Positive Money

Positive Money is a UK organisation based in London and founded in 2010 by Ben Dyson that campaigns against fractional-reserve banking. They also want to make central banking more democratic and abolish quantitative easing.

Positive Money are part of the International Movement for Monetary Reform, who have a groups within it who oppose Fractional Reserve Banking from all over the world, including Israel, India, Australia and South Africa.

Positive Money has had little success in trying to reform Britain's monetary policy, although it has had some small victories:
 * It has influenced smaller parties such as the Green Party and Christian Peoples Alliance, who both adopted Positive Money's objective of ending fractional-reserve banking ("banks creating money") in 2015.  Between them, they got around 1.5% of the vote in 2017, so don't pin your hopes on them reforming the monetary system anytime soon.
 * They got the UK parliament to debate the issue of money creation. The debate, called the 'Money Creation & Society' Debate (catchy!) occurred on the 20th November 2014, which sounds impressive, until you note that it was only a backbench debate which only about 30 MPs attended. This sounds more like a failure but Positive Money put a positive spin on it by saying that it was the first debate on how money is produced in over 170 years (which isn't surprising since ability for banks to create money digitally and cause the fractional-reserve banking "problem" has only occurred in the last few decades. How on earth were people during the prior 150 years supposed to debate a problem which didn't exist?).
 * It got the chief economist at the Financial Times, Martin Wolf, to support its proposals and even to do videos for them (yes, it's gotten to the point where some top guy at a paper supporting a group is a victory for the group).

Looking back, maybe calling these small victories was too generous. Minute victories may been a better term.

Documentaries
Positive Money have released a documentary called 97% Owned (2012), which is about how 97% of our money is controlled by banks and how this has led to financial instability throughout the world.

The producers of this also created another conspiracy theory documentary about fractional-reserve banking called Princes of the Yen (2014), which Positive Money promoted on their website. The film is about how "Japanese society was transformed to suit the agenda and desire of powerful interest groups, and how citizens were kept entirely in the dark about this" (again, totally not a conspiracy theory).

Criticism
Ann Pettifor, a Keynesian economist, an honorary research fellow at the Political Economy Research Centre at City University, London (CITYPERC) and a fellow of the New Economics Foundation, London who also is Chair of the Goldsmiths College Political Economy Research Centre's Advisory Board. She published an online article called 'Why I disagree with Martin Wolf and Positive Money' in which she criticises their proposal to negate fractional-reserve banking: If the issuance of credit or money is to be restricted to equal the money set aside in peoples' piggy banks – the "savings" that Martin Wolf refers to — then society would revert back to the Middle Ages, or to the age of the Gold Standard. We would have to restrict what society can do, in economic terms. That would mean a shortage of money, high unemployment and low economic activity – while those with savings would charge high rates and flourish.

But while we may want to limit consumption, and re-direct credit to more sustainable, useful activity, it would be a mistake to limit the things that society can do. We need, for example, to tackle climate change, a major threat to a liveable future. That will require huge resources to be directed at transforming and de-carbonising the economy. Carefully managed and regulated credit will help finance those activities. The money in our piggy banks would be woefully insufficient.

Wolf's proposal is problematic for other reasons. First, the idea that society can set up a single "independent" committee of men to make far-reaching decisions about the quantity of money needed by a nation of sixty four million people, all engaged in varied and complex activities – is bordering on authoritarian. First there is no possibility of such a committee being independent. One has only to think of the "independent" UKFI committee – set up to oversee the banks, including RBS, in which the state has a stake – to question the possibility of such a body being independent.

Restoring banking regulation to its proper place, and managing cross-border lending would once again restore balance to our financial system, just as it did in the period 1945-71. It would bring to an end the despotic power now exercised by bankers and the finance sector. By contrast, outlandish proposals for nationalizing money and granting huge powers to a committee of men to decide how much money we should all have, and whether to shrink or expand the money supply and economic activity will only add to the economic confusion that shrouds the banking system.

Rebuttal
Positive Money released a rebuttal article on their own website called 'Why we disagree with Ann Pettifor' (I see what you did there) in which they replied: Most people who have read any of our materials will be aware that we don't see money as a commodity. We clearly explain that money now is nothing more than a number in a computer system, and that essentially infinite amounts of it can be created at no cost. Money gets its value because people have faith that they can walk into a shop and exchange it for food, goods or other services. Other than that, it has no intrinsic value. It certainly isn't a commodity.

The proposal would mean that banks could only make loans after first raising the funds from savers, rather than creating the money they lend through an accounting entry. But it's jumping to conclusions to assume that this would 'contract' or 'restrict' economic activity.

By defining 'money' as 'credit', the article presents a false dichotomy between scarce commodity money (e.g. gold) and adequate 'credit' money. And since credit is created by banks, this suggests that we must have banks creating money in order to avoid the perils of an inflexible and scarce commodity form of money. This ignores the fact that you can have a form of money that is not scarce, and which does not have to be created by banks. How? By allowing the Bank of England to create an electronic version of cash.

We are specifically proposing a flexible monetary system in which the amount of money creation bears some kind of relationship to the growth of the real economy. In the Gold Standard the amount of money was fixed and could only grow arbritrarily [sic] whenever someone managed to dig gold out of the ground. It shouldn't be difficult for an economist to understand the difference between these two proposals.

Our proposals are not about restricting what we can do. In fact the opposite: they’'re about making it possible for us to achieve what is technically and physically possible. In the current system, things that can be done are not done because the only creators of money are banks that have no interest in the things that we really need to do. In the aftermath of the financial crisis, we had construction workers out of work, school buildings in appalling condition and a school re-building already scheduled, and then the government cancelled this program because there was 'no money'. Reclaiming from the banks the power to create money at that point would have meant that the new money which we needed to get into the economy could have first been used to rebuild those schools, boosting employment and helping to end the recession. 1. The idea that having a committee deciding on money creation is 'authoritarian'. This is a bizarre argument. We already have a committee of men (and it is all men) – the Monetary Policy Committee – who set and influence the interest rates that millions of people will pay on their mortgages and which millions of savers and pensioners will receive on their savings. This seems like an incredibly ‘far-reaching’ decision to make.

We're proposing that they would lose that power to set and manipulate interest rates, so that interest rates would depend much more on the supply of savings between savers and borrowers. (Ann would likely argue that this would lead to very high interest rates, yet Zopa – a peer-to-peer lender – already works on this basis and currently charges lower rates than both Nationwide and Natwest on personal loans). Transferring the power to create money directly to an independent government body such as a Money Creation Committee would in fact greatly reduce banks' influence over the lives of much of the population.

2. The idea that the committee can't be independent. Yet Ann's proposal is that we should regulate banks better. Regulators are made up of committees. If the Money Creation Committee cannot be independent, then neither can Ann's regulator.

Unfortunately, I would bet good money that Ann's proposal to rely on regulators outsmarting the banks is far more likely to ensure everything will stay the same. Removing the power of banks to create money is the reform that would give us the greatest chance of getting a financial system that works for society and not against it.

One thing is certainly established by this rebuttal, Positive Money doesn't fuck around!