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Banking

Cooking the Books: Green Recipe for Raging Inflation

‘The Green Party believes’, reads a resolution carried at their annual conference in September, ‘that the power to create money must be removed from private banks.’ What power, and how?

At one time ‘money’ was defined just as the notes and coins issued by the government or a central bank, but modern economists have come to include bank loans too as money. This can be confusing if it is assumed that these two types of money are the same, as is often done. For instance, the Green Party resolution says that only 3 percent of the UK’s ‘money supply’ is issued by the central bank as notes and coins, with the remaining 97 percent taking the form ‘of credit that is created electronically by private banks through the accounting processes they follow when they make loans’ (emphasis added).

Book Reviews: 'The Value of Radical Theory - An Anarchist Introduction to Marx’s Critique of Political Economy' & 'Disassembly Required - A Field Guide to Actually Existing Capitalism'

Marxian economics

The Value of Radical Theory. An Anarchist Introduction to Marx’s Critique of Political Economy. By Wayne Price. AK Press. 190 pages. £8.95.

We often joke that anarchists know very little about economics and that what little they do know they got from Marx. US class-struggle communist anarchist Wayne Price seems to agree and has written  a short book to explain Marxian economics to his fellow anarchists.

Cooking the Books: Marx and Banks

The Morning Star (23-24 March) carried a cartoon which has Marx holding a piece of paper on which is written ‘Cyprus banks grab’. He is writing on a blackboard:  ‘Banks in Capitalist society are institutions created for the systematic robbery of the people’ and asking, ‘Now will you believe me?’

The only problem is that this is not a quote from Marx, nor does it correspond with Marx’s expressed views on banks. Marx was well aware of the opportunities for swindlers opened up by the coming of limited liability companies and their promotion, and by stock exchange manipulations in which some financiers and banks already were involved in his day, and wrote about this.

However, Marx’s whole analysis of the nature of exploitation under capitalism was that this took place in the course of production in the places where real wealth was actually produced when capitalist employers extracted surplus-value from wage-workers, not in the sphere of money and finance.

Cooking the Books: The Bank Charter Act

The Bank Charter Act of 1844 is back in the news. An article in the Guardian (17 July) by Deborah Orr discussed its terms and stated that it “removed from banks their licence to print money.” It did remove the right of banks other than the Bank of England to issue their own bank notes, but gradually rather than immediately. Banks which had been issuing notes until 1844 were allowed to continue until they merged or were taken over, but not to increase the amount they had been issuing. Some banks continued to issue notes for the rest of the 19th century, the last continuing till 1921.

According to the wikipedia entry, “The Act exempted demand deposits from the legal requirement of a 100-percent reserve which it did demand with respect to the issuance of paper money.” The source for this claim is given as the Ludwig von Mises Institute, as if this could be regarded as a source of reliable information.

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