How to Make Banks Socially Useful (video)

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Prof Richard Werner, Director of the Centre for Banking, Finance and Sustainable Development, University of Southampton, author of “New Paradigm in Macroeconomics” gave a talk at Just Banking Conference in Edinburgh on 20th April on how to make banks socially useful:

(Presentation slides here) 

Empirically, it had been found that banks are special. Their function cannot be easily replaced by other financial players or markets. Banks must have a kind of monopoly power compared to other financial institutions.

But economic theory could not explain why.

Here is why.

Banks are special, because they can create new money ‘out of nothing’ = credit creation.

This explains why banks are special: They are not (just) financial intermediaries. They have a license to ‘print money’ by creating credit. There is no such thing as a ‘bank loan’. Banks do not lend money, they create it.

“…it proved extraordinarily difficult for economists to recognise that bank loans … create deposits. In fact, throughout the period under survey they refused with practical unanimity to do so”

Schumpeter (1954)

Download the Richard Werner’s presentation here.

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  • http://www.facebook.com/eamonn.blaney Eamonn A Blaney

    Hello Mira, I would really appreciate help me get these radical proposals
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  • Tétef 78

    Richard Werner is surely one of the most lucid man on Earth about the actual economic and political situation. Thank you for keeping us updated about him and his ideas.

  • Conrad Jones (Cheam)

    Could Professor Richard Werner please explain this to the BBC becasue they still don’t get it:
    http://www.bbc.co.uk/programmes/p0073l69

    “How do banks work? Banks are the great conjurors. They take our money because they persuade us that putting money in the bank is safer than hiding it in a sock or under the mattress. But here’s the great trick. They don’t keep it in the bank, they lend it out. So if we wanted our money back at the same time, we couldn’t have it. To help make sense of this, I am going to set up my own bank, Pesto Bank.”

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