How the current money system is damaging Businesses, Society and Environment (Conference 2013)

How the current money system is damaging Businesses, Society and Environment (Conference 2013)


I’m going to talk about the way money is created is destroying our businesses, society and the environment. So I am going to start off by talking about business, and why the way money is created, is destroying businesses. Debt-based money causes a boom and bust business cycle This is a graph of the money supply from the 1960s to 2012. Approximately doubling every ten years so they created £1 trillion up to the financial crisis. You might think that means we’ve had a boom for the last 60 years, but the black lines point out the small recessions we have had along the way,
approximately every ten years. So the banks have created all this money.
Banks create too much money in a boom, leading to asset price bubbles which burst.
So in the last big boom from 1997-2007, when approximately
a trillion pounds was created 40% of that money was lent into mortgages,
so house prices went up drastically. And 37% into finance. So this is 77% into the non-productive economy, and that’s why it is a problem for business. Only 13% went into the real economy, and 10% on credit cards and spending. So, the boom period isn’t good for business,
but even worse is the recession. Banks stop creating money in a recession,
causing the money supply to shrink and therefore deepening and prolonging the recession. So in a recession, people start paying down their debts,
the money supply shrinks, the banks stop lending to people and business.
People become unemployed. This is a graph to show that from 1992 to 2013, and
you can see the big jump in unemployment in 2008 when the financial crisis happened, and
a million more people became unemployed. This is bad for businesses, especially small and medium size business, who may have been run very well but through no fault of their own go bust. Debt-based money pulls wealth out of the productive economy through interest payments to the banks. On average per year, the whole economy pays between £100bn and £200bn in interest, so we are effectively renting
our currency from the private banks and this breaks down to being about £2000 to £5000 per person, which is an incredible amount. But there is also a net wealth extraction
from the rest of the UK into the City of London where these private banks are headquartered.
So there is a redistribution of wealth in that way. And there is a brain drain. I know when I was at university everyone seemed to aspire to want to get a high paid job in the City. And here are two quotes I like, one from
the american economist James Tobin, in 1984 “We are throwing more and more of our resources,
including the cream of our youth, into financial activities remote from the production of goods and services, into activities that generate high private rewards disproportionate to their social productivity.” And this one, from last year: “Finance literally bids rocket scientists away from the satellite industry. The result is that erstwhile scientists, people who in another age dreamt of curing cancer or flying to Mars, today dream of becoming hedge fund managers.” Which is a bit disappointing. Now I am going to move on to society.
So, why is the way money is created destroying society? Well, first the message is that
debt-based money weakens democracy and sovereignty as governments
and nations become heavily indebted. So in the five years leading up to the financial crisis,
governments spent £2.1 trillion, but commercial banks lent £2.9 trillion. And whilst there are 650 MPs which determine where that £2.1 trillion was spent, most of it was pre-allocated into
healthcare, education, infrastructure so they actually didn’t have much decision on what to play with. There’s only about 80 board members which make up the five main banks in the UK. And they got to choose where the £2.9 trillion they created got lent into.
And as I showed you earlier in the last boom it was into the unproductive economy:
housing, mortgages and finance. And what do the banks give
the government back in form of taxes? Well, in 2009 only $26bn in tax, versus £130bn
for having this license to print money and this taxpayer funded
safety net that says we’ll bail them out. Our second message for society is that
debt-based money increases inequality as wealth flows from the poor to the rich
in the form of interest payments. This is a graph which shows the percentage of household income transferred to the banks through interest and you can see it’s disproportionately
high for the people on the lowest income and disproportionately low for the people on the highest income. So this increases inequality. And this is a graph showing inequality in different countries, versus the index of health and social problems. It’s not very clear and I don’t have a pointer
but the UK is up there, along with the US. So we have got higher income inequality, and worse,
health and social problems. This index on the left is made up from things like trust, obesity, mental illness, social mobility. So, inequality is bad for everyone.
And final message on society is that debt-based money leads to high levels of personal debt. This is a graph showing how personal debt has increased since 1992 to 2008 and household savings have gone down. So, people are having to service their debts, and they’ve got less money to save. If you started university in 2012, you’re predicted to be leaving with an average debt of £53,000, and that’s before you’ve even got a job. And the job market is likely to be even worse potentially than it is now. And
houses are unaffordable for our generation. Finally, going to moving on to the environment. Why is the way money is created destroying our environment? Well, in order to pay back our debt the economy has to constantly expand, which is not possible on a finite planet. Because debt-based money needs a quick return,
so we cannot invest in long-term sustainable projects. If banks create all of this money by lending, they do that because they want the biggest profit quickest, so they’re never going to want to
invest in long term sustainable projects. We’ve got all of this energy coming from
sun, wave and wind, but we can’t invest as fast as we need to build the infrastructure. Governments won’t put in the amount of money that’s needed, because they’ll get further and further into debt.
And recessions make people and governments forget about the long-term. Governments are
pretty short-sighted at the best of times, let alone in a recession, and environmental regulation is notoriously something that gets rolled back in these times. Debt-based money affects the environment. It means the governments cannot think out these long-term problems, which we are going to be facing in the next 50 years,
such as climate change, a crisis in energy, a food production crisis as we hit 9 billion people, fresh water crisis, as we run out of fresh water, we’ll have to desalinate the seas. And we are
running out of natural resources fast. None of these long-term problems are considered
when we are trying to get out of a recession. Debt is a way of making
future generations pay for what we have now. Subtitles by the Amara.org community

11 thoughts on “How the current money system is damaging Businesses, Society and Environment (Conference 2013)

  1. Big biz usually choose to issue corporate bonds, cuz it's cheaper. And in your statistics all that is hiding in financial investment.
    Money is flowing via easiest path. printing more cash just makes easier to pay off old dept.

  2. Agreed.
    There is a Monetary Reform Party who's findings and ideas align with those Positive Money.
    PM, in 2011, made a submission to the Independent Commission on Banking.
    They (and affiliates) have just released another book (Where Does Money Come From?) and they've done numerous vids, events, talks and more I'm sure.
    So, thankfully they are informing politicians/us and such. Trouble is, the banks will offer nothing but resistance to this kind of reform as it will neuter their cash cow.

  3. Picture living your life with freedom. Pretty awesome right? Well anyone can. Look for Clouded Cash Cow on Google (GOOGLE IT). My sister has has been earning $988 every 5 days using Clouded Cash Cow. Just Google it.

  4. Soz – something went wrong there. Sign their petition "Kick Bankers Out of Parliament." A banker sits in parliament with a £5.3 MILLION budget and gets to VIEW and ALTER bills to suit banks! lt's an ancient power for The City of London. Think the position is called "The Remembrancer." The petitions by email/Twitter and Facebook go to The Speaker (Bercow) who has the power to grab banker by the ear and turf him out! l know – as if – but it's the thought that counts. Peace

  5. why is finance is called non productive economy can someone explain it to me? i have no background in economy was just trying to educate myself

  6. The video is correct to use the concept of endogenous money. It is incorrect to emphasise the importance of the money supply. The creation of money is a by-product of the processes taking place, it is not the increase in the money supply which is driving the process. Expenditure is limited by income, assets and the ability to borrow. If credit conditions ease and more can be borrowed then spending and asset purchases increases. This has nothing to do with the money supply.

  7. It doesn't require money to be created, because non-bank lending does not create money. In fact if we are concerned with monitoring the economy for signs of fragility then a recent BIS economists called "Total credit as a early warning indicator for systematic bank crises" found that Total credit rather than just bank credit was a better indicator of problems.

  8. the productive economy includes all the activities that produces things – food, or manufactures things – cars, clothes etc. The non-productive economy doesn't produce or make anything of any substance or value

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