Time to update and adapt the Bank Charter Act of 1844: James Skinner
James Skinner is an economist actively engaged in renewable energy and sustainable transport initiatives, working through his own companies Bristol Electric Railbus Ltd. & Sustraco Ltd., a trustee of the New Economics Foundation and the Organic Research Centre at Elm Farm. He has extensive previous business, economic and agricultural development experience overseas, particularly in Africa, co-founding Action for Conservation through Tourism and, later, founding The Travel Foundation..
Thomas Attwood would have appreciated the letter he wrote to the editor of the Financial Times, on December 26:(extract):.
“Sir, How right you were to remind us that banking is a “utility … [whose] proper role is simply to channel capital from those with savings to spare to those with investments to fund” (“Banks must learn from past scandals”, editorial, December 17).
“But as your distinguished financial correspondent Martin Wolf has pointed out in an often quoted comment: “The essence of the contemporary monetary system is creation of money, out of nothing, by private banks’ often foolish lending” (November 10 2010).
“Is it not time now to call for the UK’s 1844 Bank Charter Act to be updated, to adapt it to the electronic age? That act made it illegal for private banks to create new money, which, in those pre-electronic days, just meant printing notes. Today, banks dodge this prohibition by creating money electronically, in the form of credit.
“Only some 3% cent of the money supply is now issued in the form of notes and coins, but this still brings in a multibillion-pound profit, or seigniorage, to the state.
“By creating new money itself, the private banking sector is able to enjoy a far greater benefit from the seigniorage arising from the remaining 97% of money in circulation”..
As James Skinner points out, under the terms of the 1844 act, prohibiting private money creation, this benefit would go to the state, reducing banking margins/bonuses and the UK government’s austerity programme.