Since I could think, banks have intrigued me. The global financial crisis of the recent seven years presents a terrific learning experience for us about banks, their nature and what may be best for them and societies in the future. With my childish mind I presumed that money was static and finite, that there was some sort of agreement as to the amount of it that existed and all of this was either printed in wonderful coloured notes or cast in coins, which in my country had animals instead of the Queens’s head. It was a world of great childish simplicity. One of my cousins on receiving a christmas gift cheque from my father complained that all he got was bit of paper.
By the time I came to realise that you had to earn money to live on, that business had to take in as much as they paid out and that you were supposed to pay back what you borrowed, I felt very concerned for the banks in my home town. I hoped against hope that the people that borrowed would pay it back and that of the money the bank lend out there would be more interest than they paid out on savings. I figured that unless there was a decent profit on the loan business then there wouldn’t be enough to pay the nice people who worked in the banks. Unless loan interest was a higher rate than deposit interest then there wouldn’t be enough money to pay the bank manager, such my friend’s father, and to keep him and his family in their nice house. This assumes of course that the bank could only lend what it had on deposit. For me, no other money existed. How wrong was that!
Chastened by history, we now know that it was a lot more involved. The recent crisis has shown that as in time of war, all the force of the state will be applied to protect the money system. I have always thought that the neutrality of Switzerland in wartime was to protect the money so that there would be stable banking when the fighting stopped. So long as the state is the financial authority, then it is fair enough up to a point that it protects the banks and rescues them in time of collapse. Certainly the state interventions ranging from Obama’s quantitative easing, the UK’s supports, Ireland’s bailout, the measures in Portugal, Spain, Iceland and not least Greece were required in some form. The IMF has provided protection both for those who entered their support programmes and those who might have. By sustaining the essential economic systems the IMF and its partners the ECB and the EU also protected the economies of the countries that trade with those who were bailed out.
Looking into the future, banks will seek to reestablish themselves as not only private concerns again but the highest profit takers in the market. The leaders of business will again seek to control and gain from the honey pot, with a degree of deference to government and state institutions. But this must not be permitted to happen. A wave of change is needed in the banking system at least throughout Europe, the Americas and Asia. The current pattern that threatens and that is already largely in place is similar to that of the Russian oligarchs. The banks newly, recently rescued by the states in the form of the public money that was given to bail them will again become the instruments of the marketeers unless we call for them to be changed and for the rules governing them to conform more fully with their role as absolute public service.
Ironically, the bail out of the banks is the only situation, other than war, where capitalism has invoked the entire might of the communist method in the past several hundred years. Nobody doubts that a decent and workable form of economic exchange is necessary and vital. We need to work and produce and provide goods and services and exchange with each other, locally and globally. The exchange can take place in the form of money or some variation on the value for exchange theme. There is a level of stability that is in all of our interests for our societies to develop and for the provision for the next generations . However the control of the essential mechanisms for this exchange must never again be allowed to be concentrated in the hands of non accountable business people. Rather it must be born again as a dedicated public service agency belonging to us all.