Kagey

January 23, 2012

The Cap Don’t Fit Duncan Smith

Filed under: Debt,Money Creation,Politics — ken finn @ 1:37 pm

I read this morning that Ian Duncan Smith has jumped on the criticisms of the Benefit Cap that will limit the amount available to the families of the un-employed. Claiming that the principle that it should always be more rewarding to work than claim benefit is one that everyone will support.

However it suggests that claimants are exercising a choice over whether to work or claim benefit, to in IDSs words work hard and commute long hours or presumably sit on their arses watching daytime TV. As if £35k jobs were in abundance! Im sorry but its the same old nonsense and distraction that runs well in the tabloids. It sets people against each other to obscure what lays at the heart of the problem; how money is created.

The Benefit Cap is about moving the un-employed out of high value city centre properties to reduce costs as the house price bubble that has continued grow even in tough times shows no signs of shrinking and bringing relief to the governments Housing Benefit burden. It is however a burden of their own making.

Why do property prices continue to rise when its plain that prices have moved beyond many peoples ability to buy? The answer has less to do with demand and more to do with where the money comes from in the first place.

The modern banking system has developed in such a way that 97% of all the money in the economy is created by Private Banks. Youd be wrong if you thought the Government or the Bank of England creates most of our money as the BoE prints around just a measly 3%.

Whats more banks dont need to actually have the money you apply for to extend you a loan or a mortgage. The bank just creates digital money out of thin air for you to make your purchase albeit a car, holiday or a home. Its simply a matter of creating numbers in your account.

As banks control how most of the money in the economy is used they inevitably choose the safest bet. Property for the banks is a no brainer Simple, automated credit checks enable decisions to be made quickly and if in the end the borrower cant meet the loan the bank can repossess. Consider for one moment the position of the bank in this scenario. The bank created the money for your mortgage out of thin air but if you cant keep up the repayments they get the very real asset that was your home!

In the last decade the money supply created out of property debt has ballooned dwarfing the money available to the productive economy. While banks have fuelled a property price boom the money made available to businesses continues to be rationed.

For years we have been fed the myth that rising property prices are beneficial, creating wealth, jobs and a sense of wellbeing. Looking around its not hard to see why weve been robbed. As property prices rise, essential but marginal businesses start to disappear. When the value of the village bakery is distorted by what it could fetch as a country home it soon becomes history together with pubs, petrol stations and independent stores. In towns, workshops and small industries disappear along with anything else that is more valuable as residential or commercial property. Historic places of work like wharfs and canal side workshops become waterfront properties. Rising property prices are as destructive of community as they are a sap on the productive economy stealing places to work and marshalling money away from the things that generate real prosperity and diversity.

In the past a blend of social and private housing ensured that even in cities there were necessary homes for key workers and the low paid who helped to fulfil necessary functions. Today, the Benefit Cap is just another step along the road that Margaret Thatcher began with the sale of Council Houses; from mixed communities of incomes, skills and backgrounds to segregation along the lines of ability to pay, to convenience for those with money and increasing commuting for those who cant.

The power to create a nations money supply endows the Banks with tremendous power and it is clear that they influence many government decisions including financial regulation. The banks have acted in their own interest for too long and clearly in way that has created many distortions in the way things are valued. Government cannot scapegoat scroungers, the work shy unemployed, immigrants or whatever else they can dream up to cover the reality that they are complicit in a allowing private corporations to create our money.

There is an alternative way and I would urge you to begin to understand the monetary system its not as complex as they would have you believe. For real change to come about depends on how much our current government has vested in maintaining the status quo the level of privilege, wealth and connections in the current administration suggests that change wont come easy!   Ken Finn

Read/View/More Info

http://www.positivemoney.org.uk/

http://www.neweconomics.org/