The Independents -The Debt Makers

“Hello, my name is Sandeep Rajan and I’m standing as independent candidate for London Borough of Ealing and like my esteemed colleagues, I have no party affiliation. Whilst I thank Chris for diplomatically introducing me as an entrepreneur, which I am, yet I prefer to stand before you in unvarnished truth: I’m an ex-trader who made and lost a lot of money in this broken system of ours and that makes me a bit of an expert in how it all works and what we actually did with all the money.”

He stood quietly, waiting politely to give the floor time to exercise their democratic right to boo him off the stage. Instead the audience greeted his words with complete silence; he decided to take this as permission to continue.

“I’m only going to speak to you briefly but I’m going to discuss ‘austerity’, why we have austerity and what they want from us.”

Silence; broken by the odd cough.

“As we all know the banks lost a lot of money back in 2008. We know this because they told us; we had the threat of a financial Armageddon. But was it the truth? What really happened with the banking crisis? What really happened to all of that money and whose was it in the first place?”

A few people leaned forward, more alert, interested.

“Well the banks definitely lost a lot of money, and that’s for sure. But what they didn’t tell you is that they lost all of the money, everything, all of it,” he used quiet emphasis, no shouting and that somehow made it all the more believable. “And by that I don’t just mean what they had in their vaults” he shook his head slightly; “I mean all of the imaginary money as well.”

He left that with them for a few moments, glanced over at Colin, received a nod of affirmation then continued, “I have assumed you know how the banking system works, although a lot of people don’t. So, if you will forgive me, I will go through the process for you.”

He walked away from the rostrum, towards the front of the stage, the better to engage; a slim figure, immaculate in a bespoke city suit, an impossibly white shirt and expensive shoes. He hadn’t thought it tactful to dress down, clearly.

“A lot of people don’t realize how much of a confidence trick the whole process is; most people think that money comes from the government, and that Parliament dictates the amount of money that the Bank of England distributes. However, that is not the case, the banks do that.”

He waited for a response but there wasn’t much forthcoming.

“When someone puts their money in a bank, say £100 for simplicity sake… the bank can lend 90% of that money to someone and keep 10% in their vaults. In other words, the bank can lend £90 to someone who spends it and the £90.00 they spend ends up being deposited in another bank. That bank can then lend 90% of that £90 to someone else; or £81, as long as it keeps 10%, in this case, £9, in its vaults. The £81 is spent and ends up in another bank and this bank can lend 90% of that or £72.90 to another person and so it goes on. So what have we got? Add it up…we’ve lent out £90 + £81 + £72.90. So in total we’ve lent out £243.90 in three transactions when there was only ever £100 in the first place. And this practice goes on and on with ever larger sums of money. They even have a name for it; it’s called Fractional Reserve Banking.”

There was some shuffling in the audience and some noises indicating increased interest and, Sandeep hoped, a slight lessening of hostility. “And that’s only the tip of it,” he said, excitement in his voice, “because what do you think they issue money against in the first place?”

He scanned the crowd, “Did someone say gold? No, no, we’re no longer on the gold standard; we’re not on any standard. They just issue money, and that’s it.”

He drank some water from a bottle he’d brought with him. “Let’s say, for argument’s sake, that you want a loan. You phone up the bank and say ‘Hi, I want to borrow £10,000’”. There was a stifled titter from the crowd and Sandeep smiled, “Well, how does it go after that? If your credit rating is good they will lend it to you, if your credit rating is not, then they will not. That is all there is to it. They don’t go to their vault and see how much is in there….They don’t get a warning come up on their screens saying ‘not enough money left’…They just give it to you and add your debt to their figures, it’s as simple as that.”

He paused, comfortable and relaxed, sipped more water, “so the question now is, if the banks don’t really have the money in their vaults and they just make up the money they lend to you… who are the banks? …Surely, you might say, it must be the government…it must be regulated in some way. They can’t just lend money they don’t have, surely? ...But they can and they do. The banks are owned and run by private investors. The private investors are making up the amount of money that they want to lend out and for this service they are charging you interest.”

There was a stunned silence; in part because a lot of the audience hadn’t ever thought about the concept before and in part because now they were being forced to do so and weren’t sure what to make of it.
Sandeep gave them time, then judging them ready, continued, “Let me put it another way …you go into a shop and you buy a chair, and what have you got? Simple…You’ve got a chair, it’s solid, 3 dimensional, and you can sit on it, it’s real… but if you phone a bank for a loan they type a few things into a computer and you have a loan. You have no real money, you understand, you have pretend money that you can spend on their say so.”

He paused to look around the hall, no doubt, they were all listening now “They pass the numbers across to your bank account and when you spend it the numbers go to another bank. There’s no requirement to dig hard cash out of a vault; they transfer the numbers across on the PC. It’s a numbers game and they have us all trapped in it. Our wages are paid directly into the banks. Who amongst you can remember when that was not the case? Or has older relatives who tell you about those days when paper money appeared in a little brown envelope in your hand each Friday? The good old days when you could choose to put your cash in a box under the bed or into a building society? It is now a job requirement that you have a bank account; you have no choice. You are encouraged to pay by direct debits, incentivised so to do, the transfer is made invisibly from your bank to another bank, you don’t see any cash, so where is the money? Where is the real money?”

Sandeep stared around the hall, “Think about it, they’ve lent you something that doesn’t exist. It isn’t theirs, they haven’t taken any hard earned cash out of their pockets, it’s not real, it’s just made up money, but they’re going to charge you interest on this. They’re going to charge you interest on money that doesn’t exist, that they never had, that isn’t theirs and isn’t real. But they are going to charge you real interest on it; they are going to take money by direct debit directly from your bank. And make no mistake – this is real money which you have earned by your labour, and the banks are going to deduct this from your wages to cover interest on money that never existed.”

Sandeep watched whilst the audience digested his words, then launched again, “We accept this craziness because we think we get something out of the deal; a new car, the latest TV or a new kitchen. What we ignore is that we are being robbed by the banks. The only real money in this whole process is your money, you pay back real money on the loan and you pay back real money on the interest. They have lost nothing during the period of the loan. So, to recap, what they lent you did not exist so the lack of it for the period costs them nothing, the interest they charge is pure profit on a loan of nothing. It’s a cheap confidence trick.”

He paused briefly, “Well when deregulation started to come in the high street banks merged with the investment banks they started gambling with people’s savings, then we had the subprime loans - all of which combined to lead to the ultimate crash, now what was the crash? I mean what happened and what did it actually mean?”

He seemed to actually expect answers from the floor but it appeared no-one was willing to betray ignorance, so he was forced to continue, “Not to put too fine a point on it, the banks lost all of the money, not just the real money in their vaults but all of the made up money as well. They lost everything; which is why people started talking about a financial Armageddon. But was it really that bad? This is the big question because it’s why we have austerity today and why if they get their way, we will have austerity for decades to come.”

Sandeep paused again to let his words sink in, “I can see a question in your eyes…” some in the audience turned to look at their neighbours, “You’re asking, if the banks created all the money from nothing in the first place why, when they’ve lost everything, don’t they just go and create more?”

He lifted his hands and his shoulders went up, “The answer is simple; the banks never created any real money in the first place, they simply created the impression of money. Now people have lost faith and want their real money back from the banks that haven’t got it to give them.”

He drank more water from his bottle, “So now the banks have creditors on their backs; they have debts they cannot honour and if they were an ordinary company they would have gone bankrupt. They would’ve crashed without a government bailout and by government you need to read taxpayer… you and me. So if we had let the banks fail? What then? Well, you and I, the small investor would have lost our savings and that’s bad. We would have lost a few thousand, but would still have our homes and our jobs.”

Sandeep looked around the hall, “And the pension schemes, they would have lost a fortune as investments turned bad and share prices crashed. But that is an even spread, bad news for some, but not disastrous.”

There was movement in the hall, as they wondered where he was going with this.

“Then there’s the super rich investor, the millionaire, the billionaire; the wealthy 1%. Where do you suppose their money actually is? It’s invested by the financial services, by the banks and that is the reason the banks weren’t allowed to fail.”

He left a moment for his audience to absorb his point, “The banks were bailed out using PAYE tax payers money only because the wealthy 1% were about to lose everything; this greedy 1% of individuals would have lost all of their millions, all of their billions, their many homes, their jets, their yachts and their livelihoods. They would have been rendered poor. That is why the governments bailed out the banks, not to save us but to protect the investments of the rich, of the wealthy, of the 1%.”

Finally, applause from the hall.

“The wheels have come off the wagon but they will not admit that this is due to their profligacy and bad management. They are using our money to prop up these institutions to protect the super-rich, so that the rich 1% can keep their investments and keep cashing in their interest payments, and keep hold of their valueless shares until the market recovers, so they can keep their many houses and yachts and jets and fleets of cars.”

More applause and a few cheers, some people were standing to clap.

“That is why we really have austerity; we have austerity so that you and I can give more of our hard-earned money to the government so that it can continue to bail out the rich. That is the reason you are being taxed so heavily, that is the reason they are privatising the NHS, the reason they have raised VAT, the reason they are cutting public services, and that is the reason they are reducing funding to councils who in turn are reducing community services.”

He walked to the edge of the stage, clearly emotional for the first time.

“ Make no mistake about it…they are robbing the poor to pay the rich; robbing the 99% to prop up the 1%.... and it is not fair, it is not just and ….it is not democratic.”

The hall erupted.

Hope you have a nice week

Cheers

Arun

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