Reactions to Robert Peston’s documentary

I’ve been really encouraged by the response to Robert Peston’s documentary, Britain’s Banks: Too Big to Save?.

Lots of people are waking up to the problems at the core of our banking system, and like-minded campaigners are using the documentary to help spread the word.

For the Adam Smith Institute, Sam Bowman wrote

There’s a big debate on the right at the moment about the banks: naturally, most of us are sympathetic with private businesses, but people like Toby are making the argument that British banks are so closely interwound with the state that they can be better understood as semi-state bodies than private firms. If banks cannot make significant losses without being bailed out by the taxpayer, is it appropriate to think of them as creatures of capitalism or of the state? I honestly don’t know, but it’s a debate we need to have if we’re to make the necessary structural changes to the regulatory system to avoid another Great Recession like the one we are (hopefully) crawling out of now.

Meanwhile, Josh Ryan-Collins at the New Economics Foundation expounded the benefits of a 100% reserve system:

An economy running on this kind of foundation should be less prone to pro-cyclical tendencies (boom and bust) and less inflationary (house price inflation in particular) than an economy based on fractional-reserve banking. And the enormous, tax-payer underwritten banks that currently monopolise credit creation would be bought back down to size, enabling greater competition and diversity in our banking sector.

Monetary reform is an idea that should appeal to people from all across the political spectrum. It is an idea whose time has come.

6 Comments

  • evillen says:

    Dear All

    I suggest that the most active members of this group need to get a Facebook petition going to spread public awareness and garner mass support.

    I would further suggest that getting the FB petition setup and supported by someone with an acceptable and respected public face, e.g. Martin Lewis of consumer leviathon website ‘Money Savings Expert’: http://www.moneysavingexpert.com/

    Hope this helps
    The Lenster

    Good luck

  • Richard Boulton says:

    While some of this programme was eye opening, especially the hilarious account of the Basel I negotiations to set 8% as the then reserve ratio, it was saddening to see that 100% reserve banking, the only radical solution the programme tentatively explored, was typified by Peston as “religious” in a later question about it to Paul Tucker of the BoE. How can we bring the idea into the mainstream of discussion?

  • Irwin says:

    The problem with the concepts is in their presentation. The scenario of fractional banking goes way over the head of the mass media and therefore the population.

    It needs to be presented to the media and public in a way that they can understand easily like pyramid selling and ponzi schemes (with which they have a lot in common i.e. something created out of very little).

    The presentation should concentrate on,

    (1) the fact that for every pound deposited in the banking system the banks can loan large multiples, maybe comparing it to alchemy or conjuring tricks would catch the attention of the media.

    (2) the fact that once money is in circulation the government has a wide range of options as to what it can do. e.g it could cover all the deposits in the banks (used for fractional banking)with their own deposits by taking preference (usually non voting, fixed or variable income) shares in the banks. This would have the desired effect i.e. the banks liquidity would be unchanged, the call depositors would have their money guaranteed and the tax payer would share in the banks profitability. I think if presented as a secure investemnt to ensure the banks would never need to be bailed out again voters would like to see themselves as beneficial shareholders in the banks for long term profit and not to bail them out.

  • Derek Potter says:

    No I don’t think FRB needs to be over-simplified for the masses. Admittedly I have argued elsewhere that the hol polloi are thick as two short planks when it comes to money. I certainly was, and probably still am. But surely the answer lies in constant exposure of the subject in real terms, not dumbing down into virtually meaningless analogies? The difference between a liability and custody is not exactly rocket science. Too dull for TV? I doubt that too. Talking heads and helicopter shots of expensive buildings are what makes a documentary dull. Tell people that half of what they work for goes to propping up an unworkable system and even the dullest start to listen. Perhaps a spoof or two where a couple are bundled onto an aeroplane and sent home half way through a holiday they’ve worked hard for, or more nastily, a surgery interrupted half-way through – “Sorry, you’ll have to sew yourself up, Mrs Brown, our funds have been used to pay off the interest on the National Debt.”

    No dumbing down, just rub people’s noses in it. We are, after all, slaves of this foul system and we still, just about, have the democratic right to overthrow it. Stir up the anger!

  • Martyn says:

    …and of course so far as the banks are concerned “Fractional Reserve banking is SO 90s”. Nowadays they start with the loan and borrow the capital!

    The complexities of banking regulations and apparent requirements for borrowing money cloud the real issue – that we are dependent on debt to create our money supply.

    This most fundamental, systemic flaw is the root of so many problems you would need a book to explain clearly. Fortunately Michael Rowbotham wrote one some years ago and “The Grip of Death” should be mandatory reading for anyone interested in understanding these issues.

    The excellent Schumacher briefing on the ecology of money by Robert Douthwaite is also worth investigation.

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