George Osborne’s Permanent Bank Levy – Is it Seigniorage?

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Positive Money (PM) is not impressed by the Chancellors’ attempts to impose some kind of payback on the banks for the damage they have caused to the Economy since 2008. “In fact, bar a one-off punitive tax on bankers’ bonuses and a bank levy, little has changed” says a PM report ‘Banking vs Democracy 2012′. I’d like to make the case that while the Bank Levy, introduced in 2010 is indeed rather puny, it establishes a very important principle – that the banks should pay something for the money that they create.

The “Permanent Bank Levy” was introduced in George Osborne’s June 2010 Emergency Budget, having been negotiated as part of the Coalition Agreement. (Osborne has been in the habit of tacking ‘permanent’ on to the name, in part to distinguish it from Labour’s 2009 one-off levy on bankers’ bonuses). In his budget speech he declared the aim of the Bank Levy “is to incentivise a reduction in the use of wholesale finance by banks, with a view to reducing the risk of another financial crisis being triggered by liquidity issues”. The Bank Levy was to be “based on total liabilities and equity as shown in the relevant balance sheet” of the 30 or 40 biggest banks. The initial rate was set at 0.05% and was expected to raise “in excess of £2bn.”

But what possessed Osborne the Tory Chancellor to agree with his Coalition partners that a Bank Levy was the necessary and right thing to do? The short answer is that the IMF told them so. In a report (1) produced in 2010 for the G20 Summit of world leaders, the IMF rejected the widely publicised tax based on financial transactions — the so-called ‘Robin Hood’ tax. Instead they proposed that banks should pay a ‘Financial Stability Contribution’ (FSC).

“The main component of the FSC would be a levy to pay for the fiscal cost of any future government support to the sector. This could either accumulate in a fund to facilitate the resolution of weak institutions or be paid into general revenue. The FSC would be paid by all financial institutions, initially levied at a flat rate (varying though by type of financial institutions) but refined thereafter to reflect individual institutions’ riskiness and contributions to systemic risk—such as those related to size, interconnectedness and substitutability—and variations in overall risk over time.”

So the word ‘levy’ was introduced into the discourse by the IMF, not as a simple tax, but the basis for a fund to offset future risk. Clearly the size of the risk posed by each banking institution depends on the amount of funds at their disposal, but also the riskiness (or recklessness!) of the loans or investments they have made.

Osborne picked up on the IMF’s idea, not as the basis for a stabilisation fund but as a straightforward Tax. The balance sheet items of the 30 or 40 largest financial institutions were to be the basis for the levy. The least risky items on the balance sheets were to be exempt for tax. Tax at half the main would apply to moderately risky items, then the full Main Rate of the tax was to be levied on the rest. Thus the IMF’s ‘financial stability contribution’, became Osborne’s ‘permanent’ Bank Levy. Here’s how the Levy worked during the Coalition Government’s term of 2010-15:

 

TABLE 1: BANK LEVY YIELD, RATES AND IMPLIED TAXABLE CAPITAL

Table 1

The Bank Levy was introduced from 1 January 2011. Payments began to be received from 2011-12 onwards. 

M3 is an economists’ measure of the total amount of money in the economy. Most of M3 (97%) is to be found on the balance sheets of the banking institutions, having been created electronically within the banks themselves. The remaining 3% is M0, tangible cash in the form of banknotes

*Implied Capital is the Bank Levy yield divided by the Main Rate. Only part of the large banks’ balance sheets is taxed at the Main Rate. Low-risk items are exempt, and medium risk items are taxed at one-half of the Main Rate.

~ The rate was initially proposed at 0.04%, finalised at 0.05%, then increased for the last two months of Fiscal 11/12 to 0.10%. Hence no calculation of Implied Capital was made for 11/12

# Proposed as the final rate, but in the June 2015 Emergency Budget lower rates were introduced.

 

So the Bank Levy has collected small but useful amounts from the larger financial institutions, but usually fell short of its target expected yield, and never reached the £3.6bn achieved by the previous government’s Bankers’ Bonus Tax. Nor was it a big part of the total amount paid in taxes – £21.7bn in 2012/13 – paid by the banks (2).

The rate of the Bank Levy tax was, as intended and signalled, gradually stepped up, but the rate has been changed, sometimes without warning — for example in March/April 2011when it was increased from 0.05% to 0.10% for two months. It was due to reach its final ultimate rate of 0.21% in 2015/16. But then in the emergency June 2015 Budget, Osborne gave in to the pleas of the big banks, especially HSBC and Standard Chartered. A timetable of reductions of Bank Levy from 0.21% was announced with the rate to settle down at 0.10% by January 2021.

Osborne’s permanent Bank Levy – it’s Seigniorage!

The Bank Levy is a brand new form of tax. Despite it being attacked by the greatest powers in the land, the big banks, it has survived. Just as importantly the operating procedures for the bank levy have been established, definitions have been thrashed out and agreed. This is a tax which works, and continues to be paid.

But the bank tax is also important because it embodies an important if unstated principle: that banks should pay back to society some kind of recompense based on the amount of money that that they create. The technical name for this is seigniorage. What the analysts at the IMF had pushed for and what Osborne’s Bank Levy represents is a straightforward example of seigniorage in action. It is far from a new idea, and a form of it already exists right here in the UK.

Seigniorage from the Bank of England (BoE): Profit from issuing banknotes.

Seigniorage may be an unfamiliar word, but a simple idea. In the old days when the sovereign (the king) issued new money, he benefitted thereby. This still happens when the Bank of England issues banknotes and coins. It does indeed reap a financial reward – seigniorage – which is paid over annually to Her Majesty’s Treasury. Here’s how it works:

New banknotes are being issued all the time by the Bank of England (BoE). In the period 2014-15, for example, an additional £3.6bn worth of banknotes were put into circulation by the BoE. So, was a cheque for £3.6bn handed over to HM Treasury by the Bank? No. A more mysterious method to calculate seigniorage is used, although the BoE doesn’t actually use the word. They prefer to call it “Profit on note-issue”.

In essence (3), to calculate the Profit on note-issue, the BoE uses the Total value of the banknotes circulating in the economy. This is what economists call M0. In 2015 banknotes with a face-value of £64bn were circulating in the UK economy. (There are banknotes issued by Scottish and Northern Ireland banks, too, but under BoE supervision. Part of the seigniorage is remitted to Scottish and Northern Ireland governments.)

The formula for ‘Profit on Issue of banknotes’ (Seigniorage) can be taken as:

Total Value of banknotes in circulation ‘M0′ multiplied by the Average Bank Rate during that year.

Here’s what the BoE has paid over to HM Treasury for the last 12 years. Although the total note-issue has nearly doubled in that time, the seigniorage or Profit on banknote Issue has shrivelled to less than a quarter of its peak in 2008. This reflects the BoE policy of rock-bottom interest rates since then.

 

TABLE 2: SEIGNIORAGE — PROFIT ON ISSUE OF BANKNOTES BY BoE

Table 2

So a form of Seigniorage exists and is practiced by the Bank of England in relation to the issue of banknotes and coins – M0 in economists’ parlance. In a recent paper for the World Economics Association Martin Knibbe (4) describes this as ‘public seigniorage’. He explains that the (central) Bank of Canada and the European Central Bank act in a similar fashion, and also pay over to their respective governments the profit on note-issue, as do most other central banks.

Private Seigniorage too?

Should the same principle be applied to ALL of our money, including that created by private banks? Knibbe describes this as “private seigniorage” to distinguish from the public seigniorage derived from note-issue. In a small way this is just what Osborne’s Bank Levy does — it charges banks for their privileged creation of nearly all of M3. The Levy is based on banks’ balance sheets, which is another way of saying how much money the bank owed or owned to or by its customers. Most of this money on banks’ balance sheets has been created by the banks themselves in the ordinary processes of making loans. (as PM and others have explained ad nauseam, but which still seems to baffle mainstream economists and media economics correspondents!)

In 2014-15 the main Bank Levy was set at 0.156%. So should it have been set at 0.8%, i.e. the same rate as the existing ‘public seigniorage’? If so then Osborne and the Treasury would have collected more than five times as much in taxes – £14bn rather than the £2.8bn actually achieved.

Remember too, that interest rates are being pinned down artificially while the bank-induced crisis of 2008 continues. Back in the ‘normal’ times pre-2008 a bank rate of 4.6% would have been seen as very reasonable. If this rate was used for the Bank Levy it would, in theory, result in tax revenues of £81bn, a very sizable sum indeed, which would cover about 10% of all government expenditure. [Knibbe does a similar calculation for the Euro-zone and calculates that a sum of €300bn in private seigniorage, or €1,000 per citizen could be claimed from the financial institutions for their ‘exorbitant privilege’ of creating our money.]

This sounds like a huge and insupportable burden to impose on the banks. The profits of the big five banks in 2014 were just one-quarter of this at £20bn. Even bankers’ bonuses are a about a half of this at £42bn. (5) But these are not normal times for the banks. Before the Crash of 2008 their profits were many times more than this. Perhaps the figure of £80bn would indeed be equivalent to the banks’ benefit of printing their own money?

But the Bank Levy was designed to be a financial stabilisation mechanism. It was always intended to reduce balance sheets bloated by risky and reckless bank lending. If the proper rates of Bank Levy tax were applied, then the banks appetite for such risky lending via profligate money-creation would be severely blunted. A sharp incentive would exist for banks to create and lend less money.

This entirely benign result could well see the economy suffering from lack of liquidity, where insufficient money is flowing around the system to keep the economy moving. At that point the opportunity for the BoE to inject new money into the economy via QE is the obvious answer. But this time it must be different, with QE being used in a productive way which helps each and every citizen, not just to bail out the banks.

Is this achieving Positive Money’s Agenda?

But would a full-rate Bank Levy which leads to productive QE go any way towards fulfilling Positive Money’s proposals for reform of the whole money system? From the proposals page, these are

  1. Take the power to create money away from the banks, and return it to a democratic transparent and accountable process.
  2. Create money free of debt.
  3. Put new money into the real economy rather than financial markets and property bubbles.

The Bank Levy even at a low rate would result in Proposal 1 being partially fulfilled. Money would still be created in the banking sector, but has to be paid for. The higher the rate, the less appetite the banks would have for creating money through lending. This in turn opens up the possibility for publicly created QE money. This is politically feasible because the principle of bank levy has been conceded, the details have been thrashed out, the tax authorities have the systems in place, and expanding on it requires no new legislation. Expect huge resistance, and even underhanded dealing by the private banks to these proposals! But a determined government which lays out publically the realities money creation by the private banks could surely carry public opinion on this. Positive Money has a hugely important role in changing both public perceptions and updating economic theory which still hides behind the discredited ‘loanable funds’ theory of lending.

Since the banking crash of 2008 two important principles have been established, which formerly would have been rejected as ‘unthinkable’ or ‘impossible‘.

  • QE makes it quite apparent that the BoE as the agent of our Government can and does create new electronic money and inject into the economy in an appropriate way.
  • With the Bank Levy the principle that private banks should pay ‘rent’ for the money they create has also been established, and by implication that they create our money with our permission.

So the main elements of Positive Money’s proposals are now in place without any further legislation. What remains is to implement these powers for the benefit of the many, initially by increasing Bank Levy to the same rate as banknote profit. The introduction of a regular programme of QE would follow. The opportunity would then be clear to make QE work for the benefit of the economy.

 

Postscript: In his emergency Budget in July 2015 Osborne announced changes to the Bank Levy, and other bank taxes:

“The annual levy banks pay on their balance sheets is to be reduced gradually but an 8% surcharge on their profits will be introduced.”

The Treasury said the bank levy would be cut from its current 0.21% to 0.1% in 2021, by which time it would apply to banks’ UK balance sheets only.

HSBC said earlier this year that the bank levy was a factor in whether to move its headquarters from the UK.”

Note that the profit surcharge will be levied on all banks including the smaller ‘challenger’ banks which were intended to introduce a bit of competition for the ‘too-big-to-fail’ banks.

 

—————————–

References

Numbers and quotes have been taken from Bank of England statistical publications as well as HM Treasury. 

  1. A Fair and Substantial Contribution by the Financial Sector – Final report for the G-20 (Prepared by the Staff of the International Monetary Fund – July 2010)
  1. Seely, Anthony (27May 2014) Taxation of Banking Standard Note SN 5251 House of Commons Library 

This is a very useful report which identifies much of the politics around the introduction of the Bank Levy. The figure for total tax payments comes from HM Revenue & Customs. They estimate that tax receipts as a whole from the bank sector – that is, PAYE, corporation tax and the bank levy – added up to £21.7bn in 2012/13.

  1. I say ‘in essence’ because the stated procedure of the BoE involves hypothetical Bonds which pay interest. I explain how I think this works in Boyle (2007) Seigniorage and the BoE: A deeper mystery Prosperity Glasgow which can be found here.
  1. Knibbe, Merijn Private seigniorage, defined and estimated (includes a free Eurozone example!) Real World Economics Review 71, Sept 2015
  1. KPMG Report 2015

 

 

 

 

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Conall Boyle (Guest Author)

After many years teaching Economics to Building and Surveying students at UCE - University of Central England (now Birmingham City Univ.), Conall has now 'retired' to South Wales. He keeps up his interest in Basic Income, the Housing Market, Land Value Taxation and Money Creation. His main activity in 'retirement' was researching 'Who gets the prize: the case for random distribution in non-market allocation' at the Economics Department, Swansea University. (More info: http://www.conallboyle.com/)
  • jamesmurraylaw

    Coball
    Very interesting – PM by the back door?
    Is it possible, do you think, that Osborne indeed has grasped that he is charging seigniorage?
    Is it possible that the mechanism of SMC is known to him and his civil servants and the great advantages that would flow from grasping this method of financing government expenditure?
    Is it possible that he accepts that Corbynomics could well be a viable attraction to the 2020 electurer?
    And as a result, will he now try to move into SMC territory covertly?

    Watch this space….

    • ConallBoyle

      Osborne is a devious fellow, so maybe he does know it’s seigniorage. He certainly has left an open goal for the Corbynistas, if only they have the sense to see it (Unlikely). Thanks for your intelligent comment! What is SMC?

      • jamesmurraylaw

        SMC (Sovereign Money Creation) is a major leg on the tripod of proposals upon which PM is based:
        See http://positivemoney.org/our-proposals/sovereign-money-creation/ .

        The other legs are that Fractional Reserve Banking is changed (gradually?) to Full Reserve Banking…

        … and that the power of SMC is kept away from the politicians in charge of the Government of the day and resides in the more independent hands of the BoE’s MPC (to be renamed the MCC – Money Creation Committee) who will create Sovereign Money as and when the economy requires extra demand it to take it out of recession.

  • RJ

    “In the old days when the sovereign (the king) issued new money, he benefitted thereby.”

    The same happens today. When the King spend in the past they would use cash / tally sticks etc to pay someone. At that point the king had a debt liability on these coins or sticks. When they king received the coins or sticks back for tax owing the liability and tax owing (kings asset) would both be written off.

    Today when the UK Govt spends the Govt via the BoE issue reserves to the bank. The banks then credit the recipients bank account. So it involves the BoE and bank rather than a direct notes / coins payment but basically achieves the same thing. When tax is paid the bank settles with treasury using reserves. For spending increases reserves. taxes (and bond issues) drain these reserves

    Seigniorage is different . It use to I beleive transfer the value of outstanding coins from a credit liability account to revenue / P+L. But it has been stopped now. My understanding is that this payment is from BoE profits made from other revenue. It does not made a profit on coin or note issues as the debt is recorded in full = no profit except for an estimate of lost notes and coins.

  • Marco Saba

    This paper still miss the central point – i.e. the seigniorage on capital creation (the full ‘face’ value of electronic funds). Here I try to explain the point to the European Commissioner Moscovici: https://www.scribd.com/doc/282354887/Open-Letter-To-EC-Commissioner-Moscovici

    • Marco Saba

      If you print your own money you can gain the full value of the assets you can get in exchange when you spend that money – no interest is needed to mask this point !

    • RJ

      You really need to understand what money is. Money (bank credit) is a financial asset to us BUT A FINANCIAL LIABILITY TO THE BANK. It is not both an asset and a liability to the bank. There are a number of articles and recommended books on PM that explain all of this. Please read them.

      • Marco Saba

        It was a liability to the bank when it was redeemable in gold. Those days are long gone. You must update your own vision.

        • RJ

          Read the books or articles. Or read a stage 1 book on book keeping and / or journal entries.

          • Marco Saba

            Things Which Should Be Entered in the Books of the Merchants. — Of all the cash that you might have, if it is your own-that is, that you might have earned at different times in the past, or which might have been bequeathed to you by your dead relatives or given you as a gift from some Prince, you shall make yourself creditor (creditore te medesimo), and make cash debitor.

          • Marco Saba

            “given you as a gift from some Prince” or as the sovereign privilege of credit creation…

          • Marco Saba

            “Casi che aptiene amettere al libro de mercanti.
            Tutti li denari contanti che tu ti trovassi che fussino tuoi proprii cioe che havessi guadagnati in diversi tempi pel passato o che ti fussino stati lassati da tuoi parenti morti o donati da qualche principe farai creditore te medesimo. E debitore cassa. ” – Luca Pacioli, Summa de arithmetica, geometria, proportioni et proportionalita, (1494), Cap. XXXVI, (Libro 9, trattato 11). Pag.210

    • ConallBoyle

      Like you (and Buiter of the BoE), I thought seigniorage was the full value of new issues. The BoE uses the ‘percentage profit on total issue’ as does the Banking Levy. The effect is the same but averaged over the years.

  • Rollo10

    But we don’t want to make QE work, we want to get rid of it and liquidate the market with ‘real money’, wages. As we take away the power to create from banks, we should also break up Corporations, who are closing down small business. If they don’t buy them out, they have new rules introduced that makes it impossible to continue trading, this has to stop. Reduce the wages of Directors and increase those on the shop floor, repatriating manufacturing from overseas, will create thousands of jobs. ‘Free Trade’ was introduced back in the 60’s, it allowed the Corporations to move their products around without paying import / export tax, great for cheaper goods, bad for local jobs!
    Now we have become ‘cheaper’ than those slave nations, because their wages have increased 10% year on year over the last 10 years, they want to bring some of this work home. It will save them shipping fees, the only reasons we retained a car industry, was because it saved them shipping R/Drive cars, the wages were cheaper and the Companies got ‘tax’ concessions. Under the TTIP agreement, we become the ‘new’ slaves, which is 1. Why it’s being discussed in secret. 2. The reason they insist on ‘Free Movement’ of people, a constant flow of cheap labour.

  • Stamatis Kavvadias

    I really do not think that raising the levy on bank liabilities to the BoE’s average rate would achieve PM’s goals. Specifically, the goal of

    2. Create money free of debt

    would not be fulfilled, because bank rates are based and not bound by the BoE’s rate, which means that banks can increase their rates, so that they make profits.

    The only way, for a levy to return the proceeds of money creation to the public, is to for it to retain *all* bank profits for the government! In other words, unless banks are regulated out of existence (as Lord Turner says)!

    • RJ

      “levy to return the proceeds of money creation to the public”

      Are you referring to interest less expenses. This profit is taxed and salaries are also taxed. So part of this profit is returned to the public.

      • Stamatis Kavvadias

        I am saying that, excluding salaries, all profits (including dividends, bonuses and what is currently redistributed with bias towards the richer depositors as interest on deposits) should not be simply taxed, but taxed 100%. The current model of banking, where deposits get interest without risk, should be forbidden.

        This concatenation of 2 excerpts from “Money as Debt II” can help you see why:

        https://www.youtube.com/watch?v=J1qLbRjZz_8

        • RJ

          What you seem to want is government ownership of banks. I don’t disagree with part ownership of banks but wanting a publicly owned banks (including being held by pension funds and small shareholders) to be taxed at 100% is being more than silly.

          • Stamatis Kavvadias

            You misunderstand. What the video explains (which can never be of harm to anyone thinking freely and not opposing free movement of ideas), is that the proceeds of banks can only be *public* (not necessarily of the government). I would not include pension funds and any kind of “small shareholders” to any definition of what can be called public. It would be exactly like separating “depositors” from taxpayers!

            Nevertheless, you may disagree with me, without this implying either you are or I am the silly one…

          • RJ

            Th reason why this video is doing IMO more harm than good is because you do not understand the main issue with money

            CREDIT / revenue (an liability held by another party or an asset held by the asset holder)
            = DEBT / expenses (a liability held by debt holder but an asset held by the related party)

            So a debt liability always has an equal debt ASSET held by another party

            The world needs debt to
            back savings
            back money
            back profits

            No debt increases = no overall company profits / no increased savings and no money increases

            The ONLY answer now is more Govt debt until all of our saving desires are meet. And at that point we move to a low company profit world

          • Stamatis Kavvadias

            I ‘ll make an effort to help you set your facts right, about what is money.

            Money is anything with purchasing power. Money, in history, may be an object, or a coin/paper currency decreed legal for payment of taxes, or even liabilities of a creditworthy person or institution, of accepted value (expected return in a market). In fact, anything that can preserve its market value to some degree that is not considered volatile and is good enough as a store of value, has been used as money. Sometimes, this property has been backed by double entry bookkeeping and debt. Others, by decree of the state. Others with both.

            In essence, money is any means, physical or virtual, for which there is a liquid market and for which there is *trust* that this market will continue to be liquid.

            In the time of Tally-sticks, King Henry I, having a matching tally for every tally in circulation was not what gave tallies their moneyness. It was merely a way to keep track of all issued “currency”. The value of tally sticks was their validity for payment of taxes.

            Try to find where is the debt in ownership of gold. When someone possesses money he has no claim against someone. When he possesses debt he has a claim against someone specific. This claim, based on that someone’s livelihood, or even be it legally transferable to his descendants, gets its value out of their livelihoods (that someone’s and his descendents). But this is not the case with gold, for example, or other commodities that have been used as currency.

            In all cases, what gives money its value is the existence of a market for it and nothing else. Only the market can set the price, with the exception of legal regulations of such markets.

            Debt is a bad form of money, but it has become dominant because it can produce usurious interest. It is a sign of appropriation of the right of the public to trade. It does not have to be this way! It is just our feelling of heteronomy and our subservience that allows it to be so!

          • RJ

            Gold is NOT money.

            Money is a financial (not physical like gold) asset. Its always backed by debt. The debt backing gives money its value. Pretending otherwise does not help

            Notes and coins are just used as a token for credit. To use outside the banking system

          • Stamatis Kavvadias

            You are a fanatic, or what?
            I write “Money, in history, may have been”.
            You are trying to tell me what money “is”? When? Today? In whose definition?

            Is it not clear that money can be many things, as it has been in history? Do you deny that gold has been the money of global commerce for the longest of times? Do you deny that it is our choice that money is the balance of debt and that we could, instead, chose it to be backed by gold (or have some regulated percentage of money backed by gold)? Is it not our choice?

            Where did you see that I “deny” of the present day reality of your (and others) obsession with money as debt?

            I do not deny it. I discredit it. It’s a shameful reality for humanity.

            If you do not have any arguments, it’s OK not to reply. Saying the same, again and again, just shows you are in denial.

          • RJ

            “Do you deny that gold has been the money of global commerce for the longest of times?”

            Yes I do. Gold has never been money. It’s a myth. Take the UK. When was gold money. Coins have been a token for money nothing more. The UK was on the gold standard but that does not make gold money. It just means that banks and Govt’s have been at times forced to exchange credit for gold if demanded to (but few did).. To benefit those that held lots of gold. It was a rotten system that now thankfully we have moved on from.

            Money is credit today and has always been credit. Despite what you may have been taught at university (I was taught this nonsense) or read in a book. And credit as a financial asset is always backed by debt. The problem at present is simple. We need a lot more UK Govt debt and less non Govt debt.

          • Stamatis Kavvadias

            Stop trying to divert the conversation to gold.

            <>

            100% Money and the Public Debt, 1936,
            Irving Fisher, Professor Emeritus of Economics, Yale University

          • RJ

            “Mr. Dooley described a banker as “a man who keeps your money by lending it out to his friends”

            Mr Dooley either does not know WTF he is writing about. Or is deliberately misleading people. Banks do not loan our money out and never have. It always creates NEW money. This new money was once a fraction of a bank asset held like gold or reserves or notes and coins held.

            The new money is created by journal entry
            DEBIT Bank loan (our debt/banks asset)
            CREDIT Bank account (our money / banks liability)

            Our money is always the banks liability. Its the banks FINANCIAL liability but our FINANCIAL asset

            I know its confusing especially for people who do not understand double entry book keeping and has been brainwashed with lies / misinformation about money.

          • Stamatis Kavvadias

            Do not worry my friend. This is kids stuff for me. I am a computer science PhD. It is plain and simple. It is you who fail to understand what the economic historian Mr. Dooley refers to. It is simply the origin of banking from having money (those of the people whose gold the bank safe-keeps) and then lending it out. Check it in this cartoon and you will see what he means:

            https://www.youtube.com/watch?v=3HdmA3vPbSU

          • RJ

            “those of the people whose gold the bank safe-keeps”

            This is a myth with no evidence backing it. It’s a lie created by those that held all the gold.

          • Stamatis Kavvadias

            The central pillar to the gold standard, my friend, was the British empire and then the UK. You can be in denial all you want. There is ample historical evidence.

            “In 1816, the gold standard was adopted officially… In 1817, the sovereign was introduced, valued at 20 shillings. Struck in 22‑carat gold, it contained 113 grains (7.3 g) of gold and replaced the guinea as the standard British gold coin without changing the gold standard.”,

            https://en.wikipedia.org/wiki/Pound_sterling#Gold_standard

            When you deposit gold coins to a bank and get a (private) bank note and then bank notes are printed on demand and lent out, without necessarily any gold backing, you get a banking crisis (because bankers lent to their “friends” more money than gold deposited!!!!) and eventually…

            “….. In 1844, the Bank Charter Act established that Bank of England notes were fully backed by gold and they became the legal standard. According to the strict interpretation of the gold standard, this 1844 act marked the establishment of a full gold standard for British money.”

            https://en.wikipedia.org/wiki/Gold_standard#Silver (under United Kingdom)

          • Stamatis Kavvadias

            BTW, I confused Mr. Dooley (which must be Finley Peter Dunne’s fictional hero) with prof. Dunbar, of the excerpt above. Apologies….

          • Stamatis Kavvadias

            Stop trying to divert the conversation to gold.

            So that you know what it is:

            Full reserve banking | Kahn Academy

            https://www.khanacademy.org/economics-finance-domain/macroeconomics/monetary-system-topic/fractional-reserve-banking-tut/v/full-reserve-banking

          • RJ

            I stopped watching this when you went on about fractional reserve banking right at the beginning. FRB was dropped years back. Do you even know what it is?

    • ConallBoyle

      I agree that this does not completely fulfill PM’s full objectives, but to do so would require huge primary legislation in the teeth of determined opposition which won’t happen anytime soon. The Banking Levy exists NOW, and its rate can be adjusted upwards, with the beneficial effect of curbing banks appetite for lending. Hence People’s QE.

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