Some of you will have seen my article in the Saturday Paper. I can only tease you with 150 words from it here. Then you’ll need to read it on the Saturday Paper’s site.
As the financial crisis continued wreaking its havoc in late 2010, Mervyn King, who, as Governor of the Bank of England, sat at the apex of the banking system, made this observation: “Of all the many ways of organising banking, the worst is the one we have today.”
He was speaking of “fractional reserve banking”, the pea-and-thimble trick by which banks accept your deposits and assure you of access to them at all times while they’re actually lent out to others for lengthy periods.
This alchemy works so long as depositors don’t all withdraw their money at once. If they do, governments bail out banks. The alternative – the entire banking system seizing up and with it the commercial life by which we earn our daily bread – is too horrible to contemplate.
Greens leader Richard Di Natale recently floated the idea of a “people’s bank”. In the absence of further detail, pundits assume he means something like New Zealand’s government-owned Kiwibank. Adding another competitor to the four major and many minor banks in our market might win some applause on Q&A, but it doesn’t even try to address the structural problems of banking to which King referred.
In fact, we already have a “people’s bank”. Rethinking it for the internet age, using nothing more radical than the principle of competitive neutrality, could address King’s concerns while putting thousands of dollars each year into the pockets of most Australian households and into the economy.
Let me explain.
OK – that was a bit more than 150 words, but not much more, and got you up to the cliffhanger. How will it end? Will Dr Gruen be rounded up by the authorities for being unAustralian? What will Pauline Hanson think? How would it look with five big pipes from the Snowy behind the announcer? And what part of the text above is subtly different to the version on in the Saturday Paper? All these questions are answered in ways you WONT BELIEVE on this page of the website of The Saturday Paper.
Postscript: Central banking for all: The Interview