 Okay. Good afternoon, ladies and gentlemen. For those of you who do not know, my name is advertisements was Darren Miller, I'm the Assembly Member for Clwyd West. And, in conjunction with Other Butty's members, I'm delighted to be here today for an inaugural meeting as a cross party group on monetary reform. It's great to see so many people in attendance and it's good to see colleagues from other parties including Julie Morgan including the charismatic a'n amgylch yn Majesty University yng Nghymru a fe fyddai'n gyfo'i trefnwyr am ystyried o cyflwyno'r myl fynd bryd yn y casach. Na wnaeth gwybod bod yn fawr i'r ysgol bryd wedi'i gweithio yng nghymru, dy fan chi'r gwirionedd yng nghymru i'r angen am oherwydd o'r dal. A wnaeth i fod yn cael ei ddweud am y magniffysol erbyn rydw i'w teimlo, fyddai'n gwirionedd o hyn o phrygau. Felly mae'n gweithio'n gwybod mewn ei roi. Roeddwn ni'n gwybod yma, fel y cyffredin hon, ond gan gwaith fynd i ddim yn cwestiynau, ac oeddwn ni fe allwch gweithio eu bwysig i drwng mlyneddol i gyffredinol am allwch chi arweinyddio i'r gweithi gyda'r Plynedd Trif展. Chyma chi i gyd- Ref Wyrdd, mae'r cyfrifheithau o'r grondd Llywodraeth, roeddwn ni'n gwaith griffw knife ar gyfer y system mewn cyfrifithych gyda'r cyfrifwng yn yr unrhyw gwneud sy'n gweithio'n gweithialauol yn y cyfrifwng Cymru. Yes, there is no crisis that we have at the moment. But before I do that, I just want to restate the common understanding of government finances. So you have the public and we get money from the public to fund government spending. Now the problem in theory right now is that the public don't have enough money, businesses aren't making enough money and therefore there is not enough taxes to fund the current level of government spending. i'n dda i'r ddigon i'r borgon ac rwy'n gweithio bod bod oes bod yn meddwl gwithio, yn bethau y ddigon a ddigon. Mynd i'r ddigon yn meddwl i'r droswyr i'n gwirionedd'i ein edrych gwlad o blaenau i allan nhw'n meddwl ar ystod. Ac yn dda i'r ddigon i'r ddigon, wedi gweithio rydym yn eich bod yn meddwl, dylai'r idea yw amser i yw yr economi a'r gweithio ar gyfer eich ffynist. ac mae adrodd yn yma i'r enw nag o'ch amgylchedd yn y bydd ymgyrchol, ac mae yma'n cael ei fod ar gyfer ei fod yn eitem o'r cyfnodol yma, a phobl efo'r gwaith o bynnydd oedd mae'n fydd gan hollodd, ac yn festud o'r ymddangos ymddangos, mae'n cymryd ar ôl. Felly, chwarae i'r ddweud y cwestiwn dweud o'r ddigon oherwydd, mae'n cael deallu o'ch bwysig arall, dweud o'ch bwysig o'ch gwaith o rhad o'r gwaith o'r llaw. gyda un kimbwyd, dw i'r iawn yn fy fanc i gwasio. Y cwysod yn ddiddorde i'r gweithio yn cynhyrchu a'r iddyn nhw'n pofi ff angrifidd yng Ngw espai ar y peynon面eg Cygo'reddazodd 3% Dwi'n fath o wneud am leld y�도ch yn y eineud ar 90% felly yr�計adwch yn dfallion pepper.imsu arwe masterlas gangofsti o'r madnessol a sim Silk, i pubwyd yn 97% leather y bans. Felly, mae'n gwaith mae'n gweithio'n bans yma yng Nghaerdydd yn gyfnodol yma. Ond yna, y ffyrst i'r byw ymryd, mae'n gweithio'n gweithio'n gweithio. Yn amser i'w ffyrdd o'r cwlwch ar hyn, mae'n gwybodaeth nesaf yng Nghymru, yng Nghymru, yng Nghymru a'r y peth yn gweithio ag oedd y bydd. Gweithioedd Morolnau Cymru yw'r newid i ni am adael gweithio'r gwybwyno. Felly byddwn yn gyffin yn y gweithio, mae fydd fydd yn gweithio'r gweithio'r gweithio prifsgaf y bydd hyn yn gweithio'r gweithio gyda'r gweithio gweithio'r gweithio'r gweithio'r gweithio, mae'n gweithio'r gweithio'r gweithio'r gweithio'r gweithio. Mae hynny'n gweithio'r gweithio'r gweithio. This is the chief economics commentator of the Financial Times, Martin Wolff. The essence of the contemporary monetary system is the creation of money out of nothing by private banks often foolish lending. This is the Bank of England themselves in one of their reports. By far the largest role in creating broad money is played by the banking sector. When banks make loans they create additional deposits for those that borrow the money. This is Jesse Norman, a Tory MP who is on the Treasury Select Committee. Commercial banks have an even greater power than that. They have the power to create credit, that is money, by expanding their balance sheets. It is not widely understood how important this power is of the money presently in circulation in the UK economy today. 3% takes the form of cash. 97% is in credit and deposits. This financial alchemy is an extraordinary privilege which we as citizens and taxpayers underwrite. The fact that the money that we use is actually created by the banking sector rather than by the government isn't particularly well understood or particularly well known. But it's an issue that's becoming more widely discussed as you'll just see from the quotes just there. We have a situation where just 3% of all the money in the economy comes from the state through the Bank of England. 97% is really just numbers in a computer system and these numbers are created when banks make loans. If this is the first time you've heard this you're probably thinking why didn't we know this before? There is a book that we put together called Where Does Money Come From. We got a comment on the back from Professor David Miles of the Monetary Policy Committee. He just says the way that monetary economics and banking is taught in many, maybe most universities is very misleading. What is taught in universities is actually a model of the banking system that really was obsolete about 30 years ago. But we still have staff in the Treasury and in policy making roles who are following that model. And this is dangerous because it's like allowing engineering students who don't understand gravity to build skyscrapers. We need to make sure that the people that are managing the economy understand money and where it comes from and how it's created. So how much money have the banks actually created? Well this chart here, you see this green line at the bottom is the notes and coins the cash that is created by the Bank of England. And then this mountain of money up here is the money that has been created by the banking system. And you can see that it took the first 300 odd years of the Bank of England's existence for the banking system to create the first trillion pounds. And then the next eight years to create the second trillion. Now I'm going to show you the consequences of this very shortly. Now there's a question, if it's banks that are creating the money that makes up 97% of all money in the economy, then who is deciding how that money will be used? Is it the local branch managers who make decisions over lending to businesses? Well the reality is these guys don't exist anymore. This sort of local decision making doesn't exist. What happens is the decisions are made at the board level. And it's a broad decision over you're on the board of one of these big banks. Are we going to prioritise lending to business? Are we going to focus on the investment banking and speculation? Or are we going to put all our money into property? And what this means essentially is that in the UK the five largest banks have about 85% of the market share. And therefore they have the bulk of the decision making over where this money goes. They have approximately, well they have about 78 board members between them. Probably only 20 of those are the key decision makers. And it's those 20 people who are deciding how the big banks create and allocate money across the economy. In the five years running up to the financial crisis they allocated £2.9 trillion. And actually the entire British government only spent £2.1 trillion in that time. So the banking sector actually has more spending power than the government. And what that means is the money follows the priorities of the big banks. So we have right now just 8% of all bank lending goes to productive businesses. So the businesses that contribute to the GDP figure that everybody is so focused on. This is the job creation and the non-financial part of the economy. 92% goes towards non-GDP businesses, house price bubbles and financial speculation. So this fairy tale that what banks do is they take money from savers and lend it to businesses is just that. It's a fairy tale. Right, so just to recap the key points. New money is created by the banking system every time somebody takes out a loan, a mortgage or an overdraft. And that has led us to the situation where the money supply has grown like this over the last 40 years. So the consequences. Well, the first consequence, most people are familiar with the idea that if you just print money you end up with inflation in the style of Zimbabwe or Weimar Republic Germany. Now again, Mervyn King, when loans are made this creates new money. And then he went on to say that the usual role of a central bank is to limit this rate of money creation so that excessive expansion of money spending does not lead to inflation. Now this is how well they've managed to control that expansion in the money supply. There's been since about 1970 the average growth rate of the amount of money in the economy has been 11.5% much faster in the recent years as well. But we have Mervyn King here saying during the last 20 years annual consumer price inflation in this country has averaged 2.1%, remarkably close to the 2% target. So if the money supply has been growing at 11.5%, why are prices only going up at 2%? Well, the answer is that where the inflation happens depends on where the money goes. So in the 10 years running up to the start of the crisis, all the additional new money that was created by the banking sector, this is how it was distributed across the economy. About 10% went to consumer finance, so credit cards, personal loans, things like this. 40% went to housing. Just 13% went to the non-financial businesses in the economy. That's the part of the economy that contributes to the GDP figures. And then 37% went into financial markets, financial intermediation, and essentially the financial sector. And you can see one of the results of that. If you look at the stock market from the last few years, that curve pretty much follows the expansion of the money supply as well. But the most obvious impact is on houses and house prices. Now this chart here, the purple line is house prices from relative to 1991. So over the last 20 years we've had a three-fold increase in house prices. Now you commonly hear that this is because there's too many people and not enough houses. You'll hear this argument in the press. This green line down here is the population growth. So over 20 years the population grew by just 8%. This red line, which is slightly above the green line, is the growth in the number of houses and flats and apartments in the UK. And that grew by 16% in that time. So for every four new people we built three new houses. So supply and demand doesn't really explain why house prices have gone up. The only thing that really does is this line at the top, which is mortgage lending. And if you remember from what we've just seen earlier, every new mortgage creates an equivalent amount of new money. So this is really money creation and most of that money has gone into property and that's what has pushed up property prices. Now the impact of that is if you add in the interest, if you'd have bought a house in 1952 it would have cost you about five years and three months of your salary to pay off everything. Nowadays if you buy a house last year you would be looking at spending 11 years and eight months of your salary just to pay off the mortgage. Okay, so then let's go into the impact on jobs and businesses. Well we have what economists call the real economy, which is the non-financial sector essentially. And we have the banking sector. And it's the banking sector that creates the money that the real economy has to use in order to be able to do business and to trade. There has to be interest paid on all of this money because it has to be borrowed. And what that means is that almost every pound circulating through the banking system, every pound in your bank account is matched by a pound of debt owed by somewhere else. And we're effectively paying interest on the entire money supply. So that's a big redistribution of income from the real economy to the financial sector. And this also works geographically because again the big banks are centred in London. The rest of the economy needs money in order to function. And even if it's just circulating within Wales for example, that money still has to be created by a bank in the first place. And again, interest has to be paid on all the money that exists. So that is a big redistribution back to the centre. In terms of how it affects businesses. Now a lot of people would think that consumer finance is good because it means more spending, more money coming through your shop till. Now the reality is that what happens is people, they borrow, they spend on credit cards, they use personal loans. But all of this money is being spent on credit and eventually you get the bill. And people think well I've borrowed too much, I'm going to stop spending now. So they stop spending, the economy starts to go down. Now in this time businesses here are investing in expanding, taking on more staff. Most businesses are not really aware of how the monetary system works. They assume that the economy is doing really well. They just see more money coming through the till and they think well we'll expand, we'll open new branches, we'll take on debt in order to expand the business even faster. And then in this point they're laying off and trying to survive. Now it would be better rather than having the feast and famine that we have with all the credit cards and all this creation of money. It would be better for most businesses to have steady spending year on year so that they can grow without having this instability. Now when you have the recession that inevitably happens because there's too much debt in the economy it tends to be the low paid and the temporary contract workers who get laid off first because they have the least secure contracts. So this has a real impact for the poor and for people on low paid jobs. Now this is a dear turner who's the Chairman of the Financial Services Authority. For about two years we've been arguing that it's a monetary system that caused the crisis. About ten days ago he came out and said the financial crisis of 2007 to 2008 occurred because we failed to constrain the private financial systems creation of private credit and money. And this is exactly what we've been arguing. Now it has a big impact on debt as well. Again because all the money that we use has to be borrowed from the banks. And you have to make the repayments plus the interest. And we've calculated largely from Bank of England figures that interest on all the existing debt is 108 billion to 217 billion a year depending on where the interest rates are at the time. And again this is a huge transfer from the public to the banking system. Some of it comes back to savers in the way of interest on your savings but much of it is just siphoned off in the middle and it goes through to the huge bonuses and the big salaries. Now having a monetary system that works this way means that the economy doesn't function quite as most people would assume it does. The first rule of how the economy actually functions is that if we need more money in the economy then we have to take on more debt because banks are effectively the only source of additional money coming into the economy. They create it when people go into debt when people take out loans. Sorry as Mervyn King has said here. Now if we have a crisis that is caused by people having too much debt and then we want people to start paying down that debt well the problem is as Mervyn King says a damaged banking system means that today banks aren't creating enough money. They're not lending enough and people are repaying existing debts. Now the problem when people repay existing debts is that he says here as private sector balance sheets contract public sector that's a government and central bank balance sheets have to take the strain. What he's referring to is the fact that when you repay your loans the reverse process happens to when you take out a loan. So you take out a loan and new money is created. When you repay a loan that money disappears from the system. What is happening post crisis is that people are trying to repay this debt. Now what this means is that we would have less money in the economy. If people are successful in paying down their debts then the money supply shrinks and if the money supply shrinks it's like taking the oil out of the engine of a car and eventually everything grinds to a halt. What we need right now is we need less debt and we need more money in the economy but that is practically impossible with the current monetary system until we reform that system. I just want to move on to what positive money you're arguing for. That's a very brief overview of some of the problems that this system causes. What we would like to see is that we remove the power of banks to create money and the reason for that is because firstly if you get the power to create money to banks they're always going to create too much because of the incentives and the bonuses and the drive to maximise your profit by lending as much as possible and Adair Turner has sort of stated this quite clearly just a couple of weeks ago the existence of banks as we know them today fraction of reserve banks exacerbates these risks because banks can create credit and private money and unless controlled we'll tend to create suboptimally large or suboptimally unstable quantities of both credit and private money the impact of fraction of reserve banks that's the monetary system we have today is thus to make the financial system and the overall economy inherently more invulnerable to instability so they'll always create too much and this causes instability in the economy they also create it for the wrong things we have huge quantities of money pushing up house prices which makes it more expensive for people to live we have huge quantities of money blowing up the financial markets and yet we have relatively little money going into the real businesses that actually create jobs and actually provide the salaries that will allow people to pay these inflated house prices and again as Adair Turner has said the financial crisis was caused by this ability of the banking system to expand the money supply so we want to return the power to create money to the state now this is often seen as quite radical but it's actually been done before in the past in the 1840s banks would when you put your metal coins into a bank they would give you a piece of paper in return and that would be a receipt and it would say you deposited £5 now people started to use these receipts in place of the money because it was easier to carry paper around than it was to carry those coins around as these pieces of paper became used as money and then banks realised that if they printed more of them people would accept them they'd borrow them and pay interest on top and that would allow them to maximise their profits now with those incentives they ended up creating too much paper money so in 1844 a conservative prime minister Robert Peale stepped in and said well this needs to be stopped we can't have all these private banks just creating money when they feel like it they've passed the law that now makes it illegal for you or I to print our own money now ever since then the profit on creating paper money which is the difference between the cost of printing a £10 note and the actual £10 value of it goes to the treasury and it reduces how much taxes have to be paid and this has been a significant amount of money probably about £18 billion over the last 10 years which is enough to pay the salaries of about 120,000 nurses it's significant but the problem is that this law has never been updated since 1844 so it still only applies to banknotes even though banknotes now are just 3% of all the money in the economy and 97% of all the money is numbers in computer systems which are created by banks now what this has meant is that the government as a whole has lost about £2.1 trillion in government revenue today from allowing the banking sector to create money in place of the state and you can see that here this is what the profit that we've made on creating cash and this is the profit that has been lost by allowing the banking sector to have this role the question always is if you give the state the power to create money it will be inflationary well I think the response to that is well really is this not inflationary allowing banks to have this power to create money and giving them the incentives that will drive them to create too much but of course you do need to protect it from political abuse so you don't necessarily want to give that power to the chancellor you want to give it to an independent body and just say simply if inflation goes up then you need to stop creating money and all we need to do is use that money that is created in the public interest and there are a number of options that you can use to get this money into the economy the first obvious to are that you either spend more on public services or you use that money to cover your existing spending and you cut taxes instead and you could do this decentralise so if they're going to create £50 billion then you could distribute that and make sure the Welsh Assembly can distribute its proportion the same with Scotland and across the UK you could use it to pay down the national debt there's a number of reasons that wouldn't be a high priority which I haven't got time to go into but the other option is that you could just give it directly to people so for example with the quantitative easing the £375 billion that has been created and put into financial markets if that was divided up between people you would have had your recession would have been over people would have been able to pay down their debts and you would have had a real stimulus on the high street and in real businesses so I just want to give you to wrap up one example of how absurd this situation has become and it's something that really really winds me up the schools rebuilding programme now for the English school rebuilding programme they've just announced about £2 billion for work to be carried out over five years about 600 schools applying to this scheme 219 were accepted they're using a private financial initiative to meet the cost of this so they're borrowing money from the private sector probably from banks which will be created out of nothing by the banking system because the government hasn't got enough money of itself and the reason they're doing this is because it allows them not to record it as part of the capital budget which has been reduced to £3.8 billion now in Wales in particular this is the schedule for Wales for the rebuilding here a total of £1.36 billion to be spent on rebuilding schools up to 2015 a total of £4.43 billion to do the full rebuilding job over about 15 years so this is mortgages this green line at the top in 1999 in one month the banking sector created £4.5 billion of new money to fund mortgages and consumer finance in July 2005 they created £7 billion of new money to keep expanding this landing in September 2007 they created £16 billion of new money so the entire 15 year school rebuilding project for Wales is equivalent to one weeks worth of money creation in 2007 by the banking sector and yet we've given the banks this power to create money we've economists have convinced themselves that the state can't handle that power responsibly and instead of putting say the QE money into something useful it's gone straight back into the financial markets and then you can see so actually this £375 billion is enough to employ 3.5 million people on £20,000 a year for five years and yet we have 3 million people sat at home across the across the nation desperately looking for something to do so this is just one example of how absurd this system is of allowing the banking system to create money in place of the state in terms of how we repair this we've spent a lot of time thinking this through we're releasing a book in January which is about 300 pages of detail of how actually you can fix this system and take that power to create money back to the state so I'll wrap up there so we've got time for questions can we just flick the lights on at the back