One of the most effective lines peddled by the National Rifle Association ‘NRA’ in the USA in relation to gun regulation is that guns don’t kill people, people kill people.
The NRA argue that guns have no agency and in the hands of sane, god fearing upright responsible people they are harmless.
It is an effective argument because it is true. A gun that is the hands of a sane, responsible, upright, law abiding member of the community is unlikely to cause harm.
Responding to that argument with “……but guns make it much much easier for people who are not sane, responsible, upright, law abiding people to kill people..” struggles for traction even though it is also true.
The private bank apologists use a similar strategy with regard to the role of private banks in the public monetary system.
They try desperately to characterise private banks as having no agency. They like to portray the role of the private banks in the public monetary system as ‘natural’ and ‘normal’. In essence they argue that banks are just part of the routine structure of a modern civilised society.
Instead they argue, if you want to fix the problems of how the economy has a remarkable habit of grinding out a very small number of “super winners” and lots of “losers”, we need to investigate, unpack, interrogate and solve the problem of ambiguous things like “neoliberalism” first.
In other words, like the gun debate, banks are not the problem people are the problem.
When understood as good old fashioned private greed the war on “neoliberalism” becomes little more than a call that we must first solve the problem of human greed. The thinking seems to be that if we can solve the problem of human greed then we need not fear private banks. After all according to the private bank apologists banks are ‘agency free’ and natural parts of a modern economy.
Unfortunately, the idea that private banks are agency – free like a “gun” – is absurd.
Private banks consist entirely of employees, shareholders, management and customers who are all deeply interested “agents” and in ensuring that private banks serve THEIR interests rather than the public interest. Each of these stakeholders has a very real and powerful motivation in ensuring that a private bank operates in their private interests rather then the public interest.
If private banks ‘naturally’ served the public rather private interests they would not require the armies of regulators, regulations and laws they currently require ….and have managed to capture or avoid with relative ease.
If there is a concern about the rising prevalence of human “greed” then the best way to address the issue is to focus on the role and operation of the organisations that primarily manifest and facilitate that greed.
Which means that if your concern is the dominance of “neoliberalism” – aka the rise of private greed – the regulation of the organisations – the private banks – most central to the process MUST be your central concern.
If it isn’t then #GreedisGood and #FakeLeft are the hats that fit you best.
When it comes to regulation of the private banks the test is simple.
The current model of banking and monetary system regulation clearly does not work.
How many more stories of banks abusing their ‘privilege’ do we need?
The onus is on those, who believe a functional role for private banks in public monetary systems is possible, to articulate exactly the suite of regulations that will work.
If they cannot make a case and we are surrounded by their failures, the sensible and reasonable approach is to abolish the role of private banks in the monetary system and convert the private banks into investment companies that operate on exactly the same basis as all the other companies – investment or otherwise – across the economy.
If banks really are competent at selecting ‘credit worthy’ projects they should have no trouble identifying ‘investment worthy” projects and persuading investors to advance funds to be managed and invested by them. The investors would then share in the fruits of those productive investments.
Considering the track record of private banks over the last 100+ years and of the failed attempts to regulate them to operate in the public interest the answer should be clear.
The role of private banks in the public monetary system is a barbaric relic of the 19th century and its time is up.
But don’t expect the Royal Commission to examine any of this as Malcolm specifically excluded issues like this from the Terms of Reference.
Are there alternatives?
Meanwhile in other countries Central Banks are leading the debate about alternatives to a clapped out private bank dominated system.
Here is an interesting speech by the Norweigan Central Bank. Don’t hold your breath waiting for something like this from our RBA.
“…But there are some characteristics deposit money lacks. It cannot offer anonymous payments. The system is vulnerable to advanced attacks. Having more money on deposit than is covered by the deposit guarantee scheme involves risk. Nor is direct and immediate settlement between two parties, without the involvement of a third party, possible without cash.
In the future, new payment solutions may be able to offer these possibilities. Private digital currencies providing anonymity are already on the market. These currencies can also be used even if banks’ systems fail – as long as the Internet is still functioning. The same applies to platform currencies and e-money. However, there are other crucial characteristics missing from these solutions – they are not backed by any authority and the level of foreign exchange and credit risk can be high.
One alternative currently being discussed is the introduction of electronic central bank money. There are several ways of achieving this: consumers can have an account either at the central bank itself or in a system controlled by the central bank. Another possible solution is for Norges Bank to issue a payment card or develop an app for consumers to use for anonymous payments….”
Meanwhile in Switzerland they are taking the issue very seriously with a referendum in June on the subject.
And conferences as well.
The world is moving on……we don’t have to be left behind……in broken and dysfunctional 19th century private banker world and a bunch of #FakeLeft slogans.