Money is something we are all familiar with. Most people believe they do not have enough of it and if they had a little more their life would be appreciably better off. How much enough is an issue to be debated, for later discussion.
Our intention in the Good Society, is to show what is the proper role of Banking&Finance in the modern economy, (in effect what is the role of Money).The recent Banking &Financial crises has shone a light on this mysterious world Most of us simply cannot decipher the inner workings of the Banking&Financial sector (and we are not expected to).
It would seem in the eyes of many people Banking&Finance sector has been involved in massive fraud, deceit, corruption, rigged markets, manipulations, outright fleecing of clients and their money. Yet despite all this very few prosecutions. Had any member of the public done 10% of what this industry has done you would be serving a lengthy prison sentence.
So it would seem the Banking&Finance industry is too big to jail and too big to reform.
What Banks use to do in the past was very simple. They take depositors money from their customers and lend money to people to buy houses, start up small businesses, and for other general uses.
Banks used ratios and other financial yardsticks as to the viability of customer’s ability to pay, which have been developed over hundreds of years. The local Bank Manager had considerable decision making powers.
The internationalization of the Banking&Finance sector changed all that, local Banking decisions are now often impersonal made by a computer using credit scores and other data
The merging of domestic Banking&Commercial operations of banks has enabled Banks to use depositor’s money and invest or gamble in risky financial products. The outcome of these risky ventures has been Banks have lost huge amounts of depositor’s money.
We should not only blame the Banking & Financial industry but governments too, for their light touch regulation of the industry which has enabled them to bypass to close scrutiny as what they are doing.
In the UK we have the financial services authority (FSA) which is supposed to monitor and regulate the Banking&Financial sector. It would seem the FSA is no more than a name plate on a posh building, with over paid staff, who make nice statements in the media and produce glossy reports, but somehow nothing actually gets done.
The FSA needs to familiarize themselves with Goodharts law (named after the country’s leading expert on Banking).When you try to pass legislation to control the Banking&Financial sector, they will find means to avoid it, or the implementation is so weak, it does not work.
In the Good Society we want to show what proper Banking System should be and the proper role of Money &Finance in the Good Society. When governments say there is no money they are lying to the public.
There is not a fixed supply of money in the economy. Money is not like coal which you have to dig out of the ground and it is a finite resource. Money is elastic, we can make it stretch, it is an artificial creation.
Our intention in the Good Society is to change the relationship we have with money. Money should work for the benefit of people, not we work for the money.
We aim to show what the role of Banking, Finance and Money should be in the Good Society in future articles.