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.

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.