[Marxism] It's time for banks to bow to the government!
durable at earthlink.net
Mon Apr 6 23:21:26 MDT 2009
It's time for banks to bow to the government
Banking should be in the hands of the one entity that has a duty to act
in the wider interest – the government
This article considers who profits from the creation of money.
And it mentions that "Despite all the evidence to the contrary, they
("leaders") are still convinced that the major decisions in the economy
should be taken by banks – or the private sector more generally – rather
Socialism is on the rise.
"privately owned banks have been allowed to develop a virtual monopoly
of credit creation for more than 200 years". Gould got a hard time in
the thread for his suggestion that "only governments have the capability
and the duty to act in the wider interest" in respect of money issue. In
a properly functioning democracy, governments would represent the
interests of the majority of citizens. As things stand, they don't. This
helps explain why bankers are given a license to create money, and are
then bailed out when their actions bring the economy crashing down,
while the rest of us face a pay freeze or redundancy.
Ann Pettifor is right: nothing in that lengthy communique suggests the
G20 is prepared to engage with the underlying causes of the financial
crisis, nor the chronic instability and injustice that characterise the
current economic system. Chief among these is the deeply flawed
mechanism by which money is created.
Mainstream economists like Joseph Stiglitz are calling for a new
financial architecture, but none acknowledge that the monetary system,
and in particular the way money is created – as debt by commercial banks
– dictates the way that architecture functions. Cif contributor Chris
Colvin recently described the idea of monetary reform as a "wacky fix"
and an "extravagant idea that involves removing the ability of private
banks to create money and forcing them to adopt 100% reserve banking".
Yet the respected alternative economist Herman Daly wrote recently: "I
would certainly advocate 100% reserve requirements for banks (approached
gradually). All banks should be financial intermediaries that lend
depositors' money, not engines for creating money out of nothing and
lending it at interest."
Daly's argument for movement towards a just and sustainable steady-state
economy offers a comprehensive solution to the current crisis. Colvin,
by contrast, follows a long tradition of economists for whom the
parameters of the discipline are set by academic orthodoxy.
Colvin's principal complaint – that unless banks are able to create
money through traditional means there would be insufficient cash in
circulation – misses the point completely. Cash comprises just 3% of the
money supply. The rest exists only as entries in banks' electronic
ledgers. If banks can create electronic money at will through the
process of fractional reserve banking, why shouldn't a democratically
accountable central authority do the same. In this paper for the New
Economics Foundation, James Robertson and Joseph Huber argue that
central banks should determine the quantity of new non-cash money. Under
their scheme, the central bank would credit new money to the government
as public revenue which would then be spent into circulation.
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