business current affairs economics

Post Offices to the rescue?

Last week I mentioned a national savings bank, or a series of localised banks as an alternative to the current bail-out. Today MP Jon Cruddas proposed something that’s similar, but better, because it builds on an existing network with great local connections: turn the post office into a ‘People’s Bank’.

“With relative ease,” he writes, “the government could create a universal People’s Bank, based on the Post Office.” The Post Office already has 14,500 branches around the country, and it is a trusted institution, although some might argue its reputation has suffered some pretty serious knocks in the last couple of years. Nevertheless, 5 million people have Post Office cards and accounts already, and this customer base could form the foundations for a proper bank. “The core idea is simple: use the one state institution that can be found in most neighbourhoods and rural areas – the Post Office – to encourage small savings and a habit of thrift.”

Unfortunately we’re currently moving the other way, with branches closing and the business monopoly the Post Office has enjoyed being gradually removed. Sounds like a great idea to me though.

15 comments

  1. no no Jeremy, they are nothing like banks, they do not lend money , and most importantly they do not create money, they are nothing like banks at all, at least in everyway that is important.

  2. They are already a savings bank, but don’t provide all the services of a bank, no. Jon Cruddas’ point is that since they already have a network of branches, an established customer base, a trusted brand, and a healthy pile of deposits, they make a natural candidate for becoming a national People’s Bank.

    Obviously the credit crunch is about loans and confidence in lending, and the role of the Post Office would be limited in that. It’s more about providing a guarantee for savings, and possibly making provision for small loans or mortgages.

  3. ahh , now you are talking.

    I think I understand what you are getting at Jeremy, but it’s not currently a two way street.

    If there were no more ‘traditional’ banks there would be no money, because in our economy money is debt.

    The problem with the post office as you recognise is that it does not lend money, so really is not contributing to the economy. The other issue of course is the main saving arm of the post office is National savings, which is essentially the government. For me that does nothing but cause fear and nausea. We already have a perfectly good infrastructure in banks. Your wish to safe guard peoples money is good, but I think you are suggesting we scrap money lending in it’s current practice, is that right?

    If the post office became involved in lending money, isn’t that just the same as we have now, or would you propose a full reserve practice? I am confused.

    I am guessing you want to keep peoples money safe, that is your main concern. That just isn’t possible Jeremy, not in any meaningful way.

  4. I’m suggesting that the Post Office could provide the infrastructure for a national bank. It already lists personal loans, credit cards and mortgages in its list of financial services, but these are backed by the bank of Ireland. A national bank would take over that role. Yes, other banks have infrastructure that could provide that role, but the advantage of the Post Office is the relational factor.

    I’m not completely against lending. We need mechanisms for raising capital or nothing would ever happen. What I oppose is easy money, that is lent irresponsibly by banks too eager to add to their portfolio of ‘assets’. I also object to the abstraction of money beyond all comprehension that we have seen in the derivatives trade.

    To my mind, money needs to be grounded again, brought back to a level where people can understand and have confidence in their banks again. Part of that could be a return to face-to-face banking, at a local level, and the post office could play a part in that. (My own answer, incidentally, is to move to the Co-operative Bank, who aren’t involved in the high-risk end of the market to nearly the same degree.)

  5. Jeremy, thank you for taking the time to explain.

    I must say that I pretty much agree with you completely. I have nothing against banks at all, or their free operation in the money markets, but it must be done at 100% reserve. The creation of money should be left to the government.

    The next thing to help secure money, or as importantly the value is take a more active control of the market place, and supply and demand , a completely free market is only any fun if you are getting everything you need, for the millions in the world starving, I expect they have a very different view of the free market.

    But within this control I would personally still like to see the freedom of the individual to start business and trade, for the most part free from interference from the state.

  6. PS , I am guessing that you mean the government should simply be the main source of loans and create the money as required for a more limited range of uses and stricter control of who can borrow.

  7. Yes, right now I’d favour government being in charge of the money supply again, and banking only happening at 100% reserve, at least when dealing with regular citizens’ savings, pensions and mortgages. If they want to play with derivatives, it should be done with their own money.

    Thanks for discussing the issue, it’s always good to bounce an idea back and forth a little and see it it holds up.

  8. Jct: This great idea shows the Sparta effect. When visiting, your gold was deposited in the city bank for clay tokens used while in town and cashed out upon leaving. Sparta got the interest while trading went on with the clay chips.
    If all bought stamps for cash, the state would get the interest while trading would go on with the stamp tokens.
    Peg your local stamp currency to the Time Standard of Money (how many stamp-pounds/hour average labor) and Hours earned locally can be intertraded with other timebanks globally!
    In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
    U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
    See my banking systems engineering analysis at http://youtube.com/kingofthepaupers with an index of articles at http://johnturmel.com/kotp.htm

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