If you Google “Positive Money”, just under PM’s own site, you’ll find an article by Mike Robinson, editor of UK Column, which is critical of PM.
The article is a nice illustration of the sheer incompetence of PM’s critics.
Robinson starts by agreeing with PM that fractional reserve banking is undesirable, and he correctly points out that PM advocates a system under which depositors have a choice between two types of account: first,100% safe accounts, and second, investment accounts where depositors’ money is loaned on or invested by their bank.
But from then on, Robinson goes downhill very quickly.
First, he claims that the above two account system won’t prevent bank bailouts. Well for the benefit of Mike Robinson and others who don’t yet understand this, I’ll explain why the two account system DOES RULE OUT bank failures. The reasons are desperately simple and as follows.
As regards 100% safe accounts, nothing is done with the relevant money. That is, it is not put at risk by being loaned on or invested. It therefor cannot be lost (absent blatant, very well planned and large scale criminality).
As regards money that is invested, the relevant depositors (rather than banks or taxpayers) foot the bill if and when the underlying loans or investments go seriously wrong.
Ergo banks as such cannot fail! Like I said, it’s all desperately simple. Anyone who doesn’t understand is seriously lacking in IQ.
Diversion: a minor technical point.
Having said that its depositors with investment accounts who foot the bill when loans go wrong, it should be said that there are slight differences between different versions of full reserve banking. For example, under Laurence Kotlikoff’s version, depositors foot 100% of the bill, full stop. In contrast, under PM’s version, the loss is shared between depositors and the bank. But clearly the latter loss that is imposed on banks can be structured so that the bank as such never goes bust.
Zero interest accounts.
Next, Robinson claims that people “will not hold their savings in the “bombproof” account at zero interest.”
Mike Robinson may not have noticed, but millions of depositors right now have billions of pounds lodged in bank current accounts where they are paid no interest. And that’s not just quirk of the current very low interest regime: since banking first began, depositors have got little or no interest on current accounts.
The Bank of England creates money.
Robinsons next objection to PM’s ideas is that “the most nonsensical proposal here is handing over responsibility for money creation to the Bank of England, the banker’s bank.” Here again, Mike Robinson clearly has no grasp of reality.
I.e. it looks like he hasn’t heard of QE. QE consists of central bank creating money ex nihilo and buying up various assets.
So anyone who thinks there is something strange about the BoE creating money clearly has no grasp of what’s being going on over the last few years.
But then . . . and this is scarcely believable . . . Mike Robinson later in the article says, “the Bank of England already has the ability to create money!”.
So . . . please, please, Mike Robinson: what’s your final verdict on this. Are you saying the BoE already creates money. Or are you saying the opposite, namely that “handing over responsibility for money creation to the Bank of England” is as you put it a “nonsensical proposal”?
The BoE acts in the interests of the Rothchilds?
Robinson finishes his article by claiming that because the BoE does a fair amount of business on behalf of the royal family and other rich individuals and governments, therefor the BoE might be beholden to such individuals or governments. The examples of such rich individuals given by Mike Robinson include the queen of England and Rothschilds.
Ergo, so his argument goes, the BoE cannot be given the job of money creation as proposed by PM, because the BoE might be secretly working for a Rothschild or some foreign power.
Now there is a huge problem with that argument which is that the BoE already effects stimulus (via interest rate adjustments and QE). So Mike Robinson’s criticism of PM’s suggestion as to how the BoE should effect stimulus is equally applicable to the EXISTING ways in which the BoE effects stimulus. That is, if the BoE (as per Robinson’s conspiracy theory) is acting for some mysterious but unspecified foreign power when effecting stimulus PM style, then the BoE is equally likely to be acting for said foreign power when effecting stimulus in more conventional ways.
Or to be brutally realist, the advocates of conspiracy theories are usually nutters.
The BoE acts in the interests of commercial banks?
Robinson also claims that the BoE cannot be allowed to do stimulus because it acts in the interests of commercial banks.
This is certainly a murky area. This particular problem is worse in the US than the UK because US Fed committees are dominated by representatives of commercial banks: a ludicrous conflict of interest.
Plus the whole relationship between commercial banks, politicians and central banks is murky – even in the UK.
But there again, that’s no more a reason to reject PM’s ideas on stimulus than it is to reject the much broader and more fundamental idea that central banks should have ANY SAY in stimulus.