What rarely happens is someone opens up the bonnet and has a look inside this Quaker founded institution. Today you can with the help of a report on Barclays from the Centre for Research on Socio-Cultural Change at Manchester University: http://www.cresc.ac.uk/
The following is one conclusion of the report and it’s probably a fair reflection of most banks these days… and breaks the myth that banks ‘lend’ to the real economy:
- The investment banking led business model results in a bloated balance sheet and huge credit risk; In 2011 Barclays credit risk is £1,795 trillion i.e. larger than nominal British GDP of £1,500 trillion; nearly half of that is in derivatives + off balance sheet
Taxpayers should ask this question because Barclays is
(a) a machine for enriching elite investment bankers with £1.5 billion in staff bonuses last year out of a pre tax profit of £3 billion
(b) the risks to the taxpayer are not offset by corporation tax because Barclays has used losses to minimise its payments; a parliamentary question in early 2011 forced disclosure that Barclays paid just £113 million in UK corporation tax in 2000
Barclays pile of assets continues to do very little for the real economy because of its lending pattern:
- more than 60% of UK lending is to other financials, i.e. to other banks, and on house mortgages;
- loans to manufacturing, retail and wholesale account for no more than 7.2 % of the UK loan book and are in nominal terms sharply down on 2007 levels
Much lip service is paid to the idea that over many years in Britain there has not been enough investment in manufacturing. What is overlooked is that one sector did a gargantuan amount of manufacturing during this period. The big international banks manufactured money, using very simple raw materials. All they needed were computers and borrowers. Every time they made a loan, the banks simply typed the amount they were lending into their computer system, transferred it to their victim’s account, and charged interest for the privilege.
What’s clear from Barclays, and all others, is most of the lending was to each other and that is where the trading and bonuses come from. But worse of all situations they are backed by us the taxpayer and as a result of their over lending and crashing we are now in a slump that is causing misery and the destruction of our public services and living standards.
But the irony is it was the banks who lent the government money to bail them out…when the government borrowed £billions it borrowed it from the busted banks…because dear reader they have the power of money creation – out of nothing.
To learn more…. http://www.positivemoney.org.uk/how-banks-create-money/