Heart Transplant for our Ailing Economy

In the spring, the Banking Commission published its interim report. So what will it achieve?

Not much it seems, and the banks are breathing a sigh of relief – bank shares shot up the day the report was published, adding £1bn to the value of the top three banks. The proposed ‘firewall’ around investment banking would not have stopped the last crash – Northern Rock had no investment banking business, yet they were one of the first to go down.

The Commission was set up to make the banks safe (or at least safer). It was not set up to fix the economy, to tackle endemic debt and poverty, to prevent boom and bust, or to avoid spending cuts.

Yet these are all results of our monetary system, in which the banks ‘create’ as much or as little new money as suits them (through extending credit) and then charge interest on it. We are talking about big numbers – each year, the banks create over £100bn of additional money out of thin air.

It is a scandal that we give away the national money supply as a profit-making privilege to commercial banks. Banks’ licence to print money has dire social consequences.

The Positive Money principles are simple and intuitive:

• all new money should be created only by the Bank of England, not the commercial banks

• all new money should be created debt-free, ie. not requiring repayment or incurring interest.

These fundamental reforms would be like a heart transplant for our ailing economy, and this is what the Banking Commission should have tackled.

If we think we just need to implement the Commission’s recommendations and everything will be OK, then we are badly mistaken.

I call on our MPs to reject the Commission’s report as inadequate, and to press for the fundamental reforms that will give us an economic system fit for the 21st century.