Honest Banking in the UK

0:00Toby Baxendel, it's a pleasure to have you here with us today. Great pleasure to be here. You are an entrepreneur in the UK, you miraculously survived the meltdown of 2008 and thrived ever since. You're proving yourself, I think, many times over. Well, it's very kind of you to say so. I wouldn't wish to put that experience upon anyone, though. It's extremely tough to get your costs into line and to turn the things around and remain profitable in that environment. But you have several lives.

0:46You're not just an entrepreneur, you're an intellectual and somebody of a political activist and you're very much involved in the Cobden Centre. I'd like to talk about just a little bit about each of these things. Let's start with the issue that is most interesting, I think, to us, which concerns this bill that was introduced as a piece of legislation in the parliament about banking. Can you give us some background on what this is about? There are a handful of truly inspirational backbenchers and members of parliament who have not succumbed to the party whips. The nearest example you have over here is obviously Ron Paul, and he has a great following. These guys, Douglas Carswell, for example, and Steve Baker, are men of principle, and they're there to represent their constituents, and they're there to represent free market ideas as well. That's their mission.

1:46So Douglas Carswell got in touch with me when he got a slot for a 10-minute rule bill, which is a rare privilege that independent parliamentarians can introduce legislation. 65 acts have come into fruition and onto the statute books since the Second World War as 10-minute rule bills, The Theory of Money and Credit

2:40To give honest labeling for bank accounts because there's this huge tremendous confusion in the UK and I'm sure it's here as to what you're actually doing when you're depositing with most people thinking they're depositing for safekeeping and most people are actually quite horrified when they find out what their bank is doing with their money and in fact actually it's not actually their money because when they deposit as we know it's a lending arrangement with the bank and so the bill was constructed and Stefan Kinsella played his role in helping draft the legalese of the bill and Douglas presented it to his parliamentary colleagues with a very simple reform that going forward into the future, so it wasn't Retrospective is prescriptive going forward into the future to require all banks to offer either a safe custodial account, clearly labeled, everyone knowing what they're getting involved in and just lending traditional lending and intermediary services.

3:53So you're not asking anything of banks that's not asked of anybody else in the free market If I sell this computer and the hard drive doesn't work or the screen doesn't work, I would have to, I would disclose this and if I failed to do so, then they would return it back and say, well, you didn't, or if you sell a house and the foundation is cracked, you need to explain that. So you're asking, the bill just simply asks banks to disclose what kind of, what kind of reserves are available or what's happening to that, to the money that is being deposited into the account. And to give the customer a very explicit choice, your choice is depositing for safekeeping, so the bank is a custodian to you, or your choice is for lending. Lending, obviously, you're bearing some of the risk implied, you do it over a time-based period and in return you get interest.

4:53And this is nothing but the codification of a distinction that existed before the state gave banks special privileges to treat a semi-warehouse contract as a lending contract, right? That's right. So all we're requiring is clarity in this first bill, clarity in contract law. And that's it. And I think people at that point in time, once they're empowered with a bit more knowledge Research and Information, then they can make very sensible choices about their finances. And hopefully, reintroduce the concept of a bank being a fiduciary. Well, it should be a fiduciary relationship between banker and client, which seems to have completely gone by the wayside.

5:44Right. And there's no expectation that you have precisely what the customer would choose The Federal Reserve, fiat money, fractional reserve banking, Human Action, Man Economy and State, The Theory of Money and Credit

6:19It's a brilliant solution, Toby. Was this your idea? Was it just something that came together after a result of consultations with many different people? Well, I suppose I've made those ideas aware to the parliamentarians, and the parliamentarians have actually been brave enough and inspirational enough to want to grasp that idea. And they've have then come back and seized the opportunity. There's an irony to this as well in the House of Lords, unbeknownst to us, the Earl of Caithness, who was a minister during Margaret Thatcher's period of office, he actually did the same Banking Bill a year before. So we now have a little contingent of lords and a little contingent in the House of Commons who are genuinely interested in banking reform. And I think really if we can't advance the debate at all in this environment, then we are never ever going to advance the debate.

7:37would pose a special challenge to Austrians who have been thinking about these topics. How do you make these ideas real? I mean, of course, we all would dream of a gold standard or the end of fiat money, but given the existing structure, how do you rein in the capacity of the banking system to create unlimited amounts of credit and money, contrary to the depositors' wishes, and this is a great way to do it. It strikes me. It's a wonderful thing. And it wouldn't, in such a simple, I think it was a two-page bill, that's how legislation should be, you can effectively stabilise the banking system going forward. Because people face with choices and will settle down into a pattern that's sustainable, between depositing for safekeeping and lending.

8:36That's the same as we look at our stock portfolio and we divide it up between very safe things and medium safe things and risky things and we want a diversity. So that may be the effects, but there's no way to know in advance. No. Right. Now there are important macroeconomic implications for this because it does put certain limits on the ability of central banks to inspire the creation of massive new amounts of money. Yes. Well, we can either be explicit about this, or we can just hope that won't get noticed. It does remove a certain power, and I suppose there are people who do understand this point. Yes, I mean, my greatest objective in the Cobden Center will be to, you know, go for the jugular of the state to cut the oxygen and to cut the blood supply off, to force it to be honest, because I don't have a problem with politicians coming to the electorate and saying, I'm going to take X from you and I'm going to give it to Y, because I feel

9:51that such and such a cause that it's going to is deserving and so on and so forth, politician can say that to me and you can vote for that or you can vote against that. But what the politicians say is they say, I'm not going to take from X, but I'm going to give a lot What Do I? So they create this kind of whole new existence for themselves, almost like they're a third party, a benevolent third party offering you free goods if you vote for them. So it would force honest politics. So the politicians can only go on spending Planning Plans based on what they can raise off the public.

10:43It's very interesting. A friend of mine is the Euro MEP, Dan Hannon, and he was telling me when he went to Switzerland on a fact-finding mission, he was much encouraged with the robustness of the electorates there in the Cantons, because when a politician comes to them, they always just ask how much and from who, yeah? And then they make their decisions accordingly. Now, when he was speaking to all the politicians, trying to learn from the Swiss and the Cantonal systems, they're all saying to him, no, no, no, no, you definitely, definitely don't want to do, you definitely don't want to do what we do here. You can never do anything, yeah? And he was saying, Well, that's precisely why I'm here.

11:32So I think if you can enforce honest government at the same time, as honest as it possibly can be, so a politician can only come to you and say, I'm going to take X from you to give to Y, then you can vote on that. That's right. And it's a brilliant reform because you're talking about a profound monetary reform ultimately and Fiscal Reform and a really dramatic change in the way governments are financed and public policies financed through just two pages and a bill that does nothing other than ask for honesty. For honesty, yeah. Well, Jeff, that's correct. And in our fellow free market orientated think tanks and do tanks around the world and people I've got to say, I'm staggered that people don't focus on this really.

12:25You need to go... We can talk about reform of free trade here and an abolition of this law here and that law there. We're tinkering at the end of the day. We just need to focus our firepower and go for the absolute jugular. Go for the blood and the oxygen supply and just hit it there with a very simple reform And you could transform. And there's a strategic brilliance to this too, because if you oppose this bill, you have to, the burden is on you to explain why you're in favor of dishonesty. Exactly. Why you're against disclosure. Yeah. Well, true, Jeff. I agree with that. But we've got to, in a 10-minute rule bill, if you don't get the support of a governing The Federal Reserve, Mises Institute, Austrian School, Praxeology, Man Economy and State, The Theory of Money and Credit

13:41and come hell or high water you know we'll reproduce the bill and you know slowly but surely one or two more politicians come on side and especially as crisis still continues and you know we will persevere yeah what are the prospects the prospects at the moment are extremely low yeah because we haven't got a governing party who will give us the legislative time but And, you know, you look at the success of Ron Paul, he's been at the Fed for honest disclosure for, I don't know, how many years, two decades or something, and maybe longer, but eventually, perseverance, the arguments clear, consistent, you know, challenge the argument by all means, tell us why we're wrong, you know, or don't, and slowly, slowly, slowly, people get behind you.

14:34In some extent, I would say that this argument seems to be inspired well, of course, by Rothbard's mystery of banking, but more directly and more immediately by Juan Teresoto's book, right? Money, bank... And credit cycles, yeah. Well, I mean, you published the book here. I mean, the mission of the Mises Institute is just sensational and tremendous and well done for you translating that from Spanish. That's been a great influence on me. and now, and I noticed from our website, I think nearly 4,000 people have downloaded the book in full. Think of all the money you're losing. Teasing about that. Yeah, which we're absolutely delighted about. But he sets out the case for honest banking very, very clearly.

15:22And he relates the microeconomics to the macroeconomics in such a beautiful way. The institutional banking to its effects on business cycles more broadly. That's right. He's a true inspiration. He's one of the greats and, you know, his books will be enduring. That book will be an enduring book for many, many, many, many years and many generations. I thoroughly recommend it, yes, but Rothbard's book is always the great entry-level eye-opener. He took no prisoners and spared no punches. Just speaking of, what has government done to our money? Tony, yeah, just absolutely... 1963, of all things. A great, great eye-opener, and I'd recommend that to anyone to read who's got a passing interest in banking, but actually, it's one of the most critical books in all of pro-liberty books because if you get that money reform right, you really do put the handcuffs on from the politicians and enforce honest government.

16:32Unplug the money machine. Now, over the last year, or maybe it's been the last 18 months, we've seen amazing growth in the work of the Cobden Center. Tell me a little bit about this. You were involved in its founding? Yes, that's right. Well, the inspiration is the back page of Hayek's denationalization of money, where he calls for a sound money movement to rival the Cornelor Reform movement of the 1830s, 1840s. And that piqued my interest when I was, I think 16 or 17, when I first read that. and I just thought well you know that's speaking to me if no one's done that by the time I have time to to do that then I will aim to set that up and I've had there's been tremendous help and support I did attempt to get it set up three or four years ago we did and we had Jan Lester involved a great English libertarian thinker but it didn't really get any traction Steve Baker came to see me

17:46was put in touch by Lew, actually, Lew Rockwell, and he then did the technology to get the site up and running. He's then become the MP for Wickham, so we've got a great Cobdenite in Parliament, and Dr. Tim Evans, who was president of the Libertarian Alliance, he was is an old university chum from LSE and he's run the Center for New Europe and some various other things and he is now our full-time CEO so we're starting to get traction and at the moment I've funded it principally along with another donor who donates at the same level to me but following very much in the Mises Institute's tradition I want to be a I'm a tiny donor going forward. I want to have no financial influence and I want the thing to have no dependence upon me whatsoever. I want a multiplicity of little donors so we can always have true independence.

18:53But things are going well. Andrew Duncan is writing. He's a wonderful writer. He's doing these great reviews. I mean, these reviews have helped me understand better the books that we are publishing. Do you know what I mean? He's a man of great insight. Yeah, he's a very uniquely talented individual. We hope he writes more. He has a tremendous output, and I think he's going to be our David Gordon, I hope, as well. His enthusiasm is one of his passions, his knowledge is really something. I enjoy reading the website, and traffic is up, I suppose, is it? Yes, we're getting traction about a thousand unique readers a day. Good. So it's, you know, starting, we've only been going for a year and a bit and, you know, we intend to this year spend a lot of time on fundraising and really building the basis of the independence, of financial independence and to keep on running these campaigns in in Parliament, and to try and also influence our other fellow people in the think tank world

20:03in the United Kingdom that actually, you know, what we're saying is tremendously important. Well, I think you have had this influence. I mean, if you look at the work of IEA, it's been just stellar over the last two years, three years. I mean, we've co-published three books, four books with IEA, and Adam Smith Institute, I think, recently came out, even Eugen Butler has his new primer on... Why do you say primer? I thought Americans said primer, and the British say primer. So I said primer, you say primer. How did this happen? Anyway, he wrote this wonderful primer on Austrian economics, which we have for sale now, Stuart. Eamonn, I'll tell you a little story about him. The sole reason why I'm aware of Hayek is because he wrote Primer on Hayek. And that was when I was 16 years old, and I read it.

20:58I was introduced to it by an old Polish war veteran who said, if you're an anti-communist, you must read this man Hayek. And he gave me Eamonn Butler's book. So he's gotten better and better and better over the years. So your influence is spreading. It's a marvelous thing, and I should also note that the Cobden Center has adopted this open-source policy on publication. You're not enforcing old-fashioned copyright. No, you're encouraging the ideas to get out there. This is a radical step. This is, of course, a step that we've taken ourselves, and it's helping. Well, Jeff, we're copying you. You're leading the way. We want those ideas spread, full-stop, end of story. So, that's the mission. So, no copyright, no anything. Take as much information as you want from there.

21:49I hope that will always be the case. Well, the model actually was established by, of all people, Leonard Reed in the United States, because back in the 1950s when they would print their little journal, The Freeman, that had very limited circulation. And he knew that the most difficult thing was to find readers. Find Readers. So why not let the readers themselves find more readers and they encourage this open reprint policy. And that was 60 years ago, a very radical step, a visionary step. And nowadays, with copyright laws and intellectual property laws getting ever more strict and shut down, we have an opportunity, really, to open up our work and out-compete everybody else, just because we're open sourcing everything.

22:39Fantastic, and then we can get, certainly young people who are more receptive to new ideas, more exposed, lower entry point, lower cost. Yes. You know, in the due course of time, maybe we will publish, or maybe we'll just carry on recommending your publications. There's no point in us, if we can't do anything better than you, we'll certainly only ever be plugging your stuff. Where we differ is, obviously, we're doing a very British and European theme, whereas you're doing a very American theme. Yeah, but ever more, you know, I was telling somebody at this conference, sometime in the last six months, I've begun to look at a clock and see at Shanghai time and at Berlin time and, you know, and West Coast time in the United States.

23:32So, just because these are the people I work with now, it's a global world and more and more. Well, we'd certainly, you know, cooperate on a global basis, but I think it's because the UK is so under-represented at the moment in these type of Austrian ideas, we'll try and give it a flavor for that particular marketplace. Should be, as it should be. And also then link together with some of the European Institutes such as Alberto Mingane's Institute Bruno Leone and the Juan de Mariana people and Cécile Phillips Institute in France.

24:22So, you know, we're trying to link... Molinari. Molinari, yeah. We're trying to link everyone together. Well, we've got Misesians all over the world now. And at last, finally, in the UK. Yeah, that's right. Yeah, we are Misesians, but we're also in that... We're very much in that Manchester liberal tradition as well, which is very particular are very peculiar to the English political scene. Well, Mises loved Cobden and, of course, in Cobden you've got the whole thing. You've got the free trade, free enterprise, peace, civil liberties, you've got the whole agenda there. So, it's a wonderful name and a wonderful model to follow.

25:07Well, the peace thing, I feel a little bit guilty that we haven't concentrated so much on peace. And I was talking to Lew about seeing if we can network about some authors, anti-war authors, up and down the country here to see if they want to write on any UK things, because there is definitely a warmongering agenda in our parliament, which I think is very, very dangerous. I'm all for defending ourselves, but I don't necessarily think going on a war footing is in our best defensive interest. An uncritical embrace of the American Empire is a problem, right?

25:52That's right, yeah. The only empire you favor is the Misesian Empire, right? Yeah, that's right, the empire of free ID. Yeah, there we go. Thank you so much, Toby Baxendel, for joining me here. That's a great pleasure, Geoff. Thank you. It's great to have you on Auburn, and we look forward to your next visit. The Theory of Money and Credit