and wait thinking this is going to go away just like a cancer is going to grow and is going to truly what i would say to everybody is get prepared this is not a time right now to wishful thinking the government going to sort things out the governments don't seven point four percent of the total money supply was commercial bank money the three percent of money is created through the central bank and that money essentially if you created a  the difference between prints in the wood and actually selling it sometimes goes directly to the treasury so in effect all the profit that we get on creating physical money banknotes goes to the treasury of representative of what you had in the bank and instead of you taking your heavy metal coins out bank and then going in pain somebody with them if you get your paper which said how much money you had in the bank you could give that somebody and they could use that to go and get th heavy metal coins from the bank now over time these paper notes became as good as money people would use notes and started going again the real money from the bank and obviously as soon as the banks realized that what they were creating had become you know the dominant type of money in the economy they realized that by a backtrace more of it they could generate profits you know they can just print up some new notes lend it and get the interest on top of that and they did that you know trade money away from the commercial banks and brought it back to the state since then the bank of england has been the only organization authorized to create paper notes the legislation is called needs to catch up with developments in in in electronic money and the way that banks actually operate money held in bank accounts of cold demand deposits this is a computer system you make money from one computer system to another it's all a big database and this digital money is what when are you using to make payments with this what we actually used to run the economy i for this accounting entry is commercial bank money when banks issue does the public they create new commercial bank money when a custom thirty percent of the public think that when you put your money into the bank it just stays there and it's safe and you can understand why because you know every every child has a piggy bank where you keep putting money in and then when it's a rainy day you smash it and you take that money you spend it so a lot of people keep this this idea of banking you know somewhere safe to keep your money so that it's there for whenever you need it another the other sixty percent of people assume that when you put your money in that money's in being moved across to somebody who wants to borrow it so you have pensioner who keeps saving money or her entire life and then her life savings have been lent to some you know young people who want to buy a house but actually banks don't work like that a few economists will realize the way the money system works but if you don't you don't realize where that money works and you think that you know everybody saving is going to work well for the economy what really happens once you understand the way the money system works is that if know received knowledge without actually going into the details and you know money is money is the center of the economy if you don't understand where it comes from who it creates who creates it and when it gets created then how can you understand the entire  production costs at all so while we've got eighteen billion over the course of a decade in profit from creating cash the banks have actually created one point two trillion pounds between nine hundred ninety eight and two thousand seven the u k money supply tripled one point two trillion pounds was created by banks was eighteen billion pounds was created by the treasury a lot of people think when i creating out of nothing is just incredible one point two trillion in the last ten years and there's that money is being distributed according to the priorities of the banking sector not the p banking sector itself grew from one thousand eighty two point five trillion dollars to forty trillion dollars by asset in one thousand nine hundred eighty global bank assets were worth twenty times the van global fifty to sixty percent up to the end of the one nine hundred sixty after that they shot up dramatically and the real money in the world to be made today is not by producing anything at all it's simply by forms of are no longer restricted by how much they can lend and as such how much new credit they can create out of nothing they are restricted solely by their own willingness to lend the issue with allowing banks create money out of the two main issues firstly the fact that they create this money when they make loans so it guarantees you know we have to borrow money for the economy from the banks as suc second big issue with allowing banks to create money is that they have the incentive to always create more you know they create more money if they issue alone they get the bonuses and the commissions and the incentives to create you know to lend as much as possible you have to to control the money supply the money supply will just grow and grow and grow as well the level of that until the point where it crashes you when some people can't repay the debt and then they'll stop lending you hear politicians and  saying you know we've we've been living beyond our means we've become dependent on that we need to rein in our spending and live within our means it's not possible in the current system you know the reason why for these and that now is not because they've been recklessly boring we haven't borrowed all this money from you know an army of pensioners you can siphon up their old polis money and the current system is that you know it's created when banks make loans so the only way in the current system that we can have any money in the economy you know the only way we can have money for business trade is if we pour it all from the b and it's a very opposite of what the tory parties are doing today which is that you have to create savings before you can have the national health service and it's because economists have completely confused those things both in monetary policy terms but also economic thinking and because most people still harbor the old fashioned view that you need savings before you can invest that we have the mess that we're in today now one of the reasons why we find it difficult to understand the banking system and credit creation is that we leave school without any money and we go get a job working as an apprentice to plumber we work really hard all month at the end of the month somebody puts money in our back and says rest logic is you work and then you get money you get savings in reality you would never have got that job if credit hadn't been created in the first instance it's a really important you've got people you've got businesses and you've got people doing things some how many somehow emerges out of the process of people doing things doing it well making things and growing things and selling things and producing things the second managed  and it shows his complete lack of understanding of how our money system actually works you know it's a paradox under the current system if you if we as the public going to further that then that's going to put more money into the economy and we're going to have a boom when you have a boom it's easier to borrow so people get into even more debt and eventually universe the cycle continues it gets easier and easier to get at that until some people get over it that and then you know they default they can repay their mortgage that's what happened lending and you know the they were excessively lending into being and then they stopped lending and then the court makes the recession even worse people he said jobs and then they become even more dependent on that just to survive basically you know we have a system where we have to borrow in order to have an economy we have to be in that the banks and that guarantees you know the pain interest on either single pound even if even if you think the money belongs to you somebody somewhere is paying interest on that money the banking system has such a huge impact on the world but only because it supplies on nations money supply we have to protect them we have to subsidize them we have to allow them to continue because the the disaster of a bank collapse affects us all in a huge way and anyone that says that we should about out the banks doesn't quite always going to have this cycle to separate how money is created and the activities of banking then the banks can do as they wish they were normal business like everyone else there's a major democratic issue there as well you have these private for the the actual output of the economy and the seven years between two thousand and two thousand and seven the money supply doubled and the banks you know the central bank the bank of england in this time was under the impression that they had it under control because they were saying you know prices aren't going up that much because they were only looking at prices and you know in your local can't corner shop they went looking at the price of housing and housing is you know the biggest expenditure that most helping our balance of trade it's not helping the public deficit it's as there are some guys as of august two thousand and eleven eighty five point five percent of consumer bank lending was secured as if you have somebody trace money that can only be spent on one thing which is housing then the price of that thing is going to go up between two thousand and two thousand and ten they created over a trillion pounds of new money five hundred billion pounds just in the three years before the crisis that's why house prices went up the way they were there's nothing you special about houses it was just all this funny money being pumped into that market if money is spent into the economy into into a lot of money goes into huge houses with hardly any people in them london would not be the center of a kind of very rich speculative orgy well the richest people in the world won't want to get a property in london because it's seen as a as a great know houses would be seen as places to live primarily robin places to be invest in pointing to think about is if your bank and you've got to make a living you have choices you can you can get that l business goes bust you as a bank are getting nothing back essentially you know that's it so that's kind of high risk compared to loaning your money to somebody with some collateral with a house behind them like a mortgage so there's a there's a kind of simple incentive for banks to prefer but money into housing that into a small business now that's a real problem if you if you if you want now across the whole economy because it means there's an incentive to put money into speculative rather than productive investments so again we have to think about how we create a monetary system that is more balanced between those two kinds of speculative and productive investment  the back to decide now inflation can be avoided if the amount of money that goes into the economy is regulated in a way that it doesn't exceed the actual activity that's happening in the economy to help a small business start up which creates jobs which creates additional purchasing power which means there's no there's no inflation you have to have a system where credit ever spending more than ever which looks great you know when spending more it was his or her yeah we were you know but if you're not actually benefiting from what you're spending if you happen to spend the money o commuting costs you know and so forth just you know it's a cost that people didn't in the past used to have to pay because he could walk to work and you know one member the family remained was able to stay home and be appended homemaker real times it's because prices are always going up because all this new funny money is being pumped into the system by the banks and that creates and always debt so at the same time as prices going up and things get more expensive why get further and further into and you know our wealth and the return that we get from actually working is going to last and last a lifetime when you can't deal with poverty when you have a financial system on a money system that distributes money from the poor so the very rich redistributive tax system you know you talks of it you give some money to the poor you move but money down down the scale that's all very well but if you completely overlook the fact that there's another redistributive system which is taking money from the poor and given it to the rich then you're not really going to tackle this inequality and the way but that base money system works it guarantees that for every pound of money that's going to be a pound of that about debt it's typically over with you know the poor the sort of lower middle classes those people end up with them and then the pain interest on that money you're saying goes back to the banking sector and gets distributed to the people working in the city or in wall street distributes money from all the small businesses you know all the little factories around the u k and distribute some money back into the financial sector we have a system whereby the activity of actually supplying because under the very same ruth has the same organization that's responsible for profiting from putting together borrowers and lenders are your back so a bank creates on nations money supply as well as  making loans for profit the government cannot allow the banking system to fail because if it did have a ninety seven percent of all money would disappear this is why in the event of a crises the risk is  it's questionable whether we're going to get out of this recession or whether we'll just keep ticking along the way that we are now however if we do then when we come out of this recession when growth starts again look for what happens to them they were drawing and it will keep wealth from the economy was providing nothing productive in the time and why is it that we've got all this technology you know all this new efficiency and yet it now requires two people to finance a household where i was in the fifty's you only needed one person working and the reason for that is not because you know these washing machines and everything the more expensive it's because of all that and it's because you're effectively banking sector screaming it off from everything else so a growing banking sector isn't a sign you know it's not a good thing if the banking sector is growing it's either that it's becoming less efficient or it's becoming a parasite on the rest of the economy and that's you know we can talk about the bank you can make a lot of money from my i have a confession which is i go to bed every night i dream of another recession i dream of another moment like this i dream of another recession i dream of another moment you can make a lot of money f what does a progressive financial system look like and i want to hear what some of you think who thinks for example that we should ban banks from creating money control over how money is created and want to use for is this is democrat goes on its reform is believe that the entire money supply should be for the benefit of the public and should never be created by a private organization as that democratizing the money supply  means is putting the power to issue and allocate money back into the hands of people taking it away from private organizations institutions that don't actually represent the publicly needed services there's no reason that money should be viewed as any different it is a fundamentally important service that everybody needs i can't survive without enough money nobody can so it cannot be controlled purely by a small elite of big big banks as it is in the u k we do need a different system we believe that the activity of supplying a nation with money should be completely separate from the activity of banking what we need to do now is update that wall from eight hundred forty four to make the digital money real money you know real it could be electronic money but it needs to be classified as money we just want banks to to be like every other private organization private company in the economy to be subject to market discipline the problem is that now we're in this  and once we get us heads around that we can make money work for what create money is so you know so powerful you've got to be very concerned about who has the power if it's somebody who's going to benefit from drayton the money then you know they're going to have the incentive to create more than the economy actually needs the same would probably happen if you give that power to politicians you know you can't trust a politician to to be trying to please followers and so i have power over creation over creating money at the same time it's a real conflict of  and for what types of taxes the government would no longer be able to get access to large sums of money to pursue armed conflict if this was not sanctioned by the populace we would be able to see  banks should not be able to gamble with your money without your permission so what they would need to do is offer two types of account one is a a safe call a transactions account for you money in the bank doesn't lend of i don't put any risk whatsoever other is an investment account where you put your money in for a certain period of time and then the bank takes it away and they invest it what happens when you use these two types of count in the event that a bank fails the money in  accounts it's still there it's not at risk so you just move all the safe accounts to a bank that still healthy and then those people who put their money in the investment account they don't lose everything but they have to wait for the you know the standard liquidation procedures find out how much of the assets of the banks will be returned to them and it means that the government then needs to bail out a bank in banks can be allowed to fail the system would actually be how people think it is that you know when you put your money in the bank it's it's very safe or at least  so when we're talking about you know what life is going to be like in the post reform system it doesn't mean that you can't borrow it doesn't mean that you have to save up fifty years before you can buy homes it does mean that you might not be able to buy a house that's ten or twelve times your income but on the flip side it means that the house that you want to buy probably shouldn't cost you ten or twelve times your income you know how is this should be affordable should ever feels you still be able to get a mortgage you're still be able to get finance for car you know businesses will still get investment just means that won't be such you know it won't be so high it won't be such a huge feature of people's lives this is cozy relationship between government and the banks in the middle of the crisis i spoke to somebody who was working in the treasury in the middle of the crisis and he said pretty much every second person that you spoke to was working for one of the big banks so when it comes to decision