ALB
Forum Replies Created
-
Posts
-
I am not sure where to post this. Here or on the thread about the black record of the Starmer Labour government.
Anyway, it looks as if Britain is ready to support the most aggressive capitalist state towards its neighbours since Nazi Germany.
Everybody certainly does not accept the Bank of England’s (accurate) description of a bank’s business model. Some of those you quoted in your book don’t. Aaron Sahr, for instance, who you summarise as saying
“money is quite simply a product of using a keyboard as the banks create money by making and recording loans on their computer”.
and
“The whole financial system is based on creating money out of thin air. The whole financial industry really is just based on creating electronic assets (ie, virtual money) that are loans on which interest can be charged”.
He, for one, thinks (if you have summarises him correctly) that a bank’s business model is not to make money by borrowing at one rate of interest and lending at a higher one. He thinks that a bank doesn’t need to borrow money at all but can simply create it by a keyboard stroke and then lend it at interest. There is no “spread” between the two rates of interest; to calculate its income, the interest from lending does not have to be reduced by what the bank pays as interest to those it borrows from. Its income is the whole of the interest from lending.
The difference between the two models is that, in the one case, a bank’s income is its interest from lending net of the interest it pays; in the other case, it’s the whole interest from lending.
The question people who argue like him should ask themselves is: why does a bank borrow any money? Why does it seek deposits or loans from other financial institutions? That would seem to be pointless even counter-productive as the interest it has to pay reduces its income.
I think that the Bank of England’s point is that a bank is not a simple intermediary as, today, the commercial banks are part of a banking system centred on the central bank. They are arguing that it is the banking system as a whole, not single banks on their own, that create money. That may be true but it doesn’t mean that a single bank is not an intermediary between lenders and borrowers.
No wonder, in the context of capitalism where the relationship between capitalist states is based on the principle of “might is right”, that the Iran regime wants to develop its own nuclear bomb.
Look what happens if you get into a conflict with another state and haven’t got one. And of course it’s the only reason why no other state, not even the US, doesn’t attack North Korea.
As the Romans said, if you want peace, develop a nuclear bomb.
Link, you say “I remain unconvinced by the intermediary theory”. But in fact you implicitly accept it, that is if you agree that
“Banks receive interest payments on their assets, such as loans, but they also generally have to pay interest on their liabilities, such as savings accounts. A bank’s business model relies on receiving a higher interest rate on the loans (or other assets) than the rate it pays out on its deposits (or other liabilities). (…) The commercial bank uses the difference, or spread, between the expected return on their assets and liabilities to cover its operating costs and to make profits.”
(https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy).Marx had noted this 150 years ago (it wasn’t a great discovery but simply described a generally accepted fact):
“A bank represents a centralisation of money-capital, of the lenders, on the one hand, and on the other a centralisation of the borrowers. Its profit is generally made by borrowing at a lower rate of interest than it receives in loaning.”
(https://www.marxists.org/archive/marx/works/1894-c3/ch25.htm)This is not incompatible with calling bank loans “bank money” (if you want and the Bank of England does) as long as you don’t think that this is new money. That’s just a question of definition.
On the alternative view — that banks are “new money creators” — a bank’s business model would be that a bank creates the money it lends and uses the interest to cover its operating costs and to make profits. But this is neither credible nor in accordance with the facts.
Why don’t you take the next step and come out and explicitly reject that view.
Here’s a survey of typical RefUK voters conducted in February on their attitude to the war in Ukraine:
https://www.politico.eu/article/nigel-farage-reform-voters-uk-help-ukraine-war-donald-trump-us/
I doubt they feel strongly about it enough to organise anti-war rallies. People will give an opinion on foreign policy issues if asked but that’s all they will do. Foreign policy is way down the list of things that sway voters.
Wom’t the answer be that, Judaism being a tribal religion, its rules only apply to members of the tribe, so there is no ban on members of the tribe lending money at interest to non-Jews?
It is worth recording that the Communist Party of Britain, the legitimate political heir of the old CPGB, is changing its policy of how it advises workers to vote.
In the June issue of their paper Unity, their General Secretary Robert Griffiths is reported as saying that
“it was clear that the traditional advice to vote Labour where no Communist is standing could no longer apply”
and that there were “a growing number of socialist, progressive and Communist candidates” who would deserve support in future elections.
This represents a major change of policy on their part.
Incidentally, the same issue confirms that the CPB now supports the present Chinese government saying that “China are now building a modern socialist nation”.
If you believe that you’ll believe anything.
Looks as if Reform is trying to outflank on their left not just Labour but the Trotskyists too. Here’s a report of what Farage said yesterday in speech in Port Talbot in South Wales:
“He went on to say that a Reform government in Cardiff would reopen coal-mines in the South Wales valleys…”
I don’t know if any Trot promising that not even as “transitional demand”. Mind you, it is not self-evident that people there will want their kids to have to work down the pits to earn a living.
Meanwhile his deputy, Richard Tice, has been having a go at the bankers that the Left likes to hate, with his “attack on Bailey [the Governor of the Bank of England] for creating money out of ‘thin air’ to enrich City bankers”.
It sounds as if Reform might be a good hunting ground for Trotskyist “entryists”.
There is a serious point here, though. Left Populism and Right Populism use the same demagogic promises in a bid to lead “the masses”. It could even be said that Left Populism paves the way for their Rightist rivals.
Two articles on this here:
By coincidence, just after sending the post above I read this story in the papers:
It’s about the increase in the commercial banks’ reserves with the Bank of England resulting from the government bonds (and some corporate ones) that the Bank bought from them under Quantitative Easing. These reserves were increased by the Bank paying for them by adding to them (from “thin air”, as Tice correctly puts it — but which only a central bank can do, not a commercial bank). However, the banks didn’t put the new money into circulation but kept it there and banked the interest.
In some other countries the central bank doesn’t pay interest on the reserves it requires the commercial banks to deposit with it.
1. I think we are agreed, Link, that, if a government issues more of an inconvertible paper currency (one not convertible on demand into a fixed amount of gold) than the economy requires, this will lead to a rise in the general price level. This assumes a value relationship between commodities that is unaltered irrespective of the number of such paper “money tokens” that are issued. (Where there is a paper currency that is convertible into gold, as was generally the position in Marx’s day, the result is a different; it does not lead to a rise in the price level but to gold coins being withdrawn from circulation). In both cases, the validity of the labour theory of value remains. So I don’t see what argument “presented by the SPGB” is invalid.
2. Yes, I am arguing that only the government (but not commercial banks) can issue money-tokens that, if over-issued, have the effect of raising the general price level. If you chose (or it is chosen) to define bank loans as money, then of course — by definition — banks create money. Including bank loans as money is confusing, but it need not necessarily be as long as you don’t confuse such money with state-issued money-tokens. You would need to distinguish between date-issued “central bank money” and “commercial bank money”.
3. Conventional monetary theorists do in fact do this, as for instance the European Central Bank here:
“To understand how money is made, it’s important to distinguish between two types of money.
Central bank money is backed by a public institution, like the ECB. In the euro area, the national central banks can create this kind of money. It is most visible to citizens in the form of banknotes. Another type of central bank money is the deposits that commercial banks have at the central bank – known as central bank reserves. These are created electronically through our open market operations.
Commercial bank money makes up most of the money that people actually use. It is backed and balanced by the assets held by commercial banks. So it is created by banks expanding their balance sheets. For example, if a commercial bank grants you a loan to buy a car, they create money in this way. And when you repay the loan, the money created disappears.”https://www.ecb.europa.eu/ecb-and-you/explainers/tell-me-more/html/what_is_money.en.html
(Note here the statement that bank loans have to “backed and balanced” by the assets they hold.)
4. Your description of how the central bank gets more money into circulation seems basically correct — that it buys bonds off the commercial banks and pays them by adding (by a keyboard stroke) to the banks’ reserves held with it. The banks can then withdraw this and use it to lend more (provided there is a credit-worthy demand for more loans, which is not always the case, eg in a slump).
5. It is by such “open market operations” that extra money-tokens usually get into circulation rather than by the central bank simply allocating extra money to the government or by loaning money to it by creating money to directly buy government bonds (though these have happened). This is where there appears to be a mistake or maybe a misprint in your description when you write that “Governments only create money by purchasing bonds that are issued by banks and financial institutions”. The government central bank could, I suppose, do that, but in fact the bonds that it purchases are not those that banks themselves issue but government bonds that banks have acquired.
That’s the dilemma of this new breed of populist parties. Financed by capitalists who want a free hand to make profits as they think fit, they are still required to get working class votes if they are going to win political control.
But, like most workers, those with reactionary views still want jobs with good wages and still want the state to still provide pensions and social security payments. So the political side of the populist movement has to promise these. Hitler understood this too which was why he had the word “socialist” in the name of his party.
At some stage the same Musk-Trump split must be on the cards in Britain too with the ReformUK party.
I only recognise two names.
Councillor James Giles billed as leader of the opposition Merton Council. Actually he is the leader of the opposition (such as it is) in Kingston Council where he is one of 2 councillors from the Kingston Independent Residents Group. 47 of the 53 councillors there are LibDems. The two of them represent a one-time Tory ward. Be interesting to see if he uses the word “socialist” on his election statement for next year’s London borough elections. We’ll check of course.
More on him here:
https://en.m.wikipedia.org/wiki/James_Giles_(British_politician)
The other is Karl Vidol, who was the TUSC candidate for Southgate and Wood Green at last year’s general election. A socialist elector there exposed his reformist in the post below here. #262681 of 20 June
Odd though that TUSC should seem to be associated with this group. Maybe he’s not a member of SPEW. Or maybe they’ve sent him to “enter” the group to keep an eye on what’s going on.
Here’s what the Corbynistas seem to be planning for next year’s local elections in London and the rest of England:
https://thecorbynproject.com/independent-councillors-statement/
Woolly and wishy-washy. No definition of why they would want to call themselves socialists.
In an email to a Socialist Party committee dated 25 May, Tony Malone says that XR has abandoned the “3.5% rule” (that a non-violent activist minority of 3.5% is enough to bring a government to its knees and achieve the aim of the movement). He writes:
“The 3.5 percent minority theory was something that is closely associated with Roger Hallam, but was based in empirical research done by Chenoweth and Stephan (2011) on political campaigns from 1990-2006.
Roger was a high profile advocate of this theory when he was with XR, however it does not inform our current strategy.
You can read more about it (including links to the Chenoweth and Stephan (2011) paper) here:Social Movements and the (mis)use of Research: Extinction Rebellion and the 3.5% rule
Hope this helps,
Tony Marone
Public Engagement Working Group”The academic paper he references argues that the rule only applied under autocratic regimes and only to movements overthrow such a regime, to resist foreign occupation, or to seek secession; it didn’t apply in “liberal democracies”.
It’s good that they’ve abandoned this undemocratic tactic, but their website still declares:
“We have a shared vision of change: Creating a world that is fit for generations to come.
We set our mission on what is necessary: Mobilising 3.5% of the population to achieve system change – such as “momentum-driven organising” to achieve this.”Scroll down to “Our Principles and Values”.
