Report by the James Gibb Stuart Trust:
- Almost 300 people attend sold-out event
- Biggest money reform gathering in our lifetimes, worldwide
- Second ‘foundation stone’, the 335-page book Modernising Money released; diagnoses the illness, prescribes the cure
9.15am, Saturday, 26 January 2013, it’s a crisp, clear morning, and close on 300 people start arriving at Conway Hall, Red Lion Square, London.
It’s the biggest Money Reform meeting anyone attending has ever seen in their lifetimes.
The event began at 10am with a 5-minute video compilation of the best parts of Michael Meacher Labour MP’s and Steve Baker Conservative MP’s comments at the October 2011 Conference.
Positive Money’s Progress So Far
Ben Dyson then spoke on the progress so far, and “brought us up to speed” with what had happened. He stated that when Positive Money started out, around two and a half years ago, they were faced with disbelief when they pointed out that banks create money. This motivated the group to help produce the book Where Does Money Come From, the second edition of which is out now. The book, he said, had recently been mentioned in the Financial Times.
“We’ve been arguing for two and a half years that the financial crisis was caused by banks creating money”, and so it was good to see Lord Adair Turner say, “The financial crisis of 2007/8 occurred because we failed to constrain the private financial system’s creation of private credit and money.”
He quoted from Conservative MP, Jesse Norman, who is on the Treasury Select Committee: “Commercial banks have an even greater power than that: They have the power to create credit – that is, money – by expanding their balance sheets.”
He also mentioned the IMF working paper by Jaromir Benes and Dr Michael Kumhof as evidence that these ideas are getting noticed.
Positive Money have trained up 70 people to speak on the subject in the past year. Ben has spoken in the Houses of Parliament, and the Welsh Assembly. There is a forthcoming event in the Scottish Parliament in February, and he will be speaking to the Icelandic Parliament later this year. Positive Money’s videos have been translated into 11 languages.
He stated that the focus for today would be “the big question – how do we get to critical mass?”
The Problem of Debt-Based Money
He then introduced Miriam Morris, Positive Money’s Campaign Director, who led us through a session on the strategy of the campaign.
See the interview with Miriam Morris here:
It was then time for the first break-out session ”Know Your Audience”, in which each table was discussing one of the key audiences like Businesses, Students, NGOs, Academics etc. During this session everyone had the opportunity to contribute to the day and get their points noted.
This had the effect of making best use of all the brain power which had been gathered together.
The Solution: Modernising Money
Ben gave a brief history of money in the UK, pointing out that when banks realised they could create banknote money it started to cause instability. Sir Robert Peel’s government passed the Bank Charter Act in 1844, which stopped creation of banknotes (but crucially not the money banks create by making entries in their ledgers). In fact, said Ben, “The law which governs how money is created is close to 170 years old. Most of the money in our economy comprises liabilities in the form of bank deposits. 3% is covered by the law. 97% is not covered by the law!”
Positive Money, and the book Modernising Money, make clear that the central bank cannot control the money supply. Ben quoted Mervyn King as saying that for 50 years they, the central bankers, “struggled” to control the money supply.
As Ben said, in the battle between the private profit motive of the commercial banks, and the public interest motive of the Bank of England, the private profit motive has won out every time.
How has this come about? The banking system has simply “evolved” over time, said Ben, and there has definitely been “no sign of intelligent design!”
We have a system built on sand, he said. We have to wipe it away and build something on firm foundations. The money system is just a collection of rules, and laws and computer systems. It is really easy to change. “This is just an artificial monetary system” and we cannot let ourselves be distracted by the big challenges which face us in the coming century, simply because of this artificial system.
How do we change this? We have the solution. Ben ran through the following steps, which are also explained in depth in Modernising Money:
- We remove the power of banks to create money.
- We return that power to a transparent and accountable body.
- We create money free of debt. This, said Ben, is one of the most fundamental points of the book. Under the present system, more money means more debt, and less debt means less money. What we need is less debt and more money – which is impossible under the current system. However, this reform separates the creation of money from the creation of debt. It changes the system and allows debt to be reduced at the same time as new money comes into society, if necessary.
- We create money only when inflation is low and stable. Under the present system, the banks’ privately created money always leads to too much money and a bubble.
- We can put this money into the real economy via spending on public services, lowering taxes, paying down the national debt, or giving to people in other ways.
- The reform also requires banks to declare where they invest their customer’s money, giving transparency and customer control over the customer’s investment priorities.
Ben ran through the usual objections, which are becoming easier and easier to answer.
Is it inflationary? Well, which of the two is most likely to cause inflation? Banks which stand to benefit from money creation because it is profitable, or an accountable and transparent committee whose intention is to stop inflation happening? Furthermore, as Modernising Money points out, all hyperinflations have been preceded by an economic collapse, or political collapse or war, and are not the consequences of publicly-created money, per se.
Would it restrict credit? There has been no modelling done to back up such an assertion. It was “a knee jerk reaction”, said Ben, based on a poor understanding of how the system works.
Would it harm “Britain’s best industry”? Not true! The year the banks paid the most in tax, manufacturing paid 3 times as much. Banking only employs 1 in 53 people. There is nothing personal here, stated Ben, it is the design of the industry that is at fault. It is not about the people in them, it is about changing the rules under which these companies operate.
Ben ended by addressing the benefits of stable money, falling debts, and house prices which will remain stable until earnings have caught up. He pointed out the ridiculousness of the government borrowing 2 billion on the PFI system for schools – money which has been created by private banks – instead of it being created debt-free by a public agency.
It was now time for lunch, which was provided by Hackney Growers Kitchen
The afternoon began with a pre-recorded video message from Green Party MP, Caroline Lucas, who stated that how we spend money and how we create money has an effect on the environment. She described Positive Money as an “incredibly important campaign for a new system of money creation.”
That was followed by a panel discussion with Emeritus Professor of Economics Victoria Chick, and Patrick Chalmers, a former journalist with Reuters.
Why Don’t Academics Understand Money?
Prof Victoria Chick addressed the question: “Why Don’t Academics Understand Money?” She said there has been a regression in the way economics has been taught. The question has to be treated in two parts, due to a split in the way money is talked about in academic economics. She suggested that “money and banking” was treated differently from “macroeconomics”. Money and banking was seen as on the fringe somewhat, “a frivolous option”. Keynes said, when he was writing the General Theory, that he thought that what he was writing would revolutionise the way the world thought. He had a theory where “money permeated the entire economy”. In modern economics, though, the role of money is separated from the whole analysis. “We’ve regressed to pre-Keynesian economics,” she said.
She said that economics thinks of itself as uncovering universal truths rather than being based in the context of its time. For example, the quantity theory of money is based in a historical period where gold was a major factor.
When she was a student in the late 1950s, she said, it was widely understood that loans create deposits. Now students are told that deposits create loans, which is wrong.
Much of neo-classical economics “regard banks as glorified safes.” However, “banks do not lend money” she stated. They don’t have a pot of money that they are passing on.
It is the ability of banks to create money that led Keynes to say that investment came before savings. “If macroeconomics is going to regress to pre-Keynesian form, so will our understanding of banking and money…what our great heroes [Positive Money] are trying to reverse.”
During the Q and A, Victoria expanded upon her main points. To a question about whether some academics were being “bought off”, she replied that there is something that “seeps into the veins of academia” rather than people being deliberately “bought off”. Although some had been “bought off” she said, if you’ve seen the film, Inside Job.
There is also social pressure to conform, she said. “You are just not part of the gang” if you don’t go along with the dominant ideology. She thought that it can also depend upon where you are from. Economics grew up in Britain and to an extent its role was to explain the relationship between the developed world and others, so economic theory is also geographically situated. In that sense, some economic theory simply does not obtain in certain countries. She also said that economics does not see itself as “historically situated.”
Why Doesn’t the Media Understand Money?
Patrick Chalmers, author of Fraudcast News: How Bad Journalism Supports our Bogus Democracies asked, “Why Doesn’t the Media Understand Money?”
He used to be the London Markets reporter – on precious metals and FTSE – for Reuters. He asked first, “Why didn’t I get money?” Answer, “I didn’t have to! But I didn’t know I could get it, no-one was asking me to get it, and my day-to-day job was trying to find out what a derivative was and how it related to gold.” As an aside he pointed out that “the gold business is an absurd business – digging up big holes in the ground for little bits of metal, and displacing indigenous people.”
He also pointed out that his readers at the time didn’t want to hear a lecture on money. They only wanted to know how their investments were doing.
He listed some further reasons, but was keen to stress that this was his subjective view and did not constitute “a definitive answer”:
- Journalists are no smarter than the rest of us.
- They flock to those in power – and he said, “power” can also be expressed in terms of huge amounts of wealth, rather than a formal position.
- It’s not in the interests of those in power to speak to journalists about how money is made and its consequences.
- They are under no pressure to understand from editors (who don’t understand either).
- The audience isn’t clamouring to understand where money comes from. They might not even know that they do not know.
- They are understaffed and under pressure, which leads to fast writing. This situation doesn’t lend itself to deep thought.
- They are pack animals, there are few real contrarians.
- They have their own ideology – which is often that of the paper.
- Fear of backlash (flak).
What we can do, he said was to monitor them, critique errors and omissions, lobby to improve coverage, and find and share alternative media. We can also become the media. We can learn how to be the media ourselves. We can self-educate, stage film screenings and debates, champion local innovation, and engage in citizen journalism.
The point of journalism, he said, should be to serve society, not to sell products. He ended by thanking Positive Money: “I think the way they are approaching this is spectacularly powerful. It is incredibly important work!”
The campaign director Miriam Morris then spoke on the Campaign this year. We are not, she said, a debating society. We are a campaign for debt free money. We want to change something. Our aim is to achieve legislative change and to persuade all the political parties that it is a good thing.
Positive Money is very much “apolitical”. It aims to build a sustained demand for change from mainstream voters, especially those who swing elections. Politicians will listen to those who vote and change the outcome of elections. Miriam wants to focus attention on developing the clear messages which can be communicated easily.
She then went through a very transparent explanation of Positive Money’s finances, pointing out that it is doing a lot of work on the underlying illness, rather than the symptoms upon which many extremely well-funded NGOs spend their money.
She also spent time explaining the overall strategy towards the “critical mass” which Ben had mentioned at the start of the day.
- Involving our very committed supporters
- Use of technology – the tools of social media, citizen journalism, YouTube, online training
- Involving existing groups and organisations
- Taking advantage of the financial crisis! People are looking for answers…
The two books Where Does Money Come From and Modernising Money have “given us a real foundation.” The next step is working on the key messages and may involve market research to get the messages right for the various audiences. The website will also be re-designed, she said, and she quoted impressive viewing figures for the web pages. Positive Money is looking for £30,000 a year to develop its online materials. Almost half its funding comes from individual’s direct debit donations.
Positive Money team is very keen to involve all its supporters who have the ability to, for example:
- Use social media
- Create videos and music
- Build links with NGOs and campaign groups
- Run local and international groups
- Do the training and become Positive Money presenters
An aim is to make debt-free money a talking point at the 2015 General Election.
The discussion tables addressed the topics Research (academic, statistical, historical, theoretical), Media/policy monitoring, Links with NGOs and other campaign groups, Local groups (including international), Social media, web optimisation, viral marketing, blogging, Videos etc.
Then, Prof Emeritus and former Senior Economist at the World Bank, Herman Daly, gave a pre-recorded message by video. It was his opinion that fractional reserve banking pushes “anti-economic” growth. The fact that we have had such meltdowns should make the public eager to seek some kind of reform, he believed.
Speaking of the Positive Money proposals he stated that it has “in great detail laid out a very nice set of plans and institutions and I really congratulate you on that.”
The final pre-recorded video was from John Perkins, the author of Confessions of an Economic Hit Man. He regarded the Positive Money proposals as, “An important part of creating a just world.” We are, he said, at an amazing time in history. We have “tremendous power”. The way we choose to relate with our credit card, how we shop – “that is a vote”.
He urged us to “dream, mediate and pray, and take action. Look to your actions and take action every single day. Let’s turn this around.”
The videos from the presentations will be released in the next few weeks.
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