The Free Lunch

Credit creation: The dangers of the privatised money supply

2012-01-26T11:25:00.003Z

Martin Wolf's article in the Financial Times 25 Jan The World's hunger for public goods highlights what must be provided (usually by the state) so that society can progress. He says free markets cannot provide on their own such public goods as security, an educated population, public health, law, infrastructure, et al. Public goods are ever more needed with progress.

He writes that, unfortunately, the free market economy as we know it, is unstable through the ability to expand credit without limit at zero cost. This credit expansion determines the money supply and thus: 'instability is baked in the cake'. Economic stability is a public good that does not happen by itself. Wolf points out that the dire economic consequences we are suffering are a good reason for government intervention. He backs this with reference to Milton Friedman. He quotes Tyler Cowen (author: The Great Stagnation) on how to fund public goods.

We are allowing endemic instability to continue because we are not challenging the fundamental premise of the banking system: the private creation of the money supply. A very few private individuals (top bankers) are personally profiting because they are allowed to play with this dangerous toy which produces an unstable financial system for us all, characterised by booms and crashes. Where is the open debate that government should take control of the creation and allocation of the money supply?

Is economic stability as fundamental as clean water, or not? If an epidemic developed through an infected water supply an emergency would be declared to get to the root of the problem and stop it happening again. Is the mis-allocation of credit so slow acting that it is obscured as a cause? Maybe public discussion is suppressed? Become enlightened: Link to Prof Richard Werner's short YouTube video interviews on credit creation, the money supply and how a new stability could be found.

The book The Free Lunch - Fairness with Freedom examines the interfaces between the individual, the market and the funding of public goods. To buy see Amazon.

Monetary Reformer in House of Commons

2012-01-23T12:54:00.001Z

Ben Dyson and Positive Money have posted a YouTube video by Steve Baker MP Wycombe showing how most people don't understand how money works and what he doing about it. Good news that such a good communicator is in the Commons.
See also Ben Dyson: this recent YouTube interview shows what is happening on the monetary reform scene in the UK.

A policy roar for Ed Miliband?

2012-01-11T11:43:00.000Z

The Citizen's Income Trust (CIT) has just published its latest newsletter 2012-1 at http://www.citizensincome.org/
From the website:
'One of the reasons for current interest in a Citizen’s Income and in benefits reform generally in UK is that at the moment there is little financial incentive to take a part-time job, even if that would fit with someone’s caring responsibilities. With a Citizen’s Income the situation changes considerably, to the advantage of the household’s income, carers’ ability to care for dependents, and the economy'.

Read more about the Trust's researches into various levels of the Citizen’s Income:
'which is an unconditional, non-withdrawable income for every individual as a right of citizenship...
'Both of these schemes are revenue neutral, that is, the income tax rate won’t need to rise...

The CIT is a tireless promoter of this reform which any politician who wants to gain some leadership for positive thinking could surely dare to openly welcome? They say that Ed Miliband is struggling for a cause that would identify him as the originator of it, (apparently some of his ideas are being taken on by the Coalition and even acknowledged as theirs by voters).

Lord Glasman in the New Statesman (9 January 2012) writes 'Ed is going to have to show some leadership and courage'. What's holding Ed back from calling for a Citizen's Income? Might Ed 'Timidband' disprove the 'overcautious' summary of his first year as Labour leader with a policy roar that would out-trump Iain Duncan Smith's welfare reforms and identify Ed M with every citizen? and help the ailing economy to boot?

In the book The Free Lunch - Fairness with Freedom the Citizen's Income is called the Citizen's Royalty which gives the idea of a right to something that actually originates with the citizen. LINK: Read the book and follow the reasoning.

posted by Charles Bazlinton

McCarthy & Stone: Bad timing in property deals

2011-12-30T15:21:00.001Z

McCarthy & Stone is a privately owned company which builds retirement homes. A news item in the FT today McCarthy back to profit after housing crash   tells another interesting story of mis-timing in the property market (see this blog for April 5th, 2011 about Taylor Wimpey).

Dorset Business (March 2009) reported that in 2005, the business traded at a value of under £600m on the stock market when during that “boom time” it was selling 2,000 units a year. It was taken into private ownership for £1.1bn in 2006 by a consortium led by HBOS which included property investors Simon and David Reuben and Sir Tom Hunter (Josephine Moulds, Daily Telegraph  29 Jan 2007).

In 2007 Building.co.uk reported that HBOS was looking to sell most of its stake in McCarthy & Stone just five months after the above £1.1bn deal. HBOS needed the cash to buy housebuilder Crest Nicholson in early 2007. This was at about the peak of the property boom and whilst good timing for the sellers of McC & S and CN shows that some of the big shots on the buying side had not read or heeded what Fred Harrison with his analysis of the 18-year property cycle had written: such as The Power in the Land 1983; Boom & Bust 2005; Ricardo's Law 2006.

McC & S was lumbered with massive debt taken on at the time of the 2006 deal. They had to stop construction for a year from mid-2008. Michael Ball who in 2009 was McC&S's Chief Financial Officer is reported in the FT as saying at the time: 'in 2006 the group had not expected such a severe housing crisis' . Click on the link for a review on Fred Harrison's later book 2010 The Inquest . Essential reading for politicians and property people.

posted by Charles Bazlinton. The Free Lunch - Fairness with Freedom which deals with land and property issues

Un-addle the brain on banking

2011-12-29T15:12:00.002Z

George Hollingbery is a UK Tory MP from Hampshire. Recently, he expressed some unusual points of view in a Portsmouth press article . 'I admit that I'm having doubts about capitalism'. Hollingbery has created and run some successful businesses, but is 'increasingly sympathetic to those who protest about capitalism and, in particular, bankers'. He is in a dilemma about banking wealth-creation compared with ordinary wealth-creation. His problem is summarised: That a banker can earn more in a single year than he was ever likely to sell one of his businesses for despite lots of hard work and providing work for others.

Amid all the anti-banker background noise very little is articulated about the banking system that enables bankers to reward themselves so grandly. The media don't know or won't tell, but it really is quite simple.

1. The private banking system has grasped for themselves the monopoly to provide the national money supply.

2. This allows bankers to create a fountain of credit for any profitable venture that they spot. As they hit the computer keyboard and create the currency for the credit a little more of the money supply is made. The banking books instantly balance (loans to match deposits) because the loan they create ends up somewhere in the banking system as a deposit.

3. Banks charge interest on the loan and so a spout of profit gushes from the original money fountain.The bank may also share in the profits of the venture they lend to. The lending that brought the world financial system to its knees was to highly speculative financial 'products' which exist mostly on computer screens and bear only a tenuous relationship to the real world.

4. In allowing bankers the privilege to make the money supply we have not said 'use this for the common good' - we have let them carry on and meanwhile buried our heads in the sand. This has caused our brains to addle.

5. Summary: Prof Richard Werner says we have never had a discussion about the privatisation of the money supply. Click on this YouTube link.

6. Un-addle the brain:Study the 6 short videos ; go to website Positive Money

7. Buy the book, The Free Lunch - Fairness with Freedom for what could happen if banking profits flowed for the good of to create The Citizen's Royalty or Dividend. Use the 'Look inside' feature: page 131.

8. Look at what George Hollingbery said about The Free Lunch when he was the key speaker at the book's launch.

Werner at Occupy London LSX: Drop university fees

2011-12-21T23:17:00.000Z

Why do students need to pay fees for their university education? Richard Werner a leading international banking professor said at St Paul's Occupy LondonLSX site on 8th December that education could be free of charge if the government followed the no-usury law of the Bible. Werner said that the tax burden of £80 billion per annum for the UK's interest bill is quite unnecessary. Hence the possibility of new wealth through a debt-free interest-free money system.

He wove a fascinating story for an attentive audience in Tent City University. St Paul's bells chimed on, police cars wailed, passers-by diverted into the tent, listened and joined the discussion: 'a wonderful talk' said one; another said he had never heard such a clear explanation of the current economic mess.

Werner surprises you. You think you have understood his drift pretty well and then he slips in on your blind side with a whole new area of understanding and learning that gives dramatic colour to his expositions. Hey! He is talking about banking and money supply of all things! With a fascinating narrative, this time out of English history starting at 1120 AD, he illustrated yet again that unless we tackle at the most fundamental level where we get our money supply from, and how we allocate it, we are doomed to yet further cyclical economic disruptions.

Starting with King Henry I at Winchester and its treasury and hazelwood tally sticks he showed how this created the government money supply without interest. The 'no usury' rule of the Bible, Werner says, means none other than 'no interest'. Forget clever and convenient interpretations like 'no excessive interest'. 'No interest' means: no interest. Then on to the later role of goldsmiths who charged interest on their imaginary loans of gold (actually bits of paper that they declared were as good as the gold which may or may not have been in their vaults), which gradually usurped the role of interest-free tally stick money. Then the usurping role of William from Holland, the deposition of the rightful King James II and, with the help of bankers from Amsterdam, the setting up of the Bank of England in 1694, which consolidated and made fully legal the doubtful goldsmith banking practices. [As Rebecca Fraser has it in 'A People's History of Britain' (Pimlico 2002), with the founding of the Bank of England the country now had very deep pockets to fund the war with King Louis of France who lost and settled up at the Treaty of Ryswick].

Werner touched on the Corporation of London with its ancient rights, unique in England, and confirmed by the same William and Mary in 1690. He said that the Corporation is still a very privileged body based in a money-creating system which makes 98% of our money supply and allocates it to its own profit-maximising ends. This City is a strange enclave that is somehow not really a part of England - the Queen is not allowed to enter the City boundaries without the Lord Mayor of London.

It looks as though the Bishop of London is actually grasping the nettle of this financial cataclysm. He would have gained much clarity from Werner's 'sermon' in Occupy's Tent City University in the shadow of St Paul's that day.
posted by Charles Bazlinton
The Free Lunch- Fairness with Freedom

Richard Werner on the euro

2011-12-14T12:04:00.000Z

Today on BBC Radio World Service Prof Werner reiterates what he has been saying for some time: Countries under pressure such as Greece, Italy, Spain need not get funds at 7% from the bond market when their old bonds expire. The commercial banks of each these countries should lend their own governments funds at 3.5%, by creating the credit for them. Governments need not enter the bond market for funds, the mechanism is already there to avoid this more expensive option.

Werner says that the economic situation is getting muddled with a quite separate political agenda: to advance the power of the EU state. He says that no country in the EU will go bust if the ECB doesn't want it to go bust.
posted by Charles Bazlinton.

FT letter 12 Dec 2011: Debt-free public investment

2011-12-12T11:44:00.000Z

In the Financial Times today:
A debt-free way of public investment

From Mr Charles Bazlinton.

Sir, Just over a year ago Martin Wolfwrote a column “The Fed is right to turn on the tap ”(Comment, November 9 2010) commenting on the likely effect of “quantitativeeasing”. He thought it would be “a leaky hose” and “have a modest economiceffect” and he has been vindicated in the UK.

Despite the Bank of England havingcreated money and massively bought up government debt with it, the hope thatthe cash received would somehow translate into new bank lending has not happened.Mr Wolf also stated: “The essence of the contemporary monetary system iscreation of money, out of nothing, by private banks’ often foolish lending.”

So when is the penny going to drop withthe coalition government so that a public agency is set up to directnewly-created money to productive, non-inflationary purposes? The creation ofsuch money used for new infrastructure in particular could be issued debt-freeand interest-free.

Why on the one hand do we ask privatebanks to provide loan funds, at interest, for public investment, but we do wenot ask the government to direct some of the Bank of England’s new money,debt-free, directly into such investment?

Our current system benefits privatebanks, but burdens us with taxes. Surely we are missing two greatopportunities: to make money creation democratically accountable and, when usedfor public investment, debt-free?

posted by Chares Bazlinton.

Author: The Free Lunch- Fairness with Freedom available on Amazon

Prof Richard Werner, Lord Glasman, Anthony Thompson

2011-12-09T10:24:00.001Z

Yesterday at St Paul's OccupyLSX
Richard Werner's subject was:
The last successful invasion of Britain and how to win the country back
He went on to Hub Wesminster (NZ House) to speak at the Good Banking Forum run by the New Economics Foundation (nef), where

Lord Maurice Glasman gave a key speech. Snippets:

On modes of capitalism

1 Promiscuous

2 Fidelity

On the local banking theme & the real vs virtual worlds

1. Places matter

2. People & relationships matter

Another speaker there was Anthony Thompson Chair of Metro Bank. This is the first new High Street bank in the UK for 150years. In the USA 200 new banks start up each year. Guess what? It is difficult to raise capital for banks in the UK....

Richard Werner at OccupyLSX St Paul's

2011-11-30T12:05:00.001Z

One observation on UK Chanclleor George Osborne's Autumn Statement (leader in The Times) is that there is 'the recognition that the drought in lending is a serious threat to growth'. Let's get back to first principles by quoting from Prof Richard Werner a world leading champion for democratically accountable credit creation.

Note: Credit creation has to happen for lending to happen and for any sort of growth to happen, sustainable or not.

Here is Werner in his book
New Paradigm in Macroeconomics p339-341.
The fundamental principles of monetary policy... are not difficult... : to minimise inflation and maximise real economic growth, credit should be created and allocated primarily for productive purposes. Consumer credit and speculative credit will result in consumer price or asset price inflation and hence should be avoided.

Werner states that the current credit creation institutions may not be the way forward for the above good outcomes:
Allowing privately-owned central banks [e.g. the US FED] , for instance, is unlikely to be the right type of incentive structure to ensure alignment of sectarian and overall interests. But even publicly-owned central banks [e.g.the Bank of England] will not be sufficient, if they can obtain a large degree of de facto independence.
Once the facts of credit creation and its potential are more widely known, democratic processes can be used to decide upon the goals that should be achieved and the most suitable mechanism to achieve them. A clever use of institutional design and credit allocation will allow far more ambitious goals to be implemented than has so far been the case. Not only recessions, unemployment and boom-bust cycles, but also poverty and destitution can in principle be eliminated.

Werner mentions possibilities that a 'democratically accountable credit control mechanism' might achieve:

environmentally sustainble, stable economic growth
environmentally friendly energy sources
the creation of green urban spaces and leisure areas
research and investment in the above
a credit for each child administered for specific purposes such as education

On page 172 Werner summarises some of his researches:
We conclude that bankers had managed to do what kings, emperors and alchemists had failed to do - they were creating money. They had found the philosopher's stone.
p358 note 19
When governments needed money and could not raise taxes further, they believed they had no choice but to borrow from bankers. But of course the bankers were doing nothing that the kings and rulers could have done themselves. ...In the case of lending to kings, this meant that bankers could exert influence on national policies. Bankers were the masters who created and allocated purchasing power.

The world-wide Occupy movement is now rallying support for a fundamental rethink of finance and banking. All Occupiers and supporters have in Richard Werner's findings and suggestions the key to achieving that change. Werner is booked in to St Paul's Tent City University at OccupyLSX for a talk on Thu Dec 8th 11.30am.
(Message to George Osborne: Send a friend to listen in.)

See the Richard Werner interviews on YouTube

Posted by Charles Bazlinton. Author of The Free Lunch - Fairness with Freedom

Occupy Cambridge & Richard Werner on tuition fees

2011-11-24T15:54:00.001Z

Occupy Cambridge students who highjacked David Willetts' address this week at Lady Mitchell Hall might like to look over the following excerpts from Prof Richard Werner's book: New Paradigm in Macroeconomics (Palgrave Macmillan 2005). Werner is Chair of International Banking, Southampton University:

Educational reform, endorsed by neoclassical thinking has saddled students with substantial debt. Psychologists have found that this is a main source of depression among students. (pp14-15)

Werner suggests:

'Every childbearing family could, for instance, be paid $100,000 for each child born,...administered... for specific purposes. Such a policy would not be inflationary: among all inputs into the production function, human resources are by far the most important. Therefore this is the best example of productive credit creation, as long as resources are also spent on a high level of education.' (pp340-341)

If GDP is to grow, education must be encouraged. If education is to grow, students must not be deterred by tuition fees. These were his views during last year's student protests (see this blog for 27 & 29 November 2010):

Richard Werner is an advocate of debt-free money creation by governments with the money created being allocated to ends that will bring productive non-inflationary and sustainable growth. The current way of the world is that banks create and allocate credit according to their own private commercial aims and these often are not helpful in producing sustainable economic conditions – as we have seen since 2007.

The choices we have now are: Do we mend the old broken system with inevitable failure repeating ahead? Or make a new system which would build national economies in as sustainable way? One way to encourage this is to invest in freely available education funded so that it does not involve a life time burden of debt. Better to create state money to help students make their own productive way in life, than let banks create credit to blow away in speculation in volatile assets which is no help in promoting true national wealth.

‘Interest-free’ loans are a little like what we have now where special rates and terms apply to student loans. Werner is not in favour of these (although better than interest bearing loans), as future governments could easily raise interest rates, leaving us with no lasting improvement. What is needed are debt-free grants not needing repayment.

Making you as a student personally liable for high tuition fees is not the only way of funding education. Debt free money can be created for your education. Nothing to pay back and no interest. True.

But the banks won't like it. Also true.
See also Positive Money and look at YouTube interviews with Werner.

Posted by Charles Bazlinton.

Author of The Free Lunch - Fairness with Freedom buy on Amazon

St Paul's London OccupyLSX

2011-11-23T12:22:00.001Z

At the Tent City University outside St Paul's Cathedral, London yesterday I gave a talk with an interwoven discussion from a very attentive audience. The topic was the concept of the free lunches available on this planet. What are they? Who gets them? How might they be shared more fairly?

Firstly: Land brings a huge value for owners. Value accumulates on land because of the particular location of every plot and is driven by the success of the surrounding community. A desirable school will drive up 'house+land' prices in an area so that the very teachers who create the educational excellence cannot afford to buy a home in the area! The value is nothing to do with the owner of any 'house+land' package. All the owner can do is improve the house and so add 'house value'. The taking of some of the land value 'community inspired free lunch' for taxation, in place of income and other taxes is needed for fairness. The community which endowed the value would get value back.

Secondly: Credit is a marvellous device that has been around a very long time. It enables people to plan and enact constructive projects sooner than otherwise. Because of human creativeness and co-operation, surplus wealth leading to human progress is relatively easy to produce. But creation of credit is needed for this. Credit flow depends on a settled society and trust between people - in a war zone where society is hardly functioning, credit would be difficulty to get hold of. Thus the community, like in the case of land value, is the essential source of the credit and not the bank that demands the interest. The government could and should be the source of all credit money, just as it is the source of note and coin money which only comprises about 3% of the money needs. It could grant credit for public investment free of debt and free of interest. It could ban any credit towards speculative activity. Take away these dangerous toys, then the economy would settle productively and a free lunch would flow to citizens through the saving of interest charges paid by goverment to banks as is the case now.

Currently banks merely seize the business opportunity and with the government's grant of their monopoly power create the credit and cook up another debt-laden free lunch for themselves. And look what a mess they keep getting us into! This latest economic collapse since 2007 is merely the worst of many in the history of the modern economy. Many more will follow, because the UK government is trying desperately to get the banks it has taken over, into some sort of shape so they can wreak their havoc yet again.

Some at Tent City yesterday were concerned about governments getting the power to create credit. Surely democratically controlled credit creation and allocation under Parliament must achive a better outcome? [25 Nov: Banks would become retail outlets for local credit needs with credit at wholesale rates provided centrally.]

What will come out of the current crisis? The old wild capitalism again with 'banking as normal'? The rule of dictatorial oligarchs? Or will we reclaim the use of credit creation power back from incompetent banks, back into the hands of the people?

It seemed to me on my first visit to an Occupy site that these people are waiting, they are waiting in some discomfort, but peacefully and they will hear and listen and debate with anyone. They don't look as though they are going away soon. Ultimately they await politicians who alone can initiate a serious search for a solution.

posted by Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom

Richard Werner - new audio download

2011-11-19T11:56:00.001Z

An audio download of the YouTube interview with Prof Richard Werner Banking and the Economy is now available. At The Free Lunch website click on Audio

posted by Charles Bazlinton Author: The Free Lunch - Fairness with Freedom - buy it on Amazon

Occupy London - Big Society in the making?

2011-11-13T15:08:00.001Z

Strange how the challenge of the world-wide Occupy movement has got such a resonance with The Free Lunch - Fairness with Freedom . Look on page 129 of the book (read the page on-line on the link). Written in 2002 on New Labour's 'Big Tent' idea:

This book proposes a different view. Instead of a 'big tent' providing for all the people, we need as many 'tents' as there are people...people need to be asked: How would you like to be empowered? As an individual? As a family? In a group?

Now 9 years later in a fascinating way the individual tents representing Occupiers have arrived there because they have reached the end of the road with the existing financial/economic system with its continuing unfairness. Something better is expected. The Free Lunch has the same theme.

The individuals that make up this movement - it is not traditional party politics - are acting in the free way that The Free Lunch would help make more possible. The book is citizen-centred. Read about the Citizen's Royalty. Despite his recent denials David Cameron needs to look more carefully and see how the Big Society might actually be working out beside St Paul's Cathedral. Perhaps Labour is seeing it first and running with it?

Link to buy the book
Posted by Charles Bazlinton

The amazing Kristen Christian LA USA - lesson for Occupy London?

2011-11-05T22:26:00.000Z

Copies of The Free Lunch - Fairness with Freedom are now in the St Paul's Occupy London Starbooks library. A common theme of press reporting on Occupiers is that 'they don't know what they want'. Obviously not true as far as Robin Smith is concerned, but reading The Free Lunch will show various but connected ways of getting to a fairer society as well Robin's.

You wait for years for a peaceful mass protest for fairness and then two come along at once! Ms Kristen Christian in Los Angeles who owns an art gallery, started a Facebook campaign a few weeks ago calling for 5 Nov to be 'Bank transfer day': DROP mainline banks/JOIN a credit union. In the US 650,000 new accounts have opened for credit unions in 1 month (whole year 2010 = 600,000). Kristen is not affiliated with Occupy but it shows that there can be something extraordinarily powerful going around which chimes well with Occupy.

In the UK, credit unions are hobbled by law and are not permitted to act as full banks - they are people's banks but could be so much more powerful and relevant if given the same powers as ordinary banks. Credit Unions keep out of speculative investment, distribute profits to members & lend small scale at reasonable interest rates but these worthy aims in the UK are severely hampered. Economist and sometime international banker Prof Richard Werner explains in a paper that the UK legislation means that 'they cannot compete on level grounds with banks'.

He says there appears to be a powerful lobby group 'that has been influential in the creation of legislation' on credit unions. He fingers the banks who have a monopoly on the creation of credit and who want to keep this 'most lucrative activity' almost wholly to themselves. Interesting topic for Occupy London.
See YouTube interview with Prof Werner: Banking for the Big Society - means small local banks
Posted by Charles Bazlinton.

Insider's view on Occupy London from St Paul's

2011-11-03T22:35:00.000Z

Robin Smith has been living from his red tent 'Real Reform' at Occupy London at St Paul's for some time. For an insider's view read his blog and catch a flavour of life there. e.g. See Nov 3rd 'Rebirth'.

posted by Charles Bazlinton

The St Paul's debates?

2011-11-01T17:33:00.000Z

The Rev Paul Nicolson in a 6 minute video speech on Saturday 30 Oct addressed the Bishop of London and the Dean of St Paul's Cathedral with a succinct message as to the reasons of economics, finance and the need for just plain ordinary fairness behind the 'Occupy London' protest. LINK HERE.

A couple of hundred tents were erected outside a cathedral a couple of weeks ago. Did Canon Giles Fraser and Dean Graeme Knowles think on October 1st that they would both be out of a job on November 1st? The Church of England is tripping up over its inept handling of the tent village and getting a hammering in the media for not getting it.

A thousand cities worldwide now have protest camps following the first one in Zucchini Park, in the first Occupy Wall Street camp. This is all quite extraordinary according to the ways things usually happen. The movement is overwhelmingly peaceful. These are ordinary people helping each other to make an effective protest. But one centre of power has been found wanting in its handling of what they had assumed to be an easily deflectable disruption. A mere buzzing midge that would disappear with a quick squirt of 'health and safety' legislation sprayed into the annoying situation.

A most disappointing thing seems to be that they did not invite the outside protestors to come inside to debate matters which they seemed to have a common cause about with the Cathedral. What a chance missed not to established modern day Putney Debates of 2011.

Perhaps the Church can regain its poise and display a new momentum for justice and fairness? The Revd Paul Nicolson's speech must be a good place to start. He points out: ' the enormity, the magnitude of the economic injustice that has happened and is happening now' as he says to 'Dear Bishop and Dear Dean'... 'you have lost your sense of proportion'.

Read The Free Lunch - Fairness with Freedom for a reasoned way of solving what many of the protesters are camping out about.

Jonathon Porritt on The Free Lunch: ‘I have indeed enjoyed this book…it makes a really important contribution to a much neglected area of debate within the broader sustainable development terrain...contains very fresh thinking.’

Posted by Charles Bazlinton.

ECOBATE 2011: European Conference on Banking & the Economy (4 - New book on Money)

2011-10-21T21:42:00.000+01:00

One of the several notable features of this conference (Winchester, England 29 Sept) was the launch of a very important book: Where does MONEY come from? (co-authored by Josh Ryan-Collins, Tony Greenham, Richard Werner & Andrew Jackson with a foreword by eminent economist Charles A E Goodhart).

John Maynard Keynes in 1930 bemoaned the fact that in his day there was no book
'which deals systematically and thoroughly with the theory and
facts of Representative Money as it exists in the modern world.'
Where does MONEY come from? achieves in our time what Keynes was seeking in his.

Whilst the bulk of its message is easily accessible by the non-economist (as this reviewer) it is backed by the incisive research of Professor Richard Werner whose published work, (especially New Paradigm in Macroeconomics. Palgrave Macmillan) undergirds every page. The clarity of this insightful work, adds to its integrity. In one sense it is just a plain book describing money to the modern world. In being that it exposes, as truth does, much that should be openly discussed in a democracy but is usually well hidden.

Charles Goodhart gives his endorsement:
'a clear path through the thickets of misunderstanding...a
proper, good understanding of how the monetary system
works,... an excellent guide for...not only those new to
the field but also to policy-makers and academics'.
He says this, even though the book does not contain a single economics equation, that might lurk to faze non-specialists.

This book is a must have for the increasing numbers of us who are trying in the ongoing world financial crisis, to make sense of what we thought was only comprehensible by a high priesthood of specialist economists. Bankers may not be too excited as it tears the veil away from their secrets. It is a breath of pure fresh air and brings a dawning light of revelation.

Just about every piece of financial jargon you are ever likely to see or hear in the media is explained in everyday terms and set in its place relating to a panoply of banking and monetary mysteries. References are made to Babylon, Cobbett, Galbraith, Schumpeter, Jevons, Keynes, Huber & Robertson, Ingham, tally sticks, bullionism, et al. You will learn about the adequacy, or not, of fiscal policy for engendering growth. Endogenous and exogenous money feature, as do: money supply, credit creation, fractional reserve banking, foreign exchange dealings, options, hedging, etc.

The history in this book catches the interest, the writing is clear, the statements are precise. The book is as understandable and relevant to government & shadow ministers as to tented occupants of any of the Occupy Wall Street/ London/ Los Angeles / Melbourne/... campaigns that are springing up in October 2011 protesting about modern banking.
LINK: Published by the New Economics Foundation.
posted by Charles Bazlinton who has no financial interest in the success of the book.
See the Richard Werner interviews on YouTube - modern banking explained.
For remedies for modern capitalism read The Free Lunch - Fairness with Freedom

ECOBATE 2011: European Conference on Banking and the Economy (3)

2011-10-06T21:13:00.001+01:00

One of the fascinating things about ECOBATE at Winchester, England (29 Sept 2011) was the array of individuals and organisations taking part. There were pioneers into new economic and financial territory who proclaimed that the common good should be guiding light; and there were those who defended the existing paradigms, albeit acknowledging there were problems to be sorted.

One particularly interesting player in the Robin Hood camp was Theirry Philipponat of Finance Watch . He gave a master class on the wiles of the lobbies as they watch EU legislation forming in Brussels. His advice applies to any situation worldwide where vested interests have the power (i.e. usually the money backing) to get their way, so that life can continue as normal for them.

He warned of the bamboozlements that lie around in the thickets of the finance forests ready to trap the unprepared as they wrestle with policy makers:
1. Complexity: When you are getting near the truth and starting to make them feel endangered you will be belittled and told that the subject is too difficult for you to understand, you are not experienced enough, you are not a specialist. Theirry said that Basel III was an excellent example - it is full of calculus equations and the maths will cause non-specialist campaigners to give up.
2. Distraction: You will be led away from their really dangerous area as they choose small technical details to absorb your attention and your time. They will point out the obvious marshy danger in one small part of the forest that they have a solution for, to make you forget that you are arguing about the state of the whole forest.
3. Flattery: They will try and reassure you that they 'really understand' what you are saying. But beware! It may be another subterfuge to detract from the big picture.
4. Disguise: Private interests may wear a disguise so that you don't recognise the dangers of the manipulated legislation they are aiming at. The Sheriff of Nottingham might use quite unexpected ways to weaken Robin Hood's Merry Men. You won't necessarily get a full frontal attack.
5. Wrong facts: Thierry said that in defence of Sovereign CDS engineering, it is sometimes claimed that 'it helps lower the cost of funding for sovereign issuers'. TP said this assertion has no basis in fact.
6. Doubtful facts as a cover for the real facts: Theirry quoted: 'Higher capital requirements prevent banks from funding the real economy'. This is probably untrue but what it most importantly means is that the measures will result in a lower equity return for banks.
7. Sheer numbers: TP said that the financial lobby is overwhelming, it totals 3000 people in the US (5 per member of Congress) and 700 in the EU in Brussels - that is one per MEP member and 15 for each member of the Economic & Monetary Affairs C'ttee.
8. Small details/big impact : TP said that a recent EU debate on the need for the disclosure of short positions - a mere two lines in the regulations - was forced out. It is important when formulating rules to know the extent of the impact. Here was one that should have stayed in due to its huge impact, but the lobby won, knowing its impact from the inside.
9. Unhealthy proximity: The sad thing is that we have even to beware of 'friendly' human motives. The lobby is there to get close to you but it may mean you'll get neutered, or at least nobbled. Beware of getting too involved with the very people who are probably diametrically opposed to what you are trying to achieve. Ask: On this issue is this person one of the Merry Men or are they in the pay of the Sheriff of Nottingham?

In the Q&A session that followed TP's exposé, we were entertained to a cut and thrust dialogue between TP and a banker. Point and riposte darted back and forth. You couldn't have made it up. In just the way that TP had said it happens, it happened. Very politely, of course.

Posted by Charles Bazlinton. For clear unfudged statements about banks and banking see these interviews on YouTube with Richard Werner

NOTE: LINK The slides used by Lord Adair Turner in his keynote speech

ECOBATE 2011: European Conference on Banking and the Economy (2)

2011-10-01T22:04:00.000+01:00

Lord Adair Turner whose speech at this conference affirmed Prof Richard Werner's work that shows how credit creation by ordinary banks drives the economy is worth studying in full. It is available through the following link:
CREDIT CREATION AND SOCIAL OPTIMALITY A SPEECH BY ADAIR TURNER

Taking just two extracts from it you will see that Lord Turner is saying precisely what Richard Werner has been saying for many years:

p3 The most distinctive thing banks do, the essence of their function within the economy, is that they create credit and as a result create spending power.

p4 in fact they don’t just allocate pre-existing savings, collectively they create both credit and the deposit money which appears to finance that credit.

This is excellent news for the UK economy if the powers that be, above the level of Lord Turner, take heed of the implications of his Winchester speech this week.

There are summaries of the Turner speech on the mondovision website and on the citywire.co.uk website

To see Richard Werner making such statements himself see YouTube by starting at Banking and the Economy and follow through the short series.

posted by Charles Bazlinton

ECOBATE 2011: European Conference on Banking & the Economy (1)

2011-10-01T14:57:00.001+01:00

A stunningly successful event was held in Winchester, England on Thursday 29th September under the auspices of the pioneering Centre for Banking, Finance and Sustainable Development founded by Prof Richard Werner. A timely gathering in the gathering storm that seems again to be threatening the global economy, when we thought and hoped it had gone away.

The real weather was steadily glorious. The mix of delegates was excitingly eclectic. It was an international ideas-fair for the trading of old and new systems and facets of thought in matters economic and financial. The atmosphere built steadily through the day, starting with the academic speakers, who descended on this ancient capital of England from many nations. 43 papers had been delivered within 11 streams by the time the general public poured in in mid-afternoon. The topics covered: Bank Regulation; Banks & the Economy; Monetary Policy; Risk; Markets; Local Banking; Bank credit;Interest Rates and Derivatives; et al. Prof Charles Goodhart, gave the morning keynote speech on Macro-Prudential Policy i.e. suggestions on preventing recurring crises, culled from half-a-lifetime of work at the top of finance, banking and academia in the UK.

Attendees included: economists, several shades of bankers (from the ECB & national banks to savings banks), financial whizz kids, actuaries, investment seekers & advisors, FinanceWatchers, neweconomics think tankers, eco-warriors, and even a FreeLuncher. Many local people from business, local government, churches, and sundry walks of life enjoyed the free sessions which started with a book launch 'Where does money come from' co-authored by Josh Ryan-Collins, Tony Greenham, Richard Werner and Andrew Jackson. The international bank HSBC was an important sponsor of the conference and Charles Haswell (Regulatory Policy and Development for HSBC) delivered a paper.

Mayor of Winchester Councillor Barry Lipscomb opened the public session and it is a tribute to the quality of the presentations and the Q&A sessions that kept everyone in the near 200 audience closely engaged to closing time after 7pm. They were regaled by Lord Adair Turner (FSA and FPC) on subjects as varied as the banking origins of credit supply by somewhat shady goldsmiths living in the 1600's, to the mind-bogglingly complex world of modern banking with its resulting legacy of economic woes. Lord T set out to explain how these problems might be addressed through managing credit creation to deliver social optimality. Hopeful insights about truly local banking (sadly lacking in the UK) came from Wolfgang Nuemann EU Representation of German Savings Banks Association (Deutscher Sparkassen-und Giroverband DSGV) in Brussels; and from Niclaus Bergmann, Savings Banks Foundation (Sparkhassen) for International Cooperation in Bonn. Alex Templeton of the Farm Energy Project spoke of his trials as a local entrepreneur seeking funding for de-carbonising farming. Richard Werner had an interesting recollection from an encounter with Alan Greenspan (head of the FED) in 1997 on the subject of credit creation.

Come back to this blog in days ahead for more from the cross-currents of this conference.
posted by Charles Bazlinton. See the Richard Werner interviews on YouTube

Understanding the money supply & its creation

2011-09-27T11:12:00.001+01:00

In less than two days (on Thursday 29th September) the European Conference on Banking and the Economy will open in the Guildhall, Winchester, Hampshire, UK.

Will you be there? It will be a notable day. The crucial issue of who creates the money supply will be revealed and how the neglect of this subject has driven most western economies into the ground. The major creators of the money supply (commercial banks) have been given free rein to work with this money as they feel led.

Can anyone believe this is a good idea now? Do the powers that apparently rule over us in financial and economic matters understand that the banks are superior powers to them, as they wield the power to create money in their own interests? Governments will always struggle to bring beneficial economic outcomes until they take this into account.

Listen at the Labour party conference now and at the Conservative party conference next week. Do they understand?

LINK to conference details: Come on Thursday to Winchester and start to understand.

Posted by Charles Bazlinton
Copies of The Free Lunch - Fairness with Freedom will be on sale at the conference.

Land Value Tax: correction

2011-09-27T10:45:00.003+01:00

The previous post (Sept 16th) contained an error. The phrase 'land value tax on property transactions' should read
'land value tax on property'

Land value tax would be a regular annual levy on all land values and not a one-off tax on property transactions which is what happens in the UK now with Stamp Duty Land Tax when a property is sold

Stamp Duty Land Tax can inhibit the sales of underused homes from retirees to familiesneeding more space. Land value tax being an annual charge, would helpprevent price bubbles developing and enable the lowering of other taxes. Also,in incentivising ‘empty nesters’ to sell their large houses which demand highland value tax from a reduced income, it would encourage what SDLT currentlyinhibits, and thus reduce a market distortion.

For details of how LVT could be introduced whilst safeguarding poorer home owners, read the book The Free Lunch.
posted by Charles Bazlinton

Lord Glasman & Duncan Weldon: What about this?

2011-09-16T11:32:00.000+01:00

The FT today published my letter 'We must find ways to boost lending to productive activity'
Sir,
Why must we accept below trend growth? (letter Maguire 5^th Sept). The article by Maurice Glasman & Duncan Weldon Germanlessons for Miliband’s growth agenda (Comment Aug 2) stated that the ratio of creditextended to financial and property interests, compared to productiveinvestment, exceeded 4:1 from 1997-2007.

We surely need ways of actively encouraging lending for productive activity,but ways of reducing it for bubble-inducing activity. If we don’t actually want to make such loansillegal, a Tobin tax on financial transactions and land value tax on propertytransactions [see next blog post]seem inevitable in order to give regulators a more controllinghand over bubbles than they have now. New tax revenue through these wouldenable a reduction in taxes on productive activity (income, vat, corporation,et al) and induce a virtuous circle in favour of growth of the gross domestic product economy.

As to directing loans in order to promote growth, Messrs Glasman & Duncan's articlealso has lessons from German experience on how the state run KfW bank ‘ensureda ready supply of capital to productive business’. I wonder why our state ownedbanks are unable to do the same?
yours...Charles Bazlinton

This is a very useful lead into the European Conference on Banking and the Economy to be held in the Guildhall at Winchester, Hampshire on Thursday 29 Sept 2011. The issues mentioned in my letter will be addressed from the fundamental credit creation and allocation principles that Professor Richard Werner has been researching for over 20 years.
At 5pm within the free public session Lord Adair Turner will be speaking on 'How can Banks be made Socially Useful?'
Info & registration: Conference link.
posted by Charles Bazlinton

New Planning Policy: Make everyone a developer

2011-09-10T22:09:00.000+01:00

Planning policy battles are being fought in the UK as the Coalition government tries to make 'localism' work. Local people are to be the prime deciders on what is build around them and not powerful landowners through development companies.

Let's get back to first principles. Take a standard developer case such as a landed family going back hundreds of years. They have a few thousand/hundred acres, maybe a small town at one end of the estate, and several villages dotted around. Some village homes will have been sold off over the years to raise cash for the family, as the accumulated wealth of the decades is picked off to pay for a grand wedding reception, to buy a house in another area for a family member, or even to supplement income for a trust fund.

Over the decades the wealth is turned into money perhaps from the development of a few houses built in a large back garden; or from a little estate of densely packed homes tacked on the edge of a village. Value accumulates on land - which it does over any 15/20 year period or so - just the sort of timescale a landowing family can wait for. No rush. Just wait as the economy of the country picks up, people start again to have the money to put down a deposit, banks get more confident and lend, a town bypass is built (to make land jump an extra 10% in value in a very few years ), a school improves and familes want that catchment (another few %), property prices rise.

So the landowner who has land more than enough for his or her own living space is silly not to wait until prices rise. They benefit from the taxation money of road building, from the taxation money that went into the schooling system, from the efforts and hard work of everyone who held down a job and drove the economy forward. Ordinary people's work and taxes directly drive up land prices, for the benefit of all who own land and especially those who have spare land beyond their own home needs.

To solve the Coalition government's planning problem of The People vs The Developers is simple. Very simple. Make everyone, every citizen, a gainer from development. Annually take the wealth that is attracted to land solely from citizen effort, and pay a Citizen's Royalty to everyone, regularly. Everyone made the wealth, so let it flow back to everyone. Don't take a proportion of value that arises because someone worked hard and built a valuable home extension, that is their own property. Don't touch it. But do repay the effort of us all in working together to make a successful economy, that raised the land price whether the extension was built or not.

That will bring a solution to planning dilemmas. If the Citizen's Royalty had a local dimension a referendum point could be put: These proposed developments in your neighbourhood will bring another 5% lift to the regular £1000 a year payment for every member of the family. Do you want the payment or do you want the green fields left?

Read The Free Lunch - Fairness with Freedom to see how this idea could work practically and financially and take the battles out of planning decisions. Localism must have the tools to make it work. Give everyone the chance to stand where a developer stands.
Posted by Charles Bazlinton.

Can banking be made socially useful?

2011-09-09T11:43:00.001+01:00

Will history see this Winchester Conference on Thursday 29 September as marking a turning point in the public understanding of the secrets of banking?

LINK:
The website for the European Conference on Banking and the Economy (ECOBATE) is now fully open.

Speakers are coming from many European countries, the Far East, Canada, the European Central Bank and other Central Banks. From the UK, HSBC is a main sponsor (Charles Haswell speaking) and Lord Adair Turner is the Keynote Speaker. Others include: Ex-Bank of England MPC founder member Professor Charles Goodhart; Professor Richard Werner, Chair in International Banking,  who is addressing key themes on what banking is really about  e.g: Banking and the Economy - Basic but little-known facts with far-reaching consequences.

An unusual feature for a banking conference in the UK is that a local authority (Winchester City Council) is sponsoring it. There will be much of interest to small business owners in the local banking theme that will feature.  Alex Templeton of the Farm Energy Project will speak on: Towards a Community Bank in Hampshire. Tony Greenham of the New Economics Foundation (nef) on: Benefits to keeping spending local: findings of the LM3 project.

Professor Don Nutbeam, Vice-Chancellor, University of Southampton opens the conference at Winchester's Guildhall at 9.00am for the academic sessions. Richard Werner will introduce the free public session at 3.45pm. The conference ends at 7pm.

This international conference could ultimately affect the economic well-being of every local area anywhere. Register and be there! Registration is free (use the website) for the public from mid-afternoon which includes Lord Adair Turner's address.
Posted by Charles Bazlinton. Author: THE FREE LUNCH - Fairness with Freedom
The book discusses matters that are now coming increasingly into the public arena, including the banking theme.

Werner: Greek debt could be 3%

2011-08-30T13:23:00.000+01:00

Ed Butler interviews Professor Richard Werner on BBC World Service World Busines Report 30 August 2011. (Listen from 1m 25sec to 7m 30sec)

Werner says that the Basel III new banking regulations are 20 years too late and will make it difficult for banks to get credit flowing into the economy. This will exacerbate the credit crunch.

He has quite different and much more appropriate monetary policy regulations for the health of the EU economy:
EU governments should stop issuing new bonds themselves as their old bonds mature. They should borrow from the commercial banks in their country. Greek debt could be fixed at 3%. Credit would flow and the economy would be boosted with no crowding out of the private sector.

posted by Charles Bazlinton
The Free Lunch - Fairness with Freedom
www.the-free-lunch.com

Ban Bank Credit Creation?

2011-08-24T13:28:00.000+01:00

Short video clip from a European politician on why banks should be prevented from making new money.
posted by Charles Bazlinton Author The Free Lunch - Fairness with Freedom

Lord Adair Turner: Keynote speaker at banking conference in Winchester, UK

2011-08-13T20:53:00.003+01:00

A pioneering economics conference will take place next month in Winchester, UK (Thurs 29th September): The European Conference on Banking and the Economy, under the auspices of the University of Southampton's Centre for Banking, Finance and Sustainable Development (CBFSD). Lord Adair Turner Chair of the Financial Services Authority and of the Committee for Climate Change is the keynote speaker.

We are now in the fourth year of a financial crisis where economic growth has stalled in the western world - jobs are getting scarcer, poverty is growing. It may be getting worse. This crisis began through misguided banking: many banks were bailed out at the expense of taxpayers, and even now banks are not helpfully lending enough to small business from where future wealth should come - yet huge bonuses are again being paid to bankers.

The sub-title of the conference is Banking : Seeking a new Paradigm. What alternatives are there to conventional banking? Do we want to endure the system which seems largely and most of the time to be of dubious benefit to anyone other than bankers.

If you think this conference is not for you, don't decide until you have viewed the short YouTube video introduction to Banking and the Economy by Prof Richard Werner. He is the founder of the CBFSD which is hosting the conference.

Registration is free for the afternoon and early evening session. LINK: ECOBATE

posted by Charles Bazlinton. Author The Free Lunch - Fairness with Freedom

Steve Hilton needs pregnant pause for this thought

2011-08-09T15:57:00.003+01:00

Steve Hilton is a Coalition Government policy pioneer who, so it is said, is trying to transform the old style top-down government (so natural to the likes of Gordon Brown and most preceding prime ministers) into the Big Society (aka: localism, grass rootism). This means:

that we do what we want to do

in the way that we want to do it

and not what or how according to an official.

The 'we' though is to include nearby people (localism) so we are moving towards the best sort of 'considerate' anarchism : abolition of government and organisation of society on a voluntary, co-operative basis (Concise Oxford Dictionaery11th Ed.).

Very much the theme of the book: The Free Lunch Fairness with Freedom Read some of it & buy one: http://the-free-lunch.com/thebook/lookInside.html

Hilton has got recent bad press for suggesting that maternity rights for women working in small firms should be scrapped. Strange this. Suggesting a reform that adversly affects the individual voter: pregnant women. Most probably this is a silly idea.

Why not start with the banking monopoly? The Richard Werner YouTube interview on Banking for the Big Society explains that Big Society banking needs lots of little local banks. Let's have a reform discussion on this. The idea will benefit small firms who will get easier access to credit, which will help pregnant workers in their job seeking, and in using their votes. Trouble is that the big banks (just about all we have at the moment) are highly inefficient at getting local credit directed where needed. Reform would challenge their future profitability so not much hope of willing reformers there. But surely there are more voters in favour of reforming big banking as we now know it, than voters working in banks?

The Free Lunch is a source book for Big Society ideas. It exposes vested interests such as banks and bureaucracies; favours networks of relationships among citizens rather than hierachies of the powerful, and hopefully avoids getting up the noses of pregnant women.

posted by Charles Bazlinton

What credit famine? Let's get the web built

2011-07-21T13:34:00.004+01:00

Prospect magazine article (July): The web makes us richer (Maniyka & Roxburgh of McKinsey) reports that:

'in 15 years the web has enabled the same level of GDP per capita growth that the industrial revolution took 50 years to achieve'. Other McKinsey findings: small enterprise job creation = 2.6 jobs for 1 lost through productivity efficiencies; internet accounted for 10% of GDP growth over 15 years in mature economies; etc, etc. Thus economies are being shaped for the better by investment in the internet. [Original McKinsey MGI Report here: Internet Matters]

Trouble is, with the dire economic state of the economy, investment in infrastructure such as wires in the road and so on, is falling behind. Telecoms companies will invest only if there is a quick payback. Rural broadband is severly bad (i.e. slow, even if available). Web IT needs the governmet to act and invest. Next problem: government debt levels prevent traditional borrowing for investment.

Solution: Government should create the credit needed for internet investment and spend it into circulation by getting telecoms companies to build the rest of the network needed. It does not need to be new debt from banks. Prof Richard Werner in his series of YouTube interviews explains that productive credit creation is non-inflationery and the Propect / McKinsey report shows this to have been true for the past 15 years.

In summary: Banks are not creating the credit needed for such productive investment as they have their self-induced bubble crisis to get over. The only institution that can lift the economy by creating the credit needed is the government. Currently they only create about 3% of the money (notes and coins). They desperately need to start creating some of the huge shortfall of credit that is left uncreated by the malfunctioning banking sector. There need be no famine if you hold the key to full grain stores.

From YouTube interview with Richard Werner:

'..many politicians think, that governments need toborrow and get indebted in order to fund government expenditure. That’s notactually true,...The government can spend money intocirculation, money that it has issued. '

Pretty simple really.

The web brings wealth.

Investment i.e. issuing credit & spending money, must precede the extension of the web on the ground.

Banks aren't issuing credit much.

Governments can issue credit.

Why aren't they?

Let's get the web finished.

See also the previous blog post for what they are thinking about such investment in the USA.

posted by Charles Bazlinton. Read the book: The Free Lunch - Fairness with Freedom

US Congressman Dennis Kucinich and his Monetary Reform Bill - why not?

2011-07-01T20:58:00.000+01:00

Will the United States be the first major country to introduce debt-free, interest-free, government-issued money?

There is is no need for government spending to be dependent on borrowing, with interest charged to taxpayers for generations to come. If you look at Congressman Dennis Kucinich's Bill on Monetary Reform you will find a way out. All over the world goverments are paying down their debts. Kucinich's Bill (No: H.R. 6550) aims:

'to restore the authority of Congress to create and regulate money, modernize and provide stability for the monetary system of the United States, retire public debt and reduce the cost of public investment, and for other public purposes.'

[Note: 'retire public debt' , not: 'roll over the debt into more debt which runs for longer'.]

feature: REPLACING FRACTIONAL RESERVE BANKING WITH THE LENDING OF UNITED STATES MONEY

includes : 'MONETARY DIVIDEND TO CITIZENS'.

and: 'a program of interest-free lending of United States Money to State and local governmental entities, including school boards and emergency fire services for infrastructure improvements under their control and within their jurisdictions,...'

Look at this link for the full text: http://www.monetary.org/hr6550bill.pdf

Look at Richard Werner's video interview on Monetary Reform:

posted by Charles Bazlinton.The Free Lunch - Fairness with Freedom

Is land value tax as bizarre as antimatter? Sherlock Holmes' brother Mycroft says NO!

2011-06-17T15:08:00.003+01:00

I expect you have become intrigued about the current hunt for antimatter that is supposed to exist...or to have existed...either actually...or only in the mind of scientists. For me the interest grew when I needed a bit of matter to prop up a wonky table leg. I picked out a dusty tome from my shelves (the book had come from a secondhand bookshop in Radstown, in the bee-keeping area of the Sussex Downs), but unfortunately something was the matter - too thick. I flipped it open before replacing it on the shelf.

Would you believe it! In its browning pages was an account of some previously unknown conversations between Sherlock Holmes the renowned detective and his biographer Dr Watson and others, about this very subject, and much more. It seems that Holmes was a acquaintence of Arthur Schuster who first coined the term 'antimatter' in 1898. This seems unusual for Holmes as earlier he was renowned for trying to expel infomation from his mind if it seemed to have no possible bearing on likely cases that might come before him. He dreaded cluttering his brain with useless information - it might take up valuable space needed for more vital things.

The book is from a time well after the Moriaty incident and we find Holmes in an unfamiliar philosophical mood. His experiments in chemistry and the superior deductive skills of his older brother Mycroft, the high ranking government official, seems to have led him on to want to fine-tune even his famed powers.

Mycroft Holmes was a supreme source of current political and social information, moving as he did in the highest government and political circles. He was not personally a man for fighting causes, but he knew so much about the workings and financings of government that he once told his younger brother Sherlock that there was only one way to solve what he foresaw as the continuing problem of poverty. Sherlock was aghast at this idea: 'Surely, Mycroft we are on an upward path of growing and shared prosperity - what with the railways and the penny post, no one will lose out in future?'

Mycroft carefully took his brother through his inside knowledge of where wealth grew and resided in the nation, culled from his own working day experience and as explained so clearly in Henry George's 1879 book 'Progress and Poverty'. His work for many government ministries had convinced him that Henry George was absolutely right to point out that if an annual levy on land values was not made, the modern state would have to greatly increase the tax on the incomes of ordinary people. Mycroft had seen the battle to abolish income tax in the last decades of the 19th century - when almost no ordinary citizens were then liable for it. He said that anyone with the most elementary understanding of evidence and ordinary deductive powers would see this. At this point Dr Watson records that at first Sherlock's face drained of colour, he then he leant forward eagerly as the power of his keen intellect was directly focussed on a new subject worthy of intense interest.

Mycroft: 'My dear Sherlock, there is far more evidence for this enlightened policy than the antimatter mystery that you are fussing about: It is elementary - landowners of all sorts get something for nothing as their land increases in value. Where does this value come from? It is only the surrounding successful society that creates the value in their land. The roads, railways, water supply, the new-fangled electricity, other people's businesses - all these enhance the value of any piece of land nearby. Did the landowner somehow engineer this spectacular increase through effort? No! '

'Sherlock, remember this: Don't tax the buildings, don't tax the work people do and don't tax enterprises until you have fully taxed the land which attracts community-inspired value like a magnet attracts iron filings. If they don't follow this path then the poor will need increasing help though the decades. No more something for nothing should apply to all land and home owners as much as it does to welfare scroungers and to the apprehension of criminals that you are such a past master at.' And with that he shambled off to the Diogenes Club, where they sit silently - not even discussing antimatter - but where the occasional smirk or grimace at a satrical article is permitted.

posted by Charles Bazlinton with acknowledegments to Sir Arthur Conan Doyle and help from Wikipedia.

Buy the book The Free Lunch
See the video clip

Credit creation & Land Value Tax. Greenspan, Wadhwani, Werner

2011-06-15T12:46:00.001+01:00

Back in 2002 as reported in The Free Lunch - Fairness with Freedom on page 58, Alan Greenspan head of the US Fed (Central Bank) was reported to have said that homeowners who remortgaged to cash-in on equity in a house-price boom: 'such activity was important to the buoyancy of the economy of the time'. With such a mindset from so high an authority it is not surpising that over the following years economies around the world let rip, founded on soaring land and house prices and creating the unsustainable boom which ended in an almighty crash whose echo still resounds.

We now have suggestions on how to stop such dangerous behaviour in future. In the Financial Times 14th June 2011 Sushil Wadhwani (ex-Bank of England Monetary Policy Committee member) Why we may regret the UK regulatory policy bias spells out a possible mess-up. The BoE's new Financial Policy Committee's ground rules could clash with those of the MPC. They might cancel out. Besides, some of the FPC's ways of controlling banks' activity may be ineffective as the banks find ways of avoiding the FPC's fine-tuning. Wadhami worries that economic growth will suffer as harsh lending rules may stymie many banks' ability to lend. All this should lead people who dare to think beyond preserving the banking system, to study the work of Richard Werner international banking economist. The YouTube series of interviews explain how we could remodel the credit supply industry (aka: banking) for the better.

But sensible credit creation is one side of the story. Problem is, the well-endowed have access to political levers which aid wealth preservation and can stop such startlingly obvious policies as: fairness for all through wise credit creation allocation.

Rising house prices are the goal of every homeowner who is already on the housing ladder. They are not the goal of potential home owners who see prices beyond affordability. They are not the goal of those who can only ever rent their home.There is a fundamental rift in justice in our society based on home ownership. Windfall gains only come to homeowners and all types of land owners and they arise from no productive work. They arise due to the successful society around. The poor (renters) help create this success as much as anyone else and the rich (land/home owners) take the wealth. The phrase coined in The Free Lunch - The Lottery Principle: The poor create the rich is demonstrated yet again.

Whilst sensible credit allocation policies are needed, the land value gains should be taxed too. Everyone should gain from the success of all. We don't encourage welfare cash to be handed out to people who are work shy. But we encourage the diversion of the common wealth stacking up in land values to certain favoured categories of people only. Taxing the land values and sharing it out via a Citizen's Income to everyone, would start to bring some justice. Read the book for more details. Signed copies from the website: The Free Lunch.com

posted by Charles Bazlinton

Coalition needs Plan CC

2011-06-06T22:35:00.002+01:00

'The banks are not going out for business' says Vince Cable (Business Secretary in UK's coalition government) in a recent New Statesman article by Jason Cowley (30 May 2011). VC, quoting JK Galbraith says that there are two great financial motors that can grow total spending power: 1. Governments, through public deficits and 2. Banks, through private loans.

But No:1 is being reduced and this means less spending to produce growth. No: 2 doesn't work with small businesses in particular. For one reason, banks want good collateral and with house prices weak that won't work. Also their system is not geared up for lending to local businesses - see the Werner video on Banking for the Big Society which explains this.

Perhaps VC is unaware / his adviser's don't know, a third way. It is clearly explained in a new short video interview with Prof Richard Werner, International Banking academic. The title is: Debt Free and Interest Free Money. Just posted on YouTube.

Top Tories reject clamour for plan B says the FT today (6 June 2011). What we actually need is Plan CC (watch the video: CC = Credit Creation).

Summary - No:1 Not effective. No:2. Not effective. That leaves No:3. CC. When will they start?

posted by Charles Bazlinton. Link to: signed copies of The Free Lunch - Fairness with Freedom

Richard Werner on 'Banking for the Big Society'

2011-05-21T21:58:00.000+01:00

A new video interview on YouTube posted today Banking for the Big Society has Prof Werner explaining why the UK Coalition Government is having problems pursuading banks to lend to small and medium sized businesses. We get regular hand wringing from the highest level and now even threats. Prime Minister David Cameron is reported by George Parker in the Financial Times (18th May) 'Cameron warns banks to lend more' that if the banks don't keep to the Project Merlin deal of promising more lending they will face new taxes.

But Werner points out that the underlying problem in the UK is an extreme case of a mismatched banking market. In other major countries there is a much more appropriate sizing of banks to the credit need at the local level. Here is a chance for the Coalition Government to get real with its commitment to localism and release the potential of the Big Society by transforming the banking sector along Werner's lines: Legislate for new independent local banks and encourage the expansion of Credit Unions.
posted by Charles Bazlinton. Buy the book The Free Lunch - Fairness with Freedom on Amazon

Debt should be a dirty word

2011-05-14T17:39:00.003+01:00

Andrew Ellson in The Times today Debt should never be a dirty word gives a comprehensive account of how debt is used by governments / firms / individuals and he writes on uses of debt that can bring problems. He reminds of the growth of wealth over 200 years or so and how that progress has been facilitated by the use of debt for infrastrucure, schools, healthcare, etc etc. We have coped with the repayments as we have got cleverer in technological advances (through education , etc etc) - a virtuous circle perhaps.

But why become indebted to banks for this investment? Why doesn't the government issue debt-free and interest-free money itself for these publicly directed benefits? Why should banks make profit out of this when the government could legally issue credit, free of repayments and of interest? Just as they issue the coins and banknotes we use?

For governments' investment in education, broadband infrastructure, and such things, debt should be a dirty word. Substitute 'repayment-free and interest-free credit' for 'debt' and clean up the act! Progress over the last 200 years beat the previous 200 but watch progress over a couple of decades if ever governments understood what they could do and wrested the money creation process from private banks so that we did not have the huge debt burden for public investment.

See the website Positive Money for more on this, or go to the Prof Richard Werner interviews on YouTube. Start to understand how quickly poverty could be reduced, and how wealth could flow so much faster and without the dangers of our current banking system.
LINK: posted by Charles Bazlinton.

Werner on the allocation of credit

2011-05-10T12:51:00.000+01:00

The case for banking reform is continuing to be made by The Free Lunch on YouTube with No:3 just posted in the three part series on Econonic Growth and the Money Supply by Professor Richard Werner, LINK: How the Money Supply should be allocated

Prof Werner tells what is behind the banking story so that non-experts can grasp its extent and implications easily. Good watching.

posted by Charles Bazlinton, author The Free Lunch - Fairness with Freedon which has a section on banking reform and much else, signed copies available from The Free Lunch website

Richard Werner : 2 more video interviews

2011-05-06T22:16:00.002+01:00

Over on YouTube two more short video interviews with Professor Richard Werner of Southampton University, England have been posted.
LINKS:

1. Economic Growth 1 of 3: Who creates the Money Supply?

2. Economic Growth 2 of 3: Who allocates the Money Supply?

What the Prof says is a revelation about how economic growth is dependent on the way banks handle their commercial interests. You will probably have to listen more than once to grasp the implications of it all. He points to solutions that are desperately needed if we are to break the debilitating scourge of boom and bust cycles.
posted by Charles Bazlinton. Buy the book: The Free Lunch - Fairness with Freedom

FPTP good / AV better

2011-05-04T10:30:00.001+01:00

Tomorrow in the UK we vote in a referendum for an Alternative Voting (AV) system to replace First Past The Post (FPTP). Much confusion reigns in the media as to the merits of each side.

For those of us championing for such important issues as: monetary reform; for a more enlightened taxation system with Land Value Taxation; for a non-means tested Citizen's Income and for other nudges into more fairness and freedom, AV seems the right way to go. What it would mean is that whilst I may have a strong party affiliation or perhaps a floating party affiliation I am to be given a extra opportunity to give my opinion on other issues without feeling I am wasting my vote. OK, candidiates for such 'minority' issues are unlikley to get elected but what their appearance on a ballot ticket signifies is that people who have never seriously considered them would be asked 'what do you think about this?' So an election becomes a combination of the election of a candidiate and an opinion poll on other issues.

Nations seem to slowly grow into more democratic ways and the time of monolithic parties may be fading in the UK. The fine tuning of democracy needs the new issues of the future to be given space beyond narrow, timid party dogma. It is oddly patronising to suggests that AV is too complicated to understand. People can work out what their preferences are.

Anything that gives a slightly raised platform to individual candidates who stand for important focussed issues is to be applauded and AV might do this. What may happen is that the main parties will take on the 'minority view' that seems to be attracting lots of 2nd & 3rd preference votes. So reform would be helped along by the exposure given.

See: this website for a view on how AV could help fix the banks.

Posted by Charles Bazlinton. Browse/buy the book. Buy the book on EBay.

Richard Werner on Banking & The Economy

2011-04-12T10:58:00.000+01:00

Yesterday the interim report from the UK's Independent Commission on Banking headed by Sir John Vickers was published. 'More questions than answers' (Ed.) and 'banks get away with it again' (Philip Stephens) are two quotes from the FT today. Which probably suits the banks.

The trouble is that banking appears to be a complex business and the Vickers report will tax even bright and wakeful non-banking folk who may have trouble keeping all the balls in the air such as: base ratio of equity to risk weighted assets; truly loss-absorbing debt'; Basel 111 baseline capital ratio', etc.

What we ordinary bank users, mortgagers and budding entreprenuers need is someone to blow away the swirling jargon and reveal, through the smoke screen, what it all means in tems we can grasp. We are pleased to re-launch the series of short video-interviews with Richard Werner Chair of International Banking at Southampton University, UK, with an apology for the delay in bringing the first video back to public view. On You Tube, Richard Werner: Banking and The Economy Professor Werner explains how banks have a pivotal function in the economy.

What he says may be new to you. You will gain insights that millions of other people may not have. In this series Dr Werner explains clearly everyday banking matters that affect all our lives. The interviews address matters which are key to the direction banking should take, particulary in the UK. Watch the YouTube channel.

Here's another link to it: YouTube Charles Bazlinton's Channel.

posted by Charles Bazlinton.
Book on eBay: The Free Lunch - Fairness with Freedom

Could Taylor Wimpey's Pete Redfern have done better?

2011-04-05T21:02:00.002+01:00

When a property chief executive says about the house price crash of 2007 ' No one could have seen what was coming...' (FT 5 April 2011: Taylor Wimpey back at the crease) you do puzzle just a little. Mr Pete Redfern joined George Wimpey in about 2001 and sorted out the McAlpine Homes bit of that before becoming Chief Executive of the combined Taylor Wimpey which is now No.2 UK builder. Obviously a capable operator, to an extent.

The Taylor Wimpey deal was done in January 2007. Another UK developer / housebuilder, Linden Homes was sold to Galliford Try in February 2007 (Building). This was particularly neat timing by the owners of Linden as they sold the outfit within a whisker of the top of the house price market. This rose from £184,143 in Jan 2007 to £189,316 in July 2007 and then crashed down 20% in Jan 2009 (see chart). Did Linden's owners know something? Had they read Fred Harrison's books on the repeating 18 year land / business / house price cycle? In 1997 he predicted that the house market would peak in 2007 (2010 The Inquest read my review).

Redfern in the FT today is refreshingly candid, but it is all very well. The TW share price was about 430p in Jan 2007 and is about 40p now (9% of its value). I wonder if chief executives ever read in-depth about every aspect of their industry? Fred Harrison has been publishing regularly on 18-year price cycles since his book The Power in The Land in 1983. OK, Pete Redfern was 12 at the time but since then his property industry experience never seems to have prepared him for 2007, despite Harrison's insights.

Some homework: find out who sold Linden Homes in 2007, ask was it fluke timimg? If not and they are still in property, invest in their firms. But, a caution, watch this blog because land value tax might come into the equation, judging by recent Coalition Government tax policy ideas. This new factor in property development ought to be considered even for those who get the timing right.

posted by Charles Bazlinton.

The Free Lunch - Fairness with Freedom and on Amazon

Editorial note

2011-03-31T11:11:00.000+01:00

The link to a new interview video with Richard Werner has been temporarily removed. Apologies for any inconvenience.

For other insights into banking, buy the book:

 The Free Lunch- Fairness with Freedom 

posted by Charles Bazlinton 

Land Value Tax by any other name? FT today

2011-03-29T16:38:00.001+01:00

The Financial Times today reports on what Nick Clegg (UK Lib-Dem leader) calls a 'liberal tax system' which 'rewards work and enterprise and caputures pollution and unearned wealth'. Aricle: Tensions emerge in coalition over taxing the rich. The Coalition government wants to cut the 50p tax rate for high earners and Clegg's idea is to tax high value properties annually to cover the shortfall. A kind of high rated Council Tax.

A Q&A feature points out that:
1. Property cannot move offshore to avoid the tax

2. The guess for the 50p tax rate yield is £2.5bn

3. A top property tax might yield £2bn

4. No property tax was mentioned in the budget so little preliminary work is being done to check it out.

5. Buying property through a company may get round existing stamp duty, and anti-avoidance detection work is complicated.

The leading editorial champions the same cause Tax Britain's high value houses :
Funding a cut in income tax through a higher tax on wealth is therefore a good way to reward, and encourage work....foreign onwers of UK property who benefit from British amenities but pay nothing towards funding them. An annual tax on property values is also preferable to the existing regime of taxing only property transactions.

About elderly people with large houses:

the duties accrued could ... be deferred and paid at death.

You can comment on the leading article above on the FT website.

posted by Charles Bazlinton

buy the book: The Free Lunch - Fairness with Freedom

Genuine localism in planning and housing

2011-03-28T12:40:00.002+01:00

The mystery deepens over the meaning of 'Localism' a term coined by the UK's Coalition government. So far in planning terms it means that top-down housing targets from Whitehall have been abandoned in favour of local decisions as to where homes are to be built. So the new homes that are estimated to be needed annually, especially in the south-east of England, are not being built. Local opposition to large scale housing developments on green fields is powerful. Local authority councillors who decide these things will not approve unpopular schemes for fear of being thrown out of office. But how can communities grow in a way acceptable to those communuities?

In The Free Lunch- Fairness with Freedom (p85) the case is made for the needed housing to be spread around more, so that all communites would grow a little. The increase per annum needed, using 2002 figures, was deeemd to be 1% growth in housing stock. For a small town of 3000 people this would mean about 10 new houses/flats each year. Such small scale development, maybe even on green field sites at the edges of towns and villages, would probably be more acceptable than suddenly throwing up a 300 homes over 2/3 years.

The Financial Times today Property levies to fund top rate cut and also the leader Planning to grow has two Coalition ideas. 1. A council tax /stamp duty claw-back on the value of £2m plus homes and 2. Land auctions of planning permission. First: To merely rely on stamp duty inhibits property sales and there are reports of avoidance schemes. The council tax option is by far the most effective way to capture for the public purse the publicly-generated value of land from existing publicly-granted planning permissions. It would be regular, will not distort market supply and hopefully is less avoidable. Second: Land auctions would capture the large one off gain generated from new planning permissions.

Suggestions from The Free Lunch thinking:
1. Set a growth factor. Consult the residents of each city, town & village for an acceptable housing growth factor. Starting with 1% as a minimum growth in new homes per year, would a higher figure be acceptable? 1.2%? 1.7%? 2%? This figure to be cumulative, or not, by their choice.
2. Value your new planning permission. All landowners for planning applications involving new dwellings would be asked what price thay would be prepared to bid for the grant of permission. This would be an extension of the current levy already charged (Section 106 agreements) for development. An annual sale might be held to compare values.
3. Gain in local authority's funds. New revenue would be achieved as owners valued their gain. Part of what currently is taken by private landowners from a public grant of permission, would be fairly given to the public purse. Public grant = public benefit. Quid pro quo.
4. Planning - where would these homes be built? Take as a starting point the current tightly drawn town and village settlement boundaries. The local authority would receive all bids at their auction and be able to choose between offers, taking into account not only price offered, but conformity to existing planning policy. The option to build beyond the existing boundary could be considered and might be subject to lower density building perhaps, or other restrictions.
5. Council tax adjustments
The idea of a levy only on £2m + value properties each year on their existing value should be extended to all properties. This would need to be matched with a reduction in income tax, et al.

6. Summary.
a) Public gain for publicly granted privilege. At the point of development and annually.
b) Improved ability to meet market needs generally. Also, in particular: with perhaps some low-density family-appropriate homes beyond settlement edges.
c) The provision of more new housing.
d) Volume house builders would need to adjust their business model to the new small development scenario.
e) A new presumption of appropriate development, responsive to market needs and local feelings would be the guide. Housebuilding would be encouraged and bring more land on the market, with land values moderating. Rather than value going into land prices, value would go into better built and better designed homes.

Buy the book: The Free Lunch - Fairness with Freedom
posted by Charles Bazlinton .

Budget & cuts: Wolf, Skidelsky,Blanchflower, Lanchester & Werner

2011-03-26T12:41:00.003Z

UK Chancellor of the Exchequer George Osborne has just presented a Budget: a 'plan for growth' and the pundits are wary of agreeing that it will be such.

Martin Wolf in the Financial Times on 24 March A canny way to make the best of a weak hand says 'how little we know about the performance of the economy.' And about 'whether these [budget] changes make any significant contribution to underlying growth', he is sceptical. Also in the FT on 25 March in: How to avoid 20 lean years after 20 pretty fat ones:
'But growth is a complex process... it is extremely hard to manipulate, especially in high-income countries, where easy opportunities have, by definition, already been exploited. One should be extremely sceptical of any simple propositions that suggest otherwise'.

However he does write that positive action for growth through better policy on education, or investment in infrastructure is badly needed but sadly neglected by UK governments.

In the New Statesman David Blanchflower (28 March): The Budget does nothing to dispel the dark clouds of my prophecy. Having been highly sceptical of Osborne's expectation of a newly thriving economy following a reduction in government size, he writes:
'that isn't happening and is unlikely to [thrive] while banks are not lending'.

Also in the NS (28 March) Robert Skidelsky in The Osborne ultimatum writes similarly, that the theory that cutting the public sector automatically leads to growth in the private sector is not working. He says that the current 'printing of money' schemes are not the same as the 'spending of money' that will have an impact on the economy. He closes with support for a national investment bank/ green bank to create investment for infrastructure which is in the UK ' rated one of the poorest in the developed world'. 'The essence of banking is the ability to make loans several times the size of the initial capital' i.e. the key need for credit creation for growth.

John Lanchester in his book Whoops! Why everyone owes everyone and no one can pay writes, p16: ' banks are central to the operation of a developed economy; in particular, they are central to the creation of credit, and credit is as important to the modern economy as oxygen is to us' .

Professor Richard Werner's letter in the FT (24 Feb) gives the technical details on how a green investment bank should be set up. See this blog for 24 Feb 2011. In his book Princes of The Yen p262 he writes that what is essential to stimulate the economy is 'an expansion in net credit creation'.

With a nationally owned investment/green bank, the banking profits through credit creation, usually going to private shareholders, would accrue to the public purse. What's not to like?
posted by Charles Bazlinton.

FT banking and Hong Kong land taxes

2011-03-10T19:35:00.000Z

The Financial Times is making amends for poor coverage on Mervyn King's recent anti-banking stance. Yesterday the leading editorial ( King helps the case for banking reform) gave supportive comments to what he has been saying for some time. Catch up.

Today the FT has an article of interest to land taxers . Land tax being the source of much government funding in Hong Kong. Article: Hong Kong's land system that time forgot. (David Pilling). The tax system is so productive of funds that they are giving away about US$770 worth of cash to citizens. Huge fiscal reserves have built up. Seems though that the rich developers are doing very well but 'even middle-class families...[are] ..dependent on subsidised housing'. A problem is that some tax raised has to be spent on infrastructure and this limits the options to spread wealth.

Read The Free Lunch- Fairness with Freedom it covers Land Tax and banking reform

posted by Charles Bazlinton

Banking and the Financial Times

2011-03-08T09:41:00.001Z

To update (see last blogpost): The Financial Times (7 March) is now reporting on Bank of England Governor Mervyn King's criticism of bankers. Albeit a passed-on, (acknowledged) Daily Telegraph interview. One wonders if MK and the FT don't talk much at the moment? Normally the FT gives early, comprehensive, even-handed news and comment on all things financial and economic. But when coverage on such a hot issue as banking is so obviously lacking - why? Go elsewhere for banking views?
Added later: See this article on QFinance for a good round up of the Governor vs Bankers business.

Read the book The Free Lunch for insights as to how banking works.Buy on Amazon or the Free Lunch Website
posted by Charles Bazlinton

Mervyn King to join UK Uncut?

2011-03-02T10:05:00.001Z

Sam Fleming in The Times today reports on Mervyn King, Governor at the Bank of England speaking to the Treasury Select Committee yesterday 'Standards of living could take years to recover from crisis' .

King is curious at the muted respsonse of the public at banker's bonuses when 'businesses went out of existence' through the crisis caused by the banks. Fleming observes that King is a lot less conciliatory to the banks than is George Osborne Chancellor of the Exchequer. The article mentions that the BoE records actual loans made to businesses rather than the 'loan facilities' that the banks may record which may not be taken up (as the Project Merlin allows). Also that King feels that the effects of the crisis may be very long term. Is the Governor a crypto UK Uncut supporter?

Encouraging that this different understanding of things economic and financial at the top level was so clearly stated by Governor King and faithfully reported by Sam Fleming in quite a short article. By contrast if you search the Financial Times today you will find virtually nothing of the Governors' criticism of banks. How strange. You would have thought that a world class journal which purports to give the best coverage of financial and economic matters would headline it all.

posted by Charles Bazlinton
TWITTER: @thefreelunch.

Richard Werner: Big Society Bank

2011-02-24T09:44:00.000Z

Prof Richard Werner International Banking academic at Southampton University has a letter in the Financial Times today (24 Feb) . He shows how the lending of the proposed Big Society Bank (BSB) could be at least 15 to 75 times greater than already mooted.

But a Big Society Bank with all the levers back in Whitehall? Not Big Society thinking surely? A key to getting BSB lending out must be more localism in the bank lending process, see Werner's letter: 'council-backed ventures'. Ideas from the German banking model could help, where local council-owned banks feed local needs, with lending decisions made locally. Credit Unions (and not only in Germany), are another solution to localised banking, adding lending competion at the local level. The current UK credit union legislation is a primitive banking model by comparison.

Local banking: Now there's an idea that should boost the UK Coalition Government's Big Society credentials. It would also relieve conventional banks of some 'pressure' as they 'struggle' to help local business at present. A vote winner?

Posted by Charles Bazlinton
Twitter: @thefreelunch

The greatest of fun for bankers - credit creation

2011-02-23T09:36:00.003Z

Did you imagine that banks need an increase in our savings before they can make more loans to businesses? Look at Ann Pettifor's blogpost for 21st Feb 2011 Saving not necessary prior to investment

Ann Pettifor very clearly explains how banks create credit and this should be understood as a fundamental fact of life by everyone. It is not high blown economics to be understood by a few brainy bankers. It is quite a simple concept. Outrageously simple actually. But does everyone who works in financial services understand it? Does every Member of Parliament? Do you as an engineer, nurse, cleaner, railway porter, school teacher, lecturer, botanist, vicar, TV presenter, comedian...?

I think not. If this information was widely understood there would be a huge movement to capture the profits now being taken by banks (witnesss the huge banker's bonuses continuing even in our current crisis). Bankers have such money-making fun. But the profits from creating credit needs to be for the benefit of all of us and not just them. It is outrageous from a fairness point of view to think otherwise. Spread the word.

posted by Charles Bazlinton

Twitter: @thefreelunch

Big Society. Is it The PITS? (The Pie In The Sky)

2011-01-25T17:43:00.002Z

The UK media is awash with sceptiscism about David Cameron's Big Society. No one knows what it is. It seems part of a modern trend such as subsidiarity (EU Maastricht Treaty 1992) whereby the centre only does what those at national, regional or local level cannot do best for themselves. Communitarianism was another idea in the same vein: empower the smaller groupings that people identify with, so they decide what they want to do for themselves. These ideas beg the question as to who assesses the outcome of the achievements possible at the various levels? What standards are expected before you let it happen? Or do you just let the locals get on with it and end up with varying standards from place to place?

But Prime Minister David Cameron is cutting his own Big Society feet off. George Osborne is axing government spending and those very people who might do the Big Society work (charities and voluntaries) are being starved of funds as the local authorities have to spread the funds thinner and leave them out.

The book The Free Lunch - Fairness with Freedom unlocks the possibilities of subsidiarity, communitarianism and The Big Society. The key is: the Citizen's Royalty (same as: Citizen's Income; Citizen's Dividend). The idea is to start to pay everyone a regular monthly payment without any means testing at all. Children to get it as well as working adults and pensioners. The Citizen's Income Trust shows how it is workable and affordable without any new source of funds. In Iran they have just launched such a scheme. For further funds a good start is to raise money from banking - suggested in the book years before the bank crisis hit us. The government should become the sole producer of credit and issue debt-free interest-free money for the public investment that we normally borrow from banks. (Google: Monetary Reform). The savings made by cutting out banks who create such money at the moment, could add to a Citizen's Income for all. No new taxes: restribution of wealth that is already being taken. It would transform the financial sector and make a safer money world for ordinary people.

It could mean the Big Society coming to birth. For unless huge numbers of people are given the means (i.e. money) to help dedicate their time and resources and carry out Big Society work on the massive scale that David Cameron's vision demands, it will fail.

Advice to the PM: find a way to start a Citizen's Income or drop the Big Society idea fast. People are chuntering about it already and your government is barely six months old! But establish this idea and you would be remembered as a pioneering Tory who empowered individuals, families and groups and sorted welfare at the same time.

Question: What is the Big Society?
Answer: It's what you start to get when you give everyone a Citizen's Income.

posted by Charles Bazlinton

AAA - Triple A rating for this report

2011-01-22T17:25:00.003Z

The new year opens with a stunning report on how 'Badly designed housing policies played an important part in triggering the recent economic and financial crisis'. Link to the OECD website. A tour de force which will surely be referred to by academics and politicians in years ahead. Virtually every economic crisis in history has been the result of an intimate and increasingly frenzied dance between banking and property speculation. The findings should be avidly studied by anyone with an interest in improving economic policy. The Organisation for Economic C0-operation and Development deserves high plaudits for it at the Davos meeting of the World Economic Forum next week.

The report investigates policies and outcomes for dozens of countries and shows how several factors interact: credit availability, loan-to-value ratios, land shortage, supply and demand, planning restrictions, rent controls, tax-breaks, ownership, responsiveness to demand, prices, price volatiliy, mobility of labour, poverty, rent controls, et al. For example there is a wide disparity world-wide in labour mobility. 2% in one country moved home in a year compared with nearly 15% in the most mobile. The report suggests such factors as: purchase transaction costs, unresponsive markets in bringing new supply, and price disparities within countries which bring credit difficulties for movers from low to high cost areas.

The OECD recommends that the true underlying property value be taxed. They don't anywhere say 'Land Value Tax' but use the academic: 'levying on cadasteral values' (p5) - that is, land values, in a paragraph about bring property as an investment to a level playing field with other investments. Also mentioned is a tax on imputed rent - which arises from land value. The report shows up the skew in favour of the property owner against the non-owning renter and within that, a skew towards the top-end owner.

In the UK someone has suggested scrapping Stamp Duty on the buying transaction and replacing it with an annual value tax on every property which would be about double the current annual Council Tax. The tax-take to be split between local and central government. This would start to bring fairer taxation. Until a countrywide survey of land values was in place, a rough and ready measure could start soon as follows. It should be accompanied by a measure so that the taxpayer is able to to account for any income tax already paid (i.e. central government's share). Thus:

Existing Council Tax £1500 p.a.
New Council Tax £3000 p.a.
Deduct Income Tax already paid to a maximum of £1500 (on main residential dwelling only)
Amount due £1500 pa as before.

The 'shortfall' from those paying less than £1500 income tax would have to be waived on welfare grounds as it would have to be in the transition period of any such new property value tax introduction. And anyway, whatever income tax had been paid and used as 'relief' would already have been received by the Inland Revenue so no reduction in tax revenues would occur. (Note added: The amount of the abolished Stamp Duty would be covered because only the main residence would qualify for income tax relief, leaving multi-property owners and other payers of Council Tax paying more.)

The next phase would be to cut income tax rates and jack up the new property tax to yield the same amount, with fair measures for hard cases of poverty. The housing market would start to free up and the beginning of a tax shift from income to land values [LINK]: with all its benefits would have begun. Other harmful taxes such as VAT etc, which tax creativity to be trimmed ASAP. All for the chop in time.
posted by Charles Bazlinton author of The Free Lunch - Fairness with Freedom

Hosking: insights into banking profits

2011-01-08T16:18:00.005Z

'Banking profits are so enormous' says Patrick Hosking in The Times today Back to front about bonuses. He lists 5 of the ways banks create their profits, but he does not specifically name and explain the ultimate profit gusher for banks. This is: virtually unlimited credit creation that banks are licensed to perform whenever they see a profit opportunity coming into view. Without these credit creation powers, their largest profit sources would be mostly cut off.

Martin Wolf in the Financial Times 9th November 2010 was more succinct:

'The essence of the contemporary monetary system is creation of money, out of nothing, by private banks’ often foolish lending'

Ben Dyson, economist, on YouTube says that there is 'a common misunderstanding that governments create the majority of the money in an economy'

Ben's (6 min) video has an easily understood overview of the monetary/banking system and why it should be radically changed. But you may need listen more than once if the ideas are new to you. A good new year's resolution for 2011 is to understand credit creation like a top banker does. It's not difficult. It's just extraordinary. It is also highly important to us all. As tax-paying bank-rescuers we all contribute to the stable society which enables the wonder of credit creation which unfortunately banks have misused. Note: Not everyone who works in financial services understands the system.

For further academic insights into the way banks use society-inspired credit creation to their own private ends and how a better system would work, study anything by Prof Richard Werner of Southampton University, on this blog or elsewhere. Also study James Robertson's work.

Perhaps Patrick Hosking will spell out the banking credit creation bonanza in a later column? I wonder if he is glossing over it?

posted by Charles Bazlinton. Link to YouTube on The book The Free Lunch - Fairness with Freedom

Michael Hudson - Alternative economic framework needed

2010-12-17T14:30:00.001Z

Michael Hudson is an economics professor who exposes the fraud at the heart of the modern economy. Link to a recent post on his website 'From WikiLeaks to 20th Century Potato Famine' a 30 minute radio report from Australia. Summary:

Quantatitive Easing (QE), the US Fed money has gone round the world and raises currency levels to the detriment of the host country. e.g. Banks borrow Fed money at 0.2% and send it to OZ to earn 4% plus.
Neo-liberal economics with its plausible but fictional logic is designed to extend the power of the Wall Street bank and insurance industry.
WikiLeaks is hardly a secret cache of information as nearly 1m people are authorised access and maybe many more. He thinks the 'secret' label is largely to stop people printing stuff off.
The past decades of 'low inflation' (i.e. neo-liberal economics) has actually covered a period when wealth has shifted from poorer to richer. Disposable income for most people has dropped. Asset prices including real estate have rocketed benefiting the rich who have seen a doubling of wealth.
Insurance and banking are inextricably linked. A new economics solution is that credit and insurance should be a function of government.
The Latvian economy has seen a 25% GDP drop in a few years; wages have dropped 35%; 12% of the population has gone abroad for work. He says Australians should beware that their economy does not go the same way (see above QE). Beware of Ireland's plight too. Increasingly the Oz population is likley to drop.
China, Russia and other Asian countries are using local currencies between themselves to escape the powers behind the US dollar.
His outlook for 2011 is not hopeful. Latvia and Ireland as early warnings. Anyone seeing through the financial oligarchy that has ruled for so long needs to consider new economic solutions. Look further on his website for real hope.
posted by Charles Bazlinton. Read before you buy ('Look Inside'): THE FREE LUNCH - Fairness with Freedom. There is hope for economic fairness.

Mervyn King banker to lead student protest?

2010-12-11T13:49:00.002Z

In the UK, student street action in several places about raised tuition fees is turning increasingly ugly. Even Prince Charles and Camilla got caught up in it. Their limo was damaged in Regent Street, London when their route went by an angry group of protestors. But it is not all about extremists. The core of the trouble for the government is the massive increases in maximum tuition fees that universities can bill students with. Today at £3250, in future to £9000, despite assurances from politicians that re-payments (after graduates are earning above a given salary) will be reduced. Obviously this package is not being sold very well. On BBC radio there has been talk of parents dropping their school age children off to participate. When ordinary people do such things a government may have a problem. In the 1990s huge numbers refused to pay the Thatcher poll tax - exit Thatcher - exit Poll Tax.

This is all in the context of continuing feather-bedding of bankers, where it is estimated that, BBC News 5 October 2010 banking bonuses will reach £7bn this year. This is what the protest should be aimed at. It is quite extraordinary. The banks have been bailed out, by taxpayers, from annihilation over the past 2 years and yet the bonuses are nearly at the pre-crisis levels. And all the UK government is doing is trying to get the banks back to normal. The system should be brought to heel and a new banking paradigm installed. Even Mervyn King, Bank of England Governor said recently in a speech , that several times likened current banking to 'alchemy':

'Of all the many ways of organising banking, the worst is the one we have today.'

To tap the profits which are the source of these bonuses, banks create credit out of thin air and use it in money-making financial devices. They do not need more of your deposits or savings to lend more out, as Prof. Richard Werner (Chair of International Banking at Southampton University), writes in New Paradigm in Macroeconomics (Palgrave Macmillan) p192:

'Occasionally economists worry about a 'savings shortage' or 'capital shortage', which they feel is holding back growth. There is no such thing. Savings do not impose a limit on economic growth. If more money is required for investment, banks can simply create it.

See this blog for 27 & 29 Nov. Money could be created to invest in that very productive source of growth: education. To illustrate the choice: If that part of banking profit reflected in the UK bonuses was credited to student fees the 1.9m UK students would each receive around £3500. Quite apart from what the banks are making before bonus payments.

It is banking reform that needs protesting for (see http://www.bendyson.com/). Follow the lead of Mervyn King our country's top banker.
posted by Charles Bazlinton.
Read The Free Lunch - Fairness with Freedom . Rational change from ancient roots.

Werner on student tuition fees - 2

2010-11-29T16:06:00.002Z

With a third day of student protests on tuition fees planned for 30 Nov will the action be elevated from trashing police vehicles? Student leaders need to take the battle to a new intellectual level and start a discussion on Professor Werner's suggestions that debt-free grants should and could be made available. Arising out of Saturday's post, here is some updating from Prof Richard Werner (Chair International Banking, Southampton University):

Richard Werner is an advocate of debt-free money creation by governments with the money created being allocated to ends that will bring productive non-inflationary and sustainable growth. The current way of the world is that banks create and allocate credit according to their own private commercial aims and these often are not helpful in producing sustainable economic conditions – as we have seen since 2007.

The choices we have now are: Do we mend the old broken system with inevitable failure repeating ahead? Or make a new system which would build national economies in as sustainable way? One way to encourage this is to invest in freely available education funded so that it does not involve a life time burden of debt. Better to create state money to help students make their own productive way in life, than let banks create credit to blow away in speculation in volatile assets which is no help in promoting true national wealth.

‘Interest-free’ loans are a little like what we have now where special rates and terms apply to student loans. Werner is not in favour of these (although better than the current interest-bearing loans), as future governments could easily raise interest rates, leaving us with no lasting improvement. What is needed are debt-free grants not needing repayment.

Any students out there who can bring some monetary reform ideas into the mix?
PS. Tell a Lib-Dem MP near you about this. It could save Nick Clegg's skin.

posted by Charles Bazlinton author The Free Lunch - Fairness with Freedom. Brain challenges for students.

Students on the streets. Well-being? Tuition fees - Cameron, Clegg & Werner

2010-11-27T13:30:00.016Z

It is a bleak cold November and anger is spilling into English streets at raised tuition fees. Students are giving Nick Clegg Deputy UK Prime Minister a particular roasting following his pledge not to raise the fees at the May election. At the same time Prime Minister David Cameron has launched a new way of measuring the nation's success. He calls it measuring well-being and it is to run alongside the usual economic measures, such as GDP. It will look at how our lives - our quality of life - is improving, how much control we feel we have over our life and surroundings, how good our relationships are, and so on.

Prof Richard Werner in his book New Paradigm in Macroeconomics (Palgrave Macmillan 2005) writes:
Neoclassical economics is built on the fundamental axiom that the main motivation and goal of mankind is to accumulate more material wealth....reforms inspired by neoclassical economics have failed to make people happy. Instead there is evidence that they have become unhappier as a result...Educational reform, endorsed by neoclassical thinking has saddled students with substantial debt. Psychologists have found that this is a main source of depression among students. (pp14-15)

Fortunately there is a way to resolve Cameron's bold vision and Clegg's fees problem. It is to be found in Werner's book, where he deals with fundamental issues such as:

1) How we allow banks to skew the resources of the nation to their own ends. [See also Martin Wolf in the Financial Times 9 Nov 2010: 'The essence of the contemporary monetary system is creation of money, out of nothing, by private banks’ often foolish lending'.]

(2) How we could redirect economic matters to bring a greater fairness and well-being. He writes:

If GDP is to grow, education must be encouraged. If education is to grow, students must not be deterred by tuition fees. Read Werner and find out how we could achieve both and how to start David Cameron's new well-being meter whirring. It would make Nick Clegg happier too.
posted by Charles Bazlinton
Read The Free Lunch - Fairness with Freedom - its all about well-being. Amazon or click here

Bank lending, Basel Rules & Credit Creation - Werner

2010-11-18T10:09:00.001Z

To link to Richard Werner's recent podcast on ways to increase bank lending to firms, click here: listen to podcast 4 Nov 2010 about 4.5 mins

To access Prof Werner's letter on Basel 3 and the public privilege of credit creation click here: Financial Times 17 Nov 2010
posted by Charles Bazlinton

Werner on QE - Bernanke agrees

2010-11-09T16:47:00.001Z

Within a few days of posting on this blog (1 Nov) Richard Werner's view that so called 'Quantitative Easing' is normal behaviour for a central bank was confirmed by none other than Ben Bernanke, Chairman of the US Federal Reserve. Bernanke was speaking at Jekyll Island, Georgia, a day after the 'QE2' monetary policy was launched, at a conference to celebrate the founding of the Fed 100 years ago. He said:
'This sense out there that quantitative easing or asset purchase is some completely far removed strange kind of thing ...an unanticipated, unpredictable policy - quite the contrary. This is just monetary policy.' Quoted in the Financial Times 8 Nov.

At the Southampton UK 28 Oct seminar, Werner quoted from the Bank of England's leaflet on QE: 'normally the amount of money grows each year'. He asked: 'Who creates it and who allocates it?'. The BoE leaflet does not say and few economics textbooks do either.

Various measures of money supply, named: e.g, M0, M1, M2, M3 are used by the BoE, but he said these measure 'savings supply' and not the most important measure of money. In Werner's view, what should be measured is newly created purchasing power, as seen in the creation of credit by ordinary banks. The standard measures fail to capture this essential 'transaction money' that drives an economy. He showed how an old problem that puzzled Keynes, that of being able to differentiate between useful (GDP-promoting money) and harmful (asset-inflation producing money) can be solved by focusing on this credit creation process. Slide No. 33 of his presentation showed how the availabilty of credit for land purchases in the UK over 30 years had a very close relationship to the inflation of land prices. Slide 32 shows how in Japan, credit creation (over 20 years) for GDP transactions was the key economic driver and not interest rate variations or fiscal policy.

Bernanke's admission shows that the term QE is, as suggested here last week, a hollow public relations tool. Werner's own meaning of the term QE was coined to concentrate the minds of economists, central bankers in particular and governments on the creation and allocation of credit. His research has shown that this was behind the extraordinary growth of both Japan and Germany in the decades after the devastation of WW2. His seminar paper should be studied by anyone wanting to get clarity on what might safely re-start national economies. Treasury ministers, Chancellors of the Exchequer, et al, might learn something.
Posted by Charles Bazlinton

Werner - what Quantitative Easing should mean

2010-11-01T17:03:00.003Z

What Richard Werner revealed last week showed why the world economy stumbles so often and explained why the movement of wealth is from poor to rich. The School of Management held its regular seminar at Southampton University (chaired by Deputy Director Dr John Marti) and was a capacity event. Werner showed we should not expect solutions until certain banking practices are revealed and transformed to work for the public good rather than for banks. The key aspect of banking that is critical for the productive and non-inflationary growth of the economy is credit creation.

Werner told us: 'Don't bash the bankers' - they are doing just what we told them to do: maximise profits. It is implicit with the grant of any public privilege, that it should not be used against the public. But we have not told the banks how to use their power of monopoly. We don't tell them that they should allocate credit to productive purposes but not to speculative ones. Over the last 30 years we have paid homage to non-intervention in the markets, so bankers poured a spate of credit into crazy, risky schemes. Now we are reaping the full fury of unbridled profit-seeking gone wrong, and, as taxpayers, paying to rebuild the system and the banks.

Prof Werner's theme for the evening was to discern the meaning of the term 'Quantitative Easing' (QE) as used by central bankers (by the Bank of England in particular - let's call it BoE-QE) and what he meant by QE when he coined it the mid-1990s in Japan (RAW-QE). Quoting from the BoE's own leaflet 'Quantitative Easing explained' he showed that BoE-QE, means nothing more than what central banks have always done. Along with the adjustment of interest rates, they inject money into the economy by buying government bonds/other assets, or sometimes withdraw it by selling them. This is quantitative action and normal behaviour by a central bank. It has been known in the past as expansion of: reserves, high powered money, base money, monetary base, M0, money supply. So it seems that BoE-QE is merely the re-branding of an old product.

So what of RAW-QE? Werner's findings as to what was needed in Japan was reported in the newspaper Nikkei (2 Sept 1995). He had predicted that none of the above 'expansions' would bring sustainable growth to the long-ailing Japanese economy. What was needed was specific 'expansion of bank credit to the real economy' - that is, to all sectors except real estate and financial institutions. He called this: 'quantitative easing'. The Bank of Japan had opposed RAW-QE for some years but said in 2001 it had adopted QE - but what sort of QE was it? Werner showed us that the Japanese monetary experiment 2001-2006 was nothing other than an old style conventional scheme. In fact BoJ-QE, was a precursor of BoE-QE. The only difference to old style schemes is that we are now told a little more of what is going on (mere public relations?). BoJ-QE then and BoE-QE now are not new departures in central banking and BoJ-QE did not root out recession then.

Sustainable growth will follow when credit, firstly is allocated so that it reaches the whole productive economy including small and medium sized firms and secondly it is prevented from feeding non-productive, speculative schemes. His suggestion was to use the banking model of Germany where 70% of the bank sector is locally owned and controlled. This aligns with comments of Amar Bhide and Hayek quoted in this blog for October 25 2010.

A feature of Werner's investigations and revelations is that he shows up the lack of intellectual rigour of conventional economics. If something goes awry from theory it is labeled 'anomaly'. Trouble is, with so many anomalies, as Werner suggests, perhaps the type of economics is the anomaly. Meanwhile crises recur and wealth imbalances grow.

You can access the entire presentation through the Southampton University SoM website or directly e-mail to: busdev@soton.ac.uk . Ask for 28 Sept seminar paper: 'Quantitative Easing' - What you always wanted to know about it, and what you are not supposed to find out.
posted by Charles Bazlinton

Too many jockeys but the horses aren't being fed

2010-10-25T10:27:00.002+01:00

In England the summer is marked off with social/sporting events – such as Ascot (horseracing); Henley (rowing boats - river); Goodwood (horseracing); Cowes ( sailing boats - sea). Last week like a reverse Cowes Week - where hopefully everything floats - we have had Cuts Week to prevent the economy sinking. Months of scary talk from the government ended as George Osborne wielded his axe on public jobs and projects. All in the cause of avoiding national bankruptcy, apparently.

The hope is that private investment will make the economy grow and wealth-making return to bring more jobs. Vince Cable said on BBC Radio 4 this morning that the flow of credit to small firms needed to increase. The hope is that central bankers will do some more monetary magic – quantitative easing (QE). But QE monetary policy has achieved little so far (why do more if it has worked already?). Samuel Brittan in the Financial Times (22 Oct) referred to Milton Friedman writing about the 1930's and the failure by the US Federal Reserve in 'maintaining the money supply'. But QE is supposed to be about the pumping of money into the economy. Trouble is, this variety of QE does not get credit to the right place to save jobs or make them in small firms where most people are employed.

Miles Costello in The Times (18 Oct) reviews a new book The Gathering Storm by hedge fund managers (Lee Robinson , Howard Marks, et al) which warns that the original crisis may revisit because much of the new credit has gone in propping up failed banks which should have been allowed to fail. Henny Sender in the FT (22 Oct) quotes Larry Fink of Black Rock saying that Ben Bernanke has a belief in the 'wealth effect of equities' - so the credit from QE hopefully will create another bull market which will enable [big?] firms to raise cash, invest, grow, etc? Or create another bubble?

The breakdown in traditional bank lending is discussed by Tony Jackson (FT 18 Oct), he quotes Prof Amar Bhide of Tufts University who shows how banks are now centralised empires. Bhide says that the findings of Friedrich Hayek in The use of knowledge in society which was critical of soviet central planning could easily be used as a criticism of banks now. Decisions are made about centrally determined financial products at the level of the lowest common denominator and the easiest available profit. But really useful banking is about a local manager accurately assessing the customer and their situation as they sit across a desk. Mechanistic models run by a strong centre, whilst good for processing computer chips, are no good for such banking. In short, capital gets misallocated – this time on a huge scale, hence the bubbles and crisis, and meanwhile a vital part of the economy droops through lack of credit.

Banks are now huddled in a corner rebuilding their balance sheets licking their self-inflicted wounds. (Remember how they bubbled up the property market and what then happened? This collateral for small firms is now vanishing as the market drops – fewer loans.)

Professor Richard Werner is holding a seminar in Southampton at 6pm on Thursday 28^th Oct on Quantitative Easing ' What you always wanted to know about it, and what you are not supposed to find out'. He invented the QE name and it will be fascinating to hear what he says about its use in the current crisis. Here is what he says in his book New Paradigm in Macroeconomics p214-5, writing on the credit market:

' the decision about whether and how much to lend and who to lend to is entirely made by the banks, a crucial public goods function that effects the entire economy is performed by them. They not only create most of the purchasing power in the economy, they also decide about who will use it for what purpose...some are accepted some are rejected . There is no guarantee that the choice made by the individual banks is consistent with the allocation that would maximise social welfare'.

Back to Ascot and Goodwood: It has been found that in UK plc there are far too many jockeys for the number of horses and the Osborne cuts are supposed to be sorting that out. Trouble is the horses are not being given the feed they need.

So how can a way be found to create credit for loans, without using ordinary banks?

To register for the seminar on Thu 28th Oct contact:

busdev@soton.ac.uk

posted by Charles Bazlinton

OECD: Land Tax is Good

2010-10-22T11:46:00.002+01:00

'Taxes on immobile bases, such as property' are advocated in an article recently (7 Oct) in the Financial Times by Vanessa Houlder . The source paper for this was by the OECD 23 March 2010 Preparing Fiscal Consolidation. This itself quoted Asa Johansson from OECD Asa Johansson Working Paper 620. 2008
Extract:

47. Recurrent taxes on land and buildings (especially residential buildings) are generally argued to be more efficient than other types of taxes in that their impact on the allocation of resources in the economy is less adverse. This is because these taxes do not affect the decisions of economic agents to supply labour, to invest in human capital, to produce, invest and innovate to the same extent as some other taxes.

.....also, as real estate and land are highly visible and immobile these taxes are more difficult to evade, and the immovable nature of the tax base may be particularly appealing at a time when the bases of other taxes become increasingly internationally mobile. Property taxes also encourage greater accountability on the part of government, particularly where they are used to finance local government. Property taxes, with regular updating of valuation (which, with modern technology, is now feasible), can also increase the progressivity of the tax system (for example, by the exemption of low value properties), provided that special arrangements are made to reduce the liquidity constraints that the tax may imply for the relatively small number of people with low incomes and illiquid assets.

…and they could contribute to the usage of underdeveloped land…

48. The design of property taxes on land and buildings can also be used as an instrument to affect land development and land use patterns. For example, low taxes on vacant property and undeveloped land can encourage the under-utilisation of land which may lead to a reduced supply of land for housing particularly in urban areas. Linking the assessment value to market value may increase incentives for developing land as market prices also reflect the development potential of land.

Fred Harrison's book The Predator Culture ( see this blog Oct 18) comes with a strong advocacy of land taxation as outlined above but Johansson does not differentiate between buildings and the land.
Muddly.
The first paragraph says land and building taxes are less inhibiting to investment decisions.
Correct concerning taxation of land but if adding value to a building will increase the tax on it then improvement is inhibited.
So: tax the plot's value more and the building's value less (or not at all). We need good housing, offices and factories so chop taxes on them. Balance any tax loss with more tax on the site. Force the landowner to develop their plot (to raise funds for the land tax) and make this easy for them by having all buildings tax-free.
Obvious.
posted by Charles Bazlinton
BUY THE BOOK: For a fuller discussion of land tax and other measures to make a fairer society click here: The Free Lunch - Fairness with Freedom

The Predator Culture - Fred Harrison

2010-10-18T22:10:00.001+01:00

A new book by Fred Harrison The Predator Culture is another one of his to be read and re-read. This one comes from a more philosophical and moral point of view than his earlier work and comes over as a fresh approach to the author's familiar subject. He likens the sickness of the body politic to a sufferer from trauma. Rent-seeking owners of land, the 'predators', need the subjugation of the 'producers' as 'outcasts' to be able to maintain their place in the hierarchy of power that is essential to sustain them. Enduring 'pauperisation' with accompanying injustice is inevitable.

Several revealing international examples help illustrate the theme with Costa Rica as quite enlightened, to Rwanda, Zimbabwe and Afghanistan. To see a review click at Amazon here. To buy also click at Shepheard-Walwyn. A revealing book for anyone owning or trading property, in land development or associated occupations such as banking - anywhere in the world.

posted by Charles Bazlinton

Werner presents seminar Thur 28 Oct : Quantitative Easing

2010-10-08T17:07:00.000+01:00

Quantitative Easing (QE) is now shorthand for many different things, depending on which banker, academic, politician or journalist is using it. If ever there was term that was coined to mean just one thing in macroeconomics and was then used to mean much else except that one thing, it was QE.

Fair enough. Definition is all. Beware beguiling phrases which have multiple meanings. In the book Through the Looking-Glass and what Alice found there by Lewis Carroll:

Humpty Dumpty: 'When I use a word it means just what I choose it to mean - neither more nor less'.

Alice: 'The question is whether you can make words mean so many different things.'

Alice, as usual in Looking-Glass land struggles to keep up with HD, who as far out of his depth as always, has changed the subject. Alice suggests that HD's definition of 'impenetrability'

is ' a great deal to make one word mean' . Whereupon:

Humpty Dumpty: When I make a word do a lot of work like that I always pay it extra.'

What Carroll portrays is the struggle we may have with some aspects of reality. Say, the way politics, media and economics intertwine which can appear highly confusing. Just what reality are they all seeing? Are they Humpty Dumpties who just keep moving the viewpoint for a quieter life? Are they ignorant, or perverse?

So with QE? Why did the Bank of Japan use this term that was coined to be a very hopeful method of bringing new economic life, and then fail to use its essential dynamic? This seminar presented by Professor Richard Werner (inventor of the term Quantitative Easing) 6pm Thursday 28th October at Southampton University should at least define what he intended it to mean.
posted by Charles Bazlinton

Monetary Reform - letter in The Times

2010-09-27T12:44:00.008+01:00

They put a letter of mine in The Times (UK) on Saturday about the private monopoly of banking. Click on this to access. I made the case for fairness in banking like the fairness in games and sport (usually). The letter in full:

Banking of Fairness
Rules are vital to the fairness of sport and games, to why can’t be apply them to banking, for example?

Sir, Michael Smith (“Cable focuses on business distortions”, letter, Sept 23) might gain insight from the underlying implication of fairness within the two letters on sport (“Football is religion” and “Caught out”, Sept 23). An essential character of sport and games is that rules are vital to a fair contest. However, in everyday working life there seem to be few such rules and the dice appear to be loaded.
For example, why is the banking monopoly allowed to be in private hands and for its players to be so advantaged that they seem to play a different game to the rest of us? If money creation were under democratic control, as notes and coins already are, it would begin to “serve the common good” by diverting those particular banking profits to the public purse.

Charles Bazlinton

The theme was taken from my book: The Free Lunch - Fairness with Freedom. For a copy of the book at the special price of £8** post free (usually £11) contact the e-mail address shown on the order page of the website (don't click to order through PayPal at that point) and your enquiry will be dealt with directly. Put ''£8 offer'' in your e-mail subject line.

** Sterling orders only

YouTube link:

posted by Charles Bazlinton

Werner on BBC World Service - 2

2010-09-23T15:56:00.000+01:00

The BBC /Richard Werner interview reported on this blog on 22nd September brought a comment from Robin Smith:
'He [RW] said the biggest asset on banks balance sheets it govt debt. This is untrue. It is mortgage debt by a long long way.'

Werner has clarified this and says that the thrust of the BBC World Service interview was about the possibility of counterparty/borrower default and the impact on banks. He was thus referring to:
'the 'biggest asset' defined as 'claim on the same counterparty' or, explained in terms of default risk, the single biggest asset with identical default risk. In the context of worrying about debtor default, it is clear that the biggest asset item with the identical counterparty/default risk is government bonds, since loans to the same individual or single company are of course never as large as loans to the same government in the form of bond holding. Mortgages to different individuals or companies all carry different default risks (even in a synchronised housing market downturn; e.g. some borrowers are wealthy enough to repay from their other liquid assets if they have to).'

Werner points out the perils of submitting to such an interview. Cuts were made to his careful defining of terms and his explanations. Important points ruthlessly deleted and punchlines entirely omitted - as was obvious. Not that he is surprised.
posted by Charles Bazlinton

Richard Werner on another banking crisis - BBC

2010-09-22T12:16:00.000+01:00

Richard Werner, Professor of International Banking at Southampton University (UK) can be heard on BBC World Service Business Daily interviewed by Tanya Beckett (September 21st). He says we should expect a further banking crisis and explains the likely circumstances. His interview (about 6 minutes) ends at what seems to be the point that he might naturally explain measures that should be put in place to help prevent another such banking crisis.

Frustrating! If you listen to the above broadcast and want to express you views use the 'overtoyou' email address on the World Service page or some other link.

Werner is a world leader in Monetary Reform and anyone supporting this could add weight to his influence, by asking for more of his ideas to be heard on the BBC.
posted by Charles Bazlinton

Quantitative Easing - Werner, Voutsinas, Biggs, Chancellor & Brittan

2010-09-14T11:57:00.001+01:00

Quantitative easing (QE) is being bandied about as the cure-all for the ongoing economic crisis but what does the term signify? The Bank of Japan first used the QE phrase in March 2001 to describe an apparently new departure in its economic policy. Richard Werner in a new paper 'New Evidence on the Effectiveness of 'Quantitative Easing' in Japan' written with Konstantinos Voutsinas has made a study of just what the authorities in Japan did at that time and what effect it had. Werner himself coined the phrase QE in Japan in 1994 to signify a specific policy he recommended that a central bank should follow to stimulate the economy: 'the central bank directly target the quantity of credit creation by the banking system....In order to emphasise the quantitative nature of this policy tool, whilst explicitly differentiating it from the traditional monetarist (bank reserves or money supply) policy,... a new expression, namely 'quantitative easing'. Voutsinas & Werner show that what the Bank of Japan called 'Quantitative Easing' in 2001 as they embarked on a new policy was not in fact what Werner meant by QE, that is: credit creation. Their paper concludes that from the Bank of Japan's 'QE': 'no statistical evidence of a significant change in the relationship between potential monetary policy tools or intermediary targets and nominal GDP [gross domestic product] occurred'.

An article in the Financial Times (13 Sept 2010) by Edward Chancellor A Japanese lecture for bond investors points out (quoting Michael Biggs of Deutsche Bank) that the lack of flow of credit in Japan in recent decades meant that deflation took hold and he suggests that this was a deliberate policy to protect an aging population who had most of their savings in Japanese bonds. Protection for this large group against the wealth-wasting effects of inflation had the effect of dampening down more general wealth-enhancing effects if a policy of credit creation had been in place.

All this points to the need to be sure just what is meant when politicians and central bankers speak of QE. Also the importance of a clear debate as to the side effects of a new policy.

Was there a debate in Japan about the pros and cons of deflation and inflation? In the UK the big issue at the moment is the cuts in government spending that are to be implemented. But where is the debate about the new credit creation that is so vital to the production of new economic activity? As Voutsinas and Werner point out credit creation can come from various sources: central bank, government, commercial bank and trade credit. It is within the power of central bank and government to create credit.

Sam Brittan (The secret of Osborne's popularity) Financial Times (9 Sept 2010) suggests the establishment of a 'stabilisation fund that would inject purchasing power when depression threatens and remove it during periods of inflationary pressure.... There is no reason to confine such a fund to public works. It could cover any type of spending or, for that matter, provisional tax cuts. .... It would be best to finance such a fund from Bank of England advances, as this would be a respectable form of Ben Bernanke’s much-mocked helicopter money drop'.

posted by Charles Bazlinton

Coalition - Try cuts using Ockham's Razor

2010-08-26T13:02:00.004+01:00

Fairness demands that those who earn more should pay more tax and also that those most in need of welfare benefits should be protected from cuts. Obvious I suppose. The UK's Institute for Fiscal Studies (IFS) has just published a study of the last budget's tax/benefit changes. George Osborne the UK Chancellor of the Exchequer said when he delivered the budget it was a progressive one - that is - fair because the richer would suffer more than the poorer. Budgets are about money figures in a bank balance. The study shows that those on a low income of £9,900 will suffer a loss of 5% (£495) compared with top earners on £80,000+ losing 4% (£3,200). Who suffers most? The budget figures are regressive - poor will suffer more than rich.

Nick Clegg the Deputy Prime Minister in the Coalition in the Financial Times today heads his article answering the IFS study defends the fairness agenda of the Coalition: 'Fairness should never be a numbers game'. He says that the Coalition's new measures to get people working and moving out of poverty will not show up on simple net-cash-left figures. For a decade Gordon Brown tried to do this. We are now in a recession bringing more job losses. What magic is the Coalition privy to? The only thing that will really work progressively and which cuts the knotted welfare/tax nightmare is the Citizen's Income.

There seems to be a complexity-complex that affects modern government ministers and forces them to believe that simple solutions are impossible. Why have we no top ministers asking their advisers: 'Why not?' when they put forward a simple idea? Ockham's Razor comes to mind, as in: Thomas Aquinas made this argument in the 13th century, writing, "If a thing can be done adequately by means of one, it is superfluous to do it by means of several; for we observe that nature does not employ two instruments where one suffices." (See Wikipedia)
posted by Charles Bazlinton

How to make money -1

2010-08-23T11:07:00.000+01:00

For a guide to moneymaking look at this post last year (Nov 28). Prof Richard Werner, through an interview with Erich Gerbl exposes the legal mechanism by which bankers create credit. This gives them the key to high profits as they literally create the money that firms or individuals need to launch a new scheme, or that speculators want to be able to buy an asset low and sell high. The bankers can be in the game twice: 1) By charging interest on the money they lend, less a small amount to the resulting depositer of the new loan, and by 2) Joining in the speculation.

Thinking of a career choice? If you want a good one for purely making money, banking must be very high on your list. One trouble is, one only has to mention bankers in conversation with non-banking friends and all sorts of bad stories come out - so your true friends may become limited to finance and banking circles. Very few people really understand the banking credit creation mechanism. I suspect many people who enter a career in banking or finance do not understand it - perhaps many in the lower ranks never do? Certainly the vast majority of the general public do not. If we did there would be an outcry and credit creation would be taken into the control of the democratic process, just like the control of the issue of notes and coins is and just as every aspect of modern life is controlled for the public good.

Think where we would be without the regulation of medical training; without food purity standards; without engineering standards for bridges or vehicles. Why is banking so different? Wonder no more that financial crises proliferate and will do so into the future until a democratic hand grasps credit creation for the good of all.

Prof Werner made his own submission to the Basel 3 proposals for banking reform. Read it for a clear academic view on the supreme function of banks: credit creation. And watch out - probably quite in vain, alas! - for any changes to this vital process as the Basel 3 proposals gradually firm up.
posted by Charles Bazlinton

Coalition to outdo Gordon Brown?

2010-08-19T18:04:00.000+01:00

Despite the bold statement in the last blog about Child Benefit being safe without means-testing, the UK's Coalition government is now floating the idea of means-testing it - and also Winter Fuel Allowances. Nothing definite is sorted yet apparently, but The Sun 18 Aug gives the flavour.

Some of us had hoped that this new government would use lateral thinking about welfare. The biggest problem that came from Gordon Brown's approach to welfare is the complexity he has left behind. What a universal benefit like Child Benefit (CB) has done, for some decades now, is to save huge amounts of administration involved in checking incomes of millions of families. It has also delivered help where it is needed. If CB is now to be means-tested it will add another layer of admin and MORE cost. OK but why let wealthy families have cash they don't need? Let the taxation regime take care of that. Read The Free Lunch - Fairness with Freedom and look at the Citizen's Income Trust website.

We need a simpler system and a more effective one. This threat to a return to the failed old complex ways of New Labour in welfare is astonishing from politicians who have had over a decade to work out quite a different way to address the problem. The principle of universal benefit already inherent in the National Health Service needs extending to welfare, not cutting back. The Coalition has only run for 100 days. Why on earth, so soon, would it now take Child Benefit - so effective and cheap to run - and tangle it up. Even Gordon Brown didn't do that to this one.
posted by Charles Bazlinton

Luke Johnson wants to cut the fudge

2010-08-12T10:48:00.001+01:00

Luke Johnson who writes regularly for the Financial Times, yesterday Beware the cost of hidden extras compared the way such businesses as a) building contracting firms, and b) budget airlines make their profits. They entice the punters in (a) with 'at-cost' tenders and (b) with 50p air fares. In (a) with every variation on the contract and (b) every add-on possible for a flight they try to make the business pay. Johnson says this undermines trust in business - people would rather know the true cost before they commit.

He says the trend was adopted by the Labour government who were notorious for dozens of new stealth taxes whilst keeping the basic headline income tax rates unchanged for years. Here the voters were confused but gradually learnt to trust politicians even less than they did before.

The same trend has happened in welfare payments, where, says the latest Citizen's Income Newsletter Issue 2 , 1.8 million pensioners do not claim Pension Credit due to 'the complexity of the claiming process and the stigma associated with being dependent on state benefit' . The same CI letter refers to the universal availability of the NHS. No one seriously suggests in the UK that the universal 'benefit' of NHS should be subject to means-testing, no one considers it a stigma to take the free NHS services, so why is the UK welfare benefit system so riddled with means-testing that makes it ineffective to many who really need its help? Far better, says the Citizen's Income Trust, to have a Universal Benefit in place of tax allowances - a Citizen's Income: 'A regular unconditional nonwithdrawable income paid to each individual citizen as a right of citizenship'. If we did this, enabling a bonfire of the welfare benefits, a huge admin. saving would be made. Clarity and simplicity wins (OK, Luke Johnson?), effectiveness wins - benefits would reach those needing them. Earned income would be taxed leaving the better off without a change in their take home pay.

Ian Duncan-Smith (welfare reformer) and Frank Field (reviewer of poverty) need to consider the Citizen's Income as a vital measure in a new, more effective and much simpler system.

Posted by Charles Bazlinton

Get more land (Big Society method)

2010-08-10T11:30:00.011+01:00

In the UK, planning policy over the past decade or so has meant that houses are being built at high density with tiny so called 'gardens'. As discussed in The Free Lunch - Fairness with Freedom this does not necessarily help to promote a more ecologically favourable outcome. For more on this read the book. Look at the arguments for lower densities.

But there is one measure that local people can use to give themselves more space. If 6 residents in an area wish to have land to grow food they are empowered by the Small Holdings and Allotments Act 1908 to ask their Local Council to set allotments up and the Council must make efforts to acquire land. Many people, for £20 or less for a year's rent for a part-plot, would welcome the opportunity to have a bit of land to tend. Most District & City Councils will already have allotments but many small Parish Councils do not. It is a simple procedure for the Parish Council, once having received a petition from at least 6 residents to budget up to, say £10,000, to set up allotments. If they need to raise their council tax amount next year there should be time to set that in motion because the most difficult factor is usually finding suitable land which may incur delay.

Land can be rented, say on a three year extendable lease, or bought. Parish Councils can borrow money over a long period which makes a land purchase affordable even to a few hundred council tax payers in a small Parish Council's area.

Council allotments are a longstanding and proven example of what David Cameron says about his Coalition Government's 'Big Society' idea: a 'big advance for people power'. Perhaps the legal model of popular local demand for allotments could be the way forward for all sorts of new local initiatives, although to have to act after the request of 6 residents to keep the local pub open might be pushing it a bit...
posted by Charles Bazlinton

The religion of real estate

2010-07-27T12:55:00.003+01:00

Martin Wolf of the Financial Times on Friday 9th July in 'Why we must halt the land cycle' attracted much on-line support. Martin Wolf does not actually use the term' land value tax' and Prof Roger Sandilands of Strathcylde University posted a response on 13 July (on-line) - extract:

Unlike income taxes and VAT, a “tax” on the recurring annual rental values of land is not a tax at all. Rather, just as with parking charges, it is a fee for the benefits of exclusive occupancy of land (space) that none of us made but whose values are created by ever-growing pressure of demand and the community-created amenities that surround each plot. These community values rightly belong to the community.

On-line comments and print FT letters flowed in for a week afterwards giving much useful information. A transformation of taxation is needed, as Wolf says in the article:

I have long been persuaded that resource rents should be socialised, not accrue to individual owners. Yet, as Mr Harrison tellingly remarks, “as a community we socialise our privately earned incomes (wages and salaries), while our social income (from land) is privatised.”

Unfortunately the opposition to change is entrenched in the form of a quasi-religion as Richard Harris (July 9 on-line) writes. In moving the focus away from housing, to commercial real estate, he writes:

The Church of Real Estate has gathered many true believers. We could have an interesting discussion about who has been its High Priests.

cfmmculloch on 9 July writes (o-l) 'who will vote for it?'

Exactly. The book The Free Lunch contends that an annual charge on land will get nowhere with the voters, as homeowners are in the majority. Think of this: 100 years after The People's Budget, which might have started a reform along Martin Wolf's lines, the House of Commons is now just as much in thrall to landowners as the House of Lords was in 1909 - the only difference is the amount of land owned per landowner with a blocking vote - minute now, compared with the Lords' vast estates then. The Free Lunch takes the marketing view that unless we can sell a benefit from a change, to a majority of voters, we will get nowhere. To a new land value charge/land value tax, must be added: reduction in income tax/vat etc. AND a non-means-tested citizen's income at a rate to cover the new charge to the many low income homeowners. With two gains against one loss surely this is not beyond the marketing wizards?
posted by Charles Bazlinton

Divide and Rule - Werner on credit

2010-07-05T10:43:00.002+01:00

Brake and accelerate - now! say economics experts. The leading article in The Times on Saturday July 3rd 2010 (No Easy Option) shows they are worried that UK monetary policy is too easy already and we are likely to be headed for a dangerous bout of inflation. The Financial Times on the same day (Recession is still a looming menace) has it that the danger is recession and there is little sign of inflation for some time, so care must be taken that government action does not hurt growth. This argument was rehearsed in this Blog March 19th with Lord Skidelsky explaining both views.

This divergence of view at the highest levels is at a time of trying to mend broken banks which are supposed to be the source of credit to struggling firms to bring the growth needed. So do we want new credit to bring booming house prices again? Do we want more weird financial products to be gambled with to blow the system up again? No & No. Do we want new jobs created and productive old ones safeguarded? Yes & Yes. So both The Times' and the FT's views are partly right. So is a solution possible?

Professor Richard Werner of Southampton University (Chair: International Banking) points the way. He says that dangerous credit creation brings inflation in asset prices such as financial products (so ban new credit for financial speculation e.g. credit for firms to take over other firms). He says benign credit creation does not bring inflation as the money goes to productive job-making in the real economy. Quantitative easing / printing money IS needed but not for the wrong things. Differentiate. Discriminate. Divide. It makes sense. Do we want another boom and bust? If so, mend the banks and let them do exactly what they did before - creating 98% of the money supply and using it indiscriminately. If not, divide credit up into good credit and bad credit. Severely restrict/ban bad credit; encourage good credit. Divide like this and rule for the good of all - not for the financial sector as it has been. Lord Adair said:Sept 22nd 2009 'some financial activities which proliferated over the last ten years were ‘socially useless’ '. But is anything going to change?
Posted by Charles Bazlinton

Chris Grigg & Sir Roger Moore; land & credit

2010-06-21T15:44:00.003+01:00

Sir Roger Moore CBE, humanitarian worker, actor ( tv-The Saint, films-James Bond) exposed his financial affairs to Sarah Fleming (Sunday Times 2oth June 2010). Pause here: I am talking about land and anyone who has read this blog for Feb 25 , 2010, will remember Debbie Moore's 'no free lunches' claim and how Sherlock Holmes very quickly utterly rumbled her about that. Sir Roger is no relation to Debbie (although he has does have a daughter Deborah...) but his run of house purchase gains started in the 1960's at £7,500 - sold £12,000; £17,000 sold- £35,000; £75,000 - sold £250,000. His comments are quite telling. He felt 'guilty' on his first gain and 'truly felt disgusted' at the last, some 10 years ago. He now lives in Switzerland. Seems that Sir Roger has an unusually unsuppressed conscience that has not been smothered in the way it is usually is with home owners - who appear to believe that they have a God-given right to their house price gains despite the fact that they have contributed nothing to the rise of the land's value, which is the key factor in the value. The cost of building improvements that they may have added themselves, are usually a small part of the underlying total gain. Sir Roger! He gets it. Respect!

Chris Grigg I am sure 'gets it' absolutely, as he is paid to do so. He is the new chief executive of British Land (BL is UK's No. 2 property company). He has previously been with Barclays and 20 years in Goldman Sachs. He talks to Rebecca O'Connor in The Times June 21st 2010. When people find out what he does, they usually ask 'Is my house price going to go up? '. He says he is loath to give an answer. He says 'there are times when I will have a view. And times when I won't'.
Lets split this Q & A into two parts.
1) Does he say? 'When you say house price don't forget that the price of houses always drops because they deteriorate - as anything man made does - what you really need to know is are land prices going up.
2) Does he say? 'If you really want to understand if house/land prices are going up or down, read anything Fred Harrison has written and especially his finding going back for 200 years about the 18 year peak-to-peak price cycles.
But Grigg doesn't really let on any such property secrets but he scorns the view that property investment is innate 'People always talk about gut decisions in real estate... but ...really a judgment based on information.' One of these bits of information he suggests is 'looking out of the window at buildings'. Hey! that helps.

Rebecca finishes the article with a reference to Grigg's previous career in banking and how Stephen Hester his BL predecessor went to rescue Royal Bank of Scotland. Property- banking /land-credit are inextricably linked as Rebecca suggests.

Credit fuels the property price cycle. What the gainers are doing is cashing in on the need everyone has of land for living and working. Bankers use the timing of the cycle to lend to developers to buy low and sell high, they take years of interest. Developers also rake off the land rent as part of their total real estate yield. The land rent in a more moral world would be due to the public purse, since it supplies the tax for infrastructure that gives the land much of its value. Our political masters should use the innate human insight of such as Sir Roger Moore and boldly take control of these banking and land monopolies for the public good.

posted by Charles Bazlinton

George Osborne's budget - a big question

2010-06-11T13:02:00.000+01:00

Central banks are the key to the economic health of any country. How they operate, what they do, what they should do and who they are - or should be - accountable to, are vital issues raised by Prof. Richard Werner in two Bloomberg interviews (about 10 minutes each).

Werner gives unusual insights into the money supply, credit creation, interest rates and more, which are normally unreported in the financial media - or even among many economists. He has views that are counter to prevailing conventional ideas. If you have seen these videos already they are well worth a revisit.

Has George Osborne seen these interviews I wonder? His budget is due soon and we are being prepared for harsh times ahead but hopeful for economic growth too. Japan has for 20 years endured much depression and deflation because - Werner says - their central bank has not been co-ordinating their policies with those of the government. Does the Monetary Policy Committee and the Bank of England as a whole work with the UK government or is there a failure of democratic control as Werner says there is in Japan? Who is in charge? Will the UK endure 20 years of depression too?

Prime Minister by John Stewart - read it & lend it!

2010-06-04T10:42:00.000+01:00

Before I read John Stewart's new book Prime Minister I wondered if I would be wasting my time reading it. After all what better way could there be to convince people that we need to improve on the way we handle public finances to achieve fairness and social justice than a step-by-step well reasoned non-fiction tome?

I was wrong. I did not waste my time. This novel reminded me that there are more ways of communicating than the full frontal blunderbuss approach of a carefully constructed intellectual exercise: covering all bases, answering all possible objections and forcing the reader in the end to be bowled over by the dazzling rhetoric (as if). We are nurtured as children on stories, such as Grimm's fairy tales, Jesus' parables or Cbeebies Everything's Rosie, so why not try a good story to get past the intellectual barriers thrown up when a person obviously rooting for a cause approaches?

In a novel the reader is allowed to dip in and out of conviction as to the theme - if there is one - because the plot carries them along regardless. Stewart manages to keep the reader's interest and teasingly reveals his ideas in dribs and drabs as the plot develops so that the theme is accepted more on the level of feelings than of logic. Because feelings, or even passion, is what drives those really committed to social justice, a novel is a very good place to start to convince the uncommitted. Benjamin Disraeli did it with Sybil or Two Nations in 1845. Stewart's book Prime Minister does it again now.

Click here: To read my review on Amazon. To read any review on Amazon click on the book's title line.
Posted by Charles Bazlinton. Apart from being given a free review copy of the book, I have no financial interest in its success.

Werner on the Euro crisis

2010-05-22T21:13:00.001+01:00

In the UK we seem to be smugly complacent that whatever trouble the Euro is in at least we are not in it and not likely to be. But a crisis may well be what some people want in order to achieve EU political union. Given a Euro collapse and such a move would there be pressure on the UK and other semi-detached members to cave in to an offer 'we couldn't refuse' and scrap the national currency? In a recent article, Richard Werner -International Banking professor- says a 'United States of Europe' is one possibility and another is that Greece will get kicked out of the Euro. His article is a must for its insight into what is happening now, and about his warnings over many years on the danger to sovereign states if they give up their power to run their own currencies - like Greece did.

He fingers the central bank (ECB) which through its credit creation policies towards Greece and others created an unsustainable economic boom that led to this present mess. Werner says Greece cannot be solely blamed for its current position. Link to the Daily Yomuiri article.

More to come from Vince Cable & his fellow Lib-Dems?

2010-05-15T21:03:00.003+01:00

Who knows what political marvels will be produced next? With the UK's brand new Lib-Con Coalition (don't reverse the names - it's not kind- or as optimistic as the mood still is even after 5 days), it is interesting to see where a main player such as Lib-Dem Vince Cable is coming from. He was highly respected in the long run-up to the election. Any time a TV news bulletin included him speaking one stopped and listened carefully - and many people I mentioned this to, agreed.

With such a notable guru now in charge as Business Secretary (last week this was Lord Mandelson) it is interesting to note that in a forward to a recent book The Case for a New People's Budget he backs the introduction of the use of land value for 'reducing the disparity between the rich and the poor'. The book has insights on the effects on farming, business, utilities, poverty & welfare, and banking - with a practical route plan for achieving this enlightened reform.

The City is reported to be 'right to fear the arrival of Cable' - which is probably a good sign for all of the rest of us, on what he might be planning in his given role. But watch out for his, and other top Lib-Dems' influence on wider areas of policy such as taxation. It is probably a relief to the City that he is not at the Treasury, but look how far Lib-Dem leverage has got them in only one week. Read the book and prepare. Book available at above link.

Posted by Charles Bazlinton.

(No financial interest in sales of the book mentioned, apart from a free review copy).

Werner meets Harrison - Monetary Reform & LVT. No:4 Interaction

2010-05-12T22:07:00.007+01:00

In answer to a question from Richard Werner (International Banking Professor) as to what about land did Keynes not understand? Fred Harrison suggested that even in a stable monetary system such as Dr.Werner advocates, unless there is a fiscal system to tax away the gains on land from private gain towards public purposes, it is generally banks which gain those rents that accrue. He said there is an inevitability about it - a 'law'. Due to the fixed amount of land, a shift in favour of rents occurs so that income arising thus goes to those so placed to receive it. This will continue to happen unless rents from land are specifically directed for the common good. Public services should be funded from these rents, as alternative taxes, such as we now have, mean that the rich get richer and the poor get poorer. Harrison also said of the monetary approach - that it would not eliminate land originated economic failures.

Werner asked why it is that in Germany land prices are stable? Harrison said after German experiences following WW1 and the 1930s, there had developed a different ethic of economics. However, he said that despite Werner's suggestion that rules for banking about property speculation would be sufficient, monetary policy was not enough - more needs to be considered. He suggested that James Robertson** is important in the finding of a synthesis and integration between the two. David Triggs said that Henry George believed both in the full recovery of rents for the public good and also that the public control of credit through the government was vital for economic justice.

Werner said that property prices are a function of the increase in credit, with most of the value being in the land. For a while all goes well as the rising amount of credit feeds into a rising property market. His researches show that credit cycles explain property price cycles - when the credit supply slows, prices drop. In Japan prices fell 80% and broke banks. He sees the repayment of debt, with its background of charging of interest, as unsustainable for an economy as a whole. (See Blog May 2nd - Babylon). Whilst one individual bank could assess a borrower's ability to pay, no one bank could assess what was happening to the whole economy - as other banks lent out, unknown to each other. Thus is the case for the government or the central bank to control credit allocation. To a questioner, he said that interest rates do not control growth or the money supply. Low interest rates stimulate growth and interest rates follow growth.

**Five years ago James Roberston drew the work of Werner and Harrison together.

Click on this and go his summary & items 3 & 7:

“At Item 3 the books by Fred Harrison and Richard Werner complement each other wonderfully .

Harrison’s is about how the pathology of a perverse tax system encourages fluctuating land values and house prices which cause booms and busts. Werner’s is about the pathology of the present perverse way of creating new money which, by encouraging lending for the purchase of assets like land and housing instead of investment in productive activities, also contributes to booms and busts. Together they show that serious study is needed of the links and interactions between tax reform and monetary reform. Item 7 is about that”.

With the extraordinary events of the last view days resulting in a coalition government with Clegg, Huhne and Cable (leading lights in ALTER) at the very top tables who knows what could lie ahead?

Posted by Charles Bazlinton click to see the cartoon

Werner meets Harrison - Monetary Reform & LVT. No: 3 (Harrison)

2010-05-06T22:25:00.005+01:00

Et tu? When your friends don't seem to have grasped the knub of what you have spent several decades explaining so lucidly, it can make you weep. We empathised thus with Fred Harrison last week at the IU Conference in London. He referred to a speaker at the conference on another day who had, according to Fred, used a wrong methodology to assess the value of the rent of land.

But whilst such friends in the same cause are obviously a disappointment to him Fred regaled us with some of the content of his book 2010 The Inquest: see the review. This deals with his second major prediction of the land/property 18 year price cycle which peaked in 2007. He warned political leaders of this 10 years before: Mandelson, Darling, Campbell. J M Keynes remark in 1925: 'there is no land problem any more' as you can imagine does not go down well with FH and it makes JMK's views part of the problem. Harrison cannot understand the 'disconnect' with the truth about land. He said government has betrayed those it is supposed to be looking after. He likened the scenario to the treason that King Charles was charged with. He sees the failure in terms of politics and not of economics. He sees land value as a cash measure of the failure of governance. There is a failure of monetary policy. He does not particularly blame bankers and 'greed' - the rules allow them to behave as they do. He sees the issue as a breakdown or morality and intellect and wondered why the system is not being called to account by the churches, or by intellectuals and academics?

He judged our system as not being fit to cope with with the results of a 200 year trend. Land policy has failed and academics put the body of knowledge about it 'out of reach'. For some reason economics relating to land does not 'stick in the mind' - (even JMK's mind?). Fred believes that when even friends seem unable to grasp land economic fundamentals, the next generation starts 40 years back. (As though Fred H had not been around enlightening us with his amazing books? Can this really be so?).

In response to questions, he said that despite his own failure to affect changes in the UK in the 1980s, in Russia in the 1990s, or in the UK again in the 2000s, he dropped a hint of some scheme he has embarked upon recently that will take about 5 years to come to fruition. He gave the audience reason to hope that the world will continue to be enlightened - if it wishes to be - by one of the pre-eminent advocates for economic justice of this generation.

NB: More to follow later on the IU Conference exchanges between Harrison/Werner/audience.

Posted by Charles Bazlinton. Revised 8 May.
Author: The Free Lunch - Fairness with Freedom
see web cartoon