Democratise the money supply to save the planet

It seems like nowadays that every person and every country in the world is in debt. Ever since the financial crisis in 2007-8 which began with the collapse of investment bank Lehman Brothers, world leaders have been frantically trying to save other private banks and financial institutions from failing by pumping trillions of dollars onto their balance sheets and the wider economy. In the United Kingdom, Gordon Brown spent a total of over £1 trillion, which was the same as 31% of GDP in March 2010. In the United States of America, the government at the time committed an incredible £9 trillion to support Wall Street (source New York Times). By socialising the losses of the private finance sector, there are now sovereign debt crisis across Europe, which threatens the membership of the Euro currency and even the European Union itself.

Which begs the question - why did we have to spend all this money, which would have been better used on preventing the looming catastrophes of peak oil and runaway climate change? What makes private banks so special?

To cut a long story short, we are in this debt crisis because of our deeply flawed banking and monetary system. In 2012, private banks create 97% of the money in the economy as debt, whilst the government only creates 3% in the form of coins and paper money. Until this system is fixed, we will continue to spiral further and further into a debt crisis, instead of focusing on fixing the environmental crisis and other problems facing our country.

In the United Kingdom, the publicly owned Bank of England has a monopoly on creating coin and paper money, which it prints each year and circulates into the economy. This is good news, as the Bank of England, and by extension the Treasury, earns 'seigniorage', the profit difference between the cost of the paper and its value (i.e. twenty pounds for twenty pound note). In 2008, the profit to the Treasury from this was £2.33 billion, money which gets spent on public services or reducing tax. 

However, the Bank of England does not have a monopoly on creating electronic money, which private banks can legally create every time a customer opens a current account with them or applies for a mortgage. As Martin Wolf, the chief economics editor at the Financial Times puts it, 'The essence of the contemporary monetary system is the creation of money, out of nothing, by private banks’ often foolish lending.'

This is bad news! Private banks are owned by private shareholders, and are run for profit. It isn't in their interests to make sure that money is spent on productive businesses, good jobs, environmentally friendly projects, etc. It's in their interests to create as much money as they can and invest it in the most profitable sectors they can, which tend to be property (hence the housing bubble and subsequent crash) and environmentally destructive but very lucrative projects such as coal power plants, oil rigs, the tar sands projects in Canada and other nefarious schemes. As customers, we have no say over where our savings, or what should be *our* money supply, is invested.

Luckily, there is a solution. The monetary reform campaigning group Positive Money have been raising this issue for several years, and have even drafted legislation which would take the creation of money away from private banks and put it back under the democratic control of the government. You can learn more about this issue on their website, as well as on this one hour documentary called '97% Owned'.

Even better, as you are (hopefully!) a member of the most democratic political party in England & Wales, you can make it Green Party policy today to reform this system. I have submitted a motion to SOC to amend current Green Party policy EC661 to the following motion:

Synopsis:

97% of all money in the UK is created by banks. Our government prints bank notes and coins, but private banks create electronic deposit accounts. This state of affairs drives unsustainable growth and is the root of our debt crisis. This is damaging and unnecessary, and should be changed.

Amend Policies for a Sustainable Society EC661 in its entirety with the following motion:

Motion:

The Green Party will remove the ability of banks to create money and lodge the power and responsibility of creating new money solely with the state. New money will be created when necessary by the Bank of England, as determined by the politically-independent Monetary Policy Committee, and credited to the Government for use as Parliament sees fit (see EC676). Banks will not be able to lend money in customer's current accounts, effectively moving to a full reserve banking system. Customers current account money will be 100% safe, as opposed to the current fractional reserve banking system where we have to bail out banks. Banks will be permitted to lend money in savings accounts that they hold on deposit for a fixed term, but only for the duration of that fixed term or notice period. The emphasis in monetary policy will be to control and redirect the creation of money towards socially and environmentally sound areas of the economy, and away from unsustainable and consumption-driven areas.

If you want to support this motion, please email soc@greenparty.org.uk today and write something like:

"I would like to support the motion below proposed by Daniel Key. 

Text of motion (above)

Name: 

Local Party:

Postcode:

Membership Number (if you have it)"

Please do this ASAP and ask your colleagues/friends to do this, and together we can regain control of our money.

Please use the comments box below to ask any questions you may have about this issue or the policy motion.

Written by Daniel Key

Haringey Green Party