To keep in touch with AMI and perhaps to offer input on this fundamental issue from your own standpoint – Peter
———- Forwarded message ———
From: American Monetary Institute <members@monetary.org>
Date: Sun, 28 Jul 2024 at 21:50
Subject: Mayday and the Faustian Bargain of Banking
To: Peter Challen <peterchallen@gmail.com>
 |
Dear Peter Challen
AMI International Conference on Monetary Reform
September 21st – Introduction
September 27-29th, the Practitioners – mark your calendars
Mayday Wrap-Up
A Good Mid-Summer to all! The American Monetary Institute (AMI) and its sister organization, the Alliance for Just Money (AFJM), haven’t yet created an offspring that can endorse specific candidates for public office, but we can educate. AFJM this year has taken to the streets in downtown Chicago, with AMI, Move to Amend, and others as co-sponsors. On Friday, May 17th, there was a rally at the Chicago Fed with songs, chants, and advocacy for banking reform. One digital reform banker came out of his office to support our efforts and said there needs to be more such efforts. We created awareness for others, and over the course of the weekend, several young people joined our ranks and participated.
On Friday evening, monetary reformers and environmental activists met at the Climate Action Museum a few blocks away. We saw a documentary on economics and climate change and afterward had a lively discussion, making good connections.
On Saturday, we had the march around Chicago’s financial district, including the Board of Trade. At the end, we rallied at Calder Flamingo Sculpture in the Federal Plaza. It was here, and the previous night, I met two new young people who came to our Saturday evening production of James Gibb Staurt’s play, Why Only In Fantopoia? This play drives home the point that we, the public, can create our public money and not leave that crucial underpinning of society to the banks for them to profit!
On Sunday, we had two teach-ins, one on the historical and big-picture thinking of our monetary system and reform led by John Howell and the second on local currencies as a possible supplement to a national currency by Gwendolyn Walworth. Both presentations were informative and interactive.
The Faustian Bargain of Banking
Let’s transition to the 2024 AMI International Conference on Monetary Reform (September 21st for newbies and September 27th through the 29th for the full experience) and discuss the Faustian Bargain of Banking. Jonathan McMillan (pseudonym) will present how this dance with the devil begins with early banking and remains with us today.
In their new book, Capitalism And The Market Economy: Bringing Back Together What Banking Pulls Apart, the two authors describe a run on the Bank of England in 1696 by the goldsmiths. The goldsmiths knew that a run on their safes by people demanding gold or silver coins for their paper receipts could bring ruination. In the same way, the goldsmiths felt that their run on the Bank of England could bring down this new entity that later evolved into corporate banking. The difference was King William allowed the Bank of England to temporarily suspend payments in coins to get over the goldsmiths’ run (p. 40-1). The Crown’s backing (like public backing today) allowed this new financial structure to be tremendously successful because it allowed for the economy to grow on a faster scale than the limitation of finding and using gold, silver, copper, or goldsmiths’ receipts while at that time more officially and directly supporting the crown itself.
In the 18th century, the Bank of England adopted lender-of-last-resort habits, which became established in the 19th century (p. 43-4). This started with John Law’s efforts to set up the Banque Royale in France and the South Sea Bubble – both in 1720 and with the Bank of England further intervening with the Amsterdam banking crisis of 1763 and the failure of the Ayr bank in 1772 (ibid.). Excessive bank money creation created the boom, and when things faltered, then came the bust. With the passage of the English Bank Charter Act of 1844, Parliament tried curtailing the Bank of England acting as a lender of last resort. However, in the financial crises of 1847, 1857, and 1866, this law was suspended (p. 66). McMillan answers the question:
“Why are no bail-out commitments not credible? The answer is systemic risk. As we discussed in Chapter 2, the failure of a corporate banking institution is highly contagious. In a corporate financial architecture, a bank run usually escalates into a panic. When many banks fail at once, this leads to a contraction of money and credit that culminates in a painful economic recession. People who have nothing to do with the initial failure lose their jobs and are no longer able to pay for their shelter and livelihoods. In such a situation, the pressure for the government to intervene despite no bailout commitments is simply too high.”
At this point, the reader rolls up their sleeves and learns how to design a monetary system with a solvency rule that prevents systemic risk. Capitalism and the Market Economy is a thin book and, for the monetary reformer, a page-turner. If you want financial support to buy the book, call me, and AMI will get a book to you. There is a reading circle for the book meeting on July 30th, August 14th, and 28th, and a pre-conference meeting with the authors on September 11th. More information can be obtained at AFJM and at Positive Pengar. If any number of people miss the July 30th meeting, let me know, and we can hold a make-up session. Have a great rest of your summer, put the AMI Zoom Conference on your calendar, and let’s stay in touch.
Steven,
on behalf of the AMI Stewards
773-636-8255 or reply to this email
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