How should we reform the UK monetary system?
by Jonathan Tame & Guy Brandon
Money is part of our collective narrative as a society. We have always worried individually and as families not just about how much money we have, but about how decisions taken at a national and international level impact that. Inflation figures, interest rates and quantitative easing (QE) have become staples of the headlines. But although money is always there in the news, we have tended to take it for granted as a symptom or indicator of wider economic developments, rather than part of their cause.
Crumbling Foundations: A biblical critique of modern money is the Jubilee Centre’s new research report engaging with the issue of money creation. It was launched on 5th December at an event titled ‘How should we reform the UK monetary system?’
Around 60 guests attended at StBotolph-without-Aldersgate, where Christian Heritage London hosted the event. The report author Guy Brandon opened by giving a brief overview of the booklet, summarising the major problems with our approach to money creation from a biblical perspective. These included the centralisation of the money supply; the debt-based nature of our money; and the lack of commonality this produces between banks/government and the end-users of money, since these factors serve to extract value from the real economy to those who create and manage the money supply.
Paul Mills (Senior Economist at the IMF, speaking in a personal capacity) then explored the contemporary context, with reference to the Eurozone crisis and the recent Italian ‘No’ vote. He highlighted three characteristics of current monetary arrangements since severing links to gold in 1914/1931 and 1971: all our money is someone else’s debt (predominantly private sector banks); money is borrowed into existence; and the payments system used for everyday transactions is co-mingled with banks’ leveraged risk-taking.
The results are endemic inflation (the price level has risen 100-fold since 1914), forcing taxpayers to subsidise or bail out banks to protect the payments utility, and the ongoing battle between the private and state sectors over seignorage (the value reaped from issuing money).
Paul outlined the biblical insights he considered most pertinent, particularly how money expresses ‘common grace’ but is also a false god. He proposed reforming the system by ring-fencing the payments utility from bank leveraged risktaking; deleveraging the financial system to prepare for a return to a stable, long-term price level; and preparing a framework for alternative currencies (commodity-backed and/ or e-currencies).
James Featherby (Chair of Church of England Ethical Investment Advisory Group), the first of three panelists…