Whenever there’s a big decision to make about the future of the UK, the news cameras
will be focused on the people in Parliament.
But here’s a question for you; what if those news cameras are pointing the wrong way? Do
politicians really have that much power these days? And if they don’t, who’s making
the decision that really affect the UK?
You’ve probably heard the idea that money is power. If that’s true, then imagine how
much power you’d have, if you could CREATE money.
Now this might be hard to believe, but there’s a small number of private companies that effectively
have a licence to print money. They’re commonly known…as banks.
In fact, 97% of all the money that exists in the UK was created by banks, effectively
from nothing, through the accounting process they use when they make loans. That might
sound strange, but it’s what the Bank of England - the government’s own bank - actually
says:
“When banks make loans they create additional bank deposits for those that have borrowed
the money”
Those ‘additional deposits’ are actually just the numbers - or money - that appear
in your bank account when you take out a loan.
But surely it’s illegal to print money? Well, yes - if you start printing your own
£10 or £20 notes at home, then pretty soon you’d find the police coming through
the door.
But for banks it's much easier than secretly printing £10 notes: they simply have to
type the numbers into a computer system.
It’s those numbers which make up the electronic money that we use to pay for the vast majority
of the things we buy.
So if we’re using electronic numbers that were created by banks as money, why isn’t
it illegal to create those numbers, in the same way that it’s illegal for you or I
to print paper money?
Well, the law that makes it illegal to print paper money was written way back in 1844.
But that law only covers notes and coins. It’s never been updated to take account
of the fact that almost all money now is electronic, even though those numbers now make up 97%
of all the money that we use.
That leaves banks with the power to create and allocate the country's money.
And, despite the fact that the abuse of this power caused the financial crisis, there has
been no debate in Parliament, no questions raised by government advisors, and no action
to take this ability to create money away from the banks.
So if we really want to know where power really lies in the country, we should be pointing
the TV cameras at the City of London, where the big banks are based. Since those banks
have the power to create money, they have more power to shape the UK economy than the
whole of our elected government.
Let me explain.
Every year the government spends a huge sum of money; over the 5 years before the financial
crisis started they spent a total of £2.1 trillion pounds - that’s £34,000 for every
man, women and child in the UK.
But in the same 5 years, the banks LENT a total of £2.9 trillion - nearly 40% more
than the government spent.
Where the money from government goes has a huge impact - whether it goes to schools and
hospitals or paying for wars can affect the type of country we live in.
But whilst there’s 650 MPs, elected by us, who have some power over how the government
spends our money, the 5 biggest banks in the UK have only 78 board members, and only around
20 of these actually make the key decisions.
So if these 20 people decide that they should stop lending to businesses and entrepreneurs
and instead lend as much money as possible to people who want to buy houses, then house
prices go up but the small businesses that employ half of all the workers in the UK can’t
get the investment to help them grow.
And the priorities of this small group of people can determine whether house prices
soar out of reach, whether stock markets - where most people’s pensions are invested - are
destabilised by speculators and traders, and whether the businesses that we rely on for
jobs are able to make investments…or have to make redundancies.
Is it really a good idea to leave the power to create and allocate 97% of all money in
the hands of so few people? This doesn't sound very democratic. After all, banks are
not concerned with the prosperity of society; they’re obliged to be more concerned about
the profits of the company. But as we’ve seen over the last few years, what is good
for the bank is not always good for everybody else.
So this is the situation today: banks have to power to create and allocate money without
no accountability to the people, and no responsibility for the effects of their actions on our society
and economy.
And when the abuse of this power to create money leads to a recession and financial crisis,
the government has to step in to stop the whole thing collapsing.
This means the taxes we pay are diverted from schools and hospitals, and instead used to
rescue banks, along with their profits and bonuses. This leaves everybody else with higher
taxes, fewer services and less say in how the country is run.
So what do we do to save our democracy from the big banks? Well, it’s simple. We need
to take back the power to create money away from banks, because they simply can’t be
trusted with it.
So we need to make sure that the power to create money is protected from abuse; that
everyone knows who has this power and what they’re doing with it. Instead of leaving
that power to create money in the hands of profit-seeking bankers, we need to make it
transparent and accountable, and make it work in the interest of ordinary people. It is
possible, but it means we have to stand up to the lobbyists working for the banks, who
spent £98 million influencing government in the last year alone. And we need to make
sure that politicians don’t let democracy fail simply because they left something as
dangerous as the ability to create money in the hands of the same banks that caused the
financial crisis.