Real Money, Local Money

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.

Economic theory, how to deal with banks. 3

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.

Economic theory, how to deal with banks. 2

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.

Economic theory, how to deal with banks. 1

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.

Getting out of recession

Much has been said about Keynsian economics recently. Keynes is the economist who proposed government spending on capital projects with borrowed money to boost economic activity. There is an important point point the Brown government missed, and that is, borrow to spend “on capital projects”. The coalition seems to be cutting back on spending shrinking the economy and still borrowing. Banks cannot be described as a capital project. Railways and coal mines can. I will explain in the next post.

Financial Services Authority

The Financial Services Authority (FSA) will be abolished by the Revolutionary government, and the banks will be regulated by the Bank of England as before.

The banks will be restricted to banking. Depositors money is to used for loans to real businesses, such as factories, retail shops, haulage companies. Real physical businesses, not fronts for financial concoctions. A proportion may be lent to builders and for bridging loans, home improvements, and the like. A reserve must be invested in ‘safe investments’ such as UK government bonds, large establshed UK company bonds, deposits with the Bank of England. No gambling type activities on the FOREX hedge funds futures etc. Banks may own the buildings they use and have a tiny property investment portfolio. They may make new loans for house purchase or provide consumer credit.The amount banks can borrow will be controlled.

Mortgages will be provided by building societies, and consumer credit will be provided by credit unions, or savings and loan companies.

Is the pound safe?

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.

Credit cards

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.

Let’s start by using banks less, (helpful banking)

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.