John Kay, the author of Other People’s Money: The Real Business of Finance was in Australia to educate us on the economy last week – and in so doing has managed to attract the attention of the Australian media, who have finally picked up on the crucial issue of Glass-Steagall Banking. ‘This is no surprise when you look at some of the reviews: A Financial Times’ Book of the Year, 2015
An Economist Best Book of the Year, 2015
A Bloomberg Best Book of the Year, 2015′
“Other People’s Money …………… Kay provides by way of context a panoptic overview of the history, evolution and structure of the financial system in the United States and Britain, one that is impressive in its ability to weave together a comprehensive range of material, from the mechanics of banking…….”—New York Times Book Review
“Mr. Kay is a brilliant writer with an ability to explain the role in the 2007-08 financial crisis of such concepts as credit default swaps, collateralized debt obligations and moral hazard… [He] is at his best in reminding us that the financial system is still fragile and in explaining that more regulation is not the answer……….” —Wall Street Journal
“Other People’s Money … should be read by everyone concerned with preventing the next crisis…………… Above all, the finance sector should be judged on the same basis as other industries; if an activity is unprofitable without taxpayer support, it should not occur. ‘Our willingness to accept uncritically the proposition that finance has a unique status has done much damage,’ the author wisely says. Let us hope those in authority will listen.” —The Economist
“An important new book.” —Robert Lenzner, TheAtlantic.com
“A challenging book that will add to ongoing discussion and debate.” —Booklist
“Kay is both a first-class economist and an excellent writer.” —Financial Times
“It’s required reading for the nation’s economists but, although it’s very thorough, it’s eminently readable by ordinary mortals. Similarly, although it doesn’t deal specifically with Australia’s financial system, its analysis is more readily applied to Oz than a book more focused on Wall Street…….”—Ross Gittins, Sydney Morning– Herald, (5th Feb 2016) –Rossis the Herald’s economics editor.
Ross Gittins reported the heart of what Kay spoke on last Monday, the 1st of Feb, to those that had ears to hear….“We need a financial sector to service the needs of the ‘real economy’ of households and businesses producing and consuming goods and services. But none of this justifies the huge growth in the financial sector we’ve seen”.(Kay)
So where has this growth come from, I ask?
Kay continues …“Most of that growth has come in the form of massively increased trading between the banks themselves in ‘financial claims’, such as shares and bonds and foreign currencies and ‘derivatives’. If you add together all the financial assets owned by all the banks and other financial outfits, they exceed by many times the value of the physical assets—such as houses and business buildings and equipment—which are the ultimate basis for all those claims.”
Gittins goes on to writein the Sydney Morning Herald…..“Kay says, that in Britain, bank lending to firms and individuals in the real economy amounts to only about 3 per cent of their total lending. All the rest is lending to other banks and institutions busy buying and selling bits of paper to each other—making bets with each other that the prices of those bits of paper will rise or fall in coming days. Kay makes ……..the very strong condemnation that almost all this speculative activity is ‘socially unproductive’……..It’s of no benefit to….. the economy.”
Grittins asks, “If all they’re doing is making bets with each other, why aren’t the gains of the winners exactly cancelled out by the losses of the losers”? Kay’s answer to this is that the claims-trading part of banks have found ways to exaggerate the profits they make by counting expected future profits they haven’t actually captured—‘paper profits’—but delaying recognition of expected ‘paper losses’ until they’re realised. This game can continue for as long as everything’s on the up and the bubble’s getting bigger. Once it bursts, of course, former supposed profits become present, unavoidable losses. Many banks teeter on bankruptcy, but the government bails them out and they live to gamble another day”.
It is easy to see that the Banks and the Governing Authorities have been in bed together scheming up ways whereby they will force their creditors, including unsuspecting depositors, to pay the banks’ debts by stealing their savings. You think not, this couldn’t happen, think again, it’s happened before. It happened in Cypress, it’s happening now, even in Australia. http://www.smh.com.au/national/canberra-reaps-360m-from-inactive-bank-accounts-20140609-39t8p.html
Gittins reported in the Sunday Morning Herald,“Kay is excellent at discrediting myths and false belief systems”. …… Gittins also says that Kay offers in his book, a clear description of the complex current financial structure and the failure of our laws to protect the people.
One can see from reading Grittins’ report and reviews, that John Kay has the insight to understand and be aware of the ‘important signs that others miss’. Regardless of whether his views are the right way to go, our banking structure will remain the same unless the general public are made aware of the looming dangers and insist on improved policies. Our Politician’s indifference and unwillingness to address such issues as our current banking and financial instability does little to offer security for the business sector and personal savings. This continues to be our chief setback and could ultimately be the downfall of this nation, leading to an economic collapse, which has, been a concern for awhile.In my opinion, the banks currently exercise deceitful control over the political system, and especially the two major parties.
What can we do about this?
The answer has been under our noses since 1933. It’s calledtheGlass-Steagall Act, which facilitates payments, and loans to families, home owners and businesses; it is a clear-cut, uncomplicated monetary regulation that separates the high risk bankingfrom the grass roots banking that provides for the needs of the people(Home, Business and Personal loans).Gittins reported in the Sydney Morning Herald that Kay, LaRouche, and numerous other experts around the world have reached the same conclusion. ‘The solution is to separate banking that serves the real economy, from the Bankers that are making bets with each other’.
We need to do what US President Franklin Roosevelt did with the Glass-Steagall Act. This Act is also known as the Banking Act of 1933; it prohibited commercial banks from engaging in the investment business, to protect consumer’s money from speculative use. It was enacted as an emergency response to the failure of nearly 5,000 banks during the great depression – and it worked.The necessity for the Glass-Steagall act is beyond doubt but, it will not happenunless we hound our politicians to get behind it and fight for our future.
Rise Up Australia Party supports the Glass-Steagall Act and has endorsed it as our Banking Policy.It is Policy  of the first 27 policies on our website. We believe this is the safest way to conduct our banking, to protect our people and build the economy. www.riseupaustraliaparty.com https://en.wikipedia.org/wiki/1933_Banking_Act
Author John Kay is a professor of economics at the London School of Economics and a fellow of St John’s College, Oxford University. He is a director of several public companies and contributes a weekly column to the Financial Times. Kay is the author of nine previously published books and coauthor of The British Tax System with Mervyn King. John Kay lives in London.
This article has been compiled and written by: Yvonne Gentle.