Public consultation process
Please scrutinise all the proposed amendments and replies before commenting or voting. Short comments are most often read and must not exceed 100 words.You can propose an Amendment at the bottom of this page - please read the guidelines .
Note that the original wording appears again first below and sustains the same comment & voting regime as all other amendment proposals.
Section 8.4. Section 8.4. The Central Bank of Scotland is the executive arm of the Constitutional Monetary Authority and will originate the currency and regulate its distribution through the Full Reserve banking system.
Section 8.4. This would be a complete disaster for an independent Scotland. A proposal that Scotland's monetary system should be based on Full Reserve banking is based on a flawed understanding about how modern monetary systems function in sovereign countries with their own currency and central bank.
Section 8.4. No flawed understanding – just a different perception of the present arrangements. Scotland is starting from scratch and you quote no reason why we cannot be financially independent – and please spare us the Establishment gobbledegook and let’s start thinking for ourselves for the first time since Adam Smith.
Section 8.4. I haven't argued Scotland can't be financially independent - I believe very strongly to the contrary but full reserve banking leads to a fixed money supply. You need to explain where, in your analysis, money comes from.
Section 8.4. There is no such thing as a full reserve bank because if it keeps 100% reserves against the liabilities (deposits) then it is impossible to lend. As such it is then not a bank. It might be a safety deposit and payments institution but that would be all. No country in the world has tried this for very good reason. What you would end up doing is having all loans being provided by the central bank. To do the change you would have to nationalise all existing loans which would be the biggest hand-out to the existing bankers ever contemplated.
Section 8.4. In monetary circles the term ‘full reserve’ means lending no more than has been deposited or invested in equity. Pre the 1986 Thatcher/Reagan deregulation UK Building Societies were such and provided over 70% of total UK lending. The TSB, Airdrie Bank were also full reserve as are the German Sparkassen and many others still important institutions throughout the world
Section 8.4. “Full reserve banking” in the Original Version of this Section is a generic term covering a wide variety of financial institutions worldwide – Building Societies, Credit Unions, the U.S. Savings & Loans, the German Sparkassen & Landesbanken, the Swiss Canton Banks – all have their individual charters & government regulation but all have one feature in common – they are not fractional reserve and are true intermediaries required to match loanable funds deposited to genuine private & commercial borrowers. Similarly Constitutional Money is a generic term embracing any sovereign or State monetary issue.
A Constitution cannot specify detail – only principles.
Section 8.4. It does not. Deposits are a liability of the bank, not an asset. The loans are the banks assets. As such deposits can never be a 'reserve' as they are a debt. The 'loanable funds' theory of classical economics has been comprehensively debunked and is simply false. Banks do not require 'funds' in order to make loans. Loans are granted first, deposits and reserves come later. Full Reserve means the bank has enough cash in the vaults (these days sufficient funds in the reserve account at the BoE or on deposit with other banks) that it could repay ALL of the deposits. None of the banks you list could repay all their depositors on demand and as such they are not full reserve.
Section 8.4. A Constitution can deal only with clear and concise principles. Contributors wishing to refer to supporting background directly related to a Section or Amendment are respectfully requested to observe the Guidelines (tab) which deal with the use of links within Comments
Proposed New Section 8.4
Section 8.4. Section 8.4 Privatisation of profit and socialising of losses. No government agency may grant or pledge any individual or collective financial guarantee or public subsidy to any privately owned corporation or entity. No privately owned corporation or commercial entity enjoying the privilege of limited liability & legal persona under the law of Scotland shall be permitted to become a monopoly or part of a cartel deemed to be disadvantageous to the community of Scotland.
Section 8.4. Why amend to omit encouraging the return of the Building Societies? They were bought over and closed down by the big banks courtesy of Thatcherite deregulation and using the public credit (8.2). Pre 1985 these Societies provided 99% of all UK mortgages. House prices were affordable for most new buyers – thanks to the savings and pensions of the older generation. The demise of the not for profit Mutuals was an act of financial vandalism which needs protection under the Constitution. They thrive and are protected in most other countries.....
Section 8.4. The Scottish Reserve Bank shall be established by Parliament as the Central Bank of Scotland. The Scottish Reserve Bank shall be under the control of the Government and shall at all times be answerable to Parliament.
NEW ARTICLE 8 - Ethical Business Code
Section 8.4. Privatisation of profit and socialising losses shall be unlawful in Scotland. Government will legislate to secure the re-establishment of ethical Mutually Owned Savings & Loan Institutions. No privately owned commercial entity shall receive any public subsidy or financial guarantee from the public purse nor be permitted to trade as a monopoly or part of a cartel deemed to be disadvantageous to the community of Scotland. Click for New 8.5 https://cfs-hub.co.uk/comments/878
Section 8.4. The whole Article 8 is too detailed. So above is one of five Proposed Amendments all headlined NEW ARTICLE 8 and with active links to one another. This is about setting standards. Business is competitive and like any competition needs rules and regulations. There is plenty of experience to draw upon and here are some guidelines for government – not restrictive, just marking out the playing field.