 Thank you. My name is Ben Dyson. If you haven't met me before, I founded Positive Money back in 2010. Thank you. So what I'm going to talk about now is the current economic situation that we're in and what we need to be doing to deal with it and what our strategy is with where we're going over the next year or two. So, let me start. I think I'll just start with recapping how we got into this mess because it's good to keep the bigger picture in mind. Over the last couple of hundred years, we've had this evolution of money where we started off using metal coins that were created by the king or by the state. Over time, we started to put these coins into banks and these banks would give you a piece of paper to say how much coins you put into the bank. People then started to use this paper money as though it was as good as the coins and over time, people started to treat paper money as though it was the main form of money. Banks, of course, realised that then if they just print more paper money and they write anything on this, people will take it as loans. They'll pay interest to use this paper money and banks couldn't really resist that kind of temptation. So, they ended up printing too much paper money. It pushed house prices up, it pushed property prices up and caused a bit of chaos in the financial markets. So, in 1844, the Prime Minister at the time said, well, we can't be allowing private banks to create money. We're going to have to stop that. So, they updated the law to say from this point on, only the state through the Bank of England can actually create money. But then the nature of money has changed again to the point where we're now using electronic numbers that exist in the computer systems of banks for almost all of the payments that we're using, that we're making. And we're therefore using electronic money for most of the payments we make and yet the law has never been updated. Yep, there we go. So, this is where we've got to. We're now using money created by the banks. And yet there's been no debate about this in Parliament. There's been no real democratic discussion since 1844 when it was a hot topic. So, we've reached this point where the vast majority of money now, this is what has happened to how much money there is in the economy and 97% of that money is created by the banking system. It's created electronically whenever somebody goes into debt. In terms of where that money has gone, the 10 years running up to the financial crisis, the money that banks created, 40% of it went straight into the property bubble, 37% went into financial markets, 10% went to credit cards and personal loans and just the remaining 13% went to businesses that actually, you know, grow and employ people and create the real economy. So, most of that money was going into speculation and property bubbles. We've been arguing for a while that this is what caused the financial crisis. A few days after last year's conference, literally a week after last year's conference, Adair Turner, who was the head of the financial services authority, came out and confirmed the same thing. What he said was, the financial crisis of 2007-2008 occurred because we failed to constrain the private financial systems creation of private credit and money. So, what we've been arguing for is being vindicated by the guy who was in charge of the banks, really. So, the thing about allowing money to be created by banks is it gives you this very strange dynamic where if you want to get more money into the economy, you also have to take on more debt. And if you have a crisis that was caused by there being too much debt and therefore you want less debt in your economy, well then you also have to accept that you'll end up with less money in the economy because when people borrow new money as created, when they repay loans, that money actually disappears from the economy. And you can see this in the charts here. So, this red line is the amount of debt that people in the UK owe to the banks. And as the money supply goes up, the level of debt goes up, when people start repaying the debt after the crisis, then money also starts reducing as well. So, there's two ways to get more money into the economy, which is what the government wanted to do after the financial crisis. They needed more money in the economy to get people spending again and to get the recovery. First way is to get banks lending again because then they're going to be able to create more money. And this is the more money and more debt option. So, the first thing they did was lower interest rates to their lowest level in history to 0.5%, as though the problem behind the crisis was that people had borrowed too much and therefore we should lower interest rates to make it cheaper for people to borrow more. This is the madness of current economic policy. They introduced a scheme called Funding for Lending, which was designed to get banks to increase their lending again after the crisis. Again, because the crisis was caused by banks lending too much, so we want to encourage them to keep lending. We now have things like Help to Buy, which I've put help in quotation marks there. This is a government scheme that is going to encourage banks to lend even more for mortgages, for things like 95% mortgages and 90% mortgages. So, pumping even more money into the property market when house prices are at one of their highest levels in history and the least affordable they've ever been. So, you see all this is basically, we had a crisis caused by there being too much debt. The government response is we need to get more lending and more debt into the economy. Again, we've been warning about this for quite a while. A debt earner in that same speech, the former head of the FSA says, we got into this mess because of excessive creation of private credit money. We should be concerned if our only escape route implies building up a future excess. Basically, we're using the thing that caused the crisis as an answer to the recession that followed. The second way to get more money into the economy is for the Bank of England to actually create it directly. And it can do this, it has the legal power to do it. But they did it in the worst possible way that you could imagine. So, what they saw happening after the crisis had really blown up in 2008, they saw that banks were going to stop lending, so they'd stop putting new money into the economy. But at the same time, people would still be repaying those loans. And remember, as people repay loans, money disappears from the economy. This is kind of what happened in the 1930s after the Great Depression. So, the Bank of England said, well, we can't allow this to happen again. Therefore, what they did was with the banks essentially reducing the money supply, they said we need to step in to create money. And actually, Mervyn King, who was the governor of the Bank of England at that time, came out and said this. He said a damaged banking system means that today banks aren't creating enough money. We have to do it for them. So, he was talking about the quantitative easing scheme. So, I'm going to explain without getting too boring and technical how this works. So, basically quantitative easing starts off with the Bank of England creating £375 billion of new money. And they use this money to go and buy bonds from pension funds and insurance companies. Bonds are government bonds, which are basically government-boring pieces of paper that say that the government owes you some money. So, all this money floods into the bond market, and some of it overflows into the stock market. This is a very simple explanation of how this works. Nobody actually quite understands how quantitative easing is supposed to work, but the bottom line is that what this has done, and it's the Bank of England who have stated this, is that it has increased prices in the stock market and the bond markets by 20%. So, it's artificially, in the same way that money from banks has gone into the property market and artificially pushed up house prices, money from QE has gone into the bond and stock markets and artificially pushed up share prices and bond prices. Now, the idea behind that, if you ask the Bank of England, well, why did you do this? What did you think it was going to do to help? They will tell you that the people who own these shares are going to feel wealthier when they see the value of their pensions or their investments go up. And what they're going to do is then go out and spend more in the high street, and that is supposed to boost spending in the real economy, and that's going to lead to a recovery. The reality is if you've got lots of money in the stock market and you see the stock market going up, you don't say, oh, I'm going to start spending in the high street. You say, I'm going to get the rest of my savings and put them into the stock market too. So, even the basic theory wouldn't be expected to work, but what it has done, the intention was that it would make everybody who has some investments in the stock market wealthier, so it would make each household wealthier and then they would go out and spend more. What it actually did, because 40% of the assets in the stock market are owned by the wealthiest 5% of households, it's made them much richer off, much better off, by the tune of about 128,000 pounds per household in that top 5% in the UK. The vast majority of people either don't have significant amounts of investment in the stock market or they don't have any at all, so they saw no benefit. QE is a scheme that has used 375 billion of newly created money to make the very wealthy much better off on paper, so that's increased inequality and yet it's done very little to create jobs and to get the real economy going. There's another reason why it wouldn't work as well. Remember when I said when people are repaying loans, money is disappearing from the economy? Well, after the crisis, most of the money was disappearing from here, from non-financial businesses, so because banks had panicked and they said we're not going to lend to businesses immediately after the crisis, businesses as a whole in the UK repaid £100 billion of loans that were not replaced by new lending and that's £100 billion disappearing from the economy. There was also some small amount of pay-down of people's credit cards and personal loans. What quantitative easing did was it recreated that money but it went and put it into the financial markets. So they have this vague idea that money is going to somehow flow from the financial markets down to the real economy. It doesn't happen. There is no real connection between there. So all this money has become trapped in financial markets and that's where it stays. Because there's been so many big numbers after we've heard so many big numbers on the financial crisis hit, £375 billion might not mean a lot to you right now. So let me put it into perspective. £375 billion, quantitative easing. The government in one year in the UK spends £667 billion. So the Bank of England created as much money as the entire government spends on everything in six months and three weeks. So more than half of what they're spending in a year. And yet there was no real... Again, Parliament wasn't really paying attention here. They didn't question how this money was being used, where it went or whether it was having a beneficial effect. We did a little bit of analysis and we found maybe 20 MPs out of 650 who had asked questions about the scheme. That was the only analysis when this... The Bank of England had the power to create more money than the government is spending in half a year. We think about how much attention is given to half a billion of spending here or a billion there. And this is £375 billion. That is almost... Few people understand what's happened with it and few people are paying any attention to whether it's been used in the right way. So current economic situation. In the UK we're very happy to have a recovery. Recovery. Recovery means the economy is growing so we get more of everything. So there's more jobs, mostly in estate agents. So this is not a sign of a real recovery. It's a sign of a property bubble coming back to life. Again, because banks have started lending into property again. We've got more credit cards and consumer debt again. This is exactly what was happening before the financial crisis. We're now repeating these mistakes. We've got more people surviving on food banks and charity. So this next one is a chart from the Trussell Trust who run food banks in 2005. Sorry you can't read that. But there were less than 3,000 people in the country going to their food banks asking for food. We're now talking nearly 350,000 people who are dependent on charity to be able to get enough food to eat. I mean this kind of stuff happens in America but it's never really happened in the UK before. So this is a monetary system that's failing. It's an economic system that's failing and it's a government policy that's failing as well. We have now some of the most unaffordable housing we've ever had. Things have calmed down slightly. Now this shows you if you're a first-time buyer after you've paid your taxes how much of your salary is going to go straight to the mortgage. In London you're still looking at about 50% of everything you earn after tax is going on your mortgage. In the UK as a whole it looks like this is coming down which might be encouraging but this is really just because interest rates are at an all-time low. Soon as they go up you'll see this affordability tracker go up and houses will become less and less affordable compared to people's salaries. This is a really good report that came out recently. It's from the Resolution Foundation and they just analysed the condition that people are in financially. They said a sixth of UK mortgage debt sits with households with less than £200 left at the end of the month. So you only need interest rates to rise by 1% or 2% for those people to find they have nothing left at the end of the month. If interest rates rise by 3% and start coming back to where they were before the crisis you're going to find a lot of these people are struggling to pay the mortgage. So we have this economic recovery. We still have an extremely fragile economy here which is absolutely saturated in debt because we've had this system where banks have been able to create money. 600,000 households currently spend more than half their income on debt repayments, a situation we call debt peril. 5,000 people made homeless every year because housing has become so unaffordable. 3.9 million families only have enough savings to cover one month's rent or mortgage. So they only need one redundancy in the family to find themselves in serious problems. This is about 20%. It's about one in five of every household in the UK is in this situation. The poorest 10% now in the UK owe four times their annual income, household income. In Europe you have some disastrous figures here on youth unemployment. In Italy 40% of all under 25s are unemployed. In Spain it's 56% and in Greece it's above 60%. So this is a massive waste of people who want to be doing something useful but can't because the economic system has failed. In most of these countries Europe has some unique problems with the design of the Euro but fundamentally this is all rooted in this system where we've allowed banks to create the nation's money. A lot of people are saying Europe is in danger of going into a decades-long deflation. The politicians and the economists are again saying well you're going to have to start using more quantitative easing because quantitative easing didn't work in the first place so let's use some more of it. There is a much better way of doing this and it is what we released a paper on earlier this year no sorry it was November last year and it's called Sovereign Money and the idea of this is quite simple. It's that instead of allowing the Bank of England to create huge sums of money to put this money into the financial markets create smaller sums of money but to put it into the real economy where it will actually create jobs and help the economy grow. So what it does is it breaks this catch-22 situation where we either have to choose between more money and more debt or less money and less debt and it actually allows us to get more money into the economy whilst also having less debt as well. So it changes the dynamics of how our monetary system works. So the way this would work we're not saying George Osborne or any politician should have the decision over how much money to print because you would see them printing money like crazy in the years before the election and then having to reverse those mistakes in the years afterwards. What we suggested is that you have a division between how much money is created and what that money is used for. Now if you've read Modernising Money you'll see that this is all very similar to that but we're suggesting that the Bank of England's Monetary Policy Committee decides how much new money needs to be put into the economy and that the government is responsible for deciding how to spend that money, how to actually get that into the economy. So how do they get it into the economy? Well they have a number of options. The first one is just to increase government spending. Now this doesn't have to be on white elephants and wasteful projects. It could be... We've come up with a couple of suggestions. One is to build affordable housing. So in the UK we're building 100,000 to 150,000 fewer houses than we need every year just to keep up with the growing population. If you were to put some money into building more affordable houses you could be creating up to 200,000 jobs and actually you don't need huge sums of money because you're talking maybe 10 billion to make a significant difference to this. You could also have retrofitting of... So in the UK you hear about the fact that our energy bills are so expensive that we leak most of the energy through the walls once you've paid for it. So by actually taking the older houses and fitting them out so that they're energy efficient, so this is retrofitting, you make them far more efficient, people save money, but also you get to employ 200,000 workers for about 10 years to keep them busy with that. So it creates jobs as well and it does something useful in the long run. It saves people money. You could use it for tax cuts. You could also just divide the money up between everybody and distribute it directly to people so that they can spend it how they choose. There's pros and cons of each of those different methods. So I'll just give you a worked example of how this whole thing would work. So we started off with the Bank of England creating £10 billion electronically. This is newly created money from the Bank of England. It gets added to the government's account. The government then pays employers to do whatever it's decided to maybe to build affordable houses, to build clean energy infrastructure to make existing houses more efficient, to build better public transport. The important thing is that this money is then going to employers who will pay their employees and then these employees actually pay taxes. So for every £10 billion that the government initially spends into the economy through sovereign money creation, it gets about £5.6 billion back as well. So it improves the government's financial position. This whole idea of we're going to reduce the deficit by reducing what we spend is actually the complete opposite of what you should be doing by spending money into the economy. You get more tax coming back and you improve your position. Then these employees go and spend their money with other businesses. So you get a bit of a virtuous circle here where for every £1 that goes into the economy through sovereign money creation you get about £2.80 of total spending. And the other thing is some of these households will then go and repay some of their debts to the banks. So that means that households will have less debt and banks will be smaller. Not enormously smaller, but smaller in the sense that we won't need to... then don't pose such a risk to us and they won't be quite so at risk if the economy takes a downturn again. So the important thing is we're not putting new money into the housing market like is happening now with the money that banks create. We're not putting it into the financial markets and we're not pumping new money in through personal loans and credit card debt. We're actually getting money directly into the real economy and into people's pockets so that spending goes up and that actually creates jobs and boosts the real economy. So to compare, quantitative easing £375 billion created by the Bank of England that gave us approximately £30 billion of spending that's coming from a Bank of England estimate. It's very hard to actually know precisely what effect it had. A stock market bubble, greater inequality but the main thing that really annoys me about quantitative easing is it was such a wasted opportunity. So we've just had, firstly, we had a lot of the schools in the UK are not really fit for purpose anymore. The buildings are leaking, they're draughty, they're badly designed and there's been a big program to rebuild those schools that was planned. Now when the crisis hit the government said well we can't afford this anymore. There's a billion pounds of spending cut from the education budget therefore we can't be rebuilding these schools. At the same time you had tens of thousands of workers laid off from the construction industry who were desperately looking for work. So you had all these people unemployed, you had this work that needs doing and we say we can't do it for the lack of one billion. At the same time the Bank of England created 375 times that amount and put it into the financial markets where it had no benefit for the economy and a great benefit for a very few number of people. A similar one, even more topical, for the international audience the UK has just been flooded. If you go outside of London you'll find it's still under water and one of the reasons for that apart from climate change and the bigger issues one of the reasons for that is that a lot of the flood defences that people have been calling for for years have not been built because there's not enough money and again this is another thing where some of the places that have been flooded some of the homes that have been destroyed that would not have happened if they hadn't cancelled some flood defences some of this building program just after the crisis hit and you're not talking huge sums of money tens of millions fractions of one billion pound. Again you had tens of thousands of construction workers made unemployed at home doing nothing looking for work and for something useful to do. There was a lot of construction work that we needed doing if the Bank of England had been allowed to create money and grant it to the government so it could actually be spent directly into the real economy you could have got these flood defences built at the same time as creating employment and getting the economy back out of the recession. As I mentioned before we need to be building a lot more affordable and sustainable houses so that's something else that we could have had in the last few years. Instead we've had a stock market bubble and we've made the very rich a little bit better off. So sovereign money the policy that we're proposing just ten billion would lead to 28 billion pounds spending so pound for pound it's many many times more powerful up to about 284,000 jobs depending on what you spend that money on. 5.6 billion pounds in tax revenue for the government so that's immediately improving their financial position and also lower personal debt as well. These figures here the 284,000 so the 28 billion pounds spending that figure comes from the Confederation of British Industries estimate of the return that you get from spending on construction. It's not figures that we've plucked out of the air because they sound good these are figures from one of the biggest lobbyists for the banking sector, actually the CBI and the same with this 5.6 billion tax revenue as well. So just to compare the two QE may lead to greater debt it's partly designed to get banks to be more confident so that they can land again. Sovereign money should lead to less debt in the economy. QE gives a huge boost to the very top 5% of the nation not much for everybody else. Sovereign money because the money is more widely distributed it can create up to 284,000 jobs and for every £1 of money that is created by the Bank of England if they do it through quantitative easing it leads to about 8 pence of extra spending in the economy. If they do it through sovereign money they get £2.80 of extra spending in the economy. So we've had such a huge sum of money created but used in such an ineffective way at the expense of the things that we really needed to do at the expense of the people that were made unemployed over the last three or four years and could have been employed to do something useful at the expense of equality and any sense of justice being rewarded for the work you do rather than for sitting there and watching stock prices go up. We're arguing that this system needs to change and Martin Wolff, who is the chief economics commentator of the Financial Times has now been talking along the same lines so he recently said this it is astonishing how little this crisis has shaken conventional wisdom. An expansion of private borrowing to buy ever more expensive houses is deemed good privately created credit backed money from the banks is thought sound while government created money is not. None of this makes much sense and there isn't any sound economic reason for the fact that we do things the way we do it's more based on ignorance of how the system really works a lack of political awareness about the implications of these decisions, the fact that only 20 MPs asked any questions about quantitative easing. So what we're trying to do now is say that there is a better way of doing this and this sovereign money is something that we need right now to prevent us walking into another debt fuelled financial crisis. Now strategically it means we don't need to necessarily go to war with the banks at first you can have sovereign money create so you can have sovereign money creation whilst banks are still creating money and in the way that banks creating money is adding debt to the economy sovereign money can be offsetting some of that effect. It's something they can do now so that the government can see that it can put money into the economy in a way that is useful and which actually benefits the economy and benefits them and then we can say well look you have two ways of getting money into the economy when banks do it they put it all into the property bubble when you do it through sovereign money creation you're getting it directly into the real economy now if you want to restrict one of those two ways do you really want to restrict the one that actually creates jobs and actually creates growth in the economy. Okay last couple of things so modernising money the book that we launched last year that is still what we're aiming for in the end we still believe that you have to stop banks creating money there isn't a system that would give you the benefits that that actually has whilst banks still are able to create money but the sovereign money is the way that the government can actually take a step towards this without having to you know they're not going to take the risk of doing this overnight this is a way to get them into the idea of they can actually create money which in a way that will benefit the economy rather than leaving the banks to do it all. So just to wrap up we are fueling our economy through money created by the banks as debt that isn't going to last we cannot keep increasing the level of debt indefinitely so we need a different way of getting money into the economy and the best way of doing that is through this sovereign money proposal that we've put together and that would actually set a precedent for useful creation of money by the state instead of creation of money by banks.