Monday, November 09, 2009

Lord Griffiths & the morality of banking

John Arlidge's Sunday Times article ‘I’m doing God’s work’ featuring Goldman Sachs’ (GS) chief Lloyd Blankfein had a side feature on Lord Brian Griffiths of GS who is an 'international pastor...committed Christian’. Lord Griffiths relates how an employee came to him and had a long conversation about ‘the morality of banking’. It would have been an interesting discussion, but we were not told about it.

I gave Lord BG a copy of The Free Lunch – Fairness with Freedom in November 2004 when he addressed a church service in Winchester and he told me he would read my book. I wonder if he got as far as pp.43 & 44? …the Free Lunch benefit of credit creation taken [by banks]…represents an unfair appropriation of the common wealth… US presidents Thomas Jefferson and Abraham Lincoln advocated that the power to issue money should be taken from the banks and restored to the people.’ Does Lord Griffiths understand the moral dimension of what banks are doing when they grasp solely for themselves the community-derived benefits arising out of credit creation?

The use of credit creation gives rise to income from interest charged and the ability to purchase assets appreciating in price. It is an immense source of wealth as the main Sunday Times article showed. It is perhaps the most powerful example of rent seeking that there is [defn: rent seeking]. Credit creation arises naturally as we - ordinary creative and law-abiding people – exist as a settled society. Is it moral for banks to divert this free lunch to themselves? Did they create the settled society alone and thus alone should take the benefit of money creation arising? A phrase used about welfare benefit cheats is: ‘there is no such thing as a free lunch’. Are bankers any different?

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