Douglas Carswell's Blog

Barking mad banking

The Confederation of British Industry has warned that the Government would be "barking mad" to go ahead with its proposals to ring fence the retail arms of British banks from other banking operations.  I’m not so certain. 

What really is mad is to run a banking system built on a pyramid of bogus credit – with some banks having capital worth less than 5 percent of their assets. 

Under our insane banking system, banks can simply conjure up credit by lending multiple times against the same “real” money. Far from having to attract more savings (deferred consumption) into deposit accounts before they are able to lend more, they can simply lend.   

Throughout the wider economy, this allows credit to balloon way beyond any increase in the amount of deferred consumption or savings. Thus do we end up with an economy built on massive debts, overconsumption and highly vulnerable banks. That really is daft.

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