Bankers create ecological disaster and economic collapse

Can we grow on finite planet, no we can't. But one of the reason, not the only one and not the main one, is debt. Banks lend money essentially increasing the supply of money and we pay it back by producing more, if we are a country like Papua New Guinea or Indonesia this might mean cutting down our rainforests. If we are individual to pay our mortgage we work hard in the arms industry or producing useless things.

I am wary of people who just blame the banks, the whole economic system 'capitalism' is based on unsustainable growth, you cannot blame finance alone, also depressingly some 'monetary reformers' slide into conspiracy theory and at worst racist conspiracy theory. Major Douglas was the famous Jew baiting critic of the banking system but sadly there are many others in this game.

It's rare I see something really interesting and well written on banking especially the esoteric world of derivatives but in the London Review of Books, John Lanchester explains the malign magic of finance, showing how banks create more money out of thin air:

A customer goes into the bank and deposits £200. Now the bank has £200 to invest, so it goes out and buys some shares with the money: not the full £200, but the amount minus the percentage which it deems prudent to keep in cash, just in case any depositors come and make a withdrawal. That amount, called the ‘cash ratio’, is set by government: in this example let’s say it’s 20 per cent. So our bank goes out and buys £160 of shares from, say, LRB Ltd. Then LRB goes and deposits its £160 in the bank; the bank now has £360 of deposits, of which it needs to keep only 20 per cent – £72 – in cash. So now it can go out and buy another £128 of shares in LRB, raising its total holding in LRB Ltd to £288. Once again, LRB Ltd goes and deposits the money in the bank, which goes out again and buys more shares, and so on the process goes. The only thing imposing a limit is the need to keep 20 per cent in cash, so the depositing-and-buying cycle ends when the bank has £200 in cash – all the cash there is – and £800 in LRB shares; it also has £1000 of customer deposits, the initial £200 plus all the money from the share transactions. The initial £200 has generated a balance sheet of £1000 in assets and £1000 in liabilities. Magic! In real life, it’s even better: the UK cash ratio is 0.15 per cent, so that initial £200 would generate £133,333 on both sides of the balance sheet.

He shows how the City of London's activities, far from making Britain wealthy actually make us poorer:
The City is, collectively, astonishingly wealthy. It earns 19 per cent of Britain’s GDP. People don’t mind that in itself but they do mind City bonuses. Last year, these amounted to a truly boggling £19 billion, all of it paid at the end of the year. In London, the effect of that money has become almost entirely toxic. I’m not talking here about middle-class envy – the resentment increasingly expressed among the ‘middle-class poor’ about how unfair it is that these bankers get paid so much for contributing so little. That resentment seems to me to be largely hypocritical, a middle-class resentment of one of the few forms of inequality that doesn’t benefit them. But City money is strangling London life. The presence of so many people who don’t have to care what things cost raises the price of everything, and in the area of housing, in particular, is causing London’s demographics to look like the radiation map of a thermonuclear blast. In this analogy only the City types can survive close to the heart of the explosion. At this time of year, when the bonus stories come out, you can understand why. A bar announces that it is offering the most expensive cocktail in the world: £35,000. That buys you a shot of cognac, a half bottle of champagne, a diamond ring and the attentions of two security guards to protect you for the rest of the evening. A deli, at the special request of a customer, creates a £50,000 Christmas hamper. Word gets out, and another customer immediately orders two more. The expense of London is forcing people further and further out of the city, and making life harder and harder for the ones who remain.

He also explains in simple terms the Northern Rock crisis, a firm that failed by gambling on US housing investment in the 'sub-prime' market, high interest mortgages to poor Americans and how recession could be on its way.

All in all essential reading, the economic chaos of a recession might actually make ecological worse...we need a sane economy that functions without ever increasing production, consumption and waste.

I think part of the answer is in the work of green think tank the corner house here

Oh and part of the answer might be open source banking...have a look here and see what you think.