The (Proposed) Bank of England Act
Quote:Who Are We?
We're a group of economists, lawyers, engineers, former civil servants, university academics and business people who have realised that the root of the instability in the world economy, and huge burden of debt in every country, is due to the fundamental design of the banking system.
This is a reform that could prevent a future financial crisis, clear the national debt, and restart the economy.
It cures the sickness in our economy and financial system by tackling the root cause of the problem, rather than just the symptoms.
It would make the 'inevitable' cuts in public services completely unnecessary, reduce the tax burden by up to 30%, reduce overall levels of debt and allow us to start clearing the national debt. It takes control of the UK's money supply out of the hands of the commercial banking sector and restores it to the state, where it can be used to benefit the economy, rather than providing a £100 billion annual subsidy to the banking sector.
What’s The Problem?
When money is created by the state, it is added to government revenue and reduces the amount of taxes that businesses and families need to pay. However, most money now is no longer created by the state. Instead, thanks to the rules governing banking, money is created by commercial, profit-seeking banks every time they issue a loan or mortgage. Rather than going to reduce the taxes that we have to pay, it is used to generate huge profits for the banking sector, all whilst indebting UK households and businesses and sowing the seeds of the next financial crisis. This system effectively provides a subsidy to the banking sector of up to £100billion each year – a subsidy that, one way or another, comes out of your pocket.
Allowing commercial banks to create money also makes the economy hugely unstable. Each time a bank makes a loan, it actually creates new money to fund new loans. The more the banks lend, the more money they have available to lend, but as soon as they stop lending, the economy is starved of new money and quickly goes from growth to contraction, causing unnecessary hardship to millions of people .
This process – the creation of money by commercial banks – was the real root of the financial crisis, and if we allow banks to continue creating the nation’s money, then we will soon be facing a crisis even more severe than the last.
What’s The Solution?
We propose that the solution to the current financial crisis is to:
* prevent banks from creating the nation’s money supply (through a few small changes to the rules governing bank accounts)
* restore the right to create the nation’s money to a public agency of the state (the Bank of England under the direction of the Monetary Policy Committee, all under strict controls, transparency and separation of powers)
* use any newly created money to reduce taxes, fund better public services and/or reduce the national debt. (This is in direct contrast to the current situation, where three quarters of newly-created money created is pumped straight into the housing or commercial property market)
* as the economy stabilizes and the debt-burden falls, gradually synchronise the increase in the money supply to increases in productive capacity and population
* banks would continue to lend, but would do so as intermediaries between real savers and borrowers
These simple changes will withdraw the hidden subsidy that the banking sector has enjoyed for the last few hundred years and remove the taxpayer’s exposure to failure in the banking sector. The banking sector will then need to generate profits by playing a significant role in the creation of wealth, rather than simply extracting wealth from the rest of the economy by charging interest on 97.5% of the money in existence.
The benefits to the wider economy, businesses and families of the UK far outweigh the costs to the banking sector.
What’s Our Angle?
This is not a left-wing or right-wing proposal. By removing the banks’ ability to create the UK’s money supply as debt, we:
* remove a huge hidden subsidy to the banking sector, removing distortions in the economy and restoring the free market to banking
* ensure that we can allow banks to fail and go bankrupt without bringing down the whole system, once again forcing banks to operate in a free market (for the first time)
* remove the need for society to pay interest on 97.5% of the money in existence – as this interest costs fees into the cost of everything from housing to transport, this would help the poor immensely
* allow any newly-created money to be used for the widest benefit, whether through reducing taxation or increase public spending, improving democratic control over the shape of the economy
* remove the instability created by the banks’ creation of money as debt, reducing the severity of boom and bust cycles, therefore helping businesses and workers
This is not an ideological reform – it’s just common sense.
I hope this goes some where, please put your names on the list.