100% reserve banking

Just come across a video on Youtube by the Richard Werner who wrote that article with Green MP Caroline Lucas:http://www.youtube.com/watch?v=wDHSUgA29LsIt’s quite a clear statement of the case for saying that banks can create money out of nothing, but since this is so divorced from reality, how did he ever get to be a professor of banking? Typical of the Green Party to give credence to such views.

A comrade has sent in an article by columnist Deborah Orr from the Guardian of 14 July with the comment “please write a reply to this silly woman, Don’t let her get away with this nonsense”.Here’s the nonsense she wrote:

Nonsense indeed, but Guardian-readers must like this as the paper gives free rein to people’s spouting such nonsense. She goes on to advocate that banks should

She doesn’t seem to understand the difference between a bank’s capital (the money invested in the business) and money that has been deposited with it which it relends (only private banks, moneylenders and loan sharks lend their own money). Assuming that she means the latter, what she is advocating is what banks, including the big international ones, do anyway: relend money that has been lent to them or which they have borrowed. So the “reform” she is advocating isn’t needed.She discloses that she banks with the Co-operative Bank and urges others to switch to it, which suggests that she knows that this bank lends only what it has (or maybe she thinks that it’s against this bank’s proclaimed “ethical” principles to exercise the power it could to create money out of thin air). But she can’t have it both ways: either all banks can create money to lend out of thin air or none can. Actually, none can.

Agree that our Media Dept could have put something about the Deborah Orr nonsense on the comment section. Unfortunately, that’s now closed but there were 449 comments. Most of these were either from currency cranks of one sort or another or from friends of the Coop Bank. There were a few intelligent contributions, though. For instance.

We didn’t get in, but someone from Zeitgeist did:

That’s probably expecting too much from the Guardian. 

Here’s another such opportunity:Graham Hodgson writes, “One paragraph from the Socialist Standard article contains the key insight that the writer has completely missed:”One thing banks do is to reduce the need for cash. They have done this ever since, in the 17th century, they became an important feature of the capitalist economy. In addition, through clearing houses, they settle payments without the actual transfer of cash.”….There are no new arguments in the SS article. The whole piece is just a “no it isn’t” reaction to the PM/NEF critique of the conventional view of banking. They are further hampered by their underlying ideology that economic relations are materialistic, that they necessarily relate to material exchange, even though they admit that symbols can for a time stand in for the real thing. This makes it very difficult indeed to think of money as fundamentally immaterial.” Join the debate. 

 No, it’s not.

Isn’t it about time we had a dedicated pamphlet on this topic, or at least an educational study guide. I am not sure how much and how detailed Darren P intends to include in his effort but i find our responses are scattered higgelty piggelty in articles and on discussion lists eg their mis-quotes, their misrepresentations of early banking history and what not. Surely we should now be considering collating it all into a proper answer to all this since these currency and bank cranks are not going away and are actually gaining influence with many mainstream commentators being taken in by their seemingly authorative-based evidence.  And it overlaps from those on the Left and Right wings. It is easy enough to say the Media Committee or whichever department that has the responsibilty to respond to articles and blogs but they require the tools. If we have something substantial and in depth then even ordinary members can respond with its link to debunk any banking and money myths they come across. It may not convince those who appear to have gone beyond facts but for the neutral third-parties  i think it is desirable we reach out to them with something meatier to undermine the “reasonable” analysis of Positive Money or NEF I’m not asking too much. I think we have produced enough rebuttals over the years in print  and online and all it requires is editing into a single reply and checked and double checked by those i know are well qualified in the subject. i think it should be treated as a priority.   

I suppose the collapse of Barings Bank and Nick Leeson might be the most famous and therefore good example of private banks inability to create credit.