Recently the Glass Pyramid has received requests to provide an explanation of MyRBA that is easily explained and digested over a few crackers and a bowl of hummus or perhaps a beer or six. Boiled down the essence of the MyRBA proposal is nothing more than the end of the monopoly over RBA deposit accounts that the private banks currently enjoy. It is as simple as that. Anyone who wants to, should be allowed to open and operate a deposit account at the RBA. This simple reform is the critical first step in fundamental reform of our broken and dysfunctional monetary system.
What is the monopoly enjoyed by the private banks?
Unlike Australian notes and coins, which anybody can use for transactions or store under their mattress, ONLY banks are currently permitted to open deposit accounts at the Reserve Bank of Australia. This is a big deal. How many transactions do you currently complete using Australian notes and coins? How much of your savings do you have in notes and coins under the mattress (or in the freezer)? Probably not many and probably not much.
Deposit accounts have been the main game for completing transactions and accumulating savings for a long time yet the general public and non-bank organisations are currently not allowed to open a deposit account at the RBA. Keep in mind that the Reserve Bank of Australia is the safest bank in Australia and is the foundation of our public monetary system. It cannot ‘go broke’. There is no safer place than the RBA to keep your money yet you are not allowed to open and operate a deposit account at the RBA. If you don’t think your private bank is risky ask yourself why the taxpayer has to provide a guarantee to protect your savings in a private bank deposit account. The truth is your private bank deposit is just an unsecured investment and if the bank goes bust you will lose every penny.
The RBA is 100% safe. Your private bank is not.
Why are the general public and other organisations not allowed to operate deposit accounts at the RBA?
There is no good reason. The RBA already operates deposit accounts for the private banks so offering deposit accounts to members of the public or non-banks who would simply mean increasing the number of deposit accounts in their computer system. If we can spend $100 billion dollars on some new French Submarines or $70 billion dollars on JobKeeper we can surely scratch up a few million dollars to equip the RBA with a bigger computer, a website and a few apps to manage more deposit accounts.
Once upon a time people used to visit bank branches regularly to deposit and withdraw money from their accounts. Back in the olden days allowing people to operate a deposit account at the RBA might have meant the RBA would be forced to open branches right across Australia. But few people now go to a bank branch to operate a deposit account. They pay with plastic cards or increasingly their phones or via websites. Anyone who does want to deposit or withdraw from their RBA deposit account “in person” or “across a counter” will be able to do so at an Australia Post Office or some other agent of the RBA.
So there is no practical or logistical reason for prohibiting the general public and other non-bank organisations from operating a deposit account at the RBA.
So why do the private banks want to keep their monopoly over deposit accounts at the RBA?
For one very simple reason. Anyone who wants the convenience of using a deposit account is currently FORCED to use a private bank as they cannot open a deposit account at the RBA.
Naturally a private business like a bank would simply love to have the government pass laws to deny the general public access to a service provided by the government (RBA deposit accounts) so that the general public is FORCED to use a service offered by the private business (Bank deposit accounts)?
But it is just bonkers?
Why should you and the person you wish to transact with be FORCED to open bank accounts with Westpac or NAB just so that you can complete a transaction without using cash?
If both of you were allowed to open 100% safe RBA deposit accounts you would not need to deal with a private bank at all. You could just transfer the required amount between your respective RBA deposit accounts.
Why should you be FORCED to make an unsecured investment in a private bank just so you have somewhere to store the notes and coins issued by the RBA?
Why shouldn’t non-bank organisations including large public companies be able to operate 100% risk free deposit accounts at the RBA? Many organisations have a need for 100% safe liquid financial resources that are available at all times. A deposit account at the RBA is a much better and simpler solution than an unsecured investment at a risky private bank.
Of course you would always remain free to keep your Westpac or NAB bank deposit accounts, especially if you like your private bank mining your transaction data to work out if you might be interested in some debt peddler product lines, but why should you be FORCED to operate a bank account with a private bank.
Even worse. Why are other non-bank organisations prohibited from operating deposit accounts at the RBA and thereby prevented from competing with the banks? If Westpac and NAB are able to offer bank deposit accounts because they are allowed to operate RBA deposit accounts why not allow other organisations to open RBA deposit accounts and compete with them by offering deposit account services?
Bottom line
The ONLY reason that you and everyone else (including non-bank organisations) are prohibited from opening and operating a deposit account at the RBA is to ensure that the private banks have a monopoly on those accounts and the advantages they offer – including 100% safety.
This monopoly FORCES you and everyone else to enter into business relationships with private banks and limits competition as only a licensed bank is able to provide you with deposit account services.
The recent Banking Royal Commission made it very clear how the banks are abusing their privileged status in the Australian economy and this status is built on their monopoly access to deposit accounts at the RBA and it must stop.
Write to your local member of parliament and tell everyone you meet that we must
END THE BANK MONOPOLY OF THE RBA NOW!
Categories: Macrobusiness
The Glass Pyramid 
It is very simple to me. If Australia is a sovereign nation via the UN charter etc, and the Australian Constitution being British Law – then:
The law of one nation may not be used to govern over another nation.
Our politicians and current judges are either stupid or practicing deception.
“I therefore have come to the conclusion that the current legal and political system in use in Australia and its States and Territories has no basis in law.”
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Click to access 120813-%20Sir%20Harry%20Gibbs.pdf
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Advance Australia Fair! – But Who Owns the Commonwealth?
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Posted on January 28, 2008 by nigel
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Is Australia really a Constitutional Democracy or are we a company listed on the U.S. Securities Commission?
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COMMONWEALTH OF AUSTRALIA IS A CORPORATION.
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This entry was posted in Currency by nigel. Bookmark the permalink.
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h ttp://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=
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h ttp://www.sec.gov/cgi-bin/browse-edgar
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U.S. Securities and Exchange Commission,
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Commonwealth of Australia [0000805157]
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SIC: 880 – American Depositary Receipts
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State location: DC | Fiscal Year end: 0630
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Business Address, 1601 Massachusetts Ave NW
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C/O Australian Embassy
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Washington DC 20036
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Items 1 – 4
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Form SC 13G/A, Statement of acquisition of beneficial ownership by individuals , Filing Date: 2007-02-14
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Form SC 13G/A, ” ” ” ” ” ” ” ” , Filing Date: 2006-02-13
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Form 15 – 15D, Suspension of duty to report [section 13 and 15 [d] Filing date: 2004-11-22
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Form 18 – K, [paper] Annual report for foreign governments and political Filing date: 2002-03-04 subdivisions
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6 thoughts on “Advance Australia Fair! – But Who Owns the Commonwealth?”
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Mr Solomon (“Sol”) Trujillo on January 28, 2008 at 11:11 pm said:
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Hmmm, I looked into this a bit deeper and asked our accounts department and found the following:
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The Commonwealth of Australia as sighted above is the statutory body of Australia operating in the USA as an Embassy, not Australia the sovereign country.
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The two SC 13G/A forms relate to the changes in the Commonwealths ownership of Telstra, for 2006-02-13 the Commonwealth declared that it owned 51.8% or 6,446,207,123 of the Telstra shares and in 2007-02-14 it owned 17.8% or 2,220,736,177.
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Hope that clears thing up.
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On the other hand though I wonder if the Queen – who owns Australia and whom I have not had the pleasure of meeting – yet, has sold any shares?
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Cheers,
Mr Solomon (“Sol”) Trujillo,
Chief Executive Officer
Telstra Corporation
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This is an excellent piece. I agree that it’s egregious that Australian citizens are forced to bank through commercial (and often, largely foreign owned) banks.
I’ve moved all my own banking to customer owned mutual banks, but see this as a work around, made necessary by the inability of private citizens to access the Reserve for personal banking.
A question. The article speaks about citizens having accounts directly with the RBA. Good as it goes. But what about obtaining loans direct from the RBA?
The reason I ask is that I like the idea of doing away with interest as a component of borrowing. Some Islamic banks already do this, as does the even-better JAK Swedish bank model. The JAK model is essentially not-for-profit, and once established can operate on full reserves.
The major challenge for JAK, however, is access to capital for expansion. It relies on customer savings, which in a tight economy will be slow to accumulate.
If the RBA were to offer credit on a model similar to JAK (using after savings to achieve sustainability) it could also use its power to create new money to *conditionally* fund interest free loans.
But what about inflation? you say. Sure, if these loans were offered to all and sundry, they’d likely have an inflationary impact. But if the capital to fund such loans were created by the RBA – say – *only* for one owner occupied property per individual, then the effect could be substantially limited.
I understand this is a fairly novel idea, which honestly needs more thought. But Australia has led the world in the development of new financial products in the past. We could do it again; but this time for ordinary people.
Thanks again for a timely article.
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Hi nineofclubs,
“..But what about obtaining loans direct from the RBA?..”
I think it is best that the RBA stick to a narrow brief that does not extend to making loans. It will have enough to do running a system of zero interest reserve accounts for the public and giving advice to the government regarding maintaining stability in the value of public money.
But this would not prevent the government from setting up a Federal Home Mortgage finance agency with funding to advance zero interest loans to first home buyers etc.
The home buyer would of course be required to repay the loans within the term of the loan by repayments but there is no particular reason why they should pay interest.
Where would the Federal Government get the money to transfer from the Treasury RBA account to the RBA account of the Federal Home Mortgage finance agency? The balance of the Treasury account will rise with tax receipts or from the proceeds of a zero interest bond issued to the RBA on the advice of the RBA. In order to avoid deflation as the economy grows the RBA will advise the government to issue the RBA with a zero interest bond and the RBA will pay for the bond with a credit to the Treasury Account. It works the other way as well. If the RBA is concerned about inflationary pressures the RBA might advise the government to buy back an existing bond and reduce the contents of the Treasury account as part of policies designed to limit fiscal policy and reduce inflationary pressures in the economy.
Naturally, the number and size of the loans granted by the Federal Home Mortgage finance agency will be the subject of regulation and that regulation will have regard to advice from the RBA with regard to inflation.
In summary, it is not surprising that other countries are experimenting with interest free loans for specific purposes like buying a home as it can be done. The only barrier at the moment is that the current model involves a fiction that the government must always borrow money and therefore all money comes with an interest bill.
But keep in mind that any transfer of Treasury deposits is a decision regarding the allocation of scare resources so it is not a limitless magic pudding. When funds are allocated for home finance they will not be available for some other purpose. But making those decisions is what governments are elected to do.
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Some discussion in the comments to the following article
https://www.macrobusiness.com.au/2021/02/as-the-property-bubble-is-nationalised-it-only-gets-worse/
pfh007
The solution to draining this puss filled sore on the body politic is to end the private bank monopoly on operating deposit accounts at the RBA.
Start slowly by increasing the classes of folk who will be permitted to open and operate a RBA deposit account.
There will be plenty of non- bank organisations who will love having direct access to a 100% liquid and 100% safe financial asset.
The early adopter individuals are likely to be few in number and will allow time for the RBA to ramp up their capacity.
The accounts will pay no interest.
And the RBA will not be making loans as its job is the monetary system and not debt peddling. If people want a public sector debt peddling option they can set up something up to do that but it is not the job of the RBA.
Sure, ending the banker monopoly will require changes to some bank regulations but nothing dramatic.
Planning the required reform beats the usual “we can’t do nothing but wait for a bust” mentality that is sadly all too common around here.
BJW678
How does this fix the problem?
Deposits in the banks aren’t the problem, cheap/free loan creation is.
pfh007
It fixes the problem of the banks having a monopoly of easily transferrable and stored central bank liabilities.
They do not have a monopoly over central bank liabilities in the form of notes and coins.
But they have been given a monopoly over central bank liabilities in the form of an account at the RBA.
It is a useful exercise to ask yourself how is this monopoly in the public interest and why the banks are so interested in preserving this monopoly?
If the monopoly was not important it should be no issue to end it and allow everyone to operate deposit accounts at the RBA. Why not allow non banks access to the most risk free financial asset available – liabilities of the central bank?
If you give some thought to the implications of this monopoly you will see that most of the other problems we spend so much time talking about are linked to this completely unnecessary and out of date monopoly. Especially the issue you mention – excessive bank credit. Bank credit is effectively money in our economy and the only reason banks are allowed to create it so freely and so unproductively is closely linked to their monopoly on operating central bank deposit accounts.
Think about what government bonds are and what the demand for bonds might be like if everyone is able to maintain a deposit account at the RBA.
Of course there are plenty of other economic problems that require solutions but getting rid of one dysfunctional monopoly at the core of the economy is close to the top of the list.
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