to enlarge). I summarise below.
Positive Money seem to have realised that their original ideas were using more (central) bank control to solve the control of private banks – but often the same bankers were likely still to be in the driving seat. So they now emphasise that their controls must be democratic – “instead of working separately the Bank of England and the Government [should] collaborate in a democratic way.”
They want “more women, BAME people and professionals with the experience of the real economy to be appointed to the Bank of England’s most powerful committees.”
The power to create and spend new money into the economy is brought under public, democratic control. Private banks become true intermediaries between savers and borrowers and no longer have the monopoly on creating money.[Italics mine].
They emphasise that with the private banks unable to lend without central bank allocated funds this would be fairer than the ‘subsidy’ of the bank guarantee.
And they clearly want things to be sustainable and fair. “Investment in productive sectors of the real economy such as affordable housing helps to boost incomes, bring down inequality and serve society’s needs.”
“New money is created by the central bank ending our economy’s dependance on high levels of debt, creating a more stable economy.”
This is mostly motherhood and apple pie, which doesn’t necessarily follow from their proposals: the women and BAME proposals are good simply because they don’t currently exist – ergo non bankers must arrive at the Bank of England. This may be a workable possibility – after all they currently employ the founder of Positive Money, who is a non – banker (and who, later, actually gave us a talk – and not a talking to!)
However, in stating that private banks (see italicised quotes above) no longer have the ‘monopoly’ to create money they are just plain wrong. They seem to hold on to the idea that banks create money because, say an NHS trust has a Barclays account, when the Bank of England (BoE) credits it with government expenditure it means that Barclays has created that money*. This, in my view, is entirely mistaken. The nationalised BoE has created money on behalf of the government. Barclays is merely the bank where it arrives. If the NHS had a BoE account the error would be more apparent (and indeed the general withdrawal of BoE accounts has tended to cloud the origins of money).
It is certainly possible that ‘restricting any new money created by the central bank would end the economy’s dependance on high levels of debt, creating a more stable economy.’ But so too could simple legal direction of banks by the currently formed BoE as to the precise purposes of bank loans.
So, lots of desirable outcomes which are not actually dependant on the banking reforms they propose. And in making the BoE more ‘democratic’ they really just construct an extra level of democracy when the government – the real money creator – is already (in theory at least) democratic.
*29 July 18: I’ve since been told that this is indeed likely to be the view on the grounds that private banks have created ‘the means of payment’. But of course, when the BoE has created the money private banks are a simple conduit.