Three cheers to Steve Baker, Conservative MP from Wycombe, for raising the delicate yet important of matter of fractional-reserve banking in Britain´s House of Commons.
We are in a debt crisis of historic proportions because for far too long profit-maximising banks have been lending money into existence as debt with too few effective restraints on their conduct and all the risks of doing so forced on the taxpayer by the power of the state. A blend of legal privilege, private interest and political necessity has created, over the centuries, a system that today lawfully promotes the excesses for which capitalism is so frequently condemned. It is undermining faith in the market economy on which we rely not merely for our prosperity, but for our lives
Thankfully, the institution of money is a human, social institution and it can be changed. It has been changed and I believe it should be changed further. The timing of today’s debate is serendipitous, with the Prime Minister explaining that the warning lights are flashing on the dashboard of the world economy, and it looks like quantitative easing is going to be stepped up in Europe and Japan, just as it is being ramped out in America—and, of course, it has stopped in the UK. If anything, we are not at the end of a great experiment in monetary policy; we are at some mid point of it. The experiment will not be over until all the quantitative easing has been unwound, if it ever is.
Most striking about the debate is that it transcends party lines. Baker has ample support from his fellow Tories, as well as UKIP parliamentarians. Strange bedfellows from Labour, the Scottish National Party, and the Social Democratic & Labour Party also seemed optimistically enthusiastic about reassessing the role of bank lending in the British economy. (The Lib Dems remained silent on the issue.)
(Cross posted at Mises Canada)
