Britain Getting Back on Track? It’s the Economy, Stupid.

Ah yes, it’s the economy stupid.

While I am not a massive fan of the former US President – Bill Clinton – it’s for a good reason. His ‘three strikes’ policy and his sordid relationship with Monica Lewinsky did little to endear him to me. But there are lessons we can salvage from his two terms.

To his credit, he was right about one thing when he grasped at the national mood around the economy.

This was highlighted in the campaign when he effectively took down Bush (’41) on how he himself was not affected by the economic decline in the early 90s, but he was.

The Clinton Administration, while divisive, led to the creation of a budget surplus of $128bn, 18.6m new jobs but increased income taxes.

Boris Johnson could take a lesson from Bill’s book. In the 60-page booklet, published by 10 Downing Street, the Government demonstrates a firm understanding of the kind of tactile approach necessary to emerge from the crisis.

The Clinton Administration, while divisive, led to the creation of a budget surplus of $128bn, 18.6m new jobs but increased income taxes.

“COVID-19 is a new and invisible threat. It has spread to almost every country in the world… The Government’s aim has been to save lives. This continues to be the overriding priority at the heart of this plan. The Government must also seek to minimise the other harms it knows the current restrictive measures are causing – to people’s wellbeing, livelihoods, and wider health.”

Transparency and the safeguarding of lives and livelihoods aside, the impact of COVID-19 on all accounts is demonstrable.

For example, the Government has since reported that 1.8 million households made a claim for Universal Credit between 16th of March and 28th of April. This is shockingly high and to make things worse GDP will fall by 35 % later in the year, according to OBS.

In April alone, unemployment rose from 850,000 to 2.1 million. A staggering rise not seen since records began. Photo by Emiko K from Pexels

The situation is bad for everybody as more and more jobs will be lost as businesses fail, look for example at British Airways who announced layoffs of 12,000 people last week, despite the Government’s furlough scheme.

I’m unsure which industry will seek to purge costs through staff wages in an attempt to stay alive next, but I know there is more to come.

These measures are hitting working people hard. Simon Dolan, the man, taking the Government to court over human rights violations due to this lockdown, shared a message from a supporter called Robin Hunter.

Robin states that his 20-year career in hospitality was eradicated, with little chance of getting back on his feet due to his age. To make matters worse, he was laid off before the furlough scheme was introduced, and now lives on a sofa in his mums flat, while receiving £74 a week from the government.

This could happen to anyone, as thousands of small business have not been trading over the last three months and possibly even longer. What’s worse is this could happen to you next.

Boris needs to do something quick; he needs to reopen the economy and get Britain back to work. This isn’t a matter of money over lives: I grasp that people are dying, but poverty kills too.

In the previously mentioned report, the government openly admits that the country needs to get back to work and produce. The report made clear that the longer the sustained lockdown and the reduction in economic activity, the harder to maintain public finances, including services like the NHS.

It’s simple: the longer we’re in lockdown, the harder it’ll be for the economy to recover. This will lead to a significant reduction to our current living standards as compared to the past as we will have to accept a crumbling public purse and even smaller private one.

This will lead to thousands more avoidable deaths through things like suicide and poverty. When it does not kill, it mentally scares and scars the lands around it, in the words of Lord Sumption. Therefore, we must end the lockdown as soon as possible to save the economy, save the people and save the future.

While the Clinton presidency is a divisive one, a pedal-to-the-metal approach is one that the British Government needs to have at the forefront if it is to emerge from the present crisis.

Reopening Businesses Need Their Support Industries Reopened Too

The business events, delegate accommodation and meetings sector is worth £31.2 billion to the UK economy and employs over 700,000 people.

In the latest series of the Government’s opening-up announcements, the sector has been completely overlooked, with the term “conference centres” used to categorise a range of different businesses as being the same for the purposes of keeping them all closed beyond the 4th of July.

Could anyone really define what a conference is when asked?

It’s a broad term that gives little value to a UK-wide industry offering support services to business that range from accommodating training sessions for 10 people to 5000-delegate international conventions.

So many parts of the hospitality industry like pubs, restaurants and hotels have been given the green light to open. Yet meeting and training venues cannot be used to deliver a key service to the many businesses that need all the help they can get.

Right now there is demand to accommodate statutory legal training, exams, development courses, key team meetings, board meetings, strategy days, recruitment days and interviews. That’s before considering the requirement that businesses of all sizes have for buying in extra space day-to-day.

People at work want to interact face-to-face. Businesses have functioned for months with the various forms of online platforms for meeting that we have all had to adapt to. There will be a continued place for the “who’s zooming who” approach as many businesses rationalise and change post-Lockdown. But we know for sure there’s nothing quite as productive as a live, in the flesh performance being involved!

The impact of the Lockdown will lead to a greater need for meeting venues, when teams that have moved from the office space to working permanently from home need the face to face to interaction. For the trying times ahead, allowing us to play our part right now really could create a win-win in the longer term.

How is it any different to sit in a socially distanced meeting room for an exam, training or team meeting than to go to a restaurant or a wedding reception for 30 people?

People are more likely to get close at a large social gathering when spirits are high than at a meeting. Ask yourself, when did you last feel the need to hug or touch a colleague or fellow delegate when you meet up to discuss business?

There are obvious double standards that are adding to the sense of injustice too. For instance how can hotels be open and actively marketing meeting spaces on the basis of providing accommodation which puts them an immediate advantage over the dedicated sectors whilst the specialists are themselves ordered to stay closed?

None of us want to see any business disadvantaged further. We are pleased that hotels and restaurants will reopen. But when they are clearly seen to be aligned to what we do, it seems arbitrarily unfair and nonsensical that the wider range of support businesses cannot reopen too.

More often than not meeting venues are very large and able to offer safe and robust re-opening plans that can adhere above and beyond to social distancing guidelines. As it is industry standard to register delegates and visitors individually, we are well equipped to support the NHS Test and Trace service without the controversy that may arise when punters are asked to register for a visit to the local pub!

Like the many other businesses overlooked and forgotten, the Events & Meetings industry is right at the brink and now being pushed to limits. For us it feels like it will be impossible to survive.

An optimistic estimate is it will take at least 12-18 months to recover if we could reopen now. Whilst “conference centres” remain closed, we can only wonder at the message the Government is really giving to the many sectors and industries that desperately need support services like ours.

British business need us open and available to help give them confidence that they really can return to business as usual.

We are ready and willing to do whatever it would take to open on 4th July. Instead are being left behind.

Read The Backbencher Opinion on this HERE

Emma Jennings is Co-Founder and Director of The Studio Venue Company and a guest writer with The Backbencher

A National Investment Bank? Come off it Corbyn

It seems almost everyone thinks that the Tories have this election in the bag. With the latest ComRes poll giving the Tories 50% of all votes, it’s not hard to see why. But perhaps there is good reason for this. Labour leader, Jeremy Corbyn is not just a friend to controversy, he also seems to flirt with very silly ideas. One of many is the idea of a national investment bank, which he says would enable £500 billion worth of investment in infrastructure and industry. This would allegedly create one million new jobs, which might seem like a nice thing until you remember that unemployment in the UK is now hovering around 5% – the best it has been in a long while.

Corbyn’s idea seems even more preposterous when you also consider the current national debt of 1.6 trillion. But the idea of a National investment bank is not just unnecessary, it is foolish. The track record of the idea is really rather shocking. Tony Benn’s similar National Enterprise board in the 70s threw money at all kinds of wacky things. From British Leyland motors, to British leather, money was spent where it would create no wealth. Meanwhile private industries in the tertiary and quaternary sectors grew and those industries that Benn’s National Enterprise Board tried to protect simply fizzled out.

There is no reason that a rebranded version of Benn’s failed project would do any better. It would just lavish taxpayer’s money on projects run by those with political connections, creating arbitrary jobs in Labour seats. And even if you concede that the National Investment Bank’s job creation is a good thing, the kind of jobs that it aims to create are not going to help the kind of people who need helping. Gone are the days when building roads required hard unskilled labour. The kind of people who are likely to be employed to build infrastructure nowadays are engineers, operators of technical machinery, and other skilled and educated individuals who are unlikely to be unemployed.

A national investment bank has the potential to really hurt private investment too. The enormous amount of borrowed money required to pull it off would mean issuing extra bonds, which in normal times means competing with private firms for investment funds. Private firms would have to pay more to borrow, or re-consider their own investments – meaning less private capital spending on factories, machine tools, training, R&D, and housing. So when the government borrows to fund its own investment, private investment has to fall. Occasionally government investments are worth it, but boondoggles like the Millennium Dome are de rigeur. When even the most switched on venture capitalists find it difficult to pick sound investments, technocrats with no commercial experience are likely to find it impossible. Because of this, the national investment bank is not just unnecessary, but completely unworkable.

Sponsored Post: Tips for playing online slots

Online slot games are pretty simple to play but, everyone can sometimes benefit by getting a better understanding of the game they love. Slots are the most popular among online casinos as well as land based. Let’s face it, they are downright addictive. The fact that huge jackpots can be won from the comfort of your own living room makes them even more appealing than ever before.

With winning money being a big part of the appeal, getting in on a few tips and tricks to better insure your chance of leaving your computer a winner would probably make your day. Well, I am about to make your day for you by first telling you that the higher the bet the more likely you are to win.

With that said you are probably wondering why I am telling you to bet a lot of money right off the bat. Well, it is simple really. With slots, the more money that is bet on it, the more pay-lines become open. You could possibly double or triple what you bet in the first place.

The next thing that I am going to tell you is that you should stick to slots that fit into your budget. Knowing when to cut your losses and walk away will keep you from going broke. Another way to keep from breaking the bank is to set a certain amount of money aside for gambling and NEVER, EVER touch any other money during gambling. Even go as far as to NOT using any of your winnings from previous rounds to bet with. Doing this will guarantee that you leave the game with money in your pocket.

Looking out for online slots that offer bonuses such as free spins is another great way to get ahead of the game and make bank if you are lucky enough to get a match up on your free turn. If not then you didn’t lose anything. In a sense, this puts you ahead in the game because that is one turn closer to the jackpot.

It is important that you know that some slots are predetermined in what order the items land per so many turns and how much they pay out. You may want to try to avoid any slots that seem to be rigged. You could on the other hand learn the predetermination of each that you find to be rigged and know just when you are going to hit the jackpot.

A Libertarian Approach to Student Debt

Both the Tories and Labour Party have attacked the current higher education funding system for leaving thousands of students in debt that they can never repay. While Corbyn admitted he could not promise to wipe debt, Theresa May has launched a review into student debt and tuition fees. At the moment, fees are capped at £9,250, but come with a punishingly high interest rate of 3%above RPI. This interest begins to accrue from the day that students start university. How can we ensure equality of opportunity for young people of all backgrounds without leaving the next generation of workers in enormous debt?

Reducing Interest Rates

The simple fact is that the loans offered to students are too expensive, with three quarters expected to never repay the full amount. The burden of paying back this debt therefore falls onto the taxpayer, so that those who never went to university are paying for those who did. A true libertarian approach would cut interest rates to be in line with market values.

Senior economic advisor at PwC, Andrew Sentance, argues that 2018 could see interest rates triple, due to high inflation and global economic growth. To charge students an extra 3% above inflation is creating unnecessary debt. This is caused by state intervention rather than the invisible hand of the market.

Diversifying the Market

The UK has one of the highest tuition costs in the world, largely due to an unfree market. Almost half of school leavers now go to university, even if it isn’t the right option. For a genuinely free market to keep costs down, there needs to be a wider range of options.

This can be achieved through the use of apprenticeships or work placements for those who thrive in a vocational sector. Not everyone is suited for university, but many see it as the only option. Furthermore, many courses are charging the same amount despite varying in costs. Different courses should set different prices according to market forces.

Encourage Private Sponsorship

The most effective way to lower costs and the debt burden on students is for the state to be rolled back. Instead, private companies should provide sponsorship and bursaries where they see potential in students. More debt reduction and consolidation companies may enter the market in order to further ease the burden without the need for state intervention.

Successive governments have done a great disservice to our young people in the way they fund tertiary education. Interest rates should come in line with the market and private companies should be given greater freedom to sponsor students. By diversifying the education market for over 18s, overall costs and therefore debt can come down.

15 September: When the US Fed Called Time on Lehman

Having been in the market place for 53 years I suppose 15th September 2008 has to be the worst day in the history of banking by a country mile. Erin Callan, the FD of Lehman Brothers had been less than economical with the truth as to the robustness of Lehman’s balance sheet. Nor, as I recall, was CEO Richard Fuld as helpful to the market as he might have been. In fact it was all over for Lehman, with this bank loaded up with humongous amounts of bad sub-prime lending, little did the market know what was going to unfold! Lehman was largely regarded as the largest bond house on Wall Street. On 14th September 2007 Lehman’s share price stood at $59.50, valuing the share capital at $41 billion. When Lehman went down the share price was a derisory 21 cents. When Lehman Brothers filed for bankruptcy with $639 billion in assets and $619 billion in debt, Lehman’s bankruptcy filing was the largest in history. With the writing down of assets, losses close to $600 billion would have been incurred.

US Treasury Secretary Hank Paulson had been very comfortable in conjunction with FED Chairman Bernanke in getting JP Morgan to bail out Bear Stearns for $10 a share and Washington Mutual for next to nothing. Shortly afterwards AIG was shored up with a $182 billion bail-out facility. However the moment Lehman came up with its ‘Oliver Twist begging bowl’, Paulson threw the towel in – ENOUGH he cried and that sent the biggest shock waves across the international banking system. Everyone had erroneously assumed that Paulson would come galloping over the hill like a white knight in shining armour. Consequently, all the trading banks never had a chance to ‘cross’ outstanding trades, which could have mitigated some of the gargantuan losses rather than exacerbating these losses, which the banking sector was forced to absorb.

Eight years on the banking sector has still not fully recovered. Though the market is grateful for small mercies – massive quantitative easing, which bought time and restored confidence, regulation’s hob-nailed boots left their wheels of pain across the backs of every bank in the world. It is fair to say that the restoration measures taken by the FED, US Treasury and the ‘Dodd Frank Act’ with considerable cajoling from Volcker enabled the US banking system to recover more quickly, but at a price. The US regional bank is not as prevalent as it was; so many went by the wayside. With the regulators all over the sector like a bad rash, banking will never be the gravy train it once was, though US banks are making a better fist of it than other parts of the world. Regulation and capital requirements are so tough it is hard to see the kind of increase in valuations that were made in 2009/10. Let’s face it, apart from in the US the gains made in other parts of the world have been more or less surrendered.

The one criticism I have, is, that the authorities have been quick to impose painful fines for transgressing banks, but no prohibitive jail sentences for the real offenders who abused their privilege. Traders and middle ranking mangers have been easy pickings for the regulator. That is not balanced justice and some senior people in very exalted positions have got away Scott-free! There is, of course, a very fine line between reckless incompetence and fraudulent behaviour.

I am still dramatically worried about the European banking sector. The sector is short of €300 billion of fresh capital required. Deutsche is a problem with a heavy balance sheet weighting in derivatives and capital markets. Deutsche has had problems lightening their book and selling assets. However, whatever Merkel says about bail-outs, ‘hell has a better chance of freezing over’ than Deutsche Bank not beating the hangman, if matters became dire. I think Andrew Bailey has done a brilliant job in regulating the UK banks and though the capital requirements are penal the banks are in better shape in the UK than they are in Europe, though RBS remains an on-going carbuncle that needs lancing, but will eventually recover. Low interest rates have not helped the banks’ cause, but a zero rate policy and QE have been essential. However that all said, the UK banking sector in terms of profitability has performed worse that US, Japan and EU thanks to the dire state of RBS huge PPI payments proportionately to much associated with Lloyds and on-going individual issues with HSBC, Lloyds, Barclays. There may not be a non-performing loan issue with UK banks, as there is perhaps in the EU, but UK bank profitability is very poor – chart & data below provided by Panmure’s chief economist Simon French.

In closing, Brexit is a total red-herring. London is the most influential centre in Europe by far in terms of trading and M&A activity and having spent 70 years building infrastructure it is not going to be allowed to be usurped by Frankfurt, Paris, Dublin or anywhere else. Negotiations will be fierce over ‘passporting’ but good sense has to prevail, however painful. London is pre-eminent at financial services – fact. Some banks may move staff for a year or so. They will return. Why? London is where it is at. Not arrogance but fact!

Will there be another replication of the 2008 banking crisis? One hopes not. However it’s the bond market that concerns me. Is the regulation of large bond operators draconian enough?

Are ‘care pensions’ the way ahead for social care?

An insurer’s policy paper, advising the introduction of a ‘care pension’ is gaining some traction. It aims to help tackle the continuing, worsening crisis the country faces in paying for care services.

Treasury officials have expressed interest in the idea, devised by Sir Steve Webb, former pensions minister under the 2010-15 coalition government and now director of policy at the insurance company Royal London.

The plan would allow people approaching retirement to take money from their pension pot – without paying income tax – as long as they use that money to pay premiums on a new form of insurance for long term care costs.

Return of the cap?

In order to be effective, the government would need to resuscitate their scrapped policy to cap care costs for individuals. Much like a train on an ailing rail franchise, the policy was repeatedly delayed before finally being cancelled, with no indication of an alternative.

Back in 2013, Jeremy Hunt, announced a cap on care costs at £72,000. This would mean that after £72,000 the government would pick up the bill for people’s care. The policy was finally meant to come into effect in 2020.

It was scrapped in December 2017, following the Conservative’s general election disaster. A disaster which was largely blamed on what Labour and many Tory backbenchers called a ‘Dementia Tax’. This was the name given a separate policy that could see anyone with assets over £100,000 selling their homes to pay towards the costs of their care.

Without a cap on care costs, insurers could face bills running into hundreds of thousands of pounds. This has made them far too wary to introduce any packages to cover the costs of care in later life.

How care pensions could work

The ‘Care Pension’ would utilise the existing ‘drawdown’ reforms. These currently allow people to draw money from their pension pots to spend or invest when they reach age 55. In a policy paper setting out the proposals, Royal London state that: 1. introducing a care cap and 2. Making drawdowns for care funding tax free, would remove the barriers preventing insurance providers from introducing policies specifically to cover care costs.

Rather than being marketed as care insurance, Royal London’s policy paper suggests policies could be classed as ‘inheritance insurance’, because they would prevent people digging into savings and assets to fund their care.

The policy has received the blessing of Damian Green MP, yes the one who supposedly downloaded pornography at work. Mr Green is working with the Resolution Foundation think tank on a project to address aging issues.

Prior to his ejection from government in the furore surrounding porn-gate, Mr. Green was responsible for heading up the work of multiple departments on the social care green paper, which is set to be published in summer 2018. This makes the former minister a potential window through which we can view the general direction the green paper was heading, at least until his departure on the 20th of December 2017.

Speaking on BBC Radio 4’s Today Programme, Mr Green said: “We need to look at the way people contribute on a personal basis in what is effectively an insurance policy.” He suggested that those who are now nearing the end of their working life could “put aside” money to fund care, while those aged 35-40 should consider making their own investment to “fund the potential for social care in later life.”

The MP for Ashford also said that he hopes the green paper, now under the supervision of Jeremy Hunt’s department, would “throw up some radical ideas” and urged “serious public debate” on care funding.

This has been floated before…what were the challenges?

This is not the first time insurance has been touted as the key to solving the crisis in social care funding.

After the original care cap policy was formulated in 2013, ministers had believed that a new market in care insurance would develop. But when the government put the feelers out in early 2015, the insurance companies’ responses were lukewarm to say the least. What were the problems then and what challenges would a government face in adopting a model like this in 2018?

What is capped?

Firstly, insurers complained that the care cap did not factor in food or accommodation costs. This scepticism was strengthened when local authorities said they would only count costs incurred in what they defined as meeting “reasonable care needs”, rather than looking at the actual, total fees that individuals are paying for care services.

Unimpressive returns

Speaking generally, care insurance does not represent the most lucrative market to insurers. What percentage of people who pay for car, home or mobile phone insurance actually make a claim? Not that many, this is how insurance companies make their money.

Compare this to how many people who took out a care insurance policy would need to cash it in. This is the difference between accidents and inevitabilities, insurance companies prefer to deal with the former.

Changing perceptions

Over the past few years the media have highlighted the critical shortage of funding for social care, alerting more and more people to the issue. However, most people still have an ingrained view that care in later life is something funded by the state, like the NHS. How this would affect demand was a concern of insurance companies in 2015 as it will be today.

The current criteria for care funding, the hypothetical situation under a cap and the one that might incorporate an insurance component are all complex, in terms of how people’s ability to ‘self-fund’ is assessed and what proportion, of which element of care, the government will fund.

Overcoming this complexity and making it clear what people need to buy, will require considerably bold messaging from government, in the face of attacks from those who feel that a hypothecated tax is the answer to the care funding crisis.

Can it work

Potentially it could, assuming the hurdles above are overcome. There would need to be a combination of new social care policy, creating a healthy environment for a new insurance market. This market would need robust regulation of policies and pay-outs, while all concerned would need to supply strong messaging to drive the message home the situation is changing for the better.

Overall however, it sounds like a rather lightweight solution to a heavyweight problem. This particular proposal amounts to not much more than people increasing to their pensions to fund care in later life.

This could help ameliorate the care funding situation in the future, but do nothing from the situation currently. As Sir Steve Webb admits: “It is not about solving the problem of today’s 85-year-olds – it’s too late to solve that. This is about the next generation, people who are around the age of 60 and now making choices about their pension pot.”

To tackle the care funding crisis now and to do so for the population as a whole, a mix between new modes of insurance for those who can afford it, with greater taxation to help those who cannot, is what will be required. The options for taxation are themselves varied, from a full strength hypothecated tax to semi-hypothecated and the kind of local taxation which has already been tried, albeit to little effect. Perhaps indicating which option the government should go for.

The task to reform social care and sources of funding is a mighty one. Years of ignoring problems have exacerbated them. The forthcoming green paper will need to take a holistic approach and properly formulate each policy and function to work correctly with one another. It will need to have a long term vision to transform care into everything it can be. The solutions will, as Mr. Green says, need to radical and far reaching, much more so than this most recent proposal from Sir Steve Webb and Royal London.

The Bogeyman Fallacy of Evil ‘Unregulated’ Banks: How Free Banking Could Bring Transparency, Stability, and Choice

There is a phantom menace that Marxists hold dear. Indeed, in the times of milk and honey following the overthrow the bloated bourgeoisie and the ascension of Comrade Corbyn, ‘unregulated’ banks will take their place as the sworn enemy of the workers in the songs and legends of the bards. Even now, the myth builds. Bankers, let loose by a free market, milk the people of their hard-earned money whilst the Tories in parliament watch with idle glee. Lily Allen, hero of the working classes and mother of the revolution, even mentioned it on twitter the other day. She wondered aloud why it was that Britain could ‘afford unregulated banks’, whist it couldn’t afford to throw more money at the NHS and pay teachers the piles of money they deserve for their selfless and heroic service.

Lily Allen, as is often the case, is dead wrong. Firstly, she seems to have confused public and private spending; since an unregulated banking system, i.e. a system free from government intervention, would be privately run and not cost anything from government coffers. Secondly, the banking industry is probably one of the most regulated industries in the UK, and has been for decades. The simple truth is that banking is far from a free market. Marxists like Allen are so dogmatic in their committed assertion that free-markets are bad, that even evidently unfree markets like banking must be a free market. Why else would it be so bad?

If only Lily Allen had bucked her long and colourful history of being wrong and was correct in her accusation. We have intervention in the banking market to thank for many of the problems we attribute to the industry. Let’s take the banking crash in 2008 as an example. Whilst many people like to think that the collapse was an inevitable symptom of capitalism; a by-product of greedy free markets, it was in fact a result of state intervention in markets that should be free. Big banks love regulations, which is probably why they spend so much time lobbying for them in Westminster and Brussels. They can afford crack legal teams to navigate bureaucracy and locate loopholes to exploit, whilst their smaller competitors cannot. Regulation passed by American and European governments in the lead up to 2008 pushed out small firms, distorting the market in favour of large firms, fostering a proxy oligopoly. Big banks – we’re looking at you Lehman Brothers – had become ‘too big to fail’. They represented so much of the market that if they were to collapse, they would bring most of the economy down with them. It is therefore unsurprising that when they did collapse following the bursting of the housing bubble, that governments chose to pump loser firms with taxpayer money to keep the economy afloat; creating hordes of zombie banks dependent on corporate welfare. They knew then, and they certainly know now post-bail out, that they don’t need to be responsible. The government will pick up the pieces, save the losers, and happily sponsor a disparity of competition and a dearth of fairness in the market. Talk about laughing all the way to the bank.

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Government presence in the banking industry doesn’t stop at bailouts and legislation; it is part of the banking industry’s very fabric in the UK. The Bank of England holds a monopoly on currency. It also possesses the authority to set interest rates, basically dictating the price at which banks can lend or borrow money. Whilst this is hardly unorthodox – almost the entire world runs on this system – it is by no means unregulated. If Lily Allen was indeed correct in stating that our banks are unregulated, we’d all be living in a free banking society, not one with a central bank.

Free Banking hasn’t had a presence for some time now but when it did, such as in Scotland until 1844 or British Canada until 1914, the results were positive. So why did central banking replace free banking? Most central banks were formed by governments with one idea in mind. They wanted an institution that would lend them masses of money, on agreeable terms, with few questions asked. Governments sought also, as they always do, to expand control over the economy. What better way to do this than to grant a dictatorial monopoly on determining interest rates to a central bank? Now the government can attempt to slow or speed spending if they so wish. As well as that they can print more money, which is basically government sanctioned counterfeiting, to reduce the value of money; eroding savings and wages whilst falsely inflating prices. With that in mind regulation and intervention sounds rather sinister, doesn’t it? This is cronyism, not capitalism.

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Why then, do so many people lament the idea of unregulated banks? Deregulation has become a bogeyman to villainise free markets, perpetuated by those with a fallacious understanding of the economy. When the government regulates banking and currency, it merely expands its control over the individuals it is sworn to serve. But how could free banking, a system where there is no central banks and very little regulation, work?

Historically in free banking economies, basic money was determined in either gold or silver standards. Minting gold or silver coin was normally monopolised by the government, in an effort to keep the value of these coins steady and provide an official base for free floating competitive currencies. Banks would then distribute banknotes and allowed people to open accounts denominated in whatever standard, normally gold or silver, had been determined by the government. Banks endeavoured to make their currency widely accepted by other banks in order to attract customers. Banks were forced here to accept all forms of currency, striking mutual deals with their competitors to accept each other’s notes and give customers a reason to bank with them. Private notes stayed more or less at the same value as their competitors. Retailers had no problem accepting different notes, just like they don’t have a problem today with accepting various checks and credit cards from differing banks. Notes in free banking economies proved to be more reliable than central banking societies. Unlike government backed issuers, free banks can’t purposely devalue their currency and get away with it, it’s a breach of contract. They can’t take on risky procedures like dishing out more than they have in their reserves or making questionable investments, because risky banks would prove unpopular with consumers, who can easily look elsewhere. In a free banking system, competition and choice places power in the demand side of the market, empowering consumers and gives consumers true sovereignty over banks.

Free banking is transparent, stable, and maximises consumer power. Which is presumably why governments would rather opt for a central bank. No matter how often Marxists like Lily Allen insularly reassure themselves that capitalism is bad, that the poison touch of government is good, and attribute all wrongdoings to free markets, there is a simple fact that remains. The freer the markets, the freer the people. Banking and currency is no exception. In fact, it’s a sterling example.

The Euro is Deepening the Depression in Southern Europe

Currency union used to be very fashionable. There was a time when the Euro was the future – it led to increased growth, lower unemployment, and greater prosperity. Opposing it – and opposing the Exchange Rate Mechanism that was intended as its precursor – could only derive from some atavistic nationalism. How times have changed.

The ERM crashed the British Economy in 1992 and the Eurozone is not prospering today, instead it is going through a deep economic depression. This can be seen most clearly in Southern Europe – by which I mean Greece, Spain, Portugal, and Italy – where youth unemployment ranges from 25 to 50%, economic growth is either near non-existent or negative and political instability is growing. The Euro did not merely fail to prevent this crisis: it actively helped to cause it, and it is making it worse.

While times were good, participation in the Euro allowed nations with weaker economies – like those of Southern Europe – to borrow at low interest rates that reflected trust in the ECB, not in the national governments it represented. This allowed them to pursue wasteful policies, to cripplingly restrict their labour markets and make themselves less competitive, all without having to borrow at higher rates like other countries would.

On top of this the EU did not enforce the laws intended to keep Eurozone countries solvent, enabling economic mismanagement. The international bond markets did not punish economic mismanagement as they would with normal countries – these nations were allowed to become more and more uncompetitive until the financial crisis brought the house of cards crashing down.

All of that cannot be undone, only recovered from, but the Euro makes such recovery far harder. As the Euro is a very strong currency – thanks in the main to the economic success of Germany – it crushes the export markets of weaker economies, while the benefits to imports that a strong currency brings aren’t much use to countries in economic free-fall. The USA began its recovery when Roosevelt devalued the dollar. Argentina dug its way out of its depression in the 90s by unpegging from the dollar and allowing its currency to devalue. Greece, Portugal, Spain, Italy and France cannot devalue their currencies because they are in the monetary straitjacket of the Euro.

Any reasonable attempt to help those economies would have at least allowed them to unpeg from the euro until they returned to economic health, as even Wolfgang Schäuble once suggested. That though, would be a blow to federalism, which ensures that the dogmatically federalist EU will not be reasonable.

This is not to say that structural reforms aren’t needed. They are, and they are being slowly made, but without devaluation to kick-start a recovery it could be decades before Southern Europe returns to economic health. That time will see millions of vibrant young people across Southern Europe unemployed and becoming unemployable, birthing a veritable lost generation.  It will mean more bailout dramas, brinkmanship and radicalism. It will mean poverty, desperation and resentment. Southern Europe is on its knees, and the Euro is throttling it.

The only hope for a more pragmatic policy in Brussels is the foreclosure of the federalist dream. We in Britain have a chance to bring about just that. We have a chance to make Brussels rethink its dogmatic federalism – to be reasonable and to give South Europe the monetary flexibility it desperately needs. That chance comes on June 23rd.

What Now for Bitcoin?

Over recent years Bitcoin has had a habit of defying expectations. Since its dramatic 2013 price rise it has held level in spite of the constant predictions of naysayers that it’s just a fad, that regulation will catch up and that it will ultimately fail.

Yet today, bitcoin is used seriously in a wide range of roles, including everyday transactions, venture capitalism, currency exchange, charity and even dedicated bitcoin gambling.

The future of bitcoin is now the subject of intensive debate. Will this success continue, or will it soon be a thing of the past?

The block-chain technology underpinning it is undeniably revolutionary, but some have suggested the success of the technology may overtake Bitcoin itself.

But while some of the advantages of the decentralised system may be adapted by the mainstream in the future, a lot of Bitcoin’s success lies in its role as an outsider to the conventional financial system.

Indeed much of its criticism also stems from this point. Some countries and territories have banned its use, while others have been quick to point out that payment and consumer protection rights don’t apply.

Likewise its potential for anonymity makes it attractive to black marketeers and those wishing to hide their online purchases. That in turn makes it a target for regulators and opens it to calls for clampdowns on its free use. However the anonymous nature of Bitcoin is itself a subject of debate.

Another threat to Bitcoin is also one of its most exciting aspects. There is an increasing threat of conventional currencies moving to a cashless system, removing the facility for individuals to store their own money away from the threat of negative interest rates and transact without fear of monitoring.

Bitcoin presents one possible escape from that, in being a currency not beholden to the will of any central authority and, at least for the moment, largely anonymous. If the prospect of a cashless economy does come on line in the future, that could well be good news for Bitcoin and other crypto-currencies.

on the other hand, its unregulated nature and the speculation over its future does leave it open to wild price fluctuations. That volatility may settle as it becomes more established and if it becomes widely accepted as a mainstream means of transaction, but until then having money in Bitcoin has the potential to lose, or make, the holder a lot of money, depending on how well it fares in the future.

Ultimately Bitcoin’s future is at the mercy of a lot of external factors, particularly government regulation and economic policy, as well as the development of the system and potential competitors. However currently Bitcoin is an unchallenged force in this space, and in a time where the use of money is rapidly changing, that status gives it the potential to grow massively.

Already it is being taken increasingly seriously, with Bitcoin ATMs in operation, major retailers accepting it and blockchain technology being seriously pursued by mainstream institutions. There is still a great deal of growth ahead if it is to become a permanent, established medium of exchange, but some recent news has been very encouraging.

Ultimately, whichever way it goes, it’s exciting to watch and be involved with something with so much potential to radically alter the way we do business. Bitcoin is one great example of how technology has radically altered economics in the internet age, and whether or not it ultimately succeeds, it and the technology it has brought into widespread use will undoubtedly continue to disrupt and reshape the world.

That alone seems reason enough to be optimistic.