You will have noticed that the Chancellor has been making noises about bank reform?
When the next general election come around, should bank reform be part of the electoral manifesto of the party you vote for. 
Do you consider that reforming bank regulation is important?
Before you respond, please read through these quotes and the comments concerning the newly published book 'Modernising Money'

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Here is an ex- Fraud squad detective with his finger on the pulse of City malfeasance.

Here are two points about banking made 17 years ago in the P-CED white paper:

"4. After disconnecting from the gold standard, US economics and capitalism became purely a matter of manipulating numbers.  There was no longer a hard, observable, tangible, finite anchor.  Numbers are not hard, observable, or tangible, and may not even exist outside the mind of human beings."

"14. Manipulation of numbers, represented by currency/money, allows writing “new” money as needed.  There is no tangible asset, or anchor.  There are only numbers, managed by whomever might maneuver into position to do so.  Economics came to be based on numbers, rather than real human beings."

In 1998 an economic collapse in Russia gave opportunity for an experimental project to do things differently and that led to leveraging investment for a community microfinance bank based on the moral collateral lending model pioneered by Grameen. It proved successful in Tomsk and was replicated in several other regions.

Combining the business model for social benefit, aka a community funding enterprise (CFE) with the benefit of a community bank was how we saw the opportunity to stimulate local economies.  It was introduced to the UK in 2004, in a business plan saying:

Traditional capitalism is an insufficient economic model allowing monetary outcomes as the bottom line with little regard to social needs. Bottom line must be taken one step further by at least some companies, past profit, to people. How profits are used is equally as important as creation of profits. Where profits can be brought to bear by willing individuals and companies to social benefit, so much the better. Moreover, this activity must be recognized and supported at government policy level as a badly needed, essential, and entirely legitimate enterprise activity.”


Thanks Jeff. What about:

(1) When the next general election come around, should bank reform be part of the electoral manifesto of the party you vote for?

(2) Do you consider that reforming bank regulation is important?
Have you read 'Modernising Money' yet?

Firstly, I think we need such a fundamental change to the monetary system that the word 'reform' almost misses the point. Reform implies that you make modifications to something already existing. What is needed is for politicians to accept that everyone will be better off and no longer will bankers be able to gouge money out of an increasingly small 'real' economy, if there was a concerted lid placed on the activities of the financial sector throughout the world, all at once.

This way there would be no place in the world for bankers to blackmail the government with promises of the 'competitive advantage' that we realise is everyone's loss when it is too late and the bankers have siezed everything of capital value- your home, your business- and the real economy that is needed to stimulate any sort of productivity has been mortgaged off to the grabbing hands of developing economies- a good example of cutting of your nose to spite your face.

But of course, no leader- no matter how patently obvious it becomes- will be prepared to take the short term economic fall that would result from banks moving to another shore in response to the efforts to regulate their activities.

So as I see it an important step in any dismantling of the ruinuous monetary system is a way to diffuse it without the divisive short term profit motive inteferring.

But then you need someway to modernise money distribution, and as yet I don't have a clue where to begin. This Modernising Money will hopefully give some ideas!

Hi Matt

There could hardly be a more fundamental change to the monetary system than stopping banks creating the money supply out of fresh air and then supplying it to us on the terms that suit them, could there?  Call it a reform, call it legislation, call it whatever...

All the other financial related problems result from the fact that commercial banks create the money supply - AS DEBT!!!

You say 'I don't have a clue where to begin'.

Let us know what you think when you've read Modernising Money.

 Guerrilla warfare in the currency creation sphere with Bitcoin. Interesting concept and article, also check the lengthy comments,good input. How long before the Central banks take control or undermine the concept ?.

Money created as debt without reference to a finite anchor allows wealth to accumulate in the hands of a minority. This disenfranchises some human beings to the point of threatening their existence and they can and will fight back in any way they can.

That was the starting point in an argument for a alternative to capitalism where Peter Drucker's Post Capitalist Society was one of the influences:

"By going with the normal flow of free-market enterprise and the emerging replacement of monetary capital with intellectual capital as the dominant form of basic enterprise capitalization, it becomes easier to set up new companies primarily on the basis of invested intellectual capital. (See Post-Capitalist Society, by Peter Drucker). In plain English, socially responsible and forward-thinking companies can be set up quickly and cheaply--and these companies have indefinite potential for earnings and localized, targeted economic development. The initial objective is to develop model enterprises and communities, then implement successful strategies from those models into surrounding communities regionwide or nationwide, as needed."

Paul Grignon's video 'Money as Debt' which was circulating prior to the 2008 crisis, gave a clear picture of the debt creation process  It was included in our own study guide for 'Economics in Transition' the following year at Sumy State University.

Putting aside the plethora of ideas about virtual currencies there is one fairly obvious solution to the problem of debt. A financial system based on shared assets. 

A leading practitioner in asset based finance is Chris Cook who has appeared several times on the Keiser report as an oil industry spokesman. Chris sees the KwH as the ultimate unit of currency.


That's an interesting article Daniel. I'd never heard of Bitcoins before.

My immediate thought after reading it was that this could well be yet another symptom of the general unease people have with the current financial system.

Earlier in the discussion, I pasted the introduction to Modernising Money.

Below is the short concluding chapter.

I do hope that NatCAN members read and absorb what comes inbetween.




“When you start printing money, you create some value for yourself. If you can issue a thousand pounds-worth of IOUs to everybody, you’ve got a thousand pounds for nothing. And so we do restrict the ability of people to create their own [bank] notes … We’re protecting you from charlatans.”

Paul Fisher Executive Director, Bank of England


There is a curious contradiction at the heart of the contemporary monetary system. While one agency of the state – the police – spend considerable time and resources trying to prevent the private creation of paper money (commonly referred to as ‘counterfeiting’), another agency of state – the Bank of England – spends significantly more time enabling and facilitating the private creation of money by the corporations that we know as banks. Banks are able to create money because their IOUs (liabilities) can be used, via a sophisticated electronic payment system, as a substitute for the paper money issued by the state. These privately-issued IOUs now make up 97% of all the money in the UK economy. Yet as Paul Fisher’s quote attests, the Bank of England is clearly aware that the ability to issue “a thousand pounds-worth of IOUs” gives the issuer “something for nothing”. In the last decade alone, UK banks have issued more than a trillion pounds of additional IOUs. The value that they got for “nothing” was a trillion pounds-worth of interest bearing assets in the form of debt contracts secured on the property and future labour of the UK public. No other business is able to obtain value for itself in this way.


As a result, personal and household debt is at its highest level in history, causing hardship and stress for millions. The biases of banks towards lending for property over investing in business have ensured that housing has become unaffordable for an entire generation, while the real economy has become weak and stagnant, starved of investment by the banks whose core purpose is allegedly to invest in business and help the economy grow.


Some take this as proof that markets, left to their own devices, are inefficient and prone to failure. Yet the reality is that there is perhaps no industry in the world that conforms less to the principles of capitalism than banking does. No industry other than banking2 has its creditors reimbursed by the government if it is unable to do so. No other industry has the monopoly privilege of issuing the money that everyone else must use in order to trade and do business. No high-street shop or restaurant will be rescued by the government in the event of financial mismanagement or bad business practice. And in no other industry would the failure of one firm threaten to bring down the entire UK economy. Yet banks are able to continue in business whilst contravening almost every rule of capitalism in the process.


The privileged, protected and subsidised position that banks hold is not a law of nature or economics. Banks only exist in the form they do today because of countless government interventions throughout history to save them from their own worst excesses. With each failure the banks have benefitted from some new guarantee or concession designed to patch up the system and get back to business as usual, be it deposit insurance after the crisis of the 1930s or the lender of last resort function after the Overend Gurney panic in 1866. Each crisis thus strengthens the remaining banks and protects them from their previous excesses, setting the stage for even bigger crises in the future.


The current system cannot be fixed by subjecting it to ever more rules and regulations; houses built on sand will eventually collapse no matter how careful the occupants are asked to be. The issue that must be addressed is the ability of the banking sector to create money. For decades, such concerns have been sidelined. Yet these concerns are becoming more widespread that ever before, with even the chief economics commentator for the Financial Times, Martin Wolf, expressing the view that:

“It is the normal monetary system, in which the ‘printing’ of money is delegated to commercial banks, that needs defending. This delegates a core public function - the creation of money - to a private and often irresponsible commercial oligopoly.” (Wolf, 2012)


This core public function is one upon which the stability of the entire economy depends. As a result instability and fragility are built into the current monetary system.


Despite the destructiveness of the current monetary system, there are still those who defend it. One reason for this is a deep level of ignorance of how the monetary system actually works. Most of the population (and most politicians) are under the impression that only the state has the authority to create money. Many of those who do understand that most money is created by banks believe this happens through the limited and predictable ‘money multiplier’ model of money creation, which places control of the money supply firmly in the hands of the central bank. As the evidence and analysis in this book has made clear, the Bank of England does not have that level of control. In fact, Sir Mervyn King’s admission (section 10.2) that for half a century the Bank of England has “struggled” to control the money supply suggests that this is not a system that can be controlled.


The reforms outlined in this book would bring the money supply back under control. By removing the power to create money from banks and returning it to an independent but accountable public body, which may only sanction its creation during periods when inflation is low and stable, the money supply can be made to grow in line with the growth of the real economy. Instead of new money being allocated where it is of greatest benefit to the banks, it would instead be allocated where it would most benefit the population as a whole – in the real economy, through the salaries of government employees, tax rebates and reductions, or via direct payments to citizens. In doing so it returns the privilege and benefits of money creation to the people.


As they lose their power to create money, banks would also lose their power to shape the economy. A requirement for banks to inform their customers exactly what will be done with the money they put into Investment Accounts will ensure that, to a reasonable extent, the investment priorities of banks start to reflect the investment priorities of society as a whole.


By removing the power of banks to create money, these reforms address many of the problems of the current economic system at their source. They also turn banks back into ordinary businesses whose failure poses no threat to the wider economic system.


But would these changes bankrupt the banks? Would we lose the UK’s most profitable industry? A few issues need to be considered here. First, an industry that can only be profitable thanks to permanent taxpayer-funded subsidies is not profitable in any real sense. Second, much of the profits of the banking sector come from its monopoly on the creation of money and the fact that – with the exception of cash – all of the money needed in the economy must be borrowed from them. This significantly overstates the true profitability of banking. Third, banking itself (as opposed to the wider financial sector) employs only one out of every 53 workers in the UK (ONS, 2012), yet the consequences of the current design of this banking system causes instability, insecurity and the risk of unemployment for the other 98% of the workforce. Some reduction in the size of the banking sector would be a fair price to pay for greater stability, investment and employment in the real, non-financial economy.


However, the most powerful argument to suggest that these changes would not be harmful is that the reforms simply require banks to work the way that the rest of the investment industry already operates. With the exception of banks, the rest of the investment sector must acquire funds from savers first before they can lend. If these companies can be (very) profitable without the ability to create money, there is no reason that well-run banks could not be too.


The Next 40 Years


“Our problems are man-made, therefore they may be solved by man. No problem of human destiny is beyond human beings.”

John F Kennedy 35th President of the United States


Without doubt, the changes outlined here will be bitterly opposed by the banks and their lobbyists. There is a natural desire on behalf of banks to get back to ‘business as usual’ as quickly as possible. But there will be no more ‘business as usual’ – the levels of personal and household debt are simply too high to allow for another lending boom. There is also a high probability that many of the largest banks worldwide are bankrupt in a strict accounting sense, although few governments would force a strict audit of bank assets when they will be forced to pick up the tab for any bank insolvency. If we keep the current debt-based monetary system, financial crises will continue to occur, with the costs passed onto ordinary people and businesses. There is no justification for this when the changes that need to be made are both beneficial and relatively simple to enact.


The monetary system, being man-made and little more than a collection of rules and computer systems, is easy to fix, once the political will is there and opposition from vested interests is overcome. The real challenges which face us over the next 40 years, such as how to provide for a growing global population, a changing climate, and increasingly scarce natural resources, require a monetary system that works for society and the economy as a whole. For that reason, our current system is no longer fit for purpose and must be reformed. This book has provided a detailed and workable proposal that would address the deepest flaws in the current system and allow us to move on to dealing with the other issues facing society and the world. The challenge now is to ensure that these changes are made so that we can all start to reap the benefits of a monetary system that works for society rather than against it.

Good on you Joe for answering your own question "Should the Banks Be Reformed?" by plugging the solution proposed in Modernising Money, the fruits of Positive Money's research. YES, YES, YES the Banks and the monetary system needs radical reform. and YES, YES, YES this solution is doable now and we should all be pushing for it.

BUT for those looking further ahead with the ambition of perfecting personkind, doing away with greed and reforming the capitalist system, there are other voices. They extend the reforms in Modernising Money and show how those are the necessary first steps on the path to reforming the capitalist system as a whole.

Here's the place to go for the way beyond Modernising Money: In his latest newsletter he reviews two other new books all pushing in the same direction.

If you don't know James Robertson go to his site Sign up for his occasional newsletter and download his free book Future Money.

Reforming the banks the way Joe is promoting, is a joined up part of some serious, far sighted thinking on social justice and a better life. James Robertson is a prophet of the stature of E.F Schumacher and Positive Money owes a lot to his initial study with German economist Joseph Huber - together they published Creating New Money for the New Economics Foundation some 10 years or so ago. You can download that foundational work here

Look here - if reading up on these references doesn't convince you lot to get of your backsides and out on the street promoting radical bank reform will SOMEONE PLEASE TELL ME WHAT WILL?

Thank you Richard

I know that some of us can't find time to read. 

Here's a recording of radio programme from America that puts it all in prespective.

If you can't find time to read Modernising Money, please listen to this

Cheers, Joe

Sorry to be such a slow reader, but now having read Modernising Money from cover to cover, I've completed my extended review. In a nutshell I argue that Positive Money's proposal for reforming the capitalist monetary system is not a solution to the global crisis. You can read the whole thing here:   

I'd be grateful for your comments.  

Have listenned to the radio show and will spread it around.   I am incorporating a company at present that is to be run without financial assets, mainly intellectual property and a stock of equipment and instruments.  We will not ask for or accept monetary investment.  The cash flow will be entirely positive and the company itself will not be traded as it is the members of the company who will be the end beneficiaries of the delivery of the product.   This is the result of reading a lot of the stuff on these blogs and the recommended reading as well as observation over many years at many levels.  Is money really necessary?   We will find out.  Existing law does not require anyone to borrow, just to pay taxes on the profits from our work.   Fair enough lets see what the money lenders do when they require our services.

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