Money, Austerity and the Financial Crisis: Ken McIntyre

Ken MacIntyre discusses why money is one of the most brilliant of social inventions and yet, paradoxically for something so familiar and essential for day-to-day existence, one of the least understood.

Attention has focused on money and the financial system since the start of the global financial crisis in 2007. Yet governments, central banks and politicians have been unable to deal with it because conventional economics lacks any insight into the relationship between money, interest and debt.
Contrary to the insights of the great thinkers from Aristotle to Marx and Keynes, money is passive, with no impact on inflation, output or employment and banks simply lend money deposited by savers. In reality, however, money is not a thing but a social institution or a legal relationship, a set of tokens, deriving value from its being accepted by the state in settlement of taxes.
The cause of the crisis, correctly identified by Adair Turner of the FSA, lies with unrestrained credit creation by banks. Virtually all our money supply originates as debt in the form of interest bearing loans created out of nothing, that is, without any supporting collateral such as savings or government bonds. In the absence of controls, debt expands exponentially to the point where it exceeds capacity to pay, the production of goods and services. While the expansion of credit - £1trn in ten years - leverages growth and asset prices, sooner or later, the process reverses with devastating effect. If all debts were to be repaid tomorrow, the consequence would be economic collapse, in the absence of any alternative source of new money.
It is excess private debt which has simultaneously made banks insolvent and created public deficits. Austerity programmes, however, are ideological rather than being based on any economic logic and will not address either deficits which are a fact of basic macroeconomic accounting or public debt which is unnecessary.

Questions
• What is the ethical basis for charging interest on a debt which costs nothing to produce, giving a private cartel sole control over a public good?
• Why with the most productive economy in history do we suffer recessions, unemployment, poverty and inequality?
• How would government-issued money work? Would it encourage reckless spending or inflation?

The talk will be given by Ken MacIntyre, an independent researcher who holds Masters degrees from both Edinburgh and London University.
11.00, £3 on the door/free to members
Free Tea & Coffee will be available.

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