Tag Archives: banking

Making banking a genuinely free market

 

You wish to buy a house, but can’t afford one – a predicament many face. You approach the bank for a loan, repayable over 25 years. You’d think that the money the bank has loaned is actually other customer’s savings that is held in some ‘physical’ form, yet you’d be wrong. In reality, when the bank made this loan they created the money by inputting numbers into a spreadsheet; bank-created money accounts for over 97% of money in circulation today.

Effectively this means 97% of our money is also debt. When times are good people pay down their debts and the amount of money in circulation shrinks, along with the economy. Government desires to rid household debt is almost impossible; to do so would shrink our economy and wipe out almost all of the money in circulation.

Moreover, history has shown banks are not fair distributors of money; they create too much money (through reckless lending) in a push for profits and most of the money they create is speculated on financial markets and asset bubbles, fuelling the housing crisis. Regulations have proven to not be worth the paper they are written upon, because banks know that no matter how recklessly they lend, they must be bailed out because many people would lose their savings and no government could allow this. Thus the banking sector is a neither free, nor fair, market; its lending is largely monopolised and it is people outside the financial sector that pay the price for its reckless decisions.

Posted in Op-eds | 20 Comments

Too unpopular to fail?

 

In 2008, financial services firm Lehman Brothers filed for Chapter 11 bankruptcy in the United States. With over $600 billion in assets, Lehman Brothers remains the largest bankruptcy filing in US history. Under-capitalised and enormously leveraged with significant holdings of risky mortgage-backed and residential property-related assets, despite weeks of intense negotiations with regulators and prospective buyers no viable solution could be found and Lehman was allowed to fail.

In the ensuing market chaos, and following a G20 meeting in London in early 2009, the Financial Stability Board was established to monitor the global financial system and coordinate financial regulation among the G20 nations. One of the Financial Stability Board’s key objectives was to end “too big to fail”, the idea that these huge, inter-connected financial institutions with balance sheets comparable to the GDP of small nations were too complex and not capable of failing without having adverse effects upon the broader global economy. As part of a package of measures, the G20 proposed and adopted rules that would ensure that all globally and systemically important financial institutions were required to hold more capital, to segregate riskier investment banking and trading businesses from retail banking operations and, significantly, that upon the failure of the institution, the bank’s creditors have their holdings written down or “bailed-in” in order to avoid future tax-payer funded bail-outs.

Posted in Op-eds | 23 Comments

Farron blasts shelving of enquiry into banking culture

We already know that the Government tried to slip out lots of bad news (including crucial evidence of the hardship caused by the Bedroom Tax) in a giant Take out the Trash day before Christmas, but the Financial Conduct Authority used Hogmanay to slip out the fact that it wasn’t going to bother with publishing a review into banking culture. Apparently it “wouldn’t help.” Try telling that to the people who suffered as a result of one of the worst crashes in history.

Tim Farron was on this one straight away and ended up getting quoted pretty widely. He said:

Posted in News | Also tagged | 5 Comments

Opinion: Liberal Democrats should debate ways of liberating our economy from the power of the banks

“Stronger Economy Fairer Society” was the strap-line that took us into the devastating General Election of 2015.  Some members wanted a fairer society that would support a stronger economy but regardless of which way we place these adjectives and nouns, it’s still unachievable without liberating the UK economy from our five major banks.

As long as our five big banks have the power to create money when they make loans, and lend it back to us at a profit, it is very difficult to see how our economy can achieve anything other than consolidating wealth into the hands of a few.  The Bank of England (BoE) and business generally is having less and less influence on how our economy expands and grows. Not only do we need to challenge this ‘status quo’, we need to radically overhaul the system and liberate the banking monopoly so that our economy functions to support our marketplace.

Properties in London have been sliced and diced according to an economic system that is essentially controlled by five big banks and this has overly inflated prices – driving up rents and sales. Homes for families are now filled with rooms for rent that are advertised as flats. We have less than 20 square meters for a bed, cooking and toilet facilities and are charged £800 per month rent. Generation rent (typically graduate students), are unable to save to buy a home due to ‘market rents’ sucking every penny from their incomes.

Posted in Op-eds | Also tagged , and | 97 Comments

Opinion: There is a reason banks aren’t lending enough to small businesses – the regulator is to blame

Lloyds Bank, Leighton Buzzard - Some rights reserved by dlanor smadaSince the banks were ‘bailed out’ with taxpayers money, a regular refrain from across the political divide has been that the banks are doing decisive harm to the country by refusing to lend to small businesses.

If this refrain were accurate, banks would be denying capital to the businesses that create the jobs to engender a sustainable recovery, instead choosing to deploy the capital in complicated financial instruments that create little value, or pumping up housing markets, or in paying enormous bonuses to bank employees.

This latter is an argument that Vince Cable in particular was vocal in espousing, and as soon as the real state of the bonus culture, now much more shares based than cash based, becomes apparent, he will doubtless claim the credit for that.

Posted in Op-eds | Also tagged | 20 Comments

Opinion: Underpinning local enterprise through the banking system

Despite a last minute attempt to scrap criticisms of the big banks, the Lib Dems are now committed to a powerful programme to create a diverse local lending infrastructure in the UK.

And most important of all, thanks to the Rebanking the UK debate yesterday, the Lib Dems are now clear about how this great diversification is going to be achieved.

The big banks are going to pay for and mentor a new infrastructure of local banks, which will be geared up – and with the expertise they need – to lend money to a new UK mittelstand, the UK small and …

Posted in Op-eds | 6 Comments

Vince on Scottish independence: RBS would ‘inevitably’ move to London

It’s not often we hear from the Lib Dem business secretary Vince Cable on constitutional matters. But today he appeared before Parliament’s Business, Innovation and Skills Committee to discuss the implications for business of Scottish independence, ahead of September’s referendum. Here’s what he said (via the BBC):

RBS would “inevitably” move its headquarters to London if Scotland votes for independence, UK Business Secretary Vince Cable has claimed. Mr Cable told a committee of MPs that the bank would want to be based where it was “protected against the risk of collapse”. …

William Bain, Labour MP for Glasgow North East, asked

Posted in Parliament and Scotland | Also tagged , , , and | 4 Comments
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  • User AvatarRichard Underhill 26th Jul - 1:24pm
    Nigel Farage to join us? Save the story for 1/4/2018. He should be grateful that he lives in democracies such as the UK, Germany and...
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    David Raw and Mathew Huntbach Why don't you read what is written then comment instead of make up what you think I say ! I...
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    A gift for cartoonists. One I saw a few years ago showed a bearded old man leaving a house saying "That is the last time...
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    David Raw: I think many Liberal Democrats will be surprised to learn that the party no longer believes in free markets, open competition, consumer choice...
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    OK so Bill has joined us in spite of his right wing views. It's obvious from his post that he needs educating in what Liberalism...
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    Luke, you are very welcome. It is no surprise if intelligent people from either of the major parties have realised in the last year that...