only 8% of bank lending goes to productive activity. 92% goes to unproductive activity in the property and speculation fields

Excerpted from Mira Tekelova’s review of the Positive Money conference

“Ben Dyson was next up saying he had “a huge amount of information in the next hour”.

He started from the beginning pointing out that money is not taught at school. He got to asking himself, “where is all this money coming from?” One day, in the library of the School of Oriental and African Studies, the spine of a book caught his eye. It was “The Grip of Death” by Mike Rowbotham. Thinking it must be a crime thriller that had been misfiled, “the librarian in me”, made him reach up to take it off the shelf. He then realised the subtitle, “A study of modern money, debt slavery and destructive economics”.

He was hooked, and the rest is history.

He said there were 3 Key Questions that needed answers: Who creates money? How much money do they create? What do they do with the money they create?

1. Who creates it?

He said, “We have a fully privatised money system” but few people are aware of that fact (except the 200 plus who were crammed into the theatre!) He stated that even people at the Treasury don’t necessarily understand it. There is no conspiracy, it is just they don’t understand it.

2. How much do they create?

Ben explained that cash in the UK economy is £57 billion, whereas there is £2,200 billion in digital money. Another question, in this regard, is “who decides how much to create?” Every bank loan creates new money – most people in the bank don’t understand that. He explained how the sales culture in the modern banking industry incentivises bank staff to lend.

He showed an interview he had done with Paul Moore, the HBOS Whistleblower, who emphasised this unfortunate fact.

In short, bank staff are making loans without realising that every loan creates new money – and they have massive incentives to do this, which overrules the prudence of bank lending. This sales culture pushes the money supply. The automation of the modern lending process facilitates this culture.

As Moore suggested, the modern bank is a form of supermarket retailing operation.

Ben asked him whether the guys at the top understand that bank lending creates new money and the impact that has on the economy. Moore responded by saying that he thought the top people must understand that fact, but he’d never heard anyone speak about it at all, or in relation to any kind of strategy or oversight activity that was taking place.

As for whether such people might consider the impact on the wider economy, he had never heard such a discussion in any bank that he had been in ever. What they will do is consider whether the economy affects the bank, not the other way around, he said.

3. What do they do with the money they create?

A statistic which hit home was that only 8% of bank lending goes to productive activity. 92% goes to unproductive activity in the property and speculation fields.

Ben argued that only the 8% will go to real growth in the economy. He suggested that there is evidence that much of the activity of the 92% goes to such things as commodity speculation which can push up the price of food, as well as put developing world farmers out of business.

What about loans for mergers and acquisitions, where businesses buy up each other? Is this productive activity? He cited evidence that 70% of mergers make the business worse. “A lot of the activity in the city is parasitic,” he stated.

Much of this 92% of created money could be restricted, he argued, without it actually harming the real economy, and indeed, likely benefiting it.

Indeed banks have a bias against business, to the point where it could be said they are systematically biased against the productive part of the economy, which is in direct contradiction to the theory of capitalism!

He then spent some time on the consequences of this privately-created money system:

The first is that our entire money supply is effectively on loan from the banks. “We are renting our currency from the banking sector.” This means that if banks don’t lend, there is no money. If we all pay down the debt, then there will be less money in the economy.

The present system perpetuates financial inequality at several levels. There is a redistribution of wealth from the periphery of the UK to London and the City. There is a redistribution from the real economy to the financial sector, and there is a redistribution from poor to rich.

There is also a diversion of our taxes from schools and hospitals to the banking sector.

In 2009 the government spent £2.1trillion, while gross bank lending was £2.9trillion. That is to say, the 5 big banks (RBS, Lloyds, Santander, Barclays, HSBC) who between themselves have an 85% market share, and 78 board members, have more control over the quantity of money that goes into society, than even the government. There is a democratic issue here. Arguably these 78 people have more control than our 650 MPs! “