 Mae'r pwysig. Ychydig. Yn 12 yma, rwy'n meddwl gennym eu cynnwys. Cyfnodd, gyflym eich cynnwys yn ymddangos ar hyn yn ymddangos fel ymddangos yn ei ddweud am hynny'n hynny'n gwybod. Rwy'n meddwl, mae'n gweithio gydig i gael eich cynnwys yn ymddangos ar y dyfodol. a ydydd mewn mynd i'r ffyrdd yw'r ffordd, dwi'n cael ei wneud i'r ffordd o'r gwrtho. Rwy'n credu y mynd i'r cynllun iawn, a ydych chi'n llei'r gwrtho, ydych chi'n llei'r ffordd i'r gwrtho a'r gallu bod yma'r ffordd yw'r ffordd. Roedd, efall, euchynig iawn i'r ffordd o'r maen nhw, yw'r wneud i'r ffordd o'r ffordd yw'r cymrydau i'r rhanol, pan fyddwch byddwch credu i'r cyfnod yn ynddyn nhw'n gallu diwylliant. Felly, dweud, rydych chi'n gwybod i'w ei rhaid y supermarket, a'r economad hyn i'w gwirioneddau i chi'n ffamilio fyddwch yn edrych y dda'i rhaid y byddwch yn hyn o'r ddysgu y Twan roedd brofiad yma a'n ddod y byddwch chi'n ddiddor diwyddon y byddwch ar y cerddd. Mae rhaid yna maen nhw yn ystod, dyma efallai hyn o'r hynod arter. Ond mae'r ddylai eu cyfrannu yn gwahanol yma sy'n gweld i'r ddefnyddio'r cyfrannu, mae'r gwrs yn gweithio'r cyfrannu byddai'r ddechrau, mae'r ddonwy o'r ddechrau i'r ddechrau i'r ddechrau i'r ddechrau i'r ddechrau, ac mae'n ddim yn eisio y paster ar gyfnod i'r ddynneu. Mae'n ddefnyddio'r ddefnyddio. I gyrraedd mewn byddai'r ddechrau i'r ddysgu'r ddechrau, mae'r ddysgolion gyda'r ddysgolio, I stumbled across an Australian professor actually explained that if your brain was to work the way that economists thought you worked, it would need to be heavier than the entire known universe. And it seemed that the subject wasn't really applicable to real life, and this was just before the financial crisis. But there was, I did learn something useful. There was one day when I was going through the university library looking for a really boring textbook that I really did not want to read. And something caught my eye, and it was the words, the grip of death on the title of a spine of a buck. Now, economics textbooks are not supposed to sound that interesting. And I used to work in a bookshop, so it annoys me when something has been mis-filed. So I took it out to see where exactly in the library it should be. And notice that the subtitle was a study of modern money debt slavery and destructive economics. So that sounded a little bit more interesting than the textbook I was supposed to read. And I ended up sat in the aisle there reading through the first chapter with a knowledge student stepping over me. This book explained the thing that seemed to be missing from economics, and from explaining what was going on in the world around 2006 with the economic boom, was the question of money, and where does money come from? So why is this question important? Most of us would never really give it any thought, you know, money is just there. It was important because money is power. And if money is power, then what does it mean if you have the power to create money? So let's go through this. Who makes these? The Royal Mint. OK, so most of us are familiar with that. What about these? Well, there's a clue right here. So if you ask anybody in the street, you know, where does money come from? They'll usually tell you, well, obviously the Bank of England or the government creates it. What happens if you make your own? Well, something like this. But there's a twist in this story here, which is that this, the coins and the paper money make up just 3% of all the money that exists. So what about the other 97%? Well, that 97% is just numbers in computer systems. It's the electronic numbers that you see when you check your bank balance. And who has responsibility for creating those numbers? It's the banks. The same banks that were implicated in the financial crisis. The same banks that you see on the high street every day. I'm sure people in this room bank with all of these banks. Banks actually have the ability to create money. That electronic money that you see when you check your bank balance didn't come from the government. It doesn't represent some pile of cash in the bank's vault. It's actually money that was created electronically at the point when somebody took out a loan. So when you walk into a bank to take out a loan, that money isn't coming from somebody's life savings. It's simply entered into your account electronically through a really simple accounting process. Now, usually when I tell people this for the first time, they think I'm crazy. So I'm just going to show you this is a report from the Bank of England that came out in March this year. Where they say commercial high street banks create money in the form of bank deposits by making new loans. When a bank makes a loan, for example, to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of bank notes. Instead, it credits their bank account with a bank deposit the size of the mortgage. At that moment, new money is created. So whenever anybody goes into debt, new money is entered into these accounts, and that is how 97% of the money in our economy is created. This is Martin Wolff, the chief economics correspondent for the Financial Times, just saying it a bit more bluntly, the essence of the contemporary monetary system is the creation of money out of nothing by private banks often foolish lending. So what happens if you give the power to create money to banks and you give the people who work in those banks bonuses and commissions and incentives for every loan that they make, is you get something like this. So this blue line shows you how much money is in the economy. So we're currently in 1970 here, 1980, 1990. This is 2000. And then this is what happened in the next eight years running up to the financial crisis. So we went, in the space of about 40 years, we went from having 30 billion pounds in the economy to 2,185 billion pounds in the economy. And why this is really important is, well, firstly, if you see that curve from 2000 onwards, that was your economic boom. It wasn't anything fundamental. It was a result of banks creating huge sums of new money through lending for mortgages and for property and for personal loans. Now, where this affects the economy depends on where that money goes. So this is the 10 years running up to the crisis. 51% of all of the new money that banks created went straight into housing and commercial property. So that explains why house prices were so high. 31% went into the financial markets, which explains why the city of London was doing so well. Only 8% actually went to businesses. So this story that everybody has, that banks take money from savers and then go and invest it in small entrepreneurs and businesses and that helps the economy grow. That's one of the tiniest parts of what banks do today. And then the other 8% went into credit cards and personal loans. Those applications that you get on the door, Matt saying you've been pre-approved for this credit card that you never applied for. So the consequences then, the first major consequences is on debt. Now, we all start off with this conception, which we brought up with that money is good and debt is bad. And you want money, but you don't want the debt. The problem is, if money is only created when people go into debt, then they're essentially one and the same thing. And we had, for example, David Cameron saying, well, we all need to pay off our credit cards for the sake of the nation. He was about to say this in a speech and then somebody stopped him just before and asked, what happens if people repay their loans? Let's think about this for a second. If money is created when people go into debt, what happens when people pay off those loans? The money disappears. And just to confirm this, the Bank of England again, just as taking out a new loan creates money, the repayment of bank loans destroys money. Banks making loans and consumers repaying them are the most significant ways in which bank deposits are created and destroyed in the modern economy. So when you go into debt, more money comes into the economy. When you pay off that debt, the money actually disappears. So it's not the case that money is good and debt is bad. In the current system, they are essentially the same thing. And you can't have one without the other. Now, what this means is if we want to... So we have a recession, for example, we're back in 2009, 2010. We want to get more money into the economy to boost things. The problem is we have to go further into debt. And if we said, well, actually, we've all been borrowing too much and there is too much debt out there, what if we just pay it off? Well, then we're going to end up with less money in the economy. And if there's less money, there's less spending, and then you have a recession and people lose their jobs and businesses go bust. So the government was faced with this choice. Do we have more money and more debt, or do we have less debt even though we'll have less money? And what they've opted for is the more money option. And so, even though personal debt reached an all-time high just before the crisis, it hasn't fallen since then. And now it's started to rise once again. The former head of the Financial Services Authority, Lord of Day Eternal, said this about this situation. We got into this mess because of excessive creation of private credit and money. We should be concerned if our only escape route implies building up a future excess. So the very thing that would cause the crisis, which was too much creation of money by the banking sector, is what we're using as the solution to the crisis. It has a huge impact on house prices as well. So the common story is that houses are so expensive because there are too many people and not enough houses. Now that's a part of the story, but it's not the whole story by far. And just to show that, this chart here, this purple line in the middle is house prices. The line at the bottom is the population, and then this line above it is the number of houses in the country. So the number of houses was actually growing slightly faster than the population. The only line that really explains why house prices now are so expensive is this one, which is mortgage lending. This is the huge amount of money that banks created for lending to property that has created this huge housing bubble, and that has meant that houses are now unaffordable for definitely for anybody in my generation. Not that I'm bitter. So it also has a huge impact on inequality. Part of this is through the distribution because there is so much debt, and this debt tends to end up with people who are worse off. Across the economy as a whole, it means that the bottom 90% of the population are paying interest through the banking system to the top 10%. And this has a continual increasing effect on the level of inequality in society. The other big impact is through house prices. So if you're pushing up house prices by 20% a year, through artificially creating money through bank lending, if you have the family wealth or the salary that allows you to get a mortgage for one of these houses, you can get on the ladder and then benefit from those prices. If not, then you're stuck essentially renting for as long as it takes you to save up the deposit. In that time, you're paying off somebody else's mortgage. So the one with the mortgage is actually paying off their debt and building up some equity. If you're renting, you actually build up nothing. And so this has a huge impact on inequality and it widens the gaps that are already there. And then the impacts on debt and the impact that this has on society as a whole. We have 5,000 people made homeless every year. 3.9 million families who currently only have enough savings for one month's rent or mortgage. This is a really bad situation to be in. You only need one person in that family to lose their job and suddenly the whole family is in financial dire straits. The poorest 10% owe four times their household income. If you're in the poorest 10%, you're not going to be able to pay off that debt. That debt's going to be with you either for life or until you declare bankruptcy. And remember that the way the system currently works is somebody has to have this debt because it's through people going into debt that money is created. So the good news is that it doesn't have to be like that. The current banking system is almost an accident of history. It's not been intentionally designed. Back in 1844, the government of the day actually passed a law to rectify a situation that was very similar to what we had now. In those days banks had been able to create paper money and the way this worked was you would go to the bank and put some coins into the bank and in return the bank would give you a piece of paper that said how much you deposited. Now over time people found the paper money more convenient than carrying the coins around. So they stopped going back for the coins. And the banks then realised, well hang on a minute, what happens if we just write any amount on a piece of paper? Will people accept that? And people trusted that the paper was as good as the money. So they had at that point a lot of temptation to print too much money. Otherwise they could make loans by just issuing new pieces of paper which were supposedly receipts for money that other people had deposited in the bank. Now if you give banks a license to print money it's a safe bet that they're going to use it. And that led to in the 1840s a huge bubble in property crisis, a bubble in the financial markets and eventually it led to a banking crisis. So the government of the day stepped in and said we're going to have to stop banks being able to create money in this way. It's too much temptation, it's too much power to rest in the hands of companies that don't actually have any accountability to society or the economy as a whole. And what we're suggesting is that we could do this again. Because the law that was passed in 1844 to stop banks creating paper money has never actually been updated. Even though 97% of money now is electronic in the form of numbers in people's accounts. So the way we can do this, the way we can update this law, firstly we need to take the power to create money away from banks and we need to return it to some kind of democratic transparent and accountable body. Now we know from history we probably can't trust these companies but we also probably don't want to trust these guys because they're going to have the same incentives to abuse this power to create money. You know if there's an election coming up and you can actually print money to make everything that the economy is doing well, it's going to be hard to resist that power. So really neither the banks nor the politicians are the right people to have this power to create money. We need to do something very important which is to separate two decisions, one over how much money should we be creating for the benefit of the whole economy and how that money is going to be used. Because if the same person is making both decisions, they have a conflict of interest. You would need to set up some kind of independent body working in the public interest, completely transparent in the public eye which we would call the Money Creation Committee. They would create money and then they would transfer it to the government. So the government would get this new money in its account and then this would be added to all the tax revenue that they get from us. And then it's up to them really how to get it into the economy. It could be through government spending. So you know whether you want high speed rail or whether you want high speed broadband, whatever projects we can think of that need doing and there is plenty of them, it could be through tax cuts. So you could give everybody below a liveable salary a tax cut so that they can actually afford to live. Or this one, which is usually the most popular, is that you just divide it up between everybody and everybody gets a check in the post. When we do a show of hands, that's always the one that comes up. Secondly, you need to create money free of debt. Now what this means is that, whereas I explained that in the current system you need either more money and more debt because that is how money is created when people go into debt. Or less debt and less money, you really get to change this equation. You can have new money being created through either the Bank of England or through some independent body, but nobody has to borrow that money to get it into the economy. They can actually spend new money and we can get away from this current situation that we have and that economists are starting to warn about now where even though we had a financial crisis caused by there being too much debt and too much borrowing, debt has risen by another 30%. So we can get away from this dependency on debt. Banks would still exist. They would work exactly like we tend to think that they do now by taking money from savers and lending it to borrowers, but they would not have this power to create new money. So they wouldn't have the ability to fuel property bubbles and speculation in the financial markets. They might go back to doing what they used to do, which was investing in businesses helping us create wealth and create value and helping the economy grow. The third thing is we need to get money into the real economy before it reaches the financial markets. So as I said at the moment, most of the money that these banks are creating is going straight into the property market, into the financial markets and then some of it is going into personal loans and credit cards. What we actually need to do if we want to grow our economy, we want to boost employment, entrepreneurs and businesses to actually create value is we need to get money into the non-financial sector of the economy, into real businesses. You can do that either through making sure that these businesses get loans. You can do it through making sure that members of the public actually have more money in their pockets so that they can spend. Incidentally, the lobbyists for the banks will tell you when the government proposes any kind of change, that if you do this, if you insist on holding more capital or being more safe in our lending, it's going to harm how much credit we can provide and that's going to harm the economy. There was a survey of UK businesses which found that the thing that is really restricting them from growing is not finance from banks, it's sales. It's where the customers actually have enough money to spend. So a better way of boosting your economy is to get money rather than to get banks to lend more either through businesses or through the property market. So this is a seemingly quite radical idea but it's now getting into a much more mainstream discussion. This is an article by the chief economics correspondent for the Financial Times, Martin Wolff where he says we should strip banks of their power to create money and he references the book that I wrote with a colleague in there. He says, you know, this isn't going to happen overnight because it's quite a significant change to the way that banks work but it is what we should be looking at doing before the next financial crisis hits and in his view there is another financial crisis coming and this is what he says about the proposal he says this would bring huge advantages it would be possible to increase the money supply without encouraging people to borrow to the hilt it would end too big to fail in banking it would also transfer the benefits of creating money to the public instead of the banks. So if money is power which I think most people would agree it is then these are the questions that we need to be asking you know, who should have the power to create money? Should it be the same banks that caused the financial crisis the banks that are financing a property bubble that is pushing houses out of reach for most people or should we think about transferring that power back to a democratic transparent and accountable body that is working in the public interest how much money should they create should they be able to double how much money is in the economy in the space of eight years when most of that money goes into the property market or should the amount of money they create be tied more closely to the actual the potential and the value that is being created in the real economy and what should they do with that money again should it be going into property or should it be going into the green energy the investments we need to make there to switch to renewable energy all of the kind of technology and all of the developments that Mark was talking about just before me so again if money is power who do we want to have that power this affects almost every aspect of our lives and every aspect of society and this is the question that I think we should be talking about right now and just so it happens that on Thursday there will be the first parliamentary debate on this subject in 170 years thank you