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140331 Prof Singleton "Bank of England mission"

Page history last edited by Peter Verity 6 years ago

 

Date  31/03/14 Chairs Peter
Time  19:30 - 21:00 Secretaries Peter
Location  Quaker Meeting House  Type of meeting Meet-up

Attendees

19 people, including several new faces

 

Table of Contents

 



 

The Bank of England's Mission and the Positive Money proposals

presenter: Prof John Singleton (prof Economic History, Sheffield Hallam university)

 

Prof. Singleton gave us an interesting talk on the history and mission of the Bank of England, and gave us opportunities for questions and discussion during the talk. In the final section, he talked about the Positive Money proposals and aired some of his reservations. The slides of his talk can be found here > Bank of England Mission and Role.pptx 

 

Peter gave a vote of thanks to Prof Singleton, and to Sue for organising the event.

 

Discussion

I have tried to capture most of the questions and discussion points below. Apologies if I have missed or misrepresented anything!

 

1. Today only 3% of money is created by the BoE. How has this changed over time?

In the past, a bigger percentage was created by the BoE [don't know figures], this would have given them more control over the money supply but they still had no control over private bank credit. Bank credit existed even as far back as the 19th century, in fact there was an explosion of private bank notes early 19th century until 1844.

 

2. Was gold really maintained at a fixed 7.35 grams/£1 right up until 1931? What happened after Bretton Woods?

Yes - gold value didn't vary against the pound until UK came off the gold standard in 1931. The reason for coming off the gold standard was that there wasn't enough gold to support economic growth. After the Bretton Woods conference in 1944, the pound was pegged to the dollar which was fixed at $35/oz until the US came off the gold standard in 1977. It's only after that that gold has been considered an 'investment' rather than a 'currency' and the asset value of gold has been allowed to float.

 

3. What is the monetary policy of the BoE?

The policy is to maintain control of inflation. It does this by setting interest rates, not by [directly] controlling the money supply.

So do they create money or not?

They create 'base' money but the public don't/can't use that. The BoE doesn't create any public ('broad') money except the 3% notes and coins.

  • [PMN - according to the BoE, "the amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates"]

 

4. Does the BoE monitor the expansion of credit? Didn't they know a bubble was being created?

Yes they do - they monitor (and publish) levels of private bank credit. However they were probably caught up in the same boom euphoria - it's difficult to put the brakes on when everyone seems to be benefiting from a booming economy!

 

5. You say the BoE has a supervisory role. How can it supervise international banks such as HSBC?

It can't really. There is some cooperation between central bankers but in reality it has only limited powers.

 

6. What about LIBOR. How did that happen?

It was not a conspiracy at the top level, but covert manipulation of rates by individual traders. It represents a failure of supervision.

 

7. What is money? This is a question we should be asking. It is not a commodity, it has no intrinsic value.

Each person in the room might have a different answer - Money is a process. Money is a token

Who's money is it anyway? - money belongs to the public yet money creation is outside the control of the government. It is just loaned to us - this is a scandal.

 

8. With ref to John's last point - that a bank failure could still hurt millions of savers -

Interest should be a reward for risk. We currently work under an assumption that banks can/should give us something for nothing. That assumption needs to change.

 

9. With ref. to John's point about independence of the MCC (Money Creation Committee) -

Several people agreed that this was a concern. It is very important to ensure that it operates democratically, and in the public interest. This would not be easy.

 

10. How does the Bank of International Settlements fit in?

[From Wikipedia - The Bank for International Settlements (BIS) is an international organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks"... It is based in Basel, Switzerland]

Not to be confused with the International Monetary Fund (IMF)

Set up in 1929, it is a club for central bankers which supervises and imposes regulatory restrictions. It hasn't stopped crises - so is it a failure?

 

11. Large quantities of money are stashed in offshore havens. How would the Positive Money proposals deal with that?

There was discussion whether offshore money is "really there", and whether it represents a drain of real wealth.

It may be that the PM proposals would make it more difficult for offshore havens to operate, as most money creation in today's system goes to the finance sector. This is likely to change.


 

Campaign update and other business

presenter: Peter

 

1. Peter and Steve attended the PM conference on March 1st. There were 240 people present including 40 from overseas. The theme was  "building a movement for change". As a result, 12 new local groups are forming or planning to form, bringing the total to 30. A fantastic achievement!

 

2. The Bank of England have produced an important booklet and video, which for the first time confirms much of what Positive Money has been saying all along

http://www.positivemoney.org/2014/03/bank-england-money-money-creation-modern-economy/

Quoting -

  • the reality of how money is created today differs from the description found in some textbooks
  • banks do not simply act as intermediaries, lending out deposits that savers place with them
  • the majority of money in the modern economy is created by commercial banks making loans
  • in normal times, the central bank does not fix the amount of money in circulation, nor is central bank money 'multiplied up'

 

3. Steve launched the book loan scheme. Group members can lend books to other group members either by bringing them along to a meeting, or through the forum. Several books were exchanged at the meeting!



The forum is here - http://posmonshef.proboards.com/ The book loan scheme is in a "members" area, not in the "public" area, so you need to register and log in to see it

 

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