Positive Money on Radio Free Brighton

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As Chancellor George Osborne delivered his Autumn statement on the economic state of Britain, Radio Free Brighton decided to cut through the hyperbole and speak with Ben Dyson about one of the main problems at the heart of the current crisis.

The full interview (15 mins) can be heard here.

Most of the money created in the UK is conjured into existence by private banks – such as Lloyds TSB and Barclays – whenever they make a loan. This means we will always need debt if the economy is to grow, and that banks have the power to decide where money is invested. Both led to the bubble that finally brought the economy to its knees back in 2007-08.

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  • parasitstopp

    A good interview but I actually think we have to take it a bit further.

    As Ben points out – the system is broke – but how can that be if the private banks are able to create their own money? Why are the banks in as deep water as the rest of the society? The answer is that the banks don’t create money – they only create debts. The banks put them self in debt when a “loan” is created to the same amount as the customer – no money is created – only two debts on the same amount. The banks then makes us think that their debt (the figures on the customers account) IS money by giving the impression that customers pay each other money when a transaction between two accounts occur. But in reality the only thing happening is that the receiving account is getting more bank debt registered and the “sending” account is getting less bank debt registered. So the digital “payment” system is actually not a payment system at all – it’s a “bank debt swap system”. Customers don’t pay each other money through the banking systems accounts – they swaps bank debts so the banking system as a cartel don’t have to pay their debts to customers. The banks simply don’t have the money if the customers make to many withdrawals at the same time, so the banks are as broke as the rest of society and totally dependent on keeping their debt within the banking “swap debt” system. The cash less society would, in other words, mean a total debt write off for the banks, since the only way in the current system that the banks can pay their debts are when customers make withdrawals.

    I wrote a blog showing this (sorry for any gramar and/grammar errors – I’m from Sweden so feel to help me improve the text)


    • Dave

      Very good comment. That’s why using cash is so important imho

  • Pingback: How can the banking system be broke if the banks can create their own money? | Ett nytt penningsystem()

  • Tony Harvey

    Wonderful comment. Really cuts through the age-old conditioning and takes it back to first principles so we can understand WHAT IT REALLY IS, and HOW IT REALLY WORKS for ourselves. I’ve printed it off to continue getting it clearer & clearer in consciousness.
    I recommend reading the full version too as s/he says at http://parasitstopp.wordpress….

  • parasitstopp

    Thanks Tony and Dave!

    I agree! Preserving the physical cash I s very important!

    But what positive money is trying to achieve – trying to take away the banking cartels monopoly on “digital cash” at the central bank and make it a public resource is equally, perhaps even more, important (I prefer to call it “digital cash” instead of calling it “central bank money” – digital cash is more telling since it’s cash but in digital form stored at the banks digital deposits at the central bank).

    The banking cartel use the digital cash at their account at the central banks to compensate each other when one bank overtake another banks debt (the transaction between one costumers account on one bank to another customers account at another bank). The bank that receive the other banks debt will increase it’s debt to it’s customer (the customers account will increase – hence the banks debt to the customer increase as well) – the receiving bank therefore demand that the sending bank also put up an equal amount of digital cash so the receiving bank get compensated. The sending bank will reduce it’s debt to it’s customer (the customers account will decrease – hence the banks debt to the customer will decrease) and the bank will at the same time compensate the receiving bank with an equal amount of digital cash.

    So the banking cartel use their monopoly on the digital cash to compensate each other when they do debt swaps. This is done through the central banks clearing mechanism. That is to say when customers make a transactions between two different banks. The bank don’t need to use it’s digital cash if the receiving customer and the sending customer have the same bank since the bank wont increase it’s total debt to customers – the bank doesn’t need to compensate itself for overtaking it’s own debt so the transaction will occur between accounts within the bank not involving the central bank clearing system at all.

    What would happen if, let’s say, Positive Money open a bank that have access to digital cash at the central bank and this “Positive Money Bank” offered 100% reserve accounts? This would probably lead to a digital bank run from other banks to the “Positive Money Bank” when people realize that their bank actually are broke and don’t have almost any money – just a lot of debt (=customers account).

    So the real battle is making the digital cash at the central bank a public resource and Positive Money is making an excellent work in trying to take this monopoly held by the banking cartel away from the banking cartel and restoring it to the people.

    I made blog article in Swedish presenting the clearing process (debt-swap-compensation-system could be an expression substituting the word ”clearing system”). Perhaps it’s clearer then my presentation above (it’s actually rather convenient blaming any misconceptions and misunderstanding on the fact that my native languages is Swedish :) ) I could try to translate that as well.

  • Tony Harvey

    Thank-you for your further clarification below. Oh yes we’re agreed PM’s work is really excellent, To make “digital money” a public democratic resource in its creation and allocation and without debt. The campaign seems to me a “god-send” and to be taking the MR cause far further than its ever gone before- certainly here in the UK anyway. Partly because humanity is more ready for it than ever before with the crisis and other factors I believe (though we still have far to go)- so no bad reflection on all the vital & valuable work done for decades already by Monetary Reformers before PM. I also agree with PM that this reform need not suffer UK competitive disadvantage if we were to do it first and probably the reverse.
    Your post struck such a chord with me because I had already dubbed in my own mind bank cards, direct debits, CHAPS payments, cheques etc as “Electronic Bank Debt Circulators” and resolved to use cash as much as possible instead- except for very big purchases or for occasional & very short term borrowing.
    Although I believe there ARE some powerful people at work within the vested interests across the world working to maintain the public’s ignorance about the debt based monetary system in the way you indicate in the part of your paper “The Banking Cartel’s Strategy is therefore…” (and if anyone labels ME a conspiracy theorist for this it doesn’t daunt me !)- I don’t believe they are very numerous or dangerous, the far bigger factor in my opinion with the public has been laziness, and unwillingness or inability to look below the surface (me too until about 10 years ago, only special circumstances & help forced me to look deeper). But circumstances are forcing many to look deeper at things lately and it will only gather momentum, so change is really getting off the ground now. And not just here.

  • parasitstopp

    I totally agree with you, Tony – the real problem is that people seems to be stuck into a permanent “Brave new world” coma.

    I should perhaps be more specific when I talk about the banking cartel. I refer to the so called tier1 banks that have direct access to digital accounts on the central bank (there are about 6 or 7 tier1 banks i Sweden – I don’t know the numbers in Great Britain but I guess number of tier1 banks are pretty few in your country as well)

    The tier2 banks operates within the tier1 banks meaning that tier2 banks don’t have accounts on the central bank and direct access to the digital cash (central bank money). Tier2 bank got regular accounts as ordinary customers on the tier1 banks instead. So tier2 banks are a sort of secondary player. These can often have very good intentions but they can only use tier1 debt since they only are annexes to the tier1 banks and don’t have any real accounts of their own.. We in Sweden got a couple of these well intended banks in Sweden – for instance JAK is a Swedish tier2 bank that want to work according to 100% reserve banking but since they cant get to the digital cash (central bank money) they are stucked to re lending what ever they have on their tier1 banks account – JAK cant lend digital cash even if that’s JAK member banks inner wish.

    So the tier1 banks blocks banks that want to do banking according to the 100% reserve ratio. This is primary done by making the “entering ticket” extremely high so the tier2 banks can’t possibly enter the inner circle (costs for computer systems, ATM machines etc) .

    So I don’t mean that all banks are bad but the tier1 banks are looking after their interest. Hopefully PM nad other money reformers can wake the people up and demand that the payment system has to be a public utility and not a special interest utility.

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