Why Save the City? The story of Funny Munny

In this article I really want to challenge conventional wisdom and rewire your brain. Whether you support David Cameron’s approach to Europe or not, there is a fundamental on which all three parties agree – that we have to protect the City. It may well be true that others would like to damage our Financial Services industry, but we should understand better what it is we are protecting. Conventional wisdom comes from people who don’t understand money. Let me explain why.

Where does money come from? You might think, as I used to, that money comes from governments and central banks. They are the only people who can print money, aren’t they? WRONG. It’s an understandable error because that used to be the case and it’s what the counterfeiting laws say.

But behind all the clever things that economists can tell you about how the Chinese work ethic and savings habit transferred over the last quarter-century into Western debt and borrowing – all of which is true – lies a more fundamental problem. I call it FUNNY MUNNY. That’s funny-peculiar of course, and nothing to laugh about. It’s emperor’s clothes money and about as real as the Wizard of Oz. It doesn’t come from the government. Time to pull back the blanket Toto.

Originally money was a convenient form of exchange to replace barter. Its value was held stable in relation to basic commodities – livestock, crops and simple goods. That value was a simple reflection of supply and demand, with direct negotiation. And if someone wanted to borrow, someone with a surplus could choose to lend the cash. They could only lend cash that they had. Meerkat economics.

Once money took on a second function, the storage of wealth, we invented banks to keep it safe. Banks could also lend what they had from depositors and many people think that is still how it works. At first, it was possible for a bank to lend more than they had in. That was a manageable risk, because not all depositors would want their money back instantly, and most loan instalments would be repaid on time. Typically banks might lend up to ten times their deposit capital. That was usually sustainable. We went from REAL money, money that already existed, to FUTURE MONEY – money that we would earn later. And generally that money got paid back and the system still worked.

In the last few decades, that system has been destroyed. It has been destroyed by digital money, because you can have vastly more money represented by figures in computers, than actually exists in any other sense. It has been destroyed by credit cards, because you can borrow and spend that digital money more easily than real money. But more than anything it has been destroyed because the Value that it once held is based on nothing at all. We don’t even have the Gold Standard any more. And even the relationship between you and your own money in the bank has been destroyed by the “Big Bang” in the financial services industry which allowed banks to become investment speculators, using your money. That is why, when RBS lost shredloads of money, the government had to bail them out. They used your future tax money to make sure that you got today’s money back, and no-one got lynched, not even Fred the Shred.

So how did that Value get destroyed? Now, when you get a loan or mortgage from your bank, it doesn’t matter what deposits the bank has, they can always lend it to you. Computer says “Yes”. The way that the accounting works, when they lend it to you, they can show your debt to them as an asset on their books, so the value of the company goes up. At the end of the year they can show their earnings on that asset as a profit. They can pay themselves bonuses on that profit. They can incentivise their employees with commission on selling the loan, even though no money has come back to them yet. Ultimately the loan, the profits, the bonuses and the commissions all came out of nowhere, from thin air. Shazam! The money didn’t exist, and now it does.

And this is where it gets difficult to tell “REAL” from “UNREAL” money. All this made-up money looks real because you can buy stuff with it, and most of us did. Some of it was in the almost-real arena of “FUTURE MONEY” and looked the way things had before. But it wasn’t, because there is nothing any more that keeps any sense of proportion, any sense of Value.
If you started off thinking that it is the government (or Central Bank) that prints new money, and controls the ebbs and flows of economic life, think again. It is estimated that of all the money that is currently in the UK economy (and other countries will be similar) 3% is the money that has been issued by the Bank of England. That means that 97% of the money in our economy has been issued, made up, invented out of thin air by banks. I can’t even say “printed”. And this is the piece of the picture that David Cameron, Nick Clegg, Ed Milliband and other political leaders don’t get. Most economists don’t get it either. We aren’t working with REAL money any more. It’s fantasy money, made-up money, free lunch money, money that grew on trees. Even the bankers don’t get it and the few who do are happy to reap the benefits anyway, or to imagine that they do.

It’s in their imagination because even the money that gets spent comes from the FUNNY world into the real world and becomes more real, but is still not completely real. Let’s imagine that your neighbourhood banker gets a million pound bonus and buys a new house. He is living in that house and he has a real benefit. But the value of the house in £$€ is not entirely real. Some of it is in an asset bubble that has been inflated by money that doesn’t exist. From a fairness point of view, the banker is doing better than the rest of us – at least for the moment – but we are all in the same fantasy. We are all playing with Funny Munny, and that can’t last. At midnight, the golden coach turns back into a pumpkin. It’s about 11:56 now and you can feel the panic.

So what does Funny Munny do to the economy? Well, the banks are earning funny profits and paying funny bonuses. Those funny profits, made up of the money they created from the ether get counted as a part of the UK economy. They add to our Gross National Product. The financial services sector is seen as being worth about one-sixth of the economy. That is why the politicians think it is important. Some of those services are paid for from outside, so they earn currency which may also be in the form of $funny and €funny. And yes, there are jobs that are paid for in this Funny Munny. They will look real too, until midnight. And the government is making some tax revenues off this economic activity, including the bank’s £funnyprofits – at least the ones that aren’t siphoned into offshore companies – but that’s a different nightmare.

It can be difficult to follow this because it’s a bit “Alice through the Looking-Glass”, a bit surreal, a bit do-your-head-in. If you are finding it hard, take a look at www.positivemoney.org.uk where they explain it more slowly. But if you do follow it, or are willing to trust what I am saying for the moment, please understand the bottom line. Which is this.

When we started with real money passing from hand to hand, the value of money was determined by agreement. If I didn’t value your goat at 10 groats I could choose to pay 9 and have 1 groat left over to buy a sack of …. oats. 50 years ago, if the government wanted to stimulate the economy, it could print some money. By adding, say 1% to the amount of the money supply, it could encourage investment and support growth which would pay back the short-term 1% loss in value of today’s money. The agreed value of money was still mainly being managed on the Nation’s behalf.

When you hear economic reports, amounts are being quoted in Billions and Trillions. Euro bail-out funding of €250Billion is being discussed, in case Italy or Banque Paribas or whomever might need it. When we (or Europe) manage our national economic deficit, we are desperately trying to balance our budget today in order to pay back all the debts. No one really knows what those debts add up to even in conventional terms. But still less does anyone know how much of that would be REAL money, how much could genuinely count as FUTURE MONEY (which you might define as that which we might reasonably pay back) and how much is FUNNY MONEY – the invented, thin-air unreal money which no-one can ever pay back.

So when your governments tell you how valuable our banking system is, and how important our financial services sector is, don’t believe them. Most of it is as valuable to our lives and as energetically parasitic as a Flu virus. For sure, we need old-fashioned banks who help us move money around, and take care of our savings. Possibly we need insurance companies to help us deal with life’s risks. Maybe there is even some sense in having companies which manage investments – if that process can be removed from the paper-casino it currently lives in and revert to supporting companies to buy plant and equipment, or cover their trading cycles. But a City of London filled with financial institutions generating huge fantasy debts which we, our children and our grandchildren are supposed to pay back? They’re not worth the paper they’re not written on.

So welcome to the Campaign for Real Money (CAMReMON?). Money that Works. Money that we can Live With. Money that we can Live On. Money that we can Care with. Organic money, non-GMO money that has its Value DNA intact. People’s money and even the Nation’s money. The FUNNY MUNNY needs to go and the good news is that once we get our heads around it, and how it never really existed, it will be easy to let it go. The Wizard becomes a man, the dark goes to wherever it goes when we turn the light on, the fear of our debt-ridden future vanishes and we sit down to a nourishing pumpkin soup.


With thanks to www.positivemoney.org.uk

“Future Money – Evolving our relationship with finance” is available to download from www.spiralworld.net and will be published shortly in paperback. Please e-mail for details and for a special advance-order price

Please take a look at www.emergenthuman.com and the 11-11-11 manifesto.
Non-UK readers may wish to Google comparethemeerkat.com and Fred “the shred” Goodwin for obscure UK cultural references, though these are not essential to the meaning.

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