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Knowing where her mouth has been

by on March 29, 2013

Banks can “control lots of money with very little.”*
Here’s how:
– They create and destroy our money.
– We use their book money** every day.
– Minimum reserves and small reserve ratios, if any.
– Influencing new regulation before it can occur.
(Amazing but true: even the Basel III rules are voluntary!)

In Basel, Switzerland, sits a tall brown building next to the main train station. Meet the Bank for International Settlements (BIS). What’s unsettling about Settlements, is that no one really charged them with this task. It’s just how the money system evolved. BIS used to be responsible for war reparation payments, but that recently ended. (Countries are no longer penalized for starting wars, at least not in this way.) Yet why is BIS not shut down, but in fact expanded to a star-designed building nearby, once part of UBS?

Primarily to help coordinate the scheme of smoke and mirrors described above. This involves banks cancelling out liabilities among each other (netting), so that only the smallest necessary amount of actual money needs to be transferred. But also to provide a meeting place for the world’s central bankers – it’s the “bank of central banks.”

Banks lend each other money all the time. Why do banks lend each other money, when they could just create it? Because at the end of the day, they do need some form of hard currency. When there’s too much bad debt around, as in the run-up to this financial crisis, banks stop lending to each other. Like a prostitute who’ll happily kiss her clients, but not another prostitute: she knows where her mouth has been.

Since we have granted private banks the right to create public money, there ought to be some form of transparency. Then we’d all know, and could use appropriate protection (pardon my continuing this sordid metaphor). But private money-creation never was democratically legitimized. Our solution: take away the right to create money from banks altogether! They should be allowed to lend out only money that already exists. Then there’ll be no more need to juggle liabilities, fewer crises and turmoil, and I’d have to find a new target for my nasty quips.

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This blog accompanies the page www.banks-need-boundaries.net, which has a petition at change.org and provides resources for people who would like to help change the financial system in their own way.
GOOD LUCK!

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* We in no way endorse any kind of prejudice or violence against bankers or other minorities…but we were a little fiendish in our choice of words here: “control lots of money with very little” is from Godfather III.

** Book money is the money in your bank account, it isn’t legal tender, and yet we pay our taxes with it. (German: Giralgeld)

pic: BIS by wikipedia

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2 Comments
  1. A new book says reparations in this case ended in 1932, i.e. not “recently”, as stated here
    See http://www.economist.com/blogs/prospero/2013/07/inside-tower-basel

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