Criticisms of Positive Money by Mike Robinson of UK Column

Home » Blog » 2012 » November » 08 » Criticisms of Posit…

Being a Positive Money supporter is frustrating at the moment because of the poor quality of the opposition to Positive Money’s ideas: I’d prefer quality or clever opposition. That would test my brain.

Anyway, there is an article by Mike Robinson on the “UK Column” site which criticises Positive Money. The criticisms are poor quality and are easily rebutted. So don’t expect any brilliantly intelligent arguments and counter-arguments below.

Mike Robinson agrees that allowing private banks to create money is undesirable. Then under the heading “Is that it?” he claims that PM’s two account system (safe accounts and investment accounts) will “do nothing to prevent banking bailouts”.

Now it’s a little difficult to criticise his reasons for saying that because he doesn’t give any reasons!! All I can do is to briefly spell out for Mike Robinson and likeminded persons why the two account system does indeed make bank failures very unlikely.


The two account system

As regards current accounts, nothing is done with money deposited in such accounts – though possibly the money could be deposited at the central bank. Thus no risk is taken with the relevant money. So that money can’t be lost.

And as regards investment accounts, those depositing money take a hit when the underlying loans or investments go wrong, rather than only banks taking a hit. (The investors and banks share in the profits when things go particularly well and share in the losses when things go bad.) All quite simple, really.

I look forward to Mike Robinson giving us an actual REASON as to why the latter idea is flawed.

Mike Robinson then claims people won’t put their money into those safe accounts because such accounts pay no interest. Clearly he does not have much of a grip on reality: tens of billions are currently in zero or near zero interest rate accounts in Britain because interest rates are currently at a record low.


The Bank of England

Next, there is Mike Robinson’s section headed “The Independence And Accountability Of The Bank of England”. This deals with the idea that under Positive Money’s proposals, the Bank of England would create new money and supply it to government who would spend it into the economy (and/or cut taxes) when stimulus is in order. Here, Mike Robinson points out that the BoE has numerous customers other than the British Government (e.g. the Queen and various foreign governments). He then claims the BoE  “may well have more loyalty to a foreign power, or a Rothschild.”

Well frankly that’s a joke. If anyone knows of any instance of the slightest suggestion that the BoE has been working for a foreign power, please give us the details. My guess is that if there had ever been the slightest suggestion to the latter effect, the governor of the BoE would be out of a job within twenty four hours.


The Bank’s Ability To Create Money

Last, there is the section of Mike Robinson’s article entitled “The Bank’s Ability To Create Money”. He claims here that Positive Money’s above idea about the BoE creating and spending money into the economy as appropriate implies that Positive Money is unaware that the BoE already creates money.

Now that is utterly bizarre because there are any number of Positive Money articles and videos which make it perfectly clear that the BoE DOES CREATE MONEY. In particular, those articles and videos explain that the BoE creates the 3% or so of the money supply that consists of physical cash (£20 notes etc).

My advice to Mike Robinson is to read some of the literature produced by an organisation before criticising it.


Separating casino from high street banking

In a separate article (also critical of Positive Money), Mike Robinson argues for what is currently the conventional wisdom, namely that casino banks should be separated from high street banks. That can be done either by insisting on entirely separate institutions or by placing a ring-fence between the casino and high street divisions of banks, as proposed by Vickers.

However there is just one glaringly obvious flaw in the above idea: IT WOULDN’T HAVE SAVED NORTHERN ROCK!

Indeed, the idea will not save any bank which is just a high street operation, as was Northern Rock. And that’s a mighty big defect in the “separation” idea because saving high street operations is the basic object of the exercise. Put another way, we aren’t too bothered about casino banks. Barings collapsed in 1995 and no one turned a hair (apart from Barings shareholders of course).

Moreover, under the two account system, there is NO NEED to separate casino from high street banking operations, as is pointed out in the submission made by Positive Money, Prof Richard Werner and nef to Vickers (p.17).

The basic philosophy behind the two account system is that all loans and investments made by banks are 100% covered by loss absorbing bank creditors (shareholders, bondholders and depositors). In consequence, there are virtually no risks for taxpayers to cover, thus no bank subsidies.


Join the Campaign

Trackback from your site.

  • Conrad Jones


    Excellent Article. I agree with your views.

    It’s difficult to argue with criticism when no sound reasons are given, except to say “It won’t work”, or “I’m concerned that Positive Money has not taken everything into account”, without clarifying what those concerns are.

    The suggestion that PositiveMoney’s proposals would somehow be a Bailout is also incorrect. A Bank would be the custodian of someone’s Money, and could not invest it anywhere. If they then say to all there customers that they cannot provide deposits on demand, then they are breaking the law as they have lost the deposits. Under this system, Banks would not be the majority creators of the Nation’s means of exchange and would therefore not be able to pressure the Government into giving them a Bailout as the government would just shrug it’s shoulders and say “What do we care – you are
    a private business – governments should not get involved in Private businesses”.

    Investment Accounts would be the Risk of Banks and their Investors – noo one else. If someone wants to throw their money at a Tulip Farm in Holland, that’s a decision for the Bank and the Individual Investor.

    The idea that Banks and the IMF are behind the Full Reserve System idea is also ludicrous as if that were really true – we would have a Full Reserve System now.

    In 1913, a group of Bankers got together on Jekyll Island and conjured up the idea of
    the “Federal Reserve System”, disguising it as the Aldwych Plan, to make it
    look like it was a Government proposal. They didn’t get together to force Full
    Reserve Banking on everybody because they would lose all their Money creating

    After the Great Depression the original “Chicago Plan” was presented to FDR, but he wasn’t sure or his “Associates” steered him away from the idea. This was a perfect opportunity for the Banks to implement such a system, but they chose not to support it, mainly because Banks prefer the current system, because they have to be bailed out or we lose the money supply, when things go wrong for them. A Full Reserve System will remove the kiddy stabilisers from the Banking System’s bicycle.

    The “Chicago Plan Revisited” Paper from the IMF was produced by a couple of Researchers, that does not make it IMF Policy.

    As far as the Bank of England is concerned, it seems evident that there are some good people there, and it would be preferable to do away with the Bank of England’s Nominee Limited subsidiary Company as it is strange that a Nationalised Institution should have this Private Company attached to it. Although it’s probably just handling the Queen’s Estate and other Assets. The BOEN Ltd is very Opaque.

  • Conrad Jones


    The separation of High Street Banks and Investment Banks
    also sounds like a good idea but would be totally unnecessary in a Full Reserve

    The “Ring Fencing” idea is a bodge on an inherently flawed
    system, and would be laughable when compared to a Full Reserve System.

    If “Ring Fencing” is such a brilliant idea now, why was Glass-Steagall
    abandoned in the late nineties – which led the way to the current financial

    What they are saying is that Glass-Steagall should never
    have been abandoned in the first place in the United States, and as we are
    constantly reminded, our Financial System is Global, so why didn’t the
    Government of the time put in places measures to protect us from this negligent
    act by President Bill Clinton?

  • DozyHole

    “Mike Robinson then claims people won’t put their money into those safe accounts because such accounts pay no interest.”

    I wonder if he realises that this is the exact opposite of the argument used against positive money. The usual argument is that people will ONLY put their money in safe accounts and credit will dry up for home buyers and businesses.

  • Dan G

    Hi Ralph, would you be able to respond to Frances Coppola’s criticism; “Your accounting is wrong. It is not possible to transfer current accounts to the books of the central bank without either creating new money or writing off a large proportion of private debt assets”

    I think it would be helpful to go into some detail over this as it seems to be somewhat of a sticking point. I’d really like to understand the process of converting our existing current accounts to the Positive Money ones.

    • Simon

      Frances Coppola said to me that the current accounts at the private banks have corresponding debts on the other side of their balance sheets. In other words, our current accounts have been lent out by our banks, and if we all ask for the money back it won’t be there (fractional reserve banking). Moving them all to the central bank would then mean that institution would have to have the debts backing them. I think the situation is a little over complicated, I said to Frances that the debt burden would be reduced as the Bank of England issued more debt free money over time, and the current accounts would effectively become like physical cash. Another way to look at it is that if a private bank administered the current accounts, their reserve requirement would over time have to meet the total of all their current accounts. The investment accounts would be the joint risk of the investor and bank, with no recourse to the tax payer. I feel a more straightforward solution is proposed by my father Bill Davies on his site using Registered Money, but I am a strong supporter of Positive Money, and their aims. The first step is to get away from private banks creating 97% of our money.

      • Dan G

        As far as I can understand, deposits are a liability and an asset to the banks. if the bank has no deposits, it has no assets and becomes insolvent – banks need these deposits in order to do business. So if we transfer all current accounts to the BoE, we would effectively bankrupt all the banks. How can this be avoided?

        • Simon

          I imagine under Positive Money proposals, each individual bank would still manage the deposits. The key thing is they are ring fenced and not used as a basis for further lending. The power to create new money by lending is taken from the private banks, only the B of E can create new money, and gradually debt heroin would be replaced by debt free methadone. This would greatly reduce the debt in society, and greatly reduce the risk of a bank going bust. Registered Money is a similar solution.

        • DozyHole

          Deposits are not an asset to the bank, they are a liability. Loans are liabilities of the bank.

          This may seem counter intuitive, but you must remember that when you deposit money in a bank you are effectively lending it to the bank, it’s not yours any-more, until you withdraw it, at which point they could say they do not have it, hence the tax payer needs to step in to stop an economic collapse.

          The whole thing is a big mess, but a very comfortable situation for banks. Positive money sees right through this, with their proposals you only ‘lend’ money to the bank if you want to, otherwise it is yours even while deposited with the bank.

          Deposits would no longer be liabilities of the bank, which goes some way to answer your concerns I hope.

          • DozyHole

            First sentence should be:

            Deposits are not an asset to the bank, they are a liability. Loans are assets of the bank.

  • Bob Welham


  • vince

    Well I have been following PM for a few years now and have yet to see a good critique and I am still waiting for one.It seems a perfect solution in a world that has few perfect solutions.There maybe some flaw if and when it is adopted as is always the case in life, but in theory it is hard to fault.

    I think the crticism, “is that it?” tends to be the general reaction,but that massively misses what would actually happen.The way central banks work would be revolutionised,a big a revolution in the way government is organised since Bolshevik uprising in 1917 but, with far better outcome.

  • Richard Simpson

    The lack of a decent critique of Positive Money means one of two things: either Positive Money’s analysis of the current situation and its proffered solution are watertight; Or opponents just don’t want to engage in the debate for fear that ‘word will get out’. Tackling the gross inequalities embedded in our financial system is, to my mind, the stuff of revolution. It is highly incendiary. Those in power, who, let’s face it, are beneficiaries of the status quo, will fight to retain their power and throw mud in PM’s eye at every opportunity. The Labour Party should be embracing PM as a means of achieving its social goals. Why PM’s analysis is not core to Labour Party policy is a bit of a mystery to me. Without a PM-type overhaul of the financial system, all Labour’s pious utterances about equality and fairness are just so much hot air. The system will win every time.

    • Simon

      Tony Blair and Peter Mandelson now work for banks. I am not sure about Gordon Brown as he is still an MP. I sent an email to Ed Balls a few months ago outlining Positive Money’s proposals, nothing back. The Conservatives get half their funding from the City, and many politicians from the 3 main parties go on to get a nice job there after they have left politics. The system is rotten, with big money from banks and elsewhere determining our political agenda. The politicians talk tough in public for our benefit, but do little to change the current hegemony. More people are becoming aware of what is going on, but the banks spend millions each year getting their “message” across. They are supported by compliant economists, and other useful idiots who should know better. Unfortunately much of the British public is too lazy to find out things for themselves, or believe much of what they see and hear from the mainstream media, but at least our message is now being published in parts of the main media.

  • John Sheffield

    Are all these comments written by Positive Money employees? I wonder.

    Positive Money = Rothschild Front?

  • Pingback: Criticisms of Positive Money by Mike Robinson of UK Column - Positive Money | The Money Chronicle |

  • halibr

    I am having a hard time with this. I know for certain that the present system is flawed based on the fact that 85 individuals have more wealth than 3 1/2 billion people, and that this gap is widening. That alone has me very sympathetic to whose literature I do read, but feel still woefully unable to grasp well enough to effectively argue when I push this idea on fb and other sources. I look for detractors so I can get a grip. I found only one that goes into some detail at
    and am still at a loss as this seems (to my economically uneducated eye) to be still talking about some of the details mentioned above. No one at all seems to get to the core of the inequality of the present system as does positive money. No one even touches it, and all I get is that positive money is “loony”. Maybe it is, and I do not understand why. I would appreciate more debate answers to detractors broken down in a way I can understand. but sans an economic argument, I CAN debate the social part, the inequality, the growth of house prices, the rise of both unemployment but also the increasing work hours any person must put in for real benefit, the gap between hours of work and benefit of salary. Those are real, visceral and irrefutable, and I KNOW they are intimately connected to the way the system works, but I cannot seem to get to grips with the mechanics of the system. working on it. thanks.

  • halibr

    ok, here is another criticism and one I can understand that makes sense.
    I will not argue one way or the other, but these points seem to me worth tackling.

back to top