Despite my unhelpful lack of economic knowledge, what I took from the talk was this; the main issue with the banking system at the moment is who controls the money supply. To explain this, the analogy of the bath was used (fig 1). We were told that currently 97% of money comes from non-tangible loans given by banks, who therefore create money (they are controlling the taps). Banks lend favourably to mortgages, which creates speculation on the housing markets and unaffordable house prices, whereas they lend less favourably to business’ as they pose higher risks. The crux of the matter was that banks could not be trusted to control the ‘taps’ – they should not be responsible for dictating how much money they lend (the money supply) and where the money is leant to. This is because during times of financial uncertainty the banks become more hesitant to lend money, thus the taps turn off and the quantity of water in the bath gets less (the money supply shrinks).
To resolve this issue Positive Money suggested separating control over the money supply from control of where money is allocated. In this way, power over the money supply would be free from vested interests of governments and money would be allocated more equitably.
This highly optimistic theory received mixed responses from the audience. Fran coped well with the thorough questioning of Positive Money’s theory, which brought up issues including what would happen to current debt, and how the scheme would work in relation to the European Union and international financial ties. It was clear that the talk was met with some scepticism, but equally with enthusiasm by others.
You can watch the full talk below, and download the slides in PDF form here: Positive Money Slides