Charles Moore on Tories and Labour

What are the two main parties' core beliefs? Lord Moore in The Spectator  The Spectator 1 June 2024 asks for clarification about:

 '...current confusion in which Tories hint at approval of socialist principles and Labour of capitalist ones,...' 

What clear choices are there for the ordinary voters on polling day July 4th?

Maybe the only clear choice is about competence? The decline in skills in managing public affairs over the long Tory regime after 5 prime ministers in 14 years does not inspire 'More of the same please'. Is there a chance that a fresh lot would do a lot better? Here's hoping... As Moore implies they are really playing a similar song with only slight variations and they don't have  anything very new to envision us with. Are the Lib-Dems any different?

If we are really in a capitalist system does that explain the growing need for food banks? If it is socialist why are the food banks needed at all with taxes the highest for 70 years?   Has socialism failed too?  Why is it becoming more difficult to buy a house on an average salary? Why are housing rents ever increasing? OK, we are in a mixed system - part socialist part capitalist - but are there any alterative tweaks to think about?

There is a system change that would begin to sort the inefficient running of the economy which the food banks and shortfalls of the NHS show up - after all,  technological success is not an issue so the issue is fairness. A new way would focus on where taxes comes from, how welfare is handled and how citizenship should be fairly recognised.

Tax reform is need to source a large input to the public purse from Land Value Tax  instead of from income tax and other taxes. The property market mirrors the speculative aspect of capitalism and brings  untaxed gains to homeowners when they have done nothing to produce the added land value. What such free lunch do renters get like that? Separating the land value from the house value  (about a quarter or a third of the Rightmove or Zoopla price) shows the value that should be taxed on an annual basis. The amount would need to match the average income tax currently paid so that for the period of the tax reform  any income tax paid would be a rebate allowed  against the charge for land value.  

There is an added green and a housing benefit to land value taxation in that it would encourage the development of land. A house could be enlarged to build rent-producing rooms under the same land tax charge. With more homes built to cover land tax charges on vacant land with planning permission, houses would become more affordable.  The failure to build enough homes has been a feature over decades  - land value tax is an incentive to build more - whilst Help to Buy schemes merely inflate prices by adding new money into the existing housing stock. 

Welfare reform should be included in this LVT tax shift by instituting a regular unconditional Universal Basic Income (aka: Citizen's Income). This should eventually replace most of the welfare benefits which are clearly inadequate given the food banks and housing benefit needed. The individual fine tuning of welfare benefits now needed would be  reduced  bringing large admin savings. The UBI would not be conditional on work and it would be provided for citizens only. These changes would make fairness for people a new feature of our socio-economic system, reducing the centralising nature of the state and curbing capitalistic power.  

Banking reform could add to the UBI sources (see this Blog elsewhere). For other banking reforms and how banking works see:  Charles Bazlinton - YouTube  .

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

Budget alternatives: Richard Werner on Digital Currencies & A New Financial System

UK Chancellor Jeremy Hunt is set to announce 12 regional growth projects with low tax and other investment incentives (ex-PM Liz Truss wanted 200 zones).  The decentralisation idea is a good one to spread new economic growth beyond the south-east into the regions but it misses a key factor in economic decentralisation - that of the money supply.  The ultimate is to have local banks which create money where everyone needs it - where they live in their local area. 

Professor Richard Werner in this new YouTube video discussion 'Why we need a New Financial System'  in discussion with Oliver Studd and George McNee,  says that digital currencies have been around for decades and ordinary licensed banks have been creating digital currency as they create bank loans for their customers.  He also adds to the current debate that central banks should create digital currencies for their monetary system (this starts at 15min on the video). He says that this would be a dangerous development which in giving everyone a current banking account with the Bank of England leads to a possibility of centralised surveillance  and control of their spending.  Do we trust that good central bank governance would always prevent such a move? In setting a centralised bank system for every citizen the normal banking system would be fundamentally changed for ever says Werner.  Such a strong pull towards centralised banking for all would weaken the normal business model of  current banks who need the deposits and relationships of their customers. The  banking currency produced by them was always digital as they did not print bank notes for the loan: Bank Digital Currency - BDC.  The only change now is to add Central to the acronym - CBDC and herein lies a danger.   

Werner says that in earlier times in Germany, monasteries would act as bankers until they were secularised and farmers, for instance, would have difficulty with their credit needs. What happened to remedy this  was the creation of local community banks designed to operate in specified localities. Now, nearly 200 years later the widespread Sparkhassen banks, the co-operative banking system and a sound locally-originating economy is a testimony to the practicality of the solution of locally created money. Britain was also a pioneer of local savings banks around the same time.  

But small local banks grow and are bought up by larger banks who tend to like to deal in large loans for large customers, leaving smaller business customers overlooked. There is a need for many small banks to be created. These preferably will have a common-good profit motive and protected through a majority charity ownership holding which distributes bank profits to local good causes and needs. This ownership model locks in  the common-good theme preventing private predatory takeovers of small successful profitable banks.

Decentralisation is needed more and more and the fundamental way to do it is to encourage the creation of local banks. Growth for special regional zones  is a start but why not target support to enable the decentralisation of the money supply to every 'local zone' by encouraging lots of tiny local community bank start-ups where the small and micro business are? Everyone knows that such businesses create the jobs and wealth. What's not to like Mr Hunt?  

    

Another Tory policy? Basic Income (without Government Debt)

Shock! Horror! The Tories have stolen Labour's public spending policies. Chancellor Rishi Sunak has started to undo the austerity that his own party imposed for a decade which, as Headley Stone  wrote (FT letter 15 Feb) 'has brought the UK's public services to its knees' . 

Commenting on the budget in the FT on 11 March,  Martin Wolf wrote: 'It makes sense for the government to borrow to spend, especially on investment. I have been arguing this for a decade. The decision to cut investment right after the financial crisis was a classic bit of Treasury idiocy. Now ...with employment high ...no longer the ideal time....But it is still a risk worth running provided the money is well spent which one has to doubt, given the hurry.' 

What is it about our party politics that had George Osborne, a Tory chancellor imposing harsh measures for a long time to the detriment of the common good and now has a successor from the very same party determined to undo it?  Left-leaning polices have now become the centre ground but have been cleverly captured by the politicians of the old right. At long last, new enabling fiscal policy that for so long has been proscribed, will be relaxed, but if Mr Wolf is right not with the best timing.  Incidentally the investment will benefit bankers and large funds as the money will be borrowed from them. It need not be that way, as sovereign governments can create money debt free.      

The huge impact of Covid-19 on the economy and on households will surely need 'helicopter money' for every citizen and the news is that President Trump is planning to 'send out cheques to every American within two weeks' to achieve a boost. There are people calling for such a measure in the UK. A UK petition is running with an ambitious plan to set a basic income at £1000 per month, sign here: Basic Income .   This: QE for the People  explains how it would work without raising new government debt.  

What may well be started as an emergency measure to plug depleting household budgets by a free handout, needs to become a standard fact of life for every citizen. Everyone needs sheltering from the whirlwind caused by Covid-19 and the usual rollercoaster of flip-flopping politicians who play with our livelihoods through shortsighted policies.     


Posted by Charles Bazlinton author The Free Lunch - Fairness with Freedom £3   

Digital subscriber royalty: Facebook & Amazon. A Basic Income resource for the people

John D Rockefeller, through controlling oil supply, and Andrew Carnegie through steel supply, created hugely successful enterprises that grew on technological advances and expanding markets.  In largely controlling the market (i.e. monopoly), they were able to amass vast fortunes through the control of prices.     

The Free Lunch - Fairness with Freedom explains how such unfair situations can be resolved beyond anti-trust and fair competition laws - (which Rockefeller manipulated in his favour) and beyond the heavy taxation of profits (which accountants can conceal).  The book shows how to deal with natural and commercial monopolies which arise when people want a share of the good things of life which are held by a minority. Including such things as land, bank money creation, minerals, technological advances such as radio spectrum, etc.   

Hardened champions of capitalism might allege that the 'the market' must have free rein to bring the good life for all and thereby solve the socio-economic problems of poverty along with a fairer distribution of wealth achieved through tax. The last 20-30 years at least shows that they are misled and mislead. Some markets have a basic fairness about them with fluid supply matching flexible demand and steady or openly adjusting prices - the ideal world. But a free market will never bring fair distribution and  reasonable prices in a monopoly situation. 

In the case of land for instance, where everyone has a desire to have a home; due to our highly developed cities where high values relate to high demand, not many people can be satisfied. The way to tackle the land monopoly is to tax the value of land each year everywhere, use it for public goods and services and, or, distribute the proceeds in the form of a regular basic income. The tax, a type of rent paid by the freeholder (to the state that guarantees the owner's title), would resist the monopoly forces which now deprive many people of reasonably priced places to live. It would induce a greater supply by lowering prices, whereas schemes such as Help to Buy only add to demand by pumping in more money - with prices maintained or rising. 

The book examines several monopoly situations that could be addressed in a similar way.  To the list can now be added what is happening as the internet giants of the past 20 years are coming of age and clearly paying very little tax. Philip Aldrick writes about this in The Times   'In the era of digital monopolies we are being taken for suckers' . He examines the way our personal data is being harvested free and sold on, bringing huge profits for such as Google, Amazon, Facebook, etc. 

According to the principles outlined in The Free Lunch for monopolies there could be a case of the state charging these near-monopoly digital firms relating to their national user numbers and distributing it in the form of a basic income to all citizens.  The value of the product they are handling, our data, has arisen purely through our initial action of signing up so it is a fair deal for us to be given a share of the profit we are the origin of. 

It might also make the data privacy issue clearer so that if I were to take an annual fee for signing up with Facebook I would also sign up to allow Facebook to crunch my data for sale to others.  Facebook makes $16bn net annual income of which say a 33% fee (appx $5bn) divided by an estimated 2bn users worldwide would give subscribers $2.5 dollars pa. Not a lot, but given the total income of the digital giants is around $100bn the aggregate fee for most people could be over $12 pa, merely considering the new digital firms.  But digital marketing information capture started with digitally-read plastic loyalty cards, so clearly any firm or organisation attracting subscribers can exploit customer data for profit and should acknowledge that potential with a annual royalty to the subscriber.  Thus to be fair to the digital giants (they are not a special case) any profit-oriented organisation or even non-profit wanting to sell on personal data should give a royalty to the subscriber.     

Our society is now dependent on the digital way of business - Amazon, Facebook, banks, utilities, retailers, etc, etc,  - so it would be invidious to merely select their own subscribers for the basic income payback. What is needed is for governments to receive the income stream, from a digital subscriber levy or royalty on every listed subscriber and to pass it on as a part of a national basic income scheme (a.k.a. Citizen's Income; Citizen's Royalty). 

To quote the book, The Free Lunch, wealth sources arise:
  'a successful society generates them...are usually limited in supply... are vital to modern living, they are in high demand and are valuable'. 
This new digital wealth source arising entirely from us as individuals and from our actions is waiting to be appropriately redirected back to us via a basic income.  Taxation justice for digital monopolies would start be addressed. Such is a way to a fairer society. 

The book is at a new special price of £3 inc p&p UK      

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

Welby's Wish List for fairness. A new mandate from the IPPR rooted in the common good.

The IPPR (Institute for Public Policy Research) has published its interim report 'Time for Change: A New Vision for the British Economy'. Archbishop Justin Welby is leading the publicity with an FT article 'What sort of British economy do we want for our children?' [Digital title: British society deserves an economy rooted in the common good']. He continues the May/Corbyn themes (our last blogpost):
Theresa May, PM: 'We will make Britain a country that works not for a privileged few but for every one of us.'
Jeremy Corbyn, Opposition Leader: 'For the many, not the few'.

Welby calls for comprehensive economic justice - socially, regionally, generationally, environmentally - and from the IPPR report highlights his priorities: the need for reform of the education system; a fairer tax system; decarbonisation; improvements in public and private pay and the expansion of the housing stock. He believes most people want a system working in the service of human flourishing and the common good and asks why are we hearing 'Why are so many people so poor when others are so rich?' and 'Why are young people going to be poorer than their parents? 

An interesting aspect of the report is its criticism of recent economic policy.
We have experimented with bold monetary policy, but are constrained by pre-Keynesian fiscal orthodoxy. It points out the significant cuts in public spending due to government austerity programmes and says that austerity has not worked well. It suggests that monetary policy has been majored upon but helpful fiscal policy has been neglected. It wants government-initiated investment for growth and monetary policy to be coordinated to redress this, with the Bank of England advising on the integration of monetary and fiscal policy. Personal note: Ask a high official at the Bank (as I have done) if it would be possible to  invest in an industry by creating money in the QE manner - at no interest and no repayment - and they will affirm that it can be done. The IPPR obviously thinks so too and wants a change. It wants the hands of the Bank untied so that it can join in to help the economy in new ways. 

Most items on the Welby Wish List could benefit from ideas promoted on this blog over the years. Some of these are indeed mentioned in the report, which is a strong vindication of the views of book The Free Lunch- Fairness with Freedom. Such as: Education reform using monetary policy to fund education grants (Prof. Richard Werner); improving pay by  universal basic income ; a fairer taxation system which also helps the expansion of the housing stock through the incentive for development through a new land value tax .

Under the final heading (IPPR p81-83) 'Inequality and public purpose'  the report challenges the way we have measured success over the last 50 years and includes: 
'..inequality is largely a result of the ability of economically powerful groups in society to extract ‘rents’ or incomes beyond those earned by their economic contribution'. 
This gets to the heart of the matter in the way of the principles of The Free Lunch. In the vital matter of banking  (IPPR p80):
 'new insights into how the banking system creates money in modern economies, and therefore the role and limits of government or central bank monetary policy'.
The IPPR needs to look further into Richard Werner's New Paradigm in Macroeconomics who is arguably the first modern economist to have this insight. 

A banking problem from the report shows how only 5% of UK bank lending goes for businesses (15% in the Eurozone) with most going to land and property lending:
'The bulk of real estate loans and mortgages do not increase the productive capacity of the economy or contribute to growth; instead their primary effect is to drive up asset prices'.

To redress the bank lending imbalance the IPPR wants regional banks with 'geographically bounded  mandates to support the local economy' . 
It is happening already! The Hampshire Community Bank is likely to be the UK's first such regional bank and it is designed to that pattern. Additionally, being owned by a charitable foundation it will use its profits for the common good in its area and not for the high staff salaries and bonuses so roundly criticised in the IPPR report and by Archbishop Welby. Hampshire Community Bank in its whole ethos, aims to change banking for the better. Banking for the common good.  The bank, whilst not open for business yet, is currently in its licence application stage under the Bank of England's PRA. Such distinctive banks are needed across the UK. These new banks will play one part in a greater fairness for all.

With political parties broadly united over the fairness theme, and with the IPPR's excellent report spelling out some telling home truths over broad areas of economic life, the prospects that something serious for fairness will be done, are good.

Posted  by Charles Bazlinton. Author : The Free Lunch - Fairness with Freedom.  Director: Local First CIC which is promoting Hampshire Community Bank.

ECOBATE 2016 Best Paper Awards

ECOBATE 2016 was held in two Winchester locations this year. The academic papers were presented at the University of Winchester Business School in Romsey Road and from mid-afternoon the public session was back in its usual place down at the Guildhall. In a new development for ECOBATE, the morning's academic input of nearly 70 papers was recognised through Best Paper Awards which Sir Vince Cable presented as follows:

1. Category - Banks vs Financial Institutions 
Robert Unger,  Deutsche Bundesbank. 
BEST BANKING PAPER
Traditional banks, shadow banks and the US credit boom - credit origination versus financing  
  
2. Category - Global vs local banking
Sefika Betul Esen, Prof Yener Altunbas, Prof John Thornton, Bangor.
BEST REGIONAL GROWTH PAPER
The effect of banks on regional economic development 

3. Category - Monetary policy 1 
Giorgio Caselli, Catarina, Figueira, Joseph G. Nellis, Cranfield. 
BEST MONETARY PAPER
Monetary policy, ownership structure and bank risk taking: Evidence from Europe 

4. Category - Financial Development
Martin Eihak, Davide S Mare, Martin Melecky. Edinburgh. 
BEST INTERNATIONAL FINANCIAL INCLUSION PAPER
The nexus of financial inclusion and financial stability

5. Category - Financial history 
Konstantin Kiesel, Felix Noth. Halle
MOST INVENTIVE PAPER
When debt spells sin: Does religiosity guard against over-indebtedness?

6. Category - Commodities, Gold & FX
Shubasis Dey. IIMK/Kerala
BEST HISTORY PAPER
Historical events and the gold price 

7. Category - Banking and Risk
Ariel J Sun, Jorge A Chan-Lau. Cass Business School
BEST APPLIED NETWORKS PAPER
Financial networks and interconnectedness risk in an advanced emerging market economy 

8. Money Creation & Eurosystem 
Alexey Ponomarenko. Central Bank of Russia
BEST INTERNATIONAL CREDIT CREATION PAPER
The note on money creation in emerging market economies 

ECOBATE 2016 was organised by ARBE which was founded by Prof Richard Werner (Chair International Banking, University of Southampton). ARBE (Association for Research on Banking and the Economy) is also holding the Oxford Seminars at 15.30 hrs on the next four Fridays 18, 25 Nov; 2, 9 Dec. at Linacre College, St.Cross Rd, Oxford OX1 3JA

ECOBATE 2016 Prof David Llewellyn. More banking models needed for safer UK banking.

Professor David Llewellyn recommends more competition in banking to reduce the social cost of banking crises such as that which affects us still since 2007. He sees the best way to do this is through different banking models. The model that is prevalent in the UK is that of shareholder value banks and a mix is needed so that stakeholder value banks are not only encouraged but increased in number. The historical de-mutualisation of building societies in the UK was at a great cost to the stability of the banking system when these stakeholder banks were privatised, morphing into shareholding banks. The benefits of competition through more models of banks will be far greater than just adding more banks of the same shareholding kind. Typical of this genre will be community banks, savings banks, mutuals and cooperatives. These do not seek to maximise the capital return as shareholder banks do and they are likely to be less hazardous and risky. Some being locally based will encourage accountability through better relationships with customers, which will bring trust and confidence.

'Culture determines behaviour'. The bad behaviour of an individual can be dealt with (say a rogue trader), but the bad behaviour coming from underlying bad culture is very difficult to address. He wants culture to be a regulatory issue. In acknowledging Prof Richard Werner's point that in the USA small banks have a different regulator to large banks, he said that 'economists like competition' and thus competition between different regulators is to be encouraged.  

His overview of where we are now used a pendulum image. Whilst pre-crisis there was great faith in markets now we have swung to great faith in regulations. His 'series of reflections' at ECOBATE 2016 in Winchester under the general heading ' Are Banks Over-Regulated Today?' gave us a fascinating view from this ex-Chair of the EU's European Banking Authority's consulting and advisory body: the Banking Stakeholder Group (BSG). He said he would not have been able to give his talk a few month's ago when he was Chair of BSG as he would have been gagged. Now his views, as he delivered them, were his own. He is Professor of Money and Banking at Loughborough
University. He was co-author of the Bankers Oath.

The challenges for a safe banking system are firstly reducing likely failure of individual banks and secondly reducing social costs of failure if that happens. A perfectly safe banking system could be arrived at through measures such as 60% capital ratios; 50% liquidity ratios; 40% of that liquidity in German Govt Bonds, but it would be useless banking system! The problem, given that the failure rate can be reduced somewhat, is: How can we reduce the social costs arising when banks do fail? He was not for pressing for every bank to be a stakeholder bank at the expense of losing all shareholder banks. He wants a far better mix of both.  

A problem with regulation is that there is a symbiotic relationship between the regulations and banking behaviour. Both respond to each other. Banks will arbitrage the regulations ('game' them) and regulators are tempted to respond with tighter rules. But there are limits to the resulting escalation. If regulation is seen as a free good then the public will always want more of it. In fact regulation has a cost and the price of this must be taken into account. There has to be a trade off between: complexity/safety and simplicity/risk. He said that whilst individual regulations might be reasonable under a cost/benefit analysis, the totality of the regulations might not be. Excessively complex regulation might encourage unthinking 'box ticking'. Current 'one size fits all' regulations don't differentiate between what is needed for a large international bank and a small bank.  He indicated by hand the height of the stack of paperwork of all EU bank regulations - it was at about one metre off the floor.      
  
Why is culture important? Banking culture deteriorated in the years before the crisis and now trust and confidence in the banking system is as low as it has ever been. Underlying culture sets standards and influences employee attitudes which determines behaviour. He is working on a paper to cover what he outlined at ECOBATE as above, on the 'post crisis banking regulatory regime' arising out of his work with BSG.

His lecture was the Keynote Plenary held at the academic part of ECOBATE 2016 which for the first time was held at Winchester University's Business School, West Downs Campus, Romsey Road on 12th October. ECOBATE 2016 was organised by ARBE.

Prof David Llewellyn: 'Most serious banking crisis ever'. Are we safer now? Answers at ECOBATE 2016?

The 4th European Conference on Banking and the Economy (ECOBATE 2016) takes place on Wednesday 12th October in Winchester with its mix of academic seminars and free public meetings.  This year for the first time the University of Winchester's Business School (West Downs Campus, Romsey Road, Winchester) is hosting the academic side until mid-afternoon and then from 3.45pm the free public session is back across the city in its usual place - the Bapsy Hall at Winchester's Guildhall.

Up to 60 academic research papers are expected to be presented on banking and finance covering a wide range of topics from 8.30am at the University's Business School.

At the Guildhall (free to the public) Prof David T Llewellyn of the University of Loughborough is a keynote speaker. On a YouTube film (2015) speaking on the financial crisis of 2007/8 he considers that we have experienced:  'the most serious banking crisis ever on record' and his work is to help lower the chance of it happening again and to protect bank customers and save taxpayers future costs if it does. He has worked as an economist with Unilever, the UK Treasury, the IMF, Halifax Building Society and the Stakeholder Group of the European Banking Authority. He is highly respected for his banking research and regulatory advice.

Sir Vince Cable another keynote speaker was Secretary of State for Business Innovation and Skills in the UK's Coalition Government to 2015. He regularly features in the media as an independent commentator on finance and the economy and political issues.

Among current topics expected to to be addressed at ECOBATE 2016:

• Negative interest rates
• Cash - are they trying to ban it? 
• Cybercurrencies 
• Monetary reform and monetary policy
• Ethics - who are the stakeholders in our financial systems & who is profiting?
• BREXIT and its effects on the economy
• Economic growth and the lack of it.  

See the Eventbrite registration website   for more detail.

The ECOBATE conferences have been running from 2011 and are the brainchild of Professor Richard Werner who has chaired them. He is leading banking academic (Chair International Banking, University of Southampton). One of his current projects is the formation of Hampshire Community Bank a pioneering venture to create a new culture of banking for the common good in the UK.

ECOBATE  travel: There is no onsite parking at either venue but there are efficient park-and-ride schemes on the edge of Winchester. The main line railway station (Winchester) is about a 20 minutes walk away from both venues. See the conference websites for late updates and for more details on speakers.

Making Money Work: Lord Turner, Steve Keen, Chris Giles & Richard Spencer on Corbynonmics and money creation.

Lord Adair Turner has learnt a bit on the practicalities of speechmaking since we last reported (see ECOBATE 2014, 11 Nov 2014). In Winchester his PowerPoint slides were lost en route and but he did a brilliant job improvising. At the Positive Money event Making Money Work at Central Hall, Westminster on Monday 7th Sept he safely had 2 paper copies of his slides for each of the 200 or so attendees. His talk developed his ECOBATE 2014 theme and gave much detail as to how he thinks government economic and monetary policy technically could, and politically should, develop. 

He said that he did not agree with the extreme radical Positive Money view for the abolition of fractional reserve banking and its replacement with 100% reserve banking. But the 2008 crisis and slow recovery since cannot be understood without a clear understanding of the nature of debt, money and credit. Pre-crisis and for many decades we were far too relaxed about the private credit creation by banks. Post-crisis we are too terrified of the potential of what he termed 'overt money finance' (OMF) of government deficits -another name for this is 'helicopter money'. 

Lord T said there is no reason whatsoever against helicopter money, it was all a question of how much you do. A small amount will stimulate a little with no excessive inflation. He thought it would however be excessive to fund 10% of the fiscal deficit this way as it would bring hyperinflation and destroy the economy. 

In discussion  - Chair: Fran Boait (Positive Money) ; Prof Steve Keen (Univ of Kingston) & Chris Giles (Financial Times) - the matter of the doubtful effectiveness of Quantitative Easing (QE) so far was discussed in contrast to OMF. Chris Giles thought that whilst he would never rule any new idea out (e.g. Jeremy Corbyn's 'Peoples QE') he was sceptical that it is seen as a sort of magic solution which has no cost. He was cautious of using OMF as a monetary tool.  If it was used simply to put new money in everyone's bank account, good, but to use it to spend on infrastructure was fraught with problems - you might have to halt the construction of the HS2 railway unfinished, due to monetary rules.  Money is not the only driver of the economy, in addition there is housing and planning policy and new macroeconomic tools as to how banks should lend; however in the future QE might be seen to have been OMF.  Here Lord T agreed that QE, as started in 2009, might become post-facto OMF. He illustrated this with his view that with the Bank of Japan owning 60% of GDP in Japanese Government Bonds he thought it highly improbable that these would be repaid or sold off by the BoJ. He thinks it will become helicopter money and be shown to be a permanent monetisation of government debt. ''That is going to happen and I would place a bet on it'.

He thinks that we should consider a 2009 UK scenario where a 4% of GDP fiscal deficit was planned and £350bn 'reversible' QE issued. He put it that it might have been announced that 5% would be planned with the extra 1% being OMF money creation and non-reversible. He said that this would send an important signal and be much clearer than the current scenario of whether QE really is reversible.   

Currently the Bank of England is apparently doing two things: 1.Managing interest rates and QE for inflation targeting. 2. Managing bank lending through loan requirements and bank capital requirements, for economic safety and stability all without managing demand.  What he sees as actually happening is that the BoE is starting to manage the allocation capital as seen in the Funding for Lending Scheme to be directed to SME loans.  Five years ago such government allocation of capital was unthinkable! 

The cause of the crisis had been the mis-allocation of capital through private credit creation by banks.  Too much credit chased existing assets rather than to finance productive investment, which Richard Werner calls 'credit for GDP transactions'.   This caused a debt overhang with the danger of deflation.  Beyond the supply of consumer goods to most households,  housing becomes another way to compete between members of society to gain a more attractive home or stay at a hotel. As locations offer varying benefits this competition encourages more debt. Banks encourage this, being biased towards property lending due to the collateral available. Steve Keen pointed out the reverse case of lending to entrepreneurs where, maybe,  four out of five loans might fail with loss of principal. This shows the difficulties that banks can have in lending to productive ventures. 

Lord Turner questioned how widely we might be able to spread a new understanding of the monetary issues being discussed.  In confessional mode, in his new book 'Between Debt and the Devil' he has a chapter 'The crisis I did not see coming'. He had to embark on an intellectual journey to understand themes ignored in his earlier economics education - a frank admission in mid-career from a very high-flying player. He said the very essence of the insight of macroeconomics is that governments and states are not the sum of households. In the personal household economy, books have to be balanced, but the state economy is different. Steve Keen said whilst he was impressed by the new openness at the Bank of England but in contrast the political class think the government should be running a surplus. 'They vie with each other: 'My surplus is bigger than your surplus' ' which is the equivalent of banks believing they should be receiving more loan repayments than they put out in loans. Governments ought to be running a deficit with money creation financing a large part of that.  Clearly from the view of the panel, economics education should be transformed so that these things are understood in universities, but beyond that how easily can the ordinary voter understand it? As to conventional economics theory, the efficient market theory is clearly wrong as no financial trader would get up in the morning if it was, since they would not be able to make any money! But the public needs to know that economics will never give as clear answers in its field as for instance an engineer can give in designing a bridge.

In Q&A I said I was involved in helping to establish a local community bank - Hampshire Community Bank which would lend locally and give its profits to local good causes. Was this a good foil to the problems being discussed that had arisen through centralised, international banks?  By their strong applause the audience clearly appreciated the idea.
Steve Keen thought it was an excellent idea as local knowledge would inform bank decisions on loans. Centralised banking is essentially 'collateral banking' which is dangerous, but as Richard Werner emphasises local banks are the strength of German banking. 

Chris Giles said local banks are obviously good, but that a weakness might be that local firms gain loans merely by being local and not through normal due diligence and good banking practice. (Note: If I had been able to respond a comment could have been that this danger is just as likely with non-local banks! Just look at what happened leading up to the 2008 crisis. Where was careful banking practice by national /international banks then?)  

Richard Spencer, an economist whom Jeremy Corbyn uses to inform his People's QE, said that 5 weeks ago he hadn't heard of Corbynomics but since then he has been credited with writing it!  Jeremy Corbyn asks what does the economy need?  He thinks we need investment in public infrastructure and this needs money and if needed a deficit, and this if fine because people want to buy bonds. However he thinks the banking system is too powerful and People's QE would mean that the bond route would not always be wholly used and banks not needed for some fraction of the money. Corbyn has said that if the economy is booming People's QE would not be needed as the bond route might be wholly enough.  He (RS) largely agrees with Lord Turner's views apart from central bank independence. He said that for politicians to be told by the central bank the amount of OMF needed is not democracy, it would be rather like being told by bankers how much tax is needed. Politician should listen to able technocrats, such as at the Bank of England. But let's not have bankers in charge, let's have democracy in charge. Strong applause.

From the panel: When politicians had control of interest-rate-setting, public opinion (or party opinion) was often targeted very obviously and the high inflation of the 1970's might be seen as a warning that sole political control was dangerous.  'Commitment devices' (e.g. Committee on Climate Change/ Bank of England) agreed by politicians in order to keep a steady course over time ahead even when it hurts, are useful.  However the ECB has been given far too much control as it defines its own terms for price stability, for instance.      

Natalie Bennett the Green MP asked what the money system would look like if consideration for the environment and for addressing inequality (where everyone has enough) were both addressed. Chris Giles thought a monetary system could not create a better society. Lord Turner thinks that money systems are not an appropriate answer to carbon issues - there are enough devices around already.  Progressive taxation is the device to address inequality, not OMF. Steve Keen thinks that money creation is needed to redirect spending to carbon reduction, no-one will do this for a profit.    

Barb Jacobson for the Basic Income Trust asked about the idea of using money creation for cash payments to everyone?  

The panel agreed with the idea: There should be no problem with ensuring a single payment to each person through NI numbers and tax numbers / It should be directed to paying off personal debt first for those who have it / Alastair Darling tried to do it in 2009 but was told it would take 9 months, so he reduced VAT instead / Australia did the same thing in 2 weeks.

Note: 

Chancellor George Osborne understands the subject of the Making Money Work event, as reported in  this blog   Nov 13 2013:
 ' It is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money. This would allow governments to increase spending or reduce taxation without raising corresponding finance from the private sector.'   See Treasury document quoted para 3.34:  Here 

See the Positive Money official post for the event Making Money Work: HERE

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

Centre ground politics: Citizen at the centre, Mr Corbyn?

An opportunity is available for a new politics in the UK that would advance the cause of the citizen, through a clear focus on citizen themselves, as viewed without the ideological spectacles of conventional party politics. Will Labour's Kendall, Burnham, Cooper or Corbyn manage to lift their heads from accepted wisdom? 

The Tories have set their jib and are teasing Labour to follow on and endorse their poverty-extending austerity policies, which are unhelpful to the promotion of a sustained economic recovery. As Matthew Parris in The Times (Sat 25 July 2015), has it, this is a manifestation of the 'supermarket view of politics' of our day - where voter footfall governs nuances of narrowly similar policies from all parties. Cleverly, through this shared view of what is important, Labour is in thrall to Tory policies which seem primarily designed to discomfort the opposition rather than benefit the nation itself. [See: How did the Tories do that?] Labour follows Chancellor Osborne like a dependent poodle as the Labour leadership crisis now demonstrates. The critter is not rebelling, biting off its lead and morphing into a mistress of its own destiny, but is keeping in close step. Except that Jeremy Corbyn is creating differentiation as he attracts attention with his refreshing straight talking which is panicking the three other leadership contenders - and bringing great ire from Tony Blair.

The return of the dark ages of Old Labour supposedly embodied in Corbyn belies that he has actually said some quite positive things, which any reasonable person might agree with. Such as establish a national investment bank for innovation and high tech investment  [see: Marianna Mazzucato] ; create QE for people instead of for banks; strengthen tax avoidance regulation; shift the tax burden to wealth and companies and off consumption and individuals; re-nationalise the natural monopoly of the railways.  What will be the outcome of Mr Corbyn backing into the limelight? Does he view politics through the old view: the 'dead hand' of the state - or will we get citizen-centred politics, which some of the above seem they might be?

The Universal Credit scheme is taking for ever to transform the benefits system - will it ever work starightforwardly? The Citizen's Income Trust  has proposals for a  better answer, a revenue-neutral Citizen's Income as a right for all. This would bring many benefits such as: reward unpaid carers, enhance the living wage of workers and foster job creation by small and struggling businesses; bring freedom through work/life choices that are pro-family; remove benefit traps and make work pay; enable charitable donations for community-inspired projects; and overall reduce poverty and raise living standards for countless individuals, families and groups.  Any Tory or libertarian should be able to see the individual-enhancing benefit of a Citizen's Income removed from bureaucratic means-testing, but would  Labour actually dare to introduce it and in one bound make real the doubtful 'living wage' of George Osborne? The citizen would be placed firmly at the centre of government policy making through a Citizen's Income as of right. But would Labour dare itself to trust the people this way?

Currently our socio-economic system is heavily biased towards those who own property. It is not every citizen that experiences the wealth-creating effect of property ownership. Renters are forever disadvantaged also-rans, whilst freeholders stack up a 'free lunch' of property wealth brought to them by the society-inspired wealth enabled by everyone, including the renters. No individual can ever create a rise in the value of their own land apart from being a minute part of the creative community that surrounds them.

Taxing land values on a annual basis would, along with a Citizen's Income, correct this lifetime imbalance in fairness.  A simple, revenue-neutral way to introduce it would be to levy a tax on the location value of the land alone (excluding the building value) and allow a reduction in £1 of income tax paid for every £1 land location value tax paid. Houses would become more affordable and wider ownership encouraged, more houses would be built to maximise the income from a given plot of land to pay the levy. The income tax / land value tax swap would avoid a disruptive change in finances for most households. Income-poor property owners could be allowed to defer some of the tax until the sale of the property.  The current favouritism towards property owners would be reversed bringing a new consensus - the promotion of the common good. Debt through mortgage would reduce as prices eased, releasing the income from normal jobs away from payments to bankers into useful goods and services. The evidence of a failed market shown, for example, by the pressures of international buyers on house prices shows that the land monopoly needs to be constrained to function more fairly than now. Land location tax is a major part of that answer.

Encouragement of new local community banks funded by local councils, social enterprises and a national investment bank should proceed apace.  With 7 years between now and the financial crisis it is high time that an alternative to the out-of-scale international banks is needed for local investment.  Small local banks are essential, scaled to fit the needs of small and medium sized firms which are beyond the marketing scope of the current high street banks. This too would be a policy that puts the citizen's needs at centre stage in terms of financial help for their enterprises, instead of as a supplicant at the door of the high rolling bankers only seeking mega-deals. The credit supply is artificially throttled through a lack of suitable local bank outlets. This failed market needs policy encouragement to make it function for the good of all.

Old Labour wanted the state in the centre ground of too many areas of life that are best handled by individuals, families and groups - as has been shown by deregulation. Conservatives see the free market as the answer to all, despite the existence in plain sight of obvious market failures. Recent government promotion of  housing purchase schemes, for example, are clearly counter-productive as they feed the heated house price frenzy thereby blocking off those still unfortunate to be excluded.

Conventional  politics fights over the centre ground. A new politics is needed that firmly puts the citizen at the centre ground.

Posted by Charles Bazlinton, Author: The Free Lunch - Fairness with Fredom which explores this theme of the citizen at the centre.  
The author is promoting the establishment a Local Community Bank which will pass profits to local good causes. 
                                                                                                                                    

Helena Kennedy, Oliver Kamm and what banks actually do

Helena Kennedy in the New Statesman 5 June on Magna Carta says banks rely on complexity which foxes law prosecutors and befuddles politicians. Surely complexity does not automatically imply illegality? So where does the power come from that Baroness Kennedy says is wielded by financial institutions, which in her opinion shows that Magna Carta lacks bite?  It is derived from a very simple, non-complex but fully legal right to create the money supply by banks. See this short video which explains the process:  Banking and the Economy  

From this process - the ability to create money - the banks, et al, engineer the complex financial products that rattle HK, which are the source of the profits. If this power was not available and banks had to make do with their own funds, there wouldn't  be any point in making complex products - it would be too much bother given the small margins. The profits arise for banks from the huge leverage gained by multiplying small margins on a huge base of their specially created money. See also on the ignorance of politicians from Positive Money.  The answer for politicians such as Baroness Kennedy  is not 'going head to head against large banks', but to take away their right to create money - or at least encourage the formation of independent  local community banks, owned by local trusts which don't make complex products and which channel profits back to the community.    

Oliver Kamm in The Times 11 June writes:
' the role of banks and capital markets in matching owners of capital with businesses that need it' 

This new paper by Jakab and Kumhof will enlighten:  Bank of England paper No 529 
Extract:
Mervyn King (2012), former Governor of the Bank of England: “When banks extend loans to their customers, they create money by crediting their customers’ accounts.” Lord Adair Turner (2013), former head of the UK Financial Services Authority: “Banks do not, as many textbooks still suggest, take deposits of existing money from savers and lend it out to borrowers: they create credit and money ex nihilo — extending a loan to the borrower and simultaneously crediting the borrower’s money account.”

Or see this blogpost 'Bank of England concurs with Prof Richard Werner's view on creation of money by banks'
posted by Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom. 

Election emergency. Why? Russell Brand's view.

Russell Brand [Twitter @the trews] has decided to vote in the general election after all. He wants the Conservatives out of office and thinks that Labour's Ed Miliband will listen to the voters after gaining power, even though he isn't wholly smitten with EM.  His conversion to voting can be seen here.  Caption: Emergency: Vote to start revolution.  

Talking emergencies - a few days ago two pre-teen children were stuck in a lift.  They didn't use the alarm button or emergency phone because: 'We didn't think it was an emergency'. Instead, a bit like Russell Brand pre-conversion, they tired to raise the alarm by calling and shouting for help - for about an hour and a half. Eventually someone heard and the local Fire and Rescue services released them safely.  

Owen Jones of The Big Issue (Apr 27-May 3) - full article buy a Big Election edition - asks Russel B 'Are you basically a big megaphone for people and causes that are otherwise ignored?' Brand says his gifts are to make complicated information accessible and showing off. He wants his understanding of compassion and connection to communities see: Focus E15 (preventing housing evictions) to be leading and not his egotistical nature. It sounds promising - at least.

Better a late conversion to voting than no voting at all. A pity he didn't change his view a few weeks ago when there was time for unregistered voters to take notice. Consequences follow for failing to act - the children trapped in the lift suffered longer by not taking action in the manner expected. 

So for those who are registered to vote and will only vote if they can be convinced we are in an emergency - an emergency for fairness - consider these:

1. Is it an emergency for fairness that 8 years after the banking crisis and a taxpayer bailout of the banks, huge salaries and bonuses are still paid to bankers? Find a party that wants to reform the banking and money supply system, that promises regional or local banks. And Vote. 

2. Is it an emergency for fairness that in many parts of the country, young people will become old people before they can save enough for a deposit to start to buy a house? Find a party that aims to introduce land value tax in place of income tax and other taxes so that fairness for new home owners and renters is considered. Mansion tax is a start.  And Vote.   

3. Is it an emergency for fairness that whilst low income housing tenants are penalised  for having a spare bedroom and thereby suffer a housing benefit cut, that the Conservatives are considering raising the nil inheritance tax threshold to houses worth £1m ?  Find a party that is not so blatantly partisan in favour of wealthy property owners. And Vote.    

Russell B, says vote Miliband to evict the Conservatives but vote Green in Brighton. Few say it like Brand says it, but many of us do it - vote to achieve the least worst option. Maybe there is a need to look at a proportional voting system again?

By the way, if you are in a lift that won't move, your are in an emergency. Press the red button and/or  use the phone - they are usually down near the floor. Instruct your children. And never, never, try to climb out of a stuck lift if the doors are open between floors. 

And when you get out: Vote. 
Posted by Charles Bazlinton.  Author The Free Lunch - Fairness with Freedom 

Bishops' Letter: Postscript coming?

The Bishops' Letter 'Who is my neighbour' is strong on analysis. It looks searchingly at the socio-political scene and pronounces that we are in  dangerous times, evidenced by such as: an adversarial stance in politics - where there are no distinctive political goals, attractive visions or idealism; people are viewed largely as consumers and as mere recipients of narrowly targeted policies; there are grotesque inequalities of wealth and power; we are living through a banking and a housing crisis.

We are becoming a society of strangers. Respect for views other than our own, is disappearing through ignorance, leading to a selfish and competitive mindset which assumes that unfamiliar groups are a threat. The individual is king and autonomy is celebrated, but the support of those in deep need is an undervalued activity, yet therein are revealed the deepest human qualities.  The idea of a common bond between us is fast disappearing. We are moving away from the idea of a 'community of communities'.

Salvation is expected from the market and the state. But the market has damaged the condition for its own flourishing; and the 'anti-messy' bureaucracy of the state, favouring neatness, law and regulation induces a 'chill factor' which stems the flow of common sense and neighbourly help.

So what do the bishops prescribe? They think the solution, rather than to choose between right or left politics or even to split the difference, is to find sources for answers from within them all.  They still like the concepts behind the Big Society. They like mutuality and volunteering (e.g. credit unions and housing associations); subsidiarity (lower levels for decision making); 'intermediate institutions' between family and state (credit unions, housing associations and the churches). They back the idea of the living wage.

But the bishops do not discern any bigger vision for us to hope towards: whilst in 1945 and 1979 there were new visions which 'changed the political weather', they say that 'no such thing is yet on offer in 2015'.  How can it be that their telling analysis has not allowed them to do more than anxiously wring their hands and merely ward brownie points to established remedies for the failures of market and state?  What about examining valid solutions towards recovering the common good and the common bond that they long for? 

1. The living wage liked by the bishops is a voluntary measure and depends on the employer's willingness to pay it. Why did the bishops not champion the work of  The Citizen's Income Trust -  their very own minister Rev. Malcolm Torry? His organisation has painstakingly shown over some years how every person, youngest to oldest could, with economic fiscal prudence, receive a regular income which would not only help unite all citizens in a new basic monetary right, but also eradicate many of the failings of the state welfare and benefits system and so start to address the 'grotesque inequalities of wealth' the bishops deplore. Bishops, have you considered a state-paid, regular citizen's income payment to all?

2. The only suggestion in the letter about the 'banking crisis' is that credit unions are 'an ethical alternative'. What about another ethical alternative - community banks? I declare an interest as a director of Local First CIC - which is helping to form a full-licence independent local bank where profits will be directed to community causes. Such community banks are likely to become transformative common good economic agents in years to come in the UK. Not only will they generate productive lending and provide sound banking, but their surrounding communities will benefit from the banking profits hitherto taken privately. The national effects of the banking crisis we are still living through will start to mend and largely be prevented from recurring bearing in mind the local and small scale nature of these banks. Bishops, have you considered such full-licence community banks?

3. Another solution to the banking crisis unacknowledged by the bishops is that all money should be created by a branch of government under democratic scrutiny with private banks taken out of the creation of money altogether. The money supply monopoly and privilege would then be serving the common good in a powerful new way. Bishops, have you considered monetary reform?

4. To provide homes through housing associations is a reaction to a failed property market and whilst helpful, this is not a permanent solution for the difficulties of home ownership. Those who own a property are in the enviable position of gaining wealth as their property land value rises over time, even as they sleep; but those renters who own no property have no such comfort. That land values are not widely taxed is a national disgrace and a betrayal of the common good. Every citizen - including renters - who add to the success of the economy, thereby raises the common good in wealth terms, much of which is then captured in rising property values, benefiting owners alone. This reform would be accompanied by a balancing cut in income and other taxes.  Bishops, have you considered land value taxation?

5. The early church fathers of the 2nd to 4th centuries: Clement of Alexandria, Ambrose, John Chrysostom and Augustine of Hippo preached and wrote in the context of Roman law and concepts of ownership which are largely the foundation of our own law in the 21st century. (Book: Ownership by Charles Avila). These esteemed church leaders were strong on the contrast between koina - things common for all,  and idia  - private property created by yourself.  Koina being naturally occurring things - that are there for the using. As Chrysostom has it: 
        'God generously gives all things that are much more necessary than money, such as air,   water, fire, the sun, all such things ...That we may live securely,... given to us in common.'  

The problem, they pointed out, is that the law authorised people to take by force or buy up koina as idia , to the diminishing of the common good, then, as now. They also majored on koinonia - community sharing inspired by the common bond of humanity. 

The good news is that bishops today are speaking the common good talk and the common bond talk of their spiritual ancestors. I wonder when they will write a postscript to their 2015 letter and give us the 'Common Good Recovery Plan'. Attractive vision? Idealism enough, bishops? Just imagine what Chrysostom might have achieved with the benefit of a democratic system like ours... 
Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom