The revolutionary government will need to think very carefully about the monetery system. Britain has been the world leader in many things in the past, certainly railways as we have already mentioned, but also ship building, car, motor-bike, and push-bike manufacture, canals, aircraft manufacture, my father was still carying a tiny prototype piece of concorde that he had made over 40 years earlier, when he died. Many things were invented in Britain, from the spinning jenny to ultrasound and the hover-craft. From this inventiveness and skills came world leading products, and the structure behind the industrial devopment. Lloyds of London was the world leading insurer, the city of London was the worlds financial centre, when it served enterprise. The Pound was made of gold and heald a steady value.
Why can’t England compete anymore? Because the international monetary system is rigged against it. There is a real problem in that workers in many counties have less social protection than in England, and I have already proposed many measures to counteract the effec tof this. There is also a problem caused by the monetry system itself. Several towns in Britain and elswhere have introduced local money, in a bid to keep money circulating in their own town. Examples are Bristol, Lexes, Brixton, and Stroud. All of them become worth less with time, either along with sterling or at a faster rate. The loss in value encourages a quick turn around of the money, and funds the costs of the system and maybe local charities. Many transition towns also encourage ecological projects.
These are brave attempts to support small business against international business and government tolerence of their massive tax avoidance. But for the economy to flourish properly, government action is required. Stability and fairness probably sums it up.
The revolutionary government will allow the bank of England rate to rise by up to 0.5% per month for the first year if market conditions require such an increase. Artificially low interest rates for the banks are a major cause of economic bubbles. Quantitive easing is another. Payday loan for you 4000 % or more, loan to a bank 1% or less. The Revolutionary government policy of 6% for banks and an absolute maximum for you of 26% is, apparently, truely revolutionary. The maximum rate for paying of you credit card will be 1% per month, around 13%. It will be the lenders job to check your ability to repay any loan, and this will be retrospective. If they should have reasonably known that you would be unable to pay the loan, when they gave it to you, and you have made reasonable efforts to pay, then the amount you owe will be fixed as though the rate was always 13%, the rest will be written off by the loan company.
So what is the Economic theory?
Wholesale Interest rates should lead to a balance of savings and loans, and stability of the currency. Usuary should be illegal. The solution to unemployment in the longer term is to be found by providing stable conditions for industry, reasonable levels of taxation on industry and workers, savings to be encouraged and loans to be directed to productive use and not to speculation.
The great shame is that banks can no longer be trusted to give good advice. Power tends to corrupt, but the power to make money simply by tapping figuers onto a computer screen is an irrisistable temptation. The great fear polititians have is high unemployment, and they are led to believe that increasing money supply will create unemployment. To make money the banks must lend money first, this results in people being slaves to their bosses, because they must have money to pay their debt to the bank so that their credit card will work to pay for food. Then having stocked up with cash, the banks withdraw the credit, and prices of houses and shares fall, so now they or their friends can buy houses and busineses cheap, or indeed, simply repossess them. They also demande aid from the workers because otherwise they won’t be able to give savers back their money.
The revolutionary government policy will be to provide alternatives, and leave banks to shrink in size and power. The initial shock may lead to a rise in unemployment but the railway project and many other measures will create employment. The key to long term steady employment, paying wages high enough to live on, is stability, and sound money. Interest rates should be fixed by market forces depending on the supply and demand of savings and credit. In the 1950s most workers made goods or provided services that they wanted to buy, and a man’s wage could keep a family, now it takes 2 wages to keep a family.
This is intended as a guide for the leader of the revolutionary governement. He or she will need some understanding of economics in order to stand up to the banks and the rich in general. It’s not that hard, but they will try to convince you that it is. Banks have the power to create money and charge interest on it when they lend it to you. They just have to lodge about 10% of the amount they loan with the central bank, (Bank of England). They gamble with your savings on the markets. They collude to rig the markets, remember the LIBOR scandel. Banks were accused of lying about the interest rate for inter-bank loans.
There are 2 main economic theories, one says the government can manage the real economy by borrowing in the bad times, adjusting interest rates and printing money.
The other theory is that anything a government does is almost certain to make things worse in the medium term. Leave the free market free and it will work. Both have a point, though neither work well, but the UK has tried both at different times, and seems to be trying both at once at the moment. It is also cutting normal peoples incomes, robbing their savings with inflation and interest rates of less than 1%, whilst allowing companies to charge 4000% interest on loans to the poor, and now needs to make further cuts in govenment spending so as to lend money to the international monetary fund, yes really.
The short version here is that with-profits endowment policies worked very well before the mid 1980’s. You paid a fixed amount in over 10, 15 or more years and you got a fixed amount out at the end of the term, plus bonuses added each year and a final bonus at the end if things were going well. Over the years the larger companies built up very large reserve funds and these were a good garantee that even in bad times you would get the garanteed amount plus the bonuses already allocated. The full amount would be paid out if you died during the term. Stability was the word here. Companies had a record of 100 years or more of faithful service. Then the stock market got more unstable as the get rich quick follow the crowd, boom and bust took over. The Financial services authority (FSA) took over and started giving orders. It put its own pensions in the hands of Equitable Life, which didn’t pay commission to brokers, interfered with broker commissions, did nothing to control Equitable life or warn of its perilous financial position in the 1990s. When share prices fell in 2000 it ordered insurance companies to invest less in shares, just at the time they were a bargain. In finacial services steadiness is required, regulation also needs to be steady, but if a limit on share investments is to be intrduced it needs to be when shares are doing well. Properly regulated with profits investments are excellent for their proper purpose, which is fixed term, for money you understand you can’t have till the term is up, or if you do you might lose some of it. The Revolutionary government will encourage Mutual Assurance companies to offer with-profits policies. I say this in the full knowlege that they are not really recomended by anyone.
Are any currencies safe? Well of course not, no currency is fully backed on anything real certainly not on gold. Most counties could not pay their debts if they couldn’t reborrow or simply print more money. Printing money devalues it. Raising taxes doesn’t pay off a country’s debt because it tends to shrink the real economy and put people out of work.
Banks can’t pay their debts that’s why they need continuing taxpayer support. They make lots of money from gambling type activities and so they can afford to pay high wages and bonuses, and pensions. That’s why they deserve taxpayers support. ? !
They also give swap loans to small businesses. They are basically a hedge fund. Interest rate goes up you win, but the bank can cancel, interest rate goes down you loose. Interest rates have artificially been reduced by the bank of England to help the banks lend more to small business. No sorry, that should say, to help banks extract more money from small business. The FSA says these swaps are useful and appropriate products in some cases.
I was a financial advisor at the time of the big bang in the city of London and the formation of the FSA, in the mid 1980’s It has all been a disaster. The revolutionary government will scrap the FSA, and hand bank regulation back to the Bank of England. At least they might not be so rude to anyone with less than 50 million pounds who wants to set up a bank as the FSA seem to be. The banks will be restricted in how they can use depositors money. The city of London will be regulated, so that it’s word will again be its bond.
Most of us have used credit cards, and paid the extortionate interest from time to time, and maybe even the default charges. Credit can be useful, but charges for credit can be a disaster. I’ve already made one change, so that if you don’t pay by card, you will save money at the shop. Next, interest rates need to be limited, as they were in England in the past, and indeed, as they still are in France. The very maximum allowed here is 20,56%. The highest rate for a loan secured on property is 6,48%, (for a bridging loan). Even Bank on Dave charges nearly 30% in some cases, but loans with rates of over 4000% are advertised on TV in the UK. The maximum rate should be 20% above the bank of Enland rate.
It is very difficult to get rid of a credit card, because once you’ve paid this months instalment you don’t have actual money left to buy groceries, so you need to use your card. This limits your choice. You can’t buy off anyone who doesn’t take card. So this is the proposition. If you give up your credit or store card, the issuer of the card must give you a month with no interest and no payment due, and then the interest will be reduced to 1% per month. You will pay at least 3% (1% interest and 2% off what you owe). The lender will refund any default charges over the last 2 years and capitalise any arrears. After a year you payments will stay at the same level per month so that the balance is paid off in about 4 years. The issuer of the card must offer you a card which is debited in full immediately, or once a month. He may charge a fee of up to £25 a year + 0,75% on debits, for this, but no other fees or interest to you or the shop.
The right to be poor.
Untill fairly recently, being poor meant, not earning much money, so not being able to buy much. I remember a young man on the dole in Wales in the 1980’s buying a bottle of Southern Comfort. I must have questioned the wisdom of this, and he said, when the money’s gone, I just can’t buy anything till dole day. Now the lesson from this is, he might have a couple of days of misery, but come dole day all the money was his to spend.
This was before the great relaxing of regulation in the City of London, and of Banking. Now how many people can say, on pay day, this money is mine to spend as I wish. No debt to pay, no direct debits. What I’m really asking is, if you got paid in cash, would you have to run and put some, or most of it into the bank to avoid a disaster of some kind.; charges penalties repossessions electric phone cut off etc. The freedom to be poor, would mean, can’t pay, don’t have. It sounds harsh, but it is a great improvement on the present situation. One example, don’t put money in the bank to pay your insurance debit and the bank and insurance company will charge, and then there won’t be enough money in the bank to pay the electric bill, so they’ll charge and then cut you off, and then your oil central heating pump won’t work so you’ll freeze, because you can’t even light a fire, because you don’t have a chimney or it’s a smokeless zone. New sytem, don’t pay your insurance bill, you won’t be insured, that’s it.
Although it was inconvenient to us, because I didn’t know, I was very pleased to see that many restaurants and cafés wouldn’t take payment by card. This included the restaurant in the Geneva beach complex. So cash was needed, but, I hope, less of it because the cafés wouldn’t have to pay bank commission.
It is wrong that shopkeepers have to take cards or lose business, and charge cash customers the same amount even though they have no commision to pay on the cash payment.
The customer should pay the commission, and then they have the choice of giving some money to the banks or not. The same should apply to electronic payments like Paypal. The buyer should pay the commission.
First, what do I know? well a couple of examples.
I was an accredited financial advisor in the 1980, during the period of the 1987 stock market crash and the begining of the Financial services authority. I have obtained a refund from my bank, not for payment protection insurance, but for the monthly fee, for an account with extras such as car breakdown cover, which I didn’t want, need, or ask for.
I was in Geneva last week, and while I was there, I changed some out of date swiss banknotes into current notes at the Bank of the Canton. This was my first experience of a Swiss bank, and I found them efficient and helpful. That is to say they took the old notes, gave me new ones, and sent the old ones off in a cannister in a vacuum tube.
Two months ago I changed some Jersey banknotes in an English bank, around the same value as in Switzerland, about £200’s worth.
They were polite and in the end helpful. That is to say they asked for my passport, and several ID questions, and did I have an account with them, because they had to pay the money into the account. As I already had more than 200 pounds in my account, they kindly let me draw it out again.