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wonderpup

Why The Banks Had To Be Saved.

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Ok this is a bit ambitious but the idea occurred to me today so I thought it might worth a spin on here.

When capitalism finally caught up with the bankers and threatened to impose on them the kinds of market discipline they so avidly demanded for everyone else they were protected- they were bailed out and their personal wealth and that of their wealthy clients was made whole by the taxpayer.

The usual reason given for doing this is that 'the system' was under threat and needed to be saved- and the fact that the people who had wrecked that system got bailed out as a consequence was an unfortunate moral hazard that could not be avoided.

But I would suggest that there is/was a deeper and more profound reason why the banks had to be saved- which was to protect the heavily vested interest that exists in obfuscating the way in which money itself comes into being.

From a certain point of view the idea that we require a privately owned banking sector to create our currency is rather perverse- after all there is no reason why a sovereign state cannot simply issue it's own currency directly- an argument 'The Spaniard' frequently makes on this forum and indeed such was the intent of the founding fathers of the United States- they did not foresee or intend that the US currency would be lent into existence by private banks- their idea was that the State itself would issue the currency directly and debt free.

Ok- so suppose the banking system had been allowed to fail- at which point the state is forced to step in and in effect take on the role of currency creation- we would then have a situation in which the lending activities formerly carried out by the banks would become direct lending from the state to the private sector.

In short the state at this point would be seen to be manufacturing credit directly and handing it out to borrowers- which is what the banks had been doing.(Badly)

But without the intellectual cover provided by the banking system the process of money creation starts to look rather threadbare and a little too transparent.

In addition since the state itself is now the unambiguous source of credit creation an entirely new form of political pressure is born- suddenly it becomes far more difficult for the state to say that there is not enough money for welfare or pensions or health because the argument could be made that this scarcity of wealth is now a choice of the state not to simply create the credit needed to fund all these good things.

So my argument is that the banks are vital not because their functionality could not be replicated by the state- but because they provide a degree of obfuscation as to how the money supply comes into being- in effect the banking system is a price we are obliged to pay in order to prevent the true nature of our money system becoming so clear that it ceases to be regarded as a neutral arbiter of wealth and comes to be seen as a political football and a means by which the wealthy propagate and enhance their power over the rest of us.

By vesting the power of money creation in the private banking system a lot of very difficult questions can thus be drowned in the complexity of that system. People are content with their cartoon version of bank lending in which (they fondly imagine) the money the bank lends to Fred is composed of the savings deposited by Harry.

What the PTB do not want is for the great unwashed to delve too deeply into the process by which money actually comes into being- because if they did they might not be quite so willing to accept the status quo and the stranglehold that the elites currently exercise over this process.

(But it's interesting to note that if Harry went to the bank to draw out his savings and were told that he could not have them because they had been lent out to someone else- this is the WRONG answer. So the commonplace notion that banks lend out savings is itself not closely examined or even coherent- people expect their savings to be instantly available unless they have specifically agreed otherwise- a notion that does not fit the view that those savings are being lent out to other people.)

So the common man's view of how money works is a useful-but fragile- illusion- one that a complex and opaque banking system serves to maintain. To have allowed the banks to fail would have stripped away those layers of obfuscation and perhaps made all too clear the rather arbitrary and often unfair way in which our money comes into existence.

Edited by wonderpup

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Ok- so suppose the banking system had been allowed to fail- at which point the state is forced to step in and in effect take on the role of currency creation- we would then have a situation in which the lending activities formerly carried out by the banks would become direct lending from the state to the private sector.

I dont think the Bill Still/Founding fathers 'debt free money' "nationalize the money supply, not banking" was ever suggestive that the government would itself become a lender. It was simply the government would spend money into the economy by funding the public sector, or a citizens dividend or whatever. As that money cycled round the economy, it would, as is now, be held in savings accounts, to buy corporate bonds and so forth. The banking system would exist as it today in the lending/borrowing sphere, but they simply wouldnt be able to create new money/credit, just manage existing money created by government.

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Simply creating money does not create wealth! It only steals it from people holding it as a store of wealth. It would be wonderful if we could just create a million £ for everyone in the country unfortunately this would not create any extra wealth.

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FWIW, i think the banks 'had' to be saved, primarily because politicians are lazy. Allowing banks to collapse and then to assess exactly where the assets and liabilities fall and deciding who gets exactly what in event of default would be a long and arduous task. Simply printing money and saying 'carry on as you were' is the easy, cowardly and most immoral answer, but they are politicians...

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FWIW, i think the banks 'had' to be saved, primarily because politicians are lazy. Allowing banks to collapse and then to assess exactly where the assets and liabilities fall and deciding who gets exactly what in event of default would be a long and arduous task. Simply printing money and saying 'carry on as you were' is the easy, cowardly and most immoral answer, but they are politicians...

I agree. I don't think the banks had to be saved ever. That was just a line spun to the sheeple so that they wouldn't revolt about their money being given to the bankers. The sheeple bought the story.

Bottom line for me is, if the banks are too big to fail THEN BREAK THEM UP INTO SMALLER BANKS SO THEY CAN FAIL.

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Ok this is a bit ambitious but the idea occurred to me today so I thought it might worth a spin on here.

When capitalism finally caught up with the bankers and threatened to impose on them the kinds of market discipline they so avidly demanded for everyone else they were protected- they were bailed out and their personal wealth and that of their wealthy clients was made whole by the taxpayer.

The usual reason given for doing this is that 'the system' was under threat and needed to be saved- and the fact that the people who had wrecked that system got bailed out as a consequence was an unfortunate moral hazard that could not be avoided.

But I would suggest that there is/was a deeper and more profound reason why the banks had to be saved- which was to protect the heavily vested interest that exists in obfuscating the way in which money itself comes into being.

From a certain point of view the idea that we require a privately owned banking sector to create our currency is rather perverse- after all there is no reason why a sovereign state cannot simply issue it's own currency directly- an argument 'The Spaniard' frequently makes on this forum and indeed such was the intent of the founding fathers of the United States- they did not foresee or intend that the US currency would be lent into existence by private banks- their idea was that the State itself would issue the currency directly and debt free.

Ok- so suppose the banking system had been allowed to fail- at which point the state is forced to step in and in effect take on the role of currency creation- we would then have a situation in which the lending activities formerly carried out by the banks would become direct lending from the state to the private sector.

In short the state at this point would be seen to be manufacturing credit directly and handing it out to borrowers- which is what the banks had been doing.(Badly)

But without the intellectual cover provided by the banking system the process of money creation starts to look rather threadbare and a little too transparent.

In addition since the state itself is now the unambiguous source of credit creation an entirely new form of political pressure is born- suddenly it becomes far more difficult for the state to say that there is not enough money for welfare or pensions or health because the argument could be made that this scarcity of wealth is now a choice of the state not to simply create the credit needed to fund all these good things.

So my argument is that the banks are vital not because their functionality could not be replicated by the state- but because they provide a degree of obfuscation as to how the money supply comes into being- in effect the banking system is a price we are obliged to pay in order to prevent the true nature of our money system becoming so clear that it ceases to be regarded as a neutral arbiter of wealth and comes to be seen as a political football and a means by which the wealthy propagate and enhance their power over the rest of us.

By vesting the power of money creation in the private banking system a lot of very difficult questions can thus be drowned in the complexity of that system. People are content with their cartoon version of bank lending in which (they fondly imagine) the money the bank lends to Fred is composed of the savings deposited by Harry.

What the PTB do not want is for the great unwashed to delve too deeply into the process by which money actually comes into being- because if they did they might not be quite so willing to accept the status quo and the stranglehold that the elites currently exercise over this process.

(But it's interesting to note that if Harry went to the bank to draw out his savings and were told that he could not have them because they had been lent out to someone else- this is the WRONG answer. So the commonplace notion that banks lend out savings is itself not closely examined or even coherent- people expect their savings to be instantly available unless they have specifically agreed otherwise- a notion that does not fit the view that those savings are being lent out to other people.)

So the common man's view of how money works is a useful-but fragile- illusion- one that a complex and opaque banking system serves to maintain. To have allowed the banks to fail would have stripped away those layers of obfuscation and perhaps made all too clear the rather arbitrary and often unfair way in which our money comes into existence.

heads I win,tails you lose.

I'm all for a competing currency mantra right now, and it ought to be FULLY reserved by the institutions issuing such currency.

reason:

1)they will learn some discipline and responsibility for their actions,with appropriate fiscal punishment for improper practice

2) monopolies are never a good thing,they are like cancer and metastacise after a while...so they need a bit of a kick in the pants to raise their game,and improve their services...otherwise joe public can go elsewhere and get same/better quality product for less.....so it's a case of clean your act up or die.

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I agree. I don't think the banks had to be saved ever. That was just a line spun to the sheeple so that they wouldn't revolt about their money being given to the bankers. The sheeple bought the story.

Bottom line for me is, if the banks are too big to fail THEN BREAK THEM UP INTO SMALLER BANKS SO THEY CAN FAIL.

Of course they had to be saved. The implications of not doing so in the crisis were too terrible. Nothing to do with concealing the source of money creation.

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Of course they had to be saved. The implications of not doing so in the crisis were too terrible. Nothing to do with concealing the source of money creation.

Not true at all. Could easily have allowed the banks to fail and just had Banks A, B, C, D set up behind the scenes to transfer business/accounts to.

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Not true at all. Could easily have allowed the banks to fail and just had Banks A, B, C, D set up behind the scenes to transfer business/accounts to.

Yes and as we've seen with Cyprus they could have bought time to sort out the details by having an impromptu bank holiday.

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Yes and as we've seen with Cyprus they could have bought time to sort out the details by having an impromptu bank holiday.

A bank holiday to sort that out in the UK. Do you have any idea how unrealistic that is?

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Of course they had to be saved. The implications of not doing so in the crisis were too terrible. Nothing to do with concealing the source of money creation.

The banks should have been allowed to fail. That, in itself, would have reduced the moral hazard whereby banks can behave recklessly and assume that if any of the risks they take cause problems, it will be the taxpayer's problem, not theirs.

Also, bear in mind that fractional reserve lending is two-tier. Private banks create money, by lending multiples of depositor's money. But the BoE itself also creates money, by lending banks multiples of the money banks deposit in the BoE.

I think that if we must have a fractional-reserve currency, that should be operated by, or at least be very, very strictly regulated by, the Government/ Treasury/ BoE. If private banks must be allowed to create money and be bailed out if they get into trouble, all of the banks activities should be more strictly regulated and they should not be allowed to partake in other in risky activities such as insurance, mortgages, etc.. On the other hand, banks and other financial institutions that do not have fractional reserve powers (and not be able to rely on a bail-out from the taxpayer) could have their activites regulated far less.

As it is, banks can be reckless in many business activities, and expect a bail-out because their core business cannot be allowed to fail - hence the moral hazard.

So, in the answer to whether we should have more, or less, regulation, is both, depending on the type of bank and activity.

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Letting the banks fail would have brought the country to a virtual halt, the cost of which would have been many times greater than the actual coat of the bail out.

Fractional reserve banking is a different matter, but to put it back in the hands of the state would mean all banking on govt hands - a fairly chilling prospect.

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Letting the banks fail would have brought the country to a virtual halt, the cost of which would have been many times greater than the actual coat of the bail out.

yeah because the bailouts have sorted everything, it is all good now and there will be no additional costs

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Letting the banks fail would have brought the country to a virtual halt, the cost of which would have been many times greater than the actual coat of the bail out.

Fractional reserve banking is a different matter, but to put it back in the hands of the state would mean all banking on govt hands - a fairly chilling prospect.

FR banking in government hands is less chilling than the alternative; having it in the hands of unregulated sociopathic bankers. The reality is, it is to still a great extent in the hands of governments; through the central banks own FR lending, and government regulation of high street banking.

The problems with banks did not start the day they nearly went bust, but years before. In particular, high street and investment banks, although both 'banks' in name, are entirely different beasts, and used to be, quite rightly, kept apart by law in both the US and UK. Deregulation allowed the two types to be mixed, and in particular, allowed risky investment deposits to be used by banks to justify additional FR lending. When those investments went sour, it took out the FR high-street activities of the bank. This is what happened in the US, (but not the UK) but it remains a moral hazard in the UK to this day.

The Labour government failed to address this risk, and the coalition are dragging their feet and kicking the can down the road, and talking about mere Chinese walls instead of reinstating total legal seperation. The moral hazard suits the bankers; if a risky investment goes right, they pocket huge profits. If it goes wrong, it threatens to take down the high street banking arm too, so governments feel forced to bail the bank out - i.e. the taxpayer pays.

Heads the bankers win, tails the taxpayer loses, and this fact actually encourages banks to be reckless, in turn increasing the likelihood of failure.

This is why I say that, if private banks are to be allowed to make FR lending, it must be totally isolated from other, risky banking activities such as investment banking, insurance, collateralised debt and other 'sophisticated' products and devices such as CDSs, etc, and very strictly regulated. Much as things were until about 20 years ago in the US & UK.

Bear in mind that, for example, CDSs were developed as a form of 'insurance' explicitly designed not to meet the legal definition of insurance, and thus escape being subject to the regulation of banking insurance. 'Sophisticated' collateralized mortgage obligations (CMO) which supposedly evaluated and spread risk, in fact miscalculated, and through sheer complexity (and probably intentionally), disguised risk instead. If people want an unregulated market for such things, fine, but they have no place near high street banks, or anywhere where the taxpayer carries the can when they go tits-up.

Another failing of the Labour government was that it's p***-poor regulation allowed the banks to get into such a parlous state they were on the edge of collapse before the problem was even recognised. It was thus the sheer scale and urgency of the problem that meant that we nearly had systemic failure, and thus the banks 'had' to be 'saved' in what was a panic decision.

Another problem is the sheer size of the banks. When they fail, they fail spectacularly. If they are seen as TBTF, then they are very costly. Osborne's comment that he wants to see bigger banks sends a chill down my spine. It is no good us being told that a big banking sector is a great thing for the UK economy, when in fact a huge, inadequately regulated (and systemically corrupt) banking sector is in reality a massive time-bomb that could instead take down our economy, nearly did so in 2008, and could do so yet.

In an environment with tighter regulation of banks that provide FR-based lending, and a few other other limited, isolated business activities, the moral hazard would be removed, the likelihood and causes of failure would be reduced, and also the knock-on effect of any one bank failing would be reduced, meaning that a failing high street bank could be allowed to fail without bringing the whole house down. Many small 'high street banks' have failed in the US in the past 5 years without widespread damage. It's the complex, TBTF banks that are the main problem and risk.

We are told that regulation is a bad thing, and that tighter regulation would mean that banks would leave the UK, in turn damaging the UK economy. If investment banking was isolated from high street banking, investment banking could still be allowed to thrive in the UK, and even regulated less, whilst being seen as what it is - risky. The risk would be there, but when things went wrong, the bankers and investors (rightly) would lose, not the taxpayer. Such is genuine laissez-faire Capitalism. They would have no high street banking arm at risk, necessitating a taxpayer bailout of the whole, huge, messy caboodle.

At the same time, heavily regulated, boring old high street banks should be brought back, relying on prudent, conservative business practices in return for being allowed to exercise the extraordinary right to conjure up money out of thin air through the magic of fractional reserve lending. Such conservative banks would be less likely to fail, and have less temptation and opportunity to be reckless, and also should be smaller so that there is competition, and the impact of any failure would be more manageable.

This way, we could have a thriving and profitable investment banking sector, with relatively light regulation, where the investors and banks would benefit, and be liable for, their own profits and losses, and a strongly regulated, priviliged high street sector that is less likely to fail, and less costly to rescue, providing the core lending to people and businesses that would allow the rest of the economy to also thrive.

This is why both lighter, and heavier regulation may be the best solutions, depending on what particular financial activity is in question.

The reason we don't have this already is that (corrupt) bankers own the (corrupt) politicians. And we don't jail many of them.

Edit: WTF? HPC auto-corrects 'G*deon' to 'Osborne' ??!! :blink:

Edited by happy_renting

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Of course they had to be saved. The implications of not doing so in the crisis were too terrible. Nothing to do with concealing the source of money creation.

The functionality provided by the banks had to be saved- but did the specific institutions themselves need to be saved. And if the answer to that is yes then does this not in practice mean that the banking system is already an arm of the state?

If so then why the thin fiction that these are private institutions subject to the same market forces as any other business?

Perhaps another way to approach the question is to ask another one- why does the state not directly create our money rather than relying on the 'private' banking system to do so? After all politicians are not usually shy about grabbing power for themselves- but this power is one they do not seem to want.

I think the ruling elites are deeply reluctant to do this because they realise that it's a slippery slope for them- firstly because a state that directly issued credit would come under all manner of pressure to print their way out of problems-even more so than now- and secondly the more blatant the act of money creation by fiat becomes the less credible is could seem to be.

So one way to view the existence of a psudeo private banking system is that it acts as a front for the money creation process- both shielding it from political pressure and cloaking it's simple reality in an apparent complexity the way a magicians complex hand movements distract attention from his simple conjuring tricks- making them appear far more sophisticated than they actually are.

This quote strongly implies the degree to which obfuscation of the money creation process was seen by the elites as desirable:

ROTHSCHILDS BROS. OF LONDON

"Those few who can understand the system (check book money and credit) will either be so interested in its profits, or so dependent on it favors, that there will be little opposition from that class, while on the other hand, the great body of people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear it burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests."

(Emphasis mine).

So from the point of view of those who gain from the credit creation process transparency is not desirable lest those who lose from it work out that they are the losers.

Most people even today do not realise that the banks do not simply act as 'honest brokers' who bring the saver and the borrower together- they don't know that a banking licence grants the power to create credit from thin air- albeit with some limitations that are easily evaded with a bit of 'innovation'.

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Edit: WTF? HPC auto-corrects 'G*deon' to 'Osborne' ??!! :blink:

Solution: Use "Gidiot" rather than "G*deon" when referring to Osborne. Presumably it will take a couple of days for the HPC auto-correct to catch up. Or has it already? When I post this we shall see ;)

Interesting thread. I think the solution, which I shall explain in - I admit - a simplistic way, is for the Government to nationalise the banking system. Not the existing banks themselves but the payment mechanism. This would be the process:

Bank holiday (daysssssss!) as per Cyprus.

Issue everyone with a personal bank account based on NI number/birth certificate etc ie 65 million, the system would be based on the First Direct telephone/internet model - there would be no branches. This would keep costs down to a minimum. If customers want face to face transactions they could so so via the Post Office network but would have to pay transaction charges.

Link all existing bank accounts (current/deposit/cash ISA etc) to this personal bank account

Transfer the balances from existing bank accounts to the new personal accounts

Credit the existing bank accounts with a percentage (say 90%) of the money required to keep them technically solvent ie if Lloyds have to transfer £1tn then the Government 'lends' them, by way of a credit it the BoE, £900bn at RPI plus say 3%. Referred to as the Government-Bank rate

The new personal banks would pay interest at untaxed RPI plus (say) a taxed 2% profit interest, This would provide savers with a small (and taxed) 'real' return. All deposits would be 100% guaranteed (by the state!!). If savers want a better return they would be able to 'invest' in commercial banks but would have to accept risk.

The new personal bank would then be able to lend out at this rate RPI plus 2% plus a small fixed % to cover their costs/risks, this would give borrowers access to money at a reasonable cost. There might be a market for borrowers to insure their ability to repay?

The old banks would then be 'zombie' banks and would be run down, ie would exist only to collect in the loans they have previously made and repay the money lent to them under the Government-Bank rate scheme. All interest rates would be reset at the Government-Bank lending rate plus 1/4%. They would have to cover any losses from their reserves.

As I say my suggestion is simplistic but........... think of the benefits; it would free up the lending market, provide fair returns for savers

and best of all scr3w the existing banks and all those who work for them. Result.

Edited by browneconomy

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Solution: Use Gidiot rather than G*deon when referring to Osborne. Presumably it will take a couple of days for the HPC auto-correct to catch up. Or has it already? When I post this we shall see ;)

Interesting thread. I think the solution, which I shall explain in - I admit - a simplistic way, is for the Government to nationalise the banking system. Not the existing banks themselves but the payment mechanism. This would be the process:

Bank holiday (daysssssss!) as per Cyprus.

Issue everyone with a personal bank account based on NI number/birth certificate etc ie 65 million, the system would be based on the First Direct telephone/internet model - there would be no branches. This would keep costs down to a minimum. If customers want face to face transactions they could so so via the Post Office network but would have to pay transaction charges.

Link all existing bank accounts (current/deposit/cash ISA etc) to this personal bank account

Transfer the balances from existing bank accounts to the new personal accounts

Credit the existing bank accounts with a percentage (say 90%) of the money required to keep them technically solvent ie if Lloyds have to transfer £1tn then the Government 'lends' them, by way of a credit it the BoE, £900bn at RPI plus say 3%. Referred to as the Government-Bank rate

The new personal banks would pay interest at untaxed RPI plus (say) a taxed 2% profit interest, This would provide savers with a small (and taxed) 'real' return. All deposits would be 100% guaranteed (by the state!!). If savers want a better return they would be able to 'invest' in commercial banks but would have to accept the risk.

The new personal bank would then be able to lend out at this rate RPI plus 2% plus a small fixed % to cover their costs/risks, this would give borrowers access to money at a reasonable cost. There might be a market for borrowers to insure their ability to repay?

The old banks would then be 'zombie' banks and would be run down, ie would exist only to collect in the loans they have previously made. All interest rates would be reset at the Government-Bank lending rate plus 1/4%. They would have to cover any losses from their reserves.

As I say my suggestion is simplistic but........... think of the benefits; it would free up the lending market, provide fair returns for savers

and best of all scr3w the existing banks and all those who work for them. Result.

The problem with this proposal is that the government would be the sole arbiters as to who, or what, businesses, get to borrow money. If their decision is wrong, they could simply shrug it off. They would not be liable for any person's losses, because politicians can just blame state apparatchniks and the state would grant itself immunity.

If the lenders are commercial banks, they would have to make judgements balancing competiton (lose business & lose the opportunity to profit, by not lending) and prudence (losing revenues by lending if a reckless loan is not later paid back to them). In other words, the bank's success and profitably would rely on their own due diligence in a competitive market. That should lead to prudent, informed decisions.

Heaven help us if a statist gets to decide what businesses should be funded through loans, or decides what business customers are likely to be commercial successes and therefore safe to lend to.

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Could have bailed out the system without bailing out the people running the system.

Edited by cica

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The problem with this proposal is that the government would be the sole arbiters as to who, or what, businesses, get to borrow money. If their decision is wrong, they could simply shrug it off. They would not be liable for any person's losses, because politicians can just blame state apparatchniks and the state would grant itself immunity.

If the lenders are commercial banks, they would have to make judgements balancing competition (lose business & lose the opportunity to profit, by not lending) and prudence (losing revenues by lending if a reckless loan is not later paid back to them). In other words, the bank's success and profitably would rely on their own due diligence in a competitive market. That should lead to prudent, informed decisions.

Heaven help us if a statist gets to decide what businesses should be funded through loans, or decides what business customers are likely to be commercial successes and therefore safe to lend to.

I understand your concern personally I believe in the notion of a small state- living with the burden of a state that consumes 50% of everything produced I can even appreciate the benefits of minarchism (aka minimal statism). But the system we have at the moment is the worst of all worlds- the banking system privatises profit and yet is allowed to socialise losses.

"My" solution - a nationalised personal banking system would apply only to private citizens and not commercial organisations Thus commercial banks would raise money from depositors/bondholders/shareholders and would take 'risk' in commercial (business) lending. The personal banking system would be risk free and yet both pay depositors and lend to borrowers at 'fair' rates. The personal banking system would restrict it's lending to proscribed criteria presumably total borrowing limited to a range of specific income multiples. Obviously as the state bank it would be given primacy in the event of default (including future earnings/pension entitlement ?)

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I understand your concern personally I believe in the notion of a small state- living with the burden of a state that consumes 50% of everything produced I can even appreciate the benefits of minarchism (aka minimal statism). But the system we have at the moment is the worst of all worlds- the banking system privatises profit and yet is allowed to socialise losses.

"My" solution - a nationalised personal banking system would apply only to private citizens and not commercial organisations Thus commercial banks would raise money from depositors/bondholders/shareholders and would take 'risk' in commercial (business) lending. The personal banking system would be risk free and yet both pay depositors and lend to borrowers at 'fair' rates. The personal banking system would restrict it's lending to proscribed criteria presumably total borrowing limited to a range of specific income multiples. Obviously as the state bank it would be given primacy in the event of default (including future earnings/pension entitlement ?)

Not sure where the magical 2% above RPI rate is going to come from when it is the Govt that is driving down interest rates below RPI, not the banks

Also whilst the banks have been reckless in the pursuit of ever decreasing Yield (mainly via morgages, behaviourally driven again by govt through taxation) i certainly wouldnt want state apparatchiks lending to their mates above commercial at risk banking entities (of course they are no longer risk in because once again the govt is protecting their bad investments).

Not sure why there should be any deposit guarantee, Lending is lending, if you lend to a cr@p venture you can become insolvent you cant mandate solvency, at least not efficiently and healthily, you remove moral hazard and guarantee cr@p lending in the process.

Edited by georgia o'keeffe

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Not sure where the magical 2% above RPI rate is going to come from when it is the Govt that is driving down interest rates below RPI, not the banks

I'll bite. Legislation. A constitutional enactment. The State Bank would be legally obliged to pay private depositors untaxed RPI compensation plus taxed profit interest. I suggest 2% as being fair, both for savers( 2%) and borrowers (2% plus a small margin to cover the banks costs). The specific margin above inflation is perhaps a political decision but surely there is a "fair" amount for both savers & borrowers?

As the Government (bank) would be the sole bank legislation would be needed to stop them messing with the system.

A term coming into more current use is financial repression ie the state manipulating the economy to inflate away debt. Punishing the thrifty.

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May I draw attention to the Positive Money Proposal document which addresses some of the questions being asked on this thread:

http://www.positivemoney.org/wp-content/uploads/2013/04/The-Positive-Money-Proposal-2nd-April-2013.pdf

A shorter document in simplified terms:

http://www.positivemoney.org/wp-content/uploads/2013/03/Positive-Money-Reforms-in-Plain-English.pdf

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  • 238 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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