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Ring-fencing banks is not the answer

September 4, 2011

The chancellor, George Osborne, is to give government backing to the ring-fencing of high street banks’ operations in an attempt to minimise the risks of a second financial crisis.

 No stranger to this website, Gillian Swanson [opposite] has responded to a Telegraph article with an analysis which surely would have interested banker and monetary reformer Thomas Attwood:

”Though ring-fencing might provide temporary first-aid to our moribund economy, experience shows that, over time, the financial sector will always find a way to get round regulations.

”As long as banks retain a virtual monopoly over the issue of new money, they will continue to shape the economy according to their own priorities.

”What other enterprises are able to draw the bulk of their profits not by offering genuine products (despite recent attempts to bestow this honorary title on what are, in fact, merely financial deals), but by conjuring up and selling purchasing power to the nation, at the risk and expense of individuals, businesses and government?

”What other enterprises are in a position to decide who shall benefit from the first use of brand-new money, and for what purposes?

”As Sir Josiah Stamp (President of the Bank of England in the 1920s) said, “Bankers own the earth.  Take it away from them, but leave them the power to create deposits,” (ie, new money) “and with the flick of the pen” (nowadays a tap of the keyboard) “they will create enough deposits to buy it back again.”

”The answer is not ring-fencing, but legislation to update the Bank Charter Act of 1844 to cover the issue of money in all its forms.

”Deprived of their present licence-by-default to create virtually our entire money supply, creaming off compound interest at source, banks, like other businesses, would be restricted to trading with money which was already in existence.

”What a pity that members of the Commission on Banking were incapable of understanding the recommendations submitted to them jointly by Positive Money,  the New Economics Foundation and Professor Richard Werner of Southampton University!

Fortunately, increasing numbers of ordinary people are managing to grasp what is apparently beyond the comprehension of the Great and Good, and are beginning to question the entire rationale of an economy based on exponentially increasing debt.

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