The big bank boondoggle* (New Internationalist)

“No single measure is more likely to restore some sanity to finance than withdrawing from private banks their licence to print money”, reads the excellent article by David Ransom in the New Internationalist magazine.

Here’s a short extract:

[sws_pullquote_right] *Boondoggle: ‘a project that is considered a useless waste of both time and money, yet is often continued due to extraneous policy or political motivations.’ [/sws_pullquote_right]

Even the most cursory narrative of banking and financial crises makes it obvious that finance is a public utility, not private property. What is it that makes possible the endless bailing out of private banks, and therefore their continued existence, if not their automatic claim on public resources and tax revenues? Who with any say in the matter willingly hands over the power of taxation and economic policy to anything other than a halfway democratic government?

Is not the most profound and enduring objection to structural adjustment or austerity – even supposing that they actually work – that they violate this basic principle of democracy, ceding political power to naked self-interest? How did the leading exponents of tax evasion ever acquire the right to any political representation at all? Come to that, when was a bailout last subjected to democratic debate before it was an accomplished fact?

Private banks have also acquired a public licence, through the generation of credit, to create virtually all the money in circulation. This has given them quite disproportionate economic as well as political power.

One outcome has been exaggerated boom-and-bust economic cycles which societies struggle to counteract, having no effective means of doing so. No single measure is more likely to restore some sanity to finance than withdrawing from private banks their licence to print money.

Read the whole article here.